RIP Fabric-First? A closer look at the UK's new retrofit strategy

The what, why, who and how of the new Warm Homes Plan.

If you have been following UK energy policy for the last decade, you are likely used to a familiar rhythm: ambitious targets for insulation, complex grant schemes that open and invariably close after failure and a persistent stop-start approach to policy making.

However, the government’s newly published Warm Homes Plan (WHP) breaks this rhythm. With a £15 billion outlay, the plan aims to fundamentally pivot the UK’s approach to decarbonising buildings. The most obvious and visible shift is to drop what many in the sector call the ‘fabric-first’ approach i.e. to begin insulating a property and reducing its energy demand intensity before installing low carbon technologies. This plan flips the central focus to solar, batteries and heat pumps in a ‘cleantech-first’ approach. The document states clearly: “Alternative technologies—such as rooftop solar and home batteries—are likely to offer significantly more cost-effective routes to reducing energy bills.” This is accurate and as a beneficiary of a solar+battery installation on my property through a subscription based model, I can testify that its awesome!

A part of me still thinks this is a missed opportunity in driving down overall energy demand, permanently, in an efficient manner- with system wide benefits. But today’s plan has to be seen in the context of the litany of failures in policy to drive up insulation measures over the last decade. The recent decision to scrap the Energy Company Obligation scheme is a case in point. For a long time, energy efficiency was considered the low hanging fruit but time has proven that it is anything but and today’s plan therefore represents pragmatism over rigidity.

Below is a deep dive into what is changing, who benefits, and whether the numbers actually add up.

The ‘what’ and ‘how much’?

The headline figure is £15 billion over this Parliament. But looking under the hood reveals where the priorities lie:

• £5 billion for Low-Income households: which merges existing schemes (like the Social Housing Fund) into a streamlined offer to lift families out of fuel poverty.

• £2.7 billion for the Boiler Upgrade Scheme (BUS): the existing grant, which has good pick up in the public, remains at £7,500, but crucially, it now expands to include air-to-air heat pumps and heat batteries and not just air-to-water systems which has been the conventional technology. I am personally thrilled with this update because the air2air option works much better for properties like mine, and I shall be applying soon (assuming I check all eligibility criteria).

• £2 billion for consumer loans: which tackles the upfront cost barrier. These are low-to-zero interest loans designed to help homeowners buy the solar panels and batteries which are otherwise still expensive for a typical household that is cash poor.

• £1.1 billion for heat networks: which target dense urban areas like London or Manchester, where individual heat pumps aren’t viable for large groups of residential and commercial properties. The plan aims for 20% of total heat demand to be met by heat networks which has consistent for a long time.

The delivery and a new Warm Homes Agency

One of the historic failures of UK energy policy has been fragmentation. Homeowners didn’t know who to trust, and installers didn’t know which scheme would last.

To fix this, the government is establishing a Warm Homes Agency (WHA). This is something we’ve been calling for and is an essential coordination activity to manage this complex nationwide programme. Quite in line with our recommendation, the agency will:

1. Standardise advice: by creating a single source of truth for consumers to tackle misinformation and too much information.

2. Protect consumers: by enforcing strict standards and avoid cowboy builders undermining confidence in new tech.

3. Coordinate locally: by working with Mayors and Local Authorities to deliver street-by-street upgrades, rather than a scattergun approach.

The local, area based approach to home retrofitting has been an ask of the NGO community for quite a while and it is indeed welcome to see this reflected clearly in the plan. How it ultimately gets delivered- fixing the huge skills gap, setting up the necessary comms infrastructure, cutting red tape for installers without compromising performance and getting financiers and LAs working better together with the ultimate installers on the ground. All of this detail remains to be seen.

Who benefits?

If executed perfectly, or lets say to plan, the winners are:

• The “able-to-pay” middle income groups: where you own a home and have some creditworthiness. Such households are are the prime target for the “solar + battery” revolution. The plan estimates such a hhld could save £450/year with numbers varying based on a variety of factors such as the type of tariffs and the direction of the PV on the rooftop. Read this testimony of a colleague of mine who is saving a lot of ££ from clean tech and insulation.

• Social housing tenants: where the plan earmarks £3.4bn for social housing (part of the wider low-income pot). Tenants in draughty council homes are likely to see the most significant comfort improvements.

• Private renters: The plan confirms that landlords must upgrade properties to Energy Performance Certificate (EPC) Band C by October 2030 and sets a reasonable landlord cap of £10,000. With the focus shifting to low carbon tech rather than insulation, it presumably will ease compliance. I nonetheless expect the Telegraph to bring out all their tiny violins in response to this.

• The supply chain: the plan includes a £90 million investment in manufacturing to ensure 70% of heat pumps installed are UK-made. This is alongside the previously announced Clean Heat Market Mechanism that pushes boiler makers to make the transition to heat pumps.

The carbon gap?

The Climate Change Committee (CCC) has historically suggested we need around 450k heat pumps installed annually in existing homes by 2030 to stay on track for Carbon Budget 6. This plan explicitly targets only 250,000 per year by 2030 with an additional 200k coming from newbuilds.

Immediate source – Energy UK

This presumably is a gamble because if this is to stay in line with the carbon budgets, the government is likely betting that the clean power 2030 mission will simply drive down the carbon intensity of the entire grid and possibly compensate for a slowdown in heat decarbonisation with electricity system decarbonisation. If that is indeed the assumption, it remains a gamble but again, a necessary one considering the huge campaign of misinformation against heat pumps in the UK.

However, the overall pace is still too slow. In our NEF report back in January 2025, we estimated a baseline target of 1.27 million homes lifted out of fuel poverty by 2030 while calling for greater ambition than that. Today’s plan targets 1 million with an indication to consult on revising down the fuel poverty targets altogether. Our report also estimated that that we need a total investment closer to £315 billion to fully upgrade and decarbonise the housing stock. By comparison, £15 billion is a down payment and how much private finance it leverages remains uncertain.

There is also a valid critique that the plan feels like it is still in consultation mode. Many of the standards for the private rented sector and the exact mechanics of the loans are still being ironed out. But considering the graveyard of failed energy efficiency schemes (Green Deal, Green Homes Grant), which failed because they tried to do too much, too fast, with a supply chain that wasn’t ready, I am willing to go steady and get it right for the long term.

By setting a lower target (450k) and focusing on delivery infrastructure (skills training, the Warm Homes Agency, manufacturing investment), the government is arguably choosing resilience over speed. It is better to build a supply chain that can actually deliver 450,000 quality installations than to aim for 1 million, deliver 100,000 poor ones, and destroy public trust for another decade.

The Warm Homes Plan is a marked improvement on the stop-start policies of the past. It offers a coherent vision: electrify everything, generate locally, take an area-based delivery approach and plug the financing gap. All quite common sense.