Written evidence submitted by MCS Charitable Foundation [PNZ 069]

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.

The latest IPCC report makes for stark reading. It provides the clearest warning yet that we must act now if we are to mitigate against the worst impacts of climate change. In the run up to COP26 in November we urge the Government to show true leadership around its net zero ambitions and introduce as a matter of urgency a clear and comprehensive policy roadmap focussing on existing low- and zero-carbon technologies. Failure to do so will result in another wasted decade of policy inertia at a time when we have no time to waste. 

In the following pages, we set out our position in relation to three key policy areas of interest to MHCLG – changing the building regulations, addressing the retrofit challenge, and the role of hydrogen in heating our homes.

We would welcome the opportunity to be further involved in your work in transitioning the UK towards net zero.

Change the Building Regulations

Our housing stock contributes nearly 20% of all greenhouse gas emissions produced in the UK[1]. And as the Committee on Climate Change notes, those 29 million homes are not fit for the future[2]. Greenhouse gas emission reductions have stalled from existing housing stock, and there is still considerable uncertainty over the standards that the proposed 300,000 new homes the Government plans to build by the end of the decade will have to reach. There is, therefore, a considerable challenge in retrofitting existing homes to make them low-carbon, high-efficiency dwellings, as well as ensuring new build are made future proof from the outset, rather than ‘retrofit ready’.

Homes being built today are not required to install zero carbon heating or small-scale renewables like solar PV panels. As a result, new estates are being built with no renewable technology included, requiring these homes to be retrofitted if we are to meet our net zero obligations. If the Government waits until 2025 to introduce the new Future Homes Standard, as many as 1.5 million new homes could have been built under Government targets which will all need some form of retrofitting. Under the new proposals builders only have to ‘future-proof new dwellings’ to be ready for low carbon heating systems.

It is expected that the Heat & Buildings Strategy and the Future Homes Standard will ban the connection of all new homes to the gas grid and will use zero or very low carbon heating options.  MCS is also requesting that in addition to heat pumps, other domestic renewables like solar PV are also incorporated into new homes. There needs to clear guidance written into the new standards that stipulate that only zero carbon heating options are provided to all new homes and that domestic renewables must also be fitted when roof space allows and will contribute to not only heating, but also lighting for a home.

Further information

Approved Document L Conservation of fuel and power – All domestic renewables on all new builds need to be installed to MCS of higher standards. This will be 2022 to 2025 prior to Future Homes Standard

Future Homes Standard - Introduce the new Future Homes Standard, which requires Heat Pumps and other domestic renewables (Solar PV) to be installed to every new build all at MCS standards or higher. We are asking for the FHS to be introduced by December 2023, but the Government Plan is 2025 – As long as domestic renewables and MCS standards are included in the FHS we can live with a 12 month delay, but still asking for December 2023. MCS would like to all new homes being Net Zero Carbon homes by December 2023, not just low carbon homes.  We also do not want to see Hydrogen ready boilers being allowed under the Future Homes Standard Regulations in new homes when no hydrogen network exists -this would just be a gas boiler by another name and play no part in decarbonisation.

Low Carbon Heating – MCS supports zero carbon heating options for new homes and is opposed to carbon-based heating and hydrogen ready boilers

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The Government has received evidence of some poor installations of renewable technology on new build homes, as currently there is no requirement for domestic renewables to be fitted to approved industry standards like MCS.  If an existing home were to be retrofitted it would have to comply with rules and standards which are MCS or higher and we believe the same rule on standards should apply to new homes to provide consumer confidence is domestic renewables as we transform the way homes are built. 

MCS Certification and standards were established by Department Business Energy and Industrial Strategy (BEIS) in 2008 and is the only domestic renewables standard recognised under current Government retrofitting schemes. 

To achieve the net zero targets we have to introduce the new building regulations by December 2023 at the latest to prevent a massive retrofitting bill. It is also critical that these new homes are required to be fitted with zero carbon heating options, and also have additional microgeneration features built in to generate as much of that home’s energy needs as possible. Standards of installation must be maintained through the MCS Certified scheme to provide consumer confidence and assurances. This will transform new homes and make renewables part of the future landscape, delivering very low-cost energy bills and zero carbon homes. The new standards need to be implemented immediately, so any building work has to conform to new standards from December 2023, including permission granted prior to this date even if physical building works have started. 

The Conservation of Fuel and Power, Approved Document L[3] is supposed to come into effect between the end of 2021 and 2025, prior to the Future Homes Standard.  Under this draft document we have secured heat pumps being installed to MCS or higher standards, but solar PV and other domestic renewables are not required to meet MCS standards.  We are lobbying so all domestic renewables installed in new builds including solar PV conform to MCS or higher standards.  

