Written evidence submitted by the Heat Pump Association (HPA) (DHH0080)
About the HPA:
The Heat Pump Association (HPA) is the UK’s leading authority on the use and benefits of heat pump technology and includes the country’s leading manufacturers of heat pumps, components, and associated equipment. Proposals put forward by the HPA are developed closely with a membership base that represents around 95% of the heat pump market manufacturing share, including all of the large multinational companies providing product to the UK market, ensuring that the proposals are workable and credible.
The Association works to support policymakers in the development of effective heat decarbonisation policy and other matters that affect the interests of end users, wider stakeholders, and the industry. In addition, the HPA co-ordinates technical and market research into areas of mutual interest identified by members, the aim of which is to improve market opportunities at home and abroad and helping markets to transform to low carbon solutions and technologies.
The HPA recognises that heat pumps will only fulfil their promise in the market if suppliers, installers, and users fully appreciate their function and capabilities. A major objective of the association, therefore, is to raise awareness of heat pumps by informing prospective specifiers of their long-term benefits, reassuring end users and providing up-to-the-minute advice on the various systems available. The HPA conveys this message by generating publicity using exhibitions, literature, promotions, and public relations in addition to helping costumers deploy the technology through managed sales and services structures.
Previous HPA publications:
The decarbonisation of heat in homes is a big challenge that faces the UK Government if the net zero target is going to be reached by 2050. Progress to date has been limited and a significant step change is needed in order to align with the net zero target. This step change though is possible. It has been demonstrated in several countries that a supportive and sustained mix of policy support can lead to widespread use of low carbon heating technologies that already exist and can be deployed at scale, such as heat pumps.
The decarbonisation of heat will require several solutions. Heat pumps are a mature, established technology that can immediately deliver vast carbon savings and provide a route to net zero heating as the electricity grid continues to decarbonise. Heat pumps already deliver around a 60% saving compared to the emissions from a gas boiler per kWh of delivered heat and this is expected to rise to around 95% by 2050, see Figure 1.
Figure 1: The carbon savings from heat pumps (Source: HPA analysis, using BEIS data)
The Committee on Climate (CCC) change recommend that 19 million heat pumps will be needed by 2050 to reach net zero and this will come through the deployment of over 1 million heat pumps per year by the mid-2030s[i]. This signals a serious shift compared to the 27,000 heat pumps that were installed in the UK in 2019. The success of heat pump deployment across several European countries shows learnings that can be applied irrespective of context. A successful approach typically involves a combination of upfront grants, carbon taxes, planning policy, regulation, and strong support for the certification of skills and standards.
Taking the CCC’s recommended level of deployment and the policy learnings from elsewhere, the HPA has developed a roadmap to reach this level. This breaks down the heat pump deployment numbers into yearly, sectoral values that show how the scale can be achieved and the policy changes and timings that are needed alongside this to encourage such deployment, see Figure 2 below. These policies could be packaged as part of a Heat Pump Sector deal to create a commitment and partnership between industry and government to deliver the growth in the deployment of low carbon heating through heat pumps.
Figure 2: Heat pump net zero deployment trajectory with policy overlay
The policy changes outlined in Figure 2 should be committed to by the government. Doing so will provide a clear signal of intent that it is serious about the decarbonisation of heat. This will help to boost demand, grow low carbon heating installer numbers, reduce the costs, and ultimately boost deployment to significantly cut emissions. While the decarbonisation of heat is often viewed as a harder-to-decarbonise sector there are clear and specific policies that the government should immediately act upon, as outlined above. With no time to waste in tackling the climate crisis and the solutions to decarbonising heat already available to us, change is urgently required.
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?
Past and Current Policies
The main form of support for low carbon heat has been through the Renewable Heat Incentive (RHI). The scheme offers a spread of payments across 7 years to encourage the installation of low carbon heating systems. The RHI though has not created the growth in the deployment of low carbon heat that it was expected to, the Department for Business, Energy & Industrial Strategy (BEIS) originally planned that the RHI would deliver 513,000 installations by 2020[ii], but 94,480 installations across the non-domestic and domestic schemes were only achieved by the end of 2019[iii]. Deployment through the domestic scheme has remained fairly flat across its lifetime, see Figure 3 below.
Figure 3: Domestic RHI Heat Pump Accreditations (Source: BEIS)
Although this funding has been in place for several years, at the same time there has been little policy implemented alongside it to provide the certainty of the shift for low carbon heat that is needed to encourage installers numbers and grow deployment. In addition, experience has shown that the bureaucracy associated with the Microgeneration Certification Scheme (MCS) has been overly burdensome for installers to be able to provide access to the RHI funding. This coupled with the lack of a wider supportive policy mix has seen little incentive provided for those installing fossil fuel boilers to retrain and to increase low carbon heat deployment.
Arguably the primary reason for lower deployment than expected is that it does not provide any assistance with the upfront cost of the low carbon heating systems, which are usually more expensive than traditional systems. This represents a hurdle that must be overcome for consumers and, for the domestic RHI, means that those without the savings or access to capital to meet the upfront cost are unable to access the funding. In this sense, the RHI is often referred to as a ‘middle-class subsidy’.
