How to get from a cottage industry to a million heat pumps a year

This post is by Jan Rosenow, director of European programmes at the Regulatory Assistance Project, Pedro Guertler, programme leader at E3G, and Richard Lowes, research fellow at Exeter University.

The UK has made incredible strides in decarbonising its power system beyond what many thought was possible. Carbon emissions were at a record low over the recent Easter weekend. While heat pumps have been seen as a strategically important sustainable heat technology for years, the rapid progress in the power sector offers an urgent opportunity to decarbonise heating whilst supporting the integration of renewables.

The government highlighted the importance of electrifying heat in its Energy White Paper, as did the prime minister in his ten point plan, in which he committed to installing 600,000 heat pumps a year by 2028.

Fewer than 30,000 heat pumps were installed last year
It is an ambitious target: the UK needs to increase the number of heat pumps installed in homes each year at least 25-fold by 2028 to meet it. And a nearly 40-fold increase is required to meet the Committee on Climate Change’s trajectory of 900,000 heat pumps by 2028. To put this in perspective, approximately 1.6 million gas boilers were installed in UK homes last year, compared to less than 30,000 heat pumps. This demonstrates the scale of the challenge but also the opportunity for reducing emissions.

With the UK hosting crucial climate negotiations this year, there is a lot riding on the prime minister’s heat pump target being credible. The government needs to take bold, co-ordinated decisions this year to stand a realistic chance of achieving the mass market for heat pumps that will be needed by the end of this decade to stay on track. While the scale and pace of transformation set out can appear daunting, it is a necessary and achievable investment in the UK’s future.

The decade old Renewable Heat Incentive – a quarterly payment linked to the production of clean heat – has been fraught with challenges and has fallen far short of expectations. It was supposed to have supported 491,000 heat pump installations by this April, but had accredited just 63,000 by late 2020, 87 per cent short of the target.

An urgent step change is needed, both in the rate of installations and the policies that support them. The government’s soon to be published strategy for heat and buildings presents a once in a decade opportunity to trigger exponential change. Our report in March set out how to drive large scale deployment of heat pumps, drawing on successful approaches used to accelerate the adoption of electric vehicles.

Four pillars of a new heat pump strategy
To achieve this upsurge, households need guidance, financial support, incentives and standards to meet. Success requires the government to be strongly joined up, between ministries, and between Whitehall and local councils, and to work in concert with industry, banks and the supply chain. Adapting approaches used for electric vehicles to clean heating, we have made four recommendations in four areas, and each needs a clear decision from government this year.

  1. Governance

Convening a Heat Pump Council this year – similar to the Automotive Council that has been pivotal to ending petrol and diesel car sales by 2030 – would help the government to manage the step change and ensure every household opting for a heat pump has a good experience.

2. Financial support

Starting this year, to build the market, the government should begin scaling up the financial support offered to households to install heat pumps, mirroring the grants offered for electric cars. Initially, the plan could offer £6,000 for better off homeowners and £10,000 for low income households. Support should then peak at up to £3 billion in 2030, with the level of grant support for better off households falling over time as the market scales up and costs of heat pumps come down.

3. Incentives

Adjusting prices for electricity and gas to reflect their true relative costs can provide incentives while protecting fuel poor households. This can be done by pricing the cost of carbon emissions into gas consumption, rebalancing how the costs of clean energy investments are recouped from energy bills, and pricing heat pumps into property values by linking stamp duty to home energy and carbon performance. All of these measures are urgent, requiring introduction by the end of this parliament. They would enhance the economics of owning and running a heat pump – accelerating the rate at which grant support can be phased out – and sustain the market for the long term.

4. Standards

The government needs to clearly signal this year that it will phase out fossil fuelled home heating systems, with regulation allowing for a market led approach similar to the phase out of petrol and diesel cars in 2030. Ideally, this plan would eliminate oil heating systems from the late 2020s and gas heating systems from the early 2030s, sparking long term commercial investment in the skills and innovations needed to deliver the mass market for heat pumps.

Taken together, these decisions will lead the transformation from a cottage industry to a mass market for heat pumps. They will help drive down costs, support good quality jobs in the industry across the country, ensure green growth, and reduce UK reliance on energy imports while boosting domestic innovation and manufacturing. All these positive economic effects means there is no time to wait in getting the UK’s homes on track to net zero.

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