E3G response to: Call for Evidence: Scrutiny of Strategic Thinking in Government

Climate change is a complex, multi-layered problem, cutting across the work and deliverables of all government departments. While the UK has made good progress on some areas of economy-wide decarbonisation – for example, on power decarbonisation – on other areas, progress has been sluggish. A high level of strategic planning should be employed in the government’s approach to net zero. This should include:

      Long-term planning, with flexibility in-built: Climate change is an inherently long-term challenge. The best solutions are often executed via long-term frameworks, policies and funding in order to provide confidence for investors, businesses, local authorities and citizens to plan and invest. While there is a need for long-term signals and commitments, there needs to be a degree of flexibility build in – with an ability to course-correct if something does not work as intended, or external circumstances change.

      A cost-effective, efficient, whole-systems approach to decision-making: Many aspects of the decarbonisation challenge are interlocking, and efficiencies can be gained via considering the system as a whole; rather than taking a siloed approach. In addition, there are opportunities to lower costs and increase efficiency through aggregating demand for technologies and solutions at scale.

      Independent, science-based approach, informed by society-wide engagement: A net zero plan which is not based on rigorous, independent scientific research will fall short of achieving its target. There are significant corporate interests in fossil fuel-based industries which will seek to influence decision-making in a way which is not aligned with achieving net zero emissions at the pace needed. Within parliament, there are political interests which can also run counter to taking a science-based approach.

Our response focuses in on two key areas of net zero where to date, the UK has struggled to make progress in line carbon budgets: home energy efficiency, and domestic heat decarbonisation. We consider how a more strategic approach to decision making on these two areas could help boost the deployment of the clean technologies and measures needed for warm homes which cost less to run.

The UK’s shaky record on home decarbonisation – energy efficiency, heating and hydrogen

The benefits of making our homes energy efficient are well rehearsed. Warm, healthy and stable homes are the foundation of our society, supporting productive and fulfilling lives. The International Energy Agency lists 12 key benefits, including energy savings, boosting energy security, reducing energy prices, supporting energy access, bolstering health and wellbeing, improving air quality, saving emissions, household savings, increasing asset values, improving productivity, enhancing public budgets and providing wider economic benefits.[1]

The Office for Budget Responsibility has recently underscored the important role of permanent measures to reduce household energy demand (and bills) in supporting fiscal stability.[2] These include energy efficiency improvements and the shift away from dependence on fossil heating systems. Research for Citizens Advice suggested that a large-scale drive to bring homes up to EPC C by 2030 would cut consumers’ bills by £24 billion.[3] Heat pumps save more than 70% on gas use compared to a gas boiler, once the gas used to produce electricity is accounted for.[4] As the electricity grid moves further towards renewable energy this saving will increase even more. If all 23 million gas boilers could be replaced with heat pumps while the price of gas remains this high, the savings would be worth around 1.2% of GDP (£26 billion).[5]

Despite these benefits and opportunities, decarbonising the UK’s housing stock remains among the weakest areas of our decarbonisation progress to date. The UK has some of the coldest and leakiest houses in western Europe, and often comes at the bottom of heat pump installation league tables.

Below, E3G considers lessons in (un)strategic planning, and recommendations to address these.

Under delivery of retrofit schemes

A sharp decline in installations is a common theme seen across all the government-funded retrofit schemes over the past decade, as seen in the Climate Change Committee’s graph below.[6] This is due to a combination of cuts to overall funding, combined with delivery challenges.


Installers are now warning of the collapse of supply chains required to deliver the UK's flagship fuel poverty scheme, the Energy Company Obligation (ECO).[7] Recently, the Boiler Upgrade Scheme (BUS) has struggled to get off the ground in year one, with a £90 million underspend from the £150 million annual budget.[8] The BUS faced a 7-month delay to the launch of the online installer portal, which slowed down initial delivery.[9] Similarly, local authorities have struggled to fully deliver funding allocated to the Social Housing Decarbonisation Fund (SHDF) and Homes Upgrade Grant (HUG).[10] Previous government-backed schemes have also struggled to deliver: including the now-scrapped Green Homes Grant and Green Deal.[11]

The energy efficiency sector has suffered from a lack of long-term, strategic decision making – with feedback from industry on scheme design often not smoothly being incorporated to course-correct. Short-term, siloed thinking has created challenges for the market. Major issues are outlined below:

While the UK has experienced delivery challenges, these are not insurmountable. With the correct approach, applying a holistic and strategic approach, many of the issues can be addressed.

Stalling at the starting block of heat decarbonisation

Decarbonising home heating is essential for reaching net zero targets, with around 14% of UK emissions from domestic heating. Nearly 99% of our homes are heated with fossil fuels – the majority of which are fossil gas. Around 15% of homes are “off the grid” and use heating oil and LPG.

Different technological solutions are being proposed to decarbonise heat – including district heating, heat pumps and hydrogen. It is likely that some blend of these solutions will be the eventual answer. However, at the moment, there is a degree of uncertainty among industry, consumers, local authorities and the workforce regarding which technology is likely to dominate. A major source of confusion is around heat pumps vs hydrogen. Hydrogen heating does not exist as a nationwide, tested solution yet.

Green hydrogen, produced through renewables energy via electrolysis, is needed for net zero. Green hydrogen production is starting from a low baseline – with less than 0.1% of global dedicated hydrogen production coming from water electrolysis – and is likely to be a scarce and premium resource for decades to come. Green hydrogen should be deployed where it adds the greatest value for climate and jobs. E3G and others are calling for the government to take a more strategic approach to scaling up the hydrogen economy:

      Encourage the development of “hydrogen clusters” and incentivise co- location of production and demand. It is key that blending, if permitted, is limited geographically to encourage strategic hydrogen deployment – for example, in the Humber and Port Talbot.