In addition, the spread of payments also ignores the additional weight that consumers place on upfront costs as part of their decision-making process. It has been shown that consumers will disproportionately make their decisions based on the costs and/or benefits that will occur sooner rather than those that will occur later. This has been recognised by the Behavioural Insights Team, for example, who state that “we are more influenced by costs and benefits that take effect immediately than those delivered later”[iv]. The Behavioural Insights team also recommend that “policy makers should consider whether immediate costs or benefits can be adjusted (even slightly), given that they are so influential”, something that the RHI overlooks and learnt from for future policy.
The HPA are therefore pleased to see the switch to upfront grant support under the proposed Clean Heat Grant scheme and the current Green Homes Grant. This will help to overcome the crucial additional upfront cost currently faced when deploying low carbon heating systems, such as heat pumps, to more greatly encourage consumers to adopt these technologies. Analysis that the HPA has conducted for an average consumer shows that if they were to receive a typical RHI payment of £6580, spread over the 7-year period, an upfront grant level of £4804 would have the same impact with the consumer when choosing a new heating system. This means that the deployment of low carbon heat can be encouraged more cost-effectively and strongly through an upfront grant.
The Impact Assessment for the Clean Heat Grant expects to encourage the deployment of 12,500 low carbon heating systems per year[v]. This is at a rate similar to that of current yearly RHI deployment and as noted in the inquiry description, at the current deployment rate (of which RHI deployment is just under a half) it would take over 700 years to reach the 19 million heat pumps that the Committee on Climate Change (CCC) suggests are needed by 2050. The impact of this current proposed policy must therefore be backed up with a bigger budget, to ensure that the full benefit of switching to an upfront grant can be realised.
The additional upfront funding currently being provided by the Green Homes Grant is again welcome, although the impact on deployment of low carbon heat through the scheme might be limited. Low carbon heat installers for the scheme are required to have accreditation from MCS and Trustmark to ensure their competence and protect consumers. This is important for the long-term trust of the industry and needed to ensure sustainable growth occurs for years to come. However, the number of installers currently accredited through this scheme is low, at around 900 heat pump installers, compared to around 108,000 Gas Safe installers working on domestic heating and hot water systems[vi]. Many of these installers also have little to no additional capacity over the coming months, and with the scheme currently scheduled to close at the end of March 2021 it means that deployment is unlikely to increase significantly as a result of the scheme among these installers. With the scheme only providing a short term boost for low carbon heat, it also provides little incentive for installers to re-train to be able to install heat pumps instead of fossil fuel systems, due to a lack of continuity and uncertainty about long-term demand.
This installer numbers issue has been recognised by the government, with a £6.9 million Green Homes Grant Skills Training Competition announced[vii]. This funding is certainly a step in the right direction and will hopefully see a boost to installer numbers. It must though be backed up by a long-term framework of support that harnesses any initial momentum given from the scheme to upskill installers for low carbon heating technologies and build installer numbers in the long run.
International Comparators and Devolved Administrations
Many of the lessons that can be learnt from current and past policies in the UK can already be seen in the successful policy support for the deployment of low carbon heating in other countries. The UK currently lags far behind the majority of European countries in terms of low carbon heat deployment, see Figure 4, where several examples of successful policy support can be seen.
Figure 4: Heat Pump Units Sold Per 100,000 People (Source: EHPA)
The success of heat pump deployment across several European countries shows learnings that can be applied irrespective of context. A successful approach typically involves a combination of upfront grants, carbon taxes, planning policy, regulation, and strong support for the certification of skills and standards. A range of such policies is shown below in Table 1. They clearly demonstrate some of the lessons learnt from current and past UK policies mentioned above, such as upfront grant support and support for quality installations through installer certification. It can also be seen that a supportive policy mix goes beyond this, providing certainty with regulation and economic incentives with taxation to complement the subsidies and standards.
Table 1: Policy Support to Encourage Deployment of Low Carbon Heat Across Europe
In addition to this, policy stability is crucial. It has been shown that in the Scandinavian countries, with a sustained period of supportive policy framework, it is possible to create a significant shift in heating technologies used. See Figure 5 below for the Swedish example of this.
Figure 5: Long term policy support for heat pumps in Sweden
There have also been examples that have shown sharp growth in the deployment of heat pumps as a result of policy over the last few years. France saw the largest growth in heat pump deployment in Europe last year[viii]. This can be attributed to a combination of regulation and subsidy, from January 2022 oil boilers will be prevented in new builds and it will also be impossible to replace them at the end of lifetime with another oil boiler[ix]. This is part of the French Government’s ambition to end heating with oil by 2028 and has been backed-up by a generous subsidy offer for low carbon heat deployment in replacement of oil, up to €10,000, that varies according to household income and is backed up by a vast total budget of €1 billion between 2019-2021. Similar signs are also being seen in The Netherlands, where fossil fuels are not allowed in new builds and will be phased out from existing buildings by 2030. It shows that with a firm regulatory commitment and initial subsidy funding, backed up by a suitable budget, the deployment of heat pumps can increase substantially.
