In 2019, the UK committed to reduce greenhouse gas emissions to “net zero” by 2050. In April 2021, it made a further commitment towards achieving net zero by pledging to reduce emissions by 78% by 2035. Achieving this ambitious target will require significant changes to all sectors – from buildings, to agriculture, transport and how we generate and use energy.
The enormity of the task cannot be underestimated – but as 2050 draws closer, the industry has little option but to tackle it head-on. According to the Department for Business, Energy and Industrial Strategy, heating is responsible for 23% of all UK emissions, which means low-carbon heating must be a priority to ensure our buildings are prepared for net zero.
Scale of the challenge
The UK housing and building stock presents a challenge. With such a diverse mix of sizes, ages, fabric and varying historical and architectural interest, it comes as no surprise that there is no one-size-fits-all solution. Solutions will need to be assessed on property archetypes and location, with the primary methods focused on the decarbonisation of heating using heat pumps, connection to heat networks, direct electric heating and (potentially) hydrogen fuel.
Early assessment of existing assets is key to understanding whether gas boilers can be replaced at end of life or if decarbonisation of heating requires a whole-building approach. Through assessing the building’s requirements, landlords, property owners, asset managers and operators can optimise energy efficiency and embodied carbon reductions – and ultimately have a clearer picture of how to achieve net zero.
Policy drivers
The direction of government policy is clear, with the intention to phase out the installation of new gas boilers from 2035. This will impact new-build schemes (which have already adjusted with the changes to Part L of the Building Regulations) and the replacement of boilers in existing buildings.
The government released its Heat and Buildings Strategy in October 2021, which sets out the policy route map for the decarbonisation of heat during this decade. As part of that, the government is setting a clear ambition for industry to reduce costs of installing heat pumps by 25-50% by 2025 such that heat pumps are no more expensive to buy and run than gas boilers by 2030.
The government also announced £270m funding for the Green Heat Network Fund, intended to support the roll-out of low-carbon technologies for heat networks, such as heat pumps, solar and geothermal energy. These announcements sent a clear message to industry and reflect the central role of electrification of heat in decarbonisation.
Technologies and feasibility
Low-carbon heating is inextricably linked to the wider retrofit of buildings – with heat pumps and heat networks requiring a high level of fabric efficiency in order to function effectively. Understanding each building and its thermal properties, space requirements, and potential alterations to the heating system that may be required, are vital to establishing feasibility.
The main challenge is that replacement of an existing natural gas or fossil fuel boiler is not a like-for-like replacement. Heat pumps and heat networks tend to produce heat at lower temperatures and so they are better suited to maintaining consistent temperatures for a longer period of time – for example, as part of an underfloor heating system (rather than radiators). Enhanced power requirements to run heat pumps rather than gas boilers is another important consideration. Where existing connections are inadequate, there will be potential costs for grid upgrades and additional substations. That creates challenges for existing buildings, and how such costs would be recovered.
Hydrogen heating may require less adaptation for end-customers, as hydrogen boilers function similarly to existing gas boilers. Although the government’s recent Energy Security Strategy signalled its intention for hydrogen to play a role in the UK’s low-carbon future, this technology is still at an early stage. There are practical and technological barriers to adoption, and it is not clear whether it offers a scalable solution.
Who will cover the cost?
Funding is one of the key barriers to retrofitting low-carbon heating. Whether through incremental investment over time, such as replacing gas boilers at end of life, or as part of a wider whole-building retrofit approach, there will be significant upfront capital costs.
As government retrofit incentives are largely focused on social housing and local authorities, there is little financial incentive for private developers and landlords to retrofit low-carbon heating. The funding that is available, including the Boiler Upgrade Scheme that provides grants to households and small businesses to install heat pumps, is largely short-term focused – with most grants running until 2025. Uncertainty about the scope and nature of government support risks discouraging stakeholders from taking the initiative.
For landlords and developers, there are additional challenges in recovering their investment from tenants. Given the cost and potentially disruptive level of work required – whether increased rent to reflect a more energy efficient home or recovery through heating service payments – there is a need to develop an approach that tenants will be willing to sign up to. Especially in the current environment, with high operational costs due to the price of electricity, tenants may not immediately experience financial benefits from low-carbon heating.
What next?
The trajectory of change is clear – net zero is high on the agenda across the board. Whether drivers revolve around organisation or investor commitments, carbon reporting obligations, or a wider ESG agenda, low-carbon heat solutions will go a long way to achieving these goals – but measures need to be considered as part of a holistic approach to retrofit which considers not only immediate reductions in carbon emissions, but also long-term operational requirements.
Megan Coulton is a senior associate and Hannah Giebus is a solicitor at Trowers & Hamlins LLP
