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.