Written evidence submitted by Vaillant Group UK (DHH0142)

Decarbonising Home Heating in the UK.

T he Vaillant Group – Who We Are

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.

Vaillant Group UK is working to deliver both hydrogen ready boilers and heat pump system solutions to support the decarbonisation of heat in homes and meet the UK’s net-zero targets. Our UK HQ and manufacturing facility is in Belper, Derbyshire. We have over 20,000 Installer customers in the UK, 7 regional training centres or ‘Centres of Excellence’ for training our Installers and are committed to delivering low-carbon heating.

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 are 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;

• Climate-neutral this year thanks to afforestation projects
• Company’s own CO2 emissions to be halved by 2030
•       The Vaillant Group is thus supporting the aims of the United Nations and the EU on climate protection and sustainable development

Further information can be found on this link;

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E xecutive Summary

The Decarbonisation of Heat in Homes in the UK is fundamental to achieving the Government’s target of net Zero by 2050. The majority of the housing stock is ageing – but around 80% will still be in use in 2050. Low carbon heating system solutions are currently available and more are being developed over the next few years, but there will be no ‘silver bullet’ and there will need to be a multi-technology approach to help get us to net zero. Vaillant believe that there are 4 ‘pillars’- 4 action areas that fundamentally need to be addressed to facilitate change and achieve net zero in UK homes by 2050:

1-      Building stock fabric improvements

2-      Heating system improvements (including a move to lower temperature systems) 3- Installer upskilling and development

4- Consumer education

There are opportunities to move forward with the technology, such as heat pumps, which are available today whilst preparing for the hydrogen boiler option of tomorrow. Relatively straightforward improvements to the fabric of the building, which indeed may have already been done, can ensure the heat loss of homes are reduced enough to enable heat pumps to be specified.

Where the installations are more challenging, whether through fabric improvement costs or the cost of heating system upgrades, then the option could be to make an incremental step change, which can prepare the property and heating system for a second step to achieve zero carbon in future, i.e:

1-      Fit a high efficiency gas boiler and improve the building fabric and/or system in order to operate at lower mean water temperatures (6%-8% efficiency and carbon improvement),

2-      Fit a heat pump together with the incumbent boiler (80% of annual heat load could be covered by the heat pump),

3-      Fit a high efficiency gas boiler (‘hydrogen ready’ when available) and consequently move to a hydrogen boiler in future.

Vaillant Group will support all new domestic boiler ranges launched onto the UK market from 2025 being hydrogen ready, providing Government confirm and commit to a hydrogen rollout plan. As a second step on the journey only hydrogen ready appliances should be allowed to be installed from 2030 – when the planning, infrastructure, standards and training have all been completed.

Heat pumps are available and can start to decarbonise heating systems today. Heat pumps should be targeted at those properties that are more easily retrofitted in a cost-effective manner, with appropriate incentive support. This should include hybrid heat pumps as these systems can provide 80% coverage of yearly heat demand from just the heat pump, with associated carbon benefits from grid electricity going forward.

Low temperature heating systems should be incentivised, with consideration given to supporting the replacement of radiators and domestic hot water cylinders. Eventually low temperature systems could be mandated in retrofit, as well as in newbuild, to ensure that system efficiencies are improved and prepared for the future and benefits gained immediately whether gas boilers or heat pumps are chosen as the technology of today.

To effect all of the above would also need a concerted drive to upskill installers and also educate consumers to ensure that systems of the future are assessed, designed, installed, commissioned and used as effectively and efficiently as possible whilst delivering the ultimate in customer comfort and satisfaction.

D ecarbonisation Overview

Vaillant Group believe that a range of technologies will be necessary to deliver decarbonisation of heat in homes given the varied housing stock in the UK. However, it is also clear that two technologies are emerging as the most viable solutions for the vast majority of homes – decarbonised gas and electric heat pumps.

On the gas grid, homes can be decarbonised progressively through the use of biomethane, hydrogen blends up to 20% and, in future, potentially 100% hydrogen – which offers a viable zero carbon alternative to natural gas heating for the 85% of properties on the gas grid. By switching the gas in the grid, heating systems can be decarbonised with minimal disruption to consumers and with appliances which, although new, will be familiar to them. Alternatively, homes on the gas grid can be decarbonised by using heat pumps, which can be more challenging to install correctly, but in many cases are still feasible to fit into a wide range of UK homes.

