Decarbonising Heat Through Holistic Policy - Insulation The Complementary Nature of Energy Effi ciency and Low Carbon Heat - Kingspan | Group
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Insulation Decarbonising Heat Through Holistic Policy The Complementary Nature of Energy Efficiency and Low Carbon Heat
Contents
Page
Executive Summary 3
Current Challenges and Opportunities 8
Heat Decarbonisation Options 16
Implications for Policy 20
Policy Recommendations 22
Kingspan: We are Planet Passionate 25
Annex - Data Table 26
References 27
2
Executive Summary
Decarbonising the Housing Stock is Critical to Fuel Poverty
Net Zero In England, fuel poverty currently impacts approximately
2.5 million householdsvii. According to National Energy Action
In June 2019, legislation was passed, which places a legal (NEA), if the additional total costs of heat decarbonisation
obligation on the UK Government to achieve net zero schemes are recuperated via increased energy bills, averaged
emissions by 2050i. The decarbonisation of the UK housing across a 20-year timespan, there could be between 0.6 million
stock is a significant challenge in the route to meeting the to 2.6 million additional homes living in fuel povertyviii.
UK Government’s 2050 Net-Zero Targetii. In fact, according
to the Energy Saving Trust, household emissions from heating As noted above, decarbonisation of domestic heat has the
and hot water must reduce by 95% to reach the 2050iii target potential to impact on fuel poverty. In terms of a direct
and, in England alone, the energy efficiency of over 10 million impact, all forms of low carbon heat typically have a higher
owner occupied homes and 3 million private rental properties lifetime cost than natural gasix. Ensuring that a property is
needs to be improvediv. well insulated enables the same levels of thermal comfort to
be attained with reduced energy demand, thus reducing the
Current Progress is Inadequate operating costs.
Although emissions from buildings have fallen by 14% in the Domestic heat decarbonisation can also have an indirect
last decade, the scale and pace of this transition needs to impact on fuel poverty. According to research conducted by
accelerate rapidly. A UK Energy Research Centre (UKERC) the Climate Change Committee (CCC), low carbon policies
report indicated that it would take over 235 years to reach are likely to add up to £225 to the annual average bill by
zero emissions from buildings at the current ratev. The 2030x. However, crucially, energy efficiency improvements can
Environmental Audit Committee’s (EAC’s) report on the mitigate this by reducing household electricity consumption
Energy Efficiency of Existing Homes notes that “the retrofit and ensuring that households are less vulnerable to price
of the existing housing sector needs much greater focus shocks.
and is at risk of letting the rest of the economy down on
Ensuring people live in healthy and affordable homes has
decarbonisation.”vi
become increasingly important in the context of the Covid-
People Must be Protected in the Transition 19 pandemic. The Covid-19 pandemic and fuel poverty are
interconnected through two negative synergies. Firstly,
Long-term policies are needed urgently to unlock the scale the number of households living in fuel poverty is likely to
required to meet the challenge. However, the rapid roll out increase as a result of rising unemployment. Secondly, there
of low carbon heat, without due consideration for issues is significant evidence that cold homes are more susceptible
such as fuel poverty and wider energy security, could have to damp and mould growth which can increase the incidence
significant implications that could prevent us from reaching of respiratory problems; by contrast, well insulated and well
our goal. Ensuring that the fabric of the building is addressed ventilated homes reduce these risks.
prior to the installation of low carbon heat, via the adoption
of a fabric first approach, can help to mitigate against these
implications.
i Institute for Government. UK Net Zero Target.
ii Climate Change Committee. Reducing UK Emissions - Progress Report to Parliament.
iii Energy Saving Trust. Significant Changes are Coming to the UK Heating Market.
iv Environmental Audit Committee. Energy Efficiency of Existing Homes.
v UKERC. The Pathway to Net Zero Heating in the UK. London: UKERC.
vi Environmental Audit Committee. Energy Efficiency of Existing Homes.
3
Executive Summary
Wider Energy Security Addressing the Fabric First is Key
The CCC published a report on the Sixth Carbon Budget and
under the Committee’s Net Zero Balanced Pathway, heat Kingspan Insulation, alongside numerous industry bodies
pumps form approximately three-quarters of low carbon including the Sustainable Energy Association (SEA), the
heat installation sales by 2030xi. Beyond the decarbonisation Passivhaus Trust and the UK Green Building Council
of domestic heat, electrification is likely to play a key role in (UKGBC) advocate for a fabric-first approach to building
transport and industrial decarbonisation. To meet net zero, decarbonisation. With a fabric first approach, the demand
electrification must be combined with grid decarbonisation, for heat is reduced with energy efficiency improvements,
which will involve an increase in the penetration of variable prior to or alongside, the installation of a low-carbon heating
and intermittent renewables. Rising demand in combination system. While renewable energy supply and low carbon heat
with increased variability of supply could have a significant are crucial tools for reducing UK carbon emissions, reliance
impact on national energy security. However, domestic on such systems without also reducing energy demands will
energy efficiency improvements can ensure that the peak result in failing to achieve our climate change targets.
demand from domestic buildings is minimised, such that a Various organisations have explored routes to net zero in
smaller system with a lower cost may be installed. great detail and beyond addressing the fabric of the building
According to the UKERC, the benefits that could be unlocked envelope and installing low carbon heat, it is important to
as a result of energy efficiency improvements are significant; consider other mechanisms to reduce energy consumption
if all properties within the UK reached EPC Band C, the energy and reduce carbon emissions. Other solutions may include
saving would be equivalent to the annual output of six Hinkley smart control systems, the installation of efficient building
Point C power stationsxii. services and onsite renewable electricity generation. The
Figure below presents a ‘net zero home’ which outlines some
UK FIRES investigated the feasibility of ‘absolute zero’ by of the key technologies that may be present within the home
2050; that is, achieving zero emissions, without the use of of the future.