Arguably one of the biggest success stories in UK decarbonisation, so far, has been the growth in the offshore wind sector, which has flourished under the long-term certainty provided a long-term supportive policy framework and enhanced through last year’s sector deal. The Danish Government has recently announced, as part of its climate agreement for Energy and Industry, a heat pump sector deal to provide a similar guaranteed level of support and success with heat pumps. Their plans will provide heat pumps through the Danish Energy Agency under a heat-as-a-service model, providing the technology to consumers on a subscription basis that removes any upfront cost requirements and any worries with the maintenance of what is a new technology to most.
This provides an exciting potential concept for the UK to learn from, indeed the Scottish Government has already committed to exploring a heat pump sector deal to provide clear long-term market signals for the increased installation of heat pumps and complementary technologies[x]. A Heat Pump Sector Deal would be a fantastic way to package up the detailed policy supported listed above and to provide a clear signal of long-term commitment and intent to decarbonise heating in the UK.
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)?
Key Policies, Priorities and Timelines
In 2019, the HPA launched its document “Delivering Net Zero: A Roadmap for the Role of Heat Pumps”[xi] which included the policy changes and timings needed to grow the heat pump market to align with the CCC’s recommendation of 19 million heat pumps deployed by 2050 and over 1 million installations per year by the mid-2030s[xii]. We have updated the analysis carried out for that document to keep up to speed with the recommendations according to recent policy development, see Figure 6 below.
Figure 6: Heat pump net zero deployment trajectory with policy overlay
The forthcoming Heat and Buildings Strategy should commit to the delivery of the policies outlines above, following the principles learnt from successful deployment of low carbon heat abroad (see response to Question 1). The Strategy should be ambitious and leave no question as to the shift to low carbon heating and high energy efficiency standards.
Alongside the policies proposed above, there should also be a considerable focus on improving the energy efficiency of the existing housing stock. This is going to be a big task as the UK’s existing housing stock loses heat up to three times faster than European neighbours[xiii]. Improving the fabric efficiency of the existing housing stock would considerably lower the heat demand of these homes, reducing both emissions and saving consumers money on fuel bills. In addition, doing so would also improve the efficiency of low carbon heating systems installed, further lowering emissions and fuel bills, particularly if paired with a heat pump, to realise savings greater than the sum of the individual heating and fabric improvement parts.
Urgent Decision and Actions Over the Course of this Parliament
Given the urgency with which emissions need to be reduced and the slow progress on low carbon heating and energy efficiency improvements to date, the Government must take bold steps to ensure the market framework for the needed change is in place over the course of this Parliament. The decisions and actions taken should leave no doubt as to the future direction of the market, requiring and encouraging the deployment of low carbon heat and energy efficiency improvements. With a firm commitment in place confidence will be provided to the market, giving installers the incentive to retrain and for companies to up their investment.
Specifically, the Government should ensure that a supportive policy mix is in place that follows the lessons learnt from success in other countries (see response to Question 1), through a combination of:
These changes could be packaged up into a Heat Pump Sector Deal that is delivered to support the deployment of low carbon heating alongside commitments from industry.
1. Regulation to provide certainty
The Government should put in place regulatory measures to guarantee the switch to low carbon heating. This could be done through an emissions intensity standard, that rather than picking certain technology winners, focusses on the carbon content and efficiency of heating systems. Specifically, the HPA would suggest that this is set at a level of 220gCO2e/kWh by 1st January 2025, 170gCO2e/kWh by 1st January 2030 and 110gCO2e/kWh by 1st January 2035. As with vehicles, a regulatory backstop date should also be implemented alongside this, preventing the installation and replacement of fossil fuel heating after a certain date, 2035 should be the absolute latest for this, with an earlier date likely required due to a 15 year expected lifetime of fossil fuel boilers currently with many lasting beyond this time.
Building Regulations are also a crucial step to encouraging the decarbonisation of heat. Heat pumps are cost-effective in new build properties and should be deployed in this section of the housing stock[xiv]. To ensure this the Government must commit to ambitious Building Regulations, at least the 31% emission reduction level proposed in the recent Future Homes Standard consultation for this round of Building Regulation changes, as doing so will strongly encourage the deployment of heat pumps and other low carbon heating technologies immediately. They must also ensure that the Future Homes Standard is delivered in 2025, at the very latest, with no need to retrofit homes at a later date which is a far more costly practice than implementing the changes during the initial build phase.
Implementing these new build standards now will help to build the supply chain and scale needed to deliver the decarbonisation of heat in existing properties. Building Regulations must also be introduced that ensure existing homes are low carbon heating ready. This should focus on requirements to improve the building fabric, lowering the heat demand, and providing the heating infrastructure needed for low carbon and efficient heating in existing homes, regardless of the technology installed. To do this, the Government should mandate a maximum flow temperature of 55℃ immediately when an entire heating system, heat emitters and pipework are replaced. This requirement should also be introduced immediately for landlords. Operating at a lower flow temperature can considerably improve the efficiency of the heating system, reducing the flow temperature from 80℃ to 55℃ for a typical homes heating with a gas boiler would reduce fuel bills by around £70 per year. The initial upfront cost to upgrade the heat emitters to reach this flow temperature is something that is usually required for the installation of heat pumps, so incurring this cost now will allow fuel bills and emissions to be reduced immediately as well as lowering the cost of installing a heat pump at a later date.
