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By Ørsted

Where’s the ‘fairness’ in using off-grid homes as the testing ground for heat policies?


5 min read Partner content

The government may be in a hurry to decarbonise Britain's homes and businesses, but in its haste, it is leaving fairness to off-grid households to fall by the wayside.

At the heart of the Heat and Buildings Strategy is a commitment to fairness.

From the outset, the government states “Our ambition is to ensure that the costs of decarbonising heat and buildings falls fairly across society”. This is exactly as it should be. Public support is essential for the plans to succeed so the proposals must be proportionate.

So it’s surprising that the accompanying policy consultations focus only on phasing out the use of fossil fuels in buildings off the gas grid – not from all buildings as you might expect. According to the government, over a million mainly rural homes in England and Wales fall into this category, and an unknown number of businesses.

From 2024 in large non-domestic buildings, and 2026 in homes and small businesses, owners will in most cases be expected to fit a heat pump when replacing an existing boiler. The government suggests a measure of ‘reasonable practicably’ will be used to determine whether a heat pump must be fitted but hasn’t defined this or explained how it will work in practice.

It means that two households in identical houses, even in the same road, will be treated differently if one uses mains gas and the other oil, coal or LPG. The former will simply be able to replace a life-expired gas boiler with another one – and can continue to do so until 2035. The latter must, in most cases, fit a heat pump at currently four times the cost of a boiler. This strains any definition of fairness.

The cost of heat pumps

The government has set an ‘ambition’ for the cost of heat pumps to fall between 25% and 50% by 2025 to address this challenge. The problem is the government will regulate before it knows if the heat pump cost reductions have been achieved – so off-grid households and businesses will have to keep their fingers crossed and face years of uncertainty.

The average reported cost of a heat pump installation rose 37% between 2011 and 2019 and is currently around £11,000. With inflation now at over 5% and rising, the idea that prices will fall by 50% in three years seems extremely optimistic. Even if prices do fall, a heat pump will still cost at least twice as much as an oil or LPG boiler.

The government has highlighted that support is being made available but the grant funding announced simply won’t fill the gap. The money pledged to the forthcoming Boiler Upgrade Scheme and Home Upgrade Grant is only a fraction of what’s required and it’s likely that the vast majority of off-grid homes will miss out on either scheme.

It means that two households in identical houses, even in the same road, will be treated differently if one uses mains gas and the other oil, coal or LPG.

Off-grid homes and businesses are misunderstood

The proposals state that 80% of off-grid homes can accept a low temperature heat pump without any need for additional renovation. At first glance this appears to be backed up by a new report from the Energy Systems Catapult which announced that “All housing types are suitable for heat pumps” based on research it is carrying out as part of the government’s £750m Electrification of Heat demonstration project.

But what is conspicuous by its absence from the report is any mention of cost and the 80% claim avoids the question of ‘reasonable practicably’ completely. Let’s face it, if you’re prepared to spend enough money and put up with any amount of inconvenience, you can fit a heat pump into any building. But that doesn’t necessarily mean it’s sensible to do so.

A recent survey by OFTEC of over 220 rural heating businesses paints a very different picture. Their view was that less than 20% of the homes they serve were currently ‘heat pump ready’. This tallies with previous data reported by the government, which suggested that the energy efficiency of rural homes lags significantly behind on-gas grid equivalents.

Off gas grid homes are also much more varied in design than urban or suburban counterparts, which means that keeping them warm with a heat pump will be more difficult. Each installation will be different to the next and there will be few opportunities for the kind of economies of scale that could be achieved in an urban street where the houses are often similar. Significant disruption and high cost for the affected households is almost a certainty.

The situation for rural businesses is even worse. The government has admitted it knows little about them, and yet they are expected to begin the transition even sooner – from 2024. Many - particularly those in the hospitality sector - are struggling following the Covid crisis and, with no funding support announced, for some this could be the final straw.

Why is the government starting with off-grid homes and businesses?

It seems a strange choice when easier options clearly exist. The impact assessment for the non-domestic consultation provides the answer: “Deploying low carbon technologies through the 2020s, in particular heat pumps, through this policy will also increase the size of the electrification market to support the future decarbonisation of other segments of the building stock. This is essential to keep the electrification option open for buildings that are on the natural gas grid, should low carbon hydrogen boilers prove unviable.”

It's of little comfort to hard-pressed off-grid homes and businesses that they are playing their part in tackling climate change by being the guinea pigs for the development of the heat pump market, in readiness for it to go mass-market. The size of the off-grid market may make it ideal for this purpose, but these households will face the highest costs, the greatest inconvenience and the most uncertain outcomes.

It remains to be seen whether these mainly rural households and businesses – many of which are in traditionally Conservative-voting areas – will consider this a fair transition.

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