Heat Batteries: Decarbonising Homes

Wednesday 8th January 2025 Westminster Hall

11:00

[Esther McVey (in the Chair)]

I will call Deirdre Costigan to move the motion. I will then call the Minister to respond. As is the convention for 30-minute debates, there will not be an opportunity for the Member in charge to wind up.

[Deirdre Costigan (Ealing Southall) (Lab)]

I beg to move,

That this House has considered decarbonising homes and heat batteries.

It is a pleasure to serve under your chairship, Ms McVey. My constituents in Ealing Southall regularly speak to me about the cost of heating their homes. Gas bills have risen astronomically over the past few years, and in freezing weather like this, people are often afraid to turn up their heating in case they are hit with a massive bill. Indeed, research by the House of Commons Library confirms that the annual increase in gas bills in October 2022 was the largest ever recorded, based on records going back to 1970.

How did this happen, and what can we do to reduce people’s bills? There is one reason why bills have increased to such a degree: we have become almost completely dependent on Russian gas—on gas internationally, in fact. When Russia, a huge gas supplier, invaded Ukraine, it disrupted global gas supplies. Prices shot up across the world. As a country, we have put all our eggs in one basket. Some 23 million homes have gas boilers, and 85% of us depend on gas to heat our homes, so we had no option but to pay higher prices. It is a basic mistake that anyone can see if they think about it. For years we lived off cheap gas, until we were addicted to it. Then, when supplies were disrupted, we were left at the mercy of higher prices.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

The hon. Member is making a strong point, and I thank her for secured this really important debate. I represent a very rural area where homes have depended on oil-fired heating systems off grid. There is a growing awareness about the transition to renewable alternatives. However, for some, this shift is seen as more of a threat than an opportunity—I have lots of casework on the matter—so engaging consumers has to be a priority. Heat pumps are the lowest-carbon heating solution and should therefore reward homes with lower energy costs. Does the hon. Member agree that the Government should make rebalancing gas and electricity tariffs a priority, to encourage more consumers to upgrade to heat pumps?

[Deirdre Costigan]

I thank the hon. Member for her intervention; I will come to that point later in my speech. I know that the Government are giving this much consideration.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Lady for her contribution; she is making a name for herself in the House on this issue. Does she agree that if we are to reach our targets, we must assist homeowners, particularly those who are older? Does she feel that the Government should provide financial assistance so that we can achieve her goals?

[Deirdre Costigan]

I thank the hon. Member for his support for Backbench Business in this place, which is very much appreciated by all Members. I certainly agree on the need for financial support; I will touch on that point later. I expect the Minister will too, as there has been a significant move forward over the past six months.

As I have explained, we have become addicted to gas over a number of years, which is why my constituents in Ealing Southall are consistently paying higher energy prices and struggling to heat their homes. We should have started work years ago on breaking our addiction to gas by investing in our own renewable energy and upgrading our homes to use that energy, but the previous Government never had the bravery to take action at the scale that is needed. Instead, they stopped us producing cheap British-made energy by blocking the building of onshore wind farms and by cutting funding for solar panels.

The previous Government also stopped us upgrading our homes to protect them from the rising cost of gas. They slashed grants for loft and cavity wall insulation and scrapped the zero-carbon homes standard for new homes. As a result, more than 1 million new homes have been built with lower energy efficiency standards, and people are paying higher bills than they should. We continue to have the leakiest homes in Europe, with just 12,000 homes insulated last year, compared with up to 2.5 million a year under the last Labour Government.

The Carbon Trust estimates that those decisions by the Conservative Government have added at least £3 billion to UK gas bills. That is why my constituents are paying through the nose to keep warm today. What can we do about that? Thankfully, the new Government are already taking action to wean us off gas. We have set up Great British Energy, ended the block on onshore wind farms and kick-started plans to become a world leader in floating offshore wind. These are the brave steps needed to ensure that by 2030 we become fully energy self-sufficient and that 95% of the power we generate is clean energy, ending our reliance on gas and on decisions taken in Moscow.