This additional upfront cost should be given careful consideration and could be a good area for the Government to provide financial assistance, particularly to those homes most in need or unlikely to be able to afford the required upgrades. Alongside these immediate requirements and financial support, the Government should introduce this flow temperature requirement for all heating system replacements from 2026 onwards in addition to a requirement for heat loss calculations at the same date, which will allow for a greater understanding of the improvements needed for and quality of the UK existing housing stock. This would follow successful Swedish policy introduced and maintained since the 1970s (see Figure 3).
2. Upfront grants to provide initial momentum
To supplement the certainty provided by the regulations above, subsidisation is also needed to provide initial momentum and growth for early adopters. As shown in other countries, this should come through the form of upfront grants, which appeal more greater to consumer behaviour and address the issue of higher upfront costs associated with low carbon heating, as discussed in response to Question 1. The Green Homes Grant and Clean Heat Grant schemes are therefore a step in the right direction but must be built upon if they are to be successful.
The Green Homes Grant introduction was sudden and does not provide a long-term incentive to build the supply chain, such as installer numbers. The HPA have been in the process of overhauling, streamlining, and updating the route to becoming a heat pump installer, with the first courses due to be taken early next year. To align with this, and evidence from other industries[xv], the scheme should be extended until the end of March 2022, this will provide the time and confidence needed for installers to retrain, building the supply chain and also coinciding with the end of the domestic RHI. It will also ensure continuity of upfront grant support through various schemes until at least 2024, with the Clean Heat Grant following on, to provide a long-term guarantee of consistent support.
The Clean Heat Grant scheme also offers the potential to significantly boost low carbon heat deployment, however this is currently limited by the budget that has been put in place, as outlined in the response to Question 1. Successful grant schemes implemented in France and The Netherlands, for example, offer a more generous overall budget that must be matched in the UK if we are to be considered serious about decarbonising heating and reaching net zero. The current level of grant proposed under the Clean Heat Grant scheme is below €1 per capita, whereas the successful schemes abroad range from around €5.50 to €9 per capita, see Figure 7.
Figure 7: Air-to-water heat pump grant support, annual funding per capita (Source: HPA analysis)
With this initial upfront support and regulatory backstop, the supply chain for low carbon heating can grow, in particular installer numbers, to help reduce costs and build the scale needed for a subsidy free market, which should be the aim by the end of these schemes.
3. High product and installer standards
Ensuring high product and installer standards will be essential to building consumer confidence in new technologies and ensuring a smooth transition to low carbon heating. To do this the Government should ensure that technical standards for products are maintained from the current EU requirements.
Developing competent installer numbers will be fundamental to the decarbonisation of heat and should be an urgent priority. A low carbon heat skills card should be established for installers to encourage the training and upskilling of existing and new entrants to the market. The industry has recognised this and have been working hard to develop a new route to becoming an installer of a low carbon heating technology. The HPA has worked to develop an updated and improved training route to becoming a heat pump installer that will simplify the process and strip out unnecessary barriers.
There are many skills that will be needed regardless of the low carbon heating technology selected, as such the Chartered Institute for Plumbing and Heating (CIPHE), have been working with the HPA and others across the industry, on the development of a Low Carbon Heating and Hot Water course that provides these technology neutral skills. The Government should be looking to make this course mandatory for all heating installers to equip them with the baseline skills needed for installing low carbon heating systems and maximising the efficiency of current installations. To encourage the adoption of low carbon heating, this course should become a mandatory part of installer refresher course training, for example the ACS five-yearly refresher for gas boiler installers needed, which if implemented from 2021 would provide the baseline of skills needed for low carbon heating by 2026 for all installers. This should be supported through funding to encourage the early adopters of the course, to avoid cost for these installers, and build a critical momentum towards training to be able to install low carbon heating.
4. Pricing that reflects the carbon content of fuels
The running costs of heating systems is also an essential consideration that will influence the decarbonisation of heating. The electrification of heat offers a solution that can decarbonise a majority of the homes in the UK. The relative price of electricity compared to gas in the UK is though very expensive, with one of the higher electricity prices in Europe[xvi] compared to one of the cheapest natural gas prices[xvii]. This is exacerbated by the taxes placed on each energy vector. The current environmental and social levies placed on electricity create perverse incentives that do not encourage the decarbonisation of heat, see Figure 8. This must be addressed by the Government within the course of this Parliament to rebalance the taxes placed on electricity and gas to reflect the carbon content.
Figure 8: Effective carbon price: electricity and gas (Source: HPA)
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 decarbonisation of heat will require several solutions. Heat pumps are a mature, established technology that can immediately deliver vast carbon savings and provide a route to net zero heating as the electricity grid continues to decarbonise. Heat pumps already deliver around a 60% saving compared to the emissions from a gas boiler per kWh of delivered heat and this is expected to rise to around 95% by 2050, see Figure 9. Heat pumps are certainly one of the most, if not the most, viable technologies to deliver the decarbonisation of heating.
Figure 9: The carbon savings from heat pumps (Source: HPA analysis, using BEIS data)
Heat pump technologies are suitable for all housing types. The most common heat pump solution operates at a low flow temperature, typically requiring heat emitter (radiator) upgrades to be made alongside the installation of the heat pump, due to traditional heating systems operating at a higher flow temperature. For most homes, this ability to upgrade the heat emitter systems allows heat pump efficiency to be maximised and fuel bills to be as low as possible. This type of solution is viable for the majority of homes.
