Written evidence submitted by the Heat Pump Federation (DHH0128)
The Business, Energy and Industrial Strategy (BEIS) Committee has launched an inquiry examining the path to decarbonising heating in homes.
The BEIS Committee will examine the Government’s ‘Buildings and Heat Strategy’, due in November, and investigate the policies, priorities and timelines which are needed to decarbonise heating in residential buildings and help ensure the UK gets on track to deliver Net Zero by 2050.
The Committee’s inquiry on decarbonising heat follows a successful pitch by Dr Jan Rosenow, Principal and European Programme Director, Regulatory Assistance Project (RAP), at the Committee’s “MyBEIS” evidence hearing in July and is part of the BEIS Committee’s ongoing work on net zero and its follow-up to the findings of the Climate Assembly.
The decarbonising heat in homes inquiry is likely to examine areas such as the technological challenges to decarbonising heat including issues related to the future of hydrogen, network capacity and the distribution of costs, incentives, consumer engagement and protection, and how to co-ordinate and deliver low-carbon heating.
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:
4th December 2020
Submission from:
Heat Pump Federation
The Heat Pump Federation (HPF) was formed in April 2020 to provide a new vehicle for energy and heat related businesses to assemble in coalition in support of the electrification of heat. Members include utility companies, heat pump manufacturers and distributers, mechanical consultants, heat networks specialists and both commercial and domestic heat pump installation providers. Core amongst the more than seventy members are: Centrica Business Solutions, Octopus Energy, Good Energy, ESB, Viessmann, Max Fordham, Ramboll & Star Refrigeration.
The HPF is heat pump architype agnostic, supporting all forms of heat pump technology and encouraging the deployment of the most appropriate option in each and every case, both at domestic and commercial scale.
Officers or members of the HPF would be available to deliver further evidence to the Committee, either in writing or at any future oral evidence sessions.
Summary:
The UK has spent 50 years wedded to fossil fuels with a level of dependency that will be very difficult to break, but break it we must, if we are serious about decarbonisation.
This situation has kept alternative heating technologies at the level of cottage industries which now have to be super-charged to deliver real alternatives inside a single decade. This is a challenge, but one which the heat pump sector will rise to.
The low cost of fossil fuels in the UK, coupled to a failure to recognise the decarbonisation of the electricity grid through the SAP process have resulted in it being too easy to maintain the status quo and to continue to add to our carbon emissions by building homes that rely on gas and other fossil fuels. The anticipated updates to Building Regulations can change this and the ultimate cost will be borne by land values.
In the past, bold action has been taken to all but remove coal from UK electricity generation. Similarly bold action is required to remove other high carbon fuels from the UK’s heating mix, staring with oil and other off-gas opportunities. In parallel, we need to recognise that ground-source and water-source heat pump technology is already delivering the lowest cost thermal comfort when deployed into social housing, so alleviating comfort (fuel) poverty. There are also massive opportunities to access waste heat and the natural resources of our rivers and coastline.
The decarbonisation of heat is a national infrastructural change which needs cross party support and stable strategic energy policy which runs for decades, rather than months. Private investment is waiting for appropriate signals from government to provide reassurance that entering the market is secure. A migration from all carrot, to a situation where regulation, public will and carefully constructed interventions can drive decarbonisation at pace is possible, but this will require genuine collaboration between industry and all government departments, not just BEIS.
Given the change to the Committee on Climate Change emphasis to address all greenhouse gasses, the question, and inquiry in general, should refer to “low emissions” heat. Carbon dioxide is the single biggest problem for climate change, but other emissions, such as NOx, SOx and particulates, are highly damaging in terms of air-quality and public health, particularly in the urban environment.
