Volume Up The Pumps

Nesta recently responded to the Senedd Climate Change, Environment and Infrastructure Committee (CCEIC) inquiry into decarbonisation of the private housing sector. This followed hot on the heels of an interview I did with Minister for Climate Change Julie James – a wide ranging conversation which made clear the scope of the ambition on housing in Wales, and her view that it is her job to make climate change the top priority across her diverse portfolio.

A regular mantra from Ministers, in person and in print, is that “We must cut emissions more in the next ten years than we have in the last thirty and innovation will provide part of the solution.”

However, the Welsh Government’s approach to housing decarbonisation does not currently put decarbonisation first. Turning policy makers’ attention from social housing to the private sector is an opportunity to change this. 

In private housing, we can and should shift to a decarbonisation first approach. 

The current blanket ‘fabric first’ approach – prioritising improving the energy performance of the building’s materials through insulation etc. –  risks missing opportunities to act now and speed up the decarbonisation of our homes. Changing the heating system of a home has a more significant impact on decarbonisation and so, at Nesta Cymru, we argue that we need to increase the pace of electric heat pump adoption in Wales.

The case for heat pumps

Heat pumps are the best currently available replacement for fossil fuel heating systems, as they deliver the greatest emissions reductions per pound spent compared to other options.

Nesta’s analysis shows that the most expensive and intensive insulation measures like solid wall insulation can be expected to reduce energy demand by up to 17%. The cost of solid wall insulation can vary significantly; a terraced house could pay £4,500 to £6,000, a semi-detached £11,450 to £16,000, and a detached £25,300 to £34,200 (according to figures from Which? [paywall]).

As the former co-chair of the Fuel Poverty Coalition Cymru, I need no persuading that government support for insulating homes should continue, and ideally increase – especially in the current crisis. But insulation is best targeted as a fuel poverty measure, with the secondary benefit of achieving some decarbonisation. 

Directly spending thousands of pounds to save a social housing tenant hundreds of pounds on their energy bills is, in my view, entirely defensible – even given the quite long payback periods involved. 

So fuel poverty first means fabric first. But in private housing, we can and should shift to a decarbonisation first approach. 

As attention turns to Wales’ 1.1m privately owned homes, we need to revisit whether the same approach makes sense. Carbon emissions are cumulative, so cutting thousands of tonnes in CO2 from our homes at the start of this decade is worth much more than doing so ten years from now. 

The policy focus for private housing should be to deliver the greatest shared social value; meaning lowering emissions, reducing our collective exposure to volatile gas prices and remaining globally responsible in terms of impacts on other nations. 

The UK Climate Change Committee’s most ambitious pathway to net zero advocates a 28 per cent cut in household emissions over the next decade. For Wales to align with this pathway we need 250,000 heat pumps installed in homes by 2030 – saving 447,500 tonnes of CO2 per year. 

We currently have around 8,500 heat pump installations recorded on the EPC register, a likely underestimation.

The role of government

Policy has a key role in increasing the pace of installations, through providing finance, advice and support, but also by giving people confidence that switching to a heat pump is the right choice. 

Getting homeowners to take any action on ‘greening’ their homes is a challenge. Government can help reduce this challenge by advising on best options, bringing down costs and raising confidence in standards of work.  But not if fabric first unintentionally becomes ‘fabric only’ and holds us back from achieving pace on electric heating. 

Not all homes need huge, extensive retrofits before getting a heat pump. In fact, some homes won’t need any retrofit at all. Focusing on getting homes ‘heat pump ready’ through retrofitting risks locking in emissions for longer, as homeowners continue to invest in new combi boilers and take home the message that they should wait and see. 

Driving the uptake of heat pumps sooner rather than later will also help ensure Wales’ heating sector is not left behind the rest of the UK. Heating engineers will need support to retrain, and innovate new business models that bring the cost of installations down. Without this focus we may find small firms in Wales are out-competed for work by those over the border. These are good, skilled, secure jobs in the foundational economy that Wales should nurture. 

Cost of living

Never in recent history has the topic of energy been such an all-encompassing issue. We are in exceptionally fraught times, with how we stay warm and pay our bills being the overwhelming concern for the vast majority of us as we enter the colder months. We cannot ignore the cost of living crisis and ongoing pressure on energy bills which will see some households pushed into fuel poverty for the first time. 

Both insulation and heat pumps therefore play preventative roles in reducing costs in the energy system, but we cannot prevent our way out of a crisis.

In this context, government funding for insulation should ideally increase in ambition. But we should be realistic about how much we can achieve through insulation programmes, and when – given the skills bottlenecks in the retrofit sector. 

The 17% reduction in energy usage achievable by the more extensive and costly retrofit would clearly help households, but will  not offset all of the anticipated increase. Households in energy efficient new build homes, or homes which have already been insulated are all going to find themselves struggling to meet the coming price rises.

Likewise, success in the electrification of heat will play a significant role in reducing our exposure to gas price volatility in wholesale markets. However, there is no real argument that installing a heat pump is a way to reduce costs in the short term. Even if it was, the heat pump installation sector faces its own skills challenges to scale up quickly.

Both insulation and heat pumps therefore play preventative roles in reducing costs in the energy system, but we cannot prevent our way out of a crisis.

Support for households during this crisis will most usefully take the form of direct financial assistance. The pros and cons of the UK Government’s support package is a topic for another piece, and of course the Welsh Government may choose to offer additional support. 

Planning for this winter and beyond

Policy on both insulation and low carbon heat should therefore focus on what these interventions are best placed to achieve in the medium term, and not be over-optimistic about their potential to help with the immediate crisis.

So when it comes to the upcoming Welsh Government Heat Strategy (due in 2023) one critical area we are calling for focus on, and where there is a clear policy gap, is for a targeted approach to increasing heat pump adoption in well-insulated private homes in Wales. We elaborate on what this looks like in our response to the CCEIC. 

A, hopefully, short term cost crisis should not make policy makers lose focus on getting to grips with reducing our emissions during this crucial decade.

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