Heat and Buildings Strategy

The Secretary of State for BEIS, plans to publish the Heat and Buildings Strategy alongside a statement from the Chancellor in June 2021.

Kwasi Kwarteng

Bold action is needed as currently less than 2% of UK homes have any form of low carbon heating and still over 1,600,000 gas boilers are being installed each year in the UK.

The share of renewable heat in the UK is almost the lowest of any country in Europe – because the UK imposes very high taxes on electricity.

With the large reduction in the grid carbon factor the electrification of heat is the way to go and that means installing heat pumps.

Experience from countries like Sweden and Finland shows that once fossil-fuel heating is no longer the cheapest option, the market changes rapidly. However, the UK still imposes significant taxes and environmental levies (23%) on domestic electricity, but almost none (less than 2%) on gas: this is the reverse of what is needed if the UK is to achieve anything near 600,000 heat pump installations a year by 2028.

The opportunity for the UK to decarbonise heating is huge. Doing so will not only cut carbon emissions, but also improve air quality and people's comfort and health, and help to achieve our Net-Zero targets.

Rishi Sunak

Action is needed on the Fiscal Background to UK energy prices

The Chancellor needs to readjust the Fiscal Background to energy prices if he is serious about preparing for Net Zero carbon emissions.

It will not be possible for Alok Sharma to invite the world to CoP26 in Glasgow – with a straight face – until the Fiscal Background is corrected.

The Hidden Hand of the Market

Since the Energy Act of 2008 the Government has spent substantial sums on the administration of schemes to reduce carbon emissions from heating. These costs were spent on the Green Deal, the Green Homes Grant, The Renewable Heat Incentive, Ofgem, assessors, legal fees and endless consultations. However, none of these schemes have shifted consumers away from burning gas and oil and emitting CO2.

There is a much cheaper route to addressing the fundamental issue. The fundamental issue is that the price of burning gas for heating is cheaper than the low carbon alternatives using electricity.

The reason gas heating is cheaper than electric heating is that Government imposes taxes which increase the cost of electricity by 23%, but oil and gas consumers have never had to pay for the environmental costs of issuing carbon dioxide or air pollution.

If Government would switch the inappropriate "green taxes" from electricity to gas then the "hidden hand of the market" would encourage consumers to install low carbon heating – without any further administrative costs.

A Swede is 35 times more likely to buy a heat pump than a Brit – because electric heat pumps provide the cheapest form of heating in Sweden.

Heat Poverty

Some of the worst cases of heat poverty are suffered by those who rely on direct electric heating: this is the most expensive form of heating. The Chancellor needs to reduce all the "green taxes" on domestic electricity to help those in fuel poverty. The reduction is also needed to allow consumers to choose heat pumps – and to allow the supply chain for UK heat pump installers to grow.

A carbon tax on the burning of gas is also necessary to discourage the use of combustion for heating: this will not draw anyone into heat poverty – unless the increased tax on gas (for those that use gas) is larger than the reduction in the inappropriate "green taxes" on electricity (which everyone uses).

Time for action

The country needs the government to take immediate action. The pandemic has shown how swiftly government can act in an emergency. The climate emergency is a much larger long term threat to our life on earth than the Covid virus. The cost of action to achieve Net Zero will be dwarfed by the cost of doing nothing.

It is time for the goverment to eliminate the taxes on electricity that are preventing the installation of heat pumps.

 

 

See also Sustainable energy

See also Renewable Heat Incentive

Ground Source Heat Pump Association

ICAX is a member of BSRIA