Written evidence submitted by Liquid Gas UK (DHH0119)

About Us

Liquid Gas UK is the trade association for the Liquefied Petroleum Gas (LPG) and biopropane (bioLPG) industry in the UK, representing companies who are LPG producers, distributors, equipment and service providers, and vehicle convertors. It is dedicated to the safe and effective development of LPG. Member companies cover 99% of the total LPG distributed in the UK. In our submission, we outline the significant role LPG and bioLPG can play in the current, and future, decarbonisation of heat in homes.

An introduction to LPG and bioLPG

• LPG is the lowest carbon conventional energy source available to off-grid homes and businesses in the UK, which provides immediate, expedient and cost-effective heat and energy. As LPG emits more than 33% fewer carbon emissions than coal and 15-20% fewer carbon emissions than oil[1], LPG is a transitional solution in its own right. It also emits virtually no NOx, SOx and Particulate Matter, enabling immediate air quality improvements.

• It is the industry’s ambition to offer 100% renewable energy solutions by 2040 through the rollout of bioLPG. BioLPG, alternatively known as biopropane, is a versatile, ‘drop-in’ renewable solution which can provide up to 90% emissions reduction.[2] Already available on the market today, bioLPG is chemically indistinct from LPG and can be used as it is, just like conventional LPG. This means it can be ‘dropped-in’ to existing supply chains and can be used by consumers in their existing heating appliances, stored in existing bulk tanks and cylinders, and transported using today’s infrastructure and skilled workforce.

• Switching to LPG systems today also locks-in a seamless pathway to renewable energy use, as bioLPG can directly replace conventional LPG going forward in a hassle-free way. LPG and bioLPG can also be used in hybrid systems, alongside heat pump technology. The Committee on Climate Change (CCC) modelled off-grid hybrids using bioLPG in their leading Net Zero report.[3]

Executive Summary

• For off-grid domestic consumers, an active choice on how to decarbonise heat and increase the energy efficiency is their homes is needed; for those who are on-grid, there is a clear pathway. As consideration is given to how homes are made more energy efficient, the Government cannot adopt a one-size-fits all approach that ignores the realities faced by off-grid homeowners.

• Electrification of heating systems should not be seen as the only solution to decarbonisation and low carbon heat in the UK, especially in rural areas, since this may not be possible or cost-effective for certain homes, nor provide sufficient warmth. It is important that regulations and policy reflect that different solutions will be required for different types of building stock and locations across the country.

• We advocate a mixed technology approach to installing heating technologies in off-grid homes and non-domestic properties. Energy consultancy Ecuity[4] has found that this approach will enable the UK to achieve Net Zero in the most cost-effective way. Compared to a full rollout of heat pumps, it ultimately saves £7bn in levelised cost analysis across the whole of UK or on average £22,600 per household.
• When considering a mixed technology approach; however, biomass should not be positioned as an alternative fuel for off-grid areas. Not only are there higher upfront costs for the homeowner, the use of biomass will also have a significant impact on air quality.

• Further, we believe the Government needs to be targeted with its support and acknowledge the suite of technologies available to consumers to encourage the take up of lower carbon solutions. In particular, it is important that incentive and grant schemes recognise the role that bioLPG can play in decarbonising heat for off-grid homes, either as a standalone system or deployed as part of a hybrid heat pump.

Question 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?

• In the past, Government policy has tended to be too prescriptive, rigid and a one size fits all approach. The failure of the Green Deal shows how hard it is to encourage consumer change. To drive proactive take-up among off gas grid communities, consumers must be empowered to make decarbonisation decisions based on their needs, upfront and ongoing costs and tenure.

