Written evidence submitted by Brighton and Hove Energy Services Cooperative (BHESCo) (DHH0084)

 

We are a not-for-profit community energy co-operative. Our aim is to empower people to meet their energy needs with efficient buildings and locally owned low-carbon energy.

 

Terms of Reference - Decarbonising heat in homes inquiry

Following a ‘pitch’ from Dr Jan Rosenow, Principal and European Programme Director, Regulatory Assistance Project, as part of the ‘My BEIS inquiry’, the Committee agreed to launch an inquiry focussing on the policies and regulations needed to decarbonise heating in residential buildings. This Committee will also explore some of the issues raised on the future of hydrogen by Dr Luke Warren, Chief Executive, Carbon Capture and Storage Association, in his ‘My BEIS inquiry’ pitch. The inquiry will scrutinise the Government’s ‘Buildings and Heat Strategy’ to assess whether it is sufficiently ambitious and credible and reflect on the Climate Assembly’s recommendations in this area. The terms of reference for the inquiry are as follows:

  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?

The RHI scheme has had a positive impact on decarbonization of heat for the non-domestic, higher energy users . The scheme based on kWh of renewable heat, has been costly to administer, however, we have been able to encourage businesses to invest in heat pumps.  The consistency of the availability of ND RHI meant that despite a slower uptake of the technology, momentum was building as the cost of oil increased.  The ND RHI has been a successful initiative with respect to its aims the uptake of heat pumps.

 

  1. 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)?

New buildings must be built to a standard which is net zero carbon emissions in use as a minimum. This must include a high level of insulation and air tightness with effective control of build quality and measurement of finished buildings where possible (air tightness testing for example). The design of buildings should also facilitate the effective deployment of solar PV on rooftops.

For the built environment the MEES standards must continue to drive energy efficiency standards. The current ambition of EPC band C by 2030 is not aggressive enough, moving the date forward would stimulate the building industry bringing in customers who are obliged to invest in the energy efficiency of their properties.  The building regulations around thermal improvements required when renovating homes must be enforced. Sadly, local authorities are not developing business models to justify investment in enforcement, which impacts the effectiveness of the programme.

A national training program is urgently required for installers of insulation and other energy efficiency measures and for those checking for compliance (building control) – specification of energy efficiency measures alone will not achieve good energy efficiency if they are poorly installed.

 

  1. 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?

Heating and hot water systems must be provided by electrically driven heat pumps in order to provide cost effective running costs and a clear path to zero carbon heating. Installing a heat pump today will already reduce a property’s carbon emissions by a factor of 3 and the emissions will continue to reduce as the electricity grid continues to decarbonize.

There is no clear pathway for the production of Hydrogen in an energy efficient, low carbon or cost effective way and the main focus should be on heat pumps which are a proven technology.  Hydrogen production is an additionality, as the electricity must be generated to produce the hydrogen, so why apply hydrogen to the heating infrastructure?  Investment must be made in the electricity infrastructure.  The existing gas infrastructure can be used for the transmission of green heat which will meet 25% of the nations needs through upscaling production of green gas.  The remaining heat will be provided through electricity.  Hydrogen for heat in a distributed network does not provide value for money for the taxpayer.  Hydrogen is best used for heavy transport and shipping.

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

System cost, particularly for retrofit of heat pumps is a large barrier for many homeowners. Fossil fuel boilers are much cheaper to install and are less likely to require other system upgrades, such as radiators. 

The proposal to replace the existing RHI mechanism with an initial grant is positive, although the magnitude of the grant needs to be greater than the proposed £5000 to cover the cost of heat pump installation, hot water cylinder and radiator upgrades.

There is currently no financial incentive for homeowners on the mains gas grid to switch to alternative systems as the cost of gas is currently so low. Applying a fossil fuel tax to gas supplies to level out the cost would help to make heat pump operation cheaper than gas – which is currently both cheaper to install and cheaper to run. Of course this needs to be done carefully to avoid pushing households into fuel poverty, perhaps by offering a larger heat pump grant to low income households? The gas tax can help finance the heat pump subsidy.

The cost of upgrading the electricity network will be a barrier to installing heat pumps. Regulation is not going to drive sufficient investment in the network by the DNOs.

  1. 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?

Since the goal is to reduce carbon emissions, which are primarily emitted from fossil fuels, taxation should be levied on these fuels to help fund the costs of decarbonization. Since electricity has a pathway to reducing carbon emissions, the taxation impact on electricity will reduce over time, but could be reduced further to incentivise a switch to electric heating systems.

To avoid impacting the fuel poor adversely they must be provided with additional assistance to insulate their homes and switch to the lowest cost heating system. With taxation applied in order to make the lowest cost solution also a low carbon solution.

  1. 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?

Making the low carbon route the lowest cost route is likely to have the greatest impact.

  1. 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?

The quality of installation work must be ensured through schemes such as MCS, although the current MCS system is very much focused on meeting RHI requirements and the organization should work with industry to ensure that installation requirements are focused on the customer rather than meeting Ofgem requirements in the future. HIES may be a better organization to take this forward?

  1. 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?

This is the responsibility of BEIS at present.  They appear to be doing the job well.  The problem lies in the disparity of cost of the heat pumps, the lack of enforcement of energy efficiency targets and the lack of focus in a long term strategy for reaching Net Zero. 

 

November 2020