Energy saving could boost UK economy by £7 billion a year, study finds | energy

Insulating homes in the UK and installing heat pumps could benefit the economy £7 billion a year and create 140,000 new jobs by 2030, research suggests.

However, the implementation of these energy saving measures depends heavily on government policies, according to an analysis by Cambridge Econometrics on behalf of Greenpeace.

For now, ministers have made little plan to encourage households to look into home insulation, although Chancellor Kwasi Kwarteng is expected to make a key announcement on Friday on the economic and energy crises.

Through the Boiler Upgrade Scheme, the Government is offering households up to £5,000 for a heat pump, around half the cost. But uptake has been sluggish so far. To qualify for the government incentive, households must meet a high standard of home insulation, which can cost between £7,000 and £15,000 and for which there is currently no government support for the average homeowner.

Greenpeace UK chief scientist Doug Parr said: “Britain is in the midst of an economic, energy and climate crisis. However, the government continues to shun the eco-friendly home improvements that offer a viable way out of this mess. It’s really confusing.”

The economic recovery forecast in Cambridge Econometrics’ analysis entitled “Economic Impacts of Decarbonising Heating in Residential Buildings,” published by Greenpeace on Tuesday, comes mostly from savings from rising energy bills and the creation of green jobs, as well as the positive impact on the rest of preventing the economy from freeing up people’s spending.

There are also health and social benefits, as people living in poorly heated homes are more susceptible to disease, while lifting people out of fuel poverty improves their well-being and children’s educational opportunities.

Parr said: “The rapid and widespread greening of UK homes will reduce energy use, bills and carbon emissions. It will provide millions of households with warmer homes that are cheaper to run and will help limit the catastrophic effects of the climate crisis. With the UK heading into recession it could give the economy a nearly £7 billion boost by the end of the decade.”

According to the modeling used in the report, in 2030 the government would need to spend £4.2bn on supporting heat pumps and insulation, while households would need to spend £9.3bn. This year, households would also save £11bn from lower heating bills.

Government investment in a scheme to subsidize insulation and heat pump installation would total around £27.7 billion from 2022 to 2030, according to the study.

Greenpeace called on Kwarteng to spend £7 billion on insulation and heat pump installations over the next two years, and to give more support to people living in energy poverty with an unexpected tax on oil and gas companies of 70% of their profits.

Liz Truss, Prime Minister, has set an energy bill cap of £2,500 per year for the average household, which is significantly lower than the £3,500 expected under the previous energy price cap calculation system.

However, the freeze will mean the government has to pay energy companies an estimated $150 billion.

Insulation is the cheapest way to cut energy bills, experts have said repeatedly since Russia’s invasion of Ukraine pushed up gas prices this February. But the government has since taken no steps to improve home insulation rates, to the dismay of experts and green activists.

Insulation rates have fallen by 50% over the past year and since the green house subsidy was abolished in March 2021 following its ‘botched’ administration, there has been no government support for the average household in England to install insulation. Insulation rates have been low over the past decade and the UK has continued to build new homes that use gas boilers, have no solar panels and are not built to low carbon standards, requiring expensive retrofits to reach the goal of net zero to achieve greenhouse gas emissions by 2050.

Financial markets expect gas prices to remain high for at least two years, and some predict it could be much longer.

Jon Stenning, environmental director at Cambridge Econometrics, said: “Improving the quality of Britain’s housing stock and switching to low-carbon heating technologies can immediately reduce household bills and keep the struggling household from having to choose between heating and eating in the winter, whilst also having a bigger one economic growth and significant savings in CO2 emissions in the long term.”

Michael Lewis, Chief Executive of energy company E.ON UK, said: “We have seen the personal impact of people living in warmer, more comfortable homes – not just lower bills, but families living healthier lives on the streets and in housing developments just nicer places to live.”

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