New report shows UK needs to do more to meet energy targets

By Katie Fletcher | October 20, 2015

Last week, Carbon Connect released the report “Policy for Heat: Transforming the System," which is part two of the company's Future Heat Series, a series of two independent inquiries considering both the supply and demand of heat in U.K. buildings.

The first inquiry, Pathways for Heat, released last November, compares different decarbonization pathways for the sector by six organizations—Department of Energy and Climate Change, Committee on Climate Change, Energy Technologies Institute, National Grid, U.K. Energy Research Center and Delta Energy and Environment—exploring the role of different solutions and identifying the key transformations needed to decarbonize heat for buildings.

Having identified some key transitions in the previous report, part two explores implied policy challenges, where existing policy is taking the U.K. and what options there are for new policy.  

Part two builds on the conclusions and recommendations in part one of the Future Heat Series by urging the U.K. government to implement an ambitious, long-term decarbonization strategy for the heat sector. The report calls for the next government to fill gaps in the evidence base and ramp up delivery of low carbon heating and energy efficiency. The report also argues that there is no one solution to cutting emissions from building heat, and instead the U.K. is heading towards a ‘mixed future’ of technologies and fuels.

The report concludes that at present, the U.K. is on track to fall short of its low carbon heat targets. According to the Renewable Energy Association, the largest renewables trade body in the U.K., missing the heat target has knock-on effects for the targets of other sectors, including transportation and renewable electricity.

“With the conclusions of this report, the government is sent a clear message; it can no longer muddle along in low carbon heat,” said James Court, head of policy and external affairs with the REA. “There are clear targets, there are simple recommendations, and not meeting the targets has serious consequences for other sectors of the economy.”

In the report, biomass is concluded to be an immediately available, sustainable and versatile source for low carbon heat in the U.K., providing the majority of the supply to date, although more must be done to encourage the development of other technologies. Since 2005, the majority of new renewable heat has come from the use of biomass boilers, burning wood, other biomass and waste, with a notable upswing in wood-fired heating following the introduction of the renewable heat incentive (RHI) in 2011.

“Biomass is correctly identified here as not only the leading source of the U.K.’s renewable heat, but as a versatile and sustainable source of heat. It is widely available today and can deliver significant GHG savings,” said Frank Aaskov, policy analyst with the REA. “Biomethane is also emerging as critical to decarbonizing the gas grid. Despite its success of biomass in particular, other sectors need to be encouraged.”

According to the CCC, extending current policies into the 2020s will not deliver  the  emissions  savings  required  to  meet  the  fourth  carbon  budget  period  (2023  to 2027), with annual emissions around 45 million metric tons CO2 (or 18 percent) above the level of  the  budget. The committee has identified buildings as one of the most cost-effective sectors in which to deliver these additional reductions.

The REA recently announced support of the conclusions of the report. In the release, the REA states that the association and those who put together the report warn that much greater action is needed by the government to promote the decarbonization of the heat sector. The report and the REA call for an extension of the government’s RHI. This is identified as the best tool to support this transition.

“Heat is central to our meeting our low carbon energy targets. I think that there is strong potential for geothermal heating in the U.K., as well as for biomethane and other technologies,” Aaskov said. “The RHI can easily be improved and extended to achieve this.”

Court adds, “At present we are not on track to meet our binding targets and the government is actively sending the wrong signals to investors and consumers across the country with uncertainty over the RHI budget.”

The RHI budget runs out in April 2016, and its future is expected to be announced in the government’s Comprehensive Spending Review on Nov. 25. In total, RHI heat delivery by 2015-16 is expected to be above initial forecasts and spending is projected to be within the £424 million ($654.89 million) budget cap.

The non-domestic scheme under the RHI has delivered more heat than anticipated, but with poor diversity. Small and medium biomass boilers account for 95 percent of installations. Uptake in the domestic scheme has been spread more evenly between technologies, although the recent fall in oil prices may adversely affect their installation in oil-heated households, according to the report.

Heat is one of three sectors that make up the U.K.’s binding commitment to decarbonize the energy industry by 2020. The target is for 12 percent of the U.K.’s heat to come from low carbon or renewable sources. If this is unmet, the other two sectors, transport and electricity must contribute more to meet the overall target.

Current DECC projections suggest that the RHI will not succeed in delivering the desired share of at least 12 percent for renewable heat. Based on March 2015 Eurostat data, the U.K. is now further behind its renewable energy targets than any other EU state; 9.9 percent short of its 15 percent 2020 target, with a 5.1 percent share in 2013. The U.K. needs a growth rate of over 16 percent per year in order to achieve its 2020 targets.

In the report's executive summary, the authors state, “Improving energy efficiency helps increase the sustainability, resilience and affordability of the energy system and can help bring down carbon emissions and reduce fuel poverty.” However, despite the legislative efforts of the Climate Change Act (2008) and the Energy Act (2013), the U.K. has a relatively low installation rate of retrofit energy efficiency measures and struggles at assessing the efficacy of its policies.

Partly attributed to this is the fact that in 2011 an estimated 4 million households in the U.K. were unable to afford to heat their homes. Since then, there has been progress. The report highlights two remaining challenges. One setback in energy efficiency of U.K. buildings is the announcement of the ending of the pay-as-you-save finance mechanism for consumers, in the form of the Green Deal, and another is the removal of the Zero Carbon Homes Standard. The report calls for the government to look at setting out an energy efficiency roadmap, with a scheme for the able to pay sector and a separate focus on fuel poor households.

Within the report’s executive summary, nine recommendations are given for the U.K. to reach renewable energy targets. These recommendations are expanded into 18 findings, described in detail throughout the report. A few include the government must urgently develop a cross-party, low-carbon heat roadmap to 2050, outlining a strategy and timeline for policy and phased regulation; the government must confirm the extension of the RHI to 2020 at the earliest possible opportunity; and the replacement of the Energy Company Obligation must be announced before the obligation’s expiration in 2017, in order to prevent damaging hiatus for the energy efficiency industry.

Part two, “Policy for Heat: Transforming the System,” of the Future Heat Series can be downloaded here. Part one, “Heat Pathways: Low Carbon Heat for Buildings,” can be found here.