Written evidence submitted by Energiesprong UK (DHH0100)
Energiesprong is a whole-house retrofit approach, including heating systems. Installers are required to design, build and guarantee a solution that achieves net-zero energy over the year, with solar PV on the roof equal to the electricity demand for heat, hot water and appliances. To meet this requirement, heat demand has to drop to 30-40 kWh/m2 (compared to >150 kWh/m2 in many existing buildings) and in most cases heat is delivered via heat pumps. Combustion-based heating is not allowed, low-temperature heat network connections are possible.
Energiesprong was developed in the Netherlands where there is now an established industry delivering thousands of retrofits and new build homes per year. In the UK, the first 10-home pilot was complete in 2018, with a further ~50 complete to date and funding for another 150 secured. Energiesprong UK (ESUK, an independent market development team) supported the development of two successful bids under the BEIS Whole House Retrofit programme to deliver an additional ~150 retrofits by March 2022. Along with Turner & Townsend, the Mayor of London awarded ESUK a technical support contract to support social landlords in the capital. As a result of this work, the GLA recently launched an Innovation Partnership Procedure for net-zero whole-house retrofits including electrified heating, up to £10bn value over the next seven years.
The key innovation behind Energiesprong is a cost-neutral business model for social landlords. When the industry is at scale, the cost of installation will be offset by long-term savings and income equal to or greater than the value of the work. This makes Energiesprong an extremely cost-effective route to heat decarbonisation as well as delivering multiple other benefits including eliminating fuel poverty and providing resilience to future temperature rises. We estimate around 11m homes could benefit directly from Energiesprong retrofits, and the approach could indirectly benefit many other homes through cost reduction in components and innovations in business models.[4]
ESUK believes that high electrification with heat pumps is the most cost-effective and efficient route to heat decarbonisation. See response to Q3 for further details.
There have been 10,000 domestic heat pump installations per year since 2014 when the Renewable Heat Incentive was launched, with no noticeable growth beyond the first year. In contrast, solar PV supported by Feed-in Tariffs increased almost ten-fold from 20,000 per year in 2010 to 180,000 in 2011 before Government cut tariffs. Clearly there is a demand for renewable energy, but why did the RHI not stimulate demand as FiTs did for PV? There are several reasons:
Energiesprong Foundation (NL) recently presented a comparison between the UK, Germany and Netherlands, key slide shown in Figure 1. Compared to The Netherlands and Germany, the UK invests less in retrofit, the cost of finance is higher, and energy prices are lower (creating a less favourable business case for retrofit and heat pumps). This is despite having a comparatively less efficient building stock.
Figure 1: Comparison of Key energy efficiency costs[5]
It is clear that government policy has failed to deliver a scale heat pump industry. In order to get to the volumes of heat pump installations desired by the Prime Minister (600,000 per year by 2028), the following policies are needed urgently:
Table 1 gives a summary of all the currently available domestic heat technologies. ESUK considers heat pumps to be the most appropriate heating technology for most UK homes, however it should be combined with performance-guaranteed retrofit to 30-75 kWh/m2 heat demand in order to ensure the heat pump is sized appropriately and heating costs do not rise. This is substantially lower than the “EPC C fabric first” target that BEIS is currently proposing, but consistent with the 40-50 kWh/m2 required by the Whole House Retrofit and SHDFd programmes. We do not consider “EPC C fabric first” to be a meaningful or useful metric and we urge BEIS to use heat demand intensity (kWh/m2) which is less open to interpretation and can be reliably measured.
Zero carbon hydrogen, whether “blue” or “green”, will increase household heating bills by 200-400% unless government permanently subsidises the industry; it is also an inefficient use of energy. While on the surface it is attractive as it would require less disruption to households, the costs will always be high and this option ignores all the non-carbon benefits of retrofit such as improved comfort and indoor air quality. Hydrogen plus retrofit would of course offset some of this additional cost, but heat pumps will always be more cost-effective for the same heat demand due to their higher efficiency (assuming electricity prices don’t rise significantly).
Heat decarbonisation technology | Can it be zero carbon? | Heating costs for end-user compared to fossil gas | Appropriate scale and use |
Hydrogen (zero carbon, blue or green) | In theory, although very high risk of methane leakage for blue hydrogen | MUCH HIGHER | High temperature needs only, e.g. industry. Likely not at all for domestic heating. |
Heat pumps + building thermal fabric upgrade (see note) | Yes, if grid is zero carbon. | MUCH LOWER | Almost all domestic buildings suitable with appropriate thermal upgrade |
“Hybrid” heat pumps (biomethane/hydrogen) | In theory, although same issues for hydrogen and biomethane (detailed elsewhere) | Higher | High heat demand properties only. Less cost-effective than heat pump + thermal upgrade. |
“Hybrid” heat pumps (fossil gas) | NO | Higher | Not appropriate (not zero carbon) |
Biomethane | Yes, although country cannot meet current gas demand with biomethane | Higher | High heat demand properties only (e.g. historic buildings) |
Biomethane CHP | Yes, although country cannot meet current gas demand with biomethane | Higher | High heat demand properties only (e.g. historic buildings) |
Biomass | In theory carbon neutral but high emissions when burnt with slow sequestration through tree growth | Higher | Rural high heat demand properties only |
Resistive electric heating (storage heaters, plug-in radiators) | Yes, if grid is zero carbon. | Higher | Only in highly thermally efficient properties due to running costs |
Fossil gas | NO | Same | Not appropriate (not zero carbon) |
Fossil gas CHP | NO | Lower | Not appropriate (not zero carbon) |
Table 1: Heating technologies (see notes below)[6]
Although Energiesprong UK is currently focused on the social housing market, 1918-1980 houses and low-rise flats, the approach is adaptable to most property types. Listed properties are the most challenging, but they are a very small percentage of the total. Recent modelling undertaken on pre-1918 properties suggests that the majority can achieve heat demand intensities of <75 kWh/m2. For properties with higher heat demand, biomass or biomethane may be suitable. We consider “hybrid” heat pumps using fossil gas/biomethane plus a heat pump to have very niche applications.
