Nesta, a research and innovation foundation, published a report on 8 January 2024 examining how much insulation UK homes need in order to move to low-carbon heating1. The report argues that insulation is generally beneficial but is not essential before a heat pump is installed, and sets out a proposed approach to improving the housing stock1.
The report states that heat pumps can be installed and work efficiently in less well insulated homes, and that the key factors affecting a heat pump's efficiency are system design and adequately sized radiators rather than insulation1. It says insulation plays an important role in reducing heat demand and can in some cases make heat pumps operate more efficiently, but is not the key factor in heat pump efficiency1. On running costs, the report says heat pumps can be cheaper to run than gas boilers, but only if electricity is cheap enough relative to gas, and that the electricity-to-gas price ratio has fallen to a level where efficient heat pumps can compete with boilers on running costs1. It adds that government action, including rebalancing electricity levies, could make heat pumps still cheaper to run1.
The report also compares carbon savings, stating that heat pumps generally reduce carbon emissions by more than insulation, because low-carbon heating can fully eliminate carbon emissions from home heating while insulation on its own can only reduce them1. It notes that insulation brings other benefits, including reduced energy bills, improved comfort and health, and more flexibility in energy use that could ease pressure on the electricity grid1. It adds that some measures, such as draught proofing, loft and cavity wall insulation, tend to have lower costs and offer excellent value for money, while solid wall insulation is often more expensive and does not always justify its cost1.
The report's recommendations include targeting properties with easy-to-treat cavity wall and loft insulation ahead of hard to treat properties, placing greater emphasis on insulating households in fuel poverty and social housing, and regulating for minimum standards of insulation in private rental properties1. It also says households should not be discouraged from buying a heat pump if their home is poorly insulated1.
"we should aim to improve 13 million homes to reach EPC C standard by 2030, with an estimated investment of around £60 billion"
The report also refers to Scotland, noting that plans for an EPC E requirement meant to come into force in 2020 were cancelled by the Scottish Government, which cited the Covid-19 pandemic as its reasoning1.
Why it matters for households
The report's central claim is that a home does not need to be well insulated to have a heat pump, which bears on the order in which households might consider insulation before a heat pump and other improvements. For a household weighing up measures, the report's position is that insulation and low-carbon heating are not sequential steps, and that system design and radiator sizing matter more to heat pump efficiency than fabric upgrades1.
The proposed 13 million homes at EPC C by 2030, at around £60 billion, sets a scale for the government target for EPC C homes and for how much of the housing stock would need to change. The report's emphasis on cavity wall and loft insulation as the best value measures, and its caution on solid wall insulation, indicates that the cost and benefit of improvements vary widely between property types1. Its recommendations on fuel poverty and private rental standards point to Minimum Energy Efficiency Standards for Rented Homes as an area where regulation could change what landlords are required to do1.
For a household's energy independence, the report frames insulation as reducing demand and easing pressure on the electricity grid, while low-carbon heating is what removes carbon emissions from heating altogether1. The wider benefits it lists, including comfort, health and bill reductions, are separate from carbon savings and apply regardless of the heating system in place1.
What happens next
The report is part of Nesta's policy library for decarbonising home heating1. No implementation timetable, funding commitment or government response to the recommendations has been reported1.