• Electrification is not the silver bullet to decarbonising heat as it can mistakenly be presumed to be for those off grid. The figures so far show that a sole focus on heat pumps is unlikely to deliver the transition we need. Government data shows that between April 2014 and May 2020, there were 34,906 new applications for air source heat pumps made through the domestic RHI subsidy scheme, with 6,112 ground source heat pumps applications.[5]

• Indeed, while electrification may be the right solution for some homes, it is not for others. For many older, often more rural homes, their method of construction and lack of insulation can make retrofitting electrified technology very expensive or practically challenging, without achieving real heating benefits. For example, a recent poll of 1,000 adults in rural areas showed that 43% thought it would not be possible to install cavity wall insulation, 45% solid wall insulation and 45% under floor insulation.[6]

• BEIS has acknowledged that a minority of homes aren’t suitable for heat pumps, but we believe the Department’s estimate of 20% of off-grid properties being unsuitable for a heat pump is highly inaccurate. Most bodies accept that heat pumps are best suited to new build, buildings under renovation and highly energy efficient properties, but for off-grid homes, they risk a colder, more expensive to heat home. 

• According to a recent study, just under 60% of detached homes built before 1919 are off-grid, with a further 15% built between 1919 and 1944. These homes are typically located in rural areas and are often significantly less energy efficient, with much higher heat demand.[7] As of 2017, 79% of homes built before 1919 achieved an EPC D or E, as well as 85% of homes built between 1919 and 1945.[8] In addition, the latest English Housing Stock survey data demonstrates that 32% of oil heated properties have an EPC D, 29% an EPC E and 20% an EPC F.[9]

• We call on Government to reassess what it considers can be consistently heated through a heat pump; and to back a basket of heat low carbon solutions, including LPG and bioLPG use in standalone systems or in hybrid heat pumps.

Question 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)?

• At the end of this Parliament, there needs to be a framework that provides industry and consumers with clarity and consistency over how the myriad of different energy efficiency, housing and Building Regulations policy interplay. It should be a framework that provides for a basket of solutions that isn’t solely reliant one technology and can appeal to different consumer market segments, a framework that provides industry with confidence to invest in indigenous renewable fuel supply and a framework that supports a compelling and affordable consumer proposition so that they can transition towards the decarbonisation of their heating system.

• To achieve this, for the 2 million off-grid householders, the following issues need to be addressed:
• Agreement that the phase out of high carbon fuels should not block fuels that can support a transition to Net Zero, such as LPG and bioLPG, and
• Recognition of a basket of low carbon heating options and extending public funding support to these.

Agreement that the phase out of high carbon fuels should block fuels that can support a transition to Net Zero

• The Government’s plans to phase out the use of high carbon fossil fuels by 2030 require a nuanced approach. As noted earlier, LPG is a transitional solution in its own right. BioLPG can provide a further, deeper emissions saving of up to 90% compared to traditional LPG. The LPG industry spent £100m on bioLPG in the last 12 months and plans to continue investing.  This means that supply of bioLPG will increase in order to achieve the full transition ambition from LPG to bioLPG by 2040.

• It is important such Government phase-out plans do not limit moves to fuels, nor curtail investment, that can support heat decarbonisation in hard to reach homes and areas of the economy; and in doing so, could cut off low carbon transition opportunities that support the 2050 Net Zero goal. Therefore, Government should not list LPG as high carbon fossil fuels that require phase out by 2030.

• This transitional approach was explored by Lord Deben’s words to this Committee during the Net Zero inquiry:

“I am very concerned about the question of how we move from largely fossil-driven heating in people's homes. There are those who are purists and say you have to move from where you are to a totally non- fossil fuel answer. I am very much an incrementalist on this. I do not believe you can do that.” [10]

Recognition of a basket of low carbon heating options and extending public funding support to these

• As we have noted, electrification of heating systems should not be seen as the only solution to decarbonisation and low carbon heat in the UK, especially in rural areas, on grounds of cost, viability and the need for consistent heat.

• Funding should therefore be made available for other low carbon technologies on a proportionate basis, but particularly for those off-grid communities who have to make an active choice and for whom a pure electrified heat pump may not be suitable or affordable.  A particular focus should be to nudge consumers, particularly those off-grid heated by oil boilers, to make affordable low carbon choices. This should include an oil tank (and boiler) scrappage scheme, and specific support for bioLPG and hybrid heat pumps through the Clean Heat Grant. We cover these more in answer to question 6 on incentives.

