Our policy experts respond to the Public Accounts Committee’s call for evidence regarding decarbonising home heating.
Key points
- The UK Government must provide long term policy certainty to enable the low carbon heat supply chain to scale and reduce confusion amongst the public.
- A national advice service for England is required to accelerate low carbon heating. Providing personalised and impartial advice to households creates confidence they are installing the right measures for their home and simplifies the customer journey.
- A nationwide awareness raising campaign will be necessary to tackle limited public knowledge and understanding of what decarbonising home heating means for households.
- The UK Government needs to reduce financial barriers to low carbon technologies. This includes the upfront capital costs required to install these technologies as well as the longer-term running costs.
- A fully funded strategy for skills and training is necessary to create the skilled workforce to support the roll out of decarbonised home heating. This should attract new workers to the industry and ensure those who wish to retrain are financially supported to do so.
- A national retrofit plan for England must be prioritised to deliver energy efficiency improvements at the scale and pace required. Energy efficiency is key to reducing overall carbon emissions from the UK’s housing stock and tackle fuel poverty. This must be considered as part of any attempt to decarbonise the UK’s homes.
- The policies recommended should be considered as complementary to each other with regards to accelerating home heating decarbonisation. For example, financial support alone will be insufficient to increase uptake of low carbon heating if not accompanied by impartial, tailored advice services that guide consumers through the process.
Current UK progress on decarbonising home heating
Decarbonising home heating is vital for the UK to meet net zero by 2050, accounting for 18% of UK emissions in 2021. The Heat and Buildings Strategy published in 2021 set out the UK Government’s approach to decarbonising home heating. This included a target to increase the number of heat pumps installed across the UK to 600,000 per year by 2028, as well as an ambition to ensure heat pumps are no more expensive than gas boilers to buy and run by 2030.
A total of £6.6 billion over this parliament, as well as an additional £6 billion between 2025 and 2028, has been committed to improve energy efficiency and increase the installation of low carbon technologies (LCT). Financial support from the UK Government for low carbon heating has so far mainly consisted of the Boiler Upgrade Scheme (BUS) which provides households a grant of £7,500 towards the upfront cost of a heat pump.*
* The BUS grant was increased from £5,000 for air source heat pumps and £6,000 for ground source heat pumps in October 2023.
Support has not been universal across the UK, with the Northern Ireland Executive providing only limited means tested financial support for low-income households seeking to decarbonise home heating. In contrast, financial support offered by the Scottish Government has gone beyond that offered by the UK Government, details of which are laid out in the section on reducing financial barriers to LCT.
Despite some support being available, progress in decarbonising home heating is lagging. In 2022, the UK ranked 21st out of 21 European countries for heat pump installations per capita. In 2022, only 32,910 MCS certified heat pumps were installed across the UK, rising to 39,268 in 2023. This demonstrates the scale of the challenge in achieving the 2028 installation target.
A variety of challenges are hindering home heating decarbonisation, ranging from minimal public awareness to lack of supply chain capacity. To address these and enable decarbonisation of home heating at the speed and scale required, the policies detailed below should be prioritised.
Provide long term policy certainty
An absence of certainty and clarity over decarbonising home heating policy is creating system wide issues for both the supply chain and households. Heat pumps will make up the majority of low-carbon heating systems in all homes from now through to both 2030 and 2050 according to the Climate Change Committee (CCC)’s balanced pathway. Therefore, accelerating the roll out of the electrification of heat is a no-regrets options that the UK Government should take to support the majority of households decarbonise.
Yet the UK Government is delaying the introduction of policies that would support the electrification of heat. For example, the recent delay to the Clean Heat Market Mechanism keeps households dependent on gas boilers for longer, keeps the price of heat pumps high and creates uncertainty for the supply chain. Policy changes, such as the delay to the gas boiler phase out date, also contribute to public confusion around when they need to switch to decarbonised heat.
Introducing clear, long term policy signals is crucial to provide confidence to investors, enable businesses in the supply chain to scale and effectively communicate to the public what they should expect in the transition to low carbon heat.
A national advice service for England
The current process for households looking to decarbonise their homes is complex and confusing. This leaves people unsure where to find trusted information about what measures are suitable for their property.
A lack of impartial, personalised advice provision is most prevalent in England, with advice services already in place in Scotland and to some extent in Wales and Northern Ireland. Our research shows almost half (48%) of homeowners in England don’t know where to find independent, tailored advice on reducing their home’s carbon emissions and 39% are not confident in assessing where to start in the process.*
*The research was conducted by Censuswide on behalf of Energy Saving Trust between 22 and 28 August 2023, surveying 4,298 homeowners in England.
