Dramatic, austerity, rabbits out of a hat, these are phrases often associated with a budget. This year, however, the drama started early with the shock resignation of Sajid Javid as Chancellor. His replacement, Rishi Sunak, doesn’t quite have the time to settle in; he has a budget to deliver within weeks of taking up his new role.
This budget will mark several important milestones, not only is it the first budget of the decade, it is the first budget in nearly two years (2019 was the first year without a budget since 1900). However, most importantly it will be the first since the government made its 2050 net-zero commitment.
If the government is to be judged favourably by future generations, then this budget will need to set the tone on the investment and policies needed to make 2050 net-zero happen. It must set the path for the next decade, a crucial period that will determine whether net-zero will be delivered.
Much of the focus will be on potentially large-scale projects such as electric vehicles, or as we have seen in recent weeks, investment in building low carbon hydrogen production plants. All of this will help to deliver net-zero for the urban parts of the UK. But it is vital that the government doesn’t forget about rural life, and in particular off-grid communities and businesses. We need to make sure that decarbonising rural communities doesn’t end up as another broadband scenario, where we end up with the haves and the have nots.
There are over 1.5 million off-grid homes across the UK, many of which are old historic buildings that are hard to heat due to the lack of installation, as such they all utilise fuels such as LPG, oil and coal to generate heating and hot water. The government last week said coal and wet wood use is to be phased out over the next few years. However, the significant majority of these (1.1 million) are using oil, a high polluting fuel that produces 20 per cent more carbon emissions than LPG, as well as air pollution.
LPG is the lowest carbon conventional fuel source available to homes and businesses off the grid. It is a transitional solution in its own right, providing an immediate, expedient and cost-effective energy solution. If all homeowners using oil or coal switched to LPG, this would save over 1.7 billion KG of CO2 annually – the equivalent of taking 2.7 million cars off the road.
To kick-start the route to net-zero, there are simple and effective policies that the government can take to encourage people to use cleaner fuels. Introducing an oil tank scrappage scheme to support off-grid fuel switches will help homeowners to make this move.
Unlike LPG, oil infrastructure is owned by the homeowner, therefore the cost of removing a tank and the value of the remaining fuel causes customer reluctance to move on to lower carbon solutions. We believe a scrappage scheme of between £2,000 per household will provide the right level of incentive for homeowners to begin that shift. It would also allow heating engineers and installers to actively promote alternative, cleaner heating systems.
Like any good government policy, it is important to not be short sighted and focus on any immediate cost. A scrappage scheme now, that encourages homeowners to switch to LPG, locks in far deeper decarbonisation in the near future as bioLPG increasingly becomes available on the market. A move to bioLPG will help to deliver carbon emissions savings by up to 90 per cent compared to conventional LPG.
Another target that should be on the new Chancellor’s list for the forthcoming budget is the new version of the Renewable Heat Incentive (RHI). Introduced in 2014, the RHI has primarily supported the installation of heat pumps, however it hasn’t been hugely successful due to the RHI’s limited scope. With new technology and products hitting the market, we believe that the government should expand this to include bioLPG as a standalone fuel, as well as hybrid heat pumps that use LPG or bioLPG.
Looking at the big picture, research undertaken by Ecuity Consulting on behalf of Liquid Gas UK has shown that a mixed technology approach to decarbonising heating systems in off-grid homes in the UK would save over £7 billion, the equivalent of over £4,700 for homeowners. A one size fits all approach to policy is not the route forward, and a simple expansion of a funding scheme like the RHI is an easy route to provide consumer choice, while driving down costs.
Relying on electrification through heat pumps will not be the answer to every home without heavily, and expensively, insulating homes in order for a heat pump to be effective and deliver the level of heating required. This would be no small cost to the homeowner. LPG and bioLPG will heat homes to a consistently warm level, irrespective of building fabric type; and the two fuels can also be used for cooking, again unlike heat pumps.
As Rishi Sunak considers his first budget, he will be facing competing pressures on a range of issues. Not least how to achieve net-zero in a way that doesn’t damage economic growth or place too much burden on either business or consumers. Only by embracing a mixed technology approach in rural areas, can the government hope to achieve the 2050 net-zero binding target in an affordable and non-obtrusive way.