Low-carbon Off-gas Grid Heating

David Jones Excerpts

Thursday 16th June 2022 Westminster Hall

[Mr David Jones (Clwyd West) (Con)]

I beg to move,

That this House has considered the future of low-carbon off-gas grid home and business heating.

It is a pleasure to serve under your chairmanship, Sir Christopher. I thank the Backbench Business Committee for facilitating today’s debate, which I hope will give hon. Members the opportunity to discuss the options available to the owners of rural homes and businesses that are not connected to the gas grid to decarbonise their properties. I hope to hear from my right hon. Friend the Minister how that might be done, always bearing in mind the principles of choice and fairness.

One of the clear outcomes that emerged from the Climate Assembly that was commissioned by Select Committees of this House was that the path to net zero must be fair to people who live in different parts of the UK. Hon. Members will be aware of the need to phase out boilers using fossil fuels in all homes to meet the net zero challenge, and it is the Government’s aim to ban replacement natural gas boiler installations from 2035. Most homes are connected to the natural gas grid, and the debate continues as to whether those homes may eventually be powered by hydrogen or whether they will have to resort to electric heat pumps, but little attention has been paid to rural homes and businesses that are not connected to the gas grid. The primary solution proposed by the Government appears to be electric heat pumps, which are very costly and disruptive to install, or biomass boilers, which come with air pollution concerns.

Over 4 million people live and work in our rural communities. Many rural homes and business properties, such as hotels and pubs, tend to be old and draughty; 47% of such homes were built prior to 1949. According to figures from the Office for National Statistics, only 3% of off-gas grid homes achieve an energy performance certificate rating of band C, and many rural homes need significant energy efficiency investment if they are to be suitable for electrified heating: for example, they may require replacement hot water tanks and additional radiators, and some homes will need to be rewired or have external wall insulation to accommodate heat pumps. Electricity grids in rural areas will also need to have their resilience improved and built up as heating and transport become increasingly electrified in future.

It is therefore surprising that the Government apparently intend to pursue a “rural first” approach to the roll-out of heat pumps, committing to ban the installation of replacement fossil fuel boilers in rural homes from 2026 and in larger businesses from 2024. By contrast, they aim to start phasing out replacement installations in on-grid homes from as late as 2035. Given the extra cost and disruption of installing heat pumps compared with existing boilers, rural homeowners will quite reasonably wonder whether this is fair. Under the proposals in the heat and buildings strategy, homeowners off the gas grid will not be permitted to replace an existing fossil fuel system with a new one after 2026. For rural businesses, changes will start even earlier: in 2024—only two years away—for larger business premises over 1,000 square metres, and from 2026 for many rural small and medium-sized enterprises, including those in the hospitality and agricultural sectors. I hope that in his reply, the Minister will explain why rural homes and businesses will be required to switch from fossil fuel so much earlier than their on-grid counterparts.

We should remember that nearly 2 million rural off-gas grid properties will be impacted by these proposals very soon. Most rural off-gas grid homes are heated by oil, which historically has been the cheapest fuel, although hon. Members will be aware of the current price spike. There are hundreds of suppliers of heating oil across the country, enabling consumers to shop around for the best price. There are also liquefied petroleum gas suppliers for those who wish to use gas for home heating and cooking, with some homes using electric panels as well as solid fuels such as peat and coal, but oil is the most commonly used fuel for heating. It will be a significant undertaking to replace oil-fired systems in the normal boiler cycle unless affordable alternatives are available to those who use them. Indeed, I wonder whether the Government have seriously underestimated the scale of the challenge that they have set themselves.

According to the heat and buildings strategy, the current cost of a heat pump for the average off-gas grid home is £12,000. A further £2,000 may be required to fit cavity wall insulation, loft insulation and draught proofing to upgrade a home so that it is heat-pump ready. Rural household incomes are, on average, smaller than urban ones. Although some rural householders will receive limited Government support in the form of the boiler upgrade scheme and the home upgrade grant, many will not be able to afford the cost of heat pumps and the associated energy-efficient retrofit work that is required for them to work efficiently. Put simply, the cost of installing a heat pump could be out of reach for many, and the associated disruption will be extremely inconvenient.

There is a significant policy gap in the heat and buildings strategy in relation to the so-called “able-to-pay” households, which may not qualify for any Government assistance. Many such households may lack the savings and income to pay for a heat pump. The Government are considering using the mortgage market to improve the EPC scores of such homes, and requiring homeowners to make changes at the point of sale of their property or, alternatively, to increase their mortgages to cover the cost of installing a heat pump. However, it would be deeply unfair to saddle homeowners with more debt as interest rates rise, as indeed they have done today.

