A People-Centred Approach to Heat Decarbonisation Strategy

THE URGENT NEED TO DECARBONISE OUR HEAT AND HOT WATER

We are already seeing the impact of climate change on our world, with unprecedented levels of flood¹ and overheating² already impacting the UK. Scientists warn that we are already approaching key climate tipping points, which would speed up the pace and impact of rising temperatures³. Heating, hot water and cooking causes around a quarter of UK emissions⁴, so we urgently need to switch away from fossil fuels towards low-carbon heat sources. For many homes the solution will be a heat pump, whether air, ground or water, individual or shared. The Government’s decarbonisation strategy relies on this switch, and the industry sees the need to support this as part of a just transition. Heat pumps must be affordable and effective to ensure high levels of uptake to mitigate fuel poverty.

THE COST OF LOW-CARBON HEAT

There are three key factors which impact the cost of heat provided by a heat pump, compared with a gas boiler:

Electricity costs significantly more than gas (“From January, a unit of electricity will cost 4.7 times more than a unit of gas under Ofgem’s latest price cap”⁵)
Heat pumps are significantly more efficient than gas boilers (Research conducted by Energy Systems Catapult in 2023 found the average efficiency of a heat pump was just under 300%⁶, compared with 90% for a gas boiler. Some of the best performing heat pumps can reach efficiencies of up to 600%⁷)
Heat pumps work best when heating the home to a relatively stable temperature, whereas gas boilers can be used more intermittently

This means that a careful balance is needed to ensure that both: heat pump efficiency beats the spark gap, and households heating intermittently, or underheat receive the financial, technical and practical support needed to heat their homes more consistently. Resolution Foundation is concerned that this balance is not being achieved, and warn that “Close to two thirds (63 per cent) of families would see their heating bills increase upon replacing their boiler with a heat pump, and one-in-five (22 per cent) would be spending more than £100 extra per year on heating.” ⁸

WHAT CURRENT STRATEGIES OVERLOOK

The National Retrofit Hub, Citizens Advice, National Energy Foundation and Passivhaus Trust convened a small group of industry experts to explore how national and regional decarbonisation strategies and programmes could consider all factors impacting heat pump affordability.

Our concern is that, currently, many strategies consider: housing age, size and fabric performance, climatic context, grid capacity and sometimes the capital costs of installation, but miss crucial considerations. This leads to the development of blanket heat loss figures to determine heat pump readiness. For example, the government’s Minimum Energy Efficiency Standards consultation used 4W/m2K as a ‘heat pump ready’ fabric performance. Firstly, we suspect this figure may be too high, with Passivhaus Trust, in their consultation response, suggesting a figure closer to 2.5 would be appropriate, when considering standard occupancy. Secondly, these blanket heat loss figures, even if adjusted for location, leave out factors such as:

Occupant heating patterns
Household energy budgets
Variance in heat pump efficiency
Commissioning, maintenance, and aftercare costs and needs

This means that, residents whose homes are deemed ‘heat pump ready’ might be left with higher bills if they:

Currently heat their home less frequently than default assumptions
Do not receive good quality system design and installation, or
Are not provided with adequate commissioning to fine-tune heat pump efficiency.

WHAT IS HEAT PUMP READINESS?

Participants first considered whether ‘heat pump readiness’ could be a useful concept, and if so, how this should be determined.

Fabric performance plays a role in ensuring heat pumps can be run efficiently. This is because homes with a high heat loss will need more heat input overall if heated continuously than when heated intermittently, because of losses during times when people might not need the heat – overnight and/or during unoccupied hours in the day. However, if a heat pump is only run intermittently to avoid these losses, it will need to operate at a higher flow temperature to heat the house up from cold. Heat pumps running at higher temperatures are less efficient than those run at lower temperatures.

Current heating spend is also an important factor:

Someone with a poorly performing home who is already happy to spend more on their bills to keep it consistently warm may well be suitable.
Someone heating for just 1-2 hours per day might need additional support to start heating more continuously, to ensure their installation is efficient and affordable.

Rather than leave some residents stranded, with homes and lives labelled ‘unsuitable for a heat pump,’ our aim here instead should be to provide the necessary support, to enable all homes and people for whom a heat pump is the best decarbonised option, to become ready. The switch to low-carbon heat should be utilised as an opportunity to enable those underheating by necessity to live in more comfortable, healthy conditions.

INEQUITY WITHIN THE SYSTEM

Roundtable participants highlighted anecdotal evidence of a disparity between the design and customer support provided to one-off installs within the able-to-pay market compared with installs at scale in social housing. Larger scale programmes can include less bespoke approaches, where detailed design tailored to the individual home and occupant needs and use patterns is not provided, leading to lower efficiency.

ENABLING HEAT PUMP READINESS FOR ALL

Participants shared a variety of potential solutions that could be utilised to support more householders to access affordable, reliable, low-carbon heat and hot water.

