DHH0021

Written evidence submitted by Liquid Gas UK

About Us

Liquid Gas UK is the trade association for the Liquefied Petroleum Gas (LPG) and renewable liquid gases (RLGs) industry in the UK, representing companies who are LPG and RLG producers, distributors, equipment and service providers, and vehicle convertors. It is dedicated to the safe and effective development of LPG and RLGs. Member companies cover 99% of the total LPG and 100% of the total RLGs distributed in the UK. Our members have a collective turnover of over £1bn and plan to invest around £600m up to 2025, with £300 million spent between 2021 and 2023.

An introduction to LPG and RLGs

LPG[1] is the lowest carbon conventional energy source available to off-grid homes and businesses in the UK, which provides immediate, expedient and cost-effective heat and energy. As LPG emits more than 33% fewer carbon emissions than coal and 15-20% fewer carbon emissions than oil[2], LPG is a transitional solution in its own right. It also emits virtually no NOx, SOx and Particulate Matter, enabling immediate air quality improvements.

BioLPG, alternatively known as biopropane, is a versatile, ‘drop-in’ renewable solution which can provide up to 90% carbon emissions reduction compared to fossil-based LPG.[3] Already available on the market today, bioLPG is chemically indistinct from LPG and can be used as it is, just like conventional LPG. This means it can be seamlessly ‘dropped-in’ to existing supply chains and can be used by consumers in their existing heating appliances, stored in existing bulk tanks and cylinders without any modifications, and transported using today’s infrastructure and skilled workforce, with little or no cost to the consumer.

Switching to LPG systems today also locks in a seamless pathway to renewable energy use, as bioLPG can directly replace conventional LPG going forward in a hassle-free way. LPG and bioLPG can also be used in hybrid systems, alongside heat pump technology. The Committee on Climate change modelled off-grid hybrids using bioLPG in their leading Net Zero report[4].

LPG is commonly used as heating (space, hot water, cooking) in hospitality (pubs, B&Bs, hotels), warehousing and agricultural buildings. LPG can also be used for process heating in industry, for temperatures ranging between 30 and 2,000 degrees (for drying, separation melting, rolling, kiln firing). In both sectors, oil is used more commonly.

In addition to bioLPG, industry is exploring the use of low carbon renewable liquid gases including renewable dimethyl ether (rDME). There are several routes to production for rDME, as it is made from renewable or recycled carbon feedstocks, including domestic waste. rDME has similar properties to propane and butane and is a gas at room temperature and atmospheric pressure. Like LPG, rDME is easily transported as a liquid in pressurized cylinders and tanks. Furthermore, rDME is 100% miscible with LPG and opens up opportunities for the sector to supply a ‘drop in’ blend of rDME and propane to industry. The sector is currently exploring how this innovative new fuel can support the sector in decarbonising off-grid industry.

Executive Summary

Electrification of heating systems should not solely be seen as the solution to decarbonisation and low carbon heat in the UK, especially in rural areas. It is important that regulations and policy reflect that different solutions will be required for different types of building stock and locations across the country.

We advocate a mixed technology approach to installing heating technologies in off-grid homes and non-domestic properties. Energy consultancy Ecuity has found that this approach will enable the UK to achieve its net zero target. It was found to be the most cost-effective approach, and ultimately saved £7bn in levelised cost analysis across the while of UK[5].

The drop-in nature of renewable liquid gases means that it can be used in existing supply chains and heating systems. This equipment is renewable-ready, with bioLPG already being sold on the market. LPG boilers offer a long-term, cost-effective pathway to decarbonisation through the gradual introduction of bioLPG and rDME into the mix; this means over time carbon emissions will increasingly reduce. It is the industry’s ambition to offer 100% renewable energy solutions by 2040. As renewable liquid gases become increasingly available to the UK market, Liquid Gas UK wants to work in partnership with UK Government to drive consumer behaviour in rural areas towards greener solutions. To do this, LPG and renewable liquid gases must be recognised within policy frameworks and regulations for new builds, as well as existing builds, both for domestic and non-domestic properties.