Recent development across the industry has led to the creation of high temperature heat pumps that are able to maintain good efficiencies even at higher flow temperatures. This can mean that heat emitter upgrades are not needed, providing a viable solution particularly to those homes that do not have the space to put in the larger heat emitters needed or would prefer to avoid this.
Heat pumps can also be combined with other heating systems to form a hybrid heat pump. These systems meet heating requirements by sharing the load between each system. Typically, the heat pump will take the majority of the heat share with a backup boiler providing the heat when the heat pump cannot meet the heat loss of the home or when it is more affordable for the backup boiler to operate. This is usually decided through a system of smart controls that can lower fuel bills for consumers whilst maintaining comfort. Hybrids also can eliminate the need for heat emitter upgrades, like with high temperature heat pumps. If combined with a combination boiler, the need for a hot water cylinder can also be removed which could provide a solution to decarbonising heat for homes that might otherwise not have enough space for a cylinder to be installed.
With this range of established technologies, heat pumps provide an immediate solution to the decarbonisation of heat across the whole range of house types. With such a big change needed in heating before 2050, the deployment of heat pump technology should be supported immediately. In addition to the decarbonisation benefits, heat pumps also do not emit any local air pollutants, crucial particularly in urban areas where this is already an issue and one that the deployment of heat pumps could also contribute to solving when replacing traditional heating systems. Analysis conducted by Element Energy for the CCC outlined the central case for reaching net zero in homes, here 75% of heating technologies deployed existing homes were made up by heat pumps, including hybrids, around 18.5 million installations[xviii].
4. What are the barriers to scaling up low carbon heating technologies? What is needed to overcome these barriers?
The main barriers to the deployment of low carbon heat are:
There is strong interdependence between these factors with each influencing the others. All can be addressed with clear policies in place and dates for when they will be introduced.
1. Increased upfront costs
Heat pumps currently cost more to install than more traditional heating systems. This expense acts as a barrier to consumers who either cannot afford to pay this upfront cost or are unwilling to do so. A heat pump might typically cost around 4 times the price of a fossil fuel boiler to install[xix].
The cost of the equipment itself makes up only around half of the costs with many non-equipment costs that add to the final number, see Figure 10. These are largely made up by installer premiums, which are driven up by factors such as accreditation, low consumer awareness and high search costs.
Figure 10: Breakdown of heat pump cost and cost-down potential (Source: DECC)
To overcome this barrier, the Government should use upfront grants, rather than a spread of payments to reduce the initial additional capital outlay that is needed for heat pumps. This will help to drive initial scale of the market that will increase demand and begin to drive down the costs, as seen above.
Additionally, low installer numbers and high levels of requirements on these installers currently mean that there is a lack of competition amongst heat pump installers and they are able to (and arguably have to in order to recoup the administration costs) charge more for their services as a result. As can be seen above, this means that the installation cost is a big proportion of the overall heat pump cost that can be driven down. This can be done by growing the installer base to increase competition and cutting red tape, which will reduce the barriers to retraining and the costs of operating in the sector.
As can be seen above, a large part of the cost associated with heat pumps comes from other equipment costs. Some of these components include upgrading radiators or heat emitters to allow the system to operate a low flow temperature to ensure that the efficiency of the heat pump is maximised. These costs should not be tied solely to heat pump installations, with all heating systems benefitting from running at a lower temperature, improving efficiency levels, reducing fuel bills and carbon emissions. To overcome this barrier to low carbon heating and realising these benefits, a requirement should be introduced for all homes to be able to operate at a low flow temperature when the heating system is being replaced. Doing so will provide the infrastructure for low carbon heat to be installed at a later date, if not now, and significantly lower the cost of doing so.
2. Installer numbers
Current installer numbers also act as a barrier to low carbon heat deployment. They are the key reference point for consumers and a majority of households turn to installers as the most trusted source of advice on which heating system to select[xx], yet there are currently only around 900 MCS heat pump installers compared to around 108,000 gas installers. This combination of low installer numbers and a lack of consumer awareness about low carbon heating technology means that there are low levels of competition among already qualified heat pump installers increasing the premium that they are able to charge for their work. Put simply there must also be enough installers to scale the heat pump market to the level needed to align with net zero.
An indication of the number of installers that would be needed to meet the potential trajectory is provided below, see Figure 11. It shows that there will need to be considerable growth in installer numbers year-on-year up to the mid-2030s.
Figure 11: Potential total heat pump installers needed to align with net zero by 2050 (Source: HPA)
The HPA have been working with others across the heat pump industry to redesign the route to becoming a heat pump installer, see Figure 12. There is a recognition that the current route to becoming a heat pump installer is not easy and must be changed. This involves a redesign and update of the curriculum, stripping out unnecessary paperwork, cost, and content, to bring the route on to a level of administration and expense closer to that required for boiler installers.
