Electrification Over Insulation: Why “Fabric First” Isn’t Climate First

---

Support CleanTechnica's work through a Substack subscription or on Stripe.

---

While in Europe recently, I had the opportunity to sit down with Nigel Banks of Octopus Energy on the weekly YouTube show Mesh. The channel and parent organization, Mesh Energy, are focused on sustainable energy options for the UK building industry. What follows is a lightly edited transcript of our conversation.

Nigel Banks [NB]: Good afternoon everyone and welcome to this Meshwork webinar. Today I am a guest host. My name is Nigel Banks, I’m Technical Director at Octopus Energy, and I am delighted to welcome Michael Barnard to today’s webinar. Michael, I think you’re in Europe, in Antwerp, right?

Michael Barnard [MB]: I am. TenneT flew me in to help them with a 2050 scenario planning exercise for their target grid. I took the opportunity to travel through Northwestern Europe with my spouse for a month.

[NB]: The format of today’s webinar is what we might describe as a fireside chat, but without the fire. There won’t be a formal presentation. Instead, we’ll have a conversation, and then we’ll open up for audience questions in the last 15 to 20 minutes. If you do have questions, please raise them in the Q&A or the chat, and we’ll try to pick them up along the way. Otherwise, we’ll definitely return to them at the end.

The topic of discussion today may be challenging for many in the audience. It reflects an article Michael recently wrote entitled The Fabric First Trap: Decades of Studies Show Electrification Wins Every Time. Those who follow me on LinkedIn may have seen that I’ve written on this topic as well, with an article entitled Fabric Fifth. I think Michael and I probably share some views on the topic, but we come from quite different perspectives. I’m sure there will be some differences of opinion in the audience, and we welcome that interaction later on.

We’ll start with a two-way conversation. Please come with an open mind, listen to what we have to say, and then feel free to challenge us at the end.

So Michael, perhaps to kick us off, can you give us a short introduction in your own words—your background, your areas of expertise, and the work you’re doing currently?

[MB]: Sure. I’m probably best known for analyzing major climate change problem areas—aviation, maritime shipping, ground transportation, concrete, steel, hydrogen—and assessing all the available solutions. I look at which ones are technically effective, which are actually viable, which will be the cheapest and therefore likely to dominate, and which ones people will actually accept. Then I project those trends out to 2100. That’s why I’ve ended up with the somewhat pretentious title of “climate futurist,” which I had to accept last year because, well, that’s what I do.

I help investors and organizations like TenneT figure out where the ball is going to be, rather than chasing where it is now. I work with clients around the world and publish constantly because I can’t help myself. Decarbonizing the building stock—both existing and new—is part of my focus. I’ve looked at cross-laminated timber globally, alternatives to concrete and steel, building reuse, and how to provide buildings with low-carbon heating, cooling, and water.

[NB]: What I’ve found really interesting is how you bring together economics and physics—which is often ignored in some of these topics—along with human behavior. We’ve seen that while some transitions have been slow and steady, others have been unexpectedly nonlinear, which has surprised a lot of people.

Before we dive into the fabric-first debate, it might be helpful if you shared an example from another sector where you did some analysis and turned out to be right—perhaps before others saw it coming. And maybe also something that’s surprised you along the way. That would give people some context for the kind of research you do and how it often proves to be accurate.

[MB]: Prescient—or at least I did the math and didn’t buy into the narrative.

Let’s take hydrogen, since I mentioned it. In the UK, Cadent and others were trying to shove the highly flammable square peg of hydrogen into the round hole of home heating—that round hole that comes with friction and sparks, like a box of matches. It was a ridiculous attempt to preserve their molecular business model, and it could have killed people in the British Isles unnecessarily. I found it hilarious in a grim sort of way.

I got lucky by being a broad-spectrum nerd who actually enjoys doing the math and looking at the numbers. Back in the late 2010s, I started digging into hydrogen again. I looked at the studies and did techno-economic assessments in places like Northern Africa. I realized green hydrogen was possible, but it was never going to be cheap.

Producing hydrogen requires formed electricity. Electrolyzers weren’t going to get cheap nearly as fast as people assumed. Then there were the 28 other components in an electrolysis facility, none of which were cheap. Storing, compressing, and distributing hydrogen wasn’t cheap and was never going to be.

I didn’t buy into the narrative. I just asked the question and followed the numbers. By 2018, I’d already concluded it was always going to be expensive. Others, like Joe Romm, had figured this out as early as 2004.

Now everyone’s starting to catch up. Green hydrogen isn’t going to be cheap. BNEF tripled its projected cost of electrolyzers for 2050. Even now, in 2024, their price estimates are still only at 20 to 25% of the actual prices we’re seeing. As the entire hydrogen-for-energy bubble—home heating and commercial heating included—deflates and pops, thankfully without killing anyone, I get to say “I told you so” with a gleeful bit of schadenfreude.

