Can electricity meters be objects of desire? Could we have ‘power pensions’ where you build up credit for being energy efficient, then get free heating in old age? If you put solar cells on your roof, could you get together with others to trade electricity? Can we make energy interesting? Can we design our way out of climate change?

This summer, the Design Council's RED team of designers and advisers spent six weeks in a Victorian terrace working on these questions. They investigated how people think and feel about using energy in their homes, they talked with policy makers and energy experts, and they developed products, services and policies.

The team based themselves in a flat in Lewisham. 222b Lee High Road is a typical London home. Lying along one of the arterial roads leading out towards Kent, it is an outwardly mundane two-bed maisonette in a three-storey house. It is hard to imagine that anywhere so ordinary poses one of the greatest threats to the future of human life on the planet. Yet it is an excellent example of why Britain's contribution to global warming is going to keep on growing, unless we radically rethink our relationship with energy.

This is housing built for an era when coal was cheap and climate change was not even on the radar. Single-glazed windows and solid brick walls bleed heat in the winter, and even more goes up the now redundant chimneys. The loft is uninsulated. Cold air can get in from anywhere, through gaps in the floorboards, through the electric sockets in the wall, the air vent in the kitchen and under the doors. A pressure test showed that the air in 222b Lee High Road changes a staggering 40 times an hour. If the air were water, the flat would have sunk in less than two minutes. The task of keeping the place warm falls to an antiquated boiler, about half as efficient as a modern condensing version.

The story no better when it comes to electricity. Originally, 222b Lee High Road would have been wired for just half a dozen central ceiling lights and a couple of sockets. The average house now has 35 appliances and multiple lights in every room. Today we use 70% more electricity per home than we did in 1970, and with plasma TVs and garden lighting the latest must-have items, the trend is set to continue.

Indeed, total domestic energy use has risen by more than a third over the last 30 years. In London, homes are now one of the largest contributors to carbon dioxide emissions, responsible for 44%. Heating and lighting our homes and using our TVs, dishwashers and the rest means we are pumping over 150 million tonnes of carbon dioxide into the atmosphere every year. Almost all of that is coming from homes where people are not living in fuel poverty, but could easily pay to take action on energy use.

If this is the bad news, the good news is that the technology already exists to make our homes sustainable. A team at Oxford University have demonstrated that it is entirely feasible to get our domestic energy use down to 40% of what it is now by 2050, meeting the government's long-term targets.

Indeed, everyone agrees that in theory the easiest and cheapest way to tackle climate change is to radically improve energy efficiency. Yet the failure of current efforts to do just that is leading to a call for a whole new generation of nuclear power stations to be built instead.

It is not that nothing is happening on energy efficiency. Around £500million a year is being spent on programmes to upgrade homes like 222b Lee High Road. Energy labelling of fridges and washing machines means that appliances are becoming more efficient. These programmes do have an impact, but they are not enough to stem the tide. As energy expert Catherine Mitchell of Warwick University puts it, they are not the 'step change' needed to balance the tide of electricity and gas use through the 1990s and 2000s.

Why is this? Because energy efficiency schemes have been designed to deliver insulation and low energy light bulbs rather than changes in behaviour. They work in a way that minimises the involvement and awareness of energy users - us. The problem is that we want our houses warmer than ever before, and we want more gadgets using more electricity. And even though the fridges we buy are more efficient than they used to be, they are also a lot larger, so again, total energy use goes up.

It's easy to see that we have got used to a system in which we don't have to think about energy at all. We get electricity from the National Grid and gas down the pipe, and all the complex business of delivering cheap, reliable energy is dealt with somewhere else, centrally, leaving us free to just consume. And we are pretty passive about our role. Many people who pay by direct debit don't even look at their bills.

So is there any way of reaching the '40% house'? What is needed is a revolution in domestic energy policy - one that puts the householder at the centre. This is why design, whose approach starts with the needs of the user, , could potentially play a key role.

TThe RED team has been working to address this in three areas. The first was how to transform people from being passive consumers of energy to active managers. The challenge was to make energy tangible and visible, and to design for easy control of all the systems in the home and, most of all, to create motivation. To an extent, policy is helping here. From 2007 it will be compulsory to provide a report on your home's energy performance when you sell it. But carrots are better than sticks, and design offers the prospect of making home energy management aspirational.

An early idea from the team combined tangibility, control and aspiration in prototype designs for technically sophisticated but beautiful energy monitors - a device that not only gives you finger tip control over appliances and heating, but also something you'd love to see hanging on your wall.

The team then extended the representation of energy information to an online 'Virtual Home'. Here you can enter real details from your own home, and then try out different measures such as loft insulation or a more efficient boiler virtually, through drag-and-drop drop graphics, to see the impact on energy and CO2 emissions. Details could be verified by a certified auditor, and individual home energy performance could be registered online. This would allow people to plot their own energy management over time and compare it to that of others.

The next step was to work on motivation, linking action to rewards through the Power Pension idea. Unlike 'domestic tradable quotas', where everyone gets a carbon ration that runs down more quickly the more energy you use, the Power Pension gives you more credit the more energy you save. This is a long-term scheme, tied in with financial institutions, where you realise rewards only when you retire.

Next, the team looked at how to support householders in becoming producers of energy, not just consumers. With micro-generation technologies, there is a growing number of ways to have a mini power station in your home. Solar water heating and solar photovoltaic cells are the most popular. But 2006 is set to see the arrival of micro-wind turbines for the roof, as well as gas-fired systems (no bigger than a washing machine) that will produce not only heating but also electricity for your home. The potential is massive. Greenpeace points out that if just one-third of UK households invested in a micro-wind turbine, we wouldn’t need any new nuclear power stations.

At the moment, this potential is being held back by a multitude of barriers – planning restrictions and lack of information, reliable suppliers and installers. But one of the biggest problems is that, unlike Germany or Spain, there is currently no guaranteed price for surplus electricity from micro-generation. For example, on a hot summer’s day with everyone out at work or school, a household’s solar cells may produce more power than is actually used.

The RED team looked at the potential of group collaboration as a solution. With some minor changes in regulations, energy trading clubs could be set up, allowing enthusiasts to sell or donate surplus electricity to one another. Local schools or hospitals could also get involved, and people could opt to give their excess power away to households they know are in need.

Finally, the team tackled support services. Expecting people to handle the complexities of energy managed centrally is all very well, but many will need support. Energy auditing and meter installation need trained professionals, and some people need help even fitting loft insulation. At present, the support economy for energy is weak. Lack of trust in companies selling products, and carrying out installations is a major problem.

Home energy services are more likely to come from retail and service models than from traditional utilities. Thus the RED team sketched out a hand-holding service, called Jobdone.com,  for loft insulation and other building work delivered through a big-name DIY brand addressing the trust and service design issues.

A new generation of support services also requires a different business model from the cheap but minimal approach of the current energy efficiency programmes. For those able to do so, paying for a high quality service including in-depth auditing tailored to individual homes, help with taking action on energy efficiency or micro-generation, and on-bill credit repayment. But, this is part of turning home energy services from a dreary chore, or a worthy investment, into aspirational pieces of consumerismr part of the consumer society, an aspiration similar to the “new concierge services” market.

The RED team energy project has been about provoking responses, throwing ideas out to encourage thinking by others, in the energy sector and beyond. The team believes the project points towards ways in which design can put the energy user at the centre, meaning that tackling climate change works goes with the grain of modern life, rather than against it.