Written evidence submitted by Association for Decentralised Energy (DHH0138)
The Renewable Heat Incentive has been quite successful at bringing forward biomass and to some degree, heat pump projects. It has been successful because it offered near guaranteed tariffs on a demand-led basis. The level of the tariffs for both domestic and non-domestic schemes has also been significant which has helped incentivise uptake in a nascent market where broader policy currently acts to disincentivise it, for example through policy costs that are levied on electricity bills. However, the RHI was not as successful as it could have been because the rules for applying and how the funding is structured across the different technologies were relatively complex and this has arguably led to lower domestic uptake than was expected.
The Heat Network Investment Project (HNIP) has also been successful. It has brought several projects and encouraged more low carbon heat networks than would otherwise have been the case. It would have been more successful if it had been possible to put in place wider policy changes to support heat network connections; for example, incentivising connections to non-domestic buildings through concession areas etc.
Introduce a net zero consumer engagement strategy; including how government can help consumers become engaged in preparing for decarbonisation of their home heating and improvements to energy efficiency before their existing boiler system breaks down. This must involve ensuring that tradespeople are familiar with and can advise customers on a range of heat decarbonisation technologies.
Energy policy – overarching targets
Energy policy – Overarching policy framework
Energy policy – Building standards and planning regulations
Skills and jobs
Public and private investment
To reach net zero, we will need to use all of the tools and technologies in our wheelhouse, and we see a role for a wide mixture of heat decarbonisation solutions across the UK. This view is supported by Government and many stakeholders, including the Climate Change Committee.
The ADE and its members consider that the most appropriate and viable heat decarbonisation solution will vary from place to place, and is a locally-specific question, with a locally-specific answer.
With regards to decarbonised heating infrastructure, the ADE supports the development of heat networks, electrification of heat and the use of hydrogen in those areas where they are respectively most effective and appropriate. With regards to technology, the ADE considers that the use of waste heat from Energy from Waste, CHP using decarbonised fuels, domestic and large-scale heat pumps, CCUS and electrolysis will be the most viable technologies.
Identifying the most cost-effective areas for each technology should rely on a ‘heat hierarchy’.
The Heat Hierarchy is predicated on the idea that ‘direct heat’ (energy expended specifically for the creation of heat), which will typically be higher temperature, should be reserved for areas of the UK and parts of the economy that need this ‘budget’. Areas of the UK and parts of the economy that can make use of wasted heat and upgraded heat (using a heat pump) should prioritise using this first. In zoning an area and identifying the most appropriate heat decarbonisation solution, local planning authorities should consider this principle, which will help to ensure that the right solutions are used in the right places, whilst taking a whole systems perspective.
This means that direct energy should be targeted to areas of industry which cannot make use of efficiency, wasted heat or heat upgrade (e.g. in some instances, for shipping, aviation, transport, heavy industry, or resource-low areas of the country).
The Government, through the Heat and Buildings Strategy, should formally adopt the Heat Hierarchy, and ensure that all government finance, planning policy and heat decarbonisation pathways consider this principle.
To decarbonise the UK’s heating, it needs to be more attractive to invest in low carbon heating, including city-scale heat networks and heat pumps, than in fossil gas boilers and fossil gas networks. To achieve this, we need to reform the signals to investors and ensure policy incentivises investment in a low cost, low carbon, high comfort offer to consumers.
Firstly, it is important that the overall mix of carbon pricing and support for green technologies incentivises households and building owners to invest in low carbon heating rather than a new gas boiler. The impact of different policies that price or signal carbon use on commercial and domestic buildings is quite patchy currently and doesn’t well reflect the choices that individuals and companies can make or the carbon that they are creating in the system. Ensuring these incentives are right should include review of carbon pricing for commercial buildings and domestic homes (including CCL and the balance of carbon pricing on gas and electricity) as well as a clear strategy and funding support to bring down the cost of less mature low carbon heat technologies (e.g. large-scale heat pumps).
