Comment by Katrina Young, Practice Manager – Heat Policy & Local Energy, and Fay Holland, Senior Energy Policy Advisor – Heat Policy, at Energy Systems Catapult.

The Warm Homes Plan was a key plank of Labour’s 2024 manifesto, but while the idea of “warm homes” has remained high on the government’s agenda, the full details of the plan are not expected to be published by the Department for Energy Security and Net Zero (DESNZ) until October 2025.

With the Spending Review now in the rear view mirror, focus will now shift to how the money is spent as well as complementary policies that are less budget dependent. Here are five ways the Warm Homes Plan can support clean energy innovation.

Focus on outcomes

The debate on decarbonising homes too often gets bogged down in questions of “fabric first” vs electrification, which can obscure the true policy goals of decarbonisation and improving affordable access to energy.

The Electrification of Heat Demonstration Project found that heat pumps could be installed in a range of property types without the need for extensive energy efficiency upgrades. But this doesn’t mean that fabric improvements are never needed or never beneficial for the occupants. Different combinations of measures will be suitable depending on the type of property and the priorities of the household.

That’s why we advocate for a “People First” approach to retrofit, focusing on achieving the outcomes of decarbonisation and energy savings while allowing homeowners to choose the best path for their circumstances.

To enable this, the way we measure energy performance must also focus on outcomes. DESNZ is currently reforming the metrics used in Energy Performance Certificates (EPCs), which are used in the regulation and measurement of homes’ energy performance and in the design of energy efficiency schemes. We’re calling for EPCs to adopt three outcome-based metrics focused on cost, emissions and total energy use. This would create greater scope for innovation, enabling new products and services to make it easy and desirable for people to decarbonise their homes.

Targeted support for those who need it most

Upgrading the UK’s homes to modern standards of energy performance will require significant investment – which is likely to come from private homeowners and the public purse. The government has committed to invest £13.2 billion across this parliament to deliver the Warm Homes Plan; its challenge now is to maximise the impact of these public funds and ensure that they reach those that need them most.

While retrofit is needed for Net Zero, it is also vital to improving health and wellbeing. Living in a cold home can cause or exacerbate a range of health conditions including respiratory and cardiovascular diseases, poor mental health, dementia, and problems with child development. Estimates suggest that around one-fifth of excess winter deaths are attributable to cold homes.

The Catapult’s Warm Home Prescription programme has pioneered a service helping people who struggle to afford energy and have serious health conditions made worse by the cold. The programme works with partners in the NHS to identify patients who are then offered help with fuel bills and home energy upgrades. Approaches like this can better target interventions, ensuring that people most at risk from cold homes are first in line for support. However, they can only be effective if funding mechanisms are designed to deliver the retrofit they need.

The current Energy Company Obligation (ECO) scheme, one of the largest sources of retrofit funding, isn’t reaching enough people who have been identified as vulnerable to cold homes. Our upcoming report draws on learning from a recent Warm Home Prescription trial to highlight ways ECO could be reformed to reach more people in need.

Improve the retrofit journey

To deliver these energy improvements, we need to increase the number of tradespeople with the skills and knowledge to deliver decarbonisation and energy saving outcomes.  Government needs to provide the industry with the long-term policy clarity to sustain demand and give people the confidence to invest in their own training and career pathways. Bringing a wider range of people into the sector will be vital.

We also need to ensure that the workforce is equipped to deliver high quality solutions that deliver good consumer outcomes. Poor experiences undermine trust in the retrofit industry and can put households in positions where their health is at risk. The government recently intervened to address problems with solid wall insulation fitted through its funding schemes. We would like to see increased performance monitoring of retrofits to ensure people are actually seeing the promised benefits.

And we need to make it easier for people to navigate the retrofit journey. For example, the private rental sector is one of the most challenging parts of the housing market to decarbonise. Currently, landlords have little incentive to invest in energy efficiency improvements for their properties because they are not responsible for energy bills, while over a fifth of households in the private rented sector are in fuel poverty. The government has announced plans to increase minimum energy efficiency standards and our report published next week will explore the further policy changes needed to accelerate low carbon innovation in the sector.

Align market incentives with decarbonisation

Consumer demand for low carbon heating is unlikely to take off unless consumers are confident that they won’t be out of pocket. The high upfront costs of low carbon heating compared to gas boilers is partly addressed through the grants provided in the Boiler Upgrade Scheme, and our response to DESNZ’s consultation supports the expansion of this funding up to different technologies and ownership models.

But the upfront costs aren’t the only hurdle that needs addressing. Electricity currently costs roughly four times more per kWh than gas, meaning that heat pumps need to be  four times as efficient as gas boilers to compete based on running costs. Innovations and improvements in the quality of installations are helping to increase average heat pump efficiencies, but there is a strong case for reducing the cost of electricity.

Government has an opportunity to do just that through its long-awaited consultation on how to allocate the costs of environmental policies, which are currently imposed on electricity bills. However, the allocation of levies is just one part of rebalancing incentives. We would like to see the UK Emissions Trading Scheme expanded to cover domestic heating, to reflect a proper carbon price on gas heating. A share of the revenue generated should be used to mitigate distributional impacts to lower income households.

Embrace local planning

While national leadership is important, a top-down approach is unlikely to generate the engagement needed. Working with local authorities and communities, Local Area Energy Planning translates local ambition and insights into the changes needed to decarbonise homes and buildings.

Local Area Energy Plans (LAEPs) empower local authorities to identify the most cost-effective route for decarbonising their housing stock. Rather than opportunistic individual projects, a place-based, coordinated approach is needed to scale investment in our communities.

Government should provide the funding for LAEPs to be developed for all local areas across the UK, including resourcing and capacity building within local authorities. This could help pave the way to scale up clean heat neighbourhoods and accelerate the upgrading of people’s homes across the country.

Rolling out LAEPs would provide a strong and consistent basis for Regional Energy Strategic Plans, supporting more strategic planning across the energy system. In a busy and shifting policy landscape, it’s essential that local authorities and communities have a voice in the future of energy investment in their areas.

What next?

We are engaging with government on the future of ECO and other retrofit support schemes to feed into the Warm Homes Plan. To inform our policy recommendations, we would like to hear from other organisations with experience of delivering retrofit through the ECO scheme or addressing health and housing challenges concurrently. To express interest in contributing please complete this short form.