Negative Emissions Technologies (NETs). The study found
that if the UK electrified all possible aspects of the UK
economy and expanded renewable electricity generation at
current rates, there would be a projected shortfall in required
electricity generation demand of approximately 40%xiii.
vii Institute for Public Policy Research. Beyond ECO: The Future of Fuel Poverty Support. London: IPPR.
viii National Energy Action. Heat Decarbonisation: Potential Impacts on Social Equity and Fuel Poverty.
ix National Energy Action. Heat Decarbonisation: Potential Impacts on Social Equity and Fuel Poverty.
x The Committee on Climate Change (CCC). Energy Prices and Bills - Impacts of Meeting Carbon Budgets.
xi The CCC. The Sixth Carbon Budget.
xii Energy Efficiency Infrastructure Group (EEIG). Energy Efficiency’s Offer for a Net Zero Compatible Stimulus and Recovery.
xiii UK FIRES. Absolute Zero.
4Executive Summary
The Net Zero Home
1
6 4
3
5 8 2
7
1 Solar PV 4 Smart Meter 6 Insulation
2 EV 5 Smart Appliances 7 Air Source Heat Pump
(Fridges, Speakers, Lights, TVs)
3 Efficient Windows and Doors 8 Hot Water Cyclinder
A Fabric First Approach Delivers Multiple Benefits to the installation of a heat pump, as part of a fabric first
approach, delivers significant benefits. In particular, the
Given the benefits associated with a fabric first approach potential to save up to £1,500 on unsubsidised annual thermal
identified through a review of the relevant literature, analysis energy costs whilst saving over 16 tonnes CO2e over a 36 year
was conducted in order to further quantify these benefits. The period. The consumer could also experience significant savings
analysis conducted found that for the archetype examined, in net present cost due to a lower cost heat pump combined
the installation of External Solid Wall Insulation (ESWI) prior with energy bill savings.
Financial and greenhouse gas emission net present cost
£80,000
£70,000 £67,613
£1,830
£60,000
Net present cost
£50,000
£37,697
£40,000 Net present emissions cost
£748
£65,783 Net present financial cost
£30,000
£20,000
£36,949
£10,000
£0
Scenario 1 (without solid wall Scenario 2 (with solid wall
insulation) insulation)
5Executive Summary
On a national level, if all the solid walled properties that are A Long Term, Stable Policy Framework is Required
currently uninsulated were insulated before installation of a
heat pump, up to 48 TWh of annual electricity consumption Industry is primed to deliver the transition and unlock the
and over £8.9 billion in annual fuel bills in England could be benefits associated with a fabric first approach. However, a
saved. long-term holistic approach to policy is required, to provide
industry with the certainty it needs to grow and upskill.
Beyond delivering emissions savings and mitigating against
the impacts of heat decarbonisation on fuel poverty and Whilst the Green Homes Grant was welcomed by industry,
wider energy security, a fabric first approach has significant flaws in the delivery of the scheme have been damaging to
wider benefits, often classified as ‘Non-Energy Benefits the sector and there is a need to develop a long term, stable
(NEBs)’. policy framework to enable the energy efficiency sector to
grow sustainably. Ultimately, this support will be critical to
1. Improved productivity, as a result of fewer cold-related ensuring that at least 19 million homes in the UK can be
illnesses; retrofit to become energy efficient, low carbon and resilient to
the effects of climate changexiv.
2. Increased employment opportunities, due to the
requirement for a large skills base to retrofit properties; The research and analysis presented within this report
provides a clear case for the adoption of a fabric first
3. Improved educational attainment, due to improved child
approach and this is of particular importance considering
health;
the poor state of the housing stock. However, to date,
4. Increased disposable income, as a result of a lower government policy has failed to encourage the adoption
proportion of household income being directed towards of this approach, with schemes such as ECO driving the
energy bills. installation of single measures thus failing to ensure that
properties are prepared for the installation of low carbon
heat.
The Government has highlighted a need to ensure future
options for long term heat decarbonisation are not ‘closed
off’xvi. However, this is not an excuse for inaction. A ‘fabric
first’ approach is inherently technology agnostic providing
benefits to occupiers, irrespective of the low carbon heat
technology employed. This is evidenced by a recent UKERC
study which found that insulation is a cost-effective
mechanism for emissions abatement under all approaches
modelled within the study, consisting of varying technology
mixes, including gas, heat pump and hydrogen scenariosxvii.
To this end, this report concludes by setting out key policy
asks to support the implementation of a fabric first approach.
These recommendations are summarised below, with further
detail provided in Sections 4 and 5 of this report.
xiv Environmental Audit Committee. Energy Efficiency of Existing Homes.
xv BEIS. Energy Company Obligation ECO3: 2018-2022 Final Stage Impact Assessment.
xvi UK Government. Heat in Buildings.
xvii UKERC. 2020. The Pathway to Net Zero Heating in the UK. London: UKERC
6Executive Summary
Recommendations Building Assessment and Regulations
A Replacement for the Green Homes Grant 1. Introduce additional trigger points for EPC assessment
a. Major renovations, including extensions
1. Introduce a stable, long term replacement to the
Green Homes Grant. b. Minor renovations, including replacing windows
c. Marketing of a property
2. A replacement scheme should, ideally, be a multi year
scheme, for at least the life of this parliament and d. Application for green finance
should look to build upon learnings from the Green Target for Action: March 2022 & Responsible Actor:
Homes Grant to drive a fabric first approach. BEIS/MHCLG
3. The scheme should provide upfront support for 2. Introduce Building Renovation Passports (BRPs) and
households to enable the installation of energy mandate for live renovation roadmap as part of BRPs.
efficiency measures alongside the Clean Heat Grant. Make preparations to ultimately introduce the same
Target for Action: End of 2021/ Early 2022 & trigger points as for EPC Assessment in the long term.
Responsible Actor: Central Government Target for Action: 2021 & Responsible Actor: BEIS/
MHCLG
Home Upgrade Grant
Mandate the delivery of multiple measures to ensure Clean Heat Grant (CHG)
off-grid properties are future proofed for the wide scale 1. Introduce mandatory home assessment (including
adoption of low carbon heat. heat loss calculations) under the Clean Heat Grant
Target for Action: 2021 & Responsible Actor: Central to ensure properties are adequately insulated prior to
Government funding being awarded. Reduce the permitted heat
loss requirements with exemptions made only in cases
Energy Company Obligation (ECO) where insulation cannot be reasonably improved (e.g.
heritage homes).
