Putting customers at the heart of decarbonisation

Reducing carbon emissions from homes is one of the biggest challenges to achieving net-zero by 2050

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We cannot achieve net zero by 2050 without decarbonising UK homes at pace

We cannot decarbonise homes at pace without consumer buy-in

Reducing carbon emissions from homes is one of the biggest challenges to achieving net-zero by 2050

Households remain the single largest emissions contributor in the UK, at 26% in 2021, compared with energy sector, manufacturing and transport.*

The primary use of fossil fuels in households is for heating homes, which is where efforts to decarbonise i.e. find a lower or non-carbon emission solution should be focused.

There is no single solution and a combination of activity would be needed including: exploring new energy and heating technologies; reducing wasted or lost energy through fabric upgrades; changing usage behaviour to more considered and environmentally aware.

*UK Environmental Accounts - Office for National Statistics (ons.gov.uk )

To meet net zero, heat in almost all UK buildings will need to be decarbonised.

The government has made some ambitious 2050 commitments in relation to UK homes

These commitments are split across 3 key areas:

1. Improvements to energy efficiency

2. Installing low carbon sources of heat

3. Optimising energy use

Consumers are critical to making this a reality for their homes but, concerningly, c.62% have little or no awareness of the need to change the way homes are heated to reach Net Zero.

Source: Energy efficiency of housing in England and Wales: Census 2023 A review of household behaviour in relation to food waste, recycling, energy use and air travel - Office for National Statistics (ons.gov.uk) The Latest Heat Pump Statistics (updated February 2024) Heat pumps (parliament.uk) DESNZ PAT Summer 2023 New Zero and Climate change (publishing.service.gov.uk) Baroness Parminter to Lord Callanan_Boiler Upgrade Scheme_220223 (parliament.uk)

We are a long way off reaching the Net Zero ambitions for UK homes

The UK has fewer heat pumps as a proportion of the population compared to the EU; in 2022, 72,000 heat pumps were installed in the UK compared to over 620,000 in France. The boiler upgrade scheme, intended to provide financial support, has been criticised for “failing to deliver on its objectives” and has had low uptake.

Heat pumps are not the only area where the UK are falling behind parts of Europe. While the number of heat networks in the UK has grown from 2,000 in 2013 to 17,000 in 2023,

they still only service 2-3% of the UK’s total heat demand. By comparison, in Denmark, district heating accounts for 45% of heat delivered to buildings and in Germany it is the main heating system for almost 25% of all new build homes.

The UK property stock presents a significant challenge to net-zero due to the large number of poorly insulated properties, which need substantial work, which is costly and disruptive, to become more efficient.

We need to shift consumer mindsets to drive adoption of decarbonisation measures across the UK.

The main challenge in decarbonising homes across the UK is a significant lack of consumer adoption and willingness to invest in efforts to lower the carbon footprint of their home.

Technology to reduce home emissions is continually developing and becoming more widely available but consumer adoption remains relatively low.

There are several factors that will influence whether a consumer wants to adopt, and is willing to pay for, a low-carbon technology in their home.

Affordability, lack of interest and lack of information are the top 3 barriers to consumer adoption and need to be addressed to drive people towards “I am willing” at the top of the adoption curve.

Sources: Euromonitor: Understanding Sustainable Consumers 2023 Key Insights; YouGov Top eco-conscious habits

Addressing the information barrier a key step in the journey to increased adoption and will require significant and sustained efforts to create positive perception and understanding of the need for low carbon homes.

The public are generally aware of the concept of low-carbon heating but have limited understanding of the specific measures and technologies available. This lack of consumer awareness of what the technologies are and what impact they have reduces the likelihood of adoption.

Despite a lack of trust, it is clear that consumers expect the government to take the lead in facilitating and funding the transition to low carbon homes.

To avoid an impasse, whereby both consumers and government view one another as responsible for action, the government should set out a clear strategy, which balances consumer choice with top down support and funding.

The lack of trust in government and energy suppliers means a step up in consumer engagement from them alone will be ineffective.

A united message from government and energy suppliers and trusted sources i.e. family, friends, scientists is what is required to have a meaningful impact on levels of understanding and adoption in the UK.

Consumers themselves are a powerful tool for getting others to listen and believe in messages so making early adopters public advocates will play an important role in accelerating adoption.

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^{Progress in reducing UK emissions - 2023 Report to Parliament (theccc.org.uk)}

It is time for big ideas and collaboration to accelerate consumer uptake to get back on track with net-zero by 2050.

Improved information is critical to get consumers to initiate the low carbon home journey but they will soon drop out unless they are provided with a positive and affordable experience.

Ensuring a consistent and positive consumer experience is challenging because the diversity in UK property stock means there is no one size fits all solution.

We need to explore multiple solutions that provide an affordable, simple and informative experience for as many consumers as possible.

We can already see some of the big ideas below emerging in the market, e.g. energy as a service and supplier partnerships with local authorities, but not at a scale to move the dial on adoption.

This challenge is too big for one or too parties to tackle together. To be successful, we need large scale collaboration and investment from industry, government, local authority and private sector.

At KPMG, we are committed to facilitating discussion and knowledge sharing events, bringing the best of the industry together to develop and test solutions.

Big Idea 01

Consumers pay nothing upfront

Consumers make no upfront payment for their carbon-reducing home energy upgrades.

Big Idea 02

Localised, dedicated support

Local authorities work with the private sector to decarbonise communities.

Big Idea 03

Once and done - do all in one go

Consumers have fabric upgrades, home and heating technologies installed in one go.

Big Idea 04

Home decarb subscription service

Consumers get an E2E service with affordable monthly payments that bundle energy bills, home energy upgrades.