      Focusing on the sectors where hydrogen will be essential for decarbonisation (see the ‘hydrogen ladder’ of priorities below):[16] for example chemical and refineries, long-duration grid balancing, international shipping and steel.

The Hydrogen Ladder, Version 5.0

To make the heat transition affordable and cost-efficient, national and local planning will be needed. This should be guided by strategic and independent assessments of different options, considering which pathways are most economic, and aligned with the science of net zero. As the chart below illustrates, from a system perspective, heating homes with heat pumps presents a more efficient use of renewable energy than converting it into hydrogen (requiring 26GW of renewable power, vs 150 GW) to both produce 70GW to heat the UK’s housing stock.

A diagram of a house with heat pumps and green hydrogen

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At a local level, area-based decision-making (i.e., connections to district heating, retrofitting a block of flats) can help lower the costs of installation through allowing demand to be aggregated into economies of scale. Consumers should have a say in how changes are made, and kept engaged and informed throughout. Where local communities are not supportive of change, this can lead to backlash. This was seen recently with the hydrogen heating trail in Ellesmere Port.[17] Justin Madders, MP for Ellesmere Port and Neston, said: “It is clear that leaving people with the impression that this was happening without their consent sent entirely the wrong message out about how we need to tackle climate change”.

While individual households can choose heat electrification today (by installing a heat pump), a hydrogen switchover would limit room for consumer choice. Whole areas would need to be switched over from natural gas on the same day. Hydrogen has been repeatedly shown to have a very poor economic case behind it, which means that it is unlikely that any consumers would choose it anyway because of the running cost implications. On the other hand, any decision to supply hydrogen for domestic use to an area will have to be taken by network planners and government.

Proponents of hydrogen heating point to the fact that we have a significant gas network, and households are used to having boilers in their homes. However, experts have noted limitations.

      First, it’s less efficient to use hydrogen to heat our homes. Green hydrogen is produced using electrolysis, which requires a lot of renewable energy. It is 6 times more efficient to directly electrify our homes via heat pumps.

      Today’s gas transport and heating infrastructure is not ready for 100% hydrogen. Hydrogen is a smaller molecule, and more prone to leaks and explosions, so we would need to upgrade brittle iron works, and upgrade every boiler and cooker to be compatible with hydrogen. The Climate Change Committee has found that the sunk cost of gas network investments does not mean it’s cheaper to use hydrogen rather than heat pumps and heat networks.

      Hydrogen will also be more expensive than natural gas to burn. Current estimates show blue hydrogen is twice the price of natural gas, and green hydrogen is five times this price after long-distance shipping.

Experts agree that heat pumps are our best bet to decarbonise heat fast in the UK. This has been confirmed by recent independent reports, including the Climate Change Committee and National Infrastructure Commission’s Second Assessment, which noted that ‘hydrogen heating will not be available in time to make a material contribution to the Sixth Carbon Budget emissions reduction target’, and urgent action is needed in the short-term to deliver no- and low-regrets measures to decarbonise heat.

There has been a significant push from the gas industry to dismiss heat pumps by spreading misinformation. For example, Desmog has exposed how the Energy and Utilities Alliance has spent a lot of money pushing out negative articles via the communications agency WPP, which took credit on its website for “sparking rage against heat pumps”. [18]

While the government is committed to supporting heat pump deployment – and is introducing a number of supportive policies to boost the market – the continued lack of certainty among industry, installers and consumers around hydrogen vs heating is stalling action. The government is not due to decide on the role of hydrogen for heating until 2026, after a series of trials that are still to be completed. However, some gas networks and boiler manufacturers are advertising blending as a step towards 100% hydrogen heat, which could create confusion among installers and consumers. This in turn could lead to under investment in heat pump supply chains.

The Competition and Markets Authority (CMA) review of consumer protection in the green heating and insulation sector identified several market practices of concern. These include “greenwashing” and misleading messaging about hydrogen-capable boilers alongside lack of upfront pricing information and misleading claims around product benefits.[19]

Applying strategic thinking to accelerate housing decarbonisation

As our case studies above have demonstrated, home decarbonisation policies and schemes could benefit from the application of strategic thinking by government. Below, we consider recommendations which could be applied to enhance the UK government’s approach to decarbonising homes and buildings:

      Long-term planning, with flexibility in-built: There is a need for a meaningful long-term strategy and funding plan. This is needed to guide planning and investment by industry, local authorities and consumers. Following years of boom-bust decision making and chopping and changing of legislation, industry is particular cautious of short-term announcements.

      A cost-effective, efficient, whole-systems approach to decision-making: Through providing more clarity on where different home decarbonisation approaches make sense across the country, based on a review of different housing archetypes and energy infrastructure and resources. This will allow for efficient planning in decarbonisation technologies, local skills and supply chains. Taking area-based approaches can also help achieve economies of scale, allowing communities to lower costs via efficiencies.

      Independent, science-based approach, informed by society-wide engagement: Strategic decision-making on green homes must be better grounded in science, rather than industry lobbying and political interests. Fine-tuning feedback channels from consumer groups, installers, energy companies, local authorities and other delivery partners will help improve the delivery on the ground of retrofit schemes.


[2] OBR, 2023, Fiscal risks and sustainability – July 2023

[3] Citizens Advice, 2023, Insulating British homes would deliver £39bn boost by 2030

[4] Nesta, 2022, How the energy crisis affects the case for heat pumps

[5] Nesta, 2022, Ibid.














[19]  Competition and Markets Authority, 2023, Consumer protection in the green heating and insulation