Process solutions included:

Conducting better suitability assessments, up front, to first identify any additional support needed for the resident.
Better measurement of existing fabric performance, for example using SMETERS-HTC technology, to more effectively design heat pump installations and ensure high levels of efficiency.
Installs with guaranteed performance levels.
Ensuring residents are also able to switch their cooking to electric and remove their gas standing charge. This step is also critically important for indoor air quality, as highlighted by Global Action Plan.

Technical solutions included:

Improving the fabric performance of homes based on both measured performance and occupant need.
Pairing heat pumps with PVs and batteries. For example, some participants shared examples of housing associations going back to previous heat pump installs and providing batteries and PVs to tenants, in an effort to bring down electricity bills.
High quality installs, including adequate controls, sensors, weather compensation and low flow temperatures to ensure maximum system efficiency. Initiatives such as Heat Pump Monitor can help incentivise and inform this action⁹.
Effective aftercare and high-quality commissioning for all, including post-install monitoring, to maximise heat pump efficiency.
Technical and product innovations, such as linking heat pump with hot water and battery storage, to increase efficiency.

Social solutions included:

The provision of local advice and support, so that residents know what to expect and are supported in a way that meets their needs.
Alternative financing models such as heat as a service, which would bundle equipment maintenance and commissioning, so the energy provider or installer takes the risk of poor install efficiency.
Social prescribing linked to voucher scheme – Energy Systems Catapult has explored a Warm Home Prescription in detail.
Enabling communal heating in ways that might not be ‘equal’ but would be ‘equitable’ eg: more support or fabric upgrades for residents with lower heating budgets, so they can use the new system without increased bills.
Better information for residents, so they can consider options like different tariffs, like in this guide from Carbon Coop.

The group also discussed the potential for electricity tariffs to become part of the solution. This might include:

Heat pump tariffs, for example, OVO’s Heat Pump Plus tariff which charges a lower rate for electricity used by a heat pump, or Octopus’s Cosy tariff, which encourages residents to use heat pump electricity during off-peak times, at a lower rate.
Smart tariffs, for example E-ON’s Next Smart Saver tariff, and Octopus’s Flux, an import and export tariff, which aims to optimise when customers buy and sell energy to give them better rates and support grid flexibility, this also includes an ‘intelligent option’ for compatible batteries.
Social tariffs, currently phased-out, were designed to provide discounted energy to vulnerable customers and those in fuel poverty. New social tariffs could be introduced to support those currently underheating to access more stable, decarbonised heat with a heat pump.

Participants did highlight risks associated with relying on tariffs to ensure heating affordability, these included:

Relying on a solution like this that can be pulled from the market, or where qualification criteria might change, could leave residents exposed to higher bills in the future.
People on pre-payment meters might not be able to access all tariff options available.
UK Smart Metering network might not be reliable enough to support this approach, participants had concerns that if data is lost then the tariff would revert to the standard, which may be unaffordable.
If residents do not use more of their energy at low-cost times, then smart tariffs could leave them exposed to costs well above the energy price cap.

DECARBONISATION AND OUR BILLS

Over the last few years messaging on decarbonisation and fuel poverty have become closely linked. The government’s hotly anticipated ‘Warm Homes Plan’ is expected to include decarbonisation strategy, for example. Some participants felt that this messaging was unhelpful. In and of itself switching to a heat pump will unlikely reduce residents’ bills. However, this moment can be an opportunity to combine decarbonisation with other work, systems and support to tackle fuel poverty.

Reducing the spark gap, the difference between the price of gas and electricity, is well supported by the industry and understood by the government. Removing policy costs from ECO and some of the Renewable Obligation is one small step in this direction. However, further action is needed. There are many strategies to reduce the price of electricity, relative to gas, with recommendations from organisations such as Greenpeace and Nesta providing different pathways. What the industry needs is a more certain path. A set of fairly certain, government-backed projections on the ratio cost of electricity and gas would help us all plan for the future. This would enable the industry to model predicted heat pump running costs over the lifetime of the heat pump, and make a better financial case for the switch. At the same time these projections would help us all plan for increasing gas prices. There is a considerable risk for people who remain on the gas grid in the future, as prices are predicted to increase to cover network costs from a increasingly smaller pool of homes.

NEXT STEPS

All of this reinforces the need for heat decarbonisation strategies that start with people’s lived realities. Without clear long-term price signals, practical support, and attention to real running costs, households risk facing higher bills and greater uncertainty. A people-centred approach ensures that decarbonisation improves comfort, affordability and security, rather than adding to the burden.

This is the start of a wider conversation about what people-centred heat decarbonisation should look like in practice. At the National Retrofit Hub, we plan to explore:

How to develop a better understanding of what different residents might need, and how this can start to influence regional decarbonisation strategies.
Whether a pre-installation suitability or risk assessment tool might be useful, particularly for grant funded heat pumps for vulnerable customers.
The potential role for national government and combined authorities in supporting fuel poor residents further, for example, by supporting social tariffs or capital costs associated with solar panels and batteries.
Systems and models that allow for better commissioning and maintenance, and for the installer or energy provider to take responsibility for heat pump efficiency.

If you would like to get involved in the next part of the conversation get in touch with us at info@nationalretrofithub.org.uk, or follow the National Retrofit Hub for updates.