When it comes to weaning our home heating systems off gas, the recent Budget invested £3.4 billion as a first step towards the new Government’s warm homes plan. As a start, 300,000 homes will benefit from upgrades next year, with grants for heat pumps and support for renters and low-income households.

[Perran Moon (Camborne and Redruth) (Lab)]

I congratulate my hon. Friend on securing such an important debate; it is incredibly disappointing that not a single Conservative MP has turned up to listen. Does my hon. Friend agree that our transition away from fossil fuel heating must include domestic network ground source heat pumps at a much broader scale, including in social housing? Heat pumps are essential to the transition. The largest producer of ground source heat pumps, Kensa, is in my constituency and is ready, willing and able to support that transition.

[Deirdre Costigan]

I thank my hon. Friend for his intervention. I am well aware of the company he mentions and will talk about it later in my remarks. It is a great example to build on.

We need to wean our home heating systems off gas, in the same way that we need to wean the country off gas when it comes to renewable energy. The recent Budget invested £3.4 billion as a first step in the warm homes plan. Heat pumps, which will benefit from some of that money, are a great way to wean us off gas. They use electricity rather than gas, so they can be fed from home-grown energy from our wind and solar farms.

Just 1% of UK homes use a heat pump, compared with 60% in Norway. That is a real indictment of the previous Government’s inaction. It is fantastic that this Government are systematically removing barriers to heat pumps. We have increased funding for the boiler upgrade scheme by £30 million this year and will be doubling it from April. We are removing the need for other home upgrades before households can get that funding, and we are changing planning requirements and the 1 metre rule so that heat pumps are easier to install.

[Sarah Dyke]

Like many residents of rural areas on an off-grid oil heating system, my constituent Nicholas in Sparkford desperately wants to change to a heat pump, but it would cost him £19,000 to transition. The cost is preventing so many people in rural areas from decarbonising their home. I appreciate that the Government are taking steps to help, but in rural areas the cost is simply too high. What can the Government do to incentivise people who live in rural areas to decarbonise their home?

[Deirdre Costigan]

As I have laid out, the Government have already taken steps to increase the funding to transition to heat pumps. I am sure the Minister will have more to say on rural communities and the particular barriers they face.

Although heat pumps are extremely important in the move to wean us off gas, they do not work for every home. An estimated 20% of homes are unsuitable for heat pumps. We need to do more to break down the reasons why people can be reluctant to choose them. Air source heat pumps need outdoor space. Many of my Ealing Southall constituents live in small terraced homes or flats and do not have much outdoor space, so a heat pump is not a viable or attractive option. Many people have repurposed the space that used to house their hot water tank.

That is where innovative British firms such as Kensa in Cornwall and Tepeo in Reading come in. Both companies use heat batteries, using the same science that is behind hand-warmer packs, to store thermal energy until it is needed. Tepeo’s zero emission boiler, ZEB, uses a heat battery that automatically buys energy at cheaper times of day and releases it when required, reducing energy bills. Users do not need an outside pump; they just need a box about the size of a gas boiler. Because of their small size and their ability to plug and play without needing to do replumbing, heat batteries are a good solution for heating homes in built-up urban environments like London, including parts of Ealing Southall.

Kensa uses shared ground source heat loops that are connected to whole streets or blocks of flats. The energy is connected from the ground, is produced in networked heat pumps in each of the linked houses or flats and is then stored in Kensa’s Sunamp heat batteries. No outdoor space is needed, and it replaces the need for a hot water tank.

[Tom Hayes (Bournemouth East) (Lab)]

Will my hon. Friend give way?

[Esther McVey (in the Chair)]

Order. Before the hon. Gentleman intervenes, may I remind Members that interventions should be concise and should not be speeches?