A mixed technology approach alleviates pressure on the electrical grid and supply chain. While the supply chain for gas boilers is mature, the accelerated uptake of heat pumps is constrained by its supply chain and network engineering challenges.

A vastly increased number of trained heat pump installers would be needed, as according to MCS there are only 1,494 contractors certified to design and install heat pump technologies[6]. Upskilling the existing workforce or training new engineers takes time, education policy is never changed or implemented swiftly, it would be unrealistic to assume that these numbers could be sharply increased (and geographically spread) in time to deliver necessary skills for upgrading off-grid rural new builds or existing homes.

We believe this is especially important considering Citizens Advice have recently reported that heat pump owners frequently contact them “feeling they are being overcharged for repairs” or that “they have been misled by their installers as they were promised extra funding from the government to help pay for the heat pump or savings on their energy bills which didn’t materialise.”[7] The supply chain must be much further developed, as well as guarantees that consumers, whether it be homes or businesses, are not misled or miss-sold heat pumps.

Heat pumps will cause a significant rise in demand for electricity consumption on the local network, especially when coupled with demand for electricity to power electric vehicles – it is important that this additional demand does not cause power outages. As well underground lines costing between 3 – 5 times more per km than overhead lines[8], upgrading the network and the actual technology in the home would cause significant disruption to the rural population. It is in these rural located homes and businesses, where boilers using RLGs and hybrid solutions should be used to ensure new homes are low-carbon.

The lack of skills available and the cost of the technology should not be underestimated and the knock on effect it could have to delivering affordable new homes, especially considering the National Audit Office recently reported that none of UK Government’s planned affordable ‘starter homes’ were built.[9] By taking a mixed technology approach in rural off-grid areas, with a mix of LPG/RLGs and heat pumps, it allows progress to be made faster by utilising existing expertise and supply chains, while others are developed and strengthened.[10]

Consumers have a range of preferences, lifestyles or needs, and government policy should recognise this diversity by supporting a range of low-carbon heating options and ensure that consumers have a choice between these.[11]

A recent report by the Leeds Beckett University and Energy & Utilities Alliance found that at least half of the UKs homes 22.7 million will not be suitable for heat pumps[12]. In addition, research by Gemserv[13] found that 44% of rural off-grid homes would not be suitable for standalone heat pumps, instead needing a bioLPG system or hybrid heat pump – this is much larger than BEIS’s 20% estimate which is wholly unrealistic, and based on technical feasibility – not cost. The recent report from the National Audit Office on Decarbonising Home Heating further confirmed this gap, noting that DESNZ is still to determine how to decarbonise those 20% of homes that may be exempt from the phase out of fossil fuel boilers[14]. Government should be clearer on where they are targeting the use of heat pumps, and for those properties which will not be suitable for an electrification system, alternative solutions such as renewable liquid gases should be offered.

The upfront cost and ongoing running costs of electrified heating solutions is significant. This is especially important to recognise when at least 16% of householders in off-grid areas are in fuel poverty[15] and generally use cheaper, high-carbon heating oil to keep warm in winter months. A recent report from the National Audit Office noted that whilst the cost of heat pumps installations has fallen, there has not been the progress planned on reducing running costs[16]. In fact, installation costs for heat pumps ‘will need to fall around three times faster over the next two years if they are to reach the minimum 25% reduction ambition.’[17] Having a mixed technology approach helps homes to choose an affordable heating solution that works for their home and needs, rather than imposing a ‘one size fits all’ heating system on them.

Liquid Gas UK believes that forcing off-grid homes down a ‘one size fits all’ route will result in significant unintended consequences. This is down to five key reasons:

1. Unsuitable measures for rural, older and heritage buildings

2. Unaffordable costs for rural off-grid households and businesses

3. Supply chain capability

4. Just transition

5. Consumer choice

It is well established that low temperature heating systems only operate efficiently and cost-effectively in well-insulated homes[18], and the homes highlighted above are clearly significantly less energy efficient, with much higher heat demand. Their method of construction and lack of insulation can make retrofitting electrified technology very expensive or practically challenging, without achieving real heating benefits.