[NB]: Maybe something that surprised you—where you thought, “Oh, that moved fast,” or the costs changed in a way you didn’t expect. Aside from solar and batteries, which most people are familiar with, is there anything else that stood out to you as interesting?

[MB]: Yeah, solar in Pakistan. I look globally—I don’t have a patch except the world, and I don’t have a domain except everything that touches climate change. And just to be clear, when I speak about climate change and home heating, I don’t focus on comfort. I don’t care if people have to put on a jumper, as long as they’re not freezing to death or dying of heat prostration. That meets my threshold for social acceptability. I care about the climate outcomes. Your clients, on the other hand, will care a lot about comfort, so keep that in mind when I speak from a climate-first perspective.

Back to solar in Pakistan—they added 17 gigawatts of rooftop solar in 2024, bringing their total to 22 gigawatts. And it happened purely because it was cheap.

[NB]: Yeah, that’s the same amount the entire UK installed—Pakistan matched it in just one year.

[MB]: And five times as much as Canada does. 

[NB]: I wanted to ask that because I think it’s interesting for everyone to understand that you’re coming from a climate change perspective, but also with a very practical lens—both top-down and bottom-up. You’re looking at cost, practicalities, and realism.

So let’s move on to your article, The Fabric First Trap. Give us a brief summary of the thesis, and maybe explain why you felt the need to write it.

[MB]: The passive house advocates have really gotten under my skin over the years, which is part of why I felt I had to revisit the topic. For probably five years now, I’ve been saying I don’t care if people have high home heating bills—as long as they’re using electricity and that electricity is green. From a climate perspective, that’s good enough. If people in Texas want houses made of doilies and walls of fans, that’s fine, as long as the energy is clean.

There are secondary systemic concerns like peak demand and total energy use, but the primary concern is decarbonizing residential and commercial heat. Heat pumps solve 90% of that. District heating is viable in some places—but not in Texas, aside from maybe two blocks in Austin or a university campus.

My core thesis is that we need to electrify first, then optimize fabric in a Pareto sense—do just enough to make the budget work. Every time I say that, I get pushback from the passive house community. One person in particular became so persistently argumentative that I eventually removed them from my LinkedIn network. It seemed obvious to me: they were professionally and emotionally invested in the passive house model and couldn’t see past that.

To be clear, I’m not a practitioner in this space. I’m not dealing with clients or people who are uncomfortable in their homes. I’m not dismissing those concerns, but from a climate perspective, they’re secondary. As long as people aren’t freezing to death or dying of heat prostration, comfort is not the primary issue. Climate is.

[NB]: Yeah, you called this The Fabric First Trap, and I think that ties into rebound effects. You referenced several international studies on the subject. Could you highlight a few of the key findings?

[MB]: I’ll just go through all of them—I’ve got a nice summary list here. Thank you, ChatGPT. I asked it to summarize my article on the subject.

I’ve had this discussion with Jan Rosenow—still with RAP, now in a great position in the UK—because he challenged me on something. I’d always referred to the UK study from 2023, I think. Where was it?

[NB]: Cambridge.

[MB]: Yeah, the Cambridge study looked at 55,000 UK homes that received insulation upgrades funded by government programs. They focused on gas use and found that, over time, all the gas savings were lost to rebound. In the end, there were zero net gas savings across those homes.

Jan Rosenow challenged me on that, saying it was more nuanced. I’ve got a lot of time for Jan, so I asked him how, exactly. And I wondered—are there other studies? Because one study might just be a data point. But if it’s consistent across studies from multiple countries, maybe it’s not just an outlier. Maybe it’s a pattern.

So I went and looked. The UK already had the Warm Front study from 2011, which found some minor savings, but mostly the gains were eroded by comfort rebound. People living in cold, leaky homes—who used to wear jumpers and keep the heat low—turned up the heat once they had insulation. They opened windows, enjoyed better air quality, and stayed warmer. But their overall gas use went right back to where it started. No net savings. Same emissions. Same climate impact.

And that’s a bigger deal than just combustion. The methane leakage from the distribution system is substantial. It’s not just the gas burned in furnaces. Methane leaks out of the pipes, out of furnaces, out of stoves. And methane has a global warming potential 80 times that of CO₂ over 20 years. That’s a big concern. For me, rolling up the gas grid is critical—to stop both the combustion emissions and the leakage.

So when people tell me, “Just leave the gas system in place and insulate,” it really gets up my nose.

There’s also the 2017 Wales study: they saw a 37% initial reduction in gas use, but that too was eroded by rebound. And 37% isn’t enough. We want 100%.

