‘Green Day’: Could the government’s leaky energy efficiency policy hamper UK heat pump hopes?
A number of positive interventions on clean heating in the government’s revamped Net Zero Strategy were overshadowed by underpowered progress on energy efficiency
So large was the avalanche of UK government climate policy announcements that made up ‘Green Day’ last week – some 44 documents running to 2,840 pages in total, according to Carbon Brief – that for most green figures without the time or wherewithal to go through them all with a fine tooth comb, it will have been extraordinarily difficult to navigate quite what was new, what was rehashed, what was disappointing, and what was genuinely promising for Britain’s burgeoning green economy.
It meant that, within the veritably thick stew of policy documents published last Thursday, while there were certainly a number of welcome interventions designed to accelerate uptake of low-carbon heating technology in the UK’s carbon-intensive homes, such progress was also overshadowed by both the overwhelming deluge of wider green policy announcements, and the government’s underpowered support for a green home energy efficiency retrofitting, even despite the clear benefits for energy security and meeting climate targets.
One of the more notable announcements last week was the government confirming plans to “rebalance” gas and electricity bill costs, in order to make low carbon heating technologies more affordable and attractive for households. In line with a recommendation in Chris Skidmore’s Net Zero Review earlier this year, the government has agreed to to develop an approach next year for shifting policy costs – such as funding for fuel poverty support and renewables subsidies – away from electricity bills towards gas bills, with a view to implementation in the tail end of 2024.
The move marks a major win for campaigners who have long warned additional levies on electricity bills act as a deterrent for the uptake of electric heat pumps, even if some continue to argue a more progressive policy option would be to pay for such levies and policy costs through general taxation rather than bills.
In addition, the government said it would be advancing plans to introduce a requirement for boiler manufacturers to make rising minimum proportion of alternative low-carbon heating systems – such as heat pumps – from 2024, akin to the Zero Emission Vehicle mandate being developed for car manufacturers in the UK. And, under current proposals for the Clean Heat Market Mechanism (CHMM) launched for consultation last week, manufacturers would be required to install 60,000 heat pumps in existing homes each year from 2024, rising ten-fold to 600,000 in 2028. To further incentivise households to purchase boilers, moreover, the government is extending the Boiler Upgrade Scheme through to 2028, in order to support more interested householders with up to £5,000 off the cost of buying and installing a heat pump.
All in all, it is unlikely to silence demand for far more policy support to ramp up the heat pump rollout – particularly given sluggish take up of Boiler Upgrade Scheme grants to date, and the pervasive lack of detail as to how its extension should be funded – but the clean heating announcements on ‘Green Day’ last week have nevertheless been granted as positive by clean energy advocates, not least the government’s decision to maintain the subsidy scheme after its new mandate on manufacturers.
For Adam Bell, former BEIS civil servant and now head of policy at sustainability consultancy Stonehaven, the latter policy is particularly significant. As he pointed out last week on Twitter, it means the Boiler Upgrade Scheme “is now a de facto subsidy for boiler manufacturers”.
Not being done with heat – the trajectory implied by the CHMM consultation indicates a de facto ban on new gas boilers by 2032. Chart below extrapolates the trajectory in the consultation until it hits the current annual boiler sales of 1.8M/year. /6 pic.twitter.com/7MU5B1vHgw
— Adam Bell (@Adam_Grant_Bell) March 30, 2023
Elsewhere, the government has stuck firmly to its “ambition” to phase out all new and replacement fossil gas boilers by 2035, although it did concede it would “further consider” the Net Zero Review’s recommendation for the date to be brought forward by two years to 2033.
While campaigners – and indeed Chris Skidmore himself – were disappointed by the government’s decision to not embrace the more ambitious phase-out date, the various policy measures designed to boost heat pump supply and demand set out last week suggest resistance is ebbing away within government to the notion that heat pumps are set to be the dominant technology in the decarbonisation of UK homes. These include the launch of the Heat Training Grant, which aims to subsidise the retraining of 10,000 workers to become low carbon heating installers, alongside a new £30m “heat pump investment accelerator” to incentivise manufacture of heat pumps, as well as the promise of a net zero investment roadmap for heat pumps.
