The Climate Change Committee Report 2022: Decarbonising heat or just a lot of hot air?

Introduction

Following our recent articles which looked at the key themes arising from the Climate Change Committee's (“CCC”) 2022 Progress Report, in this our fifth article in the series, we take a more detailed look at what the report says about the decarbonisation of heat.See the previous articles on the CCC here:

1. “Actions speak louder than words”: reviewing the Climate Change Committee 2022 Report to Parliament

2. The Climate Change Committee Report 2022: is decarbonising UK rail on the right track?

3. The Climate Change Committee Report 2022: Energy Supply - A Rough Diamond

4. The Climate Change Committee Report 2022: EVs, EVCI and Buses - All aboard?

The buildings sector accounted for 20% of total UK emissions in 2021, with the biggest source of buildings emissions coming from heating. This means that decarbonising the heat sector could lead to a significant reduction of the UK's overall emissions. The Government is working on numerous policies to help achieve this, including the advancement of and improving the energy efficiency of buildings, with some progress in the form of the update to Part L of the Building Regulations. However, progress in this area in the past has been slow, with direct emissions from heating buildings not changing significantly between 2015 and 2019. The distribution of emissions in the buildings sector has also been complicated by the COVID-19 pandemic, with a fall in commercial buildings' emissions offset by a rise in residential buildings' emissions, reflecting the rise in home working since 2020.

Progress and key messages

The key messages set out in the report are:

Low carbon heat

• Heat Pumps: Going forward, the Government expects heat pumps will be the major domestic low-carbon heating technology. The Heat and Buildings Strategy and subsequent documents, set out a stated aim of installing at least 600,000 heat pumps each year by 2028, increasing to 1.9 million per year by 2035. However, the heat pump market is still a very long way from this point, with only 55,000 installed in 2021. This is due to a combination of high upfront costs for consumers and a difficulty in matching supply to demand. Despite this Government push, heat pumps are not a panacea as they are not suitable for buildings with poor thermal efficiency without associated energy efficiency measures such as insulation and updates to central heating.
• Heat Networks: The Government intends to appoint Ofgem as the heat networks regulator for Great Britain and is providing new funding through the Green Heat Networks Fund, which covers England and Wales. This follows the Heat Networks Investment Programme but imposes a requirement that all new networks use low-carbon heat sources. In England, local authorities will also receive new powers to designate heat network zones, with new homes and commercial buildings within the zones required to connect to the network.
• Biomethane: The Heat and Buildings Strategy set out plans to increase the amount of biomethane in the gas grid and aims for the Green Gas Support Scheme to deliver 2.8 TWh of renewable heat per year by 2031.
• Hydrogen: The Government has committed up to £300 million until 2024 towards various pilot programmes and innovation schemes for hydrogen, with an intention to take a decision on the role of hydrogen in buildings by 2026. The Government's Hydrogen Strategy and updates also provided details on how the Government is working with industry and regulators to evaluate the safety case, and technical and economic feasibility of blending hydrogen into the existing gas network.

Energy Efficiency

• Existing Homes: The Government's overarching target is for most homes to achieve at least an EPC “C” rating by 2035, but there are not yet firm policies or consultations on how this will be achieved for most existing homes. Positive progress includes additional funding for the Social Housing Decarbonisation Fund through to 2025. A commitment to finalise proposals made in 2020 to increase minimum energy efficiency standards for the private rented sector to an EPC “C” rating by 2030 is over a year behind schedule.
• New Homes: The UK continues to build new homes to standards which do not align with the net zero target. However, the recent update to Part L of the Building Regulations pursuant to the Future Homes Standard has marked a shift towards both low-carbon heating and high levels of fabric efficiency in new homes. These changes will have greater impact upon full implementation of the Future Homes Standard in 2025. The Government has also introduced interim building standards to manage the transition, but these can currently be met without low-carbon heating.
• Non-residential buildings: There are also key policy gaps in non-residential buildings. Committed Government funding to decarbonise public buildings covers less than a half of the upfront costs of achieving the Government's 2037 target to reduce emissions from public buildings by 75% compared to 2017 levels. The proposed phase-out date for new gas boilers in non-residential buildings is also too late to be compatible with the Government's net zero targets. One bright point in this area is the upcoming introduction of the Future Buildings Standard, which will require commercial buildings to use low-carbon heat.

CCC Recommendations

Based on these messages, the CCC has made a number of recommendations to Government, including:

• Energy prices: Ahead of this coming winter, the Government should set out its plans to reform electricity and gas pricing to remove current market distortions, which create a significant barrier to the uptake of electrified heat. There has been recent movement in this area, with the Government's energy relief support schemes for consumers and businesses which cap the unit price of electricity and gas separately. Whilst this will help avoid some of the worst economic and social consequences of the energy crisis, the Government also needs to consider increasing funding and accelerating plans for energy efficiency policies, particularly in fuel poor homes, to keep emissions and energy costs down in the long term.
• Energy efficiency: The Government must address the policy gap for energy efficiency in owner-occupied homes and commercial buildings. For homes, this could include a policy requiring EPC C from 2028 at the point of sale and/or a mandatory minimum requirement for mortgage lenders. It should also set clear energy efficiency standards for social homes and deliver the legislation for energy efficiency improvements in the private rented sector.
• Heat pumps: The Government should publish detailed plans about how its proposed market-based mechanism will work. This should clarify how the boiler manufacturers' obligations will be implemented and enforced, and what powers are needed to regulate the market. The Government then needs to start implementing these policies to support growth of the heat pump market. One way in which the Government is already doing this is via the Heat Pump Ready Programme which incentivises innovative solutions across the heat pump sector.
• Heat networks: The Government needs to deliver on proposed legislation for heat networks. This includes empowering Ofgem as the regulator for heat networks and establishing a clear statutory framework for the industry and heat network zoning.

Conclusions

The CCC is suitably downbeat about the progress made to date on the decarbonisation of heat and it is hard to overstate the scale of change needed in this area. However, we are starting to see some promising policies being translated into legislation.In particular, the Energy Bill 2022 and the updates to Part L of the Building Regulations do represent steps forward. One key aspect of the Energy Bill is that it provides for the regulation of heat networks, which the Government intends to introduce by 2024. This will facilitate the implementation of heat networks in many parts of England and Wales whilst protecting consumers. Whilst the Energy Bill is notably light on the decarbonisation of heat networks, this is partially addressed in Part L of the Building Regulations which will set tight controls on the emissions allowed for new buildings from 2025 onwards. Taken together, along with the Government's plans for the heat pump market, this could begin to shift the sector in the right direction. However, as noted by the CCC, timescales are key and it remains to be seen whether changes will be made quickly enough to achieve net zero.

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