Putting consumers at the heart of the energy transition

• We must put consumers at the heart of efforts to decarbonize buildings and we must support the most vulnerable through the transition.
• Achieving our Net Zero goals will require new forms of collaboration; no one organization can solve this alone.
• The Sustainable Homes and Buildings Coalition is one such example of the sort of collaboration we will need.

That's because the next big chunk of available carbon reductions will need to come from homes and buildings. And that means retrofitting and upgrading real estate - residential, commercial and industrial. It's a particular problem in the UK which has some of the worst performing buildings in terms of energy efficiency with about 90 percent of homes heated via natural gas.

Tackling this next part will not be easy. The solutions will vary by property type and by the circumstances of individuals or businesses that occupy them. There is no one-size-fits-all approach. What works for an apartment building in an urban area may not work for a detached property in a rural area off the gas grid.

There are also significant social considerations to take into account, particularly given the current cost of living crisis. “More than anything, the transition to Net Zero must be equitable,” argued Alastair Harper, Head of Public Affairs at Shelter UK. “If we don't ensure the most vulnerable are able to affordably keep their homes warm and healthy, we will lose public consent for the transition.”

One of the best ways to get bills down permanently, reduce the UK's dependence on imported oil and gas and lower carbon emissions is to improve energy efficiency. So if we want to deliver more affordable and accessible housing, we need to ensure it is energy efficient. We need to make sure the required retrofitting is affordable. And we need to ensure that incentives are properly aligned so that renters are not left behind (when renters pay the utility bills, landlords have little incentive to invest into energy efficiency).

“There is an obvious alignment between our environmental obligations and what we need in order to continue to function as a society as our climate continues to change. This is about strengthening our resilience by ensuring we are keeping our population healthy and affordably heated across the land,” added Alastair.

Perhaps the biggest challenge, however, is in overcoming consumer inertia. Retrofitting can be disruptive and a hassle (particularly for those in rental homes who worry their landlords may `flip' the property to those willing to pay higher rent for an energy efficient home). Funding is also a big issue - even if consumers understand the return on their investment, many struggle to find the upfront cash.

Ensuring a robust, capable and affordable supply chain is also key. “One of the challenges is that government incentives change before the supply chain is able to properly ramp up. That means private sector lacks the confidence to invest into developing the right capabilities and, as a result, costs remain high and capabilities remain inconsistent in various markets,” noted Alastair.

What quickly becomes clear is that no single organization can address all these considerations alone. Indeed, it requires the buildings sector to come together with a range of other ecosystem players - banks, energy providers and the heating supply chain to name a few - to develop integrated solutions that help overcome financial, logistical and technical barriers in order to offer consumers the tools they need. It requires a clear strategy on how to get there. And it needs to put the consumer at the center - in control and taking steps that reflect their own needs and circumstances.

If you were following last year's COP 26 event in Glasgow, you may have noticed a group called the Sustainable Homes and Buildings Coalition. It's made up of NatWest (a leading UK bank), Worcester Bosch (a technology provider), British Gas (a large energy retailer), Shelter (a charity), supported by KPMG. Together, we published a report that explored opportunities to put consumers at the heart of the transition to green homes and buildings. The report takes a detailed look at the challenge, identifies key barriers to consumer adoption and offers some suggestions for driving the transition.

Since Glasgow, the Sustainable Homes and Buildings Coalition has been on the road talking with city councils, policy leaders and other ecosystem partners about how the findings of our report can help drive local area energy plans that encourage decarbonization of homes while recognizing the unique differences between regions and individuals. Each plan must be carefully localized and individualized. There is no tried and trusted blueprint.

Retrofitting homes and buildings is just one of the many actions that must be taken by individuals if governments hope to achieve the ESG and Net Zero goals they have set. So, what did we learn from our efforts to drive positive change in consumer behavior that could be applied into other sectors and challenges? Here are five lessons that came from our work.

1. Government needs to provide the right incentives to drive adoption. This should be a mix of 'sticks' (like higher energy efficiency standards) and 'carrots' (like tax breaks for energy efficiency improvements). There is also a key role for local authorities in taking forward the development of local area energy plans, in consultation with local communities.
2. New forms of collaboration are required. No one organization can solve this challenge alone. Enabling and empowering consumers to make environmental decisions takes an ecosystem of partners working together to communicate a consistent and customer-centric message.
3. We must start by thinking about consumers. We must approach this issue by thinking about the needs of different consumers, helping identify and then overcome different barriers they face in the take-up for energy efficiency and decarbonization measures. Too often in the past this issue has been approached from a technical or policy angle, with the consumer angles only considered as an after-thought.
4. Consider the most vulnerable. To achieve positive outcomes for society, issues can't be viewed in isolation. Understanding how social trends and issues influence the environmental agenda will be key to driving success. In particular, focus must be placed on ensuring the needs of the most vulnerable are understood and addressed to ensure it is a 'Just Transition'.
5. Tailor the solution to local realities. Localization is critical to driving adoption of environmental goals at the consumer level. People need to trust the suppliers, understand the context and feel empowered to drive perceivable change. And local nuances and realities must be reflected to ensure the outcomes are real and relevant.

Consumers are key actors in driving our collective efforts to move to a Net Zero economy. And, while I've framed this story in the context of energy efficiency and homes, the point is that it will take collaboration and coalitions to really change the consumer mindset in ways that drive real environmental outcomes. Moving forward, together.

Want to learn more? Check out this video produced by the UK Government and the Sustainable Homes and Buildings Coalition where leaders from the coalition discuss the key findings.