HHIC PATHWAYS FOR DOMESTIC HEAT Research and analysis conducted by Delta Energy and Environment
Key Findings: The Heating and Hotwater Industry Council (HHIC) supported by Delta-ee has developed a scenario for deployment of low carbon heating appliances that meets the 2030 residential carbon target. The industry believes it can deliver this scenario but only if the government plays a role in stimulating demand in a coordinated way and building confidence for industry and other players to invest. HHIC believes that delivering the target through a range of appliances keeps options open for further decarbonisation to 2050 and minimises impacts on customers and the energy system. HHIC’s scenario pictures the annual heating appliance market transformed by 2030. Condensing boilers fall from their dominant position today to just over one third of the market (nearly half of these with solar thermal or flue gas heat recovery). Electric heat pumps grow to over one quarter of the market (just over half of these hybrid systems with a boiler). Low carbon gas technologies (gas heat pumps and micro-CHP – including fuel cells) rise to one fifth of the market, with district heat close to one tenth of the market.
SECTION 01 Residential heating and carbon targets – what’s the goal?
SECTION 02 HHIC’s scenario for meeting the 2030 target: • The challenge and options • HHIC scenario
SECTION 03 Assessing low carbon appliances and their fit in different housing types: • Assessment of low carbon heating appliances • Customer challenge – drilling down into customer segments
SECTION 04 A challenge for the heating industry – and for government. The need for intervention and investment.
Section 1 Residential heating and carbon targets – what’s the goal? Delta-ee and the HHIC consulted with the Committee on Climate Change and DECC on carbon targets. Delta-ee worked with the HHIC on different low carbon heating appliance mixes that reach carbon targets.
HHIC PATHWAYS FOR DOMESTIC HEAT
The 2027 / 2030 carbon target for residential heating The target:
The starting point for residential emissions from heat:
80% reduction of CO2 (on 1990 levels) by 2050
Total residential emissions in 1990: 155MtC02 (including indirect emissions)
On the pathway to 60% reduction by 2030 by the end of the 4th Carbon Budget (2027)
The carbon pathway under the HHIC Scenario gets close to the 4th Carbon Budget target
Direct emissions* (non-electric) in 1990: 80MtCO2 So what is the residential emissions target for the 4th Carbon budget? Question: Is it only the direct emissions (i.e. excluding emissions from electric heating) from residential heating that are important? Answer from CCC: Yes
Carbon emissions (MtCO2)
Key points: There are no specific targets in the 4th carbon budget, just an overall target to reduce UK overall emissions by around 60% by 2030. However for residential heating, the medium scenario pathway gives a reduction in residential direct emissions of 38% (to 49MtCO2 by 2027) To remain on the pathway, scenarios should reach 49MtCO2 from direct emissions by 2027. Discussion with DECC indicates a revised scenario of 50.2MtCO2 from direct emissions by 2027 * Note: For calculating the carbon from residential heating the CCC uses direct emissions as the measure – this is the emissions from fuel – excluding electricity. The emissions from electric heating are not counted – these are accounted for instead under a separate budget under a separate ‘capped’ budget for large emitters.
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Context for the HHIC developing a pathway to 2027
In March 2013, DECC released an updated view for domestic heat to 2050, and with gas continuing to be an important part of the mix to 2030 and beyond. This recognises the role of gas heat pumps and hybrid heat pumps as transition technologies. It fits with Delta-ee’s analysis for the Energy Networks Association that keeps a number of options open for as long as possible – a principle shared by HHIC. However to date no work has been carried out to look at the shorter term view as to what the industry can deliver, and how. This report adds to the view and highlights in the short term what the key challenges and risks are in ensuring the heating industry is on the path to 2050. The right steps taken today until 2030 will keep options open for the future.
Delta-ee Pathways for Domestic Heat to 2050, for the Energy Networks Association Delta-ee presented a number of different scenarios for reaching 2050 carbon targets. The lead scenario “Balanced Transition” (see below) outlined the benefits of keeping a mix of fuels for domestic heating, for the customer and for the energy system while still getting close to carbon targets.
Number of appliances (%)
HHIC’s goal is to develop a pathway for the heating industry appliance uptake, which meets the objectives of the fourth carbon budget. The view presented is one the industry says it can stand behind with confidence that it can deliver, with the right support and incentives from the government.
Delta-ee (2012) “Pathways to 2050 for domestic heat”
Heat Strategy 2013 In March 2013 DECC updated their view on domestic heating for 2050. Recognising the challenges, especially in suburban homes of moving completely away from gas. Also, it foresees that gas will have a “major role” to the 2030s, and possibly for some homes through to 2050.
