Written evidence submitted by Wales and West Utilities (DHH0073)

Introduction

1.     Wales & West Utilities are the local system operator and gas network owner for Wales & SW England. In our region, we provide the energy for around 80% of heat and increasingly the flexible power generation that has enabled renewables and nuclear to be dominant in our region.

2.     Having a central role in the energy system, we have been acknowledged as experts in the field of whole energy systems engineering. Part of this expertise has come from the development of the Pathfinder energy system simulator – a unique tool amongst electricity and gas distribution operators. Our responses have been drawn from evidence from both Pathfinder and other research commissioned by Wales & West Utilities into the area of heat decarbonisation as part of a whole energy system, broadly defined by the diagram below:
3.     In the context of this whole energy system, we would agree with the thinking that there is no one silver bullet; however we believe there is one area that has been overlooked by most of the evidence provided to-date – that of smart hybrid heating systems.

Smart Hybrid Heating

4.     The journey began with the Freedom Project, brought to us by Western Power Distribution – the evaluation of the first smart controlled hybrid heating system. This project fitted 75 small air source heat pumps to existing gas central heating systems – this saved at least 25% on installation costs. The smart control system developed was able to switch between the two appliances based on cost and carbon. The installation involved significantly less disruption than a full air source heat pump and at a lower cost. The hybridisation improved the heat pump efficiency by 25%. https://www.wwutilities.co.uk/media/3859/freedom-project-briefing-document.pdf. The project identified that the heat pump could satisfy 80% of the heat demand, the gas boiler the remaining 20%.

5.     More recently, compact hybrid boilers have been developed and are being trialled by UK Power Networks and Wales & West Utilities: https://www.smarternetworks.org/project/nia_wwu-066). These appliances are a major breakthrough, combining a gas boiler and a heat pump in the same appliance that’s very similar in dimensions to a standard boiler. The unit is built and ready to fit in the factory, meaning a gas safe registered engineer can fit it as a replacement for the existing boiler. These characteristics mean:

1. Faster deployment – gas safe registered engineers can fit up to 1.5 million per annum. This helps to tackle the skills challenge of retrofitting low carbon heating.
2. Can utilise cheap renewable electricity when it is available and avoid high cost, high marginal emissions electricity when it isn’t.
3. Use green gas when not using electricity – any green gas – biogas; biogas/hydrogen blend or hydrogen. Since the heat pump can take up to about 80% of the heat demand, it means the green gas goes 5 times further than the amount used in a standard boiler.
4. Eliminates disruption and behavioural change for the consumer.
5. At least 50% saving on installation costs compared to a full air source heat pump.

6.     To independently assess the hybrid concept and whether it should feature in a net zero future, Wales & West Utilities commissioned an evaluation report by independent consultants, Navigant. It concluded that the latest research on hybrids using a smart control system could be a major part of a net zero future in the UK. Report: https://www.wwutilities.co.uk/media/3858/benefits-of-hybrid-heating-systems.pdf

Wales & West Utilities Vison and Net Zero Plan

7.     As noted above, our grasp of whole energy systems has led to an evidence led vision and detailed plan to play our part in achieving Net Zero. Our plan involves hydrogen for industry; a ‘hybrid first’ approach for heat in buildings; biogas and hydrogen for heavy transport and green gas-powered flexible generation to support renewable generation:

Enquiry questions and answers

• 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?

8. On the positive side, the support for biomethane has seen over 100 gas to grid plants being connected. In our network area, there’s enough biomethane capacity (~1.8TWh) connected to supply around ~150,000 homes, with ~142,000 of these homes in the South West of England.

9. There is a strong link to smart hybrid heating systems here – they make the biomethane go five times further, so ~750,000 homes in our network could receive a decarbonised gas supply now if hybrids were fitted (see next question), with ~710,000 of these homes in the South West of England.

10. Some zones in the South West of England are reaching biomethane levels where every home in those areas can receive a decarbonised gas supply, e.g. the Vale of Evesham where biomethane will soon be at least the 20% needed for hybrids all year around:

        Key - Blue is 2020; Orange is 2021.

11. On a negative front, subsidies for renewable electricity are higher than for heat, so over 50% of biogas sites just produce electricity, which is both inefficient (due to generation losses and vented heat) and low value (flat, inflexible profile of delivery).

• 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)?

12. A ‘hybrid heating first’ policy, as recommended by UKCCC, would enable the best of both grids as they decarbonise. Compact Hybrid boilers, now being trialled in England and Wales collaboratively by UK Power Networks and Wales & West Utilities, can be fitted by Gas Safe Registered engineers, and if fitted at the time of boiler replacement, could see 15 million fitted over ten years. This has a dramatic impact on overall cumulative carbon emissions (assuming the electricity grid can decarbonise, of course):

Sample of 10,000 homes using differing heat decarbonisation technologies as an illustration of compact hybrids

13. Mandating only hydrogen-ready boilers and hybrid heating systems by 2025 would add little/no additional cost and ensure boilers are ready for a decarbonising gas grid.

• 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?

