Future of low carbon heat for off gas buildings - call for evidence: analysis of responses

Executive Summary

This summary sets out key findings from analysis of responses to the Energy Efficient Scotland call for evidence: the future of low carbon heat for off gas buildings. The call for evidence opened on 26 March 2019 and closed on 17 June 2019. The call for evidence paper is available at: https://consult.gov.scot/better-homes-division/the-future-of-low-carbon-heat.

A total of 54 responses were received, of which 50 were from groups or organisations and 4 from individual members of the public. Responses varied in format and focus. Some responded across all questions while others were primarily concerned with specific low carbon technologies (often reflecting respondents’ areas of operation and expertise). Responses were also varied in the extent to which they cited specific evidence and/or expressed opinion. This summary considers key themes emerging across responses, while the remainder of this report sets out responses to each question in turn.

The role of policy and regulation

Policy and regulation were seen as having a key role to play in supporting deployment of low carbon heat in off-gas buildings. There were calls for consistent, long-term policy to provide the stability and certainty required to encourage investment, and to provide a clear statement on the role of a range of heat technologies. This included setting clear targets for deployment of low carbon heat, provision of financial and other support to facilitate uptake, and guidance or standards to ensure high quality installations that deliver the required carbon reduction.

While there was support for the Scottish Government’s policy approach, some perceived a lack of clarity around policy timescales. Respondents suggested that clear interim targets were required to allow stakeholders to plan investment, and provide time to build consumer confidence. This included calls for a firm end-date for new high carbon heat installations, and subsequent dates for conversion of existing systems.

Financial support for low carbon heat was also perceived as a key aspect of the policy framework. Uncertainty around the future of the UK Government’s Renewable Heat Incentive scheme (RHI) post-2021 was a key concern, with some suggesting this was limiting industry investment. This reflected a common view that there is a continuing need for financial support for deployment of low carbon heat. This was seen as a particular issue for lower income and fuel poor households and those in buildings with poor energy efficiency, for whom installation costs were regarded as a key barrier to deployment. Respondents supported use of a range of financial mechanisms to support uptake of low carbon heat, including:

• Government grants and subsidised loans, including larger upfront payments to overcome installation cost barriers;
• Other public finance mechanisms such as scrappage schemes, tax reliefs and Government-sponsored mass purchase;
• Private finance such as low and zero interest financial products, including long-term loans and green mortgages; and
• Wider reform of fuel taxation to penalise high carbon fuels.

In addition, respondents suggested a range of other policy and regulatory changes to support deployment of low carbon heat:

• Building regulations requiring new build and major renovations to incorporate low carbon heat, or to be ‘future proofed’ for subsequent deployment;
• Revision to the EPC framework, placing more emphasis on carbon emissions;
• Requirement for installers of ‘traditional’ heating systems to include low carbon options when quoting for heating system replacement; and
• Better signposting of independent advice and information for consumers.

Consumers and low carbon heat

A lack of consumer awareness and understanding of low carbon heat was described as having been a significant barrier to its deployment. This included some who perceived a lack of public understanding around the rationale for decarbonisation of heat and the need for urgent action.

Respondents saw consumer ‘inertia’ regarding change of heating systems as reflecting this lack of understanding. This included reference to low consumer awareness of available low carbon technologies, and a lack of clarity on the relative heat performance, reliability and cost of low carbon heat. Respondents also suggested there are negative consumer perceptions around some low carbon heat technologies, particularly heat pumps. Some suggested that unrealistic performance and cost estimates from installers, and a lack of training on use of new heating systems, had contributed to ‘bad press’ around some technologies.

Some suggested that consumer awareness had improved in recent years, but overall there was a view that further action is required to improve understanding and acceptance of low carbon heat, if policy targets are to be met. Respondents saw a need for varying approaches to achieve this change:

• Scottish Government communicating its approach to low carbon heat in a way that engages consumers, ‘normalises’ low carbon heat, and makes clear the need for urgent action in decarbonising heat in Scotland.
• Provision of high quality information and advice on low carbon heat technologies. This included reference to the role of installers in providing information on low carbon heat technologies. Some saw a need for industry standards to ensure the accuracy of information and performance/cost estimates provided by installers.
• Improving consumer access to independent information and advice on low carbon heat, particularly at key ‘trigger points’ such as failure of current systems, major renovation and house moves. Respondents saw a potential role for a range of organisations in provision of independent information and advice. These included Home Energy Scotland, Citizens’ Advice and other third sector organisations. Some also saw a need for a reliable, impartial online source of information and advice, and a standardised consumer information pack was suggested.

Changes to further strengthen consumer protections around low carbon heat were also suggested. Some wished to see the Scottish Government engage more with the UK Government (particularly the Department for Business, Energy & Industrial Strategy), Ofgem and industry to strengthen consumer protection in heating. Guidance and licensing were also supported as a means of providing consumer protections. This included reference to existing standards and accreditation schemes across the UK.

Costs of low carbon heat

Cost was perceived by respondents as a key factor for the decarbonisation of heat in Scotland. This included the potential for capital and running costs to inhibit uptake of low carbon heat, and a perceived tension between the decarbonisation of heat and ongoing work to address fuel poverty.

Capital costs were seen as a significant barrier to adoption of low carbon heat. Respondents cited varying installation costs but overall these were described as higher than high carbon systems, particularly for retrofit to existing buildings. Some suggested that consumers switching to low carbon heat are likely to have to meet substantial upfront costs (including those who receive public funding). ‘Demand risk’ was also seen as a key factor limiting installation of heat networks; respondents suggested that uncertainty around the number of consumers likely to connect had undermined the economic case for some heat networks.