Heating systems off the gas grid may be more suited to a heat pump and could benefit from the large carbon savings and low running costs which they offer. With ground source, air source and water source heat pumps all viable options, together with hybrids (heat pump / bio-LPG boiler combinations), the majority of existing UK homes off-grid will be suitable for a heat pump.

For new build homes, greater efficiencies, both from a cost and carbon perspective, can be gained from heat pumps being installed from day one and this is the direction of travel with the Future Homes Standard.

M arket Metrics

Decarbonisation of heat in homes as we move towards 2050 has to cover the following market segments:

1-      Newbuild homes (150,000 units p.a.)

2-      Retrofit existing homes (1.55 million units p.a.)

a.       Homes on the gas grid (1.4 million units p.a.)

b.      Homes off the gas grid (100,000 units p.a. (50k oil, 25k electric, 25k LPG))

Figure 1 shows the current installed base of systems in existing homes – which is the biggest challenge for decarbonisation. The Future Homes Standard is expected to drive heat pump installations into the circa 200,000+ newbuild homes each year from 2025, as the systems can be accurately specified and integrated into the design of the home.

F igure 1: Installed base of system/fuel types in U.K. homes (2019)

H ydrogen

Hydrogen should be a key component in the decarbonisation of heat in existing homes as it helps to answer and address the issues that can be found when retrofitting homes for low carbon heat, and the challenges inherent in a very seasonal demand requirement. It also overcomes the potential consumer related issues of how home heating systems are used.

Currently we have no roadmap of what a hydrogen roll out into the gas grid could look like, nor do we yet have a commitment from Government that this rollout will happen. In the Government’s recently issued 10-point plan, and subsequently the Energy White Paper, there was an ambition highlighted to establish how hydrogen could help deliver a zero carbon future, through the development of a hydrogen neighbourhood, hydrogen village and hydrogen town by the end of this decade. Consequently, the current policy landscape is shown in Figure 2.

F igure 2: Current planning for hydrogen trials in the UK

The key consideration in the rollout of hydrogen for heating is the clarity of when and where hydrogen will be available to the home. There is currently much debate and discussion on making gas boilers ‘hydrogen ready’ – potentially in 2025. However, if there is no commitment to a timeline, and the first town is only converted to hydrogen in 2030, and there are an additional  4000+ towns in the UK, then this means that any ‘Hydrogen ready’ boilers installed in the late 2020’s may never see hydrogen in their lifetime. The increased cost burden for the hydrogen ready appliance, estimated as circa £100, will lie with the homeowner and they will never see the benefit of this investment realised. Of course, there is also the consideration of the hydrogen conversion kit required to convert the appliance at a later date and the gas system components required -meters, governors, etc, that also need to be paid for along with the mechanism for their installation. BEIS have recently said that H2 boilers will only be used in trials until the mid-2020s, consequently, we call on BEIS to set the expectation for the H2 stepping stones from now until 2025 and beyond, aligning with the Future Homes Strategy and the delivery of hydrogen to individual homes.

I ndustry Readiness

The Hy4Heat programme has clearly demonstrated the potential for hydrogen to be one component of the zero-carbon future for residential heating, however the programme is not yet complete and the scale up to wider field trials is still to be done. Whilst the larger boiler manufacturers in the UK have engaged with Hy4Heat and HyDeploy programmes, smaller manufacturers have not and are possibly several months, if not years, behind on hydrogen developments. With consideration to all the above, Vaillant Group believes that a two-stage approach is needed, synching together with the grid rollout plan for hydrogen. Consequently, we call on Government to mandate that all new products launched to market after April 2025 be hydrogen ready. This first stage makes sense from 2025 as the Hy4Heat programme should be complete by this time and first community trials started, giving some reassurance as to the viability of the hydrogen grid. Products available at this time could, therefore, be targeted at those areas where hydrogen is to be utilised first.

There are currently no product or installation standards in place to approve hydrogen boilers to. Products going into demonstration trials are usually approved for maximum period of 2 years and should be replaced by fully approved ‘production’ models after this time. Standards and certification processes need to be put into place to enable true development of the hydrogen boiler market and ensure availability of products on the market at scale.

Indeed, if the first hydrogen town is not planned until 2030 this means that the ramp up of hydrogen across the UK gas grid will not start happening until at least this point in time, assuming all goes well in the implementation and sign off of this project. Additionally, if the rollout is subsequently done in a progressive,  phased way across the UK from 2030, targeting those areas that are easiest to convert to hydrogen due to their proximity to hydrogen generation or distribution grid capability, a full mandate for hydrogen ready appliances makes sense from 2030.