The current advice landscape in England is patchy and inconsistent, dependent on the existence of local support services. If we are to decarbonise home heating at scale, advice cannot be dependent on a postcode lottery and must be available to all. England therefore needs a national advice service that provides action-oriented advice to empower households to decarbonise their homes.
From our work delivering free, impartial and tailored advice in Scotland, we know advice is a driver of home heating decarbonisation. After receiving advice from one of our Home Energy Scotland (HES) advisors, 47% of customers had installed at least one energy efficiency measure, low carbon heat or renewable energy improvement and 38% of customers were planning to install at least one in the next 12 months. Of the measures installed that were attributed to HES advice in 2021/2, air source heat pumps came out on top.
International examples also reiterate the effectiveness of advice. For example, France’s large scale retrofit scheme, which provides a comprehensive financial assistance programme, has advice at its core. The service has sought to make the customer journey as simple as possible and offers advice on a variety of measures, including through online tools, assessments, retrofit management support and lists of accredited installers. The success of the scheme is evident, with the installation of 156,000 heat pump in 2022 alone. This shows with personalised expert advice, households can be confident they are installing the right measure for them and take action to decarbonise.
A national advice service would ensure appropriate coverage across England. It should complement and work alongside local services where these are available. By taking on simpler queries, a national advice service would also free up capacity of local services, allowing them to focus on more complex cases. Considering the whole customer journey will be paramount. As such, any service should include the provision of post-installation support so consumers are confident in operating their low carbon heating system and know where to turn if things go wrong. A national advice service would also enhance consumer protection, for example by referring consumers directly to accredited installers and enabling them to identify and report scams.
We estimate the cost of delivering such a service would be £3.75 – 5m per year per million people served with a digital-first service, plus initial set up costs. This includes specialist technical telephone advice given to the estimated 50,000 – 100,00 who need it. This is a comparatively low cost compared to that already committed for energy efficiency and LCT and provides significant return on investment. This is because a comprehensive advice service would drive greater effectiveness and efficiency of government spending by referring eligible households directly to schemes.
A nationwide awareness raising campaign
General public awareness of low carbon heating is low. For example, 47% of people know little or hardly anything about the need for changes to domestic heating and 55% have little to no knowledge of air source heat pumps.
There is a clear need for a nationwide awareness raising campaign on net zero. Specifically, this should educate the public on LCT, as well as mainstreaming LCT in the public consciousness. This should encourage behaviour change and make clear the tangible actions households can take to decarbonise their homes. A nationwide awareness raising campaign would also drive uptake of financial support available. Case studies should be included that demonstrate the costs, benefits and co-benefits associated with low carbon heat.
Last year, we brought a group of experts together to discuss the key features of a national retrofit plan for England. Engaging households in the net zero transition through providing consistent and clear information was a key finding. Comprehensive, independent advice was viewed as a core part of the infrastructure for the net zero transition that should be underpinned by a public awareness campaign. This should signpost households to a national advice service where they can receive the support they need.
There are significant lessons to be learned from international examples, such as the “Reduce Your Use” campaign which was introduced by the Irish Government in 2022. It consisted of an online, print and radio campaign, as well as an information booklet that was received by the majority of households. Whilst this focused on reducing energy usage, the UK can learn from the campaign’s wide reach, which exposed 99% of the population to the messaging. What was notable about the “Reduce Your Use” campaign was the careful design of the messaging which considered the concerns people had through the energy crisis. Messaging was also tested before being shared more widely and was tracked so it could be adjusted according to public opinion at the time.
A UK awareness raising campaign will need to understand what framing and narratives resonate and motivate households to act, track how the public respond and combat any new or prevailing myths about low carbon heating.
Reduce financial barriers to low carbon technologies (LCT)
Reducing upfront costs
The average cost of installing a heat pump is around £14,000. Despite the UK Government increasing the level of grant funding available through the BUS in December 2023, there is still a large capital outlay for households that means heat pumps remain unaffordable for many. Policy options to reduce this barrier and make the consumer offer more attractive include:
- Interest free loans: In Scotland, interest free loans are available to support with the upfront costs of installing energy efficiency measures or low carbon heating systems. The loans cover a range of technologies and can be combined with grant funding to cover the total cost of a new system. A rural uplift is also applied to the maximum loan amount to account for the increased installation costs. Importantly, all loans and grants are accessed through HES, which also provides personalised, impartial advice. This streamlines the process for households.
