Cost Optimal Domestic Electrification CODE

Cost-Optimal Domestic Electrification (CODE) was a research and modelling project with the final report written Jason Palmer and Nicola Terry and published by BEIS with oversight from Oliver Sutton, George Bennett and Anna Stephenson. Acknowledgements for the work are also given to Cambridge Architectural Research (CAR) and Cambridge Energy (CE) teams; Ian Cooper, Anthony Guillem, Fionna Catlin, Janet Owers, Suzie Webb, and Yi Zhang.

The objective of the study was to assess costs of retrofits based on the perspective of the consumer. It therefore only considers costs that directly impact the consumer: the upfront cost of equipment, energy costs and maintenance costs. The Final Report BEIS Research Paper 2021/051 can be accessed via the government link here. The report takes the view that the decarbonisation of electricity creates a major opportunity to reduce greenhouse gas emissions from home heating in Great Britain without requiring extensive and costly deep retrofits. The study tries to demonstrate that home conversions from gas or oil heating to electric heating can be achieved at significantly lower costs than commonly assumed, while maintaining thermal comfort and delivering substantial emissions reductions.

The research was commissioned to identify cost-optimal pathways for installing electric heating and complementary energy-efficiency measures from the consumer’s perspective. Whereby the costs considered included upfront capital expenditure, energy costs, and maintenance over a 15-year period, discounted at 3.5% to 2020 prices. Wider electricity system costs, such as network reinforcement or generation capacity, were excluded. As a result, “cost-optimal” in the study refers strictly to what minimises total cost of ownership for households under present-day conditions.

Detailed modelling was undertaken across 12 representative house types, or typologies covering around 90% of Britain’s 28 million dwellings. The typologies reflected common combinations of dwelling form, construction type, and existing heating systems.

Firstly a form factor-based approach was looked at, comparing the all important heat loss parameters for detached dwellings with and without extensions and semi-detatched and end of terrace with and without an extensions. This led to an approach that divided the 'semi-D's, end-of-terrace, and detached’ cases into three groups of compact, medium and sprawling.

Secondly, a construction-based approach, looked at the roof, floor, windows and walls. Roofs tended to be pitched and it was assumed insulation levels were similar at around 100mm. Floor type related to wall type, but with suspended timber floors as a minority for all types except the 28% of dwellings with solid walls. So all solid-wall properties were modelled with suspended timber floors and as many were built with no insulation up to at least the 1990s, all cases floors were modelled with no insulation in the base case. Wall typologies were referred to as bungalow, flat-small, flat-ground, flat-mid, flat-top, mid-terrace, compact house, medium house and sprawling house, with differentiation between Cavity High U, Cavity low U, Solid high U and system high U. the final analysis included nine cases with Cavity walls and low U-values, plus three solid walls with high U-values.

Dynamic thermal models with hourly resolution were used to simulate tens of thousands of combinations of heating technologies and fabric upgrades, ensuring that all selected options met defined comfort standards. The modelling included a range of electric heating technologies currently available in the UK, including high- and low-temperature air- and ground-source heat pumps, air-to-air heat pumps, infrared panels, and electric storage heaters. These were assessed in combination with insulation measures, solar PV, batteries, and thermal storage where appropriate.

Results showed that, over 15 years, cost differences between most electric heating options are relatively small, typically within 10%. Low-temperature air-source heat pumps and air-to-air heat pumps are cost-optimal for most house types when time-of-use electricity tariffs are applied. Under flat-rate or Economy-7 tariffs, electric storage heaters become cost-optimal for some homes, particularly small flats.

The analysis found that extensive fabric upgrades are rarely cost-optimal over a 15-year horizon. In most cases, minimal measures such as draught-proofing and top-up loft insulation provide the best value, while high-cost interventions like internal or external wall insulation do not repay their capital costs within the modelling period.

Sensitivity testing highlights that assumptions about time horizon, electricity prices, and disruption strongly influence outcomes. Longer horizons reduce the attractiveness of heat pumps due to replacement costs, while lower electricity prices shift cost-optimal solutions toward storage heating. Finally, while batteries and thermal stores can provide demand flexibility, neither is currently cost-optimal at prevailing energy and capital costs, though thermal stores offer better value than batteries for load shifting.

The outputs of this work have fed into various aspects of policy moving forward including the Boiler Upgrade Scheme (BUS) and the Warm Homes Plan.

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