Written evidence submitted by Cadent [PNZ 024]
I am writing to you alongside our submission for the HCLG Committee’s Inquiry into ‘Local Government and Net Zero’. Cadent welcomes the Government’s recent focus on the important role the home can play in achieving net-zero goals; this submission looks to summarise Cadent’s thoughts on how the Government should look to invest in and deliver decarbonisation of home heating.
Energy efficiency
One focus of decarbonising the home is energy efficiency, and Cadent is fully supportive of all measures to improve this. As new low-carbon energy sources continue to be developed, increasing energy efficiency should be encouraged and incentivised, not only to see almost immediate results in carbon emission reduction in individual homes, but also so that when new energy vectors are increasingly introduced in home heating, properties are equipped to use these in lower volumes with reduced wastage.
Improving energy efficiency requires consumer buy in, meaning incentives will likely be required. The Government should consider new schemes that would encourage and educate property owners and occupiers on the benefit of energy efficiency, whilst being mindful that any new scheme introduced will take both time to mobilise and also for the supply chain to respond. We would urge patience from Government to allow the market to respond enabling the positive impact to come into fruition.
It is important to note also that targeting and prioritisation of any energy efficiency incentive scheme should be considered in policy development. The Government should look to concentrate these schemes at those homes off the gas grid or in properties viable only for low temperature heating sources, such as heat pumps, to protect those who will require robust energy efficiency measures long term.
Whole systems approach and the role of hydrogen
If the UK is to reach its 2050 net-zero target, a mosaic of different solutions will be needed. It is important that Government policy supports a range of different solutions and doesn’t stymie innovation. Decisions to back any particular technology need to be taken carefully; enabling a diversity of supply by encouraging investment in several energy sources, keeping all credible options open and nurturing a whole systems approach. This will leave the UK in the best stead to transition to net zero effectively and efficiently.
Cadent welcomes recent announcements, including the Prime Minister’s ‘Ten Point Plan’ and the Energy White Paper, which have provided much needed clarity on Government support for hydrogen as a future fuel. We are clear that if the UK is to reach net-zero by 2050, then there is a critical role for hydrogen to play alongside alternatives. The updating of standards presents an opportunity for a further step change in policy and regulatory support along the whole hydrogen value chain, as well as with other low carbon energy sources, as well as electricity.
The role of local government
Cadent believes local authorities and regional bodies will be key in driving the reduction in carbon emissions and achieving net zero targets. The knowledge they possess of local stakeholders and the local economy, as well as their relationship and trust with the community will put them in the best position to develop and deliver tailored local area energy plans. Best practice would perhaps involve local bodies working with local industry and experts to build their knowledge and capability to drive a strategic programme, make decisions, and buying services that will provide the best low carbon solution for their area.
However, the Government will play a role in facilitating this. Local government must have financial support from central government and local plans should be built within a national framework aligned with UK-wide energy policy to ensure the lowest cost for UK plc.
Cadent strongly welcome the Government’s commitment to decarbonisation and the recognition of the role that the home plays in this. We are firm in our commitment to assist in achieving that goal and believe the recommendations outlined above will help the UK to achieve its net-zero goal by 2050.
I would be more than happy to discuss in detail any of these points or to provide any further information should this be of use.
Appendix: Inquiry Questions
New homes: The Future Homes Standard and Future Buildings Standards
Do the government’s proposals for improving the energy efficiency of new homes by 2025 go far enough?
Cadent welcomes the ambition and progress being made by Ministry of Housing, Communities and Local Government (MHCLG) to meet the recently established net zero emissions reduction target by improving the energy efficiency of homes, particularly through initiatives such as the updating of the Future Home Standard (FHS). We agree that updating building standards for energy efficiency to meet the standards of zero carbon buildings will be a key driver in decarbonising heat, so we fully support measures that facilitate this.
Well insulated buildings will be essential in achieving net zero targets, whilst keeping people safe and warm, even on the coldest days. This should be high on the committee’s priorities; working to identify and implement low carbon energy vectors is hugely important, but improving energy efficiency of homes alongside this means lower volumes of energy will be required and wastage is reduced in each household, decreasing overall cost for all parties. Whilst there is a wide variety of options readily available on the market now for improving energy efficiency in homes, much more work needs to be done to find solutions for homes that are attractive to householders and are low cost with minimal disruption. Increasing efficiency is a ‘quick win’ for reducing carbon emissions as measures can be implemented almost instantaneously for new builds, however this not the case for existing buildings.
The targeting and prioritisation of any energy efficiency incentive scheme, as well as its attractiveness to the consumer, should be considered in policy development. The Government should concentrate these schemes at those homes either off the gas grid or in properties viable only for low temperature heating sources, such as heat pumps, to ensure those who will require robust energy efficiency measures long term to ensure a safe and warm home are prioritised.