Introduce ‘multiple measures’ obligation under ECO4 to
ensure properties are adequately insulated prior to the 2. Increase the minimum SPF under the Clean Heat
wide scale adoption of low carbon heat. It should be Grant to above 2.5.
ensured that the worst properties are targeted first and
Target for Action: March 2022 & Responsible Actor:
that suppliers are obliged to install measures that have
BEIS
previously been avoided, such as ESWI.
Target for Action: March 2022 & Responsible Actor: The Able to Pay Sector / Green Finance
BEIS Utilise the results of the Green Finance Strategy Review
to implement measures to support the ‘Able to Pay’
sector in advance of the introduction of regulation.
Specific mechanisms may include green mortgages
awarded on the basis of improvements in line with BRPs;
following a renovation roadmap should drive ‘wrap then
heat’. There is also potential to consider how a more
centralised finance model, such as that developed by
Bankers without Boundaries (BwB), could be supported.
Target for Action: 2021 & Responsible Actor:
BEIS / Treasury
7Current Challenges and Opportunities
Net Zero Target is currently inadequate2. Under the Sixth Carbon Budget
Net Zero Balanced Pathway, heat pumps are the dominant
In June 2019, legislation was passed, which places a legal technology, representing approximately 75% of low carbon
obligation on the UK Government to achieve net-zero heating system sales by 2030 with roughly 34% of emissions
emissions by 20501. According to the Committee on Climate abatement in buildings up to 2030 coming from energy
Change (CCC), the decarbonisation of heat is an essential efficiency improvements3.
part of achieving net-zero and policy to support this transition
Suitability of UK Housing Stock
for Low Carbon Heat
16% 19%
65%
District heating Air source heat pump Other
Figure 1 - UK Housing Stock Suitability for Low Carbon Heat According to the CCC’s Sixth Carbon Budget.4
The Balanced Pathway Scenario of the CCC’s Sixth Carbon Heat pumps are an efficient way to decarbonise heat with
Budget sees electricity demand in residential buildings reported mean efficiencies between 320% and 350%6,
increase by 87% between 2020 and 20505. This increase is meaning for every unit of electricity supplied 3.2–3.5 units of
primarily due to the deployment of heat pumps and already heat are produced. Electrification of heat through heat pumps
takes into account the retrofit of a range of energy efficiency takes advantage of the increasing amount of low carbon
measures which reduce demand. For example, in this Scenario electricity available. The UK’s share of low carbon generation
there are 3.4 million floor insulation, 3.1 million cavity wall is continuing to rise; 2020 saw the most significant year on
insulation, 3.4 million solid wall insulation and 10.8 million year rise in renewable electricity generation in history, with
roof insulation measures installed by 2050. Without this renewables overtaking fossil fuels to become Britain’s largest
nationwide retrofit, electricity demand would be significantly source of electricity generation7. In total, low carbon sources,
higher. including Nuclear, formed 59% of electricity generation in
20208. Given the high efficiencies associated with heat pumps,
large scale deployment of this technology could allow the UK
to make use of increased renewable capacity in an effective
way, both now and in the future. However, interventions to
decarbonise heat and reduce building emissions, without due
consideration for demand reduction, could have significant
implications for fuel poverty and wider energy security.
8Current Challenges and Opportunities
The CCC see a smaller role for hydrogen, however there 3. Efficiency of services: Ensuring that the remaining energy
are similar benefits of insulation if hydrogen becomes an requirements are served efficiently (HVAC strategy, hot
economically viable solution for widespread decarbonisation water demand, ventilation, efficient plant, lighting &
of domestic buildings. Again, lower energy demand due controls). Focusing on the building envelope will reduce
to insulation means lower system costs as less hydrogen energy demands and improve performance of services.
generation and storage is required. Currently, storage and
4. Decarbonising electricity through renewable energy supply:
generation of hydrogen is expensive so reducing energy
Using onsite and offsite generation including solar PV and
demand in buildings should be a priority. This provides further
solar thermal. Insulation of the building envelope first
evidence that a ‘fabric first’ approach is technology agnostic.
reduces strain on the electrical infrastructure.
Various organisations have explored routes to net zero in
5. Decarbonise heat and meet energy demands using lower
great detail and there has been general agreement that key
carbon heating (heat pumps, district heating systems,
considerations are:
CHP etc). Envelope first reduces the requirement for
1. Energy reduction: Changing wasteful behaviour to reduce renewable heat.
demand, smarter control systems, passive demand.
Figure 2 displays a net zero home which includes some of the
2. Limiting the use of unnecessary energy: Optimisation of key measures and technologies that may be present within
the building envelope (building form, glazing/shading the home of the future.
strategy, insulation, airtightness etc.). The building
envelope should be the first consideration for all new build
and rapid, deep refurbishment to deliver net zero.
The Net Zero Home
1
6 4
3
5 8 2
7
1 Solar PV 4 Smart Meter 6 Insulation
2 EV 5 Smart Appliances 7 Air Source Heat Pump
(Fridges, Speakers, Lights, TVs)
3 Efficient Windows and Doors 8 Hot Water Cyclinder
Figure 2 - The Net Zero Home
9Current Challenges and Opportunities
All of these steps are essential and all need addressing to minimise the impact of the transition on fuel poor and
together if we are to meet the targets and deliver net zero; vulnerable households. The installation of a heat pump in an
however, energy efficiency has the most crucial role to play in efficient property will lead to lower operating costs to achieve
easing the gap between capacity and demand. the same levels of thermal comfort, compared to if installed
in an inefficient property (see Section 3.3).14 Installing low
Efficiency measures save money by reducing the required carbon heat without ensuring adequate insulation measures
capacity of plant (heating boilers, electricity generators could lead to negative consequences for the household.
etc.) and reducing the ongoing running costs.