Figure 12: the new route being developed to become a heat pump installer
In addition to these industry efforts there is a role for government to play in helping to stimulate demand for installers to retrain. An example of this is in France, where following the French Government’s commitment to phase out all oil boilers within 10 years and the provision of a scrappage scheme grant alongside this, there is no doubt that the French Government is committed to increasing the uptake of low carbon heating. As a result, there has been a surge in heat pump installer training. The number of installers trained in the first half of 2019 grew by 264% for heat pumps compared to the same period in 2018. By providing an equivalent commitment, as well as vouchers for the first installers to undertake this route, momentum can be built in the UK to emulate the success seen in France.
3. Consumer awareness
Consumer awareness of low carbon heating options is currently low. This acts as a barrier to the deployment of low carbon heat as it means that there is less demand for the product and inquiries to installers or questions asked about low carbon heat. In a recent Public Attitudes Research, it was revealed that only 33% of respondents were even aware of heat pumps[xxi].
As mentioned already, much of this can be overcome with a growth in installer numbers as the key point of reference to consumers. The industry will also continue to work hard to promote the technology and this could be backed up by a government awareness campaign promoting the solutions to heat decarbonisation. Installers also rarely offer a choice to consumers, here there could be a requirement for installers to recommend a low carbon heating option as part of the quoting process, with incentives for the installers to retrain to be able to make this offering.
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?
Distribution of Heat Decarbonisation Costs
As mentioned in response to Question 1, the switch to an upfront grant rather than a spread of payments, as under the RHI, is a move that will see the distribution of costs fall more fairly. Under the spread of payments given under the RHI, only those with enough capital are able to access the subsidy. Due to the higher upfront costs of low carbon heating systems, this has typically been households that are well-off, essentially freezing out access to the subsidy for poorer homes that do not have the upfront capital investment required. By switching to an upfront grant, this problem is significantly reduced, with far less capital needed in addition to the grant, it becomes more accessible.
The Green Homes Grant also offers a higher grant level of up to £10,000 for the poorest households and two-thirds of the cost, up to £5,000 for all other households. This is perhaps a fairer mechanism than a flat rate for the grant, as proposed under the Clean Heat Grant, however there is a trade off here between scheme simplicity which helps to increase uptake and understanding. Following the conclusion of the Green Homes Grant an assessment should be made as to whether the mechanism has been successful or not.
There are also already policy measures in place to support fuel poor homes and communities for fossil fuels. The Energy Company Obligation (ECO) offers valuable improvements for fuel poor homes that could be extended to include low carbon heat measures, such as heat pumps. Heat pumps are not currently funded through ECO, representing a missed opportunity that should be corrected.
The cost of gas supplied to domestic homes is around 4.5 times cheaper than the cost of a standard electricity tariff for a home currently[xxii]. This is one of the highest ‘spark gaps’ in Europe and disincentivises the switch to low carbon heating. It is exacerbated by the environmental and social levies that are placed on each fuel, which is around 23% of the electricity price[xxiii] and only just under 2% of the gas bill[xxiv], despite the average emissions of electricity now considerably lower per kWh than natural gas[xxv]. This leads to levies placed on the fuels that are not reflective of the carbon content within them, see Figure 13 below:
Figure 13: Effective carbon price: electricity and gas (Source: HPA)
This leads to consumers having to pay a higher price for their electricity and disincentivises the switch to electric low carbon heating options, such as heat pumps. Therefore, this distribution should be urgently reviewed to ensure that carbon reflective levies are placed on all energy vectors used for heating. Doing so will lower the relative electricity price and incentivise the uptake of heat pumps.
6. 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?
A combination of incentives and regulatory measures will be essential to providing a supportive policy mix to encourage the uptake of low carbon heating. Incentives will be needed, especially initially, to help grow and scale the market with regulatory measures providing no doubt that heating will need to decarbonise and to complement the incentives.
As mentioned in response to Question 1, upfront grants have been shown to be successful in the deployment of low carbon heat in other countries. The switch from the RHI to the Clean Heat Grant and Green Homes Grant is therefore a step in the right direction, due to the far greater weight that consumers place on upfront costs in decision making. These subsidy schemes should be improved in a couple of ways.
The Green Homes Grant has seen a sudden introduction and will only last until the end of the financial year, this provides only a short window and not much of an incentive for installers to upskill to be able to install low carbon heat, to develop the supply chain and reduce costs. The Green Homes Grant should therefore be extended until the end of the domestic RHI in March 2022 to provide long-term certainty and stimulate the growth in installer numbers that is needed. This would also then provide a bridge to the Clean Heat Grant scheme.
The Clean Heat Grant scheme currently lacks the budget needed to signal serious intent from the Government about the decarbonisation of heat, with the impact assessment predicting that deployment will only be around the low level currently deployed under the RHI. The HPA believe that this will not be due to a lack of demand, but the limit placed but a small overall budget, which is far below that per capita spent in countries using such schemes successfully to increase the deployment of heat pumps.
As already referred to, installers are a vital component in the decarbonisation of heat. Without enough installers the rate of change needed will simply not be able to be met. Growing the installer base should therefore be a key priority to encourage households to uptake low carbon heat, as the key point of information to consumers in their decision-making process around the technologies to install. The HPA are currently working hard with the whole industry to develop a new training route to becoming a heat pump installer, that is simpler and more dynamic, so that it can be kept up to date, than the current training courses.
