Too many technologies and not enough infrastructure: How do we reach - - PowerPoint PPT Presentation

Delta Energy & Environment Ltd Registered in Scotland: No SC259964 Registered Office: 15 Great Stuart Street, Edinburgh, EH3 7TS

Heating & Cooling to 2020 and beyond

• Dr. Lindsay Sugden, Senior Analyst, Delta-ee

Contact: lindsay.sugden@delta-ee.com, +44(0)131 625 1006 www.delta-ee.com

Too many technologies and not enough infrastructure: How do we reach sustainability?

Delta-ee: Experts in Heat & Distributed Energy

2

Delta Energy & Environment

Clients: Energy companies Manufacturers Finance sector Policy makers Delta-ee provides: Market insight & forecasts Techno-economic analysis Competitor analysis Strategy & tactics

Generation

Demand

Electric Vehicles Electricity Storage Connected Home CHP Fuel Cell Photovoltaics Energy Efficiency Demand Response Heat Pumps

Networks

Micro-CHP Energy Services

Research Services: Heat Pump Service Connected Homes Service Micro-CHP Service Microgeneration Insight Service Distributed Power Service Pathways & Roadmap Service

Delta-ee: Experts in Heat & Distributed Energy

3

This presentation

New low carbon heating technology will be important in the UK if carbon targets are to be met The limitations of the energy system infrastructure create a need for a balanced transition involving many technologies There are customer and installer challenges to overcome Disruptive business models & connectivity in the home may support change in the heating sector

Delta-ee: Experts in Heat & Distributed Energy

4

This presentation

New low carbon heating technology will be important in the UK if carbon targets are to be met The limitations of the energy system infrastructure create a need for a balanced transition involving many technologies There are customer and installer challenges to overcome Disruptive business models & connectivity in the home may support change in the heating sector

Delta-ee: Experts in Heat & Distributed Energy

5

2012 2025

UK heating market today

Gas boiler Electric Storage Heater Oil / LPG Low Carbon Appliances 1.8 million Gas boilers are responsible for the vast majority of CO2 emissions from domestic heat

Source: Delta-ee UK Pathways & Roadmap: Reference Scenario

Delta-ee: Experts in Heat & Distributed Energy

6

Reaching Sustainability: Decarbonising the heating market requires lower carbon gas boiler alternatives

The scale of the challenge: 2015 residential heat emissions 5,000 10,000 15,000

Detached - Other (Pre 1944) Detached - Other (1945 -2011) Terraced - Other (Pre1944-1980) Terraced-Other (1980-2011) Semi - Other (Pre 1944) Semi - Other (1945-2011) Flat - Other (Pre 1944 - 2011) Detached - Electric (Pre 1944) Detached - Electric (1945 -2011) Terraced - Electric (Pre1944-1980) Terraced-Electric (1980-2011) Semi - Electric (Pre 1944) Semi - Electric (1945-2011) Flat - Electric (Pre 1944) Flat - Electric (1945-2011) Detached - Gas (Pre 1944) Detached - Gas (1945 -2011) Terraced - Gas (Pre1944-1980) Terraced-Gas (1980-2011) Semi - Gas (Pre 1944) Semi - Gas (1945-2011) Flat - Gas (Pre 1944) Flat - Gas (1945-2011)

Urban / Suburban Mainly rural Mainly rural/ some urban Thousands of tonnes C02/yr Gas: 22m homes Electric: 2.6m homes Others: 1.3m homes

Source: Delta-ee Heat Study for Energy Networks Association

Delta-ee: Experts in Heat & Distributed Energy

7

2012 2025

UK heating market in 2025 –growth of low carbon appliances

Gas boiler Electric Storage Heater Oil / LPG Low Carbon Appliances 1.8 million Which technologies will make up the 400,000 low carbon appliances?

Source: Delta-ee UK Pathways & Roadmap: Reference Scenario

Delta-ee: Experts in Heat & Distributed Energy

8

Which technologies will make up the 400,000 low carbon appliances – which can displace gas boilers?

2012 2025

Gas boiler Electric Storage Heater Oil / LPG

Low Carbon Appliances 1.8 million

Source: Delta-ee UK Pathways & Roadmap: Reference Scenario

2012 2015 2020 2025

Gas boiler plus solar thermal Biomass Fuel cell Micro-CHP Gas heat pump Hybrid heat pump gas boiler Hybrid heat pump oil boiler ASHP GSHP

Heat Pumps

400,000 42,000

Delta-ee: Experts in Heat & Distributed Energy

9

This presentation

New low carbon heating technology will be important in the UK if carbon targets are to be met The limitations of the energy system infrastructure create a need for a balanced transition involving many technologies There are customer and installer challenges to overcome Disruptive business models & connectivity in the home may support change in the heating sector

Delta-ee: Experts in Heat & Distributed Energy

10

The limitations of the energy infrastructure

Source: Energy Technologies Institute, 2012

2010 UK heat & electricity hourly demand variability

Design point for heat delivery system Design point for electricity delivery system Peak electricity demand will exceed electrical grid capacity in future

??

