A National Scheme of Building Insulation Instead of QE3

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Oct 23, 2011, 4:04:10 PM10/23/11
to Guild of Green Economists
Ken Neal of Newbury, Berks. has just sent this off to all the relevant
politicians and the Ecologist and Economist magazines after consulting
with a number of friends and colleagues in "the trade".
It seems to chime with what Tim Jackson was saying at the Schumacher
Centenary Festival with regard to where the QE money was going and
where it should be going. Ken posted it on PowerSwitch and the
discussion there may be useful.


This paper makes the case for a national scheme for the insulation of
buildings, especially housing, to very high standards which would be
funded by the government printing the money and that money being
reclaimed over a long period through a charge on the property. This
scheme could be in addition to or instead of Quantitative Easing.

The UK faces a number of problems in the coming years which could all
be mitigated by the introduction of a national scheme for the
insulation of buildings to a standard which will meet the 2008 Climate
Change Act’s legal requirements for an 80% reduction in energy use by

Rather than the Bank of England pumping Quantitative Easing (QE) money
into the banks and seeing it swallowed with little effect in the
general economy, the top down approach, a scheme such as this would
send a flood of money around the economy and rejuvenate it from the
bottom up. The money would end up in the banks in the end but would
have done some good on the way there. The building industry has
traditionally led the country out of recession and could do so again
with this scheme.

This way of boosting the economy using the building industry is more
efficient than by boosting new build as new build is about 70%
materials and 30% labour whereas this type of refurbishment work is
about 30% materials and 70% labour. There are more jobs created in
refurbishment work than in new build.

Among the problems referred to in the first paragraph are:-

1 A national indebtedness problem requiring a reduction in national
borrowing and spending.
2 A personal indebtedness problem requiring a reduction in spending
and an increase in saving.
3 A shortage of liquidity in the banking system leading to a reduction
in lending.
4 The failure of the first round of QE to stimulate lending to
5 Lack of growth in the economy.
6 A need to spend more on a personal basis, which would have to be
funded by increased borrowing, to stimulate growth in the economy.
7 An increasing balance of payments deficit caused in part by the
average 6% per annum depletion of North Sea oil and gas reserves,
together with a circa 20% reduction in production this year, and the
necessity to import replacement fuel.
8 Fuel supply difficulties caused by political action, world
shortages, high growth rates in China, India and Brazil and higher
fuel use in the producing countries.
9 A 40% reduction in our electricity generation capacity in the next
five to ten years as our nuclear and coal generation plants are phased
10 The Kyoto requirement to reduce our fossil fuel use by 80% by 2050
and the Climate Change Act setting that requirement into law.
11 An aged housing stock with low insulation, air tightness and
thermal comfort levels.
12 An aging population which requires higher temperatures for thermal
13 Fuel poverty created by increasing fuel world prices and lowering
pension payments.
14 Increasing unemployment levels and a lack of available investment
to counter this trend.
15 Low interest payments to savers, mainly the elderly wishing to
supplement their devastated pensions.

The government has tried to address some these factors with the Green
Deal (GD) and to address energy efficiency but this will,
unfortunately fail. It will fail for five reasons:-

1 The purported £10,000 available in the GD is not enough for any
significant work to be done.
2 The GD Golden Rule requires an economically viable solution to
individual installations
3 People are unwilling to spend money in the current climate of
financial uncertainty
4 Interest will be charged on the sum borrowed, which will probably
double the repayments over the period of the loan.
5 The workings of the GD are too slow to address the problem as it is
market led.
6 Take up has to be very strong to get the numbers needed and
currently there is no incentive for this.

In the first case above, the sum available is not enough to address
the 80% reduction in fossil fuel use required by the Kyoto
commitment. To address this reduction a huge increase in the
insulation standard of all the building stock is required. In an
older solid walled house it would be necessary to install insulation
to the walls, the capital cost of which would be far too high to be
covered the initial savings available, let alone all the other
measures such as draught proofing, loft insulation, ventilation and
window replacement. As future fuel cost rise, however, there would be
an immense saving available. In a modern cavity walled house the 80%
reduction would require not only the insulation of the cavity but also
exterior wall insulation as well as the above additional measures
required for a solid walled house.