[Tom Hayes]

I thank my hon. Friend for securing this debate. I was lucky recently to visit Kensa’s air source heat pumps in Sutton Dwellings in Chelsea. I have also visited Tepeo’s factory; it is great to see the chief executive officer in the Public Gallery today. Does my hon. Friend agree that for heat batteries to enjoy the same penetration of the market as heat pumps, it is important that they benefit from VAT relief and the same levels of subsidy so that we can decarbonise our heating?

[Deirdre Costigan]

I absolutely agree, and I will come on to exactly those points. Kensa’s approach also uses ground source heat technology, aligned with heat batteries—a cheap and efficient way of rolling out heat pumps at scale. My hon. Friend mentions a visit he made; another example is that Kensa has replaced direct electric heaters with shared ground loops alongside heat batteries in more than 270 flats across three tower blocks in Thurrock. Residents’ bills have reduced by more than 60%, which is a huge saving. Both those technologies can wean us off gas. They are examples of the kind of British manufacturing and innovation that we need to support to create good-quality jobs. However, barriers remain, and I hope that the Minister will consider ways of addressing them.

[David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)]

I thank the hon. Member for giving way and for securing this important debate. My constituency has one of the highest levels of off-gas-grid properties in the UK, with over a third of my constituents dependent on heating oil to keep their homes warm. Does the hon. Member agree that it is vital that the Government bring forward plans to help off-grid homes to decarbonise not only to help the environment, but to help to bring their bills down?

[Deirdre Costigan]

I am sure that the Minister will have more to say on that when she responds.

Heat batteries in the UK currently face a significant disadvantage compared with heat pumps as they are not eligible for a grant under the boiler upgrade scheme. I know the Minister is continuing to look at how she can maximise the benefits of the scheme and I hope she will also look at whether new technologies such as heat batteries can also be supported.

Unlike heat pumps, heat batteries are not on the list of energy-saving materials that qualify for VAT reductions, so extending VAT relief to heat batteries would help to heat the 20% of homes currently missing out. I have written to the Chief Secretary to the Treasury to ask him to consider reducing VAT for heat batteries, and I hope the Minister might work with him on that.

There are barriers to installing networked ground source heat pumps that use heat batteries, including planning considerations and the need to adopt a street-by-street approach that can upgrade hundreds of homes in one go. The Minister has already committed to changing planning rules for air source heat pumps. I hope that she will consider whether changes also need to be made for networked ground source pumps and that she will include networked heat pumps allied with heat batteries in the forthcoming low-carbon flexibility road map she is working on.

To give certainty to British businesses investing in innovative technologies such as heat batteries, we need to ensure that there are consistent heating requirements for new homes being built. The Minister will shortly be bringing forward the new future homes standard to end the scandal of gas boilers still being installed in new homes. I hope the standard will include heat batteries and other emerging technologies.

[Gideon Amos (Taunton and Wellington) (LD)]

I thank the hon. Member for giving way; she has been very generous and has brought a genuinely important issue to the House. She mentioned the future homes standard. According to a calculation I carried out, if every new home built since 2015, when the Conservatives cancelled the zero-carbon homes programme, had solar panels on the roof, we would have saved around 30 MW of energy—enough to obviate the need for an entire gas-fired power station. As a complement to what she is arguing for, I hope that she would support solar panels on every new house. My constituents in Taunton and Wellington cannot understand why that is not already a regulation.

[Deirdre Costigan]

We do not have solar panels feeding into our energy system to that much greater degree because of the last Government; it is as simple as that.

I will continue with the changes that I would like the Minister to consider. Lastly, I would like her to think about heat pumps and heat batteries and the way they both currently use electricity. Electricity can make them more expensive than gas boilers, which is one of the big barriers to consumers. It sounds strange, but because of the way the market works, the price of electricity depends on the price of gas. It is surely unfair that a levy is paid on the electricity used by heat batteries, but those levies are not paid back when and if they feed back into the grid.