It is important to note that the impact on energy bills is also
The decarbonisation of buildings also has the potential to dependent on the system being replaced (the counterfactual
facilitate the decarbonisation of other sectors by reducing technology). For example, the Energy Saving Trust (EST)
demand on limited resources and providing flexibility of estimate that for a four-bedroom semi-detached house,
demand in an increasingly dynamic energy system. Failing annual bill savings of between £395 and £425 may be observed,
to address it uses up limited resources and could overload if replacing a G-Rated Gas Boiler with an Air Source Heat
electrical infrastructure. Pump. However, if replacing an A-Rated Boiler, an increase in
Improved building envelope standards are key to electricity bills may be observed of between £95 to £10015.
underpinning the successful contribution that buildings The rebound effect, whereby the energy use of households
must make in line with the necessary decarbonisation increases, with a reduction in the operational cost of their
trajectory. heating system, must be considered when installing new
heating systems or energy efficiency measures. A greater
The Costs Avoided Through a Fabric First Approach
demand means that larger systems may have to be installed
There are a number of potential economic and societal costs in fuel poor homes than previously estimated, indicating
that may arise as a result of domestic heat decarbonisation that domestic heat decarbonisation may cost more than
however these can be limited or avoided through the previously predicted for certain homes16. Effective insulation
adoption of a fabric first approach. These include energy may limit the extent of the rebound effect and ensure
costs, investment in energy infrastructure and non-energy that decarbonisation targets and fuel poverty can be
costs such as reduced NHS spend. simultaneously addressed.
Fuel Poverty It is fairly clear, that when a household cannot afford to
heat, they frequently do not heat, with knock on effects of
In England, the high cost, low-income measure states that health, wellbeing and degradation of the building fabric.
a household is considered to be fuel poor if the fuel costs In large part, the rebound effect shows that as costs come
associated with their property are greater than the national down, consumers take advantage of this. If we move to more
median and if they were to spend their full fuel costs, their costly electrified heating without addressing heating demands
remaining income would be less than the official fuel poverty through an improved building fabric, we risk pushing more
line9. people into fuel poverty, unable to afford to heat.
In England, fuel poverty currently impacts approximately Indirect Impact
2.5 million households10 and there is a clear correlation
between energy efficiency and fuel poverty. As of 2015, 92% If government support for heat decarbonisation is ultimately
of fuel poor households in England lived in houses with an transferred to consumers, through increased energy bills,
Energy Performance Certificate (EPC) rating of D or below this could indirectly lead to increased rates of fuel poverty.
and 37% lived in houses with an EPC Rating of E, with those The NEA estimate that if the additional total costs of heat
in non-fuel poor households more likely to live in households decarbonisation schemes are recuperated via increased
with an EPC of C or above. Furthermore, the more inefficient energy bills, averaged across a 20-year timespan, there could
the property, the greater the fuel poverty gap11; that is, “the be between 0.6 million to 2.6 million additional homes living
average reduction in fuel bill needed to remove a household in fuel poverty17. The NEA highlight that this is a worst-case
from fuel poverty”12. Although energy efficiency measures scenario, however, important learnings must be drawn from
cannot prevent fuel poverty, they can help to address the this about how support is awarded.
crisis, such that fewer households are vulnerable. According Energy efficiency improvements can ensure that the costs
to National Energy Action (NEA), if not adequately managed, associated with low carbon policies are offset. The extent
domestic heat decarbonisation has the potential to increase to which energy efficiency improvements can reduce costs
fuel poverty both directly and indirectly. The direct and should not be underestimated; research conducted by the
indirect impacts of the decarbonisation of heat on fuel UKERC found that improving energy efficiency of buildings in
poverty and the mechanisms by which energy efficiency the UK could lead to significant savings by 2035, equivalent
improvements can mitigate these are outlined below. to a reduction in demand of approximately 25%18. In 2016,
Direct Impact the Committee on Climate Change (CCC) found that energy
All proposed forms of low carbon heat typically have a higher efficiency improvements are capable of offsetting the costs
lifetime cost than the current cost of natural gas, which of low carbon policies to 2030. The CCC estimated that
could have a direct impact on energy bills13. Elevated energy under their modelled scenario, bills in 2030 would rise to
bills can result in households, who have not previously been £1,550 without energy efficiency but that energy efficiency
considered fuel poor, being exposed to the risk of falling into improvements would eliminate this impact, keeping bills to
fuel poverty. The adoption of a fabric first approach can help £1,350 (see Figure 3)19.
10Current Challenges and Opportunities
1800
1600
1400
1200
Consumption Changes
1000
Low Carbon Policy Costs
800 Other Energy Price Changes
Other Energy Costs
600
400
200
0
2016 Bill Price Changes Expected 2030 Bill
Impact of EE
Figure 3 - The Committee on Climate Change’s (CCCs) estimated impact on annual household energy bill changes (2016-2030)
(Adapted from CCC)
It is fundamental that efforts to decarbonise heat are not The Covid-19 pandemic and fuel poverty are interconnected
at the expense of efforts to address fuel poverty, since fuel through two negative synergies. Firstly, the number of
poverty has significant impacts on the health and wellbeing households living in fuel poverty is likely to increase as a result
of those affected. It is predicted that across the next 15 years, of rising unemployment. The pandemic has had a significant
there will be approximately 125,000 premature deaths as a impact on the UK economy and despite the Treasury’s actions
result of fuel poverty in the UK20. Children that live in poorly to kerb increasing unemployment rates, such as the furlough
heated homes are two and a half times more likely to suffer scheme, the figures indicate that people have been left
from coughs and wheezing than children in ‘dry’ homes21. behind. The number of people claiming benefits for being out
Furthermore, those suffering from fuel poverty often face of work, or on very low income is often used as a metric for
the decision between purchasing fuel or food; approximately unemployment; between March and September, the number
one fifth of parents living in fuel-poor households regularly do of people claiming these benefits increased to 2.7 million (a
not eat so that their children can22, which has wider health rise of 120%)23. This is likely to be exacerbated by increased
implications. time spent at home as a result of the winter lockdown, with
research by USwitch, in 2020, estimating that on average,
consumer bills were likely to increase by £16 per month24.