Question 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?

• Liquid Gas UK has consistently argued for the UK Government to adopt a technology-neutral approach to decarbonising heat. The most appropriate mix of technologies across the UK is one that recognises the variety of housing stock and tenures across the country require a range of technologies to ensure consistent heat in all homes. That basket of solutions should include LPG and bioLPG, whether as a standalone system or deployed through a hybrid heat pump, as endorsed by the CCC.

• As noted, energy consultancy Ecuity has calculated that the use of LPG and the transition to 100% renewable bioLPG in a proportion of off grid homes supports the UK’s Net Zero target. This is because LPG is a drop-in, renewable solution that can provide up to 90% emissions reduction.[11]

• As highlighted above, LPG and bioLPG offer viable routes to decarbonise the heating of homes in the case where electrified heat pumps cannot be retrofitted or provide consistent heating. Its cost-effectiveness also makes it viable. A case study in the recent Ecuity study showed that a typical pre-1918 detached family home would face levelised costs of 40% higher, equating to £22,6000, between now and 2050, if forced to switch to a heat pump rather than to switching onto LPG/bioLPG. These estimates are also backed up by Savills[12], which has conducted analysis based on Government data from MHCLG.

• Government should therefore be supporting the development of bioLPG because it unlocks a seamless transition to those hard to reach off-grid homes. This can be done by working with industry to promote localised indigenous production, and in supporting its use in the Clean Heat Grant. Likewise, hybrid heat pumps warrant similar proportionate support through the Clean Heat Grant. LPG and bioLPG are the perfect partners for hybrid heat pumps in rural areas. Indeed, as we referred to earlier, hybrid heat pump solutions using bioLPG have also been identified by the (CCC) as a key technology for decarbonising heat in off-grid buildings:

“Hybrid heat pumps can be installed alongside existing heating systems, with these secondary fuels later transitioning to low carbon sources. For hybrid heat pumps on the gas grid, peaking gas use can be transitioned to hydrogen, whilst off the gas grid, biofuels can be used (assumed to be bio LPG for the purposes of our modelling).” [13]

• Biomass should not be positioned as an alternative fuel for off-grid areas; not only are there higher upfront costs for the homeowner,[14] but the use of biomass will also have a significant impact on air quality. In addition to endorsing bioLPG hybrid heat pumps, the CCC have said the use of biomass in heating buildings should be limited and BEIS has acknowledged the burning of biomass will have an impact on air quality. An independent report recently completed for Liquid Gas UK[15] on the opportunities for the non-domestic market to decarbonise highlights the significant difference in air quality between bioLPG and biomass. Soon to be published, the analysis shows the air quality damage costs are 24 times worse when using biomass than when compared to LPG or bioLPG use. Liquid Gas UK are happy to share the report with the committee, when published, to aid its consideration and guide recommendations.

Question 4: What are the barriers to scaling up low carbon heating technologies? What is needed to overcome these barriers?

• Consumer engagement remains a significant challenge, and barrier, to change. Most domestic consumers will not engage on the issue until their existing heating system has reached the end of its life and needs replacing. When considering what technology is the most appropriate for them, consumers will primarily focus on costs (upfront and running) and whether it provides the consistent heat they want.

• Should the Government persist with a policy of electrification, except in certain tightly defined circumstances, some off gas grid consumers face an adverse scenario: it will cost more to retrofit their home than their on-grid counterparts and they may not have the consistent heating of their on-grid counterparts. Providing for (and supporting) a greater choice of technologies and fuels is likely to persuade more off-grid consumers to proactively choose a low carbon heating option.

• Another constraint that exists if with an electrification-only approach, and conversely can be reduced if a diversified path is followed, is increased grid demand. Heat pumps will cause a significant rise in demand for electricity consumption on the local network, especially when coupled with demand for electricity to power electric vehicles. It is important to ensure that local networks can supply the necessary heat to rural homes, especially during the winter where isolated households must not be left without. Upgrading the local network takes time and costs money, for example underground lines cost between 3 – 5 times more per km than overhead lines.[16]

• Further, BEIS’ one size fits all trajectory does not support or aid investment or development of other low-carbon heating technologies. The bioLPG supply is developing, and the industry is committed to supporting its growth; however, the supply chain could have been developing at a greater pace if Government had signalled support for a range of technologies.