Secondly, the current financial and subsidy support package for low carbon heat, whilst welcome, lacks strategic overarching direction. This current support is time-limited and is not currently integrated into a longer-term strategy – making it difficult for investors to plan for infrastructure.
At the moment, there is no clear funding support for large scale heat pumps, which will be a crucial technology for decarbonising many non-domestic buildings, in particular commercial buildings, after the closure of the non-domestic RHI in March 2021. Large scale heat pumps represent a significant funding gap, with other forms of technology that were previously supported by the RHI receiving help elsewhere. Large scale heat pumps still face higher costs, particularly compared to the counterfactual, and post-RHI support is necessary for supporting cost reductions in the supply chain. At present, one of the few places where large-scale heat pumps will receive financial support is through the Green Heat Networks Fund. However, this fund is not large enough to cover both heat network infrastructure and large-scale heat pumps, as heat networks need support in their own right; as do large-scale heat pumps.
The Government should recognise that large scale heat pumps will be crucial for decarbonising many non-domestic buildings and address the funding gap by introducing new financial or subsidy support post-RHI.
Per our recommendation above, we should be ensuring that we are deploying the right technologies in the right places. We should be ensuring that all of our low carbon installations support the UK’s energy transition, by providing clear benefits to the wider system and supporting local heat decarbonisation pathways. This should particularly be true of installations directly supported by government and the taxpayer. However, current government finance and subsidy does not adopt this principle. The proposed Clean Heat Grant is a clear example of this, as the grant could support the installation of heat pumps (or in rarer cases, biomass) in areas with existing or forthcoming heat networks. Therefore, the Government should make a commitment that all future government finance and subsidy should take a local approach, meaning that only technologies consistent with local heat decarbonisation pathways should receive government support.
Creating the economic conditions to scale demand for low carbon heating will also address the barrier of current supply chain capacity. As stated above, we would encourage government to introduce support and a long-term strategy for education and training in green jobs and, in particular, the construction sector. This should include grants focused on re-skilling by the UK and devolved governments, particularly focussing on the skills required for the installation of low carbon heating and to deliver high quality energy efficiency retrofits. This programme should build on the good work already being undertaken through Trustmark and PAS 2030/2035 and ongoing work to develop skills in the flexibility sector.
Finally, a clear barrier to scaling low carbon heating technologies is the condition of the UK housing stock and its relatively poor energy performance. Decarbonised heating solutions are not viable unless we address the relatively high levels of energy required to make our homes warm and to keep them warm. To overcome this barrier, significant investment is required in retrofit, driven by strong regulation and policy support, including the £9.2bn commitment to investment in energy efficiency included in the manifesto.
Different areas of the UK benefit from different resources and infrastructure, including geothermal resources, opportunities for carbon capture and storage, more efficient building stock, less grid constraint, access to transport and so on. Access to these resources and infrastructure will help to reduce the cost of the transition for these areas of the country. However, areas that do not have access to these opportunities will see a higher cost energy transition unless principles of distributive fairness are embedded into decision making. The degree to which it is appropriate to socialise such costs, noting that this reduces cost-reflectivity, should be explored.
Further, currently, the majority of policy costs are levied on electricity bills rather than gas bills. This is the case because there are more people connected to the electricity system than the gas system. Further, there have been several programmes to support renewable electricity (for example, the CfD, RO and FiT) that have been levied on electricity bills. The equivalent for renewable heating (the RHI) was levied through taxation. In addition, the Climate Change Levy is currently levied on both gas and electricity, but the rate is higher for electricity than for gas. However, Treasury is levelising this cost. Finally, ECO is also levied currently on electricity bills.
Coupled with the fact that electricity commodity prices are more expensive gas commodity prices, this means that electricity is significantly more expensive than gas, and therefore, it is more expensive to source heating from electricity than gas currently.
This distribution should be reviewed. In the short-term, moving more policy costs onto gas as a proxy carbon signal to support heat electrification should be explored. However, in the medium to long-term, a more sustainable solution needs to be found to recovering such costs without distorting investment choices between different systems for heating (e.g. heat networks, electrification, hydrogen).