14. Single technologies expose the inherent disadvantage of each. For example, solar powered heat pumps have been recently suggested, but supply and demand would be diametrically opposed:

     Case study – Swansea

15. UK feedstock for biogas production is considered to be limited to 150TWh per annum, insufficient to simply replace natural gas.

16. Mixed renewable generations leaves multiday gaps in supply:

Case study – Swansea

17. The solution then is a balanced portfolio:

1. Hydrogen for industry
2. Wind/solar for power with electricity storage and flexible green gas generation
3. EVs and hydrogen for cars/lorries respectively

18. Heat for buildings:

19. Working with the Energy Networks Association, Wales & West Utilities have developed a net zero pathway which minimises disruption and cost to the consumer and provides the lowest overall carbon emissions both during the transition and beyond 2050.

1. Energy efficiency to a level that is economically viable (20%)
2. Heat networks in very specific locations, and off-gas solutions inc. heat pumps and hybrids with bioLPG (20%)
3. The remaining 60% based on smart hybrid heating systems, including compact hybrid boilers, using 80% renewable wind and 20% green gases (biomethane & bio-synthetic methane gas (BioSMG) with a hydrogen blend in some local areas/regions and 100% hydrogen elsewhere):

20. As a result of having fuel switching flexibility, heat pumps in a hybrid can optimise to guarantee lowest whole-system carbon – with the ability to set a ‘live minimum COP threshold’ to avoid upstreaming more marginal emissions to the power sector than are saved in buildings – similar to the offshoring of emissions. The HyCompact project will be investigating this live minimum threshold in the hybrid controls. It is important that emissions from heating buildings is not considered and confined only to within the boundary of buildings but considers the whole-system carbon emission impact. Use of an average electricity grid emissions factor is inappropriate and misses the real carbon consequence of transferring a demand from one energy vector to another. If the heat pump in a hybrid is not operating efficiently enough, it will put additional demand on flexible fossil fuel generation sources that emit more carbon than the boiler would have emitted at the building level. Smart hybrid heating systems are lower whole-systems carbon than heat pumps on their own.

• What are the barriers to scaling up low carbon heating technologies? What is needed to overcome these barriers?

21. Skills are always going to be a concern, but for home heating, the compact hybrid boiler ‘first’ proposal eliminates the skills challenge as Gas Safe Registered engineers can fit them and if incentivised, could simply replace the current routine boiler replacement churn. (1.5m per annum). The conundrum around skills for heat pump installation is overcome by the heat pump being fitted into the boiler unit during manufacturing; therefore, significant heat pump deployment and achievement of 80% electrification of heat can be delivered by the existing gas installer base and hybrids.

22. Hydrogen-ready appliances, as developed by the BEIS Hy4Heat Programme would avoid a mass changeover when converting to 100% hydrogen (hydrogen blends to 20% do not need appliance change).

23. Existing housing stock, even with all cost-effective energy efficiency measures undertaken, leave many too-hard-to-heat with an air source heat pump alone.

         Source:  MHCLG public EPC data, England and Wales, November 2019

• 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?

24. Key is to start with the lowest cost, least regrets pathway, which the above suggestions are aiming to achieve.

25. The distribution of subsidies should focus initially on those that give the best and hence fastest carbon reduction per pound invested.

• What incentives and regulatory measures should be employed to encourage and ensure households take up low carbon heat, and how will these need to vary for different household types?

26. WWU Business Plan has explored the options of low carbon heat delivery – a RAB-based model may be appropriate: https://www.wwutilities.co.uk/media/3567/3-wwu-business-plan-december-2019.pdf pp125

27. Hybrid heating systems would need lower subsidy than standalone air source heat pump to reach market maturity and ‘wean-off’ incentives, compact hybrid boilers about 25% lower still.

28. Hydrogen-ready boiler roll-out would reduce the networks’ need to exchange appliances when hydrogen conversion takes place.

• 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?

29. This is a challenge – the UK Climate Assembly needed several weekends to establish understanding of the issues and options. However, the message from them over the ‘heat’ weekend was to minimise disruption and costs, with hydrogen favoured over full electrification. Hybrids were included in the evidence provided in the hydrogen session.

30. Hydrogen-ready boilers and compact hybrid boilers eliminate disruption and keep costs to the absolute minimum, maintaining a familiar system to the one they currently have. In addition, hybrids provide energy system flexibility (including high value, indefinite and immediate turn-off for Fast Frequency Response) whilst maintaining affordable warmth and comfort. Hybrids can be retrofitted first (rather than fabric) to provide 80% electrification, even in homes that are highly inefficient, and be used to diagnose the cost-optimum building fabric retrofits, if needed – this avoids the upfront fabric retrofits and changing of radiators, pipework and flooring that’s needed for a full air source heat pump system.

• 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?

31. Energy networks, whilst not the most recent role, have many, if not all, of the requisites to undertake a significant role in the coordination and delivery of low carbon heating. They have many of the characteristics needed:

1. Reliable and trusted
2. Very high customer service scores (9/10)
3. Financially stable and can access investment
4. Can provide a local area/regionalised and optimised roll-out

32. I hope the evidence provided above gives at least an insight into the work Wales & West Utilities have gathered and we would be delighted to provide further details as needed.

November 2020