Recommendations & Conclusions
9 items
4
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
In October 2021, the government published its Heat and Buildings Strategy. The Strategy stated the government’s ambition to end the installation of new fossil fuel boilers by 2035. It also committed to growing the supply chain for heat pumps to a minimum market capacity of 600,000 heat pump installations per …
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In October 2021, the government published its Heat and Buildings Strategy. The Strategy stated the government’s ambition to end the installation of new fossil fuel boilers by 2035. It also committed to growing the supply chain for heat pumps to a minimum market capacity of 600,000 heat pump installations per year by 2028; and developing the evidence base to inform strategic decisions in 2026 on the future role of hydrogen in home heating.4 Costs to households
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Government response AI summary
The government agrees with the observation but notes there is currently no single data source for heat pump installations and is investigating various data sources to cover gaps, stating it cannot commit until a suitable mechanism is found.
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HM Treasury
10
Recommendation
Thirty-Seventh Report - Decarbonising h…
Acknowledged
DESNZ recognised that the cost of running heat pumps was also a key barrier to heat pump adoption. It explained that, as they are based on electricity, heat pumps are more expensive to run than fossil fuel boilers because of the cost of electricity is higher than gas.17 This view …
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DESNZ recognised that the cost of running heat pumps was also a key barrier to heat pump adoption. It explained that, as they are based on electricity, heat pumps are more expensive to run than fossil fuel boilers because of the cost of electricity is higher than gas.17 This view was supported by written evidence to our inquiry from some energy suppliers including Good Energy and Octopus Energy; a consumer campaign group, Fuel Poverty Action; and Energy UK.18 In their written evidence, the Heat Pump Association and the MCS Foundation told us that the UK’s price ratio between electricity and gas prices of 4:1 was one of the highest in Europe.19 Both EDF Energy and the MCS Foundation explained that this disparity was partly due to the government levying a large proportion of its environmental policy costs on electricity bills, such as schemes to support renewable energy development and energy efficiency. The MCS Foundation added that, for a standard direct debit customer, 16% of their electricity bill will be made up of these levies, compared to only 5% of their gas bill.20 DESNZ explained that although electricity was about four times per unit more expensive than gas, this was offset by the fact that heat pumps were three times as efficient as gas boilers, which “helps a lot”.21
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Government response AI summary
Government agrees with the recommendation to address running costs but defers an implementation date, stating they are considering ways to reduce costs and funding an innovation programme to improve heat pump performance, without specific commitments on the electricity-gas price ratio.
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HM Treasury
27
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
In a written submission to our inquiry, the Chartered Institute of Housing expressed concern that the social housing sector, which it said accounted for over half of all heat networks, would need clear guidance and support to prepare and respond to the new regulatory regime for heat networks, and that …
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In a written submission to our inquiry, the Chartered Institute of Housing expressed concern that the social housing sector, which it said accounted for over half of all heat networks, would need clear guidance and support to prepare and respond to the new regulatory regime for heat networks, and that this represented a “considerable shift” for the sector. It added that almost all heat networks in the social housing sector were operated on a cost recovery basis, and “significant” costs of regulation and zoning would therefore be passed through to residents for them to remain viable. Its overall concern was that connecting customers to heat networks through the zoning process could increase running costs for residents relative to the gas systems they replace, with social housing residents having a much lower household income than other tenures.49 DESNZ explained that it was developing a regulatory framework to oversee heat networks through the Energy Act. It said the aim for this framework was to ensure fair pricing and quality of service that is already in place for gas and electricity customers. The NAO called for DESNZ to further consider how to ensure that people living in harder-to-decarbonise homes are not left behind or penalised unfairly.50 The role of hydrogen and gas networks
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Government response AI summary
The government recognizes that the social housing sector will need support and that Ofgem will be responsible for regulating heat networks. DESNZ is working with Ofgem to ensure a proportionate regulatory framework.