[NB]: We’ve got to get to 100% in buildings. Yeah, absolutely.

[MB]: Germany, 2021—$340 billion spent on retrofits and no net national reduction in gas heating. Once again, rebound brought consumption right back to where it started. In the US, a 2018 study by Fowlie et al. showed only 10 to 20% persistent savings—far below the modeled 25 to 50%. A consistent feature across these studies is that projected gas savings never materialize, and in many cases, there are no savings at all.

New Zealand, 2007—moderate energy savings that were mostly erased because people just turned up the heat. I spent some time digital nomading there a couple of years ago. Many homes have no heating and no insulation. The building code is one of the worst in the developed world. So it was surprising they even had a study, but it told the same story.

France, 2024—this is where we start getting into more sophisticated studies. One from RTE compared insulation and electrification. Insulation delivered a 19% savings, while electrification alone delivered 81%. Just from switching to electric heating from the grid.

In the US, a 2023 LBNL and Brattle study found that targeted insulation and electrification could cut emissions by 90%. The key was doing just enough insulation to make the business case for a right-sized heat pump. Nothing more.

So that’s study after study, over two decades, saying the same thing. Fabric first is the wrong approach. It’s not really fabric fifth either, though that was a cheeky and productive title you used. But “fabric first” is a trap. If we insist on making it regulatory, or if practitioners insist on prioritizing it, we’re not helping from a climate perspective.

And let me be absolutely clear: when I spoke with Rob Jackson, head of the Global Carbon Project, he talked about how he started his career studying indoor air pollution from gas stoves and furnaces. The pollution levels were off the charts. Forget comfort—gas appliances make kids and adults sick. There’s no climate value. There’s no health value. You’re not helping by prioritizing fabric over electrification. You’re just making people a bit more comfortable while doing nothing meaningful for emissions.

So yes, I get passionate about this. This is me irate. I’m Canadian—I’m sorry.

[NB]: Where I got to with Fabric Fifth came from frustration. At the time, many government programs required insulation before you could install a heat pump. That meant some people missed out on getting a heat pump altogether—because they didn’t want to empty their loft for insulation, or wait three months for someone to come drill holes to fill the cavity walls, even though their boiler needed urgent replacement.

That’s why I argued for electrification first, paired with smart tariffs to reduce both running costs and grid impact.

But I do think there’s value in some basic fabric interventions. I don’t think you’re saying “never insulate.” You’re saying, do the basics needed to enable cost-effective electrification.

[MB]: Slight nuance there. Remember, I said if you live in Texas and want to build a house out of doilies and throw green electricity at it all day and night, I don’t care. From a climate perspective, that’s fine.

What we need from a government policy and regulatory standpoint—and this is where you were heading—is to stop requiring fabric first before allowing electrification. Electrification is the climate solution. If someone wants to overpay for a heat pump, why would we stop them, as long as they’re decarbonizing? Electrification is the answer. Insulation is not.

[NB]: Okay, I’m going to come back with a few challenges on that because I’ve had plenty myself on some of the same points I’ve raised. But I want to flag a couple of additional data points relevant to this discussion.

One is the analysis by UCL on the London housing stock, which pointed to the same conclusion—that insulation alone won’t decarbonize housing. That’s very clear. It’s electrification that delivers the carbon savings.

Interestingly, the Climate Change Committee, in their latest Carbon Budget 7 report—out just last month—made a big shift. In the previous carbon budget, they had projected 250,000 solid wall insulation installations per year. In the latest version, that number has dropped to just 15,000 total between now and 2050, and no floor insulation at all. That’s because they approached it from a purely techno-economic analysis: what is the most cost-effective way to achieve net zero?

They found that only 15,000 out of 7 million solid wall homes in the UK would need some level of insulation to enable cost-effective electrification. That’s likely in cases like large remote rural properties, where grid upgrades would otherwise be significant. In those scenarios, fabric interventions might avoid the need for a major electrical upgrade, potentially keeping a home on single-phase rather than requiring a three-phase connection.

So there are a few edge cases where deeper fabric interventions make sense from a techno-economic perspective—but they’re rare.

[MB]: Let’s test that, because it’s great that the UK is taking a very data-centric, techno-economic approach. But I think there’s an organization or company claiming you can install batteries and solar panels with heat pumps on remote rural properties and avoid grid upgrades. Do you know anything about that? [Note that Nigel works for Octopus which is focused on that, and advocates for that.]

[NB]: Solar and battery are absolutely key for me when it comes to delivering decarbonization with heat pumps. Solar, battery, and some low-cost insulation measures can lead to significant bill savings, but it’s the solar and battery combination that delivers the biggest savings.

