Four key inclusions in the Heat and Buildings Strategy
The UK Government has unveiled its long-awaited plans for transitioning heat and buildings to net-zero. Here, edie pulls out the key facts and stats from the Heat and Buildings Strategy.
Published following delays spanning the best part of a year, the Heat and Buildings Strategy outlines the Government’s approach, in terms of timings and technologies, for decarbonising two hard-to-abate sectors that account for a significant proportion of the nation’s carbon footprint; heat for buildings alone makes up 21% of annual national emissions.
The Strategy features headline commitments to bring the upfront and operational cost of heat pumps for homes to price parity with gas boilers by 2030. This will lay the foundations for all new domestic home heating systems installed from 2035 to be fossil-fuel-free.
Energy efficiency, electric heat pumps and energy storage are all named in the Strategy as key focus areas for decarbonising domestic and commercial buildings alike in the short-term, as technologies that may play a larger role in the long-term, such as green hydrogen and carbon capture technologies, scale-up. It is worth noting that the strategy only applies, in its entirety, to England. Devolved UK administrations may take a different approach, although many key projects and targets are UK-wide.
Overall, the Strategy details £3.9bn of funding, with the Department for Business, Energy and Industrial Strategy (BEIS) stating that the entirety of this amount is new. The Department is also touting up to £6bn in GVA for the UK economy and the creation of 175,000 skilled jobs by 2030.
Here, edie summarises the key changes set to come about under the strategy, in fields including energy efficiency, electric heating and alternative fuels.
Heating domestic buildings
The Strategy measures that have taken the tabloid headlines this morning (19 October) are, understandably, those relating to heat for homes.
Included in the Strategy is a £450m boiler upgrade scheme, through which homeowners will be able to claim grants of £5,000 to assist with the upfront purchase of a new heat pump if they are choosing to replace their gas boiler. The scheme will run for three years and is targeting 90,000 homes. Many green groups had hoped for a longer-running scheme, given that there are 29 million domestic properties in the UK.
A further criticism of the boiler upgrade scheme is that there is no requirement for applicants to improve the energy efficiency of their homes before installing a heat pump. More on this in the next part of this article.
To help deliver the heat pumps and installers needed, BEIS has stated that it will work closely with the industry. The Department is hoping that, by scaling up production and making technologies more efficient, the costs of a domestic heat pump will be 25-50% lower in 2025 than today, and that they will be comparable with gas boilers by 2030. Operating costs will also be lowered by changes to the Climate Change Levy, to be phased in over a decade. Gas levies will rise as electricity levies fall, thus making electrification cheaper.
There are also updated commitments to work with local authorities to help encourage individuals to choose a heat pump when next replacing their boilers. Councils are encouraged, through the strategy, to retrofit their own buildings and lead by example, while also providing communications and tailored practical support to residents.
Additionally, local authorities are urged to identify appropriate locations for low-carbon district heating networks. This is not yet a legal requirement. BEIS has stated that it is working with Ofgem to “develop a better understanding of the opportunities and challenges presented by local area energy mapping and planning and is considering the most appropriate policy options to take forwards”. For context, there are currently some 14,000 heat networks in the UK, collectively serving some 480,000 customers.
Improving energy efficiency
As mentioned above, energy efficiency has been something of an elephant in the room in buildings policies developed by the current government. The Conservative Party pledged in its 2019 General Election manifesto to spend £9bn in this field this Government, and progress has not been swift – especially due to the failure of the Green Homes Grant.
The Strategy provides some clarity, though many had been hoping for more information and a replacement for the Green Homes Grant of the same scale, if not larger – especially given that the UK’s track record on home energy efficiency has been poor for far longer.
“We recommend that consumers prioritise the most cost-effective energy efficiency measures, in particular those measures that pay back within 20 years,” the Strategy states. “However, we appreciate that many households and businesses will be interested in going further, for example for increased comfort or to coordinate with other planned building improvements. “
To that end, a £950m Home Upgrade Grant scheme is detailed in the Strategy. This is less than half of the funding originally promised through the Green Homes Grant. The Social Housing Decarbonisation Fund, originally launched as a £60m one-year initiative in 2020, has been extended through to 2025, with the Government pledging to invest £800m by this time.
The Strategy states that the policies it details could bring up to 70% of England’s homes to Energy Productivity Certificate (EPC) band C or above by 2035, from approximately 40% at present. It adds that BEIS will explore whether minimum energy performance standards should be set for the 2030s and 2040s, but no plans for anything similar in the shorter term are outlined.
Sky News is reporting that BEIS Is also looking to incentivize mortgage companies to focus their lending on properties with higher EPC bands. This could drive change at that part of the value chain, but there is the risk of penalizing low-income individuals with less efficient homes.
Following the publication of the Hydrogen Strategy in August, there had been hopes for a commitment to hydrogen for heating homes, offices and other commercial buildings.
But the new Strategy defers this decision to 2026, given that trials of the UK’s first Hydrogen Village are due to be completed in 2025, with support from BEIS and the private sector.
It states: “Hydrogen offers the potential opportunity to repurpose all or parts of the existing gas network to a low-carbon alternative, which could reduce the need for new network infrastructure more broadly.
“However, further work is required to assess hydrogen network requirements as the hydrogen economy scales up, and how future decisions on heat might affect this.”
The Strategy also states that the scale of Carbon Capture, Usage and Storage (CCUS) needed for decarbonising heat is “dependent on the balance of hydrogen production methods and ongoing research regarding using hydrogen as a heat source”. Nothing new is confirmed on CCUS that was not already in the 2018 CCUS Action Plan, or subsequent Energy White Paper and Ten Point Plan.
The Strategy acknowledges that, as the energy mix for heating changes, with natural gas scaling back and electrification and hydrogen scaling up, systems change is needed to maintain energy supply and security.
At a top-line level, BEIS has stated that it will work with Ofgem and National Grid to assess how supply and demand are likely to change, and how flexibility can be built in using technologies like batteries to manage that change. It also states that strategies will be developed to help coordinate the installation of heat pumps with other technologies that assist the low-carbon transition, including rooftop solar, battery storage, electric vehicle charging and smart technologies.
However, in-depth information remains lacking, with the Strategy largely reiterating existing policy packages and pieces of government research.