Written evidence submitted by National Grid (DHH0056)
National Grid sits at the heart of Britain’s energy system, connecting millions of people and businesses to the energy they use every day. We understand our responsibilities to the environment and future generations, so we are working to develop solutions to make the transition to a clean economy in which nobody is left behind. As we focus on recovering from the impact of COVID-19, there’s a huge opportunity to create a cleaner, greener economic future. Transforming how we heat our homes can play an important part in this. If we get this right, there are opportunities for jobs and economic growth across the country. Ensuring the policy and regulatory frameworks are fully aligned to support these ambitions will be critical. National Grid is working to ensure that we can facilitate the low carbon heating transition.
We welcome the opportunity to respond to this Call for Evidence on decarbonising heat in homes. We believe that decarbonising heat will be key to realising the UK’s net zero ambition, as the heating sector (domestic and non-domestic) accounts for more than a third of the UK’s greenhouse gas (GHG) emissions[1]. If the decarbonisation of heat is to be successful, over 20,000 homes per week from 2025 to 2050 will need to switch to a low carbon heat source[2]. There is no one optimal solution to achieve the decarbonisation of homes across the country, and we believe that a mosaic of solutions will be needed. This will include both electricity and low carbon gas, alongside major improvements to the energy efficiency of buildings – which the Committee on Climate Change (CCC) has emphasised as one of the key low regret, near-term actions to put the UK on track to net zero emissions by 2050[3]. Given that the technology options for decarbonising heat are at different levels of maturity, it is important that for the longer term, we avoid closing off any future options with the decisions we make today.
For a successful heat transformation, consumers will need to be actively involved in conversations and decision-making. This is especially important for the 85% of UK households who use natural gas to heat their homes and will be expected to engage with the new technologies. Research underpinning our latest report, Heating our homes in a Net Zero future[4], found that though consumers have a major knowledge gap in this area, they are willing to act in order to help the UK achieve its net zero targets. Against this backdrop, we welcome the focus of this Call for Evidence on decarbonising heat in homes. Please find below answers to a selection of questions in this Call for Evidence which are of greatest relevance to National Grid.
Responses to ‘Call for Evidence’ questions
1) What has been the impact of past and current policies for low carbon heat, and what lessons can be learnt, including examples from devolved administrations and international comparators?
Effective and consistent policy: we believe that the government’s commitment to a ‘Heat and Buildings Strategy’ will be an important stepping stone to create the level of change needed in this sector to achieve net zero. We recognise that government has previously introduced several policy measures in this area, for example, to support the adoption of improved energy efficiency. However, these previous measures haven’t necessarily resulted in the scale of uptake previously expected, or the scale required to achieve the enhanced ambitions for net zero. As an example, the government previously created the Green Deal to support homes and businesses deliver energy-saving improvements. The National Audit Office confirmed that the government’s design and implementation of the Green Deal policy did not persuade householders that energy efficiency measures are worth paying for[5]. This resulted in the current gap in the ‘able-to-pay’ sector. A further example relates to the Clean Heat Grant – the proposed successor scheme to the Renewable Heat Incentive. The current proposals for the scheme do not provide financial support for hybrid systems, despite the Committee on Climate Change advising that hybrid systems have a role (even if a transitional one) to play in supporting net zero. Should this remain unchanged. A successful heat transition will need to be underpinned by effective and consistent government policy. An inconsistency in policy could diminish the confidence of consumers to adopt the low carbon heating options that could support the UK’s net zero ambitions. In our research, consumers voiced their frustration at changing government policy, which contributed to a level of apathy towards government targets, such as with net zero. There were references to government’s changing approach to diesel cars, as an example. Consumers will need to be active participants in this heat transition. Therefore, developing policy consistency will be key to both creating confidence in the supply chains to serve consumers, as well as consumers themselves in the investment decisions they make for their homes.
2) What key policies, priorities and timelines should be included in the Government’s forthcoming ‘Buildings and Heat Strategy’ to ensure that the UK is on track to deliver Net Zero? What are the most urgent decisions and actions that need to be taken over the course of this Parliament (by 2024)?
We believe that energy efficiency should be an immediate priority. These next few years will be crucial for the trial and deployment of critical technologies such as hydrogen and Carbon Capture Usage and Storage (CCUS), but action is also required on these now. These technologies could contribute to lowering emissions from heating not just from homes, but industry too, and it is important that government continues to focus on these opportunities that could deliver benefits for green industry, a green recovery, and domestic heating options. In parallel, it is important that industries are given sufficient lead times to develop the skilled work forces required to deliver these ambitions.
National Retrofit scheme supplemented by rollout of low-carbon heating technologies: energy efficiency should be an immediate policy priority in the decarbonisation of heat. Improving the energy efficiency in existing homes to at least EPC rating “C” is a low regret action that will help to reduce the scale of the decarbonisation challenge and is a measure that applies to all decarbonisation pathways. We welcome the establishment of the Green Homes Grant to support this and would like to see sustained, long-term support for energy efficiency investments to develop confidence in the supply chain and for consumers. This should include consideration for green home finance products to incentivise energy efficiency retrofit. In addition to energy efficiency, a rollout of low-carbon heating technologies is urgently needed. However, removing the consumer barrier of high upfront costs is critical to bringing consumers on the heat decarbonisation journey. Our research highlighted key questions from consumers including how the upfront heating system costs will be financed, the impact on energy bills, who will organise and deliver the transformation, and how households will be helped and supported during the transition. Support for consumers can be delivered by extending the Clean Heat Grant (the proposed successor to the Renewable Heat Incentive scheme) to incentivise relevant forms of low carbon heating technologies, not just heat pumps, as is currently being proposed.