That said, there’s a challenge with heat pump startup currents. If you need a 25-kilowatt thermal heat pump, current guidance says you’ll need a three-phase supply. To avoid that, you’d need a massive solar and battery setup—enough to run that heat pump during the worst-case winter conditions.

Solar and battery can help, but on a dark Christmas night in the north of Scotland, in the Cairngorms, solar isn’t going to help much. You might need your heating on continuously if it’s minus five outside. So there may be some niche examples where off-grid or microgrid setups work, but I think those are exceptions. For 99% of homes, the Climate Change Committee’s analysis confirms that. In my view, they now agree that fabric first is no longer the priority.

In your article, you also talk about anchoring bias. One thing I’ve noticed is that some people, after looking at the data and analyzing it, have come around. Interestingly, the Passive House Trust in the UK has a new retrofit guide that now talks about installing heat pumps and low-cost measures ahead of deep retrofit. So as an organization, they’ve shifted a bit.

But anchoring bias is strong, and you see it in many sectors.

[MB]: I mentioned that I tend to do three layers of analysis. One of them is: will humans accept it? That’s why I spend a lot of time on cognitive science. I never got the chance to work with Daniel Kahneman directly, but I’ve worked with people who did—so kind of one degree of separation. Some of my material is in Bent Flyvbjerg’s book How Big Things Get Done, and I first came across Bent through Kahneman’s Thinking, Fast and Slow. I’ve spent quite a bit of time with Bent and his team.

There are a few cognitive biases that come into play—things that make us human. I’m subject to them too. Everyone is. Kahneman himself is great in the introduction to Thinking, Fast and Slow. He says, “I don’t claim to be free of psychological biases—I have all of them, and I can’t spot them in myself.” He encourages people to use the book as a tool for watercooler conversations, to help recognize biases in others and correct them systemically.

One of the big ones is confirmation bias. If you believe something—for example, if you’ve built a third of the Passive Houses in the UK—it’s going to be very hard to accept data that contradicts your belief. So congratulations to you for managing to do that, because that’s not easy. When we hold something to be true, we tend to reject data and sources that challenge it. And we readily accept anything that supports it—even if it’s a clickbait article about flammable vinyl siding. We say, “Of course that’s true, because I believe it.” We’re all subject to it.

Anchoring bias is another big one. It’s the tendency to fixate on the first number we hear or the starting point in a conversation or dataset. Even when studies show clearly that initial assumptions were massively overstated, it’s hard to let go of that anchor. We’ve got decades of studies showing this, but we struggle to move off the original figure.

Go back to hydrogen. I say I got lucky with my conclusions on that. But look who didn’t get lucky: the International Energy Agency, LUT, CSIRO, Australia’s energy modeling community. They all seemed to start from the psychological anchor that green hydrogen was necessary for decarbonization. Then they asked, “What price point does it have to reach to be viable?” And instead of challenging that assumption, they just worked backward and pretended we could hit that number.

And then we twist the math to support that. In 2020, they had cost estimates for manufacturing green hydrogen that were completely out of sync with reality. In 2021, they inched the estimates up slightly—still way off. In 2022, same thing. In 2023, another small adjustment. That’s anchoring bias in action. We don’t move to where the data actually points—we just shift our anchor slightly in that direction.

The same thing happens with our assumptions about insulation. It’s hard to let go of the original assumptions and do a full rethink. Bloomberg New Energy Finance is the only group that made a radical shift: they tripled their projected price for electrolyzers in 2050. They were the only ones to take a leap instead of inching forward like a caterpillar. And honestly, I still think their numbers are too low—but at least they moved.

[NB]: Confirmation bias and anchoring bias are definitely amplified by social media. The people you follow on LinkedIn, Twitter, Bluesky—whatever the platform—tend to repeat the same messages. You see someone else echoing what you already believe, and it reinforces your position. That’s a real challenge.

You mentioned some of the early projects I was involved with. At the same time I was working on 30 of the first 100 Passive House projects in the UK, I was also involved in the first 120 zero-carbon housing projects. Those included solar, heat pumps, and heat networks—they were more technology-led. That gave me a broader perspective on the benefits of each approach.

And now, working at Octopus Energy, I’ve gained a deeper understanding of how the energy market works and the value of being able to shift energy use with flexible smart tariffs. When we talk to developers and house builders—and I’m sure many in the audience will have experienced this—you see a real difference between those who have an electric car or a solar battery system at home and those who don’t. When people can see and feel the benefits on their own bills, they become much more engaged. It’s easier to have those conversations than with people who’ve only worked in one narrow part of the system.

We’ll open up to questions in about 10 minutes—I’ve seen one or two points come through in the chat, so do keep sending them in.