11Current Challenges and Opportunities
There is also significant evidence that cold homes are more 30%-75%27. However, the CCC recommend large scale
susceptible to damp and mould growth which can increase electrification as a core part of the solution to building
the incidence of respiratory problems, by contrast, well decarbonisation. The most significant challenge surrounding
insulated and well ventilated homes reduce these risks. Even heating electrification, compared to other demands on
prior to the Covid-19 Pandemic, the economic burden of fuel electricity generation, is the fact that demand for heating is
poverty on the National Health Service (NHS) was significant, relatively synchronised across the country, during periods of
costing the NHS somewhere in the region of £1.4 -£2 billion cold weather with identifiable peaks and troughs throughout
per annum25. As a result, addressing fuel poverty is particularly the day (see Figure 4). The seasonal differences in demand
important now, more than ever26. are much greater for heating (natural gas is used here as a
proxy for heating) than electricity (see Figure 5). Furthermore,
Wider Energy Security changes in demand can occur suddenly with a rise or fall
in temperature, meaning the rate at which supply must
The Potential Impacts of Heat Decarbonisation on Energy
change (the system ramp rate) is relatively fast. The most
Security
significant impact of heating electrification on energy security
The electrification of heat is only as low carbon as the sources is likely to be observed in winter, as space heating demand
of electricity within the National Grid. As such, in order to increases significantly due to the cool ambient temperature,
achieve the UKs net-zero ambition, electrification of heating whilst Coefficients of Performance (heating efficiency for
must be combined with further decarbonisation of the power heat pumps) drop off. Heat pumps tend to be less efficient
system. Increased system demand due to increased electric in colder climates and therefore require increased electricity.
heating, cooking and transport, in combination with increased In mild weather, the Coefficient of Performance (CoP) (a
penetrations of variable and intermittent generation, will, metric for energy efficiency) of an Air Source Heat Pump
if not adequately managed, have implications for energy can be approximately 4.0. However, when the temperature
security. drops to 0˚C, the CoP can decline to 2.528. To this end, it is
Reports developed by industry bodies and academics, contain doubly important that heat demand levels are reduced in
a wide range of recommendations regarding the proportion combination with moving to electrified heating.
of the UK’s heat demand which should be electrified, from
12Current Challenges and Opportunities
Modelled hourly aggregate heat demand for domestic and non-
domestic properties during three summer and winter weeks
180
160
Aggregate heat demand (GW)
140
120
100
80
60
40
20
0
Sat
Sat
Sat
Thurs
Thurs
Thurs
Fri
Fri
Fri
Mon
Sun
Mon
Sun
Mon
Sun
Wed
Wed
Wed
Tues
Tues
Tues
Week 1 Week 2 Week 3
Winter demand Summer demand
Figure 4 - Modelled Hourly Aggregate Heat Demand for Domestic and Non-Domestic Properties During Three Summer and Winter Weeks29
Monthly electricity and natural gas consumption
120
Monthly energy consumption (TWh)
100
80
60
40
20
0
ril
t
r
r
r
r
y
ry
ay
ry
ch
ne
e
be
be
be
us
l
Ju
Ap
a
ob
ua
M
ar
Ju
g
em
em
em
nu
Au
ct
br
M
Ja
pt
ov
ec
O
Fe
Se
N
D
Gas consumption Electricity consumption
Figure 5 - Monthly Electricity and Natural Gas Consumption During 201930 31
Further to this, renewable electricity generation fluctuates on kWh, whilst generation is over 1500 kWh33. It is important to
a seasonal basis. This is a particular issue for solar PV, which highlight that this is for a single household and assumes solar
formed 7.6% of total electricity generation in Q2 of 2020 but PV panels are installed without battery storage. In addition,
just 1.4% of generation in Q132. By contrast, demand for heat for technologies such as offshore wind, increased generation
is greatest in winter. For a single household assuming on-site is typically observed in winter months. However, it remains
solar generation, demand is the inverse of supply. Demand the case that lessons must be drawn about the potential
can reach approximately 2000 kWh in December and implications that widescale electrification could have on
January, whilst solar generation is at less than 500 kWh and energy security and ultimately cost.
demand is typically lowest in July and August at less than 500
13Current Challenges and Opportunities
A study by Imperial College estimates that distribution Like all heating systems, the performance of heat pumps is
network reinforcement costs could be between £13bn and impacted if they are installed in poorly insulated buildings,
£30bn if 10 million heat pumps are installed34. However, this which can create a disparity between design and as-built
analysis does not assume thermal efficiency improvements performance39. According to Zero Carbon Hub, complex
and, if the electricity consumption of a heat pump can be and/or uncommon technologies, including heat pumps, are
reduced through installing insulation, then the impact of heat particularly susceptible to poor installation and therefore the
pumps on the electricity network will be lower. This ultimately creation of a performance gap40. In order for heat pumps to
results in lower costs for consumers nationally as the network operate effectively, and ensure sufficient temperatures for
reinforcement costs are passed on through electricity bills. thermal comfort, they should be installed in highly insulated
buildings41.
The importance of fabric efficiency is further evidenced by an
‘absolute zero’ by 2050 (zero emissions, without the use of When lower demand and higher heat pump performance are
Negative Emissions Technologies (NETs)), electrification only combined, both electricity demand and the capacity of the
scenarioxviii. Under this scenario, modelled by UK FIRES, all heat pump required is lower. This is because the heat pump
aspects of the UK economy are electrified as far as possible can operate at a higher efficiency, producing more thermal
and renewable electricity generation is expanded at current energy for the same input of electrical energy. A lower
rates. Crucially, the model found that under this scenario capacity heat pump comes at a lower cost to the consumer
there would be a projected shortfall in required electricity and lower electricity demand reduces running costs. This is
generation demand of approximately 40%35. As a result, particularly important in winter, as the heating efficiencies
in order to reduce the projected supply-demand gap, it is of heat pumps drop off in colder weather. Lower electricity
recommended that must use at least 40% less energy than demand also reduces the emissions associated with each
we currently use (or generate at least 40% more). Without heat pump, as even low carbon electricity has associated
energy efficiency improvements, achieving this would rely on greenhouse gas emissions.
consumers using heating for 60% of the time that we use it
currently. The Non-Energy Benefits (NEBs) of a Fabric First
Approach
Finally, it is also important to consider the impact that a
gradual shift away from sources of heating such as coal Beyond mitigating against the impact of the transition on
fires and wood burning stoves may have on demand from fuel poverty and wider energy security, a fabric first approach
central heating systems. In February 2021, the Government has significant benefits, often classified as ‘Non-Energy
announced plans to phase out coal and wet wood for Benefits (NEBs)’. NEBs may be divided into occupant benefits
domestic burning, due to the Particulate Matter (PM2.5) and wider societal benefits. Occupant benefits are essentially
associated with these sources of heat generation36. Whilst a reduction in or avoidance of, the impacts of fuel poverty,
there is likely to be a shift to other sources such as dry wood cited above. Four examples of wider societal benefits are
and other manufactured solid fuels, this may also lead to a listed below42:
greater reliance on central heating systems in the future.
