Policy & governance findings report

What were we trying to do?

The research aimed to contribute to understanding of current UK energy policy and governance. We investigated mainstream and innovative cases, developed new theoretical understandings, concepts and policy ideas, and worked with stakeholders to demonstrate the potential for reformed policy and governance to help deliver a fair transition to a zero-carbon future.

How did we build on what had been done before?

At the start of CREDS, different aspects of the theme’s work had different starting points. Our work on building retrofit, for example, built on a considerable tradition and literature, to which we have contributed further, whereas our work on ‘policy asymmetry’ is exploratory and novel. Our research on new policy ideas (e.g. Retrofit Salary Sacrifice), engagement methods (e.g. Watts the DealOpens in a new tab) or practices (e.g. off-site construction) is creating new areas of inquiry.

Main findings

Contribution of energy demand policy to the net-zero transition

The agenda for energy demand change is much bigger than marginal efficiency improvement, and is critical to the low carbon transition. There is a significant resource of untapped energy-saving opportunities in UK homes: specifically, our estimates suggest that one quarter of the energy currently used in UK households could be cost-effectively saved by 2035.

The contribution of demand-side and other modular options will remain crucial, as mass-produced technologies tend to improve more quickly than those requiring large construction projects. The energy transition will include a systemic shift from heat-producing to work-producing energy sources. This enables very large improvements in the conversion efficiency of final energy, through the use of electricity and hydrogen, in particular in heating and transportation. A reduction in final energy demand of up to 40% is likely from this effect alone.

Energy demand appears to receive less policymaking attention than energy supply, even where demand side change could secure similar policy objectives more cost-effectively. Target setting, technologies and market-based instruments receive most policymaking attention while energy demand solutions, changing practices, regulation and finance do not receive the attention they deserve.

While shifting the focus to energy demand solutions and policy support for existing technologies are within the remit of energy policy, regulatory and institutional change for more human-focused energy system operation, and, most importantly, education and public awareness, are not. These require systemic transformation of policy and practice to achieve a just transition to net-zero.

Retrofitting buildings for energy efficiency and climate change

Current UK buildings policy and governance – for both domestic and non-domestic buildings – are insufficient to meet the challenge of climate change. Significant changes in governance, policy, culture and practice are required.

We concluded that successful retrofit and renovation for energy efficiency requires attention to be paid to timings, bespoke/building-specific requirements, and complementary objectives – retrofit is more than just carbon reduction.

At the household level, opportunities for household retrofit should be supported by policy at key points, such as change of ownership/tenancy, or as part of other planned construction work. Working from home, particularly during the pandemic, has been identified as a new trigger for a specific subgroup of salaried homeowner employees to undertake retrofit works. Researchers developed the concept of a Retrofit Salary Sacrifice scheme, building a single process to link finance, project appraisal, management and delivery, and engaging employers as a new actor supporting retrofit. This would overcome a significant deployment barrier by increasing consumer confidence and trust in retrofit delivery. This idea has attracted considerable interest from national and local government, employers and the finance sector, amongst others, and continues to be developed further.

Specifically for commercial buildings, lessons from the successful Australian performance-rating model could be applied in the UK for both retrofit and new build.

Construction skills for net-zero buildings

The UK construction sector currently operates in a low-skills equilibrium which makes it difficult to produce low-energy buildings. Current policies have failed to stimulate an effective retrofit sector. CREDS’ work with the Federation of Master Builders proposes changes that would increase skills to enable the delivery of high-quality zero-carbon retrofit and construction. Meaningful educational and training reform (including higher levels of accreditation and professionalisation) requires industry reform at the same time to create appropriate demand pull.

CREDS commissioned economic modelling work that indicated how buildings and industrial policies could support a net-zero post-pandemic recovery. This included a skills and retraining programme for construction workers to include re-training of gas installers, so that they could develop appropriate zero-carbon technology skills as part of the energy transition.

Multi-level governance

Attention is increasingly turning to subnational institutions and actors (particularly local government) and the potential roles which they could play in driving climate action at local and regional levels.

For city-level action, only 19 of the 35 City Deals we assessed include measures on climate change mitigation, with one also addressing climate change adaptation. Most City Deal climate measures build on existing initiatives or focus on individual projects or specific issues; there is a lack of joined-up approaches. Policy innovation will be needed as sub-national governments are increasingly seen as a significant driver of climate action, including energy demand reduction, at local and regional levels.

There is policy uncertainty and contestation over responsibilities for heat and energy efficiency across scales of government, and policy divergence between Scotland and England. There is a more comprehensive, planned approach to energy efficiency in Scotland than England, with specific policy institutions and funding.