In the second case, the Kyoto requirement is for an 80% reduction in
fuel use and is not an economic judgment but an environmental
necessity, so why judge the remediation measures required on the basis
of an economic payback? We have to reduce, by legal requirement,
the country’s fossil fuel use by 80% so the decision of what to do
cannot be made on the basis of whether the measures taken will give an
economic payback. Also with the probable volatility of future fuel
prices it is not possible to calculate the future fuel saving in order
to calculate an economic return. Even the government is telling us
that the future trend in fuel prices will be upwards, and not by small
jumps either.

People’s unwillingness to spend at the moment is fueled by the
uncertainty over job and wage cuts and the near certainty of cost of
living rises. With this scheme there would be no outlay to put off

Fourthly, there is no reason for interest to be charged on the
expenditure required to facilitate a government policy such as
reaching the Kyoto requirement, especially in our current world
financial predicament. There are two ways that money can be
introduced into the national financial system; by the currently
popular way of the banks lending money to individuals and companies
and charging interest; and, secondly, by the government spending the
money into existence for capital projects; that is printing it. This
does not attract an interest charge.

This latter measure could be very inflationary if no measures were
taken to remove the money from the system once it had done its job.
In the proposed case here of a scheme of insulation there would be a
saving to the householder of about 80% over their previous fuel bills
which would enable them to repay the installation costs over a number
of years. The repayments would be in the form of a charge on the
house, not the owner, so that, in the case where the house was sold
on, the charge, along with the benefits of the reduced fuel bills,
would be passed on to the new owner, as in the Green Deal. The level
of the repayments could be adjusted to suit the government’s
requirements to allow some of the savings to be used by the
householder to either repay existing debt or to put money back into
the economy through additional spending power.

Fifthly, the scale of the problem is immense. We have about 40 years,
until 2050, in which to achieve the insulation of the 25 million
dwellings in UK. This means we have to insulate 625,000 homes per
year or 2,400 per working day every day until 2050. We are currently
not even insulating 2.4 homes per day to the required standard, let
alone 2400.

It would be essential for most of the buildings to be insulated
externally as, if the insulation were fitted internally, this would
necessitate the removal and refitting of the kitchen, utility room,
bathrooms and much fitted furniture, necessitating the temporary
rehousing of the occupants.

If the work took eight weeks per house, with an average of 2.4
occupants per house that would require 2,400 x 2.4 x 8 x 7 = 322,560
temporary beds per day to accommodate the displaced people.

This would add considerably to the costs. Internal insulation would
also not be as effective as external insulation as there would be
considerable cold bridging and there would be a risk to the structure
of many of the buildings from interstitial condensation caused by the
exterior walls becoming much colder. So it would be best for the
insulation to be fitted externally in most circumstances.

On the basis of external insulation and the other measures enumerated
above, say it was 6 weeks work for 3 men per house. That would give
216,000 man days work per day or 216,000 new jobs in installation
alone, plus work for supervisors, scaffolders, designers, trainers,
plus the extra jobs in insulation manufacture and delivery. These
would be new jobs requiring extensive training and would be created
mostly in this country as most of the insulation materials required
are manufactured here.

To insulate each house on an individual contract basis to achieve an
80% reduction would cost about £20,000 on average, taking into account
differing house sizes and the mix of detached, semi detached and
terraced houses. This is unaffordable on an individual or economic
basis and it would also be an inefficient use of labour. On a larger
contract basis for, say, a street at a time this could be reduced to
about £13,000 per house.

This would give a cost per year of £8.125 billion which, in view of
the £75 billion just injected into the banking system by the Bank of
England, is very affordable.

Government should print the money to pay for this, rather than borrow
it from banks, which don’t have it in the first place, as proposed in
the GD and tax it back from the fuel savings, as also proposed in the
GD, in order to write off the printed money and prevent excessive

About 40% of the total energy used in the UK is in heating. As at
least 80% could be saved by this method it would lead to a 32% saving
in the nation’s energy bill, much of that on gas. As our North Sea
oil and gas are depleting at about 6% per year this would make a
considerable difference to the balance of payments.