UK Housing Stock
Dense urban
Suburban
Rural
Time
We should facilitate heat networks in denser urban areas where there is limited space for heat pumps. Storage on the networks will help with grid balancing that could be a major barrier to building - level renewable heat dependent on electricity
22%
5%
19%
In all locations and building types, continue to drive down demand for heat through increasing thermal efficiency and influencing consumer behaviour
High efficiency condensing boilers remain the dominant technology in suburban areas into the 2030s
Gas still used for heating, but in more efficient systems using gas absorption heat pumps... and hybrid systems with gas boilers and electric heat pumps
High electric heat pump penetration faces fewer barriers in homes that are less clustered, starting with buildings off the gas grid which are more likely to have space and be using expensive, high carbon forms of fuel such as heating oil.
DECC (2013) “Future of heating meeting the challenge” page 78
HHIC PATHWAYS FOR DOMESTIC HEAT
Section 2 HHIC’s Scenario for meeting the 2030 target: • Challenges and options • HHIC Scenario The HHIC Scenario has been developed by the heating industry, with support from Delta-ee in modelling the consequential carbon emissions.
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Different pathway options to 2030
OPTION A
There are different pathways that can be taken to 2030, a critical point at which the UK needs to be on the right trajectory for meeting the binding 2050 targets. Broadly, these can be grouped into three key scenario options.
ALL ELECTRIC: Push electric – meet the target primarily using electric heating solutions only. This would involve pushing ASHP and GSHP into a significant proportion of on gas homes, with annual sales upwards of several hundred thousand installs per year, from an annual market today of under 20,000 per year. Sets out on a pathway that can meet 2050 targets – but it’s a narrow, challenging pathway to 2030. Key risks and challenges: • Carbon targets only reached if the electricity grid is predominantly decarbonised as projected. • Significant re-enforcement required for the electricity distribution network. • Electric heat pumps can be challenging in retrofit – in high heat loss homes significant upgrades required. In smaller properties space can be a challenge. • Significant incentives required – The additional up-front costs a customer pays (compared to a boiler) is significant, and on-gas the running costs will be broadly comparable with a condensing gas boiler (to 2030) so without support the customer proposition is weak.
HHIC PATHWAYS FOR DOMESTIC HEAT
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OPTION B
OPTION C
FOCUS ON LOW CARBON GAS + HYBRIDS: The 2030 target can be met by pushing low carbon gas appliances such as fuel cell and GHP into customer homes. However this requires very aggressive take up.
BALANCED MIX: Push for a mix of low carbon gas appliances and electric heat pumps to provide a range of solutions for different house types, staying on the path to 2050. Planning for a mix of technologies is a pragmatic way to manage uncertainty and keep options open.
Can just meet 2030 target, but very large uptake of new products required. Does not put UK on pathway for 2050 target as most biogas will be directed to other sectors. So large shift to electric heating required post 2030 from a very low base.
Pursues a range of technologies with different technologies for different types of customers; keep options open for both precise balance of technologies to reach 2030 target and then pathways to 2050, and avoids some of the challenges of an all electric approach.
Key risks and challenges: Key risks and challenges: • T he long term carbon savings from low carbon gas will not be sufficient to reach the 2050 target. This largely postpones the foundations and growth of electric heating that will be required to meet the 2050 target. • Technology uncertainty – many of the low carbon gas products are only just emerging in the UK or are not yet available (GHP and fuel cells). The exact performance, cost and appeal of these technologies is uncertain going forward.
• Requires significant take-up of new low carbon gas appliances. • Full carbon savings will only be realised if the grid decarbonises as projected. • Some network upgrades required – but less speedy ramp up of electric heat pumps and use of hybrids gives more time for network re-enforcement. • Retrofit challenges – even with a suite of technologies, it is difficult to encourage customers to move away from a gas boiler without any interventions. There is no single technology ‘silver bullet’ but greater choice will give wider customer appeal for low carbon heat in general.
HHIC Choice: Option C, Balanced Mix This scenario provides:
01.
02.
03.
04.
lexibility – an important F principle when there is lots of uncertainty around low carbon heating in the UK.
A range of technologies widening customer choice – recognising that different customers in different types of housing have differing preferences and requirements.
educed impact on R the electricity system – while electric heat pumps see significant growth, use of hybrids and other technologies limits the reenforcement required on the electricity distribution network and the impact on peak demand.
Slower ramp-up rates for any single technology than the other scenarios, allowing more time for supply chain and installer development.
It will, along with the other scenarios, require aggressive reduction of thermal demand in existing homes, and significant growth in heat networks both in new-build and existing housing.
