Home Economics

The subject of this post is the heating and insulation of homes in the UK, with particular regard to the capital cost of reducing carbon emissions. The costs estimated for homes will be compared with those of other ways of achieving carbon reduction. While the calculations which appear below are based as far as possible on realistic figures, they should be regarded as for illustration only.

UK Government policies on domestic energy and retrofit

A policy paper on the 2020 UK Budget stated that “The heating of our homes will need to be virtually zero carbon by 2050, replacing natural gas and other fossil fuels with low carbon alternatives – likely to be primarily a mix of green gas, heat pumps and heat networks” (Treasury, 2020).

As part of an economic statement issued in July, Chancellor Rishi Sunak outlined plans for green home upgrades. Reporting on the details of the plan, Naomi Schraer wrote that vouchers “worth up to £5,000 will be issued to homeowners in England to make their homes more energy efficient under a Government scheme being launched in September … eligible homeowners will be able to use the vouchers to help pay for environmentally friendly improvements such as loft, floor and wall insulation or double glazing to replace single glazing” (Schraer, 2020). She went on to say that a Government update on 4 August made it clear that the scheme was “more complex than it originally appeared” and only available if at least one of the following improvements was made: solid wall, cavity wall, underfloor, loft or roof insulation; renewable heating such as air-source or ground-source heat pumps, or solar thermal systems. In certain cases of low income vouchers might be available for up to £10,000.

Householders may wonder how the sums mentioned compare with the full cost of the work needed to make their homes energy efficient, and the next section attempts to address this question.

Cost of retrofit

Illustrative costs are given below for several forms of insulation, for glazing and draught proofing and for heat pump installation. With the exception of heat pump costs, all the figures are taken from “What does it cost to retrofit homes?” (BEIS, 2017).

Cavity wall insulation was estimated at £480 to £660 for a semi-detached home of less than 80m2. (This and the other estimates from this source exclude VAT, and are for the same size of house unless otherwise stated.)

The cost of internal wall insulation was estimated at £55 to £140 per square metre of wall, or £5,000 to £10,400 in total, with the corresponding figures for external wall insulation being from £55 to £180 per square metre or £7,000 to £9,000 in all.

Loft Insulation was likely to cost from £10 to £20 per square metre or £180 to £610 total for insulation installed at the joists, or £20 to £40 per square metre, or £1,900 to £2,500 overall for insulation installed at the rafters.

Floor insulation data was scarce, and estimates ranged widely. For insulation beneath suspended timber floors the lowest estimate suggested was £750 for a large semi-detached house, whereas figures quoted in the literature for insulating suspended timber floors were considerably higher: £3,500 to £8,300 per dwelling.

Double glazing costs were in the range £4,800 to £7,000 for a small semi-detached house with uPVC windows.

The following costs for heat pump installations are taken from three sources.

“Ground source heat pumps are the most expensive of the heat pump systems. GSHPs cost anything between £11,000 and £15,000…

Air source heat pumps come in at around half that, between £5000 and £8000. Again, this depends on size and area.” (The Renewable Energy Hub, 2020)

“The cost of an air source heat pump installation lies between about £8000 and £17000” (Tradesmencosts, 2020)

Evergreen Energy (2018 ) quotes The Energy Saving Trust, which “estimates that a typical air source heat pump installation will cost you around £6000 – £8000”

Taking the sum of the lowest and highest costs for cavity wall insulation, external wall insulation, loft Insulation at the joists, floor insulation, double glazing and an air source heat pump installation, the totals range from £18,210 to £42,570. For the purposes of calculating the cost of saving emissions in the following section, we will take a round figure of £30,000, which is close to the average of the low and high totals. Many homes will of course not need all the work included in this total.

Effectiveness of retrofit in reducing carbon emissions

Homeowners contemplating substantial expenditure such as that suggested above may wonder how much CO2 emission will be avoided if the improvements are carried out. To estimate this we must assign a typical figure for household energy consumption, and calculate emissions based on a likely fuel mix. Typical domestic consumption values based on the last two years have been estimated as 12,000 kWh for gas, 2,900 kWh for electricity to domestic unrestricted customers and 4,200 kWh for electricity to domestic Economy 7 customers (Ofgem, 2020). We will take the average of the two types of electricity consumption, 3,550 kWh. The amount of greenhouse gas resulting from the above consumption can be calculated using the appropriate conversion factors (BEIS, 2020a). For gas, the factor given is 0.18387 kg CO2e/kWh, and for electricity, 0.23314 kg CO2e/kWh. Using these factors yields an annual CO2e figure of 3.034 tonnes, which we will round down to 3.0 tonnes.

The conversions factors used above can be expected to change with time. A BEIS report noted “the continuing downward trend in emissions from power stations, with a 13.2 per cent decrease between 2018 and 2019. This is mainly as a result of changes in the fuel mix used for electricity generation, away from coal and towards renewables” (BEIS, 2020b). If we consider the period from 2020 to 2050, we can expect the carbon emissions from electricity generation to decrease substantially, and for electricity to play an increasing part in the provision of domestic heating. The European Environment Agency gave a conversion factor of 0.013 kgCO2/kWh for electrical energy produced in Sweden in 2016 (RenSMART) and it seems plausible to assume that the UK will at least match the Swedish figure by 2050. The reduction in carbon emissions due to domestic heating is likely to be more rapid in the early years than later, but for simplicity we will assume a linear decrease from present values to near zero in 2050. This means that the figure of 3.0 tonnes CO2e per year for the unmodified house in our example would, without improvements, be replaced by an average value of 1.5 tonnes CO2e per year over the 30 year period, giving an aggregate of 45 tonnes CO2e. This represents an upper limit to the emissions savings that could be achieved by the improvements. Since the embodied carbon in the materials to be used is not insignificant, and the heat lost from the building will not be reduced to zero, the true figure of emissions saved, at a capital cost of about £30,000, is likely to be considerably less than 45 tonnes CO2e.