Delta-ee: Experts in Heat & Distributed Energy

11

What happens under a more balanced scenario? Role for electric HP, hybrid, gas HP, micro- CHP… storage, demand response… 90% carbon emissions reduction Half the additional peak capacity required in the full electrification & heat networks scenario (24 instead of 48 GW) Half the infrastructure investment costs required in full electrification (half of £16–28bn distribution grid, £4bn – gas grid shut-down)

Balanced Transition – a wider mix of technologies Gas Electric Heat networks

0% 25% 50% 75% 100%

2012 2015 2025 2035 2045 Number of appliances (%)

Source: Delta-ee Report for the Energy Networks Association - Balanced Transition Scenario

Delta-ee: Experts in Heat & Distributed Energy

12

This presentation

New low carbon heating technology will be important in the UK if carbon targets are to be met The limitations of the energy system infrastructure create a need for a balanced transition involving many technologies There are customer and installer challenges to overcome Disruptive business models & connectivity in the home may support change in the heating sector

Delta-ee: Experts in Heat & Distributed Energy

13

Customer proposition for low carbon technologies…

upfront cost time

gas boiler

The upfront cost of low carbon technology will fall over time…. But running cost savings alone may not be enough – especially without incentives

annual running cost time

gas boiler

Policy intervention is the market will be critical for new low carbon technologies

Delta-ee: Experts in Heat & Distributed Energy

14

In reality, there are challenges gaining customer buy-in

4,000 8,000 12,000 16,000 2012 installations Air source heat pump sales in 2012 Majority of the market Social Housing Owner occupiers are challenging

Costly & time-consuming?

“The primary barriers to renewables are the cost and time for training, and for membership of an approved body. …and there is a lack of interest from my customers”

Source: Delta-ee Microgen Insight Service Installer

Social Housing – new build Social Housing - retrofit Self-build Developer Owner occupier

No customer pull?

“Renewables very rarely feature in my customers’ list of desires… …customers go off the idea with price and complexity of installation”

Delta-ee: Experts in Heat & Distributed Energy

15

“if someone said they’d put it in for free, I’d say no problem, do it.” “I want information from someone who does not have a vested interest in selling it”

Customers don’t like change? Lack of awareness / trust?

“I’m standing here with £8K and saying somebody please come and give me one

• f these things and the industry is saying

no”

Difficult customer journey so far? Too expensive?

“I don’t know how safe it is” “finding the capital would be difficult” “[I would want] documented evidence that these [fuel bill] savings can be delivered” “A big concern is the actual upfront cost” “[my gas boiler] is just very effective” “I don’t really see the need to be changing my system”

Source: Delta-ee Microgen Insight Service

In reality, there are challenges gaining customer buy-in

customer

“I would need a much longer warranty” “I want information from someone who does not have a vested interest in selling”

Delta-ee: Experts in Heat & Distributed Energy

16

This presentation

New low carbon heating technology will be important in the UK The limitations of the energy system infrastructure create a need for a balanced transition involving many technologies But there are customer and installer challenges to overcome Disruptive business models & connectivity in the home may support change in the heating sector

Delta-ee: Experts in Heat & Distributed Energy

17

A glimpse into the future…. ? Business models…

“Removing the ‘risk’ of poor performance through a ‘real’ ESCo is key to gaining consumer confidence in a new heating system” Wolfram Moritz, MPW Legal & Tax (ESCo expert)

Source: Delta-ee Heat Pump Service

“We are selling a lot of heat pumps for multi- family homes in Switzerland because of the heat contracting offer from local utilities”

Major European Heat Pump Manufacturer

Delta-ee: Experts in Heat & Distributed Energy

18

A glimpse into the future…. ? Connectivity…

“Microsoft has s a long ng term m plan an that has s the cons nsole

• le as the cent

nter er of

• f

an autom tomat ated ed home me system”

“save energy, heating costs and environment…”

“…simple, easy to understand heat pump controls and remote diagnostics” “monitor and control the heating & domestic hot water comfort” “ABB, Bosch, Cisco & LG Consortium Develops Open Standard for Smart Home Appliances”

Delta-ee: Experts in Heat & Distributed Energy

19

10,000s 1,000s 100s or less

Annual sales of connected home energy products

UK one of leading countries in Europe for connected home energy products

+ + + +

Battle between the utilities

• ffering low cost, low

functionality products

Source: Delta-ee Connected Home Service

Delta-ee: Experts in Heat & Distributed Energy

20

Changing our relationship with heating: How will connectivity support the low carbon transition?

Builds consumer confidence through performance visibility Better control / more intelligence… lower running costs Remote diagnostics reducing poor performance and reducing servicing costs Enables demand side participation in energy markets...

Delta-ee: Experts in Heat & Distributed Energy

21

This presentation

New low carbon heating technology will be important in the UK – technologies to displace gas boilers are critical to achieve decarbonisation The limitations of the energy system infrastructure create a need for a balanced transition involving many technologies – with a role for electricity and gas Gaining customer buy-in to low carbon technologies is critical – incentives will help but there is still a need for awareness-raising, information dissemination and a strong focus on a positive “customer journey” Disruptive business models can support this change in the heating sector through breaking down customer barriers (e.g. ‘upfront cost’, ‘risk’) Connectivity in the home can be a positive driver of low carbon heating through enhancing the customer experience, and changing out relationship with our heating system