HHIC Scenario – installed appliance base to 2027
Number of appliances (% installed stock)
Keeping options open – multiple solutions
2012
2015
2019
2023
By 2027 the transition to lower carbon appliances – compared to condensing boilers - is well underway
2027
Carbon emissions: 51 MtCO2
HHIC believes that this scenario can be delivered but it will be challenging. It will require significant investment from industry and other players, and significant government intervention to be realised. • O ver 60% of homes have only a condensing gas boiler installed (9% with ‘gas boiler plus’). • 5 % of homes have district heat installed – the roll out in dense housing has begun. • 2 0% of homes have some sort of heat pump – so outside units will be becoming the norm (incl. gas HP and hybrid HP). • O il share has fallen to about 2% of the housing stock – reducing significantly but still present.
HHIC PATHWAYS FOR DOMESTIC HEAT
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HHIC Scenario – how the annual heating market changes
To deliver this mix, the annual heating market will have changed dramatically by 2027 – ramping up for even greater roll out of low carbon appliances post 2030. Heat pumps, and a suite of low carbon gas technologies make up the majority of the market.
35%
of annual sales comprise condensing gas boilers, with nearly half of these ‘gas boiler plus’ (with the addition of solar thermal, and / or passive flue gas heat recovery)
20%
of sales are low carbon gas technologies (gas heat pumps, micro-CHP)
27%
of sales are electric heat pumps (over 50% of these are hybrid units to ease early transition to an electric-heat pump heavy future)
Other
Annual Sales (Thousands)
Heat pumps
Low carbon gas
Gas boiler
* Note: by 2030 we have assumed that innovative oil solutions will begin to emerge, this is reflected in the modelling by increasing the efficiency of oil boilers. There is also potential for innovative LPG solutions, such as LPG mCHP and LPG hybrids, however the scope of this research did not extend to include LPG.
Section 3 Assessing low carbon appliances and their fit in different housing types: • Assessment of low carbon heating appliances • Customer challenge – drilling down into customer segments This section has been researched by Delta-ee, taking into account HHIC (and other stakeholder) views and opinions.
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Why this technology mix – the industry challenge The UK heating market is dominated by replacements in existing homes (>90% of all installations), with boilers (natural gas, oil and LPG) accounting for the vast majority of these installations – typically providing hot water and high-flow temperature water distribution via radiators. The low carbon solutions, detailed below (some of which are coupled with boilers), only comprise 3-4% of the current market today. Summary of low carbon options for UK homes Figures are to orders of magnitude / one significant figure to indicate current size of markets and scale of the challenge for 2027.
UK volumes / yr today
European volumes / yr today
UK volumes / yr by 2027
Electric ASHP (air to water)
~10,000
100,000s
200,000
Established products, many available in UK. Learnings re: retrofit to UK homes will see improved performance, but retrofit can be challenging in some homes.
Electric GSHP
~1,000
100,000s
40,000
Established products, learnings re: retrofit to UK homes, and low running costs.
Hybrid boiler - ASHP
100s
1,000s
250,000
Many products currently being brought to market, easier retrofit than pure heat pumps (but lower carbon savings), combi products available.
Thermally driven HP
0
100s
200,000
No product yet available in UK, but several being developed, some recently available in Germany. Retrofit challenges (but slightly easier than elec HP).
100s
1,000s
20,000
Product available, but limited success in UK to date – better performance in other markets, and some potential in the UK.
0
10s
100,000
Not yet widely available, but 10,000s / year sold in Japan, 4 of top 5 European boiler manufacturers developing product, some with Japanese corporates.
Biomass boiler
Low 10,000s
~100,000
20,000
Several products available in UK, well understood and mature product.
District heating
Low 10,000s
100,000s
140,000
Dependent upon infrastructure development – connection to home relatively straightforward.
1,000s
1,000s
Engine micro-CHP
Fuel cell micro-CHP
Solar thermal
Key opportunity / challenges
Suitable for all homes with roof-space and hot water tank (possibly also homes with combis). 250,000
Flue gas heat recovery
Low 10,000s
~100,000
Introduced in last few years, suitable for all new boilers.