According to a recent study, just under 60% of detached homes built before 1919 are off-grid, with a further 15% built between 1919 and 1944. These homes are typically located in rural areas and are often significantly less energy efficient, with much higher heat demand[19]. As of 2017, 74% of homes built before 1919 achieved an EPC D or E, as well as 69% of homes built between 1919 and 1945[20].

In addition, the latest English Housing Stock survey data demonstrates that 40% of oil heated properties have an EPC D, 35% an EPC E and 16% an EPC F[21]. Considering these figures, we believe the BEIS estimate of 20% of off-grid properties being unsuitable for a heat pump is highly inaccurate, as most bodies accept that heat pumps are best suited to new build, buildings under renovation and highly energy efficient properties, or risk a colder, more expensive to heat home[22].

For example, take Archetype 1[23], a pre-1918 detached oil heated property with a demand of 142 kWh/m2*year. It would cost nearly 10x as much to install a heat pump (£18,270) than a bioLPG system (£2,000). This is without the necessary retrofit that would be needed in order for the heat pump to run efficiently, so taking into account the necessary retrofit it would cost nearly £31,000 up front – this is totally unachievable for the majority of rural off-grid households.

A recent study showed that a typical pre-1918 detached family home would face levelised costs of 40% higher, equating to £22,600, if forced to switch to a heat pump rather than to switching onto LPG/bioLPG[24]. This is unaffordable and unattainable for most ordinary people in the UK, and especially for at least 20% of householders in off-grid areas who are in fuel poverty[25]. With this in mind, it’s vital to have a consumer led, market approach to off-grid heat decarbonisation, which provides a mix of heating solutions.

As highlighted in Archetype 2[26], which represents over 42,000 properties in England, these homes would actually face upfront costs of £13,060 for a heat pump. This would then grow to nearly £30,000 if you carried out necessary retrofit to bring down bills.

Looking at English Households disposable income, starkly only 27% of households could afford to pay for an air source heat pump for Archetype 2, with only 10% able to afford the necessary retrofit to keep the running costs below an existing fossil fuel system. Instead, switching to LPG would only cost £1,900 or for existing users sticking with LPG and they would have a clear pathway to bioLPG, which also has the lowest levelised cost for these type of homes.

There should be a focus on readily available, well-established and affordable decarbonising technology. LPG is the lowest carbon conventional energy source available to off-grid homes in the UK, which provides immediate, expedient and cost-effective heat and energy. LPG is used for space, hot water and process heating. As LPG emits more than 33% fewer carbon emissions than coal and up to 20% fewer carbon emissions than oil, it is transition fuel in its own right. It emits virtually no NOx, SOx and Particulate Matter, enabling immediate air quality improvements. The role for bioenergy in the strategy is significantly underestimated, whereas the role for heat pumps is vastly overestimated.

Biomass Strategy

The Biomass Strategy, released by the Department for Energy Security and Net Zero, sets out the role that sustainable biomass can play in reaching net zero, and notes within that:

‘Renewable liquid petroleum gas (BioLPG) and renewable dimethyl ether (rDME) could also prove useful measures for decarbonisation of off-grid properties. BioLPG is a drop in fuel that could be used in existing LPG boilers without modifications being made. We understand from the LPG industry that rDME could be used in an existing LPG system with certain modifications or blended with LPG up to a certain point with no need for system modification.’[27]

The policy paper also states that ‘For heat, this will mean focussing the use of renewable liquid fuels such as HVO or bioLPG towards those properties off the gas grid that cannot be readily decarbonised through electrification’.

It is clear from the Biomass Strategy that Government sees a role for renewable liquid gases within the future heating mix. Liquid Gas UK believes that Government should assist in making the UK an attractive place to invest in renewable liquid gases, and should adopt a mixed technology approach to encourage consumer choice - UK Government should recognise the importance of and benefits of competitive markets, including driving economic growth, offer products to satisfy the consumer’s needs, reducing prices and enabling innovation.

April 2024

5