Rishi Sunak has repromised Britain will be carbon neutral in 2050. The current government’s Build Back Better: Our Plan For Growth celebrates cutting-edge technologies and industries, hydrogen, nuclear, and carbon capture and storage (CCS). Sunak is giving them lavish investments in the hope of return. Meanwhile proven solutions such as energy-efficient homes are underappreciated. The 2021 Autumn Budget never mentions “insulation”, “heat-pumps”, or “retrofitting”. Our Plan For Growth meanwhile mentions “retrofitting” once and “heat pump” twice.
The growth-plan promises “to aim for 600,000 heat pumps by 2028”. The heat-pump scheme incentivises buyers to buy heat-pumps through subsidy, so as to prime a “market led intervention” in making houses energy-efficient. This state-lite marketist approach is likely down to the intimidating price-tag for making houses throughout the land carbon-neutral. A house-retrofit costs about £26,000 and there are 26 million old houses projected to be inhabited in 2050. (The remainder to be demolished and new ones built.) So, making houses carbon-neutral for everyone with old homes is going to cost an estimated £676 billion in total. That total figure, however, might mislead you and Sunak alike into intimidated acquiescence: we cannot afford it, that’s the bottom-line.
But if you consider the annual spend—26 billion—the fact homes must be carbon neutral to a deadline—2050—and the fact that in the long-run retrofitting cost-saves—£1289 in energy minused from families’ annual bills—the picture is far rosier. £26 billion is half the annual UK spend on new homes and around the same as current UK maintenance and repair costs. Making the money back for each house would take 20.3 years. And if it’s to happen to the 2050 schedule, it better start soon.
Each retrofitting technique has a present-day-estimated saving-timeline: solid wall insulation six years, window glazing forty years, and roof insulation 46 years. Heat pumps’ timeline is pretty much unknown.
These implemented technologies would save bills. Those saved bills would give future consumers more spare money to contribute taxes to pay-off the retrofitting; beyond the recoup period, citizens would profit from more money to spend on consumption or to save for entrepreneurial endeavours. So, government sponsored retrofitting has evident positive spillovers for the UK economy. £26bn a year and £667bn over twenty years looks appealing by these lights. The money is also available for the government to invest: the chancellor writes, in the Autumn 2021 budget, that £405bn is to be spent over two years, that consumers saved 105bn since March 2020, and between March-Dec 2020 corporate companies saved an extra £100bn. Therefore there is plentiful money in the UK economy, and a conservative government spending highly has an ambitious precedent. Consult the public-sector spending chart from the Autumn Budget, below, for a sense of proportion.
The retrofitting project would have to be state-initiated; every great national transformation has been state-powered. The retrofitting project would not however have to be state-run. As part of the levelling-up agenda, regions with the lowest wages and productivity rates could be selected for trial home retrofits. That has three principle benefits: first, it delivers on levelling-up by upgrading those homes that need upgrading most. Second, fewer people means there are fewer houses to pay for in the short-run. Third, it makes for a model for companies and consumers to learn from and be inspired by, as is already happening with some companies retrofitting whole homes to net-zero carbon. If retrofits work for one region (such as the North East, with the lowest UK wages) with economies of scale applying, then retrofits are likely to catch-on with higher-earning citizens elsewhere. The 12bn Boris Johnson is investing in speculative tech, for example, could pay for 500000 retrofitted homes in The North East. The government could subsidise net-zero retrofit companies and scrap the disparity between new-homes that are incentivised with zero value-added tax (VAT) and refits that suffer from a 5% VAT disincentive.
Retrofitting could, then, become a bottom-line way to save private money in the long-run. We could pay to insulate Britain and it looks like it will pay dividends.