Key information

• As a matter of urgency, we need the new Future Homes Standard to be introduced by December 2023. The new Standard will require that all new dwellings be fitted with zero carbon heating systems and require other microgeneration solutions to reduce grid dependency.   
• If the Government waits until 2025 to change the building regulations e.g. Future Homes Standard – it could potentially lead to another 1.5 million homes being built between now and 2025, all of which will need to be retrofitted, potentially delaying our ability to reach the Government’s net zero target.
• BEIS are concerned as to the reputational damage that could arise from poor installations that benefit from short-term funding or any changes to Planning Regulations, hence the need to insist that MCS standards and certification for all new homes is a basic requirement under the new Future Homes Standard for all domestic renewables (Heat Pumps & Solar etc). This will ensure all installations meet the MCS standards, and prevent unqualified or certified builders taking advantage of a new and expanding market. These MCS standards will provide the consumer confidence that is needed and is why MCS was set up by the Government in the first place.
• The Government needs to make renewables in the home the norm and make changes to the Planning Regulations by December 2023.
• To change Approved document L so all new homes have domestic renewables fitted to MCS or higher standards.  

Retrofitting

The 2019 Climate Change Committee report ‘UK Housing: Fit for the future?’ stated that the 29 million existing homes across the UK are not fit for the future, and that they:

‘must be made low-carbon, low-energy and resilient to a changing climate. This is a UK infrastructure priority and should be supported as such by HM Treasury.’

MCS strongly supports that position. The Government must introduce a range of policy measures to kick start the mass scale retrofit required. Policy measures to introduce include:

• Removing VAT on all small-scale renewable energy products and installations for a period of 10 years
• Introducing loans such as such as Property Assessed Clean Energy (PACE) Loans at 0% interest rates available for all households underwritten by the Government to support retrofitting of existing properties
• Introduce a new long-term incentive/grant scheme of at least 10 years for all domestic renewables and energy efficiency measures
• Reducing the tax burden on less carbon intensive fuels and removing subsidies and rebates on fossil fuels
• Introducing tax credits of up to 30% of the value of capital costs for energy efficiency and renewable energy equipment, capped at £15,000
• Introduce a national energy advice service underpinned by local and regional one-stop-shop hubs to support households through the process of identifying and introducing a range of carbon reduction measures appropriate to their home

These policies will create the momentum and security the sector needs to scale-up the retrofitting the UK’s unfit for the future housing stock. It will help make the 29m homes more liveable, as well as contributing towards meeting the Government’s net zero target.

Hydrogen

MCS supports the strategic use of green hydrogen (i.e. using renewable energy to power the electrolysis process required to manufacture green hydrogen) in the hard to decarbonise sectors like shipping, heavy industry and aviation.

MCS does not support the use of green hydrogen for domestic heating until costs can be significantly reduced below that of natural gas prices today. Using green hydrogen to heat our homes is up to five times more expensive than current natural gas prices[4], and up to seven times less efficient than using renewable energy to power a heat pump[5].

MCS does not support blue hydrogen made from fossil fuels. It is an expensive technology that would require the modification of the gas-grid and replacement of all gas boilers in the UK with ‘hydrogen-ready boilers’, along with the development of large-scale carbon capture and storage (CCS) plants to capture the associated carbon emissions from its production. Given that there are currently no such CCS plants in the UK, and the massive cost overruns and performance failures of plants such as the $1bn Petra Nova plant in the USA and the $3bn Gorgon LNG plant in Western Australia, it a risk MCS does not consider passes any cost-benefit analysis, especially given the range of proven zero-carbon solutions currently available to decarbonise our homes. And with research showing that the greenhouse gas footprint of blue hydrogen may be more than 20% greater than burning natural gas or coal for heat and some 60% greater than burning diesel oil for heat[6], it becomes even more difficult to support the use of blue hydrogen in any strategy aimed at tackling climate change and achieving net zero.

Given the current lack of supporting infrastructure and CCS facilities, the time and cost required to build them, and the ultimate cost to consumers of adopting a hydrogen-based strategy, we would urge Government to reconsider. Focussing on hydrogen takes the focus away from retrofitting our homes, potentially diverting huge sums of Government finances into infrastructure projects around blue hydrogen and CCS. Carbon capture and storage is a yet to be deployed in the UK, and the £800m Government has set aside for two test sites could be better spent elsewhere. Allowing carbon intensive industries to continue with little or no change is not consistent with achieving our net zero goals.

The role of hydrogen in decarbonising heating has been the subject of much debate in recent months. For many in industry and government it is seen as a way of delivering low-carbon heating into the majority of the UK’s 29 million homes with minimal disruption. However there are significant, and as yet unanswered questions regarding the costs involved in upgrading the national grid to accommodate hydrogen and for the large-scale carbon capture and storage (CCS) facilities required to sequester the greenhouse gas emissions that are a by-product of the production of blue hydrogen. As the APPG on Hydrogen[7] notes, “Significant and long-term [government] financial support is required for the development, deployment and operation of hydrogen technologies.” And as they also note, there are currently no operational large-scale CCS facilities in the UK.

The issue of CCS is a significant one. At present, there are twenty-eight commercial CCS facilities around the world, the majority of which have been financed through state-owned enterprises and large corporations. One of the principal models used to estimate the global requirements for CCS in reaching the Paris Agreement targets is the International Energy Agency’s Sustainable Development Scenario (IEA-SDS). The model takes into account the global pledges made as part of the Paris Agreement, and requires 15% of all emissions reductions to be achieved using CCS. Translating that into the real world, the 2021 Global CCS Institute[8] report “Unlocking Private Finance to Support CCS Investment” states that:

“The need for CCS in the IEA-SDS translates to an estimated 70-100 CCS facilities built per annum, for which we estimate the total capital requirement to be between US$655 bn and US$1280 bn. To achieve this, the private sector must be incentivised to invest in CCS because the capital requirement far outstrips what governments are willing to pay in the timeframe required.”

