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UK Economic Outlook

Explore the financial benefits from upgrading residential energy efficiency and the contribution these improvements could make towards the UK’s net zero ambition

July 2021

The residential sector accounts for around 20% of UK CO2 emissions. The sector’s emissions have only fallen by 13.5% since 1990 and actually rose by 1.8% during 2020, due to lockdown restrictions and remote working. To achieve the UK’s net zero target by 2050, it is therefore crucial that policymakers focus on improving the energy efficiency of UK housing. This principally involves:

  • Reducing the energy required for heating homes with more efficient heating appliances and improving insulation
  • Installing energy efficient electrical appliances, including low energy lighting

In this edition of the UK Economic Outlook, we assess the potential financial and environmental benefits of improving the energy efficiency of UK properties.

Households could save around a quarter of their annual energy bills from upgrading their property’s energy efficiency

All Energy Performance Certificates (EPCs) issued in the UK set out suggested upgrades to each property and the potential EPC rating improvement those could collectively achieve. We estimate the gross energy bill savings and emissions reductions that could be associated with such improvements (not accounting for the upfront costs of upgrades, or the emissions associated with making the upgrades).

The savings per household vary by the type of dwelling (i.e. a house or a flat) and whether it is a new property (i.e. built within the last 3 years since the Minimum Energy Efficiency Standard (MEES) was introduced in 2018). As expected, the savings are greater for houses and older properties.

For an average dwelling in England and Wales built before 2018:

  • Households can expect to save around one quarter of their energy bill each year, or £178, by upgrading to their potential EPC rating, as determined by the Ministry of Housing, Communities and Local Government (MHCLG). This is equivalent to about 0.3% of their annual household disposable income.
  • Viewed over 10 years, these total savings amount to around £2,150 per household.
  • Aggregate energy bill savings in England and Wales could amount to £6.7 billion per year, equivalent to 28% of England and Wales’ annual total energy consumption, or £80 billion over 10 years.

Total energy bill and carbon emission savings per year from upgrading properties to their potential EPC rating as determined by MHCLG, England and Wales (£m)

Source: PwC Analysis

Improving residential energy efficiency has the potential to account for almost 15% of the UK’s journey to net zero

Viewed through energy bill savings at the individual level does not fully capture the benefits of improving residential energy efficiency. Our analysis reveals that if all properties in England and Wales were to upgrade to their potential energy efficiency, it could deliver considerable environmental benefits and make a significant contribution to the UK’s emission reduction targets.

  • Total avoided CO2 emissions in one year could amount to 46 million tonnes, equivalent to 67% of UK residential CO2 emissions and 14% of total UK CO2 emissions in 2020.
  • By 2050, the avoided CO2 emissions could total 1.4 billion tonnes.
  • Cutting 46 million tonnes of emissions a year would play a key role in the UK’s journey towards net zero, accounting for 14% of the required annual cut in CO2 emissions from now until 2050. This does not account for the need to reduce emissions of other greenhouse gases as part of the UK’s 2050 net zero target.

Realising these benefits, however, will not be without its challenges. In order to encourage households to make energy efficiency upgrades, some key barriers need to be overcome. First and foremost, the upfront costs of investing in home upgrades can be significant and sometimes need to be spread over multiple homeowners over a period of time. Although upgrading could eventually increase house prices, for low income households in particular, this long clawback time could deter investments.

Clear policy guidance and long-term support to homeowners, landlords and construction-related businesses could incentivise and potentially speed up the progress toward more energy efficient homes, as well as meeting the UK’s ambition for net zero by 2050. This guidance should include emphasising the wider environmental and long-term financial benefits, which include an increase in property values. The return on investment will be higher for households living in regions with higher house prices.

How upgrading home energy efficiency could contribute to net zero CO2 emissions by 2050

Source: BEIS, PwC Analysis

Explore the data

See how the financial and environmental benefits differ at the local level and by property type over time, and the proportion of household disposable income that could be saved using our interactive data explorer below.

The data explores the potential benefits of upgrading properties in England and Wales to:

  • Their potential Energy Performance Certificate rating, as determined by MHCLG
  • New build standards, as set by the Minimum Energy Efficiency Standard (MEES) in 2018

Find out the EPC rating of your property, and recommended measures to make your home more efficient and sustainable.

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[1] mtCO2e stands for million metric tonnes of carbon dioxide equivalents
 

Contact us

Nick Forrest

Nick Forrest

UK Economics Consulting Leader, PwC United Kingdom

Tel: +44 (0)7803 617744

Dr Jonathan Gillham

Dr Jonathan Gillham

Chief Economist and Director of Econometrics and Economic Modelling, PwC United Kingdom

Tel: +44 (0)7714 567297

Hannah Audino

Hannah Audino

Economist, PwC United Kingdom

Tel: +44 (0)7483 348728

Barret Kupelian

Barret Kupelian

Senior Economist, PwC United Kingdom

Tel: +44 (0)7711 562331

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