Is the government right to anticipate that heat pumps will become the primary heating technology for new homes?
We disagree with heat pumps becoming the primary heating technology. At Cadent we advocate a technology-led, agnostic approach that is futureproof to emerging policy decisions, such as the potential for converting the gas grid to deliver net zero hydrogen.
Importance of whole systems approach to decarbonising home heating
The importance of a whole systems-led, planned and coordinated approach to decarbonising home heating is paramount. In short, this means that both electric and alternative solutions such as low carbon gas should be considered, allowing future buildings to choose the right solution for their circumstances. Rather than a blanket policy we believe the Department of Business, Energy and Industrial Strategy (BEIS) should set out a range of appropriate options, recognising that further net zero compliant solutions may emerge over the next thirty years, and technology costs and consumer preferences are likely to change over that time.
Heat pumps and heat networks have benefits, but there is also a growing understanding and evidence that hydrogen and hybrid solutions will be required in some places to ensure that the future energy system has resilience. This is because the amount of electricity required to deliver peak heat demand in the UK would be significant, would place a critical burden on the electricity network, and be particularly challenging extremely cold days, and on calm winter days where wind output might be limited. The future of heat delivery will require a range of alternative solutions to ensure that this peak can be met reliably and affordably, and the capacity of the whole energy system is optimised.
Hydrogen has several benefits which make its contribution highly valuable in the energy system. It can be stored for use in the winter months and for power generation, its versatility of form (gas, liquid or solid) means it can be moved easily, be burned for energy or used within a fuel cell. Hydrogen can also be made via curtailed renewable power, which will become an increasing issue as higher levels of renewables connect. Without an economic energy storage system, such as hydrogen, the efficiency of renewables will be reduced. There is growing evidence that the availability at scale of hydrogen supports a more secure, lower cost more flexible overall energy system.
There is a further risk of favouring electrical solutions above others at this stage in policy. Moving heating loads on to the electricity grid has a significant impact on the networks, either taking up any existing spare capacity or triggering new reinforcement works, which will drive up cost and introduce delays to projects. With new build properties favouring electrical heating, any spare capacity will be taken up, which could well be sub-optimal ahead of a decision on how to decarbonise heat and the gas grid more generally. We therefore recommend keeping all options open and not encouraging one solution over another at this stage.
Careful consideration should be made of the most viable and suitable options for all types and locations of different properties. Decisions made now should complement future decarbonisation policy, rather than distort or constrain it. Supporting the installation of hydrogen ready appliances, and hybrid systems, ahead of a wider decision on heat policy would look to achieve this. To build on the above point on the importance of definitions, hydrogen appliances and hydrogen-ready appliances should be included, allowed and encouraged as a ‘low-carbon heating and hot water system’.
Importance of diversity for system resilience
There is also the factor of ‘diversity of supply’; having options for energy sources will be crucial as we move forward.
To meet future heat pump peak energy needs there will be seasonal redundancy in renewable power generating assets to generate the electricity required to meet the seasonal peak heat needs in the UK. For mass rollout of heat pumps, the industry would need to take consideration of how electricity will be supplied at this level, and hydrogen would act as a complementary energy source and storage medium to assist in this transition.
Spotlight on hydrogen as an energy vector
The national gas grid is currently working to go through its own decarbonisation journey in the same way that the electricity grid has and could be net zero in places well ahead of the electricity system.
The current gas infrastructure is already in place, ready to carry hydrogen to people’s homes. A conversion to hydrogen will make use of the existing gas grid and gas networks have been replacing pipes from cast iron to plastic over the past few years, making the network increasingly hydrogen ready. It is important to understand the issue is not with the appliance itself, but with the fuel, which today is natural gas. A boiler isn’t “bad”, it is a boiler burning a high carbon fuel that is the issue to be addressed.
There are currently plans outlined to blend hydrogen into the natural gas grid to enable immediate decarbonisation and there are pilots under way to demonstrate the safe conversion of the existing gas network to hydrogen. Indeed, the Climate Change Committee have called for the gas grid to be converted to hydrogen, alongside electrification, given the importance of hydrogen across the economy, including heavy transport and industry.
One of Government’s strategies as outlined in the recent Ten Point Plan for a Green Industrial Revolution is to enable blending of hydrogen into the gas grid by 2023. Blending hydrogen acts in the same way to decarbonise the gas grid as renewable electricity has done to start to green the electricity grid. The aim is to start enabling the decarbonisation of home heating by blending natural gas with hydrogen to provide a lower carbon gas solution, before enabling a future transition to 100% hydrogen. A government decision to support hydrogen blending across the existing gas networks would reduce carbon emissions equivalent to removing 2.5 million cars from UK roads. It would make a dramatic contribution to the delivery of the UK’s 2030 climate targets and the CCC’s Fifth Carbon Budget. Netherlands, Germany, France, Australia, South Korea and Japan are all planning hydrogen blending too. The UK is not unique, but an early decision now can help lead the world.
