ACHIEVING NET ZERO HOMES

Net Zero Housing – how do we do that?

How do we make UK housing net zero? Doing it is one thing. Paying for it is entirely different. In his fourth of our series of articles, Andy Sutton, Co-Founder and Director of Innovation at Sero, focuses on the money.

We need to talk about how we pay for net zero carbon. First, let’s put to bed the idea that net zero carbon can be paid for by public funds from government, whether devolved, national, or international. The macroeconomics just don’t add up, even for economies that are used to carrying a much higher tax burden than is politically acceptable here in the UK. There’s a case for national debt financing, of course, but that’s just swapping one massive burden on future generations for another.

Grant funding and subsidy schemes have to focus on the two areas government money can make a meaningful difference: supporting the most vulnerable in society; and accelerating innovations that offer wider solutions after they have achieved cost reductions. The smart public money will be spent on these two areas, and in many cases at the same time. Welsh Government’s Innovative Housing and Optimised Retrofit Programmes both typically illustrate combining these objectives.

“…we need to see our home’s journey to net zero carbon as a pathway, not a one-off cost.”

With the public purse limited to helping those who need it most, how do the rest of UK homes decarbonise?

Firstly, we need to see our home’s journey to net zero carbon as a pathway, not a one-off cost. By breaking the scale of the challenge into smaller pieces, and spreading this cost over time, it can be included as part of the ongoing repair and maintenance expenses of a home. Whilst most owner-occupiers don’t overtly budget in those terms, every home has an annual maintenance spend, and the ‘distress purchase’ to replace a broken combi-boiler can become a planned switch to a decarbonised heat source at the end of its service life.

Secondly, as awareness of the legal Net Zero Carbon obligation rises, we will see normal commercial behaviours come to bear, with negotiations over the price of homes more likely to include the cost of works required to make a home net zero. We’re already aware of new homes bought by a larger landlord that are having the cost of decarbonisation deducted from the purchase price, and these are likely to represent early movers for the wider housing market. If we fast-forward a decade, to hold or maximise your property value, you’re likely to need to be able to show that the home has a low future cost for it to achieve net zero.

Thirdly, relevant costs will move to support net zero. In part, this will be the regrading of taxes on electricity as alluded to in the UK’s ‘Heat and Buildings Strategy’. This will reduce the tax on the lower carbon electricity supply and increase it on the higher carbon gas supply. The resulting impact on home energy bills will affect the choice of heat source at replacement (and the more vulnerable will need to be supported during the transition).

Manufacturing scale and supply chain will, of course, be the other major cost movement here. Many retrofit measures, especially the low/zero carbon technologies, are only at the beginning of their cost reduction curves as the volume of production increases. These, with the associated efficiency innovations, will drive unit costs for many technologies down. Combined with reduced time-per-install, such cost reductions will reduce the capital price of measures as each step on a home’s Pathway to Zero becomes needed.

Taken in combination, the increase in cost to take a home to net zero from a basic level of annual maintenance costs will therefore reduce. It will be seen in the context of preserving the intrinsic value of the home, or even improving it. It will be measured against the reduced operational costs of lower carbon energy, and avoidance of the inevitable taxation that will be levied on carbonprofligate homes at some point.

■ More information on Sero here: www.rdr.link/laa003