Innovative finance can overcome consumers’ reluctance to invest in home efficiency

Research published yesterday by the National House-Building Council (pdf) showed that house buyers are not very interested in energy efficiency, even though it will save them money in the long run. They’re more interested in a nice kitchen.

Something similar emerged from the UK version of the McKinsey curve of marginal abatement costs (see p14 of this pdf). Lots of the measures below the line (i.e. those that save money as well as reducing emissions) are to do with building efficiency – condensing boilers, wall insulation etc. – and are not happening even though they make economic sense.

Two possible explanations: (i) consumers are too short-sighted to understand the benefits of improving their homes, or (ii) their discount rate is sufficiently high to prevent them from investing. They prefer to spend the money on kitchens or holidays that they can have now.

There must be opportunities for energy suppliers to make deals with home owners. You get a new boiler for free and pay a premium on your bills until it is paid off (the better efficiency means that the total bill is not higher). The premium would be designed so that the supplier could profit on its capital outlay.

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One Response to “Innovative finance can overcome consumers’ reluctance to invest in home efficiency”

  1. Unfortunately, house buyers are more interested in a nice kitchen or bathroom than energy efficiency of their potential home because these are the selling points of the house. People are more likely to enquire about the kitchen than they are about the house’s insulation. i would say that it is their short-sightedness that supports their choices so we need to make the point of long term benefit of energy efficiency a lot clearer!

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