Carbon and running cost of different appliances Different technologies have varying running costs and carbon emissions. This slide summarises the performance of the different appliances – the Delta-ee model calculates the running cost and carbon emissions of each appliance year by year in each of 39 different housing segments. Running cost and carbon performance of different low carbon heating appliances
Running cost (condensing gas boiler = medium)
Carbon emissions in 2027 (direct emissions only)
Electric ASHP
Medium - low
Zero
Forecast rises is spark-spread mean SPF of 3 – 3.5 required for running costs to be comparable to a CGB
Electric GSHP
Low
Zero
Assuming SPF of above ~ 3 - 3.5, which is achievable
Hybrid boiler - ASHP
Medium - low
Low - very low
Thermally driven HP
Low
Low
SPF of 1.3, likely 1.5 by 2030,, but no evidence yet from performance in UK homes
Engine micro-CHP
Low
Low*
Widening spark-spread good for economics. *If assumed to (and credited with) displace marginal /fossil generation
Low
Low*
Widening spark-spread good for economics. *If assumed to (and credited with) displace marginal /fossil generation
Biomass boiler
Medium*
Almost zero
*Depends on future pellet price
District heating
Low - high*
Low - zero**
*Dependents on heat network costs and how these are financed / passed on to customer **Assumes low carbon heat source (e.g. biomass, heat pumps)
Solar thermal
Medium - low
Medium - low
Some, but relatively modest running cost savings compared to CGB
Flue gas heat recovery
Medium - low
Medium - low
Some, but relatively modest running cost savings compared to CGB
Fuel cell micro-CHP
Comments / notes
Depends on proportion of heat load met by heat pump, and SPF of heat pump (which should be working more in it’s comfort zone)
Electric resistance heaters are not shown above – as the electricity grid decarbonises their carbon emissions will fall. However their running will be high unless significantly attractive time of use prices are introduced – which is possible – in which case storage heaters will be relatively well placed. However we don’t expect substantial customer switching from hydraulic heating to storage heaters.
HHIC PATHWAYS FOR DOMESTIC HEAT
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Pure electric heat pumps Electric air-source heat pumps INDICATIVE MARKET TAKE-UP: ELECTRIC ASHP
• European volumes already in 100,000s / yr – mature supply chain. Some, but limited cost reduction potential.
• UK market still learning lessons re: sizing, installing etc.
Units per year
Marginal customer proposition for existing on-gas homes; stronger in off-gas grid homes. UK learning’s will see improved system performance. Current market in RSL / new build sector. RHI drives growth, particularly in off-gas homes , and building regs in new build
Government intervention to support growth in on-gas replacement market
– improved performance compared to EST trial in the future.
• Differing opinions on how retrofit-able ASHPs are for homes with relatively high heat loss and high flow temperature heating systems – but in principle suitable for much of the housing stock if space for outdoor unit and hot water storage tank.
Ground-source heat pumps INDICATIVE MARKET TAKE-UP: ELECTRIC GSHP
• Mature in new-build markets in Europe (~100,000 / yr). • Drilling / trenching costs are big proportion of overall costs – margins already relatively low.
Units per year
Low running costs, but limited scope for cost reduction means likely to stay relatively niche in new build / social housing
Market predominantly in new build / RSL sector
• UK market still learning lessons re: sizing, installing etc. – improved performance compared to EST trial in the future.
KEY CHALLENGES / OPPORTUNITIES • Likely widening spark-spread will mean running cost savings hard to achieve – for air source – compared to condensing gas boilers. • Carbon performance will improve rapidly as electricity grid de-carbonises, if the government plans are met. • Some, but limited potential for cost reduction as existing EU markets mature – and for GSHP drilling costs will remain high. • Requires supply chain / installer up-skilling to ensure heat pump systems operate to their full potential.
“New” heat pumps Hybrid electric ASHP with gas or oil boiler
Thermally driven heat pumps
Lots of new product emerging, using existing technologies. Strong potential to open up the gas boiler replacement market to heat pumps.
First products on market in Germany – growing investment from major heating appliance manufacturers, strong potential for gas boiler potential market.
• Only one product introduced in UK so far – but many more
• Commercial-building scale products mature (10,000s per year),
products, with different configurations, emerging.
• Compared to pure ASHP,
products have a smaller heat pump operating more in its ‘comfort zone’, therefore better performance.
• Some configurations have no hot water storage tank; compact, wall-hung indoor unit; and higher flow temps – so relatively retrofittable.
residential products emerging – so far mainly in Germany. Significant potential for cost reduction from initial high prices.
• Growing investment from boiler manufacturers, new product introduced in selected EU countries from 2014.
• Lots of potential for future learning if the heating industry invests in further R&D, product development, market creation efforts.
• UK installer / supply chain learnings still needed.
INDICATIVE MARKET TAKE-UP: HYBRID ASHP
INDICATIVE MARKET TAKE-UP: THERMALLY DRIVEN HEAT PUMP Very strong growth in replacement market
Units per year
Units per year
Very strong growth in replacement market
First products in market
Likely to require growth in other markets to drive volumes & cost-down First products in market
KEY CHALLENGES / OPPORTUNITIES
KEY CHALLENGES / OPPORTUNITIES
• Likely widening spark-spread will mean running cost savings not
• Cost and performance: How quickly will costs come down?
significant when compared to gas boiler. Installed cost for some products between gas boiler cost and pure ASHP cost.
• Carbon performance will improve as electricity grid decarbonises, if government plans are met.
How quickly will volumes increase in rest of EU? Minimal field data in UK – expected SPFs of ~1.3 upwards, a step above gas condensing boilers.