It was suggested that low carbon technologies can deliver reduced running costs in some circumstances. However, respondents also suggested that running costs are highly sensitive to factors such as building energy efficiency and current heating systems. Some expressed a view that low carbon heat will require subsidy in many circumstances to achieve positive whole-life economics relative to existing systems.

Respondents saw potential for costs to reduce as technologies and the supply chain mature, although this varied by technology. Moreover, some suggested that decarbonising heat would lead to increased heating costs for consumers in the short to medium term. Some saw potential for ‘pushback’ from consumers who may be more motivated by short-term costs than longer-term societal benefits. In this context, respondents saw a continuing need for public financial support.

Some expressed concerns that fuel poverty could be worsened by the higher installation costs and potentially increased running costs of low carbon heat. This was regarded as a particular issue for ‘hard to treat’ buildings and rural areas. Few respondents cited specific evidence on use of low carbon heat for fuel poor households, although some examples of cost savings achieved by low carbon heat were cited. Overall, respondents saw a need for targeted financial support to mitigate any negative impact on fuel poverty. Respondents also regarded advice and support as important in enabling fuel poor households to choose and operate the most suitable low carbon technology.

Other barriers to delivery of low carbon heat

Respondents suggested a range of other barriers to uptake of low carbon heat. These were primarily related to building-specific and infrastructure constraints, and cost pressures associated with some low carbon technologies.

The most commonly suggested constraint related to the relatively poor energy efficiency of off-gas housing stock in Scotland. Respondents referred to the large proportion of off-gas buildings in rural and island locations as being subject to poorer energy efficiency levels, and to the prevalence of ‘hard to treat’ build types. These factors were seen as undermining the viability of some technologies, and/or requiring costly energy efficiency improvements alongside installation of low carbon heat. Other technical and infrastructure constraints suggested by respondents included:

• Disruption associated with some installations, for example where new heat emitters or ground source collectors are required.
• A limited installer base for some technologies restricting access to low carbon heat, and undermining consumer confidence for example around access to ongoing maintenance and repair services. This was seen as a particular issue in rural areas and islands.
• Restricted electricity grid capacity in some locations limiting potential scope for, or increasing the cost of, deployment of electric low carbon heat.

Gaps in knowledge and the need for further research

Respondents highlighted perceived gaps in knowledge around low carbon heat, and recommended specific areas for further research.

This included technologies where a small install base and/or the speed of development were seen as limiting available evidence, such as hybrid heat pump systems and bioenergy. Some saw a need for more evidence on the relative performance and costs of these technologies. Respondents also recommended further research and demonstrator projects across a number of emerging technologies such as battery storage, fuel cell technology, localised production of low carbon heat sources, and new biofuels. In addition, respondents cited relatively little evidence in relation to some aspects of the call for evidence. This may imply a need for further research in relation to the lifecycle of heat pumps, and customer satisfaction with low carbon heat.

Electrification of heating

There was support across respondent groups for a range of low carbon electric heating technologies including electric heat pumps, hybrid heating systems, heat networks using electric heat sources, and electric storage heating.

However, some respondents raised concerns regarding the feasibility or desirability of decarbonising heat primarily or wholly via electrification. This was explicit in responses to some aspects of the call for evidence, such as electricity grid capacity being suggested as a barrier to deployment of low carbon heat in some locations.

Respondents suggested a number of approaches to mitigate grid constraints on deployment of electric low carbon heat. Managing peak electricity demand was seen by some as a key focus if electrification is to play a significant role in decarbonising heat. Some expressed support for integrated systems in making best use of available energy infrastructure, and the importance of taking a ‘whole system approach’ including use of a range of energy sources. Some also saw a need for further work to understand the potential role of different technologies in balancing demand. Other specific suggestions included on-site or localised energy generation, use of thermal and electrical storage, smart controls and demand side management, and ongoing trials of smart grid solutions.

Concerns regarding electrification were also implicit in some respondents’ focus on the potential role of other energy sources in decarbonising heat. This included reference to bioenergy technologies as lower carbon options than current off-gas heating systems, and some support for continued extension of gas networks. However, others wished to see a limit to gas grid extension until proven low carbon gas solutions are available, and some raised concerns that continued extension will delay deployment of low carbon alternatives.

Bioenergy and low carbon heat

Support for bioenergy as part of the approach to decarbonising heat in Scotland included reference to a number of specific benefits. Respondents suggested that installation costs are relatively low for some forms of bioenergy, and suggested that bioLPG can be ‘dropped in’ to existing LPG systems with minimal installation or conversion costs. Potential for bioenergy to reduce carbon emissions while minimising disruption to consumers was seen as a key benefit. This included the suitability of bioenergy for high temperature heating systems. Some respondents also suggested there is substantial bioenergy feedstock capacity within Scotland, including opportunities for use of local fuel supplies.

Call for evidence questions on bioenergy were a particular focus for private sector respondents active in the bioenergy sector. These respondents’ support for bioenergy was also evident across other parts of the call for evidence, such as in overcoming potential constraints on low carbon electric heating, and mitigating the impact of decarbonisation on fuel poverty. These respondents wished to see a clear policy statement on the role of bioenergy in decarbonising heat in Scotland.

Other respondents suggested potential barriers to use of bioenergy to decarbonise heat. These included suggestions that installation costs are higher for biomass and some bioliquids, concerns around availability of consistent feedstock supply limiting consumer confidence, fluctuation in fuel costs as a risk to consumers, limited bioenergy supply chains in some parts of Scotland, and air quality concerns inhibiting uptake (although this was seen as a lesser issue for rural off-gas areas).