Some able-to-pay households may receive a £5,000 grant, via the boiler upgrade scheme, towards their air-source heat pumps or biomass boiler installation. However, a maximum of just 90,000 households will be helped under that scheme, which applies to both on and off-grid properties. That simply does not cover the boiler replacement cycle in off-grid homes. There is no support for energy efficiency improvements in able-to-pay households, and it is not clear how they will afford the transition—especially if they are required to change their boiler at short notice—or accommodate the significant disruption and time taken for a heat pump to be installed. Notably, the strategy contains very little detail on the Government’s position on the cost-effectiveness of the measures they propose.

A study by Gemserv found that 44% of rural off-gas grid homes that currently use heating oil can be considered hard to treat when the cost of transition is taken into account, and heat pumps are not the cheapest low-carbon heating option for them. The Federation of Master Builders suggests in its national retrofit strategy that hard-to-treat homes should be last to be retrofitted rather than first, to allow the energy efficiency industry to drive down costs and increase its skill base to meet the challenge.

The Government also appear to assume that the cost of heat pumps relative to traditional boilers will halve by 2025 and reach cost parity by 2030. That is ambitious. The heat-pump market is already at a mature stage of development—many thousands are manufactured each year—so it is hard to see where those cost reductions will come from. Delta-EE, the independent analyst and Government adviser, recently published a paper stating that even in an ambitious scenario, reductions of only 34% could be achieved by 2030. That means that rural homeowners will be required to pay a significant premium to decarbonise their heating unless extra support and a more affordable range of choices are provided.

What do rural homeowners themselves think of the proposed measures? According to the Calor rural attitudes tracker, they are not very happy with them: 59% think that it is unfair that off-gas grid homes will see their traditional boilers phased out earlier than those connected to the gas grid; 69% do not think that it will give them enough time; and 83% cited cost, and 64% cited technical constraints, as the main barriers.

Last year, the Prime Minister wrote in The Sun, “Boiler Police are not going to kick your door in & seize your trusty combi”. That is a reassurance and it may well be true, but it appears that the only option available for off-grid households after 2026 will be a heat pump. I would suggest that a greater range of affordable, low-carbon heating options will be required if rural homes are to decarbonise fairly and affordably, so how can the Government make the transition fairer for rural off-grid consumers?

First, they should reconsider the 2026 deadline and bring the deadline in line with their plans to phase out all fossil fuel boilers by 2035. The Government should adopt a “heat-pump ready first”—not a “rural first”—approach. All homes from post 1970, both on and off grid, should be targeted first, not just the more challenging, off-grid homes. That will help the Government’s ambition of 600,000 annual heat pump installations by 2028 to be achieved and will reduce the risk of negative installation experiences for rural householders.

Secondly, the Government should provide a choice, not a mandate, on the heating system that may be used. Heat pumps should be installed because householders want them, rather than because they are forced to have them. The Government should also give greater support to other technologies, such as hybrid heat pumps. These run alongside traditional boilers, which, in times of high heat demand, will allow more difficult-to-heat rural homes to use the traditional boiler element to keep those homes warm. The Government should also incentivise the development of alternative renewable fuels, including bioliquids and biogases such as BioLPG and HVO—hydrotreated vegetable oil. BioLPG is already on the market, but its uptake is hindered by a lack of policy support and by the fact that it is not currently recognised in building standards. These fuels, if adopted, would allow existing central heating systems to reduce their emissions significantly and could see hard-to-treat homes decarbonised more affordably.

I hope that the Government will pause for thought as to how they treat rural homes and businesses in the transition to lower-carbon heating. It is essential that the principle of fairness should be upheld. The Government should give rural homeowners and businesses access to a full range of options to decarbonise their homes and premises. The extent of the challenge is great indeed—too great to rely on heat pumps alone.

--- Later in debate ---

[Mr David Jones]

It has been a valuable and interesting debate. As the Minister has correctly pointed out, we heard from colleagues from all parts of the United Kingdom—united, indeed, in that we come from rural constituencies full of houses lived in by people who are feeling the cold and are worried about feeling the financial cold at some time in the future.

I am grateful to my right hon. Friend the Minister for his reply. I take some heart from him saying that the Government are not going to fossilise heat pumps as the only solution to the problems we are living through at the moment. This is a period of transition, and periods of transition are always difficult, but I hope that the Government will bear in mind the concerns of people living in rural areas who are concerned about potentially very high costs to replace existing boilers with heat pumps.

One point I take from the Minister’s reply that gives me considerable heart is that the Government continue to look at alternatives to heat pumps. He mentioned particularly biomass and biofuels, which I think offer a solution to this problem in the future. I hope that his Department will continue to look carefully at those solutions.

Question put and agreed to.

Resolved,

That this House has considered the future of low-carbon off-gas grid home and business heating.