MCS SBE0076

Written evidence submitted by MCS Charitable Foundation and MCS (MCS Service Company Ltd)

MCS Charitable Foundation

Our vision is a world where everyone has access to affordable and reliable renewable energy and zero carbon technologies – for the benefit of our environment, our communities and the general public. As a Foundation we work to increase public confidence, awareness and access to renewable energy and zero carbon solutions across the UK. We support education and engagement programmes, fund research and facilitate innovative solutions to drive widespread adoption.

In addition, the Foundation oversees the Microgeneration Certification Scheme (MCS) which defines, maintains and improves quality standards for renewable energy at buildings scale.

MCS (MCS Service Company Ltd)

Since 2008, MCS has been the only recognised Standard for UK products and their installation in the small-scale renewables sector. It is a mark of quality. We create and maintain standards that allows for the certification of low-carbon products and installers used to produce electricity and heat from renewable sources. We are impartial: technology neutral, manufacturer neutral, and supportive of Installers committed to quality installations and consumer protection. Membership of MCS demonstrates adherence to recognised industry standards, highlighting quality, competency and compliance. Our mission is to give people confidence in low-carbon energy technology by defining, maintaining and improving quality.

MCS response to the consultation

The Committee of Climate Change (CCC) in their report [1] made a number of recommendations on the way new homes should be built and how existing homes need retrofitting, as well as the compliance and standards [2] that need to be applied to all steps of the process and also enforced. The CCC Report recommended that greater levels of inspection and stricter enforcement of building standards are required, alongside stiffer penalties for non-compliance. We all know how important the thermally efficiency of a home is and that changes to new build homes and refurbishment will only happen by the introduction on new stricter Building Regulations as soon as possible and by December 2023 at the latest. The current plans to introduce the Future Homes Standard by 2025 is ‘kicking-the-ball down the road’ and needs to be introduced at the early possible opportunity to prevent more new homes being built to lower standards that will still require some form of retrofitting.

When considering regulations and standards the Approved L - Conservation of

fuel and power Volume 1: dwellings has MCS standards for Heat Pumps, but also needs these for all other domestic renewables to be included in the new Standards to provide consumer confidence in domestic renewables under a certification scheme, which will also help with proposed enforcement measures.

The Climate Change Committee was looking at how UK homes could reduce emissions have strongly recommended the wide deployment of heat pumps and the application of better insulated homes. We have already seen that new homes need better standards to provide consumer confidence in domestic renewables it is vital that universal standards to installation are applied and this should be MCS or higher standards. It is also not enough to install one type of renewable e.g., a heat pump. A smart home design should be applied looking at Solar PV and Solar thermal applications to help reduce the demand of that home on an already overstretched grid, as well as installing the highest levels of insulation to improve EPC ratings. Having smart homes means that less energy is being used and any surplus can be exported to the grid.

There also needs to be thought given to the design process for homes to maximise solar potential, so the orientation of roofs and homes should be built into any design or planning permission proposal going forward as well as technologies being used and deployed in the building regulations. All new homes need to look at how best to capture that solar potential in for heat and energy, maximise energy efficiency and be designed so they do not overheat and are comfortable homes for those who live in them.

These design choices have been known about for a long time. Our Campaigns Ambassador Charlie Luxton has provided expert design advice through his Architectural practice and via his many TV programmes like ‘Building the dream’ to create thermally efficient buildings which require very little heating. Building in heat recovery mechanisms and other technologies to create smart homes with low energy demands. It is principals like these that need to be built into the new Future Homes Standards Building Regulations, which should be implemented before December 2023.

Across the UK there are approximately 29 million dwellings and at least 20 million of these will need some level of retrofitting to reach EPC ‘C’ standards. A significant number will also need more major retrofitting and energy efficiency measures being applied to them, some will be social housing, and other homes will be owned by others on low income or in or near to fuel poverty who will not be able to pay or borrow money for expensive retrofitting measures.

Others may be in conservation areas or have some level of protection, which can limit the measures or options for decarbonising these buildings. Within the Committee on Climate Changes report they go on to say that retrofitting the UK’s homes is a major priority in reaching Net Zero targets and as such needs substantial support from HM Treasury. The Treasury have so far failed to provide the sums of money required for mass retrofitting and decarbonisation of domestic homes. In fact, have seen plans to end the Domestic Renewable Heat Incentive with no replacement scheme, the sudden ending of the Green Homes Grant [3] which has created some damage to the domestic renewables sector and due to short term policies did not deliver the long-term job gains and now leaves a massive gap with no incentives schemes to support the renewables industry.