But before that, let’s circle back to one of the common challenges raised against pushing electrification ahead of fabric first. One concern is: won’t we need a grid that’s twice the size? Wouldn’t that cost more than insulating the buildings? What’s your take on that? Have you looked into grid constraint issues?

The original argument in the UK was that we use around 120 gigawatts of gas on a peak winter day, and the electricity grid only delivers about 30 gigawatts. So if we’re electrifying heat, transport, and more, and we don’t do insulation, aren’t we going to have to build a much bigger grid? How do you see that playing out?

[MB]: Let’s start with this: heat pumps only require about a third of the energy—one third of the gigawatts—to provide the same amount of heat because they’re drawing heat from the environment. That’s fundamental efficiency. We’re using electricity for work, which it’s really good at, to move heat from one place to another.

So no, we don’t need 120 gigawatts of electricity to replace 120 gigawatts of gas. We need around 40 gigawatts. That’s still more than the grid currently supplies—completely agreed.

But then we also talk about cars and other loads. Just as people now charge their cars in the middle of the night using timers, we can use price signals to move other electricity demand as well. The grid is built for absolute peak electricity demand. Everyone in the UK is in the same time zone. They get home around 5:30 or 6:00, turn on the TV, turn up the heat or air conditioning, and everything spikes. A lot of people are now plugging in their electric cars without thinking about peak demand because they don’t have smart chargers or just don’t care.

But that’s not how it has to be. Take midday in the UK—even in winter, there’s still solar radiation coming in. There’s sun hitting the grid. 

Just like anyone with an EV in winter—they pick up their phone, tap a button, and preheat the car to 18 or 19 degrees before they get in. Ten minutes later, they walk out to a warm, comfortable car. It hasn’t been idling or burning gasoline. It’s just been using electricity to generate heat. Same thing applies to homes. Heat pumps can be set on a timer—at 3 p.m. when electricity is cheap, they can start warming the house. You can come home to a toasty residence even if you’ve cut off other loads.

And that’s not all you can do. My favorite example—it’s a stupid simple hack, but it works—is thermal storage. Water is a great medium for thermal storage. My favorite solution is from Harvest Thermal—now just called Harvest—led by Dr. Jane Melia, who I spoke to a couple of years ago. She uses a water tank with four times the volume of a standard one. It’s not dramatically bigger because you’re scaling up a cylinder, which increases volume faster than surface area.

The system trickles in hot water when electricity is cheap, creating a thermocline—hot at the top, cold at the bottom. That lets you draw hot water, cold water, radiant heat for underfloor heating or radiators, or you can use a heat exchanger to blow warm air. It runs on an AI that forecasts when electricity will be cheap and how much heat and hot water the household will need over the next couple of days. It makes sure there’s enough, delivered in the most cost-effective way possible.

That flattens demand, just like a timer on your EV charger. Instead of a 90 or 95% spike at 6 or 7 p.m., you get the same total load, but spread out—maybe 60% peak, spread across 24 hours. So the grid doesn’t need to expand dramatically.

You’re right that heat pumps have a high startup draw and may require better grid connections. But even there, you can buffer that with batteries and solar. You can put batteries on far more rooftops. I was in the Netherlands recently, and it blew my mind—they have more rooftop solar per household than Australia.

[NB]: And they’re not just putting two panels on a roof—they’re putting 20 panels on the roof.

[MB]: The whole roof area—well, the roofs I saw—they weren’t even filling them completely, but they were still installing enough panels to make a big difference.

[NB]: To point people to some other analysis on this, the National Energy System operator—formerly National Grid—publishes an annual Future Energy Scenarios report for the UK. This week, they released their 2025 edition. It looks at various levels of electrification of heat and includes analysis of peak grid impacts. While there’s still some mention of insulation, the biggest focus now is on shifting loads. They call it “heat demand flex”—essentially, changing when heat is used. The same applies to electric vehicles.

We have a tariff that’s half the normal electricity price between 4 and 7 a.m., 1 and 4 p.m., and 10 p.m. to midnight. You can heat your hot water for half the cost, and in many cases, do almost all your space heating year-round at that lower price. Those time windows align with when energy is cheap and when people typically want to heat their homes.

Another useful study comes from the Centre for Net Zero, an independent R&D arm within the Octopus Energy group. It has access to smart meter data across the customer base. They monitored a group of homes where the heating was turned off for two hours during winter. These were standard UK homes, not highly insulated or fabric-optimized. On average, the indoor temperature dropped only 0.3 to 0.4 degrees Celsius—basically unnoticeable. Most thermostats wouldn’t even respond to that kind of fluctuation. So turning off a heat pump for a couple of hours in the middle of winter doesn’t compromise comfort.

