Insulating Britain: If not now, when?

1 June 2022

In light of news of further energy price cap increases, Lecturer in Machine Learning for Smart Buildings and Cities Dr Phil Symonds evaluates different home energy efficiency measures and how to measure the return on insulation investment.

It emerged last week that the energy price cap is likely to rise again in October by £800, up to around £2,800 for a typical household. That’s a staggering 120% year-on-year increase. Figure 1 shows the evolution of the wholesale electricity price (£/MWh) and the energy price cap since Feb 2018 to present. Increases in energy costs are being driven by a rebound in demand for natural gas following the pandemic and supply issues amplified by the war in Ukraine. Homeowners and tenants must now be considering ways in which they can reduce their fuel costs. Given that heating is responsible for roughly 60% of typical household energy consumption (~10 MWh/year in the UK [1]), home energy efficiency measures (such as insulation) should be considered a worthwhile investment.

Figure 1 – Wholesale electricity price (£/MWh) and the energy price cap (source: Ofgem [2])

How long for a return on insulation investment?

When considering whether to invest in home energy efficiency upgrades, the payback period is often considered. This is the time over which a return on the initial investment is made and is defined as:

Payback period (years) = Upfront cost of intervention (£) / Energy savings per year (£/year)

A key limitation of this formula is that it fails to account for dynamic (time varying) energy prices. For example, installing loft insulation a few years ago (say 2010) might have initially cost £300. The insulation may have saved around £120 per year (based on energy prices at the time). This yields a two-and-a-half-year payback period. However, assuming the insulation maintains similar performance to when installed, the annual saving now (based on Ofgem’s April 2022 price cap) could be around £255. Table 1 provides estimates of typical intervention costs, and annual savings under both the April 2022 and the expected October 2022 Ofgem price caps. These estimates indicate that if you were to install cavity wall or loft insulation now, you could see a full return on the investment within just two years. So why for England’s 24 million homes, have only around 50% of walls and 40% of lofts been insulated [3]?


Measure	Installation cost (£)	Annual estimated savings (April 2022 energy prices) (£)	Annual estimated savings (expected Oct 2022 energy prices) (£)	Payback period based on Oct 2022 energy prices (years)
Cavity Wall Insulation	750-1,000	285	400	1.8-2.5
Solid Wall Insulation (internal)	5,000-7,000	390	555	9-12.6
Solid Wall Insulation (external)	8,500-15,000	390	555	15-27
Loft Insulation	550-750	255	360	1.5-2
Floor Insulation	1,300-2,700	75	106	12-25

Table 1 – Installation costs and annual savings based on the April and October 2022 energy price caps for various insulation types (data sources: [4, 5]). Note: Installation costs (including work and materials) are also likely to rise.

Insulating Britain: A mammoth task

As of December 2020, it was estimated that there were 3.9 and 5.7 million easy to treat homes in Great Britain (GB) with uninsulated cavity walls and lofts, respectively [6]. Table 1 indicates that installing cavity wall and loft insulation should be no brainer. The financial argument for insulating older homes (usually pre-1930s) with solid walls is less compelling. As an owner of a ground floor converted flat (circa 1900s), I find myself in this position. As much as I would like to make my flat more energy efficient, neither of the two insulation options available (wall or under floor insulation) are likely to be cost effective*. Private renters may find themselves in precarious situations where their landlord has no incentive to upgrade their property, pushing those on low incomes further into fuel poverty. In GB, 7.7 million (91%) homes with solid walls remain uninsulated [6]. There is therefore a need for additional financial incentives to insulate these harder to decarbonise properties.

Faltering schemes to promote insulation measures

There have been several Government schemes designed to promote uptake of insulation and other home energy efficiency measures over the years. Recent schemes include the Energy Company Obligation (ECO) and the Green Deal (more details on these here [8, 9]). Recent schemes, however, have failed to deliver the uptake required to substantially decrease energy demand from the UK housing stock. Figure 2 shows historic installations of insulation and the projected insulations required under the Climate Change Committee’s (CCC) net-zero pathway [10]. Installation uptake has dropped significantly since the early 2010s, when previous schemes were active⁺. There are several financial reasons why more recent schemes have failed to live-up to expectations (see this post [11] for more details). There are also concerns that insulation (if not installed correctly with provision of compensatory ventilation) can lead to indoor environmental quality issues such as overheating, damp, and increased indoor air pollution levels [12].

Figure 2 – Historical home energy efficiency (HEE) installation data from Department for Business, Energy and Industrial Strategy (BEIS), and projected data from the CCC [10]. Image credit: Giorgos Petrou.

Concluding remarks

If the UK is serious about meeting its net-zero targets, it needs to act fast. Maximal life cycle carbon and financial savings will be achieved if insulation is installed sooner rather than later. When the chancellor announced last week a package of measures worth £15 billion in response to soaring energy prices, not a penny was set aside for energy efficiency. Recent schemes to promote energy efficiency such as the Green Deal and the Green Homes Grant have failed to deliver on expectations. Better financial incentives are required to encourage installation of insulation, particularly in older hard to decarbonise homes which are often also responsible for high emissions. There is also a need to set out clear and transparent objectives in future schemes. Finally, there needs to be additional money set aside to ensure that installations minimise disruption and don’t compromise occupant’s health and wellbeing.

Phil Symonds joined UCL IEDE in 2014 as a research associate and was appointed as a lecturer in 2020. He is involved in the Wellcome Trust funded project 'Complex Urban Systems for Sustainability and Health' which seeks to engage with stakeholders in several cities to identify healthy decarbonisation pathways. Phil’s expertise include the computational modelling and analysis of built environment data through the use of statistical techniques. Prior to joining UCL IEDE, Phil completed a PhD in Experimental Particle Physics at Brunel University (2010-2014). During his PhD, he was based at the Center for European Nuclear Research (CERN) for 18 months as a member of the Compact Muon Solenoid (CMS) experiment.