On paper at least, the government remains committed to exploring the use of hydrogen for heating buildings, but observers were quick to spot that last week’s ‘Green Day’ documents do not rule out a scenario where the UK could reach 1.9m heat pump installations a year by 2035 – an outcome that would likely render “hydrogen-ready boilers” unable to get a foothold in the market at all. Conversely, even the government’s most bullish scenarios for hydrogen heating will depend on heat pumps outnumbering hydrogen systems by at least two to one, according to Bell.
Energy inefficiency?
However, if electric heat campaigners were cautiously optimistic in the wake of ‘Green Day‘, the same could not be said for those that had hoped the event would usher a new string of policies that would drive a step change in efforts to enhance the poor energy efficiency of homes across the UK.
Despite prior media reports suggesting they were primed for announcement by Ministers last week, the much-anticipated update to plans to establish stricter energy efficiency requirements for privately rented homes failed to materialise, and were therefore a notable omission from the various plans. The government provided few extra details on its plans to raise the minimum requirement for privately rented homes, which would see private landlords required to achieve EPC level C or above as standard for new tenancies from 2025, and for existing tenancies from 2028.
Given these proposals were first subject to consultation in 2020, there had been hopes the government’s response to the Net Zero Review would set out a timeline for their introduction in order to galvanise supply chains and jobs in home retrofits, help cut bills for renters, and shrink the emissions produced by the private-rented sector.
Experts have long warned that domestic decarbonisation targets will fail if landlords are not incentivised to insulate the homes they rent, with 19 per cent of all homes in England rented. Landlords and building companies, meanwhile, have urged government to provide more clarity on its proposals so they can prepare.
As such, the Generation Rent campaign slammed the government for missing the opportunity to give landlords a timeline to bring homes up to standard. “Everyone is still in the dark, and renters face more winters in damp, draughty homes,” it said. “The government should use this time to decide how to speed up the retrofit of private rented homes once new rules are in place. For example, grants are available for low-income households but renters can’t be expected to apply for them if their landlord can simply raise the rent or evict them to cash in on the upgraded property.”
For its part, even if it amounts to yet again kicking the energy efficiency challenge down the road, the government has promised a flurry of consultations on these policies, The government has pledged to publish a summary of the responses to its consultation on minimum energy efficiency standards for the private rental sector “shortly”, and to also launch a new consultation by the end of this year focused on improving the energy efficiency of owner-occupied homes. Moreover, it has reiterated plans to consult on the introduction of minimum energy efficiency standards for the social rented sector within six months of its Social Housing Regulation Bill coming into force, and to consult on the technical green new-build specifications for the Future Homes Standard and Future Buildings Standard this year with an aim for legislation to take effect in 2025.
Still, with roughly £2.1bn of the budget for energy efficiency promised in the government’s 2019 manifesto budget yet to be spent, the lack of fresh funds and regulation designed to encourage real world action is becoming hard to square with urgent climate, energy security and cost of living concerns.. The Energy Company Obligation (ECO+) scheme may have been rebranded as the Great British Insulation scheme last week, and expanded to target 300,000 more homes through to March 2026, but that amounts to little more than a drop in the ocean, considering the UK has up to 25 million homes that need decarbonising through better insulation and greener heating supplies.
As Skidmore himself stressed last week, pushing key decisions on energy efficiency until later this year is a major missed opportunity for government to get ahead on tackling fuel poverty and readying green retrofit supply chains ahead of next winter.
“If we’re going to have a national retrofit strategy, 300,000 extra homes being brought into scope through the ECO+ – or Great British Energy Efficiency Scheme – is welcome,” he said last Friday. “It might be a way of opening the door to a wider programme in the Spending Review in the autumn.
“But obviously there is a window of opportunity now for us to move as fast as possible.” he added. “And the more we delay the further we kick the can down the road.”
As many observers were quick to note last week, the government does increasingly appear aware – on paper at least – of the need to decarbonise heating and buildings if its climate and energy security goals are to be met. But without a clear policy roadmap backed by a decent chunk of public funding to attract consumer uptake, businesses and investors alike towards the challenge, the government’s hopes of ending fuel poverty and rolling out heat pumps risk – yet again – being left out in the cold.
