Industry responds to major changes on the route to net zero

rishi sunak
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Rishi Sunak confirmed major changes on the route to net zero in a speech yesterday, including increasing the Boiler Upgrade Scheme grant and delaying the phase out of fossil fuel boilers.

The PM has pushed back both the ban on the installation of oil and gas boilers and the sale of new petrol and diesel cars to 2035. At the same time, he has increased the amount a household can claim towards a heat pump under BUS from £5,000 to £7,500.

Members of the Environment All Party Parliamentary Group (APPG) – a cross-party group of MPs and Peers chaired by Chris Skidmore MP and run by the Green Alliance UK – have spoken out about the changes.

Chris Skidmore, Chair of the Environment APPG, said:

Any delay to our net zero commitments will be at the detriment of the UK’s jobs, investment and economic growth. We risk destabilising business confidence in the UK that would have created thousands of jobs across the country. People will pay the price through higher bills and prices, leaving the UK stranded with the industries of the past rather than the future.

Barry Gardiner, Chair of the International Conservation APPG, said:

Our response to climate change must be science-led not politics-led. Instead of a unilateral statement rolling back climate action further, real leadership would have been to call together a cross party dialogue to reach a consensus on how we can help the vulnerable cope with energy bills this winter and accelerate our progress towards the cleaner future that his own Treasury Review said was the economically sensible thing to do.

Other responses from the wider industry have highlighted the increased affordability of heat pumps thanks to the increase to BUS while flagging up the need for more detail concerning the BUS budget as a whole.

Ian Rippin, CEO, MCS, said:

MCS welcomes the government announcement that Boiler Upgrade Scheme grant values will be increased to £7,500. Making it easier and more affordable for the average UK consumer to transition to low-carbon heating is vital if we are to reach our national decarbonisation goals.

More people will now have the confidence and ability to invest in low-carbon heating and this is an important step forward towards net zero.

However, it is disappointing to see a delay in the deadline to phase out new gas boilers by 2035. The most important element of helping consumers make the right, informed, green choice is clarity and moving the goalposts now risks confusing home and business owners about what the right thing to do is.

Henrik Hansen, Managing Director at Vaillant Group UK & Ireland, said:

As the leading supplier of home heating systems, we recognise the importance of giving homeowners choice when it comes to heating their homes. For almost 150 years we’ve been committed to providing efficient heating solutions for our customers’ homes and, as a manufacturer of both gas boilers and heat pumps, we are technology agnostic. Our aim is to provide unbiased guidance for homeowners on both technologies to make the right decision for their property and heating requirements.

We understand from customer feedback that the cost and complexity of transitioning to a heat pump is a major barrier for homeowners keen to install low carbon technology. Our experience from some European countries with more established heat pump markets has shown that stronger subsidies and the benefit of lower running costs can speed up the consumer adoption of the technology. The announcement today of the increase of the Boiler Upgrade Scheme to £7,500 will be welcome news to homeowners in England and Wales considering making the switch.

We await more detail from the announcement made today on the overall budget for the Boiler Upgrade Scheme. If the overall budget is not increased, the number of homeowners able to access the grant will be limited to 20,000 per annum which represents less than 0.1% of the housing stock in the UK, potentially slowing down the transition to heat pumps. We believe that significant investment into consumer education is needed together with a rebalancing of gas and electricity prices to make the potential benefits of installing and running a heat pump more attractive to the homeowner.

With the number of installers able to competently install a heat pump under the MCS scheme still at a relatively low level compared to gas safe registered installers, more needs to be done to upskill existing installers while attracting new skilled labour to the industry.

Dr Matthew Trewhella, CEO of The Kensa Group, said:

This is extremely concerning news, at a time when we should be scaling up to reach our Net Zero commitments by injecting investment and stability into green businesses and proven sustainable solutions, our planet’s future is being cynically used as a political bargaining tool.