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HM Treasury
31
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
Several written submissions to our inquiry highlighted that uncertainty over the role of hydrogen is delaying key decarbonisation investment decisions until government makes a decision on hydrogen. Hydrogen UK, for example, told us that the decisions about trials and recent announcements had “created ambiguity in the role of hydrogen in …
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Several written submissions to our inquiry highlighted that uncertainty over the role of hydrogen is delaying key decarbonisation investment decisions until government makes a decision on hydrogen. Hydrogen UK, for example, told us that the decisions about trials and recent announcements had “created ambiguity in the role of hydrogen in domestic heating”. It explained that clarity around the role of hydrogen was needed to “enable industry stakeholders to make informed decisions, commit to necessary investments, and drive forward the innovation and infrastructure development required”.59 Similarly, a climate change think tank, E3G, suggested that industry was “suffering” from a lack of clarity regarding government’s “indecisiveness” on the future role of hydrogen for domestic heating.60 The MCS Foundation also told us that businesses, installers and manufacturers will be reluctant to invest in skills and technologies if there is a risk than in later years the government will focus on hydrogen rather than electrified solutions.61 Good Energy further indicated that manufacturers of heat pumps and heat network developers require “affirmative signals” over the future of hydrogen for heating.62
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Government response AI summary
The government acknowledges uncertainty around the role of hydrogen in home heating and is committed to providing clarity, informed by hydrogen village trials, and intends to make strategic decisions in 2026.
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HM Treasury
32
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
Alongside industry, some written submissions highlighted that households were unclear over the role of hydrogen. Octopus Energy told us that there was “widespread 53 Qq 92, 93 54 Department for Energy Security and Net Zero, Correspondence – Hydrogen Heating Town pilot: letter to Gas Distribution Networks – update, 9 May …
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Alongside industry, some written submissions highlighted that households were unclear over the role of hydrogen. Octopus Energy told us that there was “widespread 53 Qq 92, 93 54 Department for Energy Security and Net Zero, Correspondence – Hydrogen Heating Town pilot: letter to Gas Distribution Networks – update, 9 May 2024. 55 Qq 86–88 56 Qq 85, 94; C&AG’s Report, para 2.5 57 DHH0036, Written evidence submitted by Hydrogen UK, 29 April 2024 58 Qq 92, 94 59 DHH0036 60 DHH0012, Written evidence submitted by E3G, 29 April 2024 61 DHH0014 62 DHH0046 Decarbonising home heating 19 customer confusion and investments in electrification are being held back”.63 Centrica also reported that customers were “unwilling” to make their own decisions on whether to install particular low-carbon heating measures while there is uncertainty over which options they could take in the future.64 The Chartered Institute for Housing added that some social housing providers are employing a “wait and see” approach, awaiting the government’s decision on hydrogen, to decarbonise at least some of their homes.65 In October 2023, DESNZ set out that heat pumps and heat networks will be the main low- carbon heating technologies over the next decade, with “the potential for hydrogen to play a role in slower time in some locations”. DESNZ told us that it was thinking about the locations and buildings where hydrogen might be used, but that anyone looking to install a heat pump should do so, irrespective of where they live.66
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Government response AI summary
The government recognizes the need to ensure households have clear information about the role of hydrogen in home heating and will continue to work with industry and consumer groups to raise awareness and provide information.
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HM Treasury
33
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
We asked DESNZ if it was aware of the level of uncertainty for industry given that an increasing number of businesses do not know what the government’s position is on heat decarbonisation. DESNZ told us that it needed to “take decisions in the right order at the right time” and, …
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We asked DESNZ if it was aware of the level of uncertainty for industry given that an increasing number of businesses do not know what the government’s position is on heat decarbonisation. DESNZ told us that it needed to “take decisions in the right order at the right time” and, in its view, it remained the case that a decision on hydrogen should be taken in 2026. It told us that there was a risk that taking decisions earlier could result in it becoming locked into a “suboptimal path”.67 In contrast, the NAO and written submissions to our inquiry from Hydrogen UK, Good Energy and Octopus Energy have called for the government to consider bringing forward some aspects of its decision on hydrogen.68
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Government response AI summary
The government acknowledges the level of uncertainty for industry and households regarding the role of hydrogen in home heating and believes that a decision on hydrogen should be taken in 2026 to avoid becoming locked into a suboptimal path.
