The Warren Report

Why heat pumps may never be value for money

It costs more to run a heat pump than the best condensing boilers. As long as EPCs recommend the most cost-effective method of energy efficiency upgrades then installations will remain low

y 2030, we want to reduce

Benergy consumption from buildings and industry by 15 per cent.” The Government’s Autumn Statement featured the most ambitious objectives to cut energy usage enunciated since the Coalition government ended back in 2015.

The Chancellor, Jeremy Hunt, promised that “reducing demand by this much means, in today’s prices, a £28bn saving from our national energy bill or £450 off the average household bill.”

Initially, some commentators scoffed about how realistic such ambition might be. Until they were reminded that between 2005 and 2015, final energy consumption did drop by as much as 16.2 per cent. According to the official Directory of UK Energy Statistics, during that decade, annual energy usage fell from 159,676ktoe (kilotonnes of energy equivalent) to 137,430ktoe.

Existing building stock

Inevitably, there has been much concentration upon what can best be done to improve the energy efficiency of the existing building stock. Since the overnight demise of the Green Homes Grant scheme in March 2021, with 80 per cent of its initial budget left unspent, I have lost count - as will have most readers - of the number of independent studies that have set out blueprints of how important it is to improve the fabric energy performance of the nation’s buildings.

These point to ever widening policy and funding gaps They also detail how, despite having a far more energyefficient building stock, many other European nations are injecting billions into similar schemes designed to “build back better” after Covid 19.

Starting next April, the longestablished Energy Company Obligation (ECO) scheme, designed to enable the installation of energysaving measures in homes, is set to be doubled in size. Of the £1bn additional funding likely to be available through the new ECO+ scheme, around 80 per cent of the funding will be made available for those households who live in some of the least energyefficient homes in the country – that is, those with an Energy Performance Certificate (EPC) rating of D or below. Crucially, investments will be concentrated upon those living in homes which are in the lower council tax bands. These cheaper council tax bands are, confusingly in this context, labelled A to D.

Andrew Warren

Chairman of the British Energy Efficiency Federation

The Government has created an evaluation scheme which discards this technology

Double fuel spending

Empirical work undertaken by the UCL Smart Energy Research Lab, monitoring actual consumption levels in 13,000 homes, has revealed that during last winter F and G EPC-rated homes actually spent almost twice as much on fuel as did an A or B EPCrated household (97kWh per day, as opposed to 47.1kWh per day).

National Grid’s Future Energy Scenarios have calculated that “improving thermal efficiency of most homes by just one EPC rating gives the potential for a 14 per cent reduction in residential gas demand in 2030.”

In November 2021, the Government finally published a document that should strictly have been called a “heat IN buildings”, rather than the “heat AND buildings”, strategy it was officially named. The emphasis was firmly against gas and oil boilers, in favour of electric heat pumps. But only subject to “expected” cost declines. The press release led with “Government sets out plan to drive down the cost of low carbon heating technologies like heat pumps, working with industry to ensure that in future they are no more expensive to buy and run for consumers as (sic) fossil fuel boilers.”

Half-hearted centrepiece

The subsequent centrepiece grant scheme is pretty half hearted. Consider. There were 43,000 heat pumps installed during 2021. The fund announced only provides a £5,000 part payment for just 30,000 heat pumps to be installed during each of the current three financial years.

But how does anybody find out what they should be installing to make their building more energy efficient? Simple. Before you buy or rent any building (residential or commercial), you must by law be given an Energy Performance Certificate. Each quarter, around 400,000 of these are issued. The majority of buildings in Britain now have an EPC. As well as measuring from A (great) to G (dreadful), the energy surveyor must provide useful proposals on how to improve the building: upgrade windows, lighting, insulate roofs and walls, change the boiler etc.

Indefatigable Green MP for Brighton, Caroline Lucas, wondered, just how often EPC advice has included installing a heat pump? She raised the matter in Parliament. The then Buildings Minister, Eddie Hughes, had to confess that, er, no surveyor had ever recommended installing a heat pump.

Why is that? It will be because right now installing and running a heat pump is rather more expensive than putting in a highly efficient condensing boiler. And the advice provided with the EPC must, by law, stress cost-effectiveness. EPCs were introduced quite deliberately in order to provide specific information for building occupants regarding what would be the most cost-effective items that might be installed. At present, the capital and running cost differential between the list price of condensing gas boilers and heat pumps is at least double.

Scheme discards heat pumps

Most damaging of all, to the prospects for heat pumps becoming major players in existing buildings, is the undeniable fact that by opting for EPCs as its measurement of progress, the Government has created an evaluation scheme which effectively discards this technology as being of little or no value. Replacing a conventional boiler with a heat pump can never be recommended as a method of improving a home’s EPC rating.

Already nobody can legally let out any of the worst energy performing buildings (F or G). Ministers are already planning to ensure that only A or B ratings will become permissible in non-residential lettings. So, it is difficult to see how heat pumps can surmount this barrier, unless there is a root and branch revision of how and what an EPC measures.

From past experience, agreeing such major alterations could take many years. Until such changes are made, government ministers will continue to have to admit that no EPC surveyor has yet, or ever will, recommend installing a heat pump. And absent 75 per cent installation grants, it will be very difficult to make mass market heat pump installations value-for-money. ■