The Pump it Up campaign is calling on government to embrace early wins in the pursuit of net zero emissions by unleashing large-scale heat pump projects.
With headline policy focused on the mass roll-out of small heat pumps to replace gas boilers in the home, and with political rhetoric obsessing on the what-ifs of hydrogen, a logjam of commercial heat pump projects is building up. They were preparing to enter construction via the Renewable Heat Incentive, now being phased out.
Pump it Up members have brought forward large-scale heat pump projects in a wide variety of sectors, including retail, utilities, agriculture, housing and academia. Compared to other heat decarbonisation options, these projects are characterised by their high efficiency, high flexibility and low emissions.
With political attention elsewhere, there is currently insufficient policy support to realise this potential to any meaningful degree.
As a result, commercial-scale carbon savings, available today, are being left on the table.
Phase 1 of the campaign, in summer 2020, drew attention to the problem. Thousands of businesses, parliamentarians and consumers took part.
In 2021, as the UK prepares to host COP 26, phase 2 seeks to work with government and other interested parties on a set of solutions.
It is unquestionable that electrification will be a primary driver of heat decarbonisation. No other pathway is available today. With a growing national realisation that fossil fuel heating must be phased out, large-scale heat pump projects stand ready to play a lead role in non-domestic settings.
The Committee on Climate Change has repeatedly advised government to structure support for larger heat pump projects. Its 6th Carbon Budget, recently put before government, envisages a widespread rollout of heat pumps over the next decade. Conversely, it envisages only a modest future role for hydrogen to displace natural gas heating ‘in some buildings’.
It’s time to PUMP IT UP.
Government has many options available to it in order to break the logjam of large-scale heat pump projects. Broadly speaking, it will be necessary to combine three inputs: stick, carrot and a levelling of the playing field with high carbon incumbents.
The Pump it Up campaign aims to help government find the right combination of these three inputs. It seeks a balanced approach that will mature an immediately scalable low carbon heating industry.
The balance of three inputs
It is a given that heat decarbonisation of any kind will require political intervention.
A policy environment to unleash commercial heat pump projects will blend three complementary inputs. Dialling up any one input would allow government to dial down the others.
A level playing field
Today’s playing field artificially inflates the cost of low carbon electrical heat because the electricity bill already bears all the policy costs associated with accelerating the UK renewable power sector. In other words, the nation’s success in cleaning up power is actively discouraging the uptake of clean heat.
At the same time, the cost of high carbon gas heating remains artificially depressed thanks to decades of tax breaks.
When the former is being asked to help displace the latter as soon as is possible, this makes zero sense!
The solution? While options are many and varied, they all involve the redistribution of policy costs.
Some argue that now we are asking UK electricity to decarbonise heat as well as power, historical policy costs should be moved away from the electricity bill and into general taxation.
Others advocate that all additional policy costs associated with decarbonising heat should be allowed to accrue around a rapidly inflating gas bill.
Because of the inevitable time it will take to redistribute policy costs, we advocate a short-term fix: the introduction of a bespoke thermal electricity tariff.
Quite simply, smart meters can be geared to recognise that when electricity demand is for the purpose of heating rather than power, it should be charged at a rate free from all historical levies. This would have the immediate effect of allowing heat pumps to compete on price with gas. Even more so if carbon emissions from heating were to be taxed.
It’s abundantly clear from the experiences of the renewable power sector that for true transformation, carrot should be partnered with stick.
Updating buildings regulations to mandate reductions in carbon and NOx would lift the handbrake on the deployment of genuinely low carbon, low emission heating solutions such as large-scale heat pumps.
Government’s recent proposal to bring forward a Future Buildings Standard by 2025 is noted. As is its view of ‘an increasing role’ for heat pumps in non-domestic settings.
In their review of these proposals, Pump it Up members will be looking for greater urgency and ambition for non-domestic buildings, including retrofitting on a grand scale and the removal of barriers for customers wanting to start work immediately. Anything less risks kicking the can down a dangerous road.
Additionally, all eyes are on the forthcoming Heat & Buildings Strategy and the opportunity it presents to bring forward a regulatory framework and timetable with real bite.
The Renewable Heat Incentive was intended to provide the catalyst for 73TWh of clean heat. It is now being wound down, having delivered only 13TWh.
One factor behind this under-delivery is that in the non-domestic space, biomass projects were allowed to crowd out heat pump projects for a full decade.
In practice, large-scale heat pump projects have only benefited from revenue support from government since 2018 and the introduction of Tariff Guarantees to the Non-Domestic Renewable Heat Incentive. This triggered a step-change in commercial deployment. In less than three years, the pipeline has ballooned across a diverse range of sectors.
This experience underlines the sheer scale of unfulfilled potential that can be unlocked by appropriately designed policy support.
Rather than allowing the hard-won momentum behind large-scale heat pump projects to be stopped dead in its tracks, a temporary period of bespoke financial support for commercial heat pumps will turn market demand into gigawatts of near-term decarbonisation – this is simply unachievable with other technologies.
Government’s options here range from a ‘no regrets’ stay of execution and short-term extension to a reformed Non-Domestic RHI, to the utilisation of Climate Change Levy funds and the ‘polluter pays’ principle to help mature the non-domestic heat pump market via new revenue support and grant funding mechanisms.
In its summer 2020 report on heat pump retrofits for the Greater London Authority, the Carbon Trust recommends that the UK government delivers a successor to the Non-Domestic RHI that “continues to support the financial case for heating systems serving multiple dwellings and also supports the exploitation of waste heat sources – a new Renewable and Waste Heat Incentive”.
Why this is an impending mistake for energy policy:
Cleaning up our national heat supply is the next frontier in the race to achieve net zero emissions.
An effective ban on ‘one of the primary technologies for decarbonising heat’ is nonsensical.
The existing government support mechanism for stimulating heat decarbonisation, the Renewable Heat Incentive, has dramatically under-delivered.
Some 2 million projects generating 73TWh of clean heat were envisaged, but fewer than 100,000 projects generating 13TWh of clean heat have been delivered.
The lack of surety on offer to heat pump projects for the first decade of the mechanism, before the introduction of Tariff Guarantees, was certainly a contributory factor.
Having been crowded out in the early years by biomass projects within the RHI, and gas CHP projects without the RHI, heat pump projects have recently started to take root as a low carbon, low emission solution.
The updating of building regulations, long overdue and out of kilter with even modest decarbonisation objectives, is expected to further lift the handbrake on heat pump projects.
Clearly, increasing the pace of heat pump deployment will only be possible if the burgeoning pipeline of nationwide projects is not decimated in the interim.
Industry leaders across a range of sectors have identified large-scale heat pumps as central to their decarbonisation strategies.
The successful operation of pioneering projects over multiple years has helped to breed confidence.
An active pipeline of innovation and investment across these organisations presumes access to some form of government support following the closure of the Renewable Heat Incentive.
Ideally this would be similar in format to the RHI and make use of the significant funds unallocated by the RHI due to aspects of poor policy design.
That’s why we are challenging government to pause and re-think the future support it makes available to large-scale heat pumps.