Industry Voice: Mike Thornton, chief executive of the Energy Saving Trust, looks at how to support the supply chain key for future green heating in the UK
Heat pumps are a key low carbon heating system that will help decarbonise heat in homes over the next decade. Meeting the challenge of installing these systems at the pace and scale required to meet net zero targets is crucial.
In November 2020, the UK government committed to a new target of 600,000 heat pump installations a year by 2028 - one of the headline ambitions in Boris Johnson's Ten Point Plan for a Green Industrial Revolution. The Scottish Government is also targeting a peak of 250,000 renewable heat installations a year in the 2030s, of which the majority are likely to be heat pumps. Meanwhile, the government's independent advisors on the Climate Change Committee (CCC) have recommended a UK target of one million installations a year by 2030.
While we welcome these commitments as an excellent step forward, it is worth highlighting that the government also raised the interim greenhouse gas emissions target for 2030 to a 68 per cent reduction on 1990 levels, up from 57 per cent before. This brings the interim target in line with the UK's net zero by 2050 goal; however, it also increases the 2030 challenge by approximately 20 per cent.
For heat pump deployment, the CCC still recommends that the supply chain should be installing one million units per year by 2030 but with a steeper deployment trajectory that would result in 5.5 million (cumulative) heat pumps in homes by 2030. In addition, by 2050, the CCC predicts that around a fifth of heat will be distributed through heat networks.
What's the problem?
Decarbonising the heating systems in the UK's 30 million homes is a massive challenge and will result in millions of households having to change the way they heat their homes.
While heat pumps were identified early as a key technology to enable the transition to low carbon heating, issues with installation costs and practicalities have since emerged. A lack of familiarity with the technology is another barrier but one that can be addressed by providing people with information about the benefits of heat pumps. Homeowners are less likely to invest in an unfamiliar technology unless they can get expert, impartial advice on how to make it cost effective for them - something that Energy Saving Trust can offer.
Another key issue in meeting the net zero challenge for homes is to scale up the supply chain. If this challenge is to be met, clear, firm targets and long-term investment, from both government and the private sector, are critical to provide the certainty of demand which will then allow the supply chain to invest.
Where is the funding?
On finance, it looks like there could be up to five available routes for supporting heat pumps:
- The Clean Heat Grant - aimed at supporting low-carbon heat technology. The government has indicated there will be £100m of funding over four years, although final details are still to be announced.
- The revised Eco Company Obligation (ECO4) - government has increased ECO funding to £1.4bn and has recently consulted on changes to the scheme, which should align its outcomes more closely to net zero targets.
- The government is expected to outline further financial support in its anticipated Heat and Buildings Strategy, including new types of financial support for households (it is not clear what this will be yet, although there could be a replacement for the Green Homes Grant scheme, and new grants for both social housing through the Social Housing Decarbonisation Fund and homes not connected to the gas grid through a Homes Upgrade Grant).
- The Conservative 2019 manifesto allocated £9.2bn for energy efficiency and included the Homes Upgrade Grant (£2.35bn this Parliament) and Social Housing Decarbonisation Fund (£3.6bn to 2030, of which £1bn by 2025). However, as we don't yet know what the total level of funding will be, we can't assess if it these costs are sufficient to meet the government's energy efficiency targets.
- In August 2021, the Department of Business, Energy and Industrial Strategy (BEIS) opened bidding for the £160m first wave of the Social Housing Decarbonisation Fund. This first round of funding will see up to 38,000 social homes install energy efficiency upgrades and low carbon heating systems - with a total fund investment of £3.8bn over 10 years. While this is again a good step in the right direction, there continues to be a need for greater financial commitment for the sector to scale up to one million installs a year by 2030.
How do we get there?
Requiring new builds to make heat pumps the default option from 2025 could cover around half of the installs required for net zero targets. While new builds will be the lowest cost route to growing the supply chain, the remaining half will need to come from retrofitting existing stock. The priority here would be older boilers in the 1.5 million homes using high cost, high carbon fuels such as oil, LPG and coal.
A clear phase out date for fossil fuel heating - parallel to the phase out date for petrol and diesel cars - would also support the sector, while giving a clear signal to individuals and the market on the direction of travel. The 15-year lifetime of conventional boilers suggests that 2035 is the latest date this should be set. This would need to be matched by a rapid growth in low carbon alternatives, to ensure they can meet this demand from 2035.
What commitment do we need to see from government?
Currently less than a quarter of a million of the UK's 29 million homes have heat pumps. In 2019, 27,000 were installed - in stark contrast to the 1.7 million replacement boilers. If heat pumps are to account for more than the present one per cent share of the heat market, we need much more, rather than less, government intervention.
A larger Clean Heat Grant fund of £1bn over four years could support up to 250,000 heat pumps, doubling the total numbers. This figure aligns more closely with the CCC's estimate that we need £1.5bn-2.5bn a year for a rollout of energy efficiency and low carbon heat through the 2020s. This estimate is for the UK as a whole and does not include the additional funding required for fuel poor households.
When implemented alongside wider measures, such as reducing the cost differential between heating fuels and regulation or an emissions standard for replacement heating in off-grid homes, this scale of funding could positively transform the sector. Policymakers will need to act swiftly in the next decade on the future of heating in the UK and set out a detailed roadmap to net zero. The upcoming Heat and Buildings Strategy needs to provide the practical steps to reduce carbon emissions from homes and must ensure a fair and equitable transition to net zero heating by 2050.
Mike Thornton is chief executive of the Energy Saving Trust.
This article is sponsored by the Energy Saving Trust.