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(Send backwards until image appears behind title. Do not cover the footer banner.) 9 May, 2019

Heat Decarbonisation

Facing the challenge

Future of Heat, May 2019

Why does decarbonising heat matter?

Future of Heat, May 2019 2

• Heating has impacts across our economy. In our homes, we rely on it for comfort, cooking and
• washing. Businesses need heating and cooling for productive workplaces and heat is integral to

many industrial processes.

• Meeting our existing Climate Change Act commitment to reduce greenhouse emissions by 80%

by 2050, or more stretching future targets, will require decarbonising nearly all heat in buildings and most industrial processes.

• The Clean Growth Strategy (CGS) identifies heat as the most difficult decarbonisation challenge

facing the country. It will involve large-scale transformation, including disruption to consumers and wide-ranging change to energy systems and markets. Delivering it will require coordination beyond the scale of most public policy programmes.

What is the heat challenge?

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• Heating is the single biggest reason we consume energy in our

society and is responsible for over a third of our emissions

• Heat demand is highly seasonally variable and can be several

times electricity demand during winter peaks

Future of Heat, May 2019

Heat decarbonisation in the 2020s

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To meet carbon budgets, action is needed to drive uptake of low carbon heating at scale, throughout the 2020s. Commitments include:

Phase out fossil fuel heating off the gas grid during the 2020s (territorial extent depends on policy levers) Buildings Mission, to at least halve the energy use

• f new buildings by 2030

(England only) Reduce emissions from the public sector by 50%, including by reducing the energy use of buildings, by 2032 Reduce business energy use by at least 20% by 2030 Improve the EPC of fuel poor and private rented households to Band C by 2030 (England only) Commitment to bring the EPC rating for all homes to Band C by 2035 (England)

Reducing heat demand: domestic

5 Future of Heat, May 2019

The Clean Growth Strategy set out our aspiration to strengthen the PRS standards and replicate an EPC led approach across other tenures. To this end we have:

Owner occupiers

• Oct 2017 published a Call for Evidence on ‘Building a Market for Energy Efficiency’

Private rented sector

• Strengthened regulations to require landlords to contribute up to £3500 in place from April

2019

• A consultation on increasing standards in the domestic PRS to take place in the autumn
• A non-domestic consultation to be published shortly

Supply chain and consumers

• Summer 2018 published a call for evidence on improvements to EPCs
• Each Home Counts review – quality mark and industry standards
• 6 supply chain demonstration projects - to improve supply chain coordination
• Sustainable Energy Advice – a new digital tool for trusted consumer advice

Reducing heat demand: non-domestic

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The Clean Growth Strategy sets an ambition to improve business productivity by enabling businesses to improve energy efficiency by at least 20 per cent by 2030.

• This will deliver:
• Up to £6bn in cost savings for businesses
• Carbon savings of up to 22 MtCO2e
• Call for Evidence (Jul 2018) sought views on how to deliver the 20% ambition – the

Government response was published in March 2019

• We sought views on a number of proposals and approaches to make buildings more

energy efficient e.g.:

• Improving energy efficiency requirements for new & existing buildings
• use of more sustainable technologies, benchmarking building performance and

tools to monitor and evaluate building energy use and performance.

Reducing heat demand: industry

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Industrial Energy Efficiency Accelerator - A £9.2M competition which will identify and accelerate deployment of new energy efficient technologies and processes to UK industry / manufacturing sectors Innovations with large cross-sector energy and carbon reduction impact, either from novel technologies or known technologies in new sectors Climate Change Agreements - Now in Final Target Period (2019 and 2020) – evaluating to inform decisions on future schemes Industrial Energy Transformation Fund - As part of the Industrial Strategy, the government will establish an Industrial Energy Transformation Fund, backed by up to £315 million of investment, to support businesses with high energy use to transition to a low carbon future and to cut their bills through increased energy efficiency. Industrial decarbonisation challenge - Establish the world’s first net-zero carbon industrial cluster by 2040 and at least 1 low-carbon cluster by 2030 Industrial heat recovery support - Phase 1: Support for Feasibility Studies - £6m; Phase 2: Capital funding - £12m to provide direct financial support for projects that would otherwise not have gone ahead and to encourage the deployment of recoverable heat technologies in industrial clusters

Supporting low carbon heat: off gas grid

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The Clean Growth Strategy set out our ambition to phase out the installation of fossil fuel heating in new and existing buildings off the gas grid in the 2020s.

• In 2018 we ran an extensive programme of engagement to seek views on how

industry, government and consumers could work together.

• Responses were clear that Government should set a long-term framework that would

enable industry to play their part in the decarbonisation of off gas grid areas.

• We are now looking to develop a comprehensive policy framework to support this
• transition. It will aim to take forward the gains made by the Renewable Heat Incentive

(RHI) and continue to build the market, backed by standards. This year, Government will consult on regulations; skills and training; and Part L of the Building Regulations for England to continue developing this policy framework.

Supporting low carbon heat: new build

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• By 2025 the government will introduce a Future Homes Standard for new build

homes to be future-proofed with low carbon heating and world leading levels of energy efficiency.

• This will create healthy homes that are fit for the future, have low energy bills,

and are better for the environment.

• This will be implemented through an uplift to the Building Regulations, subject to
• consultation. We will expand on the technical detail of these proposals during

the 2019 Part L consultation.

• The Buildings Mission, announced by the PM in May 2018, is the first mission

designed to meet the aims of the Clean Growth Grand Challenge. It aims to halve the energy use of all new builds by 2030, and to halve the cost of retrofitting existing buildings to a similar standard

Supporting low carbon heat: green gas

• To meet our climate targets, we need to reduce our dependence on burning

natural gas to heat our homes.

• “we will publish proposals to require an increased proportion of green gas in

the grid, advancing decarbonisation of our mains gas supply”

• The Government will consult on the appropriate mechanism to deliver this

commitment later this year.

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Supporting growth in low carbon heating

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We are supporting innovation for a range of potential heat technologies, including electric and low-carbon gas technologies We are investing £320m of capital funding in heat network projects through grants and loans, to leverage around £1bn of private and other investment. We are developing a market framework for self- supporting heat networks in future We are spending £4.5bn between 2016 and 2021 to support innovative low carbon heat technologies in homes and businesses, such as heat pumps, biomass boilers and solar water heaters. We are developing options for phasing out fossil fuel heating in properties off the gas grid and in new builds and will consult on these later this year

Furthering our understanding of heat technologies

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• No clear consensus on the best approaches to decarbonising heat at scale
• We have come a long way in developing our understanding of the options in

the past few years

• But, as set out in Clean Growth: Transforming Heating, evidence gaps remain

and we have a ‘common agenda’ to plug them. E.g.: Hydrogen - testing the costs, practical delivery challenges and public perception and experience of hydrogen technologies; Electrification - improving understanding of potential future requirements for electricity generation and network reinforcement under different circumstances,; Bioenergy – improving understanding of the potential for expanding feedstocks and the competition for limited bioenergy resources in the future

• As well as continuing to plug the gaps in the evidence, further work is needed to develop a long-term policy

framework for heat to enable strategic decisions in the mid-2020s on the future of heat

• We have committed to develop a roadmap for policy on heat decarbonisation, which we aim to publish

by mid-2020, to get us to the policy framework

Developing a policy framework for decarbonising heat

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• It is an open question as to what form the framework will take, but we will be looking to set this out in the

roadmap and to work closely with you to do so: the scale of the challenge to decarbonise heat will need all

• f us to work together to tackle it