Consideration should also be given to the fact that manufacturers in the UK are almost all part of larger European Groups. Although the UK is more advanced and has more to gain from a hydrogen gas network -due to its larger coverage of gas connections to UK homes - alignment with EU developments would make sense. The European Heating Industries (EHI) position is also referenced in Figure 3.

Figure 3: Vaillant Group UK position compared to current EHI position.

V aillant Group UK Position:

If the government confirms its long term hydrogen strategy to repurpose the existing gas mains and make hydrogen a key pillar in the route to zero carbon heating in the retrofit market, then Vaillant Group confirm their support that all new domestic boiler ranges launched onto the UK market from 2025 will be hydrogen ready. This could be supported by appropriate labelling of the appliance to show ‘Hydrogen Ready’, when the approval methodology is concluded and integrated into existing certification processes.

This should be the first step on the journey to a full mandate for only hydrogen ready appliances to be allowed on the market from 2030 – when it is anticipated that the government will have proven that a hydrogen town can be achieved in the UK – starting a wider rollout of hydrogen in the gas grid from this point.

Between 2025-2030 the legislation should be drafted and implemented such that only Hydrogen Ready appliances – up to 400kW - are allowed to be placed on the U.K. market from 2030. During this period there would also be the time to develop and prove the hydrogen grid infrastructure, develop hydrogen generation capacity, implement standards and certification for hydrogen appliances and train engineers on the technology. This is shown in Figure 4.

Additionally, with further development of the HHIC Digital Benchmark scheme installation of H2 Ready appliances can be recorded and located in future for subsequent conversion when hydrogen becomes available. This digital record of the appliance installations, if expanded to cover further system and home improvement activity, could potentially inform the EPC of the future and create a ‘home passport’.

F igure 4: Vaillant Group UK position, aligning with development of hydrogen infrastructure, s tandards, certification and training of gas engineers.

S easonal Demand

For many years the gas network has been used to get natural gas to homes throughout the year for heating, hot water and cooking. Figure 5 shows the typical seasonal demand for both electricity and gas across a number of years. It highlights the challenge in the peak heating period where the energy demand is roughly four times the average demand for the rest of the year. Historically, this has been met via storage of gas for use at these peak times.

A move to pure electrification of heat will pose significant challenges for the electricity grid to cope with seasonal demand. With little means of storage, and the variability of wind and solar energy generation, challenges are presented for green electricity generation. Hydrogen, as a ‘replacement gas’, can be stored overcoming the challenge of variability in electricity demand and generation throughout the year. This can of course be achieved by direct usage of hydrogen in heating or re-use of hydrogen to generate electricity.

F igure 5: Seasonality of Gas and Electricity Demands in UK

R etrofit of Homes

It is clear from the Energy White Paper and the Climate Change Committee’s 6th Carbon Budget that heat pumps are expected to be a large part of the solution to retrofit heating systems in the UK as a low carbon solution. The target from the Energy White Paper is to drive the Heat Pump market such that 600,000 heat pumps are installed p.a. by 2028. If newbuild is transformed progressively such that in 2025 all new homes are fitted with heat pumps, and provided the build rate of new homes is increased, in line with government ambition, then perhaps 250,000 new homes will have heat pumps installed in 2028. The remaining 350,000 heat pumps will come from the retrofit market where the challenge is multi-faceted. To achieve cost-effective growth in this sector we need:

1-      Effective targeting of those properties that are most suitable for a heat pump retrofit

2-      Government support to provide grants for insulation and system upgrades where needed and cost effective.

3-      Implementation of processes and training/upskilling for installers to ensure appropriate evaluation, design and installation of heat pump systems to deliver a correctly performing system

4-      Improved communication to homeowners to ensure the operational differences of heat pumps are understood and accepted

5-      Process needs to be put in place such that if a heat pump is not installed then the incumbent system is made as efficient as possible and future proofed to allow for the future installation of a heat pump, or indeed a hydrogen boiler.

In addition to the above any levies and taxes should be applied proportionately across fossil fuels, low carbon fuels and electricity, taking into account the efficiency of different technologies whilst maintaining an awareness impacts of potential fuel poverty.

E ffective targeting of those properties that are most suitable for a heat pump retrofit

UK homes have a myriad of ages and build types, and are also installed with many different heating systems – all of which can pose challenges for the installation of electric technologies, of which heat pumps are the most preferable due to their high efficiency performance levels. The different housing types are shown in Figure 6 (see also Ref #1).