Utility Week

UTILITY WEEK | DECEMBER 2021 | 23 Policy & Regulation it's not ready for prime time yet," he says. This shi in spending priorities appears to re ect a broader government faith in tech- nological solutions evident across the wider Net Zero Strategy and exempli• ed in this case by heat pumps. But the £450 million ear- marked for the Boiler Upgrade Scheme can be expected to support only around 90,000 installations over the next three years, which is a small fraction of the 600,000 Boris John- son wants to see rolled out annually by 2028. "In the short term, the funding for heat pumps is still limited," says Lowes. However, the size of the pot makes more sense if viewed as a way of fostering con• - dence in the heat supply chain rather than direct delivery of the prime minister's target, says Bell. "They want the most well-o' peo- ple to pay the higher cost upfront to enable the market to develop and for the cost to come down so the least well-o' can buy them." The key driver behind delivering the 600,000 target looks more likely to be man- dating boiler manufacturers to ensure a pro- portion of the devices they manufacture are heat pumps, proposals for which were out- Is there a future for gas? The implications for the gas network of a shi to a more electri ed heating have yet to be confronted even now that the House and Buildings Strategy has been published, according to the BEIS department's ex- director of clean growth. Giving evidence to the House of Lords industry and regulators committee's ongoing inquiry into Ofgem and net zero, Tony Blair Institute senior fellow Tim Lord said: "If we are moving away from the gas network, it's a huge strategic challenge. We need to be thinking pretty hard and quickly about the future of the gas network. "If we are electrifying vast majority of our heat, the pro le of heating demand is going to be very di‡ erent. We need lot more clarity over the next few years." However the EUA's Mike Foster believes the strategy o‡ ers a lifeline for the UK's gas networks. He says the government's decision to push ahead with industrial carbon capture clusters could provide a launchpad for hydro- gen to be rolled out within surrounding gas networks for domestic use. On top of that, many other homes will be unsuitable for heat pumps because they will be too costly to insulate while others will lack the space to accommodate the retro tting of internal infrastructure like cylinders that will be required to store hot water, Foster says: "You only have to do the maths to recognise that the government may see this [gas net- works] as a simpler solution." Envisaging that more than 50% and perhaps up to 70% of homes will still be run on some form of gas heating, he says: "The networks will have long-term future delivering gas into peoples' homes." lined in a consultation paper issued along- side the strategy. "This gives government time to get its longer-run plan up and running," says Bell. And while the mandate could ramp up the supply of heat pumps, it will not necessarily increase demand, which will rely on the cost of buying and running heat pumps coming into line into with those of gas boilers. Bell says it is "eminently doable" that the price of heat pumps could be reduced by a quarter, which is the bottom end of the gov- ernment's anticipated cost reduction. But it is "di" cult to believe" in the more optimis- tic predictions that costs can be reduced by half. "You can never rule out technological breakthroughs, but these will still be rela- tively complex devices," he says. And given the much bigger numbers of heat pumps that have already been deployed in continental Europe, Foster questions why the government's subsidy for 90,000 devices will result in a signi• cant price drop. The big target In terms of the government's overall target of 600,000 heat pumps by 2028, Beanland reckons it is achievable via a combination of the Boiler Upgrade Scheme, the social hous- ing decarbonisation programme, the roll out of the devices in o' -gas-grid properties and moves to ban gas boilers in new-build homes. However, the 600,000 target remains an "optimistic" one, says Lowes. "It's a big chal- lenge to get there." The key pressure point will be in two years' time, he says: "In 2023 and 2024, we might get into period where we are not see- ing the growth we need." Beyond this date, Lowes envisages that the mooted market mandate will be the key mechanism for delivering heat pumps. Refer- ring to the mechanism to force boiler manu- facturers to ensure that a proportion of their output is heat pumps, he says: "They think they can get away with using regulation to • ll in market failures." "This means no additional cost on con- sumers until at least 2025 when the mar- ket mechanism policy comes into place," says›Bell. However, this timetable means that the heavy li ing in terms of heat has been put o' until a er the next election, which must hap- pen by the end of 2024, says Bell: "A lot will be happening in the middle of the decade, which feels like cutting it • ne, but I suspect that it is driven by electoral politics rather than the policy itself." David Blackman, policy correspondent "If I had £450 million to spend, I would spend it on energy effi ciency for arguably a better payback on carbon and bill savings." Mike Foster, CEO, Energy and Utilities Alliance payback on carbon and bill savings." Mike Foster, CEO, Energy and Utilities Alliance

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