• Product availability: how quickly & how much product will come to UK?
• Retrofit challenge: slightly lower than for electric ASHP, but still present.
HHIC PATHWAYS FOR DOMESTIC HEAT
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Micro-CHP Engine micro-CHP
Fuel cell micro-CHP
Slow to grow, remaining niche to 2027, but a big potential upside possible if global volumes increase & costs fall.
Product development investment in EU accelerating on back of Japanese success – high potential if cost-down achieved.
• Globally, ~10,000 / yr – only a fraction of this in UK. Future global
• >50,000 systems sold in Japan, large investments from big
volumes uncertain.
corporates – early systems on sale in Europe (on v. limited basis).
• Early product on the UK market – but still lots of learnings.
• 100s units trialled in Germany – investment from all top 4 European boiler manufacturers, some in partnership with Japanese manufacturers. European market introduction from 2015.
• Potential for some cost reduction, improved reliability. • Relatively straightforward retrofit – combi models available
• Suitable for wide range of homes, but requires hot water storage
outside of the UK.
tank.
• Could grow into niche for medium-high thermal demand homes in UK, increasing spark-spread good for customer economics.
• Relatively straightforward retrofit. • Increasing spark-spread good for customer economics.
INDICATIVE MARKET TAKE-UP
INDICATIVE MARKET TAKE-UP
Considerable upside if reliable, lower cost product comes to market
Only 100s units / yr today
Units per year
Units per year
UK market growth dependent on global volumes and cost-downs
Market introduction post 2015
KEY CHALLENGES / OPPORTUNITIES
KEY CHALLENGES / OPPORTUNITIES
• Product availability: reliable product does not reach UK.
• Cost: how quickly will costs come down? How quickly will
• Low volumes: costs high – volume doesn’t grow globally. • Low carbon? If consider the actual power plant displaced (fossil,
volumes increase in rest of EU and Japan to access lower costs?
• Low carbon? If consider the actual power plant displaced (fossil, rather than renewables or nuclear), low carbon post 2030.
rather than renewables or nuclear), low carbon post 2030.
• Can add value to the wider electricity system.
• Can add value to the wider electricity system.
Biomass and district heating Biomass boilers
District heating
Established technology, mature in some international markets. Relatively high cost limits opportunity.
Mature and established concept in many other European markets. Flexibility in source of heat supply. Significant commercial barriers for widespread growth in UK.
• European volumes of 10,000s / year, mature and established product.
• Some current UK growth in new build and social housing sectors – but hardly any UK examples of retrofit to owner occupier homes.
• Only limited potential for product cost reduction, but some scope of installation / supply chain cost reductions in the UK.
• UK volumes currently small (~1,000 per year) – potential to grow
• Technically well understood, but room for innovation / learning on minimising cost and ‘hassle’ for connections to existing homes.
on off-gas grid where space is available for installation.
• New connections of 100,000s per year across Europe, but some room for cost reductions in UK if volumes grow.
INDICATIVE MARKET TAKE-UP: BIOMASS BOILERS
INDICATIVE MARKET TAKE-UP: DISTRICT HEATING
Growth driven in off-gas grid homes - owner occupier and social housing, but strong competition from heat pumps and boiler plus
Units per year
Units per year
Owner occupiers increasingly added onto schemes Growth driven in: 1. New build (flats / denser urban areas) 2. Social housing refurbishment
KEY CHALLENGES / OPPORTUNITIES
KEY CHALLENGES / OPPORTUNITIES
• Almost zero carbon technology.
• Building on recent success in new build sector (driven by
• Space constraints mean most of opportunity in the rural market. • Relatively high upfront costs and pellet costs make for a tough customer proposition when competing against natural gas.
regulation / planning).
• Increased use in social housing refurbishment. • Commercial framework for critical.
owner occupier connections is
HHIC PATHWAYS FOR DOMESTIC HEAT
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‘Boiler plus’ ‘Boiler plus’ – solar thermal
‘Boiler plus’ – flue gas heat recovery
Established and mature product – some potential for simplification of retrofit, and some new product can work with combi boilers.
Relatively new technology, but already 1,000s of installations a year (with new boilers) – scope for learnings that could reduce cost and increase performance.
• UK volumes have in past reached ~20,000 units / year.
• Relatively ‘new’ product in UK and Europe – only a few different manufacturers.
• Retrofit relatively straightforward – pipework and typically new hot
• Currently several thousand installations per year.
water tank required.
• Can provide pre-heat for combi boiler (storage integrated in the
• Can be retrofitted, but all units currently installed with new boilers.
solar panel).
• Relatively small additional cost (few – several hundred pounds) on top of boiler.
