On 17 November, Carbon Connect published an independent report, Pathways for Heat: Low Carbon Heat for Buildings, calling on the next government to set heat as a policy priority for the coming decade. The report takes stock of what we understand today about the challenge of decarbonising heat for buildings by comparing six pathways for the sector to 2050 from a variety of different organisations: the Department of Energy and Climate Change (Decc); the Climate Change Committee; the Energy Technologies Institute; National Grid; the UK Energy Research Centre; and Delta-EE.
Together, the pathways examined in the report paint a picture of the nationwide transformation getting underway in how we heat our homes and buildings. The report identifies that by 2050, gas used to heat buildings could fall by 75-95 per cent while electricity increases from a 10 per cent share today to 30-80 per cent, and district heat increases from less than 2 per cent to up to a 40 per cent share.
At the same time, energy efficiency could help to lower bills and offset the expected growth in our heating needs from an expanding population and building stock.
The next step in Carbon Connect’s programme on heat is to consider the policy implications of these pathways. Two areas we will be examining in the next phase of the Future Heat Series are the implications for energy bills, and the implications for consumers and installers.
Levies to fund various energy-saving and low-carbon policies are currently spread between electricity and gas bills. For example, in 2020 Decc estimates that energy policies will add £159 to the average household electricity bill and £41 to gas bills, while energy-saving policies are estimated to save £173 on electricity bills and £103 on gas bills.
To add a further dimension, while developing low-carbon electricity is funded through a levy on electricity bills (£7.6 billion by 2020/21, in 2011/12 prices), developing low carbon heat – supported primarily through the renewable heat incentive – is funded through general taxation (£1.3-2.4 billion by 2020/21, in 2014 prices).
A price on carbon emissions has begun to be reflected in electricity prices, through the European Union Emissions Trading System and the UK carbon price floor, which are estimated to add around £23 to the average household electricity bill in 2014, £37 in 2020 and £80 in 2030, according to Decc estimates. In contrast, no carbon pricing is reflected on gas bills.
All the pathways we examined showed a long-term decline in the volume of gas used for heating homes and buildings and an expansion of electric heating. Increasingly, therefore, we might question whether the way policies are currently funded and how carbon is priced helps or hinders the transition to low-carbon heating.
With heat being serviced by more of a mix of electricity, district heat and gas, there may even be a case for utilities selling the service of heat, or even comfort, instead of fuel.
Consumers aren’t generally interested in units of gas, electricity, or even heat. What really matters is comfort. Developing a customer proposition along these lines could be a challenge for utilities, but business model innovation could benefit the often troubled consumer-supplier relationship, as well better aligning incentives for suppliers to drive energy efficiency improvements.
Andrew Robertson, manager, Carbon Connect
Consumers and installers
A common theme coming from the pathways examined in Pathways for Heat: Low Carbon Heat for Buildings is the impact that a transition from a gas-dominant heating sector to a one powered with a greater mix of technologies might have on consumers and installers. The former will be faced with more choice, and potentially confusion, while the latter may well face challenges in broadening skills sets and knowledge.
Installers and technicians currently play an influential role in consumer decision making about their heat systems, especially at the point of replacement. At the panel debate marking the publication of Pathways for Heat in Parliament, panellists discussed the potential need for a source of independent, trustworthy advice for consumers as the range of technologies on offer expands.
Whether installers can deliver unbiased, technology-neutral advice, or whether this could develop into a new opportunity for private or public energy advice services is a question that remains to be answered.
At a more fundamental level, there are also unanswered questions about the balance between consumer choice and central planning.
The heating challenge has dramatic consequences for infrastructure planning and managing energy systems. A focus on infrastructure and system management lends itself to a more centralised approach, with a substantial decision-making role for local authorities, for example. On the other hand, the transformation in heating will also mean changes to how comfort is provided in every home and building across the UK. Not giving consumers enough say in this could severely hinder progress.
This not just a technical or economic question, but a deeply political one, which is why working with politicians, such as Dan Byles MP and Jonathan Reynolds MP, is a critical part of the Future Heat Series. With thinking about heat policy at an early stage, there is a great opportunity to build consensus politically and across industry, so that more effort can be spent finding solutions to difficult challenges.