To meet our net zero targets, we will need a framework to support households and industry to make the right choices of how to decarbonise their heating. Thus, understanding consumer choice is a crucial element of understanding the impact of the energy transition on domestic consumers. The Energy Systems Catapult has been looking to understand the role of choice in heating and consumers perspectives in net zero, and this work must be explored further. At present, consumers receive a jumbled patchwork of policy signals from government about how to decarbonise their homes. They have limited opportunities to benefit from the energy system, and often lack the resources, understanding or agency to make use of the opportunities they do have. Support packages are confusing, and not tailored to consumer situations, and it is often actors that consumers do not trust who provide frontline advice about decarbonisation.
Zoning is designed to create a framework to help consumers make an informed choice that is right for them and their locality, as the consumer will receive policy support for deploying the technology or technologies most suited for their zone, and for suitable energy efficiency improvements to optimise deployment of that technology. Whilst consumers in existing buildings retain the ability to choose the combination of heating technology and energy efficiency measures that suit them the most, zoning is designed to address the jumbled policy signal and establish clear, locally specific decarbonisation pathways. Thus, though the consumer can choose to invest in any energy solutions, they will only receive policy support to deploy the zoned option.
Zoning will also create opportunities for oversight, as local planning authorities (and/or a regional or national resource) will play a role in monitoring zoning outcomes, and ensuring that consumers are getting a fair deal. Consideration should be given to how the Zoning Framework could embed existing and forthcoming protections and service standards to ensure that consumers receive good outcomes.
Overall, domestic consumers should be adequately incentivised to take up low carbon heating by (a) cost, (b) good consumer service, and (c) a simple way to achieve statutory decarbonisation targets, particularly at trigger points.
Moving from the distress situation
At the moment, domestic consumers make the choice to install a new heating system in a distress situation – their boiler has suddenly broken down, and they need a replacement, fast. The installation of low carbon heating systems often requires an element of forward planning, be that to upgrade the energy efficiency of a building, to make space for a heat pump, to increase the size of radiators to support a lower temperature system, or to time with installation of a heat network connection.
Currently, consumers often do not plan for their next heating system, but this will have to change. The introduction of green building passports as recommended by the Green Finance Taskforce28, exploring a package of retrofit measures and actions to be taken to improve the building, could also be one way to support domestic consumers.
Finally, industry tradespeople will tend to recommend technology that is familiar and well understood to consumers – and many are not currently trained to install low carbon systems. As such, domestic consumers continue to be recommended higher carbon solutions. There is a need for trained retrofit coordinators who can provide a whole house, low carbon solution and to ensure that tradespeople are able to recommend the right measure for the building, not just the one they are most familiar with.
The domestic sector has a clear disconnect between heat provision and carbon emissions. Therefore, heat is not deemed to be a priority by the domestic sector. For the minority in the sector that have an understanding of low carbon technologies and deem it be a priority, there is relatively little difference in the preference of technology. This is demonstrated by research conducted by the Energy Systems Catapult which looks at domestic attitudes to heat. While 75% of people believe climate change is a serious threat, participants were still unclear as to which activities in their lives emit carbon – with only 49% (31% of households) realising natural gas heating contributes to carbon emissions. Less than 20% of people would consider switching to low carbon heating and they realise making this change is both difficult and expensive. Just less than half of homeowners agree that moving to a renewable heating system will significantly reduce their personal impact on climate change. Participants were asked how much they agreed and disagreed that moving to one of the low carbon technologies will reduce their impact on climate change. Of those that agreed, 45% said heat pumps, 46% said heat network and 44% said hydrogen boilers. Those who selected that they would be very or fairly likely to implement a low carbon technology when they next replace their heating system, 19% would choose a heat pump, 19% selected a hydrogen boiler and 15% selected a heat network.