INDICATIVE MARKET TAKE-UP: SOLAR THERMAL AND FLUE GAS HEAT RECOVERY (FGHR) Regulation could mandate / push FGHR
Units per year
FGHR grows from current foundations RHI boosts solar thermal customers find this technology attractive
KEY CHALLENGES / OPPORTUNITIES
KEY CHALLENGES / OPPORTUNITIES
• Relatively straightforward retrofit with UK heating systems.
• Could be incorporated into most new boilers.
• Always
• Improves domestic hot water efficiency by 3-4 percentage points
requires hot water storage – either in a ‘conventional’ hot water storage tank, or integrated with panel.
• Customer economics are not compelling.
– but does not improve space heating efficiency.
• Relatively new product currently sold in low volume, so potential for cost reductions.
The customer challenge Encouraging a significant shift in the heating choices of the customer is a challenge – in terms of physical fit in UK homes (amongst the smallest in Europe), and the customer economics of the technologies, and complex customer decision making.
• All the technologies require customers to pay more up-front cost that replacing their boiler with a condensing boiler. • DECC’s forecast widening ‘spark-spread’ between electricity and gas prices means that low carbon gas technologies always lower customer bills, whereas heat pumps must reach SPFs of 3 or higher to reduce bills compared to a condensing boiler.
• Physical fit is difficult in flats, terraces and some semi-detached properties – many of the low carbon options include an outside unit, and all have a larger internal unit. Around 13 million homes have also had their hot water tanks removed so replacing combi-units in these homes with systems requiring a storage tank is an additional space challenge. While many of these challenges apply across the whole housing stock – they tend to be more significant on gas, when competing with gas boilers. This is a concern for policymakers, as the biggest share of carbon emissions come from on-gas homes as illustrated below. The next sections focus on the customer challenge in a number of these on gas segments, and for comparison in an off gas property.
Percentage of CO2 emissions from on-gas and off-gas domestic households (2012) On-gas Off-gas
GAS DETACHED: 31% CO2 emissions
GAS SEMI: 23% CO2 emissions On gas breakdown
GAS TERRACE: 20% CO2 emissions
GAS FLAT: 6% CO2 emissions
HHIC PATHWAYS FOR DOMESTIC HEAT
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Customer impact – Gas Terraces Key messages District heat – good potential with urban terraces , but new frameworks will be required for district heating to penetrate the owner occupier sector. Physical fit for low carbon technologies can be challenging in terraces, a large number of terraces have combi-boilers and space will be limited for installing a thermal stores, and for both a larger internal unit and an external unit – hybrids, that can run in combi-mode may have an advantage here.
KEY FACTS:
‘Victoria & Alastair’ live in a terraced house, in the suburbs of a city.
6.8 million existing on-gas terraces in UK
Their current heating system is a gas combiboiler and they have converted the old hot water tank cupboard into a small en-suite shower-room.
Currently contributes to 20% UK CO2 residential heating emissions
Externally there is limited space, a small front garden and a walled and paved back yard.
Indicative installed base in 2027
Technology highlights
2027 Scenario Mix: in the installed stock gas boilers still dominate, opportunity for hybrid heat pumps and low carbon gas
FGHR
4%
7%
GAS HEAT PUMPS
6% 5%
9%
Limited space for solar thermal, internally and externally but FGHR a relatively cheap and easy retrofit.
69%
Limited space for hot water tank, but high efficiency gas has attractive economics (running cost savings) compared to a gas boiler, and avoid upgrade of heat distribution system. Gas heat pumps will be a winning technology as models emerge which work in combi-mode.
HYBRID ASHP Limited space a challenge for all heat pumps, as are high running costs compared to a gas boiler. However with the right support hybrids can be an attractive option, perceived as less risky by the customer, and possible to work in ‘combi’ mode, avoiding retrofit of a hot water tank.
Customer impact – Flats (on-gas / electric) Key messages District heat makes most sense – as dense housing provides an ‘easy win’. Flue gas heat recovery can be incorporated in new boiler installations, and a small number of other low carbon technologies are possible. Overall – physical fit will be challenging in flats – to replace electric heating, conversion to wet system will be required, and district heat is a big infrastructure challenge. There are limited choices for technology that s suited to flats – however small ASHP units are already being retrofitted onto balcony’s in social housing so this is not impossible.
Key facts:
‘Sarah’ lives in a small modern flat near a city centre.
5 million existing flats in UK
Her current heating system is a combination of storage heaters in the hallway, living room and bedroom – and panel heaters in the remaining rooms. There is no outside space or balcony and limited internal storage.
Currently contributes to 12% UK CO2 residential heating emissions
Indicative installed base in 2027
Technology highlights
2027 Scenario Mix: There are limited opportunities to switch due to space constraints. District heat has an opportunity.
FGHR Mostly FGHR - relatively cheap and easy retrofit.