This has been developed alongside the CIPHE’s Low Temperature Heating and Hot Water course which is a technology neutral course to provide the basic skills needed for all low carbon heating systems to maximise efficiency. Following the completion of this course, installers would then be able to take the individual technology specialisms, such as heat pumps. To build momentum behind the installer growth in these key skills, a £300 voucher should be provided to the first 5,000 installers to retrain through the Low Temperature Heating and Hot Water course to cover what is expected to be most of the cost of the course.
In addition to ensuring that installers have the skills for low carbon heating systems, funding should also enable homes to become low carbon ready. The installation of heat pumps often requires upgrades to radiators and other heat emitters to ensure that the system can operate at a low flow temperature and maximise the heat pump’s efficiency. Operating at a lower flow temperature actually increases the efficiency of all heating systems in place, both lowering consumer bills and emissions. This change can often yield a positive payback from the upfront investment, that is often overlooked due to most consumers not taking the longer-term effects into account as part of their decision. Here, government could provide support to upgrading the house so that it is low carbon ready, covering the cost of emitter upgrades and allowing a low flow temperature to be used to heat the home, saving money for the consumer and emissions, whilst also removing this upgrade need if a heat pump is to be installed at a later date to increase the chances of deployment in the future.
Novel financing options should also be implemented. The upfront cost barrier could be lessened if financial offerings were not tied to the private individual, but to the property instead. Doing so would reduce the uncertainty that people have about moving away from a house, essentially de-risking this by passing the investment debt on to the next owner of the property if they move away as part of the contracts and tax arrangements for the home. This would follow a structure used by the PACE programme which has been hugely successful in the USA, is now being deployed in Europe and beginning to be explored here in the UK[xxvi].
Council tax could also be an interesting option to further explore to promote low carbon heat. Council tax rates have not been updated for several decades and have high compliance and pay back rates that could be utilised. Council tax could for example be changed to be based on a property’s carbon emissions rather than its value. This would provide an incentive to improve the energy performance of the property and invest in low carbon heating to lower the property emissions and pay less on council tax. It could also be constructed in a revenue neutral manner to preserve district council budgets by increasing the overall rates, but maintaining the difference between bands, to keep the same incentive for improvement in place without sacrificing local council service provisions.
All of the incentives above should be backed up by complementary regulations to ultimately guarantee the take up of low carbon heat.
The direct subsidy for the cost of low carbon heating technologies should be backed up by a regulation on the emissions intensity of heat delivered. Doing so would ensure that the heating systems that are not aligned with net zero are phased out over time. This regulation would prevent the replacement of a system that does not fall below the emissions intensity level, such that low carbon heating systems will gradually become the default replacement. Specifically, the HPA would propose that the following levels are set for the following dates: 220gCO2e/kWh by 1st January 2025, 170gCO2e/kWh by 1st January 2030 and 110gCO2e/kWh by 1st January 2035. This would mean that the households currently emitting the most through their heating would be targeted first, these would be homes off the gas grid using oil or gas for example.
Building Regulations must also be introduced to ensure the deployment of low carbon heat. Heat pumps have been shown to be cost effective in new build properties and so should be the go-to technology option in new build properties immediately. Specifically, the Government should adopt the more ambitious 31% carbon reduction from the Future Homes Standard consultation for the current Building Regulations update. The Future Homes Standard should also be enforced from 2025 at the very latest to ensure that all new builds are fully aligned with net zero from this point onwards.
Regulations should also be introduced through skills requirements for installers. A low carbon skills card should be established that demonstrates competence to install low carbon heating systems. This should follow a refresher structure every 5 years to ensure that skills are kept up to date. As part of this and to complement the initial subsidy to early adopters, it should be a requirement for all existing installers to undertake the Low Temperature Heating and Hot Water course as part of any accreditation refresher course, such as the requirements under the Accreditation Certification Scheme needed for Gas Safe qualification.
Building Regulations must also be introduced that ensure existing homes are low carbon heating ready. This should focus on requirements to improve the building fabric, lowering the heat demand, and providing the heating infrastructure needed for low carbon and efficient heating in existing homes, regardless of the technology installed. To do this, the Government should mandate a maximum flow temperature of 55℃ immediately when an entire heating system, including all heat emitters, are replaced. This requirement should also be introduced immediately for landlords. Operating at a lower flow temperature can considerably improve the efficiency of the heating system, reducing the flow temperature from 80℃ to 55℃ for a typical home heating with a gas boiler would reduce fuel bills by around £70 per year (see Figure 14). The initial upfront cost to upgrade the heat emitters to reach this flow temperature is something that is usually required for the installation of heat pumps, so incurring this cost now will allow fuel bills and emissions to be reduced immediately as well as lowering the cost of installing a heat pump at a later date.
Figure 14: Net Present Value (NPV) of Upgrading All Radiators in a 1980s, 3-Bed, Detached Home to Allow a 55℃ Flow Temperature
Alongside these immediate requirements and financial support, the Government should introduce this flow temperature requirement for all heating system replacements from 2026 onwards in addition to a requirement for heat loss calculations at the same date, which will allow for a greater understanding of the improvements needed for and quality of the UK existing housing stock.
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?
High product and installer standards have been shown to be an important part of the recipe for success in deploying heat pumps in other countries. Products in the UK currently have to follow EU guidelines that are seen in most of these other countries and so will provide the consumer with a reliable product to protect them from poor quality technologies.
