1. Household investment in home energy retrofit: designing effective policy
18th September, 2018, BIEE Conference, Oxford
Niall Kerr
Research Fellow, ClimateXChange/University of Edinburgh
Mark Winskel,
Senior Lecturer and Chancellor’s Fellow, University of Edinburgh

3. Outline Background Retrofit policy in Scotland
Potential for private investment
Evidence review
How should private investment be measured?
How can policy more effectively encourage private investment?

4. ‘Consumers at the heart of the energy system?’
Home energy retrofit: wide-range of intervention options, with varying degrees of intrusion.
Low carbon heat options: the public acceptability of retrofit and other low carbon heat options.
Private and public collaboration: retrofit involves a joint investment from public and private funds.

5. Scotland and retrofit policy
Scottish Energy Strategy (2017) and Climate Change Plan (2018)
Energy Efficient Scotland Route Map (May 2018)
Millions of homes already retrofit: cost-effective first, low hanging fruit
Ambition: ‘By 2040 all Scottish homes to be EPC band C (where technically feasible and cost effective)’
Retrofit investment
Policy ambition: more than £10 billion required investment in Scotland
Public funds likely to be below this – less than £1 billion designated public funds over the next 5 years for retrofit in Scotland

6. Our evidence review
“How can public policy more effectively encourage private, ‘able to pay’ households to invest in energy efficient retrofit?”
Private, ‘able to pay’ owner-occupied households investing in home energy retrofit
Required retrofit investment to achieve Energy Efficient Scotland ambitions

7. Systematic Evidence review
Systematic collection of evidence: 1000 academic research articles considered and 81 given a full reading
Structured review: broad topic required evidence themes - Quantifying household investment and Achieving household investment - demand-side policies, supply-side policies and overall policy package dynamics
Expert peer-review of initial findings
Re-focus of UK supplier obligations “entirely on low-income and vulnerable”

8. Household investment: policy additionality
Does policy facilitate additional retrofit or support retrofit that would happen in its absence?
Different additionality for different measures: higher additionality for supplementary measures e.g. new insulation, than for replacement measures e.g. new windows or doors
Positive spillovers: from programme participants and non- participants; can lead to 100% + ‘Net-to-Gross’ ratio estimates
Overall take-up and scale: high additionality does not equate to large amounts retrofit
Re-focus of UK supplier obligations “entirely on low-income and vulnerable”

9. Policy additionality

10. Household investment: leverage
Leverage: private investment alongside public investment
Leverage and additionality: only private investment that is additional counts as leverage
Policy efficiency: one means of assessing policy is it’s efficiency of attracting additional private investment
Overall private investment: affected by Additionality, Leverage and Spillovers
Re-focus of UK supplier obligations “entirely on low-income and vulnerable”

11. Leverage of private household investment

12. Household investment: additionality, leverage and scale
Additionality : the extent to which policy supports ‘additional’ retrofit or whether the households receiving support are ‘free- riding’
Leverage: the ratio of private to public investment associated with retrofit policy
Overall effectiveness and scale: high additionality and leverage do not mean high levels of retrofit
Re-focus of UK supplier obligations “entirely on low-income and vulnerable”

13. Demand for retrofit: the financial carrots
Grants or Tax incentives
Non-repayment subsidies more common
Attractive to households
Low interest loans
Less common and less attractive to households
Higher private investment leverage
Policy effectiveness vs Policy efficiency?

14. Demand for retrofit: the sermon and the stick
Information based policy
Energy performance certificates and
face-to-face energy assessments
Regulations
Minimum standards for replacement
Retrofit when extending a home or when
renovating

15. Supply-side of retrofit
Actors involved with installing, designing, advising or selling home energy retrofit
General home refurbishment: a much larger market than energy retrofit
Trigger points: moving house and other renovations
Whole house plans: whole house projects beneficial but often impractical

16. Overall policy package
Policy stability
Churn in policy design creates uncertainty for demand and supply side
Policy simplicity:
Simplicity in application for funds and in understanding policy
Policy flexibility
Regional flexibility and in reacting to policy evaluation

17. Summary
Large opportunity (and need) for private household investment in retrofit
Additionality, leverage and overall scale: how is policy effectiveness measured?
Financial incentives: loans offer higher leverage but are less attractive to households
Supply alongside demand policy: thinking holistically about policy offering a push and pull from demand and supply
Tension between policy efficiency and effectiveness as retrofit policy extends across the housing stock

18. Thank you Questions? Comments? niall.kerr@ed.ac.uk