The adoption of low carbon heat technologies in the UK has been highly variable to date. Whilst deployment levels for Solar PV and biomass boilers has been relatively strong, the number of heat pumps deployed in the UK since 2008, when the Renewable Heat Incentive (RHI) was first publicised, has been very disappointing. The outcome of the last twelve years of policy interventions has failed very badly to reflect the anticipated deployment figures from early RHI impact assessments. Heat pump installations are running at around 10% of the levels expected. This is as a direct result of the failure to set RHI subsidy tariffs at a level that equally incentivised all heat technologies. As a result, many consumers have ended up with technologies that are not best suited to their long term needs.
Under the previous incentive package, the Low Carbon Building Programme, heat pump solutions outsold biomass installations. Support under the LCBP was a flat rate grant, regardless of technology selected. This meant that there was no perverse incentive to “follow the money” down technological pathways that did not best suit either the application itself, or the long term interests of the consumer.
Heat pump deployments have a very different project gestation timescale to other heat technologies, especially to that for replacement fossil fuel boilers. This is partly due to poor awareness and understanding of the technology amongst potential clients, and partly due to the very high number of regulatory hurdles faced by those wishing to invest in the technology. Replacing an existing fossil fuel boiler is an easy decision for consumers to make. Displacing fossil fuel boilers with biomass boilers is almost as straightforward because it is easy to play to the direct replacement flow temperatures, etc., especially when very generous financial incentives can be waved in front of the home or business owner.
Any migration to a heat pump based heating solution requires much more thought and a much deeper (and longer) sales interaction with the client. This is made much more difficult and time-consuming when having to also explain why the financial outcome isn’t nearly as good as would be achieved by dropping in a pellet biomass boiler.
Until very recently, there seems to have been a very poor understanding by officials of the requirement for long term stability of both policy and support in order to truly encourage heat pump adoption. Whilst the RHI has been a long term incentive package, the speed of reaction to what was very quickly seen to be an unreasonable allocation of opening tariffs (both Non-Domestic and Domestic) was far too slow. As a result, the market for heat pumps, especially for ground- and water-source was halved, doing lasting damage to the installer base, the supply chain and to the confidence of all involved.
In parallel, the failure to recognise the very significant and progressive reduction in the carbon factor for grid electricity continued to over-reward Solar PV generation and fossil fuel Combined Heat & Power (CHP), largely gas-fired, whilst continuing to penalise heat pump operation from the CO2 emissions perspective. Even today, it is impossible for any SAP assessment to recommend a heat pump in the resulting Energy Performance Certificate. Addressing this situation needs to be an absolute priority if the UK is serious about the decarbonisation of heat. MHCLG consulted on updates to Part L of Building Regulations, where the carbon factors reside, back at the beginning of 2020, but has yet to publish its response. Apart from making immediate changes to the carbon factors in Building Regulations, it is imperative that a mechanism is introduced which provides for the annual updating of these figures. The grid is decarbonising so quickly that anything less than an annual review risks yet more damaging perverse outcomes in the future.
The imminent closure of the Non-Domestic RHI, without any core and well thought through replacement support strategy is again, hugely damaging. Supply chain and installer businesses cannot plan or invest in either plant or recruitment and training, in a policy environment that moves from feast to famine. Whilst the Domestic RHI has been extended out until 31st March 2022, which is very welcome, even this household segment of the market does not yet have a credible long term strategy for what comes afterwards. The consulted upon Clean Heat Grant is both too short term (just two years) and is underfunded (supporting just 12,500 heat pump deployments per annum, rather fewer than is currently being deployed annually).
The HPF entirely accepts that government funding cannot be an open-ended proposition. In fact, members would prefer to operate in an unsubsidised market, but whilst it remains more financially attractive to burn high carbon fossil fuels, some level of tax-payer support cannot be avoided. The industry would like to use the forthcoming Energy White Paper, Heat & Buildings Strategy and the MHCLG consultation response on Building Regulations and the Future Homes Standard to work constructively with government to develop a set of medium to long term strategic policies to drive decarbonisation of the built environment in pursuit of Net Zero 2050, whilst progressively moving from public intervention to private investment.