Skills and training: linked to the above, we believe that the success of net zero will depend on the availability of skills to perform the required retrofit of homes and installation of low carbon heating options. Our Building the Net Zero Energy Workforce report released earlier this year found that 400,000 roles will need to be filled within the energy sector between now and 2050 in order to reach net zero, with 117,000 of those needed in the next decade[6]. To achieve the scale of change required for low carbon heating, the upskilling of existing gas installers and providing training for new entrants on low carbon heating options should be a priority. The importance of this workforce should not be underestimated. From the consumer research we mentioned earlier, we know that plumbers and gas installers are the key sources of advice for most consumers. We can see the impact that this skills deficit is having already, given recent media reports suggest that a lack of installers is adversely affecting the Green Homes Grant scheme.
Public engagement: it is crucial to make the public aware of the need to decarbonise heat and how this may be achieved, and of the ways in which low carbon heat can have wider societal benefits. Our research showed that consumers are unaware that the way we heat our homes will need to change for the UK to meet its net zero target and had a low familiarity with the low carbon heating alternatives. Only 5% of the consumers we spoke to identified heat as a main contributor to the UK’s carbon emissions. We also found that existing knowledge on heating options is relatively low, with only 20% identifying as very or quite familiar with ground source heat pumps, 18% with air source heat pumps and 2% with heat networks when first introduced. There is a risk that the heat transition could be unsuccessful if consumers aren’t active participants, which is why public engagement and the development of a strong consumer proposition should be a priority.
3) Which technologies are the most viable to deliver the decarbonisation of heating, and what would be the most appropriate mix of technologies across the UK?
The optimal pathway for the decarbonisation of heat is still unclear, as different options are at different levels of maturity and policy is still under development. Therefore, technology neutrality should be maintained to avoid closing off any future options with the decisions we make today. There isn’t a “one size fits all” solution, as different heating solutions will likely be required for different types of housing across the country. Some potential factors could be (but not limited to):
- costs;
- geographical location;
- age, type and ownership of properties;
- existing network connections; and
- other conditions (for example, being in a conservation area)
We believe that there will be a mosaic of solutions, including both electricity and low carbon gas, resulting in the most cost effective and best way to meet the needs of consumers in different areas. Our consumer research report explored how consumers perceived the trade-offs between different low carbon heating alternatives for their homes. As emphasised in our response to question 2, there needs to be a strong focus on energy efficiency to reduce the scale of the decarbonisation challenge. In addition, a move to hybrid heat pumps – comprising of a heat pump and hydrogen-ready gas boiler – alongside the current focus on heat pumps, will create further opportunities to start the decarbonisation of heat.
5) How can the costs of decarbonising heat be distributed fairly across consumers, taxpayers, business and government, taking account of the fuel poor and communities affected by the transition? What is the impact of the existing distribution of environmental levies across electricity, gas and fuel bills on drivers for switching to low carbon heating, and should this distribution be reviewed?
7) What action is required to ensure that households are engaged, informed, supported and protected during the transition to low carbon heat, including measures to minimise disruption in homes and to maintain consumer choice?
It’s essential that we continue to listen to consumers so we can better understand their concerns to effectively address them. Consumers told us consistently that the vulnerable must be protected from both the technological and social change that is coming. In one case study, a participant worried about her husband’s visual impairment and the accessibility of new technology, given he had grown used to their gas boiler, whilst many worried about the elderly and those less able to pay. We heard of existing problems in relation to heat, particularly for those on lower incomes. Current problems with damp, draughts and affordability mean that the future of heat is an opportunity to solve some of these issues which are currently impacting many consumers’ health and quality of life.
Beyond this, consumers indicated that rather than being wedded to technologies, like their gas boilers, they were instead wedded to outcomes, as being warm and comfortable were priority.
Given the scale of the task, and based on our report Heating our Homes in a Net Zero Future, we recommend the formation of a Delivery Body to promote public awareness and make consumer advice readily available. This is discussed in the response to question 8. Alongside this, local trusted advisors will be needed, looking at energy efficiency, heating technologies, local specifics, energy requirements and specific circumstances.
8) Where should responsibility lie for the governance, coordination and delivery of low carbon heating? What will these organisations need in order to deliver such responsibilities?
We see an important need for the establishment of a Heat Delivery Body to be responsible for consumer communication, advice and delivery of the heat transformation (in a similar capacity to Digital UK with the Digital Switchover Campaign). During our research, we heard from consumers that they are keen to make choices on low carbon heating options that are right for their homes, families and circumstance and there is an appetite to receive information to inform their decision-making. We believe that there is much to learn from the Digital Switchover of 2008-2012. This case study is of relevance, given it relates to the coordination of a technological and behavioural transition that needed consumers to be active participants.
Furthermore, we believe that for the heat transition to be successful, a partnership approach will be key. Therefore, we want to see industry, stakeholders and Government work together to establish a Heat Transformation Council – like previous initiatives for offshore wind and Carbon Capture Usage & Storage – to assess the deliverability of various low carbon heating options and make recommendations to Government. Co-chaired by senior ministers from both BEIS and Treasury, the Council could include representation from such sectors as consumer groups, energy, local government, social housing and the supply chain.
November 2020