Research has shown that households often have a very complicated relationship with their heating systems. People would generally prefer to put up with poorly performing heating systems rather than have to suffer the disruption of installing a new one. This is compounded by the apparent lack of awareness of low carbon heating systems. The Committee on Climate Change (CCC) found that 57% of people had never heard of or knew very little about the need to switch away from natural gas for heating. 51% had never heard of hydrogen boilers. BEIS data shows that 68% of people had never heard of, or knew very little, about renewable heating systems, although a third of respondents claimed to be aware of heat pumps.
This suggests that consumers are not aware of the need to switch away from natural gas and the alternative low carbon heating options. Therefore, there is expected to be little awareness that they will have to experience some level of disruption to support the decarbonisation of the heating sector. Bringing consumers with us on our journey to net zero is imperative – and indeed engagement with consumers can unlock wider system benefits such as domestic DSR. Given the urgency of net zero, we recommend that BEIS regularly assess and monitor public awareness and acceptability of in-home disruption, alongside a nationwide retrofit of the UK’s domestic building stock.
To improve domestic awareness of what it will take to meet net zero there needs to be an initial undertaking from policy makers to understand how the transition will affect different tenures or households. For example, policymakers could use supplier obligations to identify and hold Priority Services Registers of those who are in vulnerable circumstances. However, some households may be harmed by new digital energy business models, such as homes without the internet, or by carbon taxes, such as homes without access to low carbon energy networks. In understanding how different people will be affected, the case for change can be clearly made with consumers being fully aware of what the transition will look like for them.
To improve domestic consumers awareness, a multifaceted engagement strategy is needed. The experiences of moving to low carbon heating and improving energy efficiency are expected to differ by tenure – and this is something that the government must consider as part of this engagement strategy. This will ensure that the views of all groups are captured and not overshadowed by the majority. For example, the views of those in social housing and or fuel poverty need to be captured and accurately reflect the barriers that need to be overcome in order to ensure that all are brought along with the decarbonisation of heat. Learnings should be taken from consumer acceptance in connecting those in social housing and/ or fuel poverty to the gas network and apply these to low carbon heating solutions in addition to understanding the nuances that are specific to each low carbon heating technology option. Engagement should also be targeted by region, focusing on the technology sources that are most appropriate for that locality. A broader level of public engagement is needed to facilitate the profound societal changes necessary in a transition to a low carbon society.
Scotland’s regional energy advice services which offer free home visits provide a gold standard the rest of the UK should follow. The transition to low carbon heat is expected to be delivered regionally. This means that energy advice services are best offering support through local centres that can give advice tailored and relevant to each area. Services should also use trained advisors to help the public navigate the complexities of installing new heating technologies in their homes. There is an important need for more retrofit coordinators who can provide impartial advice on low carbon heating solutions in addition to energy efficiency.
This would ensure customers are well informed about opportunities to engage in DSR and also suitably empowered to engage, through campaigns similar to Power Responsive.
While social landlords are generally well informed about the retrofit measures available, research conducted by RegenSW found that private owner-occupiers either are not aware of retrofit solutions and technologies or do not fully understand them. This is particularly true for renewable heat and intensive energy efficiency measures. It is said to be especially difficult to engage with low income and vulnerable households, particularly regarding intensive energy efficiency measures funded through ECO. The research found that private owner occupiers do not clearly understand that the subsidies they receive are due to policies such as ECO and Green Deal, as most advertising tends to refer only vaguely to how the cost of specific measures is reduced by government subsidies.
By 2022, BEIS should draft and commence a net zero engagement strategy, with explicit aims to: (1) make consumers aware of the net zero transition and the role that they have to play in it – including focusing on opportunities such as domestic DSR; (2) help consumers to understand that they will have to experience some level of in-home disruption; and (3) give consumers a clear route to engaging on the net zero transition – through their local authority. This strategy should consider the impact of net zero on different households by tenure. It should make consumers aware of the opportunities they can already access to decarbonise their homes and improve their energy efficiency.
In the mid-term, BEIS should look to develop a comprehensive engagement strategy that is facilitated at local authority level. Different areas of the UK will install different heating and energy efficiency solutions, due to the different opportunities and constraints they face. As a result, different areas of the UK will require tailored engagement strategies, as they will take action at different times, in different ways, and engage with different stakeholders.
What role does participation have to play in acceptability?
There is a clear need for governance structures and organisational formats that are participatory, inclusive and mindful of the lived experiences of local people. Citizens often remain locked out of the decision-making processes of the energy transition. In addition, the amount of effort it takes to participate will also affect the acceptability. Local oppositions to the deployment of renewable energy technologies have been significantly higher than expected in Europe. In numerous instances, these oppositions have been in reaction to the disempowerment of local rights and entitlements associated with specific developments.
Considerable research has shown that public involvement in decision making drives consumer acceptance. Consumer buy-in has been shown to be critical for how we bring consumers along with us in our journey to net zero, creating clear opportunities for involvement in decision-making, allowing them to receive a clear benefit from the energy system, plan for their future, and crucially, create distributive justice across the UK. Citizens Advice is already calling for more to be done to include consumers in decisions taken by energy networks.
How can we coordinate the transition to low carbon heat in buildings, and who is making decisions?
Heat and efficiency are inherently local. Local actors are best placed to understand local context, including existing resources and infrastructure, and demand. This is a principle repeatedly reflected in UK, Scottish and Welsh policy. For the UK to transition to a low carbon energy system, local areas will need to make best use of the low carbon resources in proximity to their boundaries, using a decentralised energy approach. To ensure a coherent national approach and enable appropriate local decision making, the ADE recommends a framework where policy is decided at a national level but directed at local level; a national framework should set out how local heat decarbonisation should be approached. It should also develop policy and regulatory tools to enable investment in low carbon heating and efficiency technologies in those places where they are needed.
Governance of the UK’s heat decarbonisation strategy will need to recognise that different areas of the UK will take different decarbonisation pathways, with different actions happening at different times, resulting in different outputs. It will need to bring together the patchwork of decision-making, to deliver a comprehensive net zero strategy.
The ADE sees that there are three key decision-makers as part of this framework, with industry playing a key role alongside decision-making at all three tiers:
The Government should establish clear roles and responsibilities for decision-makers, and set out a clear direction for how the strategy will interplay with devolved policies and devolved decision-makers, to support the UK as a whole to meet its net zero targets.
Local authorities will play a vital role in decision-making in net zero. At the moment, the question about the role of local authorities in reaching net zero remains unanswered, but increasingly we see discussions point to the vital role that they can and will necessarily have to play. Many local authorities have declared climate emergencies, recognising that their decisions affect local decarbonisation, and some are successfully making use of existing devolved powers. However, greater clarity about their role is needed to stimulate the investment needed to meet net zero.
In the short term, this clarity should include formal government recognition within policy for the important role that local authorities will play in net zero, and a commitment to supporting local decarbonisation pathways. This should be done alongside piloting of zoning techniques and the introduction of responsibilities for local authorities to assess opportunities and constraints in their areas.
Further to this, the Government should then introduce clear roles and responsibilities for local government in directing national government policy. This should include a statutory duty for local authorities to assess the heat decarbonisation and energy efficiency opportunities and constraints in their local area. The strategy should commit to reviewing this statutory duty, with a view to strengthen this duty in 2022-25 to require that local authorities designate heat zones where an appropriate solution has been identified. The Government should also commit to providing adequate resource to support local authorities to identify opportunities and constraints in the immediate-to-short-term, and to supporting zoning in the short-to-mid-term.
What role could a National Delivery Body have?
Further, the Government should commit to exploring the introduction of a National Delivery Body for heat decarbonisation, beginning with the immediate creation of a centre for expertise and knowledge sharing, responsible for collating information and evidence to support the decarbonisation of heat, creating a central repository for evidence to support long-term decision-making on low carbon heat. The Heat and Buildings Strategy should set out a role for a National Delivery Body in coordinating the heat transition.
The ADE sees that a National Delivery Body could have a key role to play in coordinating the transition. With different local areas taking different actions at different times, responsibility needs to sit somewhere for ensuring that this patchwork of actions supports a whole systems approach to net zero and delivers a least cost transition for consumers.
The National Delivery Body can play this coordination role, working as a conduit between local and national government. It could have responsibility for (by working with providers) data collection, knowledge sharing, developing skills programmes and training courses, standardisation, mapping and planning, tracking targets, and publishing a progress report.
The National Delivery Body could also have an explicit responsibility work cross-vectors – to bring together decision-making on transport, communications, national energy networks, and more.
 Zoning should be thought of as a policy framework which uses energy masterplanning, Local Area Energy Planning, and other locally based approaches to energy, to identify the most appropriate heat decarbonisation solution for a particular area, resulting in ‘zones’. For example, a zone could be a heat network zone, a heat pump zone, a biomass zone, and so forth. Particular zones would benefit from particular policies designed to support that technology to come forward – zoning is a way to target the implementation of government policy. A heat network zone, for example, would benefit from policies designed to support heat network uptake. More information about Zoning can be found in this ADE report.
Department for Business, Energy and Industrial Strategy, Clean Growth Strategy, 2017: https://www.gov.uk/government/publications/clean-growth-strategy
Committee on Climate Change, Progress Report to Parliament, 2018: https://www.theccc.org.uk/publication/reducing-uk-emissions-2018-progress-report-to-parliament/#outline
ENA, Electricity Networks Association backs the Committee on Climate Change’s Net Zero Report, 2019: http://www.energynetworks.org/news/press-releases/2019/may/energy-networks-association-backs-the-committee-on-climate-change’s-net-zero-report.html
UKERC, Written Evidence Submitted to POST Inquiry on Clean Growth, 2018: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/science-and-technology-committee/technologies-for-meeting-clean-growth-emissions-reduction-targets/written/92215.html
National Grid Gas, Future of Gas, 2019: https://futureofgas.uk/
Ofgem, Future Insights: The Decarbonisation of Heat, 2016: https://www.ofgem.gov.uk/system/files/docs/2016/11/ofgem_future_insights_programme_-_the_decarbonisation_of_heat.pdf
The Energyst, Ofgem Heat: Decarbonising heat the biggest energy challenge, 2019: https://theenergyst.com/ofgem-chief-decarbonising-heat-key-challenge/
BEIS, A Future Framework for Heat in Buildings, Government Response, 2018: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762546/Future_Framework_for_Heat_in_Buildings_Govt_Response__2_.pdf
 Please see: Heat Hierarchy
 Energy Systems Catapult (2020) Understanding Net Zero: A Consumer Perspective
 Energy Systems Catapult (2018) How can people get the heat they want, without the carbon?
 Committee on Climate Change (2018) Public acceptability of the use of hydrogen for heating and cooking at home
 Department for Business, Energy and Industrial Strategy (2019) Public Attitudes Tracker Wave 28
 Energy Policy (2019) Temporality, vulnerability, and energy justice in household low carbon innovations
 Chilvers J, Pallett H and Hargreaves T. (2018) “Ecologies of participation in socio-technical change: The case of energy system transitions.” Energy Research & Social Science 42: 199-210
 Policy Connect (2019) Uncomfortable Homes Truths: Why Britain Urgently Needs A Low Carbon Heat Strategy
 RegenSW (2014) Retrofit Supply Chain Study Summary
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 Citizens Advice (2018) Strengthening the voice of consumers in energy networks’ business planning
 BEIS, Energy Company Obligation: ECO3 2018-22 Flexible Eligibility Guidance, 2019 MHCLG, National Planning Policy Framework, 2019 MHCLG, National Local Growth Assurance Framework, 2019
 Scottish Government, Local Heat and Energy Efficiency Strategy Pilots, 2019
 Welsh Government, Fuel Poverty Strategy, 2010