Other ways to reduce carbon footprint

The homeowner, faced with the above figures, will of course note that the capital to be invested will bring a significant reduction in heating bills, but may still have questions about the cost of reducing emissions. On the above calculations, which are admittedly very approximate, the capital cost of saving one tonne of CO2e is at least £667. In order to reap the full financial benefit from reduced heating costs, the homeowner must live in the house for many years, and some may want to consider other ways of using capital to reduce emissions. Two possible routes are carbon offset donations and investment in renewable energy schemes. Carbon offset donations are made to a scheme which promises to reduce emissions in some way, such as by reforestation projects. Investment in a renewable energy project such as a solar PV installation offers emissions reduction and also puts capital at risk, but with the possibility of dividend payments and eventual return of the investment; detailed information about the project and its progress is often available.

Carbon offset websites may invite visitors to enter details on their use of flights, other forms of transport, or domestic energy consumption, and will then calculate the associated carbon emissions and invite a donation to offset them. One such website sets donations at £15 per tonne CO2e (World Land Trust). This organisation “has funded partner organisations around the world to create reserves and give permanent protection to habitats and wildlife.” Another offset website specialises in flight compensation: for example it sets the compensation cost for an economy return flight from London Heathrow to New York JFK at £25.44, corresponding to £14.37 per tCO2e (C-Level). This organisation has projects in Tanzania, Kenya, Nicaragua, India, Indonesia, Mongolia, Fiji and Mexico.

How are we to reconcile the figure of £15 per tonne CO2e with the minimum of £667 per tonne calculated for home improvement? One answer to this question was offered by Duncan Clark almost a decade ago: “Many people are confused by the low prices of carbon offsets. If it's so bad for the environment to fly, can a few pounds really be enough to counteract the impact? The answer is that, at present, there are all kinds of ways to reduce emissions very inexpensively. After all, a single low-energy lightbulb, available for just £1 or so, can over the space of six years save 250kg of CO2 – equivalent to a short flight” (Clark, 2011). While offsetting carbon in the UK may now be expensive, there are no doubt still parts of the world where it is possible to do so cheaply.

More recently Josie Wexler recommended “offsetting at the level of individual projects (rather than just giving to a company’s whole portfolio) because this is the level at which there is most information available” and “giving to Gold Standard-approved wind or solar energy projects. You can find Gold Standard VER projects on the Gold Standard website and you can buy Gold Standard CERs directly through the UN’s platform”. However she pointed out that the “best thing to do is reduce your own emissions in the first place.” (Wexler, 2017).

An insight into the projected costs of carbon offsetting at city level is given by The Carbon Offset Funds Survey Results 2019: this set a price in Greater London of £60/tonne CO2e, expected to increase to £95/tonne CO2e in 2020 (GLA, 2019).

Government statistics on the cost of solar PV give £1077 per kW for small scale solar installations (10 – 50 kW), including installation, grid connection, and VAT in 2019 – 2020 (BEIS, 2020c). Some community energy solar PV projects fall into this category, and have been funded through share offers. Take the lifetime of such an installation as 25 years, i.e. 219,000 hours, and the load factor as 9.7% (Hemingway, 2013). The energy produced over this period is then 21, 243 kWh, less a correction for declining efficiency, per installed kW. If we take 18,000 kWh as the corrected figure, and assume a carbon coefficient of 0.058kg CO2e/kWh for solar PV (POST, 2006) and 0.23314 kg CO2e/kWh for mains electricity, the saving is 18,000 X (0.2331 -0.058) kg, i.e. 3.152 tCO2., at a capital cost of £1077. The cost per tonne CO2 saved is therefore approximately £342.

A more effective method of investment in solar PV installations may be available through the recently launched UK local government green bonds, which allow investment in renewable energy through a local authority project. Such bonds will help install solar power at sites owned by councils such as West Berkshire Council (West Berkshire, 2020) and Warrington Borough Council (Warrington, 2020). Analysis of this type of Community Municipal Investment shows that it has the potential to unlock £3bn for councils to finance net zero strategies (Sharman, 2020)

Conclusions

It is worth repeating the warning in the introduction to this post: the calculations are for illustration only, and they concentrate on only one aspect of the subject, the capital needed to save a tonne of CO2. Other issues such as return on investment have not been analysed. The results suggest that the investment needed to save a given quantity of CO2 varies widely with the method chosen; reforestation schemes are at the low end, effective retrofit of UK homes at the high end, and investment in various types of renewable energy project are in between. Many factors will influence those wishing to deploy capital on carbon saving, and some may decide that the best policy is to divide resources between projects at different points on the spectrum.

References

BEIS, 2017, What does it cost to retrofit homes?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/656866/BEIS_Update_of_Domestic_Cost_Assumptions_031017.pdf

BEIS, 2020a, Greenhouse gas reporting: conversion factors

https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2020

BEIS, 2020b, 2019 UK greenhouse gas emissions, provisional figures, BEIS, 26 March 2020

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/875485/2019_UK_greenhouse_gas_emissions_provisional_figures_statistical_release.pdf

BEIS, 2020c, Solar photovoltaic (PV) cost data, BEIS, Last updated 28 May 2020

https://www.gov.uk/government/statistics/solar-pv-cost-data

Clark, D., 2011, “A complete guide to carbon offsetting”, The Guardian

https://www.theguardian.com/environment/2011/sep/16/carbon-offset-projects-carbon-emissions

C-Level Flight Carbon Calculator