There’s a growing evidence base around this kind of flexibility. What we don’t yet have is a hard set of financial impact numbers for it. But part of the reason I wrote the Fabric Fifth article is that I saw government-funded programs spending over £100,000 to install 250 to 300 mm of external insulation on one-bedroom flats. They had to extend the roof, dig out the foundations to deal with thermal bridging—it became a rebuild project.

Just yesterday, I heard about a home under the current Warm Homes Fund where more than £200,000 was spent on fabric upgrades alone. It’s mind-boggling. You could rebuild the entire house for that. And in effect, that’s what some of these retrofits are doing—rebuilding a second house around the existing one.

In contrast, the cost of installing heat pumps, solar, and storage—which deliver major bill savings and real decarbonization—is an order of magnitude lower in many of these cases.

[MB]: And to be clear, while I tend to deprecate comfort—which our audience can’t, because if they don’t make their clients comfortable, those clients won’t hire them or recommend them—it’s worth noting that electrification delivers comfort too.

[NB]: That was the last piece—comfort and health. You mentioned the health impacts of gas, and it’s clear that burning gas inside a kitchen, often with poor ventilation, is not good for health. You also brought up hydrogen safety, but there’s still a significant safety issue with natural gas itself.

[MB]: 4,000 buildings a year in the United States catch fire or explode due to natural gas.

[NB]: I think the UK stats are something like 17 deaths or serious injuries a year from gas, so there are definitely other benefits to electrification. I still say Fabric Fifth because if people have the money and want to do the work to improve their comfort, then why not? But my main message is: don’t let that be the first step. Make it the last step, not the first.

I think we’ll open up to a few questions now, and I’ve got a few I’d like to ask as well if others don’t jump in.

[MB]: Let’s start with the most irate one first.

[NB]: The most irate one first—nuclear. That’s often one that sparks strong reactions.

[MB]: Completely unrelated to this topic. But if you really want me to go off topic, I’ll tell you why nuclear is a bad idea.

[NB]: You think nuclear is a bad idea? Okay, let’s keep it short and sweet.

On demolition—I mentioned that it’s often cheaper to demolish and rebuild. But from a carbon perspective, given your work on steel, concrete, CLT, and so on, what’s your view? Should local authorities require people to retain existing buildings and electrify them, or promote demolition and rebuild from a climate perspective?

[MB]: Retain the buildings. Renovate wherever possible. Unless the building is falling apart or the foundation is completely shot, it has to be in pretty bad shape for rebuilding to be the better option from a climate perspective.

[NB]: Yeah, and I think even CLT has a significant upfront carbon footprint. It doesn’t have to, but the trees take time to reabsorb the carbon. It really depends on how you frame the argument.

[MB]: Cross-laminated timber—my argument is that we can electrify the entire supply chain. We can electrify forestry operations, sawmills, panel distribution, and construction equipment. Every ton of CLT embodies roughly a ton of CO₂ from the atmosphere.

Now, standards organizations around the world are still debating whether that should count because of end-of-life uncertainties. But I argue that there are at least five mechanisms I personally know of that can preserve that sequestered carbon for 80 years or more. And if I know five, there are probably 15—because I’m not omniscient. I’m not the flying spaghetti monster.

So yes, I think sequestering a ton of CO₂ from the air for 80 years should count.

[NB]: Currently, I don’t think you deliver those savings. But there is no “but.”.

[MB]: You don’t get 100% savings from heat pumps today, but we know we’re moving toward fully electrified, fully decarbonized electricity. So every year, a heat pump gets better. Same argument applies—what matters is the direction of travel. And the direction that helps us is cross-laminated timber, not continuing with concrete. It’s that simple.

[NB]: There’s been a question about nano coatings and nanothermal sprays. I’ve always been a bit dubious about their actual performance—I haven’t seen any solid analysis from independent sources that supports the claims.

But even if a new insulation technology came along that made insulation incredibly cheap, my argument still stands: it doesn’t deliver decarbonization. Even if it were free and reduced demand by 50%, you’d still be left with 50% of your heating demand, and if that’s still being met by gas or oil, you haven’t solved the climate problem.

[MB]: And you’ve still got the methane leakage all along the supply chain—and inside the house. Plus the nitrogen oxides and other pollutants from gas combustion that contribute to smog and trigger asthma in children, along with a range of less common chemicals that also affect health.

Cooking with gas… I have to say, the natural gas industry won on so many marketing fronts. “Natural gas”—as if that makes it good. It’s not whale oil, it’s natural. Total accidental branding win. Even now, people say, “Oh, but it’s natural.” And then there was the “cooking with gas” campaign—this whole marketing push to convince us that burning fossil fuels inside our homes was somehow superior.

Induction, baby. Induction.