The two immediate COVID-19 interventions are, again, examples of government funded mechanisms which do not recognise the timescales involved in the successful positioning, sale and delivery of high quality heat pump systems. The Green Homes Grant and the Public Buildings Decarbonisation Scheme (PBDS), both partly aimed at heat pump deployment, were both launched with initial deadlines for expenditure of 31st March 2021. It is just not possible to get public procurement or planning consent processes to work that quickly. Whilst it is laudable for government to inject significant sums into the economy as part of the COVID-19 response, the desired outcome must be both genuine decarbonisation and long lasting, skilled new employment. Six month programmes risk attracting poorly qualified entrants to the various markets, employing unskilled labour, resulting in poor quality and dreadful outcomes for consumers, with the labour joining the ranks of the unemployed again on 1st April. It is therefore to be welcomed that the Green Homes Grant has been extended out to 31st March 2022. Given that larger commercial projects are more complex to plan and deliver, an equivalent extension of the PBDS must be the minimum outcome. The suggested extension to 30th September is just not long enough. The heat pump sector could make a tremendous impact using the PBDS, and this would reflect true central and local government leadership by example, but a viable timescale is essential if the public investment is to result in the sort of energy infrastructure value that ground- and water-source heat pump installations provide.
It has been government policy for decades to keep the price of fossil fuels, particularly gas, low, whilst artificially inflating the price of electricity. When electricity generation was largely driven by the combustion of coal, applying 100% of the environmental levies to electricity was reasonable – the polluter was paying. The situation has now fundamentally changed. Electricity is routinely the lowest emissions primary fuel and yet it is still penalised with the full weight of the environmental levies – the polluter is no longer paying. The spark gap between gas and electricity pricing needs to be addressed. Doing so, in incremental stages, over a very extended timescale will minimise the impact on householders. Parallel provision of excellent advice and assistance to reduce energy demands could mean that overall expenditure on energy does not have to increase - pay more for it, but use less of it. It would be perfectly possible to identify mechanisms to protect those in comfort poverty. The UK has one of the widest spark gaps in Europe and, as a direct result, has very low heat pump penetration. By contrast, Sweden has a spark gap of almost zero and, unsurprisingly, has a heat sector dominated by heat pumps.
Recognition of the need for stable medium to long term policy is essential. It is vital for government to seek and gain cross-party consensus in order to construct an energy policy that is fit for the purpose of delivering net zero over the next thirty years. Any risk that energy policy will fundamentally shift from one parliament to the next will be disastrous.
In the short term, the anticipated changes to Part L of Building Regulations need to be enacted to recognise the decarbonisation of grid electricity and to mandate a maximum flow temperature from any heat technology into emitter systems (radiators, UFH, etc.) of 55°C, with a potential to reduce this further in coming years. A mechanism for annual reassessment of the carbon factor for grid electricity is essential.
There are now a plethora of incentives available to support heat pump deployment. Whilst individually welcome (accepting the shortcomings identified previously), the funding landscape is now very complex. It is extremely difficult for the industry to identify the most advantageous funding, or combinations of funding for any given project, let alone to position this with clients. A move towards some sort of simplification of support mechanisms would be sensible.
Fundamentally, policy needs to make it attractive for homeowners to displace fossil fuels and to be able to afford to do so. At present, it is far too easy and low cost to continue to burn gas and far too difficult and expensive for most homeowners to borrow the monies required to invest in alternative heating solutions. A successful strategy to deliver Net Zero 2050 will need to address both these elements.
A combination of taxation levers can be used. It is incompatible with decarbonisation for VAT rates to be set at 5% for domestic gas whilst being set at 20% for the installation of solar PV panels. Government should take the opportunity afforded by BREXIT to reduce VAT on all low emissions technologies, including the peripheral services required to optimise their performance, to 5% or, better still, to 0%.
Some form of carbon taxation needs to be enacted. This might be a combination of migrating the environmental levies from electricity to gas, progressively ratcheting up the VAT rate on fossil fuels or a straight carbon tax. It is essential to discourage long term use of high carbon fuels, such as gas and oil.