HYBRID HEAT PUMPS
8%
Space and public acceptability (of external wall hung units) will be barriers for all types of heat pump - although hybrid heat pumps that can work in ‘combi’ mode will be a better fit. 29% 54%
1% 2%
1%
ELECTRIC STORAGE HEATERS Overall, electric heating, especially electric storage heaters can be a good fit in many flats, especially where there is low thermal demand. As more modern units with better controls become available, we expect them to maintain a high share of this sector.
5% DISTRICT HEAT Many of the UK flats are in dense urban areas – and present an opportunity for district heating. Initially we expect this to be focused in the RSL sector (~900,000 flats under RSL tenure) – and already we are seeing ECO begin to drive retrofit district heating.
HHIC PATHWAYS FOR DOMESTIC HEAT
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Customer impact – Semi-detached (on-gas) Key messages Greater space availability, inside and outside, makes electric and gas heat pumps viable in many homes particularly if they have a low heat loss. Hybrids are an option where space is a constraint or heat losses are very high. District heat will entail high cost here in many cases: less dense housing is a weaker opportunity for district heat.
‘John and Janette’ live in a semi-detached house in the suburbs of a big city, and have 2 young children.
Key facts:
Their current heating system is a gas condensing boiler, they have a small back-garden with limited space outside. The property has double glazing, and loft insulation.
Contributes to 23% UK CO2 residential heating emissions
6 million existing on-gas semis in UK
Indicative installed base in 2027
Technology highlights
2027 Scenario Mix: low carbon gas can make a big contribution with lower running costs than a gas condensing boiler.
SOLAR THERMAL
11%
Potential for some competition with PV for roof space – but these homes have FGHR opportunity.
GAS HEAT PUMPS / MCHP
10%
52%
By 2027, the technology paybacks for mCHP and GHP start to look more attractive as the spark-spread widens. For customers who want to avoid an outdoor unit, mCHP will win out but GHP may also be popular. The risk around these technologies is that they are only just emerging today, so price points, supply chain and performance are relatively uncertain.
14%
13%
ASHPs Semi’s present a strong opportunity for all electric heat pumps. Space is less challenging and a majority of homes will be able to fit the technology. However, in 2030, the technology is still more expensive than a gas boiler and doesn’t have significantly lower running costs, and so requires policy intervention to support its uptake.
Customer impact – Detached (on gas) Key messages Lack of space constraints open up opportunity for electric heat pumps – space for hot water storage tanks and outdoor units opens up this opportunity. However some homes will require some modifications to heat distribution system and heat losses / thermal demand will be too high– this is an opportunity for biomass, or low carbon gas. Low carbon gas potential – where electric heat pumps are challenging low carbon gas will have high appeal, and economically these technologies look attractive by 2020 – 2030. For low carbon gas an up-front subsidy could be sufficient to stimulate interest in the early decades, while for heat pumps some form of on-going support is likely. Lack of space constraints may present opportunities for biomass.
‘Andy and Caroline’ live in a detached house in a suburb of a large city. He has 3 children aged between 8 and 13 years old. He and his wife both work full time, with
Key facts:
flexible working hours.
Contributes to 31% UK CO2 residential heating emissions
Their current heating system is a gas boiler, they have no double glazing and solid walls (without insulation).
5.7 million existing on-gas detached in UK
Indicative installed base in 2027
Technology highlights
2027 Scenario Mix: Low carbon gas is an attractive option – electric heat pumps will need incentives to gain this level of uptake
SOLAR THERMAL
10%
Potential for some competition with PV for roof space – but these homes have FGHR opportunity.
GAS HEAT PUMP / MCHP By 2027, the technology paybacks for mCHP and GHP start to become more acceptable without incentives (in region of 10 years).
10%
50%
The technologies are also likely to be easier for customers to accept as gas remains an attractive fuel for domestic users. The higher upfront costs of the technology (compared to a gas boiler) will require some incentives.
16%
ASHP / HYBRID ASHP 13%
Not all detached will be an easy fit for heat pumps. Very high heat loss properties will require upgrading (adding cost). However, for many the technology is a good fit – but without incentives the running costs are not substantially lower than a gas condensing boiler.
HHIC PATHWAYS FOR DOMESTIC HEAT
25
Customer impact – Detached (off gas) Key messages Lack of space constraints and high alternative fuel costs open up opportunity for electric heat pumps. However some homes will require some modifications to heat distribution system and heat losses / thermal demand will be too high – this is an opportunity for biomass, or low carbon LPG / oil. Overall - positive opportunity for switching – customers today are already looking for alternatives to costly non-natural gas systems. The RHI will make the running costs savings significant compared to base technology (an oil boiler) – but the high up-front costs remain a barrier. Paybacks remain long until the late 2020’s – by which time the technology will have a stronger customer proposition. There is potential for oil/LPG “boiler plus”, oil/LPG hybrids and oil /LPG fuelled heat pumps – we expect that a large number of homes which undertake replacements, and stay on oil, will upgrade at this time to a higher efficiency system, which includes solar thermal, or FGHR.