[NB]: Very good. So Jay Clayton was asking about the Fabric Fifth list. We had heat pumps at number one, smart controls and smart tariffs at number two, basic ventilation and fabric measures at number three, and storage—which delivered cost reductions—ahead of deeper fabric interventions. That was the structure of the Fabric Fifth argument.

On phase change materials and thermal battery storage: you’ve talked about the benefits of hot water storage, but do you see phase change materials any differently? Or is your view simply whether they’re cost-effective or not?

[MB]: I haven’t seen anyone pencil in phase change materials as cost-effective. They get talked about a lot, but the reality is it’s cheap to build a big store of water or use an underground aquifer as a thermal store. In the Netherlands, for example, there are over a thousand seasonal thermal storage systems that pump heat underground in the summer and pull it back with heat pumps in the winter—and they work, and they’re cheap.

The issue with phase change materials is that they’re expensive compared to something like a buried, insulated vat of water. You can build a very large water tank and get far more heat storage, or use a vat of sand, as in some of the sand battery systems. If you’re looking to store and release heat, you want the cheapest material that can do the job effectively.

The claimed advantage of phase change materials is that they can be engineered to release heat at a specific temperature—for example, a constant 20°C for several hours. But that’s exactly what heat pumps and temperature controls are for.

[NB]: There’s a company called Sunamp based in Scotland that has a relatively cost-effective solution. Their main benefit—and the use case they promote—is around size and shape. They can fit into tight spaces where a traditional hot water cylinder wouldn’t fit, which is a real concern in many small British homes. That’s a legitimate use case I’ve seen in practice.

That said, there are new solutions emerging that can fit into existing spaces as well—systems that store some water or use heat exchangers and heat pumps directly. Those are interesting developments.

As for the claim that gas is 8p and electricity is 28p, so heat pumps don’t save money—that’s often the gist of these arguments in poorly insulated homes. I’ve got a clear view on that, but I’m curious to hear yours.

[MB]: My view is that in the UK—as in most of Europe—electricity prices are still tied to gas prices. The problem isn’t electricity itself. The problem is the linkage between electricity pricing and gas pricing. We’ve got to decouple that. We’ve got to reduce the spark spread.

Take Germany as an example. They used to apply equivalent uplifts on both gas and electricity to promote efficiency, which just made both expensive. But now they’re removing those uplifts on electricity to promote electrification. For industrial heat, they’ve dropped the electricity price from €0.15 to €0.06 per kilowatt-hour. That’s significantly reduced the spark gap per BTU—or gigajoule, since we’re speaking to a British audience. (And yes, I find it hilarious that the U.S. still clings to BTUs too—love teasing them about it.)

But here’s the point: it’s now cheaper per unit of heat to use electricity in Germany for industrial processes than it is to use natural gas. Globally, everyone’s waking up to just how fragile the economic value of natural gas really is. We had 20 years of stable, low gas prices because of the fracking boom. But the Permian and other basins are now in their last third of viable sites. The economics are marginal. Production will start declining because they won’t be able to make money from shale gas.

LNG is the most expensive form of energy any country can import, and it can be displaced massively by domestic solar, wind, and storage. As a result, gas prices are going to become more volatile and spiky going forward.

Electricity, on the other hand, can become more stable—if we decouple it from gas by building renewables, storage, and transmission. That’s the policy and regulatory challenge: reverse the spark gap so people don’t end up paying three times more for electricity.

Now, even today—8p for gas sounds cheap, but with a heat pump that’s equivalent to 24p of heat, and heat pumps are three times as efficient. So in practice, you’re still only paying 8p for useful heat with electricity. Yes, there is a spark gap even now, but it exists because of the flawed pricing link to gas. That will go away. Everyone knows it. It’s coming. It’s just deeply frustrating that it’s not here yet.

[NB]: That’s one of the things we’re really pushing government on. The Climate Change Committee has also flagged it in their carbon budget—the single biggest thing we can do to support decarbonization for households and electric vehicles is to reduce electricity prices. Right now, they’re artificially high because of levies, taxes, and charges that are applied to electricity but not to gas.

That pricing structure comes from a legacy context. As recently as 2012, 40% of the UK’s electricity came from coal. But as you’ve said, the facts have changed, and we need to update our assumptions and policies accordingly.

We’ve talked quite a bit about insulation, but what about airtightness improvements? Any thoughts on that? I presume it falls under the same general argument.

[MB]: It helps the business case for a heat pump, sure. I like what the UK has done—they removed the regulation that required fabric improvements before awarding heat pump grants, but they still recommend making those improvements. That’s the right balance. It doesn’t block the heat pump. It doesn’t force people into doing unnecessary or expensive upgrades—especially those cases where, under whatever grading system is used in your country, you had to reach an A rating to qualify. People sitting at a G rating were being told they needed to spend £100,000 just to be eligible. That’s absurd. Just electrify.