HM Treasury has a vital role to play in deliver the Green Industrial Revolution and without massive investment in decarbonising our homes it will fail to achieve the Net Zero targets being set by the Government. The Chancellor needs to support the political targets and pledges being made by this Government with the huge investment needed to transform every home in the country, as nearly 30% of all CO2 emissions comes from our homes and how we heat them. Currently investment is being targeted in white elephant carbon intensive schemes like ‘Blue Hydrogen’, which is unlikely to play any significant role in decarbonising our homes [4], due to the expensive processes need to manufacture this energy source, the cost to consumers and the vastly expensive infrastructure needed to support this industry with Carbon Capture and Storage, new pipelines, storage etc. Green hydrogen should be the focus for the future [5] and this should only be used strategically to tackle the hard to decarbonise sectors like heavy industry, transport, shipping and aviation as a tactical priority.

Homes should use zero-carbon sources of heating such as heat pumps and heat networks, which are off the shelf solutions. The uptake of energy efficiency measures such as loft and wall insulation along with solar PV and solar thermal mean that the Government has the opportunity to create the smart homes of the future with insulation standards that can reduce household bills for heating and lighting massively. This is why the new Heat in Buildings Strategy needs to reflect the standards in Approved Document L - Conservation of fuel and power Volume 1: dwellings [6], to make sure all domestic renewables are installed to MCS standards or higher.

The Government targets for new homes is around 300,000 new homes a year and more than 1.5 million new homes could be built across the UK with gas heating options and lower levels on insulation unless plans for new higher standards under the Future Homes Standard are introduced before the end of 2023. MCS strongly supports the findings of the Committee on Climate Change that no new homes should be connected to the gas grid by 2025 and would go further and say that no new homes built from 2022 should be connected to the gas grid, to future proof as many homes as possible and prevent costly retrofitting or replacement of heating systems.

All new homes should be heated through zero carbon sources, have ultra-high levels of energy efficiency alongside appropriate ventilation and, where possible, be timber framed. A statutory requirement for reducing overheating risks in new builds is also needed, alongside more ambitious water efficiency standards.

MCS would strongly recommend urgent and substantial funding from the Treasury to support a range of Green funding options including new green mortgages, underwriting new green PACE (Property Assessed Clean Energy financing) loans secured against the property and not the person, which then allows loans to improve homes and install heat pumps (we are suggesting at 0% interest rates) and repaid through an energy tariff equal to the current combined energy bill for a fixed period of years. This must be underwritten by the Government in the same way Student loans. Currently we are all used to buying a house with energy bills and having an energy tariff equivalent to the energy bills would be familiar to all householders. There also need to be other fiscal incentives to help finance upfront costs, like the removal of VAT from all energy efficiency measures and domestic renewables for a period of 10 years. Positive tax incentives work very well, but the Treasury is setting test so high that they are in danger of under mining the Green Industrial revolution and the urgent need to tackle the Climate Crisis. The costs of delaying to the economy would be disastrous and with the UK hosting COP26 would send the wrong message globally. After the Queens Speech it was telling that no major changes to finance and tax incentives is being legislated for and would urge the Committee to call the Chancellor to give evidence on how he intend to fund the green industrial revolution for the next 10 years and what plans he has made in the Comprehensive Spending Review covering the next three years.

Failure to act now on the most urgent crisis our planet has faced will impact all life on Earth.

As well as financial measure it is vital that consumers also have the right information and advice services which are independent and up to date. England and Wales have poor information provision compared to Scotland and householders are not able to find the right advice, services or grants to support their journey in decarbonising their homes.

The Government needs to incentivise more repair, maintenance and retrofit of existing buildings. This has been hampered by deploying single short-term incentives or grant schemes that create artificial cliff-edges for the renewables and retrofitting industry. The simple solution is to provide a range of options and solutions to meet people’s needs where they are now from loan, grants, tax incentives. We would suggest the following practical steps to help with deployment and consumer adoption over the next 10 years I have suggest 10 actions that would support Net Zero targets:

Cutting VAT to 0% for a period of 10 years for all energy efficiency measures, domestic renewables and renovation work on homes. This is a vital step in removing up to 20% of the cost for consumers and helping to simplify the VAT systems at present on these measures, so Zero Carbon = Zero VAT.
Bring forward the date for Future Homes Standard regulation from 2025 to December 2023. This will reduce the number of new homes being built that will need some form of retrofitting. It will ensure high degrees of energy efficiency and create smart homes of the future which incorporate multiple domestic renewables and smart meters, making these homes cheap to run with low energy bills providing a comfortable warm home. The sooner building regulations are changed the sooner CO2 emissions will start to fall and retrofitting costs be reduced.
Stop all new homes being connected to the gas grid. Claims of using hydrogen for domestic heating are unrealistic [7], expensive and would be 30 years [8] or more away and should play no role is decarbonising new built homes as it is cheaper and more cost effective for builders and consumers to create homes with heat pumps at the design stage.
To make sure that all new homes home are smart homes with high levels of energy efficiency and combine a range of that domestic renewables like Heat Pumps, Solar PV and Solar thermal are combined with smart meters to create new energy efficient homes that are cheap to run, comfortable and able to help with new social housing to tackle fuel poverty. This means changing building regulations so standards are required for domestic renewable installation and should be MCS of higher.
MCS support the reduction in electricity tariff and welcome the excess being removed which can make electricity 75% more expensive to consumers. This change in tariff should be transitioned over to more carbon intensive processes. It is also important to provide protection for those people in or close to fuel poverty, so any transition is just and is supported by other measures to help tackle fuel poverty to make sure that new policies do not impact negatively on the poorest people in society.
MCS would like to see a new long term grant scheme (10 years or more) to reduce costs of heat pumps and other renewables and to provide the mass investment in energy efficiency measures. This scheme needs designing and investing in over a 10-year period and should not be changed or rates reduced as a cost cutting measure like the Feed-In-Tariff was. Long term stability is required for any market to grow and create the Green jobs the government wants to create. Long term schemes provide this.
The Government needs to provide a range of new financial mechanisms like Green Mortgages and PACE loans (Property Assessed Clean Energy financing) to meet people where they are today. A PACE loan can be secured against the property and not the person and allows loans to improve the energy efficiency of homes instantly, so a buy now pay later scheme open to all. It is vital that profits are not made from these loans and we are suggesting that a 0% interest rate on loans and that they are repaid through an energy tariff no more than the current combined energy bill (which should include the low current energy bill) for a fixed period of years, which should be flexible, but no more than 20 years and paid for with energy savings. If you move to a new house the remaining part of loan stays with the property. We would advocate these loans are run through high street lenders and that the high street lenders costs are fully met by central government in delivering and administering loans, plus incentive payment to support banks in administering these loans. All loans would be fully underwritten by the Government, in the same way student loans are and would become normal very quickly. It would also tackle the issue of getting all homes to EPC C or higher at the rate needed to meet Net Zero targets. These financial measures are vital as part of the Heat in Building strategy. Typical improvement could be between £8,000 to £15,000, so would be less than a typical student loan. In some more extreme cases costs will be substantially higher or buildings will have listed protection and these cases would exceed loan limits, so provision would need to made for these buildings. In the UK we are all used to buying a house with an energy bill, so the consumer would notice no difference. If they didn’t do the energy efficiency work they would still pay the same high energy bills, which could become even higher. By taking a loan, consumers will then see their actual bills become lower and when loans are repaid these homes will cheap and efficient to run. This type of loan would free the large sums of capital required for the able to pay sector and a large percentage of the loans would be repaid and the administration costs could be lower than some incentive schemes.
There also needs to be mass investment in social housing to retrofit the worst homes and help the communities with low energy efficiency housing stock to allow for investment etc. This will need central government loans and interventions for Local Authorities, who will need additional money for de carbonisation work for Government. This work would be very visible across those communities being retrofitted and again will show direct action being taken to tackle the climate emergency.
Carbon Tax. It is vital as part of any incentive or change in consumer behaviour that Tax is used to persuade and dissuade buying habits. Carbon taxes for CO2 intensive processes need to be added and the use of tax rebates can also be effective in reducing the cost of heat pumps to create parity with gas boiler costs. The Italian Government currently have a 65% rebate payable on heat pumps [9] through income tax over 5 years. This massively reduces the cost of heat pumps and had led to large scale adoption of this technology and needs no complicated or expensive application process, just proof of purchase from installer and receipt. As all domestic renewables require MCS accredited installers there is a clear audit trail to stop fraudulent activity and new installations have to be commissioned which provides tax proof for HM Treasury for a rebate.
Do not use Blue hydrogen to heat homes [10].

Should the Committee need additional evidence or information MCS is willing to appear to give oral or additional evidence and research papers.

May 2021