Energy Insight: Decarbonisation of heat in the UK

In order to meet emissions reductions targets, every sector of the economy must be decarbonised, including power, heat and transport. This Energy Insight focuses on heat, including space heating, water heating and industrial processes.

Energy Consumption in the UK (ECUK) 2018, Dept. for Business, Energy and Industrial Strategy.

In the UK, significant progress has been made in decarbonising power generation, thanks to improvements in efficiency, switching from coal to natural gas, and an increase in the share of renewable electricity sources. In 2020, the proportion of low-carbon electricity generated (includes nuclear power) reached a record 59.3%, according to the department for Business, Energy and Industrial Strategy (BEIS). 

In contrast, progress in decarbonising heat has been extremely limited – just 5% of total UK buildings heat demand came from low-carbon sources in 2018. According to the Energy Technologies Institute, domestic space and water heating accounts for 23% of UK energy demand and 20% of UK carbon emissions. 

To minimise the need for space heating and cooling, new homes must be built to improved construction standards so that they are suitably energy efficient. However, most existing buildings will still be in use in 2050 and beyond, and much of the UK’s existing housing stock is old and poorly-insulated. It is estimated that 26 million homes will require low-carbon installations or retrofitting, a huge endeavour that will likely be costly and disruptive. As part of the Clean Growth Strategy, the Government announced that all housing should have an Energy Performance Certificate Band C or above by 2030, but there is limited policy in place to achieve this. Efficient buildings are an important prerequisite for decarbonising heat, as increased efficiency means that the need for other technological measures, and their associated costs, will be lessened. 

An August 2018 report by Imperial College London for the Committee on Climate Change (CCC) lists three possible pathways for decarbonising heat in the UK:

1) ‘greening’ of gas supply by altering the gas grid to run on low-carbon ‘green’ hydrogen 

2) electrification of heat supported by low-carbon power generation 

3) hybrid solutions, using green gas to meet demand at peak times

What are the technologies that will enable one or more of these pathways?

Jeff Douglas, Strategy Manager at the Energy Systems Catapult

The vast majority (85%) of UK households are connected to the gas grid and use a natural gas boiler for heating, which warms up water that is pumped to radiators throughout the home. Boilers can also run on oil, LPG, coal or wood. One option for reducing the carbon footprint of gas boilers is to use biogas, a mixture comprised primarily of methane and carbon dioxide generated by anaerobic digestion. Microorganisms break down organic material in an environment with no oxygen, and the resulting gas can be purified and injected into the gas grid. Using biogas is only feasible if there is a steady supply of organic waste that can be digested in a suitable, warm environment (such as a farm); at present, it remains an inefficient technology used on a small-scale basis.

Nevertheless, the energy supplier Ecotricity has offered a tariff for customers to buy ‘green’ biogas since 2009 (any emissions are offset by the CO2 absorbed by the organic material during its lifetime).  

An alternative method is to use electricity for heating.

Electric storage heaters use immersion heaters to heat up a tank of water overnight (potentially taking advantage of cheaper off-peak electricity prices) - the hot water can then be used throughout the day. Electric heating is only as green as the energy source that is generating the electricity, and it is currently an expensive method of heating a home, as electricity is much more expensive than gas per kWh.

Heat pumps use electricity to harness the heat energy in the air (air source) or heat in the soil or bedrock (ground source) as a method of heating a building and can be much more efficient than an electric storage heater. A ground source heat pump uses a ground loop – a series of buried, underground pipes – connected to a pump at ground level. A water and anti-freeze mix flows through the ground loop, absorbing heat from the ground, which is then extracted by the heat pump and used to heat the building.

Air source heat pumps are less expensive to buy and less disruptive to install than their ground source counterparts, however they are more affected by seasonal change and therefore less efficient. They are attached to the side of a house, much like an air conditioning unit. The heat pump absorbs heat from the air and uses an electric compressor to increase the temperature of water that can then flow around the house. As with ground source heat pumps, air source heat pumps still need electricity to work – the subsequent increase in electricity costs when switching from gas heating should be offset by a reduced gas bill.

It is also possible to use solar power for domestic heating – solar thermal generators concentrate sunlight and convert it into heat via a heat-transfer fluid (such as propylene glycol). The fluid is circulated to a storage cylinder where it can heat up water. Solar thermal usually needs to be coupled with a back-up heat source, especially in a country such as the UK where solar irradiation is low during the winter.  

Excess heat produced during generation of electricity is commonly wasted – combined heat and power (CHP) aims to avoid this by capturing usable heat during the power generation process. Sometimes called cogeneration, CHP allows power generation to reach about 80% efficiency, reduce carbon emissions and potentially save money on energy bills. CHP is often linked with heat networks - examples of current UK CHP projects include Liverpool University and Lister Hospital in Stevenage.

In the November 2018 report ‘Hydrogen in a low-carbon economy’, the CCC noted that hydrogen gas can contribute to decarbonisation of heat as a low-carbon fuel, particularly if the existing gas grid can be utilised. ‘Green’ hydrogen gas can be created by electrolysis of water (electricity splits water into hydrogen and oxygen), a method which is currently expensive and energy-intensive. An alternative method is steam reforming of natural gas (hydrocarbons are split at high temperatures); however, this produces the greenhouse gas CO2 as a by-product unless coupled with carbon capture and storage (CCS). Additionally, hydrogen causes embrittlement of iron, which means it cannot be carried at high concentrations in older, steel gas pipes. As the Iron Mains Replacement Programme (IMRP) continues to switch pipework to plastic (polyethylene), gas distribution networks are becoming more suited to carrying hydrogen. However, new hydrogen transmission pipelines would still be required to carry the gas to households.