We need to look at the electricity market to see if there are ways of splitting off the price of cheaper renewable energy from the price of gas to reflect the true value of energy storage. I hope to hear more from the Minister on that point, as part of the review on the electricity market that she has committed to undertake.

Every family and business in the country has paid the price of Britain’s dependence on foreign gas markets. Retrofitting homes with the help of heat batteries is just one of the range of actions we need to take to bring down bills and keep Britain’s leaky homes warm. In just six months, the Government have already made huge advances in increasing our energy security, and I look forward to hearing more from the Minister on her plans to harness new technologies to protect the cost of heating our homes from decisions made in other countries.

11:20

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Miatta Fahnbulleh)]

I thank everyone for their insightful contributions, and I thank my hon. Friend the Member for Ealing Southall (Deirdre Costigan), who I know works hard for her constituents, for bringing this issue to our attention.

My hon. Friend is absolutely right to point to the inheritance that we are grappling with. The reality is that for too many people, energy is simply unaffordable. That is a reality that the last Government were willing to accept; it is not one that we think is tenable or that we are willing to accept. Every voice, every piece of new technology and every benefit must be considered as we try to reduce our reliance on gas and make our way forwards towards clean power by 2030, so I thank my hon. Friend for her research and work on heat batteries.

Heating our homes via low-carbon means is key to our efforts to tackle not just emissions but fuel poverty and the high cost of living that is biting across the country. As we enter the colder months of 2025, we are acutely aware of the financial pressures that families are under when heating their homes, which is why it is critical that we continue to move quickly towards cheaper, cleaner and more secure methods of heating homes for everyone across the country.

The Government were elected on an energy promise: to deliver warmer homes with lower energy bills for families across the country. Decent homes are the foundation of decent lives, and our warm homes plan is driven by the simple principle that every household deserves the security of a home that they can afford to heat.

[Noah Law (St Austell and Newquay) (Lab)]

I welcome the debate secured by my hon. Friend the Member for Ealing Southall (Deirdre Costigan) on this important topic. The warm homes plan currently being rolled out by the Government is particularly welcome for those of us in Cornwall with poor energy-efficient homes. Can the Minister outline the steps that she is taking to accelerate the roll-out, so that as many households as possible, particularly those with vulnerable elderly people and young people—who have access to the worst-insulated homes—can feel the immediate benefits?

[Miatta Fahnbulleh]

I will go on to outline the steps that we are taking, because we recognise that the plan is critical to dealing with the challenges across the country.

I want to emphasise why we got here; my hon. Friend the Member for Ealing Southall made that point very well. Let us remember that Putin’s illegal invasion of Ukraine exposed our country to our egregious over-reliance on international gas markets. When prices rocketed, the British people suffered. That is why we have made our strategy to reduce reliance on gas a central plank of this Government, and we can do that in two ways.

First, we want to reduce reliance on gas within the electricity system. One of the Prime Minister’s key missions is to make Britain a clean energy superpower. We have taken immediate action by lifting the ban on onshore wind within our first 72 hours in government, setting up the new mission control at the heart of Government, and setting up Great British Energy—a publicly owned company that will invest in clean home-grown energy.

Secondly, we want to reduce our reliance on natural gas for directly heating our homes, which is why this debate is so important. Over 80% of UK homes currently use gas, which is one of the highest proportions in the world. Cleaner heating is therefore a huge part of Britain’s path to energy independence. The good news is that if we get this right—there is a lot we need to do to get it right—it is also a route for us to deliver cheaper energy for people’s homes.

Although other technologies such as heat batteries might have a role to play—I will say more about that technology specifically in a second—we already know that heat pumps can be an effective and affordable way of moving forward. We know that heat pumps are three times more efficient than traditional gas boilers, and because they run on electricity, people can achieve lower bills by integrating them with smart tariffs. To the point made by the hon. Member for Glastonbury and Somerton (Sarah Dyke), we understand that we need to do more work to make sure that it is cost-effective for people who make the choice to have clean heat. Thinking about the balance between gas prices and electricity prices is a key part of how we try to do that.

