Britain’s clean energy transition: Heat

The United Kingdom (UK) is becoming a laggard in the deployment of heat pumps. These carbon-free heat sources reduce reliance on gas, a now proven strategic weakness given Britain’s inability to control the price of gas and unavoidable dependence on imports. It is certainly a formidable, likely multi-decade challenge for His Majesty’s (HM) Government, but the Treasury should resist going cold on heat pumps now.

This month, the Environment and Climate Change Committee in the House of Lords wrote to Lord Callanan, a long-standing minister at the new Department for Net Zero, to warn that the government’s scheme for supporting the rollout of heat pumps is failing. HM Government is on track to spend only half of what has been budgeted for this phase of the boiler upgrade scheme.

While Britain has led the way in reducing fossil fuels in its power sector – all but pushing coal off the grid completely and scaling up offshore wind deployment rapidly over the past decade – it has struggled to do the same in the heating sector. Around 85% of homes rely on a gas boiler to keep warm. 

This has become a strategic weakness: North Sea gas production has fallen as the basin has naturally matured, while shale gas extraction remains economically unproven but, more importantly, a political non-starter. Therefore, the UK has become more and more dependent on imports since 2004, exposing British families to volatile gas prices which are set at the European (and now increasingly international) level.

Vladimir Putin, President of Russia, knew this. While unlike Germany or Italy the UK did not import much gas directly from Russia before the Kremlin’s full-scale war against Ukraine, Britain was still vulnerable to the price spikes caused by a constriction in supply. European energy retailers and industry began competing with British retailers and industry for North Sea gas to keep the lights on. 

An understated reason why the markets reacted so negatively to the ‘mini budget’ of Liz Truss, previously Prime Minister, was because Treasury finances are now linked to volatile gas markets by her Energy Price Guarantee, which subsidised energy bills for British citizens.

The gas price has now fallen to around the same level as in autumn 2021, when countries started coming out of Covid-19 lockdown and Putin began constricting gas supplies to Europe in the run up to his renewed aggression. This is partly due to new British liquified natural gas import deals with the United States (US) and Qatar. But even with this new supply, the UK will remain reliant on gas produced overseas to heat its homes and therefore unable to control the price.

Countries across Europe in the same situation have been turning to heat pumps as a solution to reducing demand for gas. Heat pumps act as a fridge in reverse, taking the heat from the air outside, compressing it, and distributing it to heat a building. They are considered three to four times more ‘efficient’ than a gas boiler because, rather than combusting gas, it produces more units of energy.

Most importantly, they run on electricity. With the UK planning to expand the capacity of its offshore wind fleet to 50 gigawatts (GW) by 2030, its solar capacity to roughly 70 GW by 2035, and commission a new generation of nuclear reactors, heat pumps would mean Britain can take back control of its heating while simultaneously decarbonising one of the most polluting sectors of the economy. Almost one fifth of the UK’s greenhouse gas emissions come from heating. Even if the electrons powering a heat pump came from a gas-fired power station, less gas would still be burned because heat pumps are so much more efficient. 

HM Government launched its boiler upgrade scheme in April 2022. It committed £450 million up to 2025, providing households with £5,000 grants for ‘air source’ heat pumps and £6,000 for ‘ground source’ heat pumps. But as previously mentioned the Lords’ Environment and Climate Change Committee has pointed out how uptake has been low.

Transitioning to a more efficient heating system will stabilise and reduce energy bills and bring Britain closer to becoming truly sovereign over its own energy system once again.

It cannot be denied that there are many homes which simply are not ready for a heat pump. A house needs to be energy efficient before a heat pump is installed, but there are millions of homes that do not yet have cavity wall or loft insulation, disqualifying them from receiving the boiler upgrade grant. Works to improve the efficiency of a house only adds more to the overall upfront cost of heat pump installation.

Another key reason for the low intake from the many millions of British homes that are ready appears to be low awareness. The Environment and Climate Change Committee called on the government to raise awareness through a campaign after it found that 80% of people had not even heard of heat pumps.

A further problem is that there were only 2,000 heat pump installers in 2019 compared to 130,000 gas boiler installers. There are simply not enough people to get the job done. The wider energy efficiency sector in the UK suffers from the same issue of a tight pipeline of qualified installers.

Over the past decade, HM Government has repeatedly pulled the rug from underneath energy efficiency by creating complex, Whitehall-driven schemes which were doomed to fail, like the Green Homes Grant. The stop-start nature of the government destroys confidence in companies for investing in the training up of new works or reskilling existing ones.

It is concerning, therefore, that the Treasury will claw back the underspend from the current phase of the boiler upgrade scheme, rather than reinvesting it back into the scheme. This demonstrates a short-termist approach which could undermine efforts to regain energy sovereignty and reach net zero, both long-term programmes.

Instead, HM Government should redouble its efforts to raise awareness of the need to transition Britain’s heating system. Creating a new T level qualification course for low carbon heat installation and wider energy efficiency would bring more people into the trade. 

And at the Spring Budget, the government should announce financing mechanisms to make it easier for British people to insulate their homes to make them heat pump ready. Establishing a salary sacrifice scheme, which would see people pay for home upgrades in tax-free monthly instalments, could unlock billions in private finance and help people to help themselves.

Electrifying heat is undeniably a major challenge, more so for Britain than perhaps any other G7 economy, aside from perhaps the US. The subject is well explored elsewhere. But HM Government should stick to its guns. Transitioning to a more efficient heating system will stabilise and reduce energy bills and bring Britain closer to becoming truly sovereign over its own energy system once again.

Jack Richardson is James Blyth Early Career Associate Fellow at the Council on Geostrategy. He is also Senior Climate Programmes Manager at the Conservative Environment Network.