1. Improved productivity, as a result of fewer cold-related
Energy Efficiency as a Solution illnesses;
Collectively investing in incremental efficiency improvements 2. Increased employment opportunities, due to the
could unlock significant demand reduction, such that we can requirement for a large skills base to retrofit properties;
attain the same levels of thermal comfort with reduced input
3. Improved educational attainment, due to improved child
of energy, helping to alleviate the potential impacts of heat
health;
electrification on the grid. To put this into context, a study
conducted by the UK Energy Research Centre (UKERC) found 4. Increased disposable income, as a result of a lower
that if all properties within the UK reached EPC Band C, the proportion of household income being directed towards
energy saving would be equivalent to the annual output of six energy bills.
Hinkley Point C power stations37.
These factors in combination lead to economic growth.
Building insulation is already cited as part of the Furthermore, improved occupant mental and physical health
Government’s Clean Growth Strategy to limit the impact of reduces the burden on public funding, including funding for
heat decarbonisation on energy security, through reducing the NHS43.
peak demand38. From a heat pump perspective, the
energy efficiency of a building has a significant impact on
performance. The Seasonal Performance Factor (SPF) is the
amount of heat that the system produces relative to the
amount of electricity consumed per annum, accounting for
impact of seasonal variation within the ambient temperature
on heat pump efficiency.
xviii This study was focused on the use of existing technologies. Flying and shipping cannot be electrified through existing technologies and as such, this study has assumed entire phase
out of these sectors to meet absolute-zero, prior to re-introduction post 2050, once electrification has developed and NETs are industry ready.
14Heat Decarbonisation Options
Heat Pumps, Controls, and Insulation the CCC’s Balanced Pathway Scenario projecting that 2.4
million properties will need to install solid wall insulation in the
Improving the energy efficiency of a building not only reduces UK by 203046.
heat demand but also allows a heat pump to operate at
a higher efficiency. Heat pumps operate best when heat Our modelling does not take into account government
demand profiles are smooth, as lower flow temperatures can support such as the Green Homes Grant Local Authority
be used. Increasing levels of insulation improve a property’s Delivery Scheme, Energy Company Obligation (ECO) and
thermal efficiency meaning less heat is required to raise the Renewable Heat Incentive (RHI), which reduce capital
internal temperature. This results in smoother daily profiles and operational cost of low carbon technologies or energy
than less efficient properties and therefore better heat pump efficiency measures.
performance44.
Although radiators will typically need to be replaced for larger
How households control and engage with their heating heat emitters when installing a heat pump due to lower flow
systems is changing, with greater deployment of smart temperatures, this is not always the case, as some properties
devices and integrated systems. Combining low temperature already have oversized radiators. For this reason, radiator
heat pumps with insulation provides efficiency gains and also replacement has not been included in this analysis, however
improved control. Three popular controls are summarised improving the thermal efficiency of a property reduces the
below: likelihood of needing radiator replacements, and this could
be considered as a further benefit of improving thermal
Weather compensation allows for heating to be controlled efficiency.
by weather predictions, where projected cold weather in
the next few hours triggers the heating to come on. With Below, we evaluate the benefit of improved energy efficiency
an improved thermal envelope this ramp up could happen under two scenarios. The same terraced, solid wall property
closer to the time of predicted cold weather, reducing is used for both model scenarios. It is assumed to have been
energy costs, and improving consumer comfort. built between 1930 and 1944, have a floor area of 93 m2, loft
insulation, double glazed windows, and planning to install a
Smart controls allow consumers to remotely control heat pump. The only difference between scenarios is:
their heating. If it takes less time to reach the desired
temperature as a result of insulation, then less notice Scenario 1:
needs to be given by the consumer to ensure the property
is adequately heated. Uninsulated solid walls
Load compensation is a form of heating control where Scenario 2:
the heating system adjusts the temperature of flow in the
External solid wall insulation
radiators automatically based on the difference between
the actual and desired temperature. When a home is Whilst it is expected that homes will require further energy
properly insulated the flow temperatures can be lowered efficiency improvements as part of a holistic retrofit, solid
as a result of load compensation, resulting in a better wall insulation has been selected for this analysis due to the
performing heat pump and reduced consumer heating low rates of deployment and the significant impact it has on
bills. energy demand.
If the thermal efficiency of a property is brought up to a very The model is run over a period of 36 years to reflect the
high standard (e.g. passivhaus standard) it may be possible average lifetime of solid wall insulation, as heat pumps have
for heating to be moved outside of peak hours allowing a lifetime of roughly 20 years, two heat pumps are required
consumers to benefit from a lower cost electricity, if they are for the property over the assessment period. The financial
on a variable tariff, as the home can operate as a thermal merits of the two scenarios are analysed using a discounted
store, retaining heat for longer. Therefore, insulation increases cash flow model and following government Green Book
the flexibility of domestic heating, increasing its value as a guidelines47. The full list of assumptions used in this analysis
demand side response to grid balancing. are shown in the Annex.