The anticipated provisions in the Future Homes Standard need to be enacted at the earliest possible date. It is madness to continue to add to the carbon emissions problems by continuing to build houses with high carbon fuel heating solutions. It is particularly important to mandate at the earliest opportunity for local domestic hot water storage to stop the use of Combi-boilers which are inherently highly inefficient when in heating mode. Beyond this, ensuring that all new build dwellings are Net Zero compatible is both vital for decarbonisation and fair for the house buyer. Most new house buyers will reasonably expect that their new home is built to current emissions expectations. Under existing Building Regulations this is just not the case. New homes being built now will require expensive retrofitting to achieve Net Zero. Developers routinely express concern about the cost of swapping out business as usual Combi-boilers for heat pumps, however, this cost will eventually merely be recognised in the value of the land, once existing land banks have been built out. Setting a policy framework that allows and encourages third parties to invest in in-ground infrastructure across new build estates leaves the developer merely having to procure the ground-source heat pump which is not that much more than purchasing a boiler when at the point of build.
To support the deployment of both heat pumps and EV charging facilities in new build, DNOs should be encouraged to install three-phase electricity supplies as standard. Having routine access to three-phase supplies will allow for considerable expansion of the ENA database for both EV chargers and heat pumps which enjoy “connect & notify” status. Requiring prior consent to connect is a real barrier to heat pump deployment, especially at the time of a distress purchase when a fossil fuel boiler has failed or reached end of life. It is understood that Western Power Distribution has already decided to deploy three-phase supplies into all new build. Cost to the tax-payer is nil, so this is very low hanging fruit.
Social landlords and Housing Associations should be encouraged to consider the much lower long term total costs of ownership derived from investment in ground-source heat pumps. Whilst capital costs are higher, the cost of the heat for tenants, many of whom are in comfort poverty, will be the lowest available, and this will only improve if the spark gap is addressed. This is a core opportunity when seeking to ensure that the consumer is brought along with the decarbonisation process and that no one is left behind.
Public awareness needs to be addressed. The heat pump decarbonisation of high profile public buildings, of all new builds and of all social housing will dramatically lift the profile of heat pumps in the public perception. Current trusted resources should be engaged and encouraged to assist with public messaging. This might be celebrities, flagship retailers or e-platforms.
Quality of installations is vital in consumer reassurance and protection. The MCS Standard for the design and installation of heat pumps should be mandated for all deployments, both new build and retrofit. For sufficient individual installation businesses to become MCS certified in their own right will be challenging. Therefore, all manufacturers should be encouraged to operate MCS umbrella schemes, under which conventions heating firms, technicians and engineers can operate.
The use of coal, as the highest carbon fuel, is now almost over in domestic heating. The next highest carbon fuel in routine use is kerosene, largely in off-gas regions. It is widely anticipated that the Heat & Buildings Strategy will include a mechanism and timeline for the removal of oil from the rural heating mix. The timeline needs to be short and there may needs to be special assistance made available, especially because instances of comfort poverty are higher in off-gas property and those properties tend to have higher than average heat demand.
Targeting government support at comfort poverty and at the highest polluting fuels will win broad public support. Encouraging private investment in the decarbonisation of new build housing will win broad public support.
Rapid action to enable heat pump deployment in all new build and in all off-gas properties (with a proportion of both on either district heat networks or using hybrids where appropriate) will get close to meeting the 10-Point Plan ambition for 600,000 heat pumps per annum by 2028. This will build the heat pump supply chain and installer training capacity at a sustainable rate and delays any core future decision on the best approach for dwellings on the gas-grid, during which time progress will be made on the evaluation of the true potential for green hydrogen. This does not mean that no buildings on the gas grid should be converted to heat pumps in the interim. Where it makes sound technical sense, for example where waste heat resources can be exploited with heat pumps, or where water sources can be exploited for simultaneous heating and cooling, heat pumps should still be promoted and supported through policy. It may be appropriate in such circumstances to encourage such investments in heat pumps by reductions in, or removal of, Council Taxes or business rates.