As for airtightness, it’s beneficial—but only if you’ve got proper heat exchangers. If you make a home airtight and you still have gas appliances, you risk building up indoor pollutants. That can increase smog levels inside the home and lead to health impacts. So airtightness is a double-edged sword. If it’s affordable and you pair it with the right ventilation—especially heat recovery ventilation—then great, go for it. Fill your boots.

[NB]: The perspective around the importance of ventilation—“build tight and ventilate right”—is another fabric-first-style phrase that gets quoted a lot in construction. There’s certainly no harm in building well and building airtight. But I keep coming back to the cost and energy required to achieve extreme levels of airtightness, especially when it mandates mechanical ventilation with heat recovery in all homes. That was a proposal put to the government, and I think they were right not to adopt it universally.

I’ve been involved in quite a few projects and have seen situations where the ventilation fan usage has been very high. People haven’t changed the filters, the systems weren’t well fitted, and noise issues meant people just turned them off. In many cases, especially in high-rise buildings where windows don’t open, that mechanical ventilation becomes the only source of fresh air. When it’s switched off—because people don’t understand the consequences—you’re left with a sealed box and declining indoor air quality.

That’s one of the areas where we’re not well educated in the UK. People don’t really understand the benefits of proper ventilation, and the health and performance impacts of poor ventilation are significant.

That links directly to Shane’s question about mold growth, which has become a major issue. Tragically, there have been some very serious cases—including deaths—linked directly to mold in homes in the UK. In some cases, that’s been the unintended consequence of poorly installed insulation, which traps moisture in walls. In other cases, the insulation wasn’t applied around certain details—like structural elements—and that created cold spots. Moisture then condenses on those surfaces, creating ideal conditions for damp and mold to take hold. And once mold takes root, it’s very difficult to manage or eliminate.

[MB]: I understand in the UK you just burn down high rises in that case. Oh wait, that was something else.

[NB]: Make sure the insulation is done well. That’s one of the reasons the cost of insulation has increased significantly. We’ve moved from using petrochemical-based insulation in low-rise housing to using only mineral wool in high-rise buildings. That shift has driven up costs, partly because mineral wool is in limited supply. And, to be honest, there’s probably been some profiteering in the supply chain—when demand goes up, prices follow, and we’ve seen that shock ripple through the market.

What used to cost £10,000 per house for insulation is now closer to £30,000–£40,000. At the same time, the cost of solar and battery systems has dropped from £30,000–£40,000 down to around £8,000. So those costs have flipped completely.

Let’s do one last question—quick one. When might we expect to see companies expanding their zero-bills homes offerings to include EVs and modern vehicle-to-home capabilities?

That’s a great question and a nice one to wrap up with. From our perspective at Octopus, we are already delivering zero-bills homes in new-build developments. That combines basic building regulation–level fabric performance with solar, battery, and a heat pump. If you also have a vehicle-to-grid–enabled car—and there are some available now, and you can buy them through Octopus—you can get up to 12,000 miles of free charging per year.

So yes, you can now buy a home and a car with no energy bills. That’s a huge improvement, made possible by combining cost-effective technologies with smart controls and tariffs. It creates a really compelling reason for people to embrace electrification—not just because it’s better for the climate, but because it can be cheaper, safer, healthier, and more reliable.

We often find that promoting the carbon argument alone is difficult. That’s why we talk about zero-bills homes. In reality, they’re also zero-carbon homes, but “zero bills” is a far more engaging customer proposition.

[MB]: Plant. Plant.

[NB]: I definitely didn’t plan that question—it was a very nice way to wrap things up.

Is there anything you’d like to finish with or plug, Michael?

[MB]: No, I don’t work in the building trades. I don’t build high-end homes, and it’s not like anyone on this call is going to be hiring me at my outrageous rates to advise on investment for billion-dollar infrastructure and funds. But—you never know.

[NB]: What I would say is that you have a fantastic podcast—Redefining Energy Tech.

[MB]: If you’re a nerd, it’s a nerdcast. So anyone going in expecting not to get nerd-blasted on multiple topics—fair warning.

[NB]: Yeah, if you’re interested in some of those other sectors, Michael’s recently done episodes on geothermal and maritime. If you’re curious about broader areas, the podcast offers a very thoughtful take—often challenging the conventional thinking many people have around solutions to these big climate and energy challenges.

So I’ll wrap up there. Thank you very much, Michael, for joining us. I’ve really enjoyed the conversation, and hopefully those listening live or watching later on YouTube will too. Thanks for all the comments in the chat, and I’ll now pass over to Simon to close us out.