heat-policy

A few months ago, I published a blog on 10 policy steps needed to support the decarbonisation of heat in the UK. Since then, the net-zero law has been adopted and public concern about climate appears to be high on the agenda. In this blog I update the previous steps based on some comments received and updated thinking.

The main comments I have received and included are:

• Strongly ensure that any national conversation around heat cannot be overly influenced by particular interests and focuses on citizen engagement;
• Do not allow electricity system flexibility and capacity to solely be driven by the already overcentralized electricity distribution network companies but instead allow new actors and new business models to become involved;
• The fuel poor gas network extension scheme which currently provides free connections to the UK gas network for those in fuel poverty should be halted. The equivalent funding should be spent on energy efficiency measures and low carbon heat options which provide fuel poverty benefits and support decarbonisation.

The initial 10 steps have now become 12 steps. These big steps can be seen as a high level policy framework within which more local scale and more detailed regulation can sit. So here goes:

1. We need a national conversation about heat which focuses on citizen engagement. Before doing this, we need to carefully map out a sensible and transparent process.
2. Ban gas and oil from all new buildings. This will have clear benefits for the low carbon heat sector and could rapidly deploy heat pumps and district heat. In turn this would grow the low carbon heat market and drive innovation in and normalisation of low carbon heat. A minor change to Part L of building regulations could deliver this and this could happen in advance of the proposed 2025 date. Passivhaus standard (or similar) may be a sensible eventual step. The gas networks fuel poor extension scheme should also be halted and equivalent funds spent on approaches to decarbonise and reduce fuel poverty.
3. Ban oil and LPG in off grid areas. Ban the installation of new (including replacement) oil and LPG appliances as soon as possible through building regulations and squeeze out oil and LPG through carbon taxes. While the oil and LPG sectors have been promoting drop-in bio-energy replacements which may have niche roles, mass electrification and demand reduction of rural heating is a sensible end goal.
4. Do state led energy efficiency thoroughly and make it commensurate with heat decarbonisation timescales. Fund it through a carbon tax on gas (see below) or through Government bonds/0% loans. As well as providing healthier homes, this is a pre-requisite for many low-carbon heat technologies.
5. Encourage electricity network investment. It currently looks like bigger wires will be needed alongside much smarter electricity network management. While technology (smart, digital, storage) may reduce the need for peak power capacity, we can’t allow a lack of capacity to hold things back. Further still, if electricity network replacement work is taking place, this should be future-proofed to ensure it can operate flexibly and accommodate low carbon generation. This should all be part of an integrated, coordinated energy system transformation strategy and as part of this, Ofgem should have a new duty to meet CCC targets. A new ‘Energy Transformation Committee’ could support this coordinated approach to the energy transformation. Third parties (i.e. not the monopoly network owners) should be encouraged to deliver network capacity increases/management in order to increase innovation and efficiency, and this should be through a reset RIIO process and local markets.
6. We need to have a serious discussion about a carbon tax on gas. This is not just a carbon issue and needs to be linked to the UK’s wider economy. Importing lots of gas (currently 60% and likely to go up) has implications for both tax take and trade balance/inward investment issues. As well as providing an efficient market friendly approach, this tax could also help rebalance the cost differential between gas (no carbon price) and electricity (carbon price and subsidy costs). This tax should be hypothecated to energy efficiency and low carbon heating and support the poorest. The Energy Systems Catapult have also recently highlighted the importance of developing a ‘carbon driver’ for residential heat.
7. Drive the gas networks to decarbonise using a regulatory incentive linked to the carbon content of the gas they transport. The gas industry are supportive of low carbon gases (it should be noted these are deeply uncertain options) yet there is currently no decarbonisation driver for the networks in the proposed RIIO2 price control. This incentive could be linked to a carbon tax on gas but could be a standalone regulatory driver. We (The Energy Policy Group) have suggested in our recent Ofgem RIIO response, this mechanism could be designed to be cost neutral, rewarding the GDNs doing well and penalising the ones dropping behind.
8. Empower local authorities. Some have declared climate emergencies, some have net zero goals. National policy and the national discussion needs to let those at the forefront deliver. Central government should provide support for and mandate local plans for heat and energy saving. Regulate to allow LAs to deliver and finance low carbon district heat and energy efficiency if they want to.
9. Prepare the electricity sector. Rapid and sustained investment in low carbon electricity generation will be needed at an unprecedented rate for heat decarbonisation as will smart system optimisation. Electricity generation policy needs to take into account heat decarbonisation.
10. Provide thorough support for heat pump installers and users. Heat pumps are a key low carbon heating technology but require the learning of new skills to ensure the most efficient and cost effective operation. New regulations, while allowing the market to grow rapidly, should ensure that growth in skills is supported and ensure that consumers receive excellent support for heat pump systems.
11. Provide a heat decarbonisation innovation space. Policy makers need to actively engage with and encourage new entrants into the UK heat market. Many of these new entrants with the best ideas do not have the capacity to engage that some of the competing incumbents do. A funded national heat innovation competition could be a good first step.
12. Deliver a heat regulatory review. There are simple regulatory barriers around (1) planning for example heat pump locations and replacement windows and (2) accreditation (e.g. the Microgeneration Certification Scheme) which constrain change and limit innovation. A thorough review would highlight the key regulatory issues and indicate where change is needed and could deliver some easy wins.

There is no time to lose and there are plenty of benefits to be realised.

N.B. These ideas have also fed into the recent IGov publication which proposes a new UK energy governance framework. This blog was also published on the Exeter EPG site here.