Solid Wall Property Heat Pump Analysis Results
Given the benefits associated with a fabric first approach, In this analysis, the installation of solid wall insulation results
analysis has been conducted to quantify the positive impact in a 39% reduction in thermal energy demand, from 23,379
that fabric first has on the performance, running costs and to 14,170 kWh/year. The insulation retrofit also increases the
carbon emissions associated with a heat pump. This analysis coefficient of performance of the heat pump from 1.808
aims to estimate the financial and environmental impact of to 2.682. These efficiency improvements allow for a lower
retrofitting solid wall insulation in the context of heating a capacity heat pump from 12 kW to 3 kW, reducing the cost of
domestic property with a heat pump. both heat pumps over the lifetime of the insulation measure
from £11,400 to £5,770. Despite Scenario 2 including the cost
Solid wall insulation has an extremely low uptake, only 10%
of installing insulation, the total capital cost is lower due to
of the 7 million solid wall properties in England have wall
the saving on the heat pumps, from £22,800 in Scenario 1 to
insulation45. However, it is one of the vital energy efficiency
£19,940 in Scenario 2, shown on Figure 6.
measures that needs to be deployed in the coming years, with
15Heat Decarbonisation Options
Capital cost breakdown of model Scenario 1 and 2
£25,000
£22,800
£19,940
£20,000
£15,000 £8,400
Capital cost
£22,800 Solid wall insulation
£10,000 Heat pumps
£5,000 £11,540
£0
Scenario 1 (without solid wall insulation) Scenario 2 (with solid wall insulation)
Model scenario
Figure 6 - Capital Cost Breakdown for Two Model Scenarios
As a result of the reduced thermal energy demand and average annual thermal energy costs for the consumer of
increased efficiency of the heat pump, the annual electricity almost £1,500, shown on Figure 7 below.
consumption falls by over 59%. This causes a reduction in
Average annual energy cost under scenarios 1 and 2
£2,750
£2,500 £2,401
£2,250
Average annual energy cost
£2,000
£1,750
£1,500
£1,250
£981
£1,000
£750
£500
£250
£0
Scenario 1 (without solid wall insulation) Scenario 2 (with solid wall insulation)
Figure 7 - Annual Thermal Energy Costs under Two Model Scenarios
The lower electrical energy demand under Scenario 2 also of CO2e per household could be saved through installing
results in lower emissions. The modelled emissions can be insulation before purchasing a heat pump over a 36-year
seen in Figure 8 below for the two scenarios. Over 16 tonnes period.
16Heat Decarbonisation Options
Greenhouse gas emissions under model scenarios 1 and 2
30,000
27,440
Carbon dioxide equivalent emissions (kg CO2e)
25,000
20,000
15,000
11,212
10,000
5,000
-
Scenario 1 (without solid wall insulation) Scenario 2 (with solid wall insulation)
Figure 8 - Modelled greenhouse gas emissions associated of a heat pump under two model scenarios (36 years)
The financial and greenhouse gas emission net present cost of period, Scenario 1 has a higher net present cost than Scenario
the two scenarios can be seen on Figure 9. Over the 36-year 2, making Scenario 2 the favourable option.
Financial and greenhouse gas emission net present cost
£80,000
£70,000 £67,613
£1,830
£60,000
£50,000
Net present cost
£37,697
£40,000 Net present emissions cost
£748
£65,783 Net present financial cost
£30,000
£20,000
£36,949
£10,000
£0
Scenario 1 (without solid wall Scenario 2 (with solid wall
insulation) insulation)
Figure 9 - Financial and Carbon Net Present Costs of Heating Under Two Model Scenarios
17Heat Decarbonisation Options
Increasing the prevalence of solid wall insulation is one step National Level
towards achieving net zero. However, homeowners can go
further and meet the Passivhaus Standard of a maximum Of the 7 million solid wall properties in England, only 10% have
space heating demand of 15 kWh/m2. It is important to note solid wall insulation.49 This leaves around 6.3 million properties
that the costs of achieving this standard are much higher that have uninsulated solid walls. These properties are likely
than the scenarios above, with a typical semi-detached to need to be retrofitted to improve thermal performance,
property retrofit in the order of £26,000 including a heat before low carbon heat is installed, if maximum financial and
pump48. However, the costs of achieving this standard will emissions benefits are to be realised.
vary significantly between properties.
Assuming that all these properties pursue a
In order to achieve the maximum benefit from a heat pump, fabric first approach, i.e., installing insulation
it is vital to ensure high levels of thermal efficiency before before a heat pump, then the total benefit
installation. As has been shown in this analysis, the reduced across all uninsulated solid wall properties could
heat pump capital cost and running cost can outweigh be:
the solid wall insulation cost over the lifetime of the heat
Over 48 TWh saved in annual electricity
pump. Furthermore, the decarbonisation of heat through
consumption – equivalent to avoiding
electrification is much more effective in buildings with high
construction of over 1,800, 7.5 MW offshore
thermal efficiency. For these reasons, insulation should
wind turbinesxix.
complement the deployment of heat pumps to maximise the
benefit.
Over £8.9bn saved in annual fuel bills
Over 102 Mt of CO2e emissions saved over the
36-year solid wall insulation lifetime.
Not only does this approach benefit the individual consumer
and reduce greenhouse gas emissions, and costs but there
are more widespread social benefits. These include improved
air quality, reduced NHS costs due to healthier homes
and reduced risk of fuel poverty due to lower heating bills.
Widespread delivery of energy efficiency measures could
reduce costs for businesses due to economies of scale which,
provided there is sufficient competition in the market, reduces
consumer cost.
xix Assuming a load factor of 39.6% as in the 2020 Dukes Report
18Implications for Policy
Our analysis has shown that there is compelling evidence for replacement or solid wall insulation52. However, crucially, in
a fabric first approach to heat decarbonisation. The case for the majority of cases, only one measure was installed per
fabric first is even more pertinent in the UK, due to the state property. This is evidenced by the fact that approximately
of the UK housing stock. The UK has the oldest housing stock 2.8 million measures have been installed across 2.1 million
in Europe, with approximately 20.6% of the UK housing stock properties under ECO and the Green Deal Framework53,
constructed pre-191950. The English Housing Survey conducted indicating that only one measure was installed in at least
in 2018-19 found that 27% of households are suffering 75% of properties. Whole house approaches are taken in the
from damp, condensation or mould, with 41% of dwellings Scottish Warm Homes Programme as well as the Welsh Nest
constructed pre-1919 suffering from damp51. Scheme, with annual average bill savings of £319 and £400,
respectively54. Furthermore, certain measures are consistently
To date, UK Government policy has focused on the installed more than others, with installation rates of solid wall
implementation of single measures. For example, under insulation far below that of loft and cavity wall insulation (see
the Energy Company Obligation (ECO) measures installed Figure 10)55.