Given that at present there are no operational at-scale CCS facilities in the UK, and the level of investment required to build even a single one, it seems a poor policy choice to pursue a blue hydrogen strategy to decarbonise our homes. And we have been here before with the coal industry and its adoption of a ‘clean coal’ strategy. ‘Clean coal’ intended to use CCS to capture their high emissions, yet most projects that attempted to do so have failed[9],[10], and now coal is rapidly being phased out of the energy mix.

Questions also remain over the viability of producing green hydrogen at the scale required. If the Government were instead to adopt a green hydrogen approach, there are massive inefficiencies in doing so. As the 2018 Climate Change Committee report ‘Hydrogen in a low-carbon economy’[11] shows, using wind or solar electricity to directly heat our homes with a heat pump is roughly five times more efficient than using the same wind or solar power to produce hydrogen from electrolysis (see Fig.1). In addition, nearly boiler in the country will need to be replaced with a so-called ‘hydrogen ready’ boiler to accommodate the widespread use of hydrogen.

If Government can address those not insignificant challenges, we then have to address the issue of how much it will cost to heat our homes with hydrogen – a question that seems to be absent from much of the current debate. While the figures vary, there is a consensus that heating our homes with hydrogen will be in the region of three times as expensive than current residential gas prices. For example, a 2020 study by Imperial College London[12] found that setting up and running hydrogen-based heating may cost as much as 5.2-8.6p per kWh, compared to compared to 1.0-2.8p/kWh for natural gas. They concluded:

“Due to the higher cost relative to natural gas, a Contract for Difference payment between £20 per MW h and £53 per MW h will be necessary for H2-derived heat to be competitive in the market.”

Figure 1. Relative efficiency of heating: electricity in heat pumps vs. electrolytic hydrogen in boilers (Source: CCC, 2018)

Contracts for difference (CfDs) are the government’s main mechanism for supporting low-carbon electricity generation. CfDs are intended to incentivise investment in renewable energy by providing developers of projects with high upfront costs and long lifetimes with direct protection from changing wholesale prices, and to protect consumers from paying increased support costs when electricity prices are high[13]. They are in effect another subsidy that the Government will need to pay to make hydrogen cost-competitive, in addition to the grid infrastructure and CCS facility costs that they will need to pay. In short, hydrogen will cost both the Government and consumers a lot of money.

Commenting on the findings, Professor Niall Mac Dowell, one of the report co-authors, said:

“Decarbonising the heating sector is a particularly important milestone on the UK’s pathway to net zero by 2050. However it is particularly challenging because the usual technical and commercial challenges are further complicated by concerns around cost, which could increase energy poverty. It is therefore vital that the public and private sectors work closely together to enable a rapid, reliable, and equitable transition."

As the Imperial College research shows, hydrogen will require significant government support to be competitive. These are in addition to the other costs government will need to pay such as new grid infrastructure and the CCS facilities required to support a hydrogen strategy. Factor in the inefficiency of using green hydrogen to heat our homes and the case for hydrogen – whether blue or green - playing a significant role in heating our homes decreases rapidly.

Given the current lack of supporting infrastructure and CCS facilities, the time and cost required to build them, and the ultimate cost to consumers of adopting a hydrogen-based strategy for heating our homes, we would urge Government to reconsider. Heat policy should instead focus on technologies such as heat pumps that are already available, rather than wait for the arrival of unproven, expensive and inefficient solutions.

Case Studies

Petra Nova - USA

Petra Nova was the only coal carbon capture project in the United States. The CCS technology at Petra Nova required so much energy that NRG built an entirely separate natural gas power plant—the emissions of which were not offset by the Petra Nova technology—just to power the scrubber designed to remove the CO2 emissions. In the end, the $1 billion project captured only 7% of power plant’s carbon emissions[14]. The plant was closed permanently in early 2021

Kemper – USA

Kemper was intended to be a coal carbon capture project. Construction began in 2010. However as a result of a series of design flaws, construction was delayed and costs ballooned from an initial budget of $2.4bn to an even more eye-watering $7.5bn[15],[16]. The project was eventually abandoned in 2017. Kemper was intended to be a 582Mw ‘clean coal’ project, turning low-grade lignite into synthetic gas to fuel the electricity turbines. Instead, it turned into an expensive white elephant that never came online, further highlighting the risks associated with pursuing a decarbonisation strategy that relies on CCS.

Gorgon LNG plan – West Australia

Gorgon LNG plant in West Australia – the world’s largest CCS project devoted to capturing greenhouse gas emissions rather than enhancing oil recovery opened in 2019, three years behind schedule. It was only granted planning permission on the basis of capturing 80% of its emissions through CCS, cost over $3bn and captured barely 30% of emissions.[17]

September 2021