‘David & Jane’ live in a detached house, in a small rural village – they have grown up children that have left home, are semi-retired so at home during the day and have a dog called Mac. Their current heating system is a combination of solid fuel and an oil boiler. They have original sash windows, and loft insulation only.
Key facts: 1.1 million existing off-gas detached in UK Contributes to 5% UK CO2 residential heating emissions
Indicative installed base in 2027
Technology highlights
2027 Scenario Mix: Electric heat pumps will be a key growth technology, and here biomass can gain a niche
AIR SOURCE HEAT PUMP Detached, off gas homes represent a strong opportunity for ASHP and GSHP – and strong uptake of both is expected by 2030 – where heat loss is not too high. Physical fit will still be a challenge off-gas however research carried out by Delta-ee with owner occupiers over the past 12 months has already highlighted that many off-gas customers are willing to pay a premium to move away from oil.
27%
47%
8%
18%
BIOMASS PELLET BOILER Generally biomass pellet boilers do not have great customer appeal (Delta-ee research 2012). However in off –gas, larger homes they can be an attractive option. Here space is not an issue, and generally in rural areas customers have demonstrated they are more comfortable using a solid fuel, and managing such systems.
Section 4 A challenge for the heating industry – and for government. The need for intervention and investment. The interventions chapter has been lead by HHIC with support and collaboration with Delta-ee.
HHIC PATHWAYS FOR DOMESTIC HEAT
27
The industry needs the Government to create demand and develop investor confidence 01. Creating customer demand – government support is required to bridge the up-front cost gap
02. Building investor confidence will be critical – to encourage investment along the supply chain
Our analysis of customer take-up shows that without the Government intervention the vast majority of customers will continue to invest in condensing boilers ahead of more expensive, lower carbon options. Ultimately, in the long term, these products may be viable without intervention as customer attitudes evolve and technologies become more cost competitive. However - in the period to 2027 Government intervention to create demand will be critical.
While the Government has established a bold long-term strategy for decarbonising the heating sector, this has not yet translated into widespread investor confidence. To do this will require measures such as the following:
Possible levers to create demand
01.
Incentives
01.
A more detailed strategy for how the Government will intervene to reach the 2030 targets
02.
Consistent policy making with minimal delays / alterations to initiatives such as the RHI that have a detrimental affect on industry and investor confidence
Actions to invest in the supply chain
02.
Regulation
03.
Taxes to make current solutions more expensive
04.
Supporting financing solutions such as the Green Deal
HHIC would like to contribute to developing the right mix of levers.
While many (but not all) of the low carbon technologies considered in this report are commercial products today, to deliver the ambitious pathway set out in the report many new initiatives / investments will be required. To deliver this the industry and other investors need confidence in the low carbon opportunity.
• Developing innovative / enhanced route to market appropriate for higher-cost products
• Up-skilling installers • Developing distribution • Trialling, monitoring and
Incentives. A segmented approach to incentives – for example by tenure, property type, on or off gas, or by region (e.g. creating low-carbon heating zones) – could help to provide maximum impact from a fixed / limited Government financial resource. Regulation. Regulation could set a minimum performance standard for heating systems – it was very successful for condensing boilers. Ideally regulation is performance (rather than technology) led, and works best when the incremental step above current technology is not too high and is proven and accepted in the market. Taxes. Could be used to increase the cost of high-carbon systems and / or fuel , helping to close the gap with low carbon systems – but could have fuel poverty implications. Co-ordination of different interventions is essential – aligned to long term strategy
building confidence in new technology
• Building manufacturing capacity
• Continued investment in R&D
• Adapting & innovating product and technology for the UK market and the UK housing stock
A variety of organisations will be involved in these activities. The Government could where necessary share some of the investment required. Investment sources vary from Venture Capital investment for new technologies, through to competition for R&D budgets of global corporates.
Contact list
HHIC Director
Delta Energy & Environment
Roger Webb
Director
roger@hhic.org.uk
Jon Slowe Jon.slowe@delta-ee.com
Heating & Hotwater
Telephone number:
Industry Council
+44 (0)1926 513777
(HHIC) Camden House Warwick Rd
Fax number:
+44 (0)1926 511923
Kenilworth
Twitter:
Warwickshire
@HHIC
CV8 1TH
www.centralheating.co.uk
HHIC is a division of Energy and Utilities Alliance (EUA).
HHIC CR2013 ED004