Warm, Fuzzy & High Tech

Charlie Mercer - Policy Director, Startup Coalition

In order to reach net zero, we need to build, retrofit, and use our homes differently.

At the center of this is innovation: in the materials that we use, the data we unlock, and the technology we install to make homes more comfortable, cheaper to keep cozy, and better for the planet.

Today, the greenhouse gas emissions of the built environment constitutes 20% of the total emissions we produce in the UK annually.

Successive UK governments haven’t done enough to decarbonise this sector, leading to a complex system, unreliable installations, and barriers to innovation.

The Labour Government hopes to change this, with a long promised Warm Homes Plan about to be published (though now delayed until after the Budget). The Warm Homes Plan is a Government initiative designed to lift over 1 million households out of fuel poverty by 2030. In its manifesto, Labour said that:

“The Warm Homes Plan will offer grants and low interest loans to support investment in insulation and other improvements such as solar panels, batteries and low carbon heating to cut bills.”

Broadly, it is expected that the Warm Homes Plan will outline plans to subsidise access to technologies, set new standards around homes, and set a path to accelerated decarbonisation and cheaper bills. At Startup Coalition, we think it’s a critical opportunity to also unlock innovation.

Built Different: The UK’s RetrofitTech Sector

In 2024, the UK was home to a £3.2bn built environment ClimateTech sector, employing over 2,500 people across the UK and contributing 10% of all ClimateTech exits over the last 14 years. Firms in the sector have raised £912m, with hubs in London, the South East and East of England.

From Airex’s smart ventilation brick to Luthmore’s zero emissions boiler; Wondrwall’s high-tech, low carbon system to Kestrix’s “Google Maps for heat loss”, across the country, a new generation of startups is developing technologies that make retrofits cheaper, faster and smarter.

We have heard, however, that their path to impact at scale is blocked by red tape and inefficient subsidies. Government-backed retrofit schemes such as the Energy Company Obligation, the Social Housing Decarbonisation Fund and the Boiler Upgrade Scheme remain built for yesterday’s technologies.

Standards, and a bloated bureaucracy implementing them, mean that these technologies are being left by the wayside, with the Government focusing entirely on heat pumps. These are important, but they are only the tip of the iceberg and do not work for every home or business.

A Warm Homes Plan that ignores this innovation gap risks repeating the mistakes of the past: stimulating spending but not systems change.

Warm Homes 2.0

To break the cycle, the government must create a clear innovation pathway for novel technologies to gain approval for use under publicly funded retrofit programmes in the Warm Homes Plan.

This means addressing the convoluted Appendix Q process and convening the multitude of bodies involved in retrofit, from the BRE to Trustmark, to embed innovation into their work and make sure that novel technologies can play their part, and fast.

Doing so would serve multiple goals. First, it would accelerate decarbonisation, cutting emissions faster by deploying the best tools available, rather than the most familiar.

Second, it would turn the retrofit sector into a growth industry: one where British firms develop technologies fit for export to other ageing housing markets in Europe and beyond.

And third, it would deliver better value to the taxpayer, making technologies compete to be the most affordable option under the scheme, not just the winner chosen by the government.

Alongside this, reforms to EPCs, and the introduction of the Home Energy Model and Net Zero Homes and Buildings Standard could pave the way for the long term certainty the sector needs, and a system actually set up to succeed.

For too long retrofitting has been seen as a cost to bear rather than a lever to unlock innovation and growth. The government should not merely warm homes in its upcoming plan; it should ignite an industry.