Carbon counter: lofty motives empower home energy vigilantes

Northern Europe’s domestic energy vigilantes can justifiably say: “this is our moment”. Energy prices are steep and temperatures are chilly. Reducing power demand saves money and weakens Russia’s leverage on the west. Turning off a radiator in an empty room is just the start. Home insulation takes the battle to a higher level — the loft.

The UK is a good test case. Many of its 28mn dwellings are old and draughty. They account for 25 per cent of total energy use and 15 per cent of emissions. The burden needs to come down sharply by 2030 to be aligned with the pathway to net zero.

Big national numbers are a bore. Break them down to household level and they start to mean something. A good starting point is the average UK home, consuming 12.2MWh of natural gas a year and 2.9MWh of power, for a total pre-crisis energy bill of £1,200. In 2023, that is set to triple to £3,600, roughly evenly split between gas and electricity.

A £700 investment in loft insulation might lop 25 per cent off gas demand, or around 3MWh — a £430 saving at 2023 costs.

What of the longer term? Suppose energy prices return to pre-crisis levels by 2026, and savings settle at £110 per year. Lex calculates that the “present value” of those savings — applying a 7 per cent discount rate — would be about £1,700. That makes it well worth investing £700.

The internal rate of return would be more than 30 per cent — compared with the 14 per cent this investment would have returned at 2021 prices. No infrastructure investor would turn their nose up at that. Neither should the inhabitants of 33 Omdurman Gardens.

Reducing gas demand by 3MWh would cut a household’s emissions by 0.7 tonnes of CO₂ a year — or some 20 metric tonnes at a national level. That is something like 6 per cent of emissions that have a negative abatement cost, meaning you make money by reducing them.

FT readers often have nice houses, or at any rate, old ones. These tend to leak heat faster than new builds. Readers also have a higher-than- average appreciation of the significance of IRRs. The heat is on — quite literally — to deal with that neglected side loft or coach house that is splurging energy into the winter sky.

Carbon counter is a series of occasional Lex articles that quantifies cost and carbon savings from different lifestyle choices. Other articles are here.