Finally, we have a serious plan for warm, low carbon homes – Inside track

Britain’s old, heat leaking, gas burning homes left the country exposed to the energy shock that followed Russia’s invasion of Ukraine, fuelling the cost of living crisis. Four years on and energy bills are still hundreds of pounds higher than they were before the crisis.   

Successive governments have struggled to deliver progress on insulating and electrifying homes. What we’ve needed is a well thought through, properly funded plan. In the government’s Warm Homes Plan published this week, we finally have one.  

It’s the biggest public investment ever in warmer low carbon homes
The £15 billion plan will be the largest public investment ever to make UK homes warmer and cleaner to heat. It is a big step up from the £6.6 billion commitment by the previous Conservative government between 2019 and 2024.  

The plan signals a clear policy shift, from a ‘fabric first’ approach that prioritises insulation, to one where bills and carbon emissions are cut faster by replacing fossil fuels with clean technologies. Clean heat, solar power, battery systems and electrification are at the heart of the plan, backed by a mix of regulation, grants and finance. This means millions more homes in Britain will get to generate their own affordable clean energy.  

Some past efficiency measures, such as solid wall insulation, have been linked to botched home improvements and are also less cost effective. Technologies like solar and home batteries can lead to faster and cheaper bill savings for many households. 

Private renters could save around £400 a year
Insulation remains an important part of this policy package. Most privately rented homes have energy performance (EPC) ratings of D or below. That means their bills can be hundreds of pounds higher every year than homes rated A to C. The government is going to provide a huge uplift in living standards for millions of renters by raising the minimum EPC standard from E to a cosier C rating in 2030. Some homes that are costly to improve will receive exemptions, but many more will be able to receive upgrades. At current prices that could save a family in private rented accommodation around £400 a year on their energy bills. 

For homeowners who dream of improving their properties, upfront costs can be a barrier. One of the headlines in the new plan is the introduction of £5 billion worth of government backed low or zero interest loans to help unlock the benefits of solar panels and heat pumps for more households. Families will be saving hundreds a year by powering their homes, gadgets and electric cars with sunshine. Solar panels pay for themselves in around ten years on average, and will save thousands of pounds over their lifetime of around 25 to 30 years. 

Interest free loans have had a big impact in Scotland
Evidence from Scotland’s interest free loan scheme for home solar shows attractive finance can significantly increase take up and broaden access among lower income households. As yet, there is very little detail on how Warm Homes Plan loans will work in practice, including what proportion will be genuinely zero interest and how attractive any financial products will be. The coalition government’s Green Deal loan scheme in the 2010s flopped spectacularly because lending rates weren’t attractive enough for households, so getting this offer right is crucial.  

The plan recognises that electrifying home heating is crucial to end reliance on imported gas and cut the climate impact of heating homes. In addition to the new loans, households will also be able to access generous grants to switch to ultra efficient electric heat pumps.  

The plan also expands the Boiler Upgrade Scheme to £2.7 billion to 2030, with funding increasing year on year. Importantly, eligibility is broadened beyond conventional heat pumps to include air-to-air heat pumps and heat batteries, giving people more choice and reflecting the diversity of housing stock.

Reducing running costs is vital to cut heating bills
Offering new loans and extending the Boiler Upgrade Scheme will help with upfront costs but, to ensure ultra efficient heat pumps can bring bills down, the government will need to reduce the price of electricity relative to gas. 

A particularly welcome element of the new plan is the explicit integration of climate adaptation into homes policy. We have consistently argued that homes must be upgraded not just to keep warm in winter, but to stay safe and liveable in the increasingly hotter summers we are now experiencing in the UK.

The plan commits to include cost effective passive cooling measures in government support schemes and to reform EPCs so they also reflect overheating risks. Including air-to-air heat pumps in the Boiler Upgrade Scheme, which provide cooling as well as heating, is welcome on this front.  

Overall, the Warm Homes Plan is a very positive shift by this government. It recognises that that the biggest bill and emissions savings will come from households installing clean technologies, like solar, batteries and heat pumps, and that tackling upfront costs is essential if all households are to benefit. But whether it achieves its full ambition will depend on the follow through, particularly how loans are designed, whether skills shortages are addressed and whether more is done to bring down high electricity prices.