Hope, Radical Uncertainty and Reality - Reflections on the ESNZ Committee’s Report on retrofitting homes for net zero

Hope, Radical Uncertainty and Reality: Reflections on the ESNZ Committee’s Report on retrofitting homes for net zero

“Hope springs eternal,” the old proverb suggests, pointing to our tendency as human beings to always find reasons for optimism, no matter the circumstances. It sprung to mind as I read the Energy Security and Net Zero (ESNZ) select committee’s report last week on Retrofitting homes for net zero, the ‘battleground’ where hope and reality both meet.

The report, which I contributed evidence to and am pleased to be cited in, has much to commend. Select committees play a vital role in scrutinising critical issues and making recommendations to government that are based on tangible evidence – this report alone has successfully woven together evidence from 50 written submissions (and 173 submissions to its predecessor committee) and the questioning of 17 witnesses, as well as 25 previous witnesses.

It rightly recognises the scale and urgency of the task of decarbonising home heating as one of the thorniest challenges on the road to net zero carbon emissions. The figures alone quoted in the report are sobering, with the Climate Change Committee (CCC) estimating a total cost of £250 billion (or £8 billion a year) to decarbonise the UK’s homes – while Citizens Advice suggests a cost of £15,000 per home just for energy efficiency upgrades. And that’s before we get to the cost of heating systems and network upgrade costs – as well perhaps the biggest challenge of all: changing customer behaviour.

The report goes on to make a number of sensible, grounded recommendations, particularly on government retrofit support schemes and advice, recognising that such schemes “have been too numerous, complicated and short-term, which has failed to instill confidence amongst consumers, installers and the supply chain.”

The proposals for reform include: strengthening the Future Homes Standard to streamline energy efficiency schemes; establishing a national Warm Homes advice service, like they have in France; and, above all, recognising that making homes more energy efficient is a no-regrets move, whatever the eventual heat technology.

And while I agree with the vast majority of the report’s contents, parts of it still feel a little detached from operational and customer realities. This is especially clear when it addresses the practical and behavioural challenges involved in decarbonising home heating.

It is here that I was struck by two recurring themes: the search for certainty in an inherently uncertain world, and the tendency to oversimplify a complex situation – and thus not considering the full impact of its recommendations.

Dealing with uncertainty

On the subject of uncertainty and the vexed subject of hydrogen, the report has three of its recommendations calling for a prompt decision on its role in heating with one unequivocally stating that:

“Delaying a decision on the role of hydrogen for domestic heating until 2026 continues to create profound uncertainty. This means that consumers are delaying their switch to low carbon heating systems.”

Whilst this conclusion might look appealing from the point of view of ‘creating certainty’, it risks shutting down a valuable option before the full picture is clear. What is more, I very much doubt that many of the contributors who are arguing that “consumers are delaying their switch” can cite many people they know who, when replacing their gas boiler, say they have decided not to switch to a heat pump because they believe hydrogen is coming. In fact, recent data shows that just 5% of people said uncertainty about the future role of hydrogen boilers has affected their decision to install a heat pump.

In a world of ‘radical uncertainty’, as John Kay and Mervyn King have so aptly described it, maintaining flexibility or “optionality” is not dithering, but eminently sensible. Some homes, geographies and use-cases may at some point benefit from hydrogen, even if it is not the mainstream route for decarbonising home heating. This is particularly important for the significant number of households that can’t afford – or aren’t suitable for – heat pumps, or the industries that can’t easily electrify due to the high temperatures they need gas to reach. Pushing for clarity too soon might create the illusion of progress, but this risks cementing decisions before we understand and fully appreciate the terrain.

There is some commentary in the report that an early decision will seemingly help Ofgem regulate the gas network. Ofgem do that already and must be able to do that in a world of uncertainty – and be adaptable to change when it comes.

As Margaret Heffernan, the entrepreneur, CEO, and author (and professor of Practice at the University of Bath School of Management) wrote in a recent article:

“Adaptability, not control, is the critical dynamic for surviving uncertainty.”

This relates to regulation and policy making, of course – as well as running a business.

Over simplifying solutions

The report takes an over simplified view of solving the problem of decarbonising home heating without considering the consequences.

One critical example is the recommendation to reduce the policy cost difference between gas and electricity bills. While some organisations, like Energy UK, support shifting more of the cost burden from electricity to gas in order to “rebalance” the market, others – including the MCS Foundation – have rightly pointed out, this risks penalising households who are already paying more to keep warm. Meanwhile, those with greater financial means are more likely to take early advantage of schemes like the Boiler Upgrade Scheme, which provides subsidies for people investing in heat pumps.

Analysis by Cadent has shown that shifting policy costs onto gas, based on the CCC’s Balanced Pathway, would see a household connected to gas paying over £1,045 per year in energy policy costs alone by 2035, rising to £4,585 per year by 2050. Customer support for the idea of net zero is unfortunately waning, and we need to be careful of policies that seek to add further support to this narrative by making the transition painful to the most vulnerable in society. We need policy that is not just effective, but fair and credible for the many, not the few.

A second example, is the sweeping conclusion that the vast majority of customers will have electrified solutions, recommending that:

“The Government must provide consumers, installers and the supply chain with certainty that most home heating will be powered by electricity in future.”

Notwithstanding, this statement again tries to create certainty in an uncertain world, it is not clear at all how this would be delivered when:

“……despite government support, including grants of up to £7,500 provided through the Boiler Upgrade Scheme (BUS), heat pumps remain unaffordable for many households.”

So, there are real questions as to how this is going to be paid for when customers can’t afford to make the change – and we experience a tight fiscal situation that does not appear to be easing any time soon. And again, most critically, the report does not set out how we are going to persuade customers to adopt the necessary technology, even if it were affordable. It’s also not clear why electricity has to be the only solution, rather than using a mix of solutions that work best for people and the energy system.

Moreover, the conclusion on electrification leads the report to call for a repurposing of the gas network – a rather premature conclusion and one that creates an undue sense of urgency and uncertainty that could therefore lead to higher customer bills. It’s also a strange state of affairs when the gas network is one of the few bits of British infrastructure that we can be proud of as one of the only truly world-class bits of infrastructure we possess.

Overall reflections

Perhaps my biggest reflection is that the report, despite the majority of its excellent recommendations, lacks a cohesive thread. It reads at times like a shopping list of good ideas rather than the joined-up roadmap we would like to see. This is perhaps not surprising given the breadth and range of evidence provided to the Committee. As a result, the report somewhat skirts around the very real challenges of a fully electrified future, from grid capacity to affordability to skilled installers.

This is not a criticism for criticism’s sake, particularly when what the ESNZ Committee does is so valuable. It is a call for deeper integration, for policies that are system-aware, customer-grounded, and open to uncertainty. The net zero transition will not be a straight line, and that is okay. But if we want public buy-in and political endurance, we need to start speaking more plainly about the costs, choices and trade-offs ahead.

Hope is a good thing. But so is pragmatism.