Empowering the Green Transition

11th August 2023

Introducing the Low-Carbon Heat Scheme for a Sustainable Heating Revolution

Introduction

As the world seeks to transition to a net-zero economy, reducing greenhouse gas emissions has become paramount. In the United Kingdom, heating constitutes nearly half of the fossil fuel gas consumption each year, making it a significant contributor to carbon emissions. Heat pumps offer an innovative solution to this problem, utilising electricity instead of burning gas or oil. With their remarkable efficiency, heat pumps typically consume only a third of the energy required by traditional gas boilers for the same level of heat output. The accelerating adoption of heat pumps plays a vital role in reducing the nation’s dependency on volatile global gas markets.

Why Legislation is Necessary

Heating in buildings accounts for approximately 25% of greenhouse gas emissions, according to the Government’s Heat and Buildings Strategy. To achieve our ambitious net-zero targets, decarbonising the heating sector is imperative. Moreover, the heavy reliance on fossil fuel gas for heating purposes in the UK highlights the urgency to embrace ultra-efficient electric heat pumps. These pumps efficiently transfer and intensify heat from the outside air or ground into buildings. By replacing technologies such as fossil fuel boilers, they significantly reduce energy consumption and contribute to a property’s overall energy demand reduction. As the proportion of renewable energy in the UK’s electricity generation mix increases annually, electric heat pumps become even greener, bolstering our energy security.

Electric heat pumps are lauded for their impressive efficiency, often performing at three to four times the efficiency of traditional gas boilers. However, it’s important to note that the observed efficiency advantage is influenced by the significant disparity in gas and electricity prices. While heat pumps may be more efficient, they are generally considered more expensive to run due to the higher cost of electricity compared to gas. Heat pumps are currently also significantly more expensive to install than traditional boilers which is further hampering the transition. Nevertheless, with the government’s commitment to investing in heat pump technology, reductions in the upfront installation costs, and ongoing initiatives to bridge the cost gap, these financial barriers need to be addressed through legislation.

The low-Carbon Heat Scheme

The Prime Minister’s Ten-Point Plan aims to foster the growth of the heat pump market, setting a target of 600,000 annual installations by 2028. This goal is currently ambitious as in 2022 less just over 50,000 were installed in the UK, which is less than 10% of the 2028 target. This compares to 1.3 million boilers being replaced annually shows the scale of the challenge ahead. However, the government is seeking to accelerate this through the introduction of a new Low-Carbon Heat Scheme, building upon existing policies like the Boiler Upgrade Scheme and the Public Sector Decarbonisation Scheme (PSDS) which have successfully kickstarted the UK heat pump industry.

The Government’s response to consultation unveiled preliminary plans that highlight the scheme’s core elements. The Bill for the Low-Carbon Heat Scheme will attempt to lay the foundations for this transformative initiative. Once introduced through subsequent secondary legislation it will establish an obligation for manufacturers of fossil fuel heating appliances to meet a rising standard for low-carbon heat pump sales. Manufacturers can achieve this standard by selling their own heat pumps, purchasing credits from other heat pump manufacturers, or a combination of both. The scheme offers the industry a policy framework to invest in making heat pumps more accessible and appealing to a growing number of UK businesses and households, while ensuring consumer choice remains intact.

The Low-Carbon Heat Scheme hopes to play a critical role in driving investment in the heat pump industry. By providing a supportive policy framework, it enables manufacturers to innovate, develop new technologies, and improve the efficiency and affordability of heat pumps. The scheme propels the growth of the heat pump supply chain, ensuring that it will reach the minimum scale required by the end of the decade.

Importantly, the consumer remains at the heart of this initiative. The scheme does not impose a particular heat pump brand or model on businesses and households; instead, it empowers consumers to make their own choices. By facilitating a competitive market, the scheme encourages manufacturers to continuously improve their heat pump offerings in terms of efficiency, affordability, and suitability for different types of households and buildings. This flexibility ensures that consumers have the freedom to choose the best heat pump solution that meets their specific needs.

Key Takeaways

The introduction of the Low-Carbon Heat Scheme underpins the government’s commitment to accelerating the transition to low-carbon heating and reducing our reliance on fossil fuels. By providing a clear policy framework, the scheme instils confidence in both manufacturers and consumers. It sets the stage for substantial investments in the heat pump industry, spurring innovation and technological advancements. Ultimately, the scheme paves the way for heat pumps to become the go-to choice for heating businesses and homes, contributing significantly to our collective efforts in achieving a sustainable and decarbonized future.

The scheme, coupled with other policies, predicts a significant reduction in heat pump costs in the coming years as the market matures. The government aims to achieve a 25-50% reduction in upfront installation costs by 2025 and cost parity between gas boilers and heat pumps by 2030. Various funding programs and initiatives, including reduced VAT rates, further contribute to reducing costs and scaling up the market.

Heat pumps are already widely used in countries like Norway, Sweden, and Germany. Around 90% of UK homes are technically capable of being heated with a heat pump. The recent Electrification of Heat Demonstration Project concluded that all UK housing types can accommodate heat pumps. Customer satisfaction rates have been overwhelmingly positive under the government’s Renewable Heat Incentive scheme, reflecting the effectiveness of heat pumps in keeping homes warm.

Heat pumps represent a game-changing technology for heating commercial and residential buildings, substantially reducing greenhouse gas emissions and reliance on volatile global gas markets. The UK government’s commitment to accelerating the adoption of heat pumps through legislative measures and incentives illustrates its determination to transition to a low-carbon economy. By embracing heat pumps, consumers not only contribute to a more sustainable future but also benefit from a competitive market and reduced energy costs. Together, we can build a cleaner, greener, and more secure energy future for all.