included cavity wall insulation, loft insulation, boiler
2019 30% 20% 19% 12% 6%
2018 16% 16% 38% 19% 9%
2017 22% 16% 34% 18% 9%
2016 28% 19% 25% 18% 8%
2015 18% 12% 36% 24% 8%
2014 15% 7% 42% 27% 7%
2013 32% 6% 32% 24% 5%
0% 20% 40% 60% 80% 100%
Boiler Other Heating
Cavity Wall Insulation Loft Insulation
Solid Wall Insulation Other Insulation
Figure 10 - The Share of Measures Installed Under ECO per Annum up to December 2019 (Adapted from BEIS)56
ECO is delivered by energy suppliers and therefore there is requisites are far from a whole house approach to retrofit59.
a financial incentive for energy suppliers to keep the costs In fact, the more inefficient a home, the more a property
of their obligations as low as possible, due to “commercial spends on annual bills, the higher the RHI payments they will
realities”, as a result, suppliers select the “low-hanging fruit” receive, as the subsidy is linked to heat generation. Whilst it
properties, where lower cost measures can be implemented. is recognised that this is due to the higher energy bill costs
Although solid walls cost more to insulate, the energy associated with the property, this almost creates a dis-
savings are often larger when these properties are insulated, incentive for homeowners to invest in improved insulation,
compared to properties with cavity walls57. prior to their application for RHI payments. This was in part
addressed in 2017 with the introduction of heat demand
Due to the low installation rates observed in recent years, limits60. However, future policy should go further, and this
there is significant potential for solid wall insulation. However, should be considered as part of the design of the forthcoming
it should be noted that some of uninsulated solid wall Clean Heat Grant scheme in 2022.
properties are likely to be too expensive to insulate or located
in conservation areas. For example, Element Energy estimate In March 2021, the Green Homes Grant Voucher Scheme
that there are approximately 1.3 million ‘heritage homes’ in (GHGVS) was closed, with remaining funding reallocated
Great Britain58. towards the Local Authority Delivery (LAD) element of the
scheme and the Social Housing Decarbonisation Fund (SHDF)
Whilst Kingspan Insulation recognise that financial support Demonstrator. The GHGVS was a long-awaited scheme
is required to enable greater uptake of low carbon heat and which provided vouchers to cover 2/3 of the cost of eligible
welcomed the introduction of the Renewable Heat Incentive improvements, up to a maximum value of £5,000, with
(RHI) and proposed successor scheme (Clean Heat Grant), additional support provided to those on certain benefits61.
there are notable limitations to this policy approach. The pre- There has been a lot of chopping and changing of the Green
requisite requirements for loft and/or cavity wall insulation Homes Grant (See Figure 11).
go some way towards a fabric-first approach, but these pre-
19Implications for Policy
Figure 11 - A Timeline of the Green Homes Grant Scheme
Kingspan Insulation welcomed the introduction of the GHG In future, there is potential to adopt a similar tiered system
and in particular, the voucher element as a much needed but alter it, such that insulation remains categorised as a
mechanism of support for the owner occupied, able to primary measure, but low carbon heat becomes categorised
pay sector. Demand under the scheme was high; to the as a secondary measure; this could help to drive a fabric first
end of February 2021, the GHGVS saw 82,800 household approach. However, if this were to be applied, secondary
applications, associated with 123,500 vouchers of which measures would have to be encouraged to ensure the
104,300 were considered live. Of these live vouchers, 5,804 installation of low carbon heat, as whilst secondary measures
measures were installed to the end of February 2021, the represented 22% of live Green Homes Grant applications to
majority of which (84%) were insulation measures including end of February 2021, they represented just 6% of measures
Cavity Wall Insulation, Solid Wall Insulation, Roof and Loft issued64.
Insulation.
Another mechanism that was welcomed under the GHGVS
The most popular measure applied for was External Solid Wall was that all heat pump systems were required to have a
Insulation, for which there were 16,965 voucher applications. minimum Seasonal Performance Factor (SPF) of 2.565, this
In addition, there were a further 4,963 voucher applications was a step towards a fabric-first, holistic approach. However,
for Internal Solid Wall Insulation. However, installs under the this is relatively straightforward to achieve on a testing basis
scheme were low, with just 677 installs of Solid Wall Insulation and far from what is required to ensure a resilient housing
under the scheme to end of March 2021. Demand for heat stock and to this end, we would argue that in future a similar,
pumps was also reasonable under the scheme, with 7,473 more stringent requirement could be applied.
applications across Ground Source, Air Source and Hybrid
In advance of the publication of the Government’s Heat Policy
Heat Pumps and 461 installs to end of March 202162.
Roadmap, as part of the Heat and Buildings Strategy, the
Whilst it is argued that a range of factors led to the decline Government have noted their focus on ensuring future options
of the Green Homes Grant63, it is important to consider what for long term heat decarbonisation are not ‘closed off’66.
learnings may be drawn from the fundamental scheme design Kingspan Insulation recognise the importance of maintaining
and applied to future schemes. The tiered measure system consumer choice and it is important to stress the fact that
introduced as part of the scheme was welcome. However, a ‘fabric-first’ approach does just that. Although the extent
both insulation measures and low carbon heat measures were to which heat electrification will be relied upon is unclear,
included within the primary category and with no requirement with a number of decarbonisation options currently under
for property assessment under the scheme, there was a risk consideration by the Government, the installation of energy
of poorly sequenced measures being installed, including the efficiency measures is a no-regret step that will support
installation of heat pumps in inefficient properties. emissions reductions and fuel poverty alleviation, regardless
of the technology used to decarbonise heat. As such a fabric
first approach is technology agnostic.
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