- Increase grant support across the income scale: The current policy landscape creates a gap in support for those who are ineligible for fuel poverty schemes but are unable to afford the total upfront cost of switching to a low carbon heating system. For example, 81% of mid to low-income households living in the least energy efficient homes are not eligible for the Energy Company Obligation (ECO) scheme. Our report with Green Alliance for the Climate Change Committee detailed the French Government’s retrofit scheme, which provides financial support for whole-house retrofits, including the installation of LCT. The French model consists of tiered financial support from low to high income, instead of a binary income threshold. This ensures fuel poor and low-income households can access sufficient support to cover the cost of the system, as well as guaranteeing the additional market value of those on higher incomes who are able to install LCT.
Reduce running costs
At present, the running costs of heat pumps can disincentivise households from switching. This is because the price of electricity has typically been three to five times more expensive per unit than gas. According to our modelling, if a household were to install a typical air source heat pump which operates at the average Seasonal Performance Factor recorded under the Electrification of Heat Project, they would save money compared to fitting a new gas boiler, provided electricity is less than 3.6 times the cost of gas. The following policy options will be required to enable that cost saving for households:
- Rebalance energy costs: The environmental and social levies currently placed on electricity bills contribute to higher running costs, with analysis by E3G suggesting they account for around 23% of the running cost of an average home heated by a heat pump. Removing levies from electricity would therefore enable running costs of electric heating to be more competitive with gas boilers. Several policy options have been suggested to do so. This includes moving levies onto general taxation and a clean heat discount that would allow for electrically heated homes to be discounted or exempt from paying levies. The UK Government committed in the Powering Up Britain strategy to outline an approach to rebalancing energy prices by the end of 2023/24, yet nothing further has been published since.
- Enable flexibility: A key way to reduce the running costs of heat pumps is to enable more households to participate in flexibility. Cornwall Insights have estimated flexibility could enable 14 billion in savings for UK consumers in 2040. Even those who don’t or aren’t able to participate will benefit from a reduction in wholesale electricity costs due to a more efficient system. Fully unlocking flexibility requires market-wide half-hourly settlement (MHHS) to be delivered which would create greater incentives for suppliers to develop tariffs that reward households consuming electricity when it is cheaper to do so. Ofgem forecasts MHHS will deliver net benefits to consumers in Great Britain of between 1.6 and 4.5 billion by 2045 through the introduction of new tariffs and innovations that encourage more flexible use of energy. Accelerating the smart meter roll out will also be required to allow as many households as possible to benefit from flexibility. Access to trusted, impartial advice that supports customers to engage with flexibility will also be central to its uptake.
Fully funded strategy for skills and training
To achieve the 2028 heat pump target, the UK must have the skilled workforce to deliver it. Nesta estimated that as of 2022, the number of heat pump engineers was around 3,000 and this will need to increase to at least 27,000 by 2028 to meet the UK Government’s target. Yet there is currently no clear or simple pathway to train as a heat pump engineer.
Recent research also showed only a third of UK builders feel comfortable advising consumers on heat pump installations and 44% would not recommend a heat pump because they are unaware of the benefits.
The UK Government should work with industry to devise a fully funded skills and training strategy to incentivise young people into the industry through relevant apprenticeships. There also needs to be financial support available for experienced gas boiler engineers looking to reskill to avoid the disincentive of a reduced income whilst they retrain and make green jobs more attractive.
A national retrofit plan for England
Improving the energy efficiency of the UK housing stock must be accounted for alongside switching to low carbon heating. This is due to its importance in reducing overall energy demand, easing pressure on energy networks and reducing people’s energy bills, especially for fuel poor homes. Research by Citizens Advice found that upgrading 13 million inefficient homes to EPC C could save consumers £24 billion on energy bills, reduce CO2 emission by 33 million tonnes and reduce national and peak electricity demand by 8% by 2030.
The UK Government have recognised the importance of energy efficiency, introducing an ambition to upgrade as many homes as is reasonably practicable to EPC band C by 2035 and by 2030 for those in fuel poverty. However, there remains no coordinated retrofit strategy for England.
Prior to 2013, energy efficiency schemes were effective in reducing gas demand, accounting for around a 30% reduction between 2005 and 2013 according to the ECIU. However, since key schemes were withdrawn in 2013, attempts to improve energy efficiency at scale in England have been sparse. Except for the long running, fuel poverty focused ECO, energy efficiency schemes have also been short-term in nature. Had support for energy efficiency measures remained, the ECIU estimate that 10 million more homes would’ve been insulated between 2013-23, resulting in £4.5 billion in energy bill savings.
Ever changing funding streams for energy efficiency makes it difficult for householders to navigate and competitive funding for local authority led schemes means support varies by area and local authorities cannot plan for long term delivery. A long term national retrofit plan for England should be prioritised to deliver the clear benefits of energy efficiency, ensuring nationwide coverage and instilling confidence in householders that they’ll be supported to improve their homes. Any financial support for low carbon heating systems should be integrated within a national retrofit plan and supported through a national advice service.