Geopolitics is shaping the future of green homes

Green homes are often discussed through the lens of policies, technologies and consumer adoption. But the reality is that they sit within a much wider system shaped by geopolitics, wholesale markets, supply chains and investor confidence. 

At Baringa’s 11th Green Buildings and Transport Forum, we tackled that upstream context, framing the discussion around efforts to tackle the broader energy trilemma that balances sustainability, security and affordability – and how these affect progress on domestic decarbonisation. 

Security at the fore: ‘Once in a generation’ is every few years 

Between Covid, the gas supply crisis following Russia’s invasion of Ukraine, and the current Middle East conflict, we’ve lived through three ‘once-in-a-generation’ market events in six years. We’re no longer dealing with one change at a time. 

As Pete Thompson from Baringa put it, ‘The energy trilemma diagram needs to come out of the drawer. The old planning assumptions no longer hold because we’re in a period of structurally higher volatility. Upstream factors connect directly to what gets built, financed, and delivered. Even when market fundamentals point to an upcoming wholesale price drop, you can’t discount short-term shocks pushing them up.’ 

We’re in a situation where: 

• Price risk is harder to manage 

• Politicians and regulators are recalibrating incentives, carbon pricing, and CfDs 

• Government is reallocating budget from energy projects to defence 

And that has both direct and indirect impacts on energy affordability and appetite for domestic decarbonisation.  

Tackling affordability: ‘One size fits all’ no longer works 

Households have felt the effects of upstream volatility on their cost of living. Bills have risen from around £1,200 before Covid to £1,600-£1,800 currently. According to Baringa’s latest UK Financial Vulnerability Outlook, financial stress is rising, and 1 in 4 UK households are now financially vulnerability. 

However, policymakers have largely tried to tackle affordability challenges by pulling ‘one-size-fits-all’ levers. And the consensus among delegates was that this needs to change for three key reasons: 

• Consumers are disengaging 

The price cap provides a salutary lesson here. It was designed to protect consumers, but, as Guy Thompson, Chief Product Officer at MyUtilityGenius, said, ‘It’s one of the biggest sources of confusion in the market, and the massive unintended consequence has been consumer disengagement.’ Consumers don’t understand 

the difference between the price cap and a fixed tariff. They don’t realise that a cap level only lasts three months, and that it’s on a lag that dislocates it from the wholesale price dynamics they read about in the news. As a result, people have no easy way of reconciling what headlines say with what’s on their bill. 

• Retailer innovation is constrained 

Suppliers have a strong incentive to hedge to an identical position because everyone’s managing to the same price cap quarterly timescales. As much as they’d like to, they can’t deviate from this single hedge incentive – which limits their ability to develop more affordable, customer-centric propositions.  

• Network costs are driving up bills 

There’s a similar tension building on network costs. Ofgem’s RIIO3 price controls is shifting away from a flexibility-first approach towards building networks for peak capacity upfront. This is a big shift for delivery, but it also means network costs – and the bills that fund them – are likely to rise before they fall. 

How can this situation be fixed – so affordability is tackled more effectively while creating more space for decarbonisation? We need more tailored approaches. 

One option delegates discussed was introducing a social tariff instead of a universal price cap. The social tariff could specifically target and protect vulnerable households that genuinely cannot afford to pay and struggle to engage with the energy market. This would free up policy and propositions to innovate for everyone else in a way that supports the green homes agenda. 

Plus, the market is facing a genuine inflection point with the introduction of market-wide half-hourly settlement. This provides a new opportunity to work with real price signals instead of average profiles. 

Scaling decarbonisation: Demand exists, but there’s a value gap 

Despite upstream challenges, Gráinne Regan, Propositions Director at E.ON Next, struck an optimistic note, highlighting strong demand among engaged, self-pay customers. E.ON Next data shows that between February and April this year, sales of solar panels and batteries increased by 182%, air source heat pumps by 129% and EV chargers by 18%. This wasn’t an isolated experience: another supplier reported having to pause marketing because demand had outstripped what their supply chains could deliver.  

To capitalise on the opportunities and scale domestic decarbonisation in the current environment, we must address two important questions: 

• Who should own the customer relationship? 

To drive low-carbon tech adoption, the market must deliver a simple, streamlined customer experience. But when you introduce more parties (like flex providers, solar panel and battery installers, EV charger companies, and OEMs), who’s the customer point of contact? Who’s accountable when something goes wrong? 

• How do we better communicate the value of adopting low-carbon technology? 

Although retailers are seeing high demand in the self-pay segment, banks aren’t seeing demand for financing – even at 0% interest. With pressures on housing stock and the increase in stamp duty, low-carbon technology installations are competing against a range of other home improvement projects like loft conversions. Delegates even discussed housebuilders fitting dormer windows because people feel they increased value above leaving roof space for solar arrays. 

The value argument data is there. A Baringa report for the Sustainable Markets Initiative showed that heat pumps can increase property value by approximately 1.7% to 3%, with solar installations adding around 0.5% to 2%. A Rightmove study of over 300,000 homes found that consumers are willing to pay £56,000 more for homes which are EPC C compared to EPC F. 

We just need a better (and consistent) way for the market to recognise low-carbon technology as an asset with value, so consumers feel confident their investments will deliver a return. 

Collaboration is key for certainty and momentum 

Upstream volatility doesn’t stay upstream, it shows up in investment confidence, installation decisions, and what households see on their bills. Therefore, energy security, affordability, and decarbonisation challenges can’t be solved in isolation – progress on one depends on progress on the other two. 

So within that context, how do we create enough certainty to maintain green home delivery momentum? Whether it’s reforming the price cap, improving incentive schemes, or tackling the spark gap between electricity and gas pricing, collaboration is key. We need an approach that: 

• Shares risk fairly across the system 

• Shares data to enable system-wide innovation and drive customer experience improvements  

• Shares value so everyone feels the benefits of realising green home ambitions 

What practical steps do you think the ecosystem could take to enable this?  

Continue the discussion with us at our next Green Buildings and Transport Forum. To hear about future Baringa events, look out for updates in Energy Insights, our Energy and Natural Resources newsletter.