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HM Treasury
36
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
Decarbonising electricity generation is crucial to the government’s net zero strategy, including decarbonising home heating. If, as the government expects, most homes switch their heating systems to heat pumps or heat networks, it is important that these are powered by clean sources of electricity to achieve decarbonisation. In 2021, the …
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Decarbonising electricity generation is crucial to the government’s net zero strategy, including decarbonising home heating. If, as the government expects, most homes switch their heating systems to heat pumps or heat networks, it is important that these are powered by clean sources of electricity to achieve decarbonisation. In 2021, the government set an ambition that by 2035 all electricity should be generated using clean sources, subject to security of supply, while meeting an expected increase in electricity demand of up to 60%. This means phasing out polluting types of electricity generation, such as gas-fired power stations and replacing them with a new mix of zero and low-carbon generation, including wind, solar and nuclear power.73
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Government response AI summary
The government acknowledges the committee's observations about decarbonising electricity generation and its 2035 ambition. It reiterates its 2030 Clean Power target and the appointment of Chris Stark to lead a 2030 Mission Control to accelerate delivery, with further details to follow.
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HM Treasury
37
Recommendation
Thirty-Seventh Report - Decarbonising h…
Acknowledged
We noted that renewable energy sources such as solar and wind are determined by the weather, making them intermittent; a view supported by Hydrogen UK. DESNZ recognised that electricity-based heating may change existing patterns in demand for electricity. It said that it therefore needed to make sure the power system …
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We noted that renewable energy sources such as solar and wind are determined by the weather, making them intermittent; a view supported by Hydrogen UK. DESNZ recognised that electricity-based heating may change existing patterns in demand for electricity. It said that it therefore needed to make sure the power system can reliably manage peaks and troughs in both supply and demand for electricity throughout the day. DESNZ explained that this was likely to require new low-carbon technologies that provide flexible sources of energy, especially in the winter months, such as gas-fired power stations with carbon capture, hydrogen power or long-duration storage.74
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Government response AI summary
Government agrees with the recommendation but defers an implementation date, referencing a Clean Power by 2030 target and the creation of a '2030 Mission Control' to address obstacles, with further details expected later.
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HM Treasury
39
Conclusion
Thirty-Seventh Report - Decarbonising h…
Acknowledged
DESNZ told us that, since our inquiry into decarbonising the power sector, it had shifted its emphasis towards the importance of spatial planning. It explained that this involved considering both overall energy demand at a local level, such as for electric vehicles as well as heating; and how to connect …
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DESNZ told us that, since our inquiry into decarbonising the power sector, it had shifted its emphasis towards the importance of spatial planning. It explained that this involved considering both overall energy demand at a local level, such as for electric vehicles as well as heating; and how to connect low-carbon generation to individual homes. 72 Committee of Public Accounts, Public cost of decommissioning oil and gas infrastructure, Eighty-Ninth Report of Session 2017–19, HC 1742, 27 March 2019; Committee of Public Accounts, The Nuclear Decommissioning Authority’s management of the Magnox contract, Twenty-Eighth Report of Session 2019–21, HC 653, 27 November 2020; Committee of Public Accounts, Future of the Advanced Gas-cooled Reactors, Third Report of Session 2022–23, HC 118, 20 May 2022 73 C&AG’s Report, Decarbonising the power sector, Session 2022–23, HC 1131, 1 March 2023, para 1 74 Qq 73–74, 79, 97, 109; DHH0036 75 Committee of Public Accounts, Decarbonising the power sector, Fifty-Ninth Report of Session 2022–23, HC 1003, June 2023 76 Qq 1, 2, 107–108; Committee of Public Accounts, Decarbonising the power sector, Fifty-Ninth Report of Session 2022–23, HC 1003, June 2023; C&AG’s Report, Decarbonising the power sector, Session 2022–23, HC 1131, 1 March 2023, para 9 Decarbonising home heating 21 DESNZ said that work was underway with the National Infrastructure Commission to look at how to build capacity in the distribution network operators to manage the increase in demand for energy, both nationally and at the street level. It added that Ofgem had also started work to identify areas where there will be particularly high levels of demand for energy.77 77 Qq 73–74, 76, 107–108 22 Decarbonising home heating
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Government response AI summary
The government agrees on the importance of spatial planning for decarbonising home heating and is working with local authorities and other stakeholders to develop spatial energy plans.
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HM Treasury