In the second of a series of blogs organised by the Climate Justice and Social Policy Group in the lead up to COP26, Ned Abbs-Brown, a policy lead working in the UK energy industry, weighs up the justice implications of heat decarbonisation, focusing on the relative role of hydrogen and heat pump technologies.
Introduction: from ambition to action on heat
All UK parties accept the need to tackle climate change, which should in theory make decarbonisation less of a political battle. Where there is debate is around the speed, the costs, and who pays. In 2021, Labour re-pledged to eliminate the bulk of emissions by the 2030s, the Liberal Democrats all emissions by 2045, and the Conservatives all by 2050. Despite the ambition, hardly any progress has been made on heat. It is clear the time has come for action, not ambition. This blog focuses on two main technologies to decarbonise domestic heating, examining the costs and fairness implications for both.
Thinking what a just transition looks like
France has witnessed what happens when the public are not in agreement regarding decarbonisation policy and costs. When President Macron introduced a carbon tax on fuel, this caused months of riots, disorder, and an embarrassing U-turn. The same could happen in the UK if any costs, for example through additional taxes, are put onto lower income working people.
13.4 per cent of households (3.18 million in total) in England live in fuel poverty according to the new Low Income Low Energy Efficiency (LILEE) definition, which finds a household to be fuel poor if it as a residual income below the poverty line (after accounting for required fuel costs) and lives in a home that has an energy efficiency rating below Band C. The status of being in fuel poverty is often summarised by the choice of heating or eating, an awful trade-off for anyone, and one that underlines green policies are not going to be affordable for many if they come with increased costs.
The UK Government should consider these people a priority when designing heat decarbonisation plans so that more do not fall into fuel poverty. The Covid-19 pandemic, coupled with the climate crisis, are the closest we have come to a disaster scenario since WW2. Post 1945, big government borrowing and spending was used to rebuild the country, which ultimately provided a Keynesian boost, creating jobs and lifting the country out of ruins. A similar approach could be taken in the UK following the pandemic to truly ‘build back better’ and greener, yet so far the spending ambition is not there.
The main options for heat and their costs
The leading technology battles for heat decarbonisation are between hydrogen, a fuel with zero carbon emissions at the point of use, and heat pumps, which convert energy from the air into heat for domestic properties. Heat networks are another option, however unlike boilers and heat pumps, they would not be sold to consumers – instead homes would be connected to a network or already be built into one.
Hydrogen boilers will cost the same as existing boilers (£1200 on average), and would simply be sold as a replacement when your current boiler expires to be ‘switched over’ to burn hydrogen as soon as a region is ready. In the meantime, it is believed we can safely blend up to 20% hydrogen into the gas mains without requiring any change to appliances, and trials are due to conclude next year.
The extra expense for hydrogen is therefore not the appliance, it is for the fuel itself, so there is a lot of work to do between now and 2050 to create the markets needed for widescale deployment. First and foremost, given that hydrogen fuel for heat is a new technology, it is likely to be more expensive than natural gas to begin with. It is hard to say exactly how much more, because there is currently no country using hydrogen for heat. Running a hydrogen ready boiler today on 100% hydrogen would be prohibitively expensive, but by the 2030’s and 2040’s it is expected to be significantly cheaper. This is also the time period the UK Government and industry expect homes to begin switching over to hydrogen.
To get to this low-cost hydrogen the UK Government in their Hydrogen Strategy reconfirmed an ambition for 5GW of hydrogen by 2030, and set out a number of consultations to achieve this. Most importantly was a ‘hydrogen business models’ consultation which investigates various market frameworks to decrease costs for hydrogen gas. Contracts for difference (CfD) are a market framework which the UK Government introduced to significantly bring down the costs of wind power in just 10 years. The UK Government intend to do a similar thing with hydrogen costs, so that by the time regions are ready to accept 100% hydrogen, the costs will have been substantially reduced.
Given that we cannot connect to a hydrogen grid today and buy hydrogen to run a hydrogen boiler, we cannot yet accurately compare the running costs of hydrogen with a heat pump. Although heat pumps are extremely efficient, it is 6 times more expensive to run a heat pump compared to a regular gas boiler on a standard electricity tariff. Today, the gas unit rate is 3.33p per KWH, with the average yearly gas bill at £566, while the standard electric unit rate is 18.5p per KWH, making heat pumps £828 a year to run. While some providers such as Octopus Energy are introducing new tariffs to make heat pump usage cheaper than this, you would still pay around 50% more on your heating bill, due to the way carbon taxes are applied to electric. If Government were to rebalance these carbon taxes as and make gas more expensive, there is a very big risk that this could plunge thousands of gas users into fuel poverty.
Lastly, there is the question of upfront costs. Heat pumps are an existing technology and according to BEIS, air source heat pumps are priced between £7,000 and £14,000. Ground source heat pumps, which get heat from holes drilled into the ground, cost from £15,000 to £35,000, and installation prices are often driven up further by the limited number of trained installers. Heat Pump advocates claim that costs can come down rapidly for heat pumps, however given that they are a mature and common technology (unlike hydrogen) in Europe and in other parts of the world, it is unclear by how much they can come down, if at all.
The importance of consumer choice
Public buy in is key to the decarbonisation drive, and technologies should not be imposed onto people and households without a choice. Gas boilers currently heat over 80% of homes, and the majority of the country uses them and are familiar with them. In contrast, few people are familiar with heat pumps, which provide heat by slowly warming a home up over the day, rather than providing an almost instant burst of heat like boilers do. In addition, heat pumps are large and take up a lot of space in the home, and some studies have shown they are only suitable for a minority of homes, due to needing space for inside and outside components as well as water cylinders.
Hydrogen boilers would be a like for like installation given it is essentially the same product and would take a couple of hours to install (in contrast, again, to a couple of days for a heat pump). Consumer attitude surveys show that cost and control over heating are in the top most important things for a new heating system, something heat pumps arguably cannot compete with gas boilers on.
Overall, it seems preferable to let government and industry worry about the energy supply to the technology and guarantee the least hassle and cost at point of use to the consumer. If we were to go fully down the heat pump route, that would still require doubling (at the least) current electric production, and the scale of the challenge with creating the energy needed is therefore similar to the hydrogen pathway.
In the meantime an extensive street by street insulation initiative would be a low regrets option for the 2020s because it would reduce carbon emissions, given that better insulated homes require less heat. This would then allow time for hydrogen studies to conclude and for a clearer picture of the likelihood of heat pumps reducing in cost.
Whether heat pump or hydrogen, both technologies will require significant spending by government to come to fruition. However, the UK Government is currently spending just 0.01% of GDP on fighting the climate crisis. This simply isn’t enough and according to experts, about 2% of GDP needs to be spent by every country, including the UK. It is pertinent that the UK stops making endless targets and instead comes up with significant funding and roadmaps to meet the targets they have set.
Ned Abbs-Brown is a policy lead in the UK energy industry, writing here in a personal capacity.
All SPA blogs give the views of the author, and not of the Social Policy Association.