According to the CCC, hydrogen could be used as part of a ‘hybrid’ heating solution – electric heat pumps powered by low-carbon electricity could provide heat for most of the time, with hydrogen boilers acting as a back-up for very cold days or times when demand is high. This proposal would require introducing heat pumps from 2020 onwards, before introducing hydrogen boilers after 2035 as a replacement for natural gas. This lead time allows for the technology to become cheaper and more efficient.

The HyDeploy project, backed by Northern Gas Networks and Cadent, is a trial delivering a blend of natural gas and 20% vol. hydrogen to Keele University campus and some surrounding homes in the area. If the trial is successful, it will showcase a potential option for the UK to reduce domestic heating CO2 emissions with minimal modification of infrastructure. 

The UK Government supports investing in heat networks, citing the fact that 18% of UK heat will need to come from heat networks by 2050 to cost-effectively meet current emissions targets. Heat networks - also known as district heating – work by generating heat at a large, central source and distributing that heat to end users via a series of insulated pipes. There is also the opportunity to make energy savings by recycling heat that would otherwise be wasted, using an existing large heat source (a power plant or industrial infrastructure) instead of, or to top up, a dedicated boiler. Heat networks therefore have great potential to improve efficiency and reduce emissions from heating, particularly in areas with well-matched industrial heat sources and domestic, commercial, or other heat demand.

In 2015, there were nearly 14,000 heat networks in the UK, generating 17.7 TWh for heating and hot water. An example is EnviroEnergy, a network that supplies heating and hot water to 5000 homes and 100 commercial buildings in Nottingham, including Nottingham Trent University and the National Ice Arena. Waste heat from the Eastcroft Incinerator (backed up by gas boilers) is used to create superheated steam, which generates electricity and heats water. 

Heat networks require a reliable source of waste heat to be economical, as well as the installation of insulated pipes – as such, they are best suited to urban areas near power stations or industrial sites. As a result, the UK's currently installed heat networks are clustered in densely populated areas, such as London, Manchester, Belfast and Birmingham.

The Government’s Heat Networks Delivery Unit (HNDU) offers “support and guidance for local authorities developing heat networks”. The HNDU has run ten funding rounds since 2013, awarding over £23mn to local authorities in England and Wales. The eleventh round of funding is open from 1st May 2021 to 31st December 2021.

The Heat Networks Investment Project (HNIP) is “delivering £320 million of capital investment… to increase the volume of heat networks built… that can operate without direct government subsidy”. BEIS has appointed Triple Point Heat Networks Investment Management to administer the scheme, working with a consortium of investors.

Over two-thirds of Energy Institute members believe that the most effective policy for decarbonising heat is to introduce financial incentives, such as tax credits or capital grant schemes (Energy Barometer 2017). A list of UK initiatives and policies encouraging heat emissions reductions are detailed below.

The Renewable Heat Incentive (RHI) is a flagship UK Government scheme set up to “encourage uptake of renewable heat technologies amongst householders, communities and businesses through financial incentives”. Participants receive quarterly payments from the Government over a period of seven years. As of August 2021, the domestic RHI supports biomass boilers and biomass pellet stoves; heat pumps; and flat plate or evacuated tube solar panels. However, the non-domestic scheme, which applies to large and small businesses, schools and hospitals, closed to new applicants in March 2021. It covered biomass, biogas, heat pumps, geothermal generation, solar collectors, energy from waste and CHP.

To be eligible for the RHI, the heating system in question must be certified by the Microgeneration Certification Scheme (MCS). The scheme is supported by BEIS and ensures that installation companies, products and heating systems are of a high standard.

The Enhanced Capital Allowance (ECA) scheme allows businesses to “invest in energy-saving plant or machinery that might otherwise be too expensive”. Businesses on the scheme can write off the cost of the new machinery against taxable profits in the financial year the purchase was made. The scheme ended in April 2020.

Qualifying plant and machinery can be found on the Energy Technology List (ETL) which is managed by the Carbon Trust on behalf of BEIS; current products include CHP, heat pumps, motors and drives, pipework insulation, solar thermal systems and so on. This is still a useful source of information despite the ECA being discontinued. 

The Energy Company Obligation (ECO) is “a government energy efficiency scheme… to help reduce carbon emissions and tackle fuel poverty”. Large suppliers (those with at least 250,000 customer accounts) are obligated to promote measures that improve the ability of low income, fuel poor and vulnerable households to heat their homes; this includes installing solid or cavity wall insulation, boiler replacement and loft insulation. The contribution of each energy supplier is based on its market share. The latest policy, ECO3, runs from Autumn 2018 until March 2022.

The Green Deal originally ran from 2013 to July 2015 as a government-funded scheme. The scheme allowed participants to apply for a loan to pay for energy efficiency improvements in their home, such as a new boiler, improved insulation or the installation of heat pumps. The participant then repaid the loan over 10-25 years through electricity bill payments, with the reasoning that the loan repayments would not exceed any savings made on energy bills. However, the Green Deal was scrapped after the National Audit Office reported that it did not achieve value for money, with just 1% of energy efficiency improvements funded by a Green Deal loan. 

The Green Deal relaunched in 2017, with the Green Deal Finance Company backed by private investors. 

In decarbonising power generation, emissions reductions have been achieved despite limited interaction with consumers. However, decarbonising heat is a different challenge