For domestic retrofit properties, most homeowners will need experienced assistance to identify the optimal balance between energy efficiency and the installation of heat pump technology. Whilst it remains so economically advantageous to continue to burn fossil fuels, it may be necessary to fund such building assessments. The deployment of low emissions technologies is still largely a private investment but the outcomes, in terms of UK PLC decarbonisation and improvements in air-quality are public benefits. This may justify the public purse funding the highest quality building assessments.
It would be advantageous for government to enable low cost borrowing to allow homeowners access to funding for the decarbonisation of their homes. The situation is not that different to enabling all to have access to tertiary education by providing low cost student loans. Low emissions loans could be repaid by a combination of energy savings and consumers own funds over an extended period of time.
If the carbon factor of grid electricity is properly recognised (along with the ongoing potential for further decarbonisation), and in the absence of genuine green hydrogen, heat pump technology is the single most effective route to the decarbonisation of heat. Therefore, for the coming decade at least, government policy should drive heat pump deployment against all the initial targets identified above. There are many myths about the suitability of heat pumps in certain building types, but it is a simple truth that there is a heat pump solution for all buildings in the UK, be they new-build or Listed Buildings.
The heat pump sector would be the first to argue in favour of energy efficiency prior to the specification of any heating technology. However, it is essential to understand that high levels of insulation or UFH are not prerequisites for the successful deployment of heat pumps.
Selection of heat pump architype will be a function of property type, long term investment appetite, available natural resources and a host of other factors. For example, large scale waste heat or water sources may lend themselves to district heat networks. With the appropriate policy background, technologists and the markets will determine which technology or mix of technologies will be most appropriate in any given situation. Attempting to force solutions into situations where they would not otherwise be appropriate will end in disaster. This has already been seen with the number of pellet biomass boilers which were installed under the early years of the RHI (driven by financials, rather than by best practice) and which are now being replaced because of the increasing cost of fuel, the high maintenance overhead and the improving appreciation that burning trees is fundamentally not a sustainable carbon zero approach.
The single biggest barrier to decarbonisation through heat pump deployment has been a failure of support policy under the RHI. This is coupled to a failure to recognise in Building Regulations the true carbon value of heat pump operation.
Other barriers are:
Public awareness and concern over new technologies (but heat pumps are not new to our homes, we have all relied upon heat pumps to keep our milk fresh and our peas frozen for decades now. There are heat pumps quietly humming away in the corners of practically every kitchen or utility room in the land). It may be appropriate for all service engineers to be obliged to provide an information pack on decarbonisation to homeowners when servicing fossil fuel boilers. Success in other fields has been found in identifying and supporting community champions.
Affordability (use government policy to deliver low or zero interest loans for homeowners. Enable new routes to market for heat, such as heat as a service. Enable the private sector to invest in ground- and water-source heat pump infrastructure for new build)
Planning policy (review and revise Permitted Development Rights to better reflect the advanced state of both the technologies and of best practice in installation. Essentially, the deployment of heat pumps should enjoy PDR unless there are compelling reasons for it not to in specific circumstances – AONBs, etc.)
Much of this has been covered in previous responses. Fundamentally, it has to be made increasingly unaffordable to continue to burn fossil fuels. Receipts from increases in taxation on carbon (in whatever format) should be used to protect those in comfort poverty and to assist with the provision of low cost or interest free borrowing for the able to pay sector. A balance can be struck, especially with ground- and water-source between consumer contributions and private investment. For example, a utility company may fund and own in-ground infrastructure and levy a standing charge for the homeowner to connect.
Opening up access to the value of the flexibility markets will also contribute to affordability. The current entry point for individual householders is access to time-of-use tariffs for electricity. However, aggregation of community scale flexibility value will come. The value to the grid of providing flexibility by reducing load rather than by engaging peaking plant should not be underestimated. Effective Demand Side Management (DSM) will reduce the investment required in both generation and distribution. This will be reflected in lower increases for bill-payers.
