Written evidence submitted by Vaillant Group UK Ltd (DHH0112)

Contents

 

About Vaillant Group

 

Executive Summary

 

Response               4

 

 


About Vaillant Group

 

The Vaillant Group is a global market and technology leader in the fields of heating, ventilation and air-conditioning technology. For over 140 years, we have been following a strategy designed to achieve sustainable and profitable growth. Today, our family-owned company has 10 sites in 6 European countries and China. 

Founded in Remscheid, Germany, in 1874, the Vaillant Group today supplies innovative hot water, room heating and cooling solutions to countries all over the world. Our company develops high-efficiency products that save energy, conserve resources and enhance people’s quality of living.

As a business we take responsibility for “Taking care of a better climate” – to safeguard the home of millions of people and the environment. All of our employees are working to achieve this shared vision. It is both our ambition and our common goal.  Innovation and sustainability is at the heart of everything which Vaillant does as a business.  The Vaillant Group is becoming climate-neutral, and we have developed an ambitious long term climate strategy, which focuses on the following areas;

Further information can be found on this link; https://www.youtube.com/watch?v=Dmd8JjYRYrI&feature=youtu.be

 

Executive Summary

 

The move towards the decarbonization of heat will be strongly led by Government Policy.  Manufacturers are ‘gearing-up’ product wise for a low carbon future, but without the support of government in terms of funding, market-skill sets and consumer awareness, we are unlikely to achieve net zero 2050 requirements.  Policies must be put in place now to start this very important transition.

Consumers ability to pay for low carbon solutions needs to be properly assessed and financial support available to ensure a low carbon future.  Households and their connection to the gas grid also needs to be considered, as there is ‘no one size fits all’ rule here. For most households currently on the gas grid, decarbonisation of that grid will deliver a net zero fuel, in the form of hydrogen.

Installers have a key responsibility for advising customers on which heating and hot water technology solution they should purchase as they are a trusted source of information when householders are looking to renew or upgrade the systems. Installers, therefore, play a crucial part in consumer decision making and ultimately, achieving the national carbon saving target. 

  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?

After recent discussions with Energy Savings Trust in Scotland, it was clearly highlighted that although funding for low carbon initiatives is available there isn’t one easy method for communicating to this to the market.  This highlights the difficulties that will potentially emerge of encouraging consumer engagement at the level required for homeowners to make the low carbon switch.

Without clearly defined communication channels, Vaillant believe this will be a problem going forward with all low carbon programmes. Not only is there a requirement for highly skilled installers, but also national public awareness with local consumer targeting for off gas areas for heat pumps.  There needs to be specific campaigns designed to disseminate expert knowledge and advice on appropriate tools and technologies.  These campaigns must be engaging, simple to understand, and consistent in their message in order to stimulate the required action.

Vaillant supports EUA on the further detail to this question which they have included in their submission.

 

  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)?

The forthcoming ‘Building and Heat Strategy’ should consider building regulations and their impact on a net zero future.  By improving fabric efficiency and heat loss of the existing housing stock, this would positively impact and lower the heat demand of these homes.  This would save consumers money on their fuel bills and reduce emissions.

As we transition towards the 2028 target of 600,000 heat pumps per year being installed, training is especially relevant, and one of the key methods of delivering this vision.  There are two streams which must be thought about here, those who are currently working in the industry, and those who are currently trainee apprentices.  The training courses which are being delivered at colleges around the UK at the moment need to be adapted immediately to include the appropriate technology to deliver our low carbon future.

Decarbonisation of heat will require numerous solutions which need to be addressed with a high level of speed in order to achieve the 2050 net zero carbon target.  As part of this process the government need to outline their intentions to decarbonise the gas grid.  Hydrogen is an ideal fuel, and the government need to outline their intentions clearly and quickly.  Once there is “Hydrogen to the door step” the consumer will have a choice of hydrogen or electric (heat pump) heating solution, and the market will dictate the technology choice. Heat pumps are also an option of technology which needs to be prioritised in any key policy changes, the Committee for Climate Change state “heat pumps must scale up to be able to replace the majority of current gas boiler demand by the early 2030s”.  Heat pumps are an existing solution which will firmly form the foundation to the decarbonisation of heat.

Essentially, we can surmise that before 2050 most households will have two heat generator changes i.e natural gas boilers.  In most instances these will be unplanned ‘distress purchases’ so the sooner the market makes the switch to low carbon products, the quicker the governments net zero carbon targets will be met.

  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?

In on-gas areas hybrid systems are the most viable way to start to deliver the decarbonisation of heating.  Hybrid systems are delivered via a heat pump and a boiler being linked together.  The heat pump is the primary heat source, and the boiler is secondary.  In this scenario the products are linked and are therefore able to select the cheapest source of heat generation at that time, as well as minimised carbon emissions.  Hybrid systems are seen as smaller step away from the typical boiler on the wall approach which we have today, but offer the benefit of reduced carbon emissions and household bills. Over time we would expect the gas boiler in the hybrid system to be replaced with a hydrogen boiler, will offers a lower level of carbon intensity.

In off-gas areas heat pumps will raise minimum efficiencies and lower energy consumption.