Thus, in line with the Ten Point Plan’s recommendations, the standard should ensure that new builds can gain benefit from gas network conversion with a hydrogen blend. This should be encouraged in order to increase the demand for hydrogen and provide certainty for hydrogen producers. By a similar sentiment, we would like to ensure that hydrogen fuelled appliances (running on blends of hydrogen and methane and 100%) and hydrogen-ready appliances are included in the National Calculation Method.
Allowing developers to install existing gas boilers and hydrogen-ready appliances will also enable access to this future low carbon fuel. Through the BEIS Hy4Heat programme, hydrogen-ready appliances have been developed; these boilers are versatile; they complement our blending ambition, burning methane with up to 20% hydrogen today and can be fully converted to hydrogen with ease when the nearby gas network is converted to 100% hydrogen.
Given the pace of innovation and development in this space, it would be sensible to enable a wider choice of technology solutions for future homes where they can demonstrate a movement towards low carbon energy. Mandating Hydrogen-ready appliances should be a consideration for all existing properties as well as ensuring that hydrogen appliances are an allowed technology on both new builds and via Standard Assessment Procedure assessments on dwellings. We ask that hydrogen-ready boilers and their advantages be outlined in the Future Building and Homes Standard.
Impact on property owners and the consumer
It is essential to consider the role consumers will have in facilitating net zero ambitions.
However, there are cost implications for individuals. Heat pumps are expected to have a life cycle much the same as a gas boiler, however at present the unit price is considerably higher for a heat pump than it is for a replacement gas boiler or what hydrogen boilers are expected to be. The Energy Saving Trust estimates that a typical air source heat pump installation will cost around £6000 – £8000, and a ground source heat pump installation can cost £10,000 – £18,000 depending on the amount of heat required. By comparison the cost of a hydrogen boiler can be factored into the normal cycle of gas boiler replacement. It’s unlikely that the pricing would be too dissimilar to natural gas boilers at c£1500. A hydrogen boiler is therefore likely to be the lowest cost option in terms of the installation cost for the householder, being on a par with the cost of a conventional methane boiler. Furthermore, as outlined in a previous subheading, for a significant number of heat pumps to be installed the electricity network would need to be substantially upgraded right through into homes and businesses, whilst the existing gas network is already in place (Cadent’s network is >70% hydrogen ready). The cost and disruption of the upgrade to the electricity network would likely be shifted onto customers.
Looking additionally at the social impact, using a hydrogen boiler requires no behavioural change, as they work in much the same way as natural gas boilers do today. As the least disruptive solution to decarbonise home heating, we believe some householders will see the switch to a hydrogen-ready boiler as the most attractive and preferred option.
This view is reflected in the research undertaken by Savanta for Cadent in 2020. This found that customers want as close to a like-for-like switch as possible. Customers are very opposed to significant disruption which they cannot control, especially if it will last longer than a couple of days and the solution will occupy more space than their current set-up. Less affluent people and those with smaller properties are particularly opposed to disruption.
Cadent’s Savanta research also found that consumers most value reliability, control and low costs from a heating solution. People expect a warm and comfortable home that they can control. The lack of knowledge and awareness of low carbon alternatives results in an established habit to replace like-for-like. Customers’ desire for ‘like-for-like’ makes hydrogen ready boilers a clear preferred solution.
Will the proposals address the performance gap between design intent and build quality of new homes?
When developing these proposals, it is important to consider possible regional variations that could occur. The Government has the opportunity here to make progress in its ‘levelling-up’ agenda, focussing proposals and consequent investment so that the effects of innovation, skills uptake and education can be felt across the country. Any focus on local variations of the standard could hinder this progress so this needs to be carefully considered.
Existing homes - The Committee also seeks evidence on plans for improving the energy efficiency of the existing housing stock, including:
The role of local authorities in improving the energy efficiency of non-council building stock, including through take-up of the Local Authority Delivery scheme and the setting and enforcing of energy efficiency standards.
Cadent considers local bodies needing to play an important role in improving and enforcing energy efficiency standards.
Although local authorities currently hold the remit for Local Area Energy Planning (LAEP), we don’t feel this is a fait accompli. There should be consideration by the committee of whether a new type of regional body with expertise of the energy sector could be founded to cover multiple local authorities, allowing a more efficient and speedy spread of knowledge and capability across the local landscape. This could essentially act as the middle layer between central and local government to ensure local policies are tailored for a local community whilst fitting in with the Government’s overall UK-wide energy policy asks.
Similarly, to how outlined above, local authorities need to carefully consider where they will first take steps to implement energy efficiency improvement measures. Local authorities should look to firstly aim these schemes at those homes either off the gas grid or in properties viable only for low temperature heating sources, such as heat pumps, to ensure those who will require robust energy efficiency measures long term to ensure a safe and warm home are prioritised early on.