Fuel poverty would be reduced to almost zero at a time of rapidly
increasing fuel prices.

The nation’s housing stock would be upgraded and protected from major

We would have a surplus of gas which could be temporarily diverted
into electricity generation until renewable sources of generation were
bought on stream.

The increased numbers of people in work in the building industry
required to carry out the scheme would circulate more money throughout
the economy which would promote growth in other sectors and would help
refinance the retail banks by increasing their cash flow: all this
without major inflationary pressure. Even if there were some
inflation this would help reduce the level of national debt, as is
policy throughout the western world.

In our practice, we have already designed two house renovations of
1970s houses which have measured fuel savings from fuel bills of 72%
and 79% and have achieved SuperHomes Awards . We have another such
installation at the planning stage which should achieve 80% and others
are in the pipeline. Other members of the AECB, The Sustainable
Building Association of which I am a member, have achieved similar
savings. We know from our own experience that this level of savings
is achievable in refurbishments as well as new build despite what the
major players in the building industry might say.

Our first two insulation/renovation jobs were for people who had just
retired and were using their pension lump sums to invest in a project
which would give them long term, increasing savings rather than
leaving the money in a bank account which wasn’t giving any
significant return. This is obviously not a course of action which
most house owners could undertake so is not a model to roll out
625,000 homes per year.

This amount of work could not be organized efficiently on an
individual basis by individual householders, although it may be
necessary initially to get the ball rolling. It would require
contracts let a street at a time and properly supervised by a
qualified person appointed by the payee, i.e. the government. Only in
this way could the immense scale of this project be realized and
realized to a satisfactory quality standard and in the limited time

Some organizations such as Transition Towns and local Greening
Campaigns are trying to organize groups of householders to purchase
renewable technology installations on a group basis with a significant
discount but the problem of finance comes up, especially in our
current constrained times and makes uptake low despite the Feed In
Tariff (FIT). Large scale insulation installation is even less likely
to happen so intervention will be required if the Government’s energy
reduction targets are to be reached.

It would probably be best to start with Housing Association homes as
they have the organization in place to get the scheme off the ground
quickly. Their tenants are probably also the most vulnerable in
society to fuel poverty. Care would have to be taken in this sector
over repayments as tenants, especially the elderly, might not achieve
the savings possible as they would take some of the advantage in
higher comfort levels. The fuel savings and publicity generated in
the public housing sector would then lead to a demand from private
owners to have the work done on their homes, especially as it is
essentially free up front.

An education campaign would be necessary to explain the scheme and how
the insulation would work as there is some public skepticism about the
efficacy of insulation. It is not, unfortunately, seen as “sexy”
compared to the “bling” of a renewable energy installation.

The standards of insulation, U-values, required, which are similar to
PasivHaus and AECB requirements, would be as follows

Roof – 0.08 to 0.1
Walls – 0.12 to 0.15
Floors – 0.12 to 0.20
Windows – 0.6 to 1.2
Air tightness levels should also be heightened to achieve levels below
1 air change/hour.

These are insulation standards which have been achieved in our
refurbishments and are levels which should be required in all Building
Regulations applications for renovations, extensions and new build.
These standards of building have been readily achieved on new builds
in this country for a number of years now but not, unfortunately, by
our national builders, whose standards remain woefully low.

I commend this course of action to you.

i (2002 figure from The Office of National Statistics
http://www.statistics.gov.uk/STATBASE/ssdataset.asp?vlnk=7315 )
ii http://www.superhomes.org.uk/

Darrell Prince`

Mar 18, 2015, 10:53:20 AM3/18/15
to guild-of-gre...@googlegroups.com

This work is very much where I am at, across the pond, and looking to develop business+ national program around this here, and would love to have the contacts over there as well, and to know how and what y'all are doing on this...

I have actually met a minister for energy efficiency at a conference here, it still seems like you all are still worlds ahead, but we're all far behind where we need to be.

I wrote a white paper on the green new deal, 2 pages, and if any are interested I will post, though it is much the same as this Cheerio.
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