Authors: Daniela Salite, Ying Miao, Ed Turner
Energy Review, Vol 4. Issue 12. 2022
With heating accounting for around 40% of the total energy demand in the UK (of which 80% is gas-based) and 23% of GHG emissions, its decarbonisation is crucial to achieving the goal of net zero. However, it is a very challenging energy and climate policy priority, involving dealing with a mix of infrastructure and building stock, patterns of actors within the heating sector and path dependence of the sector, and addressing socioeconomic drivers of service demand such as income and poverty. It requires a complete energy system transformation, including significant additional investment in new low-carbon heating technologies (e.g., heat pumps - HP, biomass boilers, district heating - DH) and infrastructure (e.g., pipes and substations).
Despite such complexities, the urgency of heat decarbonisation is higher now that the world is not on track to limit the temperature rise to 1.5°C by 2100, with the current actions projected to increase greenhouse gas (GHG) emissions by 10.6% by 2030, compared to 2010 levels. The energy price crises, volatility and insecurity caused by the Russia invasion of Ukraine exacerbate this urgency. Thus, as many countries globally, the UK government is taking diverse actions to phase-out fossil fuels-based heating by 2050 and increase energy security. Yet, the challenges to the transition are diverse and immense, as explored below.
The UK government plans to ban gas and oil boilers from newbuild homes from 2025 and expand low-carbon district heating (DH) to 20% by 2050 and annually install approximately 600,000 heat pumps (HP) by 2028, but that has not been happening at the expected rate. The share of DH and HP remains very low at 2%. There are still some uncertainties about the technical and cost-effective suitability of these technologies, including their potential to mobilise supply chains, and create jobs and export opportunities.
Around 93 per cent of DHs are still fossil fuel-based, mostly gas – a result of the relative affordability and familiarity of gas in the country. The decarbonisation of these systems and expansion of low-carbon DHs would require the creation of the necessary conditions to increase their diffusion and adoption and reduce gas dependence and infrastructure. Such actions are very challenging as they involve high financial costs and risks, which can represent a barrier to market development and uptake of the solutions. A solution to these barriers (and possibly a prerequisite to overcoming them) is for the government to use its own funds to de-risk and even support DH development, but at times of constrained public funding, that may be increasingly challenging.
Government measures to offset these costs and support consumers and building-owners to make the transition, such as the £4.5 billion funding provided between 2016 and 2021 through the domestic Renewable Heat Incentive (RHI), were insufficient. The RHI only facilitated the installation of around 60,000 HP as funds were also used for the installation of biomass boilers in off-grid locations and solar water heaters. Currently HP installation costs can range from around £6,415 for air source HP and £13,380 for Ground source HP. The UK is lagging behind other European countries in HP sales, with only 37,000 units sold in 2020 and 42,779 units in 2021, while France (the European market leader) sold 394,000 units in 2020 and 573,000 units in 2021. This UK HP growth rate is much slower than required to reach its 2028 goal and the Climate Change Committee’s (CCC) net zero scenario of 27.2 million homes (52%) with HP. At this rate, it would take more than 600 years to reach the CCC scenario and more than 70 years to reach the 2028 government goal. To boost HP installations, from 2022 to 2025, the government is providing grant funding of £450 million towards consumers’ upfront costs through the new Boiler Upgrade Scheme, but recent past experience suggests this will not put the UK on the necessary trajectory.
The current slow deployment of low-carbon DH will also represent a challenge to meet the government goals and the CCC scenario of 42% share by 2050, despite the £320 million of government funding provided between 2018 and 2021 through the Heat Networks Investment Project, which has mostly funded gas-fired schemes. Moreover, there are immense sociotechnical, regulatory, and institutional challenges. Unlike the electricity sector (regulated by Ofgem), DH remain unregulated: government plans to also appoint Ofgem as the DH regulator have yet to materialise. The independent, non-profit consumer champion organisation, Heat Trust, currently perform some voluntary DH regulation, covering around 12% of consumers. This lack of consumers protection and security can discourage them from remaining connected or being connected to DH.
Some UK municipally owned DH companies have the insufficient institutional capacity, with eight struggling to manage their energy companies, losing around £114 million between 2016 and 2020 - three of them went under liquidation and administration. There are also skills and materials shortages for infrastructure design, planning, development, and operations of DH. There are also skills shortages for HP installations - the UK’s innovation agency for social good, Nesta, estimates the existence of only 3,000 trained HP engineers in the UK, against the at least 27,000 needed to meet the planned 2028 target. Thus, an annual increase of 4,000-6,000 will be required. Moreover, DH and HP are still not well-known to the public, politicians, and other key stakeholders (e.g., building owners, property developers, funding providers), and the unfamiliarity with these technologies and the disruption associated with their development further prevent their uptake.
Conclusions and policy recommendations
Heat decarbonisation is crucial to achieve net zero and address energy affordability and security issues. However, phasing-out gas-based heating will require unprecedent government action and support. To stand any chance of achieving its stated goals, government must create appropriate conditions to overcome the sociotechnical, regulatory, and institutional barriers to the timely and successful development and uptake of sustainable heating sources. As such, it is pertinent to:
- make extensive investments to:
i. reduce the high financial costs and risks associated with the development and uptake of DH and HP.
ii. significantly increase the energy efficiency and substantially reduce energy demand, through for example, retrofitting measures that involve a combination of more efficient heating technologies and energy efficient buildings.
iii. increase the number of skilled workers through the provision of training and the creation of job opportunities to raise people’s interest in having the required training to fulfil these job opportunities.
- disseminate more information about HP to owners of individual properties to educate them about HP and provide incentive to facilitate the adoption.
- disseminate information about DH to other key stakeholders (e.g., large building owners, property developers, heat suppliers, funding providers) to educate and encourage to adopt DH and involve them in their development.
- enhance the competitiveness of DH and facilitate the collective agreement on the uptake of DH by promoting the implementation of dynamic and customer-centric business models such as through the provision of heat as service, council subsidies, or bottom-up co-op schemes where appropriate.
- provide more capacity building to local authorities on DH planning and the implementation and management of capital-intensive energy projects to enable them to play a bigger and successful role in the development of DH networks and enforcement of connections to DH, as municipalities in Scandinavian countries have done.
- urgently make the planned appointment of Ofgem to regulate the DH market and price a reality to allow them to start protecting consumers on price transparency and quality of service.
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Acknowledgement: This research was supported by UK Engineering, Physical Sciences Research Council (EPSRC), under Grant Ref: EP/V041452/1
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(Dr. Daniela Salite is a postdoctoral research associate at Aston University, UK. Her research interests lie in energy trilemma, energy transition, climate change adaptation, and sustainable, just, and equitable development, agricultural development, food security and nutrition.
Dr. Ying Miao is a Senior Lecturer in Politics at Aston University (UK). Her research interests include inequalities in sustainable development and the socioeconomic implications of sustainability technologies.
Dr. Ed Turner is Reader in Politics at Aston University and Co-Director of the Aston Centre for Europe.He has published on topics in housing and local government and has been a number of expert commissions looking at different aspects of housing policy.)