Installers are a crucial point of information for households. Heating system replacements are regularly made based upon the advice given to a consumer by the installer[xxvii]. This reliance means that the proliferation of low carbon heat will be contingent on a well educated and competent workforce. There is a risk that without installer skills and competence consumers may not even know about low carbon heating systems or have them installed correctly.
Building the installer base for net zero heating should therefore be a key priority for the protection of consumers. There should be schemes in place that provide the skills and competence needed for installers to retrain to install low carbon heat, such as a low carbon skills card. The HPA have this year been developing a simplified and updated course for becoming a heat pump installer that lowers the barriers to entry for installers into the heat pump market, whilst still ensuring competence. With a well trained and educated cohort of low carbon heat installers, consumers will be protected and also engaged on low carbon heating.
Strong regulatory commitments will also significantly increase consumer engagement and awareness in low carbon heat. The growth seen in the electric vehicle market since the ban was announced on petrol and diesel cars from 2040, and now 2035, is a clear sign that consumers become more engaged with the topic and manufacturers have greater confidence in promoting and moving to low carbon alternatives with such a firm commitment in place. This should be mirrored in the heating industry with regulation and clear policies put in place to highlight that fossil fuel heating has an end date and create an awareness from consumers in the alternatives. This could be done through an emissions intensity standard for delivered heat to help maintain consumer choice, provided that emissions are not too high from a certain fuel and technology combination. In the recent Climate Assembly, there was strong support (86%) for a ban on the sale of new gas boilers from 2030 or 2035[xxviii] that shows a willingness among the general public for such a change.
There should also be a push to ensure that homes are low carbon heat ready. This would involve consumers upgrading their heat emitters/radiators to allow operation at a lower, more efficient, flow temperature that would facilitate a heat pump installation. Regulating this change would increase awareness that could be bought into under the ‘low carbon ready’ concept by consumers. Alongside this, the government could also significantly increase low carbon heat deployment by encouraging this change in a technology neutral manner by subsidising radiator upgrades. By bringing this requirement in at the time a heating system is already being changed would avoid doubling disruption and the need for retrofit at a later date, which would likely be more costly and also avoid the benefits that could be accrued up to this point.
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?
The policies needed to decarbonise heat sit across a number of government departments, see Table 2. It shows the importance for oversight and coordination between all of these departments to ensure that all policy change is pushing in the same direction. The Government should therefore look to hold the ultimate responsibility for the decarbonisation of heat.
Table 2: Policy Changes and Departmental Responsibility
The Industry also has a critical role to play in the delivery of low carbon heat. Manufacturers are committed to constantly develop better products and offerings to consumers, making low carbon heat a more attractive product. Companies will also have the confidence to invest with a certain policy mix that is firmly committed to by the Government. By providing a clear signal that the future of the market is heading towards low carbon heating it will allow companies to invest and deliver the products and services needed for the decarbonisation of heat. By working together in this way, through a Heat Pump Sector Deal, government and industry can pull together to deliver the decarbonisation of heat.
[i] CCC (2019), Net Zero – Technical Report,
CCC (2016), Next steps for UK heat policy
[ii] National Audit Office (2018), Low-carbon heating of homes and businesses and the Renewable Heat Incentive
[iii] BEIS (2020), RHI monthly deployment data: August 2020
[iv] The Behavioural Insights Team (2015), EAST Four simple ways to apply behavioural insights
[v] BEIS (2020), Future Support for Low Carbon Heat: Impact Assessment
[vi] Gas Safe Register (2019), Decade Review
[vii] BEIS (2020), Green Homes Grant Skills Training Competition
[viii] EHPA (2020), Market Growth by Country
[ix] Qaulit-enr (2020), Fin du chauffage au fioul
[x] Scottish Government (2020), Protecting Scotland, Renewing Scotland
[xi] HPA (2019), Delivering Net Zero: A Roadmap for the role of Heat Pumps
[xii] CCC (2019), Net Zero – Technical Report
[xiii] tado° (2020), UK homes losing heat up to three times faster than European neighbours
[xiv] CCC (2019), The costs and benefits of tighter standards for new buildings
[xv] National Insulation Association (2020), NIA calls for green homes grant scheme to be extended
[xvi] Eurostat (2020), Electricity prices (including taxes) for household consumers, second half 2019
[xvii] Eurostat (2020), Natural gas prices for household consumers, second half 2019
[xviii] CCC (2019), Analysis on abating direct emissions from ‘hard-to-decarbonise’ homes
[xix] Element Energy (2017), Hybrid heat pumps
[xx] BEIS (2020), Public Attitudes Tracker Wave 32 Summary Tables
[xxi] BEIS (2020), Transforming Heat – Public Attitudes Research
[xxii] BRE (2019), SAP 10.1
[xxiii] Ofgem (2020), Electricity price breakdown
[xxiv] Ofgem (2020), Gas price breakdown
[xxv] BRE (2019), SAP 10.1
[xxvi] Office of Energy Efficiency and Renewable Energy (2020), Property Assessed Clean Energy Programmes
[xxvii] BEIS (2020), Public Attitudes Tracker Wave 32 Summary Tables
[xxviii] Climate Assembly UK (2020), The path to net zero