Investment in basic home insulation could be recouped before the next election because lower bills will reduce the scale of Treasury support for customers, according to new analysis from the Energy and Climate Intelligence Unit (ECIU).
The government is expected to announce an 18-month freeze of energy price cap on Thursday (8 September), either at £2,500 per year or its current level of £1,971. The difference between the price cap and suppliers’ costs could be funded from general taxation or through government-backed loans that would be repaid from future energy bills.
The ECIU said an investment of as little of £1,000 could cover a basic package of measures that would move a home in Energy Performance Certificate (EPC) band D – the UK’s average – to EPC band C. Around 10 million properties lack one or both of loft and cavity wall insulation, which this level of investment could fund.
Based on the latest price forecasts, the think tank said if the Treasury picked up the tab for freezing the cap at £1,971, then this £1,000 investment could be recouped through reduced subsidies by the end of 2024, provided the support remained in place until then. It said households themselves would additionally save £450 on their energy bills.
If the price cap was instead set at £2,500, ECIU said the Treasury would break even on these energy insultation investments in early 2025.
Commenting on the analysis, ex-business and energy secretary Andrea Leadsom said: “Conserving energy makes sense at the best of times but with energy prices so astronomically high, the payback from insulation measures will be incredibly quick.
“I’m convinced the government will want to do more to help vulnerable households – and new funding for insulating lofts and walls could be a cost neutral alternative to the Treasury handing out subsidies for the next few years.
“Insulation becomes a win-win option – keeping people warmer and reducing the use of energy – so good for the purse and good for the environment, while creating jobs for small businesses right across the country.”
The new analysis has appeared following the publication by the Tony Blair Institute for Global Change of the latest in a series of plans for tackling the energy crisis.
Instead of freezing prices, the former prime minister’s think tank proposed a long-term system of rebates that maintains strong incentives for households to save energy.
The rebate would be worth the difference between any future price cap and its current level.
Providing support as a lump-sum rebate would ensure that people would continue to have a full incentive to cut their bills, according to the report. Households on benefits could receive a 100% rebate, while for all others it could be discounted to 75%.
Not giving everyone the full rebate would significantly reduce costs when compared to a straight freeze, freeing up cash to support businesses and fund a “major” insulation programme.
The think tank said EPC data could be used to target rebates more accurately at households with less energy efficient homes, while additional child-benefit payments could be awarded to larger families.
“It is time to end the political carousel of wishful thinking interspersed with emergency budgets. A clear, long-term framework would rescue households, rebuild confidence and force government to get on with the urgent work of fixing the energy system,” the report added.