British businesses have been innovating, investing, building supply chains and creating green jobs based on the UK’s net zero transition strategy. As recently as May 2023 the Kensa Group announced a £70 million investment into ground source heat pumps by Octopus Energy and Legal and General and we are already scaling up our business development, operations and R&D efforts to help drive the transition to low carbon heating and cooling. We are stimulating the economy and improving the UK’s energy sovereignty using the energy that is right under our feet.”

We are making excellent progress towards our vision of a subsidy-free, low carbon heating and cooling future that is greener, cheaper and safer than fossil fuel heating. Stalling this progress would be shortsighted, regressive and deprive the British economy of the billions of pounds of benefits that transitioning to net zero would bring. It will negatively affect consumers by keeping bills higher and homes less efficient. Delaying our transition to net zero in 2050 means future measures will need to be quicker and more drastic.

Energy UK’s CEO, Emma Pinchbeck also spoke about BUS, and the need for certainty to drive investment and innovation. She said:

Sudden changes to policies and targets like this are damaging to the very investment we need to fund the move towards Net Zero and jeopardise the economic benefits and opportunities this transformation could bring in terms of jobs, growth and greater prosperity to all parts of the country.

Businesses need certainty and stability when making long-term investments worth billions of pounds and targets help provide exactly that. That way businesses can invest, innovate and bring down the costs of low-carbon technologies that we need to adopt like heat pumps and electric vehicles – exactly as they have been doing. As recently as yesterday, Ministers were stressing their continuing commitment to these policies – so it’s alarming for companies considering UK investments in these areas when these same policies are shelved the next day.

When an estimated 70% of the funding we need for Net Zero will come from the private sector and at a time when other countries are stepping up their efforts to attract green investment, we cannot risk that money going elsewhere. It’s strange to cite our world-leading progress in reducing emissions and developing low-carbon technologies and then decide that is a reason for slowing down, and risk surrendering that position and those opportunities to other countries.

We very much welcome the extra support for customers with the Boiler Upgrade Scheme and the Government’s commitment to bring forward a Spatial Energy Plan as well as speed up grid connections. We heard the Prime Minister talk about greater transparency and accountability, and that is what the private sector needs. We need a clear vision and plan on how we stay on track for Net Zero, rather than just hoping to, after today’s changes and how, for example, this affects the emissions reductions needed from different sectors. It means acknowledging the evidence showing that a slower approach makes reaching the target more difficult and more expensive and can itself impose extra costs on people. We have seen the result when green targets have been shelved in the past – not least when customers have had to pay hundreds of pounds more in energy bills because they live in draughty properties.

The Prime Minister also talked about the cost to households but it can’t be emphasised enough that what has hit people in the pocket hard over the last 18 months – through record energy bills, the resulting effect on inflation and the cost-of-living – has been the cost of oil and gas. By slowing efforts to reduce our dependency, we do leave our economy and our people at the mercy of volatile expensive fossil fuels for longer.

Nick Coad, Director of Innovation, Wolseley Group added a merchant perspective. He said:

“While the enhancement to the Boiler Upgrade Scheme is a welcome development, the Government needs to ensure that the policy changes announced do not end up creating uncertainty over potential subsidies for homeowners and for trade professionals, and ensure uptake of insulation is encouraged to help reduce bills while keeping homes well-heated.”

A spokesperson for NIBE relayed the heat pump manufacturer’s frustration at the news:

“We are exasperated by the Prime Minister’s decision to delay the phase out of fossil fuel boilers in off grid homes and strongly disagree with the notion that the technology needed isn’t ready. Heat pumps represent a viable solution that can help us achieve Net Zero -a target that should be a top priority without hesitation or delay. Additionally, while the increase in funding for the Boiler Upgrade Scheme aligns with our advocacy efforts, it is just one of many necessary steps. For example, ground source heat pumps are a logical solution in off-grid homes using high carbon fossil fuels, yet the scheme covers a lower percentage of their costs compared to other technologies.”

The company added that policy certainty is crucial not only to industry but installers who need confidence in the direction of the market:

“The decision to backtrack on targets sends all the wrong signals at a time when we need the green light to pave the way for a net zero future.”