The independent report by Otago University researchers, commissioned by the Energy Efficiency and Conservation Authority (EECA), said the standard insulation upgrade was warming some homes in the deep south by less than half a degree.
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Radio New Zealand obtained the report under the Official Information Act.
It said the "one size fits all" approach was inadequate and suggested $10 billion was needed to make it work properly.
The report's lead author, Professor Bob Lloyd, said he had been shocked to discover the insulation did very little for some houses in Dunedin.
Mr Brownlee said the scheme, which is subsidising insulation and heating upgrades for about 200,000 homes over four years, was the biggest commitment of its kind by any government.
He said he was confident the standards were adequate for all homes and the Government could not put $10 billion into the scheme.
"The reality is that no government could make that sort of commitment to that extent," he said.
The chief executive of the EECA, Mike Underhill, said the scheme subsidised heating as well as insulation.
It recognised three zones -- the top of the North Island, the rest of the North Island, and the South Island.
"The requirement for insulation is stronger in the South Island zone...we spend proportionately more there, they get thicker insulation and that's a requirement of the scheme," he said.
Mr Underhill said insulation itself didn't make homes warmer, it meant that the heating that was used was far more effective.
The scheme insulates floors and ceilings, and Mr Underhill said research had shown that was the most important first step.