The role of local authorities in encouraging and enabling private owners to reduce or eliminate their carbon emissions, including through the development of loan schemes similar to the green deal and the delivery of existing grants, such as the Disabled Facilities Grant and Housing Renewal Assistance.
We feel we have covered the key points of this questions in our answer to the previous question.
The role of MHCLG in making the existing housing stock more energy efficient, including through its review of the Decent Homes Standard.
Cadent believes the Decent Homes Standard should be amended to include a clause on a minimum level of energy efficiency requirements, and guidance on which properties should be prioritised and targeting first for efficiency improvements.
Local government’s path to net zero
The Committee also seeks submissions on how else local government help the UK achieve “net zero” emissions by 2050, particularly in relation to improved and decarbonised public transport, waste management and decarbonising the electricity grid.
Cadent believes local government will be a key player in reducing carbon emissions and achieving net zero targets.
We have begun to see local government’s leadership role in this topic begin to be acquired. As of February, 74% of local authorities in the UK (300/404) had declared climate emergencies, with a spectrum of net zero targets announced. Additionally, from our engagement, we have seen a step up in local area energy planning, as well as, an increase in interest from local authorities in the role the gas network could play in achieving their ambitions, including in transport. Local Area Energy Planning is however ad-hoc, and Cadent is working with the other energy networks to identify a UK wide framework to enable consistent and robust LAEPs, that can also be used collectively to build a national picture.
Advantages of local government led approach
Local government bodies are already presenting themselves at the forefront of this movement, and there are clear advantages to them doing so which bolsters the opinion this leadership role should continue.
Local authorities possess detailed awareness of local challenges and opportunities that can be used to tailor emission-reduction planning to promote the needs of the local communities they serve. They also hold the relationships with local stakeholders representing businesses and the community, so can ensure they can coordinate a whole systems approach which is best suited, and at the lowest cost to, the local area.
Best practice would perhaps involve local bodies working with local industry and experts to build their knowledge and capability to drive a strategic programme, make decisions, and buy services from service providers that will provide the best low carbon solution for their area or region.
Assistance will be required to steer local authorities in the right direction
It is essential local government receive appropriate assistance from central government to allow them to fulfil net zero ambitions to the best of their abilities.
Local area energy planning is essential, but regional plans cannot be developed in isolation from UK-wide energy policy. Given the debate is still in full swing about how best to achieve net zero goals, local authorities need to have the knowledge of the variety of options being studied and implemented to allow them to act as informed clients to local stakeholders. Without aligning to national policy, which is yet to be fully defined, local authorities cannot fully strategically plan for the decarbonisation of their area based on their individual challenges, whilst also encouraging economic growth and addressing fuel poverty.
Funding is also a key determinant in the success of net zero ambitions and local authorities need to have access to Treasury-backed support mechanisms to achieve their ambitious goals.
Given these points, Cadent believes there needs to be a well-defined national framework within which local authorities can develop and deliver their regional plans. This will mean local government can ensure the most viable mix of low carbons solutions for the types of properties and geography of their area, whilst having confidence in Government-backed investment via UK-wide energy policy instruments.
As indicated previously, there should also be consideration by the committee of whether a new type of regional body with expertise of the energy sector could be founded to cover multiple local authorities, allowing a more efficient and speedy spread of knowledge and capability across the local landscape. This could essentially act as the middle layer between central and local government to ensure local policies are tailored for a local community whilst fitting in with the Government’s overall UK-wide energy policy asks.
Spotlight on a current example: HyNet North West
The current HyNet North West project represents an example of how local authorities, energy experts and businesses and the local community can come together to effectively implement a regionally tailored project to reduce carbon emissions.
HyNet North West is a hydrogen energy and carbon capture, usage and storage (CCUS) project. The goal of HyNet is to reduce carbon emissions from industry, homes and transport and support economic growth in the North West of England. It is a low-cost and deliverable project which would save over one million tonnes of carbon dioxide emissions every year, the equivalent of taking more than 600,000 cars off the road.
This project is essential for UK Government to deliver national net zero objectives, as well as the local net zero targets of Cheshire West & Chester in 2045, Liverpool City Region in 2040 and Greater Manchester in 2030.
HyNet is being delivered by a consortium of regionally located industry partners and has garnered the close support and involvement of all three local authorities, all of which have engaged closely with Cadent. There is significant support from central government, who recently announced £33m in funding, building a confident and credible way forward.
HyNet is one of the first projects of this kind that has successfully seen stakeholders working closely on a local level to achieve shared goals on carbon emissions, with the support of central government. We believe this project embodies the principles outlined in answer to this question, providing a blueprint for other local authorities to follow which will allow similar net-zero based projects to thrive.
April 2021