There is a perception in the UK that heat pumps “don’t work very well”. This is not correct. Heat pumps are commonplace in countries like Sweden, Norway, Germany, France and Japan, some of which have significantly colder winters than the UK. The problem is that if the actual heat demand of the property is worse than modelled, the system will be undersized and will struggle to meet the heat demand effectively. The problem is with the property, not the heat pump. There is an over-reliance on modelled energy assessments in the UK and known performance gap for energy efficiency retrofits. User awareness of how to most efficiently use their heat pump is also an issue.
The biggest barriers are social and political. It is technically possible to retrofit homes to a high standard and deliver zero carbon heat via heat pumps. It is financially viable if the industry can be scaled and the right mix of policies are in place. Other developed countries, many in colder climates, have high energy efficiency standards and mature heat pump industries.
Even with the right mix of policies (see responses to Q1 and Q5), scaling up low carbon heat will require major interventions in almost all of the UK’s 29 million homes. The public will understandably have major concerns over this, which is why there must be a long-term strategy with clear implications across all tenures, backed by legislation and supported by fair policies and incentives. Politicians will also understandably be cautious about such major changes, so a cross-party consensus needs to be reached to ensure consistency of policy even when the Government changes.
From a technical and financial perspective, scaling up low carbon heating requires:
With the right policies and approach, there does not need to be a net cost to decarbonising heat beyond scale-up and innovation costs at the early stages of the market.
There is clearly a cost to decarbonising heating, but in the social housing sector we already spend £5.2bn on maintaining and repairing buildings and energy systems, and tenants pay £4.2bn on energy bills, usually in exchange for poor comfort.[7] The net-zero Energiesprong approach achieves a cost-neutral or better business case for retrofit in social housing, through savings on maintenance and repairs backed by installer guarantees, plus diverting existing tenant spending on energy bills. Although there additional complexities such as long-term financing, there is no reason why the same approach cannot be applied to other tenures.
The current system of levies and subsidies is complex and creates perverse outcomes. It should be simplified and based on the following principles:
ESUK believes this is most appropriate at a local/regional level, with local authorities coordinating with major property owners and owner-occupiers. It would make most sense to identify entire areas that will be disconnected from the gas grid as this will enable the remaining grid to work most cost-effectively. These areas can be chosen according to the most appropriate retrofit solutions for those properties, e.g. council estates suitable for Energiesprong retrofit. Other areas will not be viable for disconnection until the 2030s/2040s, e.g. privately owned pre-1918 properties. Gas network operators will also need to input in order to identify the most appropriate areas to disconnect.
The main thing local/regional authorities will need is clarity. A decision must be made soon on the future of the gas grid and how a managed reduction in gas connections will work in practice. Instead of a “town heated by hydrogen” as the Prime Minister announced, we should be aiming for a “net-zero town disconnected from gas”.
December 2020
[1] https://pubs.rsc.org/en/content/articlelanding/2020/ee/d0ee02016h#!divAbstract
[2] https://www.cedelft.eu/en/publications/2437/hydrogen-for-the-built-environment-knowledge-document-for-nijmegen-municipality
[3] https://www.cedelft.eu/en/publications/2139/hydrogen-routes-for-the-netherlands-blue-green-and-imports
[4] https://www.green-alliance.org.uk/reinventing_retrofit.php
[5] Ron van Erck, Futurebuild 2020 presentation
[6] Notes:
a) Solar thermal excluded as it cannot provide space heating demand on its own
b) Thermal upgrade of properties will lead to lower consumer costs for all technologies. However heat pumps are generally more sensitive to the efficiency of the building and it is not recommended to install them in thermally inefficient buildings.
c) Heat networks have not been included as they are a distribution method not a fuel source. Heat networks should only be supported where they have a clear decarbonisation strategy.
[7] Energiesprong UK calculations based on HCA Global Accounts, Ofgem and ONS figures
[8] https://www.regen.co.uk/graphic-of-the-month-reconfiguring-domestic-environmental-levies-into-a-carbon-levy-to-incentivise-low-carbon-heating/