Existing governance institutions are unlikely to support a collective ability to respond to the challenge of net-zero emissions from buildings, and there is growing awareness of the need for institutional innovations. The institutionalist perspective has highlighted the significant contrasts between Scottish and English policy strategies, where Scotland takes a more planned approach with specific policy institutions and funding. Despite these differences, all current developments lack the urgency needed to meet ambitious legal carbon budget commitments, with major governance innovation for heat and energy efficiency policy still required.

New imperatives and new actors

Real world events have highlighted new imperatives in energy transition as well as significant research gaps. The climate emergency requires broadening our understanding of actors in the energy system, and a research focus beyond ‘the usual suspects’.

In responding to Black Lives Matter, CREDS recognised a research gap in understanding the relationship between racial justice and energy demand and developed a scoping project to derive a research agenda. A guide to racially just energy research, arising from that work, has been produced. It assists researchers in being more thoughtful and deliberate about their research.

The exceptionally high energy prices of winter 2022-23, and fast policy response, prompted reflections on how research could match the speed of change in policy and governance. The output was a research agenda and guidelines on practical aspects of executing research in a hurry.

Research has focused on actors in the energy system who are typically overlooked. This includes findings on the value of energy communities as demand-side innovators, and demonstrates that small and medium enterprises are important not only as energy users and producers of energy-using goods and services, but also as influencers of their customers and supply chains.

Novel policies for energy demand reduction

A series of projects in this theme have explored the use of innovative policy options for energy demand reduction. By expanding the scope of energy policy, introducing new policy tools, finding ‘non-energy’ policy opportunities and by transforming multi-level governance & policy evaluation, faster and deeper cuts to carbon emissions can be achieved.

• Heat as a service: heat as a service has the potential to pay a key role in the electrification of heat. The hurdles faced by energy service-based business models have a longer history than is usually recognised, and there is much to learn from the relative failures of the past.
• Local authority energy service models: local initiatives provide different retrofit mixes, with differing potential for effective change. Policy and market changes needed to empower local authorities to contribute systematically to net-zero carbon buildings have been identified.
• Peer-to-peer trading / distributed ledgers as a disruptor of energy retail markets: peer-to-peer (P2P) energy trading – where energy prosumers transact directly between each other – could help enable transition to a low-carbon energy system. Peer-to-peer communities can enable optimised supply and demand of locally generated electricity as well as an active participation of citizens in the energy transition.
• The role of clothing in the transition to low carbon heating: the thermal content and style of clothing is an overlooked but important consideration in the sustainability of the fashion industry, and an area where it could make a positive contribution to reducing carbon emissions.
• Personal carbon allowances: personal carbon allowances (PCAs) could play a role in achieving ambitious climate mitigation targets. PCAs could be trialled in selected climate-conscious technologically advanced countries, mindful of potential issues around integration into the current policy mix, privacy concerns and distributional impacts.
• Energy sufficiency: energy policy based around access to sufficient services will involve questioning expectations and norms about what ‘enough’ means and who gets to decide. Moving to a sufficiency framing will involve challenging social and political debates, and technological advances will not allow us to side-step these.
• Evaluation in the climate emergency: failing to observe, share, and act on policy-based learning risks wasting public money and slowing the response to the climate emergency. Appropriate and timely evaluation can ameliorate these risks, helping to increase the pace and scale of innovation, accelerate energy policy making, and improve delivery.

Methodologies

• Supply chain actors and local traditional and off-side modular building retrofitting strategies – social network analysis to map the skills and communication networks of supply chain actors.
• Clothing and heat demand reduction – exploring future scenarios of clothing-related reductions in heat demand and by a review of current evidence.
• Multi-level governance – comparing policy decision-making and implementation for energy efficiency in buildings in England and Scotland; analysing different local authority business structures for investing in the energy performance of buildings and low carbon heat; and testing the robustness of the typology against emerging developments in 26 City Deal regions.
• Deep refurbishment of buildings – an evaluation of the evidence base on what works (and what does not), and in which contexts, to distil lessons for future policy design and implementation.
• Distributed Ledger Technologies (DLTs) as a disruptor of retail markets – using a realist review approach to identify and synthesise evidence from research in the energy and other sectors; to better anticipate what impacts could come about, how, and who might stand to gain or lose.
• Policy asymmetry in market design – considers the policy paradigm of levelling the playing field by explicitly considering demand-side policy as an alternative to supply within a regulatory process. Drawing on international experience, and detailed analysis of the economics and institutes in the UK, the project investigated how the principle of the level playing field might be applied and the problems in doing so.
• Drivers of policy asymmetry – the work draws on theories in political science including agenda setting and policy windows. Decision-making processes are tracked through a combination of process tracing and interviews with relevant stakeholders.

Banner photo credit: Adobe Stock