Clean Heat Grant replaces Domestic Renewable Heat Incentive from April 2022
ICAX welcomes the Government consultation proposing a replacement for the Domestic RHI. A grant is a better way to support owners who face up-front costs on moving to clean heating systems – and a single payment is administratively simpler (and much cheaper) than 28 payments spread over seven years.
However, the low level of grant proposed of only £4,000 is too low to encourage homeowners to move to clean heating. The Government needs to acknowledge that a homeowner who considers a clean heating mechanism is facing a private cost to provide a public benefit.
The Clean Heat Grant is only proposed to last for two years and funding is limited to £100m. This lack of clarity will provide no certainty for businesses proposing to serve the market.
The limited level of the grant will point households to the cheapest technologies. A £4,000 grant is not enough to encourage investment in a £10,000 air source heat pump system for a small house.
£4,000 will only amount to a small contribution towards a £16,000 investment in a ground source heat pump system. The Government should be encouraging investment in ground source systems because they are inherently more efficient and because a key part of the investment is in a ground array that will last for over 100 years. The national interest is to encourage investment in long term solutions. Investment in ground source will create green jobs in the UK, but investment in air source will encourage spending on air source heat pumps which are largely imported.
A flat rate grant of £4,000 focusses the grant on small houses (whose owners may not be able to afford an investment in low carbon energy). If the Government is serious about achieving a significant reduction on emissions from houses, it should be focussing on larger houses which currently issue larger emissions of CO2.
Investment in low carbon technologies, like heat pumps, is a private investment for a public benefit. Until the Treasury accepts this and acknowledges that public money is needed to encourage the public benefit of lower carbon emissions very few heat pumps will be installed, the skills shortage will remain and the supply chain will be underdeveloped. There will be very few green jobs created in the UK by the current proposal.
The Climate Change Committee has recommended that, "The 29 million existing homes across the UK must be made low-carbon, low-energy and resilient to a changing climate. This is a UK infrastructure priority and should be supported by HM Treasury. Homes should use low-carbon sources of heating such as heat pumps and heat networks".
Nothing replaces the Commercial RHI from April 2021
Previously the government had announced an allocation of funding for the non-domestic RHI up until 31 March 2021. From the Treasury Red Book issued on the day of the budget on 11 March 2020, the Government said it "will also introduce a new allocation of flexible tariff guarantees to the Non-Domestic RHI in Great Britain in March 2021, helping to provide investment certainty for the larger and more cost-effective renewable heat projects". The previous two tariff guarantee allocations did cover ground and water source heat pumps over 100kW capacity. The new tariff guarantees will only allow the RHI for large installations, but they must be commissioned before 31 March 2022.
It appears that the Government has no plans to encourage low carbon commercial heating after the end of the RHI, unless they are linked to district heating systems!
How should the Government respond to the widespread calls for action to curb climate change?
All UK political parties express concern about climate change, but seem vague about what should be done to curb it.
The Government's advisor, the Climate Change Committee has been very clear that, "The 29 million existing homes across the UK must be made low-carbon, low-energy and resilient to a changing climate. This is a UK infrastructure priority and should be supported by HM Treasury. Homes should use low-carbon sources of heating such as heat pumps and heat networks"
Real progress has been made in decarbonising electricity generation: this has been achieved largely by curbing electric generation from the combustion of coal and encouraging generation from wind turbines.
Almost no progress has been made in decarbonising heating: almost 84% of homes are still heated by combustion of gas supplied through the national gas grid.
As CO2 is emitted from combustion of all carbon compounds, the answer to curbing climate change lies in using heating systems which do not use combustion. The alternative is heat transfer which means using heat pumps to transfer heat from the ground – or from the air – to heat buildings. This is the only practical route to achieving the Clean Growth Strategy.
It is also the only practical route to achieving the Clean Air Strategy in cities like London.
There have been suggestions that an alternative to burning gas for low carbon heating would be to pipe hydrogen through the gas grid and burn hydrogen instead.
Although there are many practical issues to be solved before burning hydrogen from the gas grid would be possible, the key difficulty is that burning hydrogen in air would yield up to six times the amount of NOx as burning natural gas in air.
See Ten reasons for the UK to use ground source energy to reduce carbon emissions.