There is broad acceptance that the electrification of personal transport is coming with a rapidly developing EV market. If the grid is to be reinforced and low emissions generation expanded (wind turbines, solar and nuclear) to accommodate EV changing. It may be that, in most instances, the additional reinforcement and generation capacity to accommodate the electrification of heat will be highly cost-effective if carried out simultaneously. After all, much of the cost is in opening up the ground. Doing this once for the electricity grid may be better value for UK PLC than opening up the ground for electricity upgrades and then again elsewhere for gas upgrades. Minimising the total cost of decarbonisation is the best way to keep cost increases for bill-payers as low as possible.
Again, much of the material response to this question has already been broadly discussed above. A balance between incentive and compulsion has to be found. The balance will vary by market segment. Public funding will be needed to support those in comfort poverty. Providing access to low or zero interest loans will enable others to make a decarbonised choice when replacing fossil fuel boilers.
Ultimately, all new build will be driven by regulation alone, because the actual cost of deployment will already be reduced by the scale across any single development, and the excess will eventually be reflected in the land value.
Retrofit will need to combine incentive and regulation for an extended period of time, the length of which will depend upon how long it takes to fairly migrate to a situation where burning fossil fuels is both more expensive that the decarbonised alternative and where burning fossil fuels becomes socially unacceptable.
One potential for addressing different houseful types and affordability would be to mandate low emissions systems for all perceived luxury heating requirements, such as for swimming pools. These tend to be concentrated within households which can more readily afford to invest in low emissions systems.
Leading by example is essential. For government to invest in low emissions heat pump solutions for both public buildings and social housing will raise the visibility of the technology and demonstrate to the public that heat pump technology, when well specified and executed, can outperform fossil fuels in both comfort and carbon.
Consumer protection will be delivered by extending the mandate for the MCS Standard to apply to every scenario, not just those where government funding is available.
Bodies such as the Energy Savings Trust are already working on consumer guidance. The Heat Pump Federation is contributing to this activity.
Those living on heat networks backed by heat pump technology could be protected by mandating the membership of the Heat Trust for all owners and operators of potentially monopolistic heat networks.
The issue of disruption in homes is potentially overstated. In some cases, upgrades to in-home emitter systems (radiators and UFH, etc.) will be desirable. However, if a radiator is well specified for a fossil fuel heating system controlled by timer and thermostat for “intermittent heating”, then it is likely to be already appropriately sized for a heat pump solution controlled by outdoor weather compensation.
Whilst consumer choice is important, those who are not on the gas-grid do not have the same choices as those who are. If the UK is serious about decarbonisation, it needs to be made more costly to choose to pollute through continued burning of fossil fuels. Choices that are heavily influenced by costs are perfectly commonplace in society.
Government will need to take the lion’s share of responsibility for delivering Net Zero by 2050 across the built environment.
If the task was easy, we would be doing it already. However, some of the activities required are straightforward, such as adopting the anticipated changes to Part L of Building Regulations. The effectiveness of this has already been demonstrated by the GLA with the adoption of 233gCO2/kWh as the carbon factor for electricity in planning applications since January 2019. This single act has seen almost all gas CHP driven developments translated across to heat pump systems.
Mandating the identification and use of waste heat opportunities is straightforward and could be encouraged through tax breaks, etc.
Mandating the MCS Standard for all domestic low emissions heating technologies would enhance consumer protection, which is a vital part of establishing and maintaining consumer confidence.
The coordination of cross party support for long term energy and carbon strategic policy can only be delivered by government but, again, this essential to provide the financial stability that will result in private investment in training of installers and in UK production facilities.
The establishment of lending capacity at affordable rates is a government function.
The heat pump industry itself has a role to play in consumer education and in the recruitment of new entrants into the sector. These activities are already in play with the involvement in programmes for schools, work on apprenticeships and partnership with all industry parties to develop and deliver training schemes for both low temperature heating and for heat pump system design and installation.
December 2020