Question 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?

• We believe industry and Government must plan for and support what is realistic for consumers install and what is realistic for Government to enable through policy levers and green grant schemes. This means Government must adopt the most cost-effective way of meeting its Net Zero targets. As outlined above, independent analysis by the energy consultant Ecuity, shows a technology neutral approach to off-grid heat decarbonisation (using a mix of LPG/bioLPG, hybrids and heat pumps)  is the most cost-effective with savings of more than £7bn versus an electrification approach.[17]

• As noted above, LPG and bioLPG can be used in hard to treat homes and have a significant role to play in enabling the Government to meet its Net Zero targets; it does so in a way that will save consumers more than £22,000 up to 2050.

• To support Net Zero, the UK industry in July 2019 announced a shared ambition to transition from LPG to fully supply bioLPG by 2020.[18] In response, the LPG industry has been investing. Investment in the last 12 months in bioLPG totalled more than £100 million. As of April 2020, the industry forecasted that over the coming five-year period, it would invest of more than £600 million, including in infrastructure, its fleet and bioLPG.

Question 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?

• For consumers who are connected to the grid, the decarbonisation decisions are made for them and there is a clearer, locked in and seamless pathway to heat decarbonisation. However, for consumers off the gas grid, the pathway to decarbonisation is not laid out and requires proactive decision making on their part. Liquid Gas UK believes there is a role for Government grants and incentives in encouraging and enabling the switch from heating oil to lower carbon fuels, as well as offering a mix of solutions so that households to pick a low carbon heat system which works for their needs and type of home.

Oil Tank Scrappage Scheme

• Liquid Gas UK has previously called on the Government to adopt an oil tank scrappage scheme to support domestic off-gas grid fuel switches from oil heating systems, and hopes the Select Committee will consider it as part of this call for evidence.

• Despite the ability of consumers to make significant carbon savings through low carbon solutions such as LPG/bioLPG or even heat pumps, it will be difficult to motivate a proportion of off-grid householders to move away from heating oil. Oil infrastructure is owned by the homeowner; therefore, the cost of removing a tank and the value of the remaining fuel causes customer reluctance to move on to lower carbon solutions.

• A Government-backed scrappage scheme (worth circa £2,000) will address a key barrier to customers switching from heating oil and alleviate reluctance of consumers who own their oil assets. This is a measure that off-grid consumers will understand and allow them to make carbon emissions savings with LPG and bioLPG or installing a hybrid or pure electric heat pump.

Expand support under Clean Heat Grant

• We would like to see the Government encourage the use of LPG hybrid heat pump systems via inclusion in the Clean Heat Grant. We note that hybrids can be supported in the time-limited Green Homes Grant and the concept should be extended.

• In a hybrid heat pump study[19] on a Northern Irish rural cottage over the winter, it showed that the electric heat pump element was used 78% of the time, with the 22% back up being powered by an LPG boiler, this suggests that most heating needs are fulfilled by electricity, but not all.

• Indeed, it would be much more cost-effective, providing immediate carbon savings and staying in line with Net Zero ambitions, to support hybrid heat pumps through the Clean Heat Grant, rather than biomass for hard-to-treat homes as is proposed. The CCC have said the use of biomass in heating buildings should be limited and have endorsed bioLPG hybrid heat pumps. Further, BEIS has acknowledged the burning of biomass will have an impact on air quality.

• Conversely, LPG emits virtually no NOx, SOx and Particulate Matter, enabling immediate air quality improvements.

• Similarly, we believe that the Clean Heat Grant should support standalone bioLPG boilers. BioLPG offers a Net Zero-complementary transition for hard to reach off grid homes, and therefore, the Government should be supporting its take-up.

December 2020

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