There is no silver bullet to deliver the decarbonisation of heat.  Electrification and hydrogen will have to co-exist in any future scenario. Electrification of heat is set to become greener over time thanks to greater investment in renewable energy.

 

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

Currently there are numerous barriers in this market place, however there are things which the Government can address now to increase the uptake of low carbon heating technologies.

 

 

It is crucial to build the market and supply chain skill base to enable alternative heating system choices.

 

  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?

Currently cost dissuades against the switch to low carbon heating.  The move to low and net zero carbon should not impact the consumer financially, this transition should be fair, accessible and flexible around future innovation.  The graph below shows a fuel cost projection by kWh, by fuel type.  Most UK households (85%) are using natural gas, which is high in carbon intensity, and cost wise over time is expected to go up.  This is similar to electricity, which will also increase in cost overtime.  The only fuel type which we anticipate reducing in cost is hydrogen.   See Figure 1.

 

 

Figure 1: Fuel cost projection per kWH (Source: Vaillant research October 2020)

It is extremely important to consider all types of consumers, especially those in fuel poverty.  These types of household will need to be fully supported financially in their transition to low carbon heating.  In these circumstances, and even in higher earning households, the homeowner may not have the disposable income to support the purchase of low carbon heating technology.

 

 

  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?

As previously mentioned, a contributory factor to the adoption of low carbon technologies is the shortage of MCS accredited installers within the market.  Funding must be provided to train and upskill installers to be low carbon competent.  At the time of a distress boiler replacement or annual service an installer should conduct a low carbon ready assessment on the heating system, radiator suitability and upgrades.  These findings should then be recorded for grant funding to allow an upgrade in the future.

Often boilers are a distress purchase, and not budgeted for by the homeowner.  In this scenario homeowners are looking for the cheapest option, and are unlikely, without the aid of grants to consider renewable heating solutions.  Here funding needs to be available to aid the transition to a lower carbon option.  If your boiler breaks today the replacement will last till at least 2035, meaning the next time you will have to replace a broken boiler will be in 2050, therefore it is crucial that low carbon options are financially accessible.  

Installers should be rewarded for successfully switching customers to any low carbon technology.  The current skill gap for designers, builders and installers of heat pumps needs to be addressed.  MCS has bought a higher quality design and installation process into the industry.  This has been relevant and suitable for the current size of the market.  To scale up the installation of heat pump installs the industry needs to both transform the gas installers and train new low carbon installers.

Homes which embrace low carbon need to be recognised via the EPC or equivalent, and consideration should be given here as to how these properties be compensated.

In terms of incentives to the homeowner, schemes like the Green Homes Grant should be available for all household types.  Upfront grants will play a crucial part in the transition to the adoption of low carbon heating and need to take into account on-gas and off-gas household requirements.

 

  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?

There has never been a public awareness campaign from any central body on the different ways in which you could heat your home. A campaign backed by government and the industry to raise awareness of different technologies and how they contribute to the commitments the UK has made to the future would make a massive difference.  Given that in November 2020 the Prime Minister outlined the 10 Point Plan and set out a target for the deployment of 600,000 heat pumps per year by 2028 it is crucial to now raise awareness and interest in low carbon heating.

The installer base in the UK is highly knowledgeable and well trusted by the customer. Installers are often the first point of contact for the customer, and take the role of ‘sales personto guide the homeowner through their options when they are outlining their hot water and heating requirements.  Often this will be delivered through a gas technology.  Installers rarely offer a choice to consumers as they are working in the parameters of what is available today, whilst also considering the homeowners pocket, but it could be made a requirement for installers to recommend a low carbon heating option as part of the quoting process.  In order to put installers in a strong position to do this, the Government need to invest in up-skilling installers.  As we transition towards the 2028 target of 600,000 heat pumps per year being installed, training is especially relevant, and one of the key methods of delivering this vision.

New builds should be mandated with lower flow temperatures making them low carbon ready and increase product and system efficiency straight away. 

  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?

 

Government should be ultimately responsible for the decarbonisation of heat as they need to enforce policy change to ensure that this happens. The long term strategy for decarbonisation should be clear and stable with a policy timeline that is defined, communicated in a timely manner and adhered to. Short term political gain and constant changing of dates does not provide a stable landscape for the necessary preparations and investment in training of the workforce and scaling up production of equipment. 

 

As a HVAC equipment manufacturer, Vaillant have a wide portfolio of low carbon heating and hot water solutions, and are seeing increasingly positive levels of uptake of our renewable technologies, especially heat pumps. We have also supported this with our televised ‘Why Wait’ campaign, which features heat pump technology and is aimed at raising end user awareness. We consider consumer awareness of the need to decarbonise heating and the available low carbon solutions as a paramount element in reaching our ambitious National targets.

 

A body such as Ofgem are important and extremely well placed to play an major role in the transition to, and governance, of net zero carbon. We believe Ofgem should take responsibility for ensuring standards and regulation are maintained and targets are met.

 

As previously mentioned, installers have a key responsibility for advising customers on which heating and hot water technology solution they should purchase as they are a trusted source of information when householders are looking to renew or upgrade the systems. Installers, therefore, play a crucial part in consumer decision making and ultimately, achieving the national carbon saving target. 

 

December 2020