Heat pump uptake is increasing. Figures for the boiler upgrade scheme show that the number of applications and redemptions in October 2024 was the highest of any month since the scheme began. Critically for hon. Members who raised key questions about rural communities and homes that are off grid, we think that heat pumps are a viable option in rural communities. Actually, 54% of BUS grants went to homes in rural communities, so consumers agree with us.

We now need to make it as easy and viable as possible for people to go on this journey. That is why we are announcing and putting in place a raft of measures to help us to accelerate the pace of our warm homes plan. We have removed the outdated 1-metre rule, giving households more flexibility to install heat pumps. We are almost doubling the boiler upgrade scheme budget for next year to £295 million.

We are looking at further ways in which we can make the up-front cost of installing a heat pump much cheaper, drawing on some of the real innovation in the market, such as Kensa, which my hon. Friend the Member for Ealing Southall mentioned. We are supporting the supply chain by introducing a reformed clean heat market mechanism on 1 April this year. We are investing more than £5 million in Ideal Heating as the first award from our heat pump investment accelerator competition, and we are doing the critical job of training installers through our heat training grant.

Let me come to heat batteries. We recognise that heat pumps will be the solution for many households and we need to make sure that they are as easy and affordable as possible for those households to install, but we also recognise that for some households they will not be the right solution. We also know that the landscape is changing massively, with innovation and new technology in train. That is why I can confirm that the Government are keeping several alternative electric heating technologies under close review as the supporting evidence develops. For us, this is about taking a technology-agnostic view on the market, pairing the most suitable technology with the home.

We recognise that heat batteries are a promising alternative electric heating technology. That is why we have launched the homes for net zero project, which is aiming to monitor the performance of up to 50 heat batteries in existing homes. We are expecting the results of that later this year. The key thing for us as we make the decision is whether it is a good deal for consumers. Is it efficient, is it cost-effective, and does it deliver the right outcomes—the outcomes that we need to see in people’s homes? As we build that evidence base and we build our confidence that it is the right proposition for consumers, we will look to review the policy framework, including subsidies, as we move forward.

Let me come to the warm homes plan. The Government are committed to being bold and ambitious to deliver the progress that we know is so badly needed on this agenda. When we were elected, we were clear that we needed to get straight back to work with the warm homes plan. In September, we announced plans that would lift more than 1 million households out of fuel poverty, by consulting on the minimum energy efficiency standards for all rented homes.

We also announced new schemes to help, in particular, low-income households—homeowners and private renters. This is through our warm homes local grant and our warm homes social housing fund, which closed for applications last November. We have confirmed £1 billion from the national wealth fund, Barclays UK corporate bank and Lloyds Banking Group to support housing associations to provide warmer, more energy-efficient homes.

In November, we went further. Alongside the policies that I have talked about, we confirmed initial funding for our warm homes plan, which means that next year up to 300,000 homes will benefit from upgrades, backed by £3.2 billion of investment. In December, we worked with housing colleagues to launch a major consultation on energy performance certificate reforms, which aims to deliver fundamental improvements so that the system better supports both consumers and our wider ambitions.

Let me conclude by saying that this Government understand the urgency of the situation, so we are moving at pace. That means that we are open-minded and collaborative. We are willing to work with anyone who will help us to drive the transition at the pace and scale that we need. I hope that my hon. Friend the Member for Ealing Southall can see that that is absolutely at the heart of the approach that we are taking. I look forward to working with her, with industry colleagues and with other Members across the House to think about the innovation and the steps that we need to take to make progress on this agenda, so that in the end we do the thing that we were elected to do, which is to ensure that we are delivering on the energy promise that we committed—

Motion lapsed (Standing Order No. 10(6)).

11:30

Sitting suspended.