Utility Week

UTILITY WEEK | 27TH APRIL - 3RD MAY 2018 | 13 Policy & Regulation Analysis T he government is at least upfront about the problem. The Clean Growth Strat- egy, published last October, describes the decarbonisation of heat the "most dif- ficult policy and technology challenge" it faces in its efforts to meet its statutory green- house gas reduction targets. And those tar- gets look set to become even more stretching aer energy minister Claire Perry this week moved to explore the Paris climate change agreement's zero-emissions goal. The faster than anticipated switchover from fossil fuel to low-carbon generation has given the industry and policymakers a bit of breathing space to tackle the issue. The government has set itself a mid-2020s target for making key decisions about how it plans to decarbonise heat – which represents a third of UK emissions – such as the extent to which it will rely on electric heating or con- verting the gas grid to hydrogen. Transformation road map To help provide a road map for the first steps in this transformation, Energy UK published a report last week. It describes as "concern- ing" the lack of direction on heating policy from the government so far. "Whilst it would be unfair to expect government to know what mixture of low- carbon heat solutions will be deployed over the coming decades, it is important to ensure that the policy framework set out deliv- ers long-term stability and certainty," says the report. "Urgent action is needed to lay the groundwork for a regulatory and policy framework that can support the decarboni- sation of heat over the next two decades." The study focuses on the actions that should be taken by the end of the 2020s, when the UK's current generation of near ubiquitous gas boilers will have to have been replaced. The biggest no brainer or "least regrets" option, the report suggests, is a com- bination of zero-carbon building standards for new buildings and improved energy effi- ciency for the country's existing stock. Paul Clark, senior policy manager, UK and Europe, at Centrica, said at the report's launch that reintroducing zero-carbon hous- ing standards made sense because it would avoid costly retrofit work at a later date. The cost of low-carbon technologies could be integrated into the cost of new dwellings, he added. On projected build rates, about 7 mil- lion new homes will have been developed by 2050 – one-fih of the country's housing stock by the middle of this century. The flipside is that, as Mike Hemsley, senior power analyst at the Committee on Climate Change points out, "most housing in 2050 is already built". However, a com- bination of upgrading the energy efficiency of existing stock and a zero-carbon stand- ard for new build properties could reduce energy consumption by 15 per cent by 2030, he says. Other "low regrets" options could include installation of district heating systems in densely populated areas and the injection of bio methane into the gas grid, he adds. More immediately, the report urges a snap review of the renewable heat incentive (RHI) by the end of this year. Clark, who led the report in his capacity as chair of Energy UK's decarbonisation of heat working group, said the existing scheme is "drastically underperforming". A review of the scheme is "vital" this year to ensure that it delivers value for money until 2021 when it is due to be wound up. Third party investors Energy UK recommends that the scheme could be improved by allowing third party investors to pay for the upfront cost of installations. The capital costs of many low- carbon heat installations mean that a "dis- proportionate number" of higher-income businesses and customers apply for the scheme, says the report. Allowing external investors would encourage greater uptake of the scheme among lower-income businesses and customers. However, any reform of the scheme should not go down the same route as recent moves to reform the ECO by targeting house- holds in fuel poverty or off the gas grid. Eligi- bility for the scheme should be kept as wide Too late to decarbonise heat? The government has given itself until the mid-2020s to decide how it is going to decarbonise heat, and some fear a lack of policy direction. David Blackman asks if the UK has left it too late. as possible to foster the development of low- carbon heat technology supply chains. Clark said: "If we can get that work- ing better, we can start to develop a market where customers have a chance of buying a technology and they wouldn't see a big mate- rial change in terms of their bills." Big decisions The key, though, is to build up to the big decisions on how to decarbonise heat that will have to be made by the mid-2020s – such as demonstrating that hydrogen can be safely injected into the gas grid. And while the current heating system is dominated by natural gas, the future system will be a mix of different technologies with different solutions working in different areas, says Hemsley. "If you are going to convert to hydrogen, you have to convert an entire region to be cost-effective, otherwise you are going to have fewer people paying for the entire cost." However, the scale of funding for research into low-carbon shows an "apparent lack of commitment to solving the issue", says the report. The sum allocated in the Clean Growth Strategy to decarbonising heat (£227 million) is dwarfed by the £3.5 billion ear- marked for transport. So, has the UK le it too late to decarbon- ise its heating system? Zoe Guijaro, policy manager for renew- able heat and community energy at Citizen's Advice, said the government was right to take a cautious approach to the issue, given the customer backlash that the introduction of an ill-thought-through solution could spark. "It seems like slow progress, but they are being really cautious and testing out dif- ferent approaches. We've seen before that they rushed in to get the Green Deal off the ground." Hemsley said the government's mid 2020s timescale is feasible if existing research and pilot projects bear fruit. "It's not too late because if you backdate the 2050 target that is the latest you could start. It's not too late but you wouldn't want to go much later."

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