Written evidence submitted by Cenergist (DHH0140)
Cenergist is a leading partner to government in driving water and energy efficiency, helping households across the UK to save money and become more sustainable. We work closely with major energy and water utility providers to deliver their regulated energy efficiency and water saving programmes.
On average we upgrade 9,000 homes each year through the installation and renewal of District Heating Systems (DHS), ground source heat pumps (GSHP) and water system upgrades. In total our work to date will deliver savings of nearly one million tonnes of CO2 over their lifetime and reduce the average utility bill by over £200 per household.
RHI has been the main policy driving low carbon heat and has been successful in this regard. However, the main technology it has promoted has been biomass, a technology government is looking to move away from in favour of other technologies such as heat pumps.
It is unfortunate – and poorly timed – that non-domestic RHI is set to end just as government is looking to ramp up heat pump deployment, particularly in the shared ground loop sector. Its likely replacement, the Clean Heat Grant, would provide a comparatively reduced level of support over only a two-year term. A long-term commitment which provides certainty, clarity and adequate financial incentive for businesses, will be critical to successfully driving the adoption of low carbon technology.
HNIP is an example of a current policy which has had some success in the promotion of low carbon district heat. However, clients with first-hand experience of this agree that it is far too onerous and costly to procure. Incentives should be made more accessible, more quickly, if low carbon technology deployment is to be achieved at pace and scale.
As it stands, compared to a gas district system, a net zero technology does not stack up without some level of blended funding. The table below demonstrates the effect of blending GHG with ECO once RHI has ended:
Example: North England 92-Flat Block of Flats
Current heating source is electric storage heating. High incidence of fuel poverty.
Cost of individual gas fired central heating systems is £0.74m
Net Cost of GSHP
WITHOUT GHG LAD
WITH GHG LAD
Cost of GSHP System
Less ECO support
Less Non-dom RHI (NPV)
Less GHG LAD
Net cost of GSHP
16% cheaper than Gas CH
95% more expensive than Gas CH
32% more expensive than Gas CH
Table 1: The financial case for shared ground loop DHS
Government and industry should be technology-agnostic in their approach. Each project will have a solution depending on its specific requirements. In general, however, net zero technologies such as heat pumps (including district ground source shared ground loops) have exciting applications for social housing blocks if capital expenditure can be balanced with grant funding.
CHP also has a significant role to play and government should consider adequately promoting this within both residential and industrial sectors.
Government is quite rightly moving away from natural gas for heat production. However, there is a risk that putting a blanket ban on gas, particularly district heating, will cause outliers to be left in a vulnerable position.
Through our work we see a substantial number of blocks, particularly in urban settings, that cannot support a net zero measure either due to lack of space, or the characteristics of the block. Those on existing legacy poor performing DHS are subject to high bills and low comfort levels, and RSLs have no budget to remedy this. It is worth considering targeted financial support via policy new/replacement gas DHS for blocks where a net zero measure cannot be made feasible. This way other intertwined issues such as fuel poverty will not be exacerbated.
Many low carbon heat technologies require commoditisation, which will only occur with mass deployment.
Government successfully achieved a near grid parity position with solar PV via the Feed in Tariff mechanism. With the ending of non-domestic RHI, technologies such as large scale and shared ground loop heat pumps currently have no level of dedicated support and therefore no policy driver. Overall, the current financial and policy-based support framework lacks strategic direction and is too time-limited in its scope. This makes it difficult for industry and investors to plan and develop projects.
Households, local authorities and industry alike are driven by four factors: cost, complexity, service/consumer protection, and whether or not the works are needed.
For larger scale RSL-led projects, financial incentives need to be introduced to the decarbonisation of homes, particularly on existing legacy district systems as the works do need doing but RSLs typically do not have the budget to replace. Cost is therefore the key barrier.
Government is ultimately responsible for governance and should provide policy clarity on the route to net zero, and the funding behind that. Delivery should be undertaken at the local level as each area will have different economic and built environment characteristics that will dictate how and what low carbon measures should be deployed.
It could be argued that local authorities are best placed to coordinate and deliver on the future of low carbon heating. In the vast majorities of cases, however, local authorities simply do not have the budget, capacity, skills or institutional knowledge to drive delivery.
The outcome of this is allocated funds not being spent, as seen by the recent low uptake of the local authority element of the Green Homes Grant, with just £76m of an available £200m accessed to date. As such RSL should be allowed to rely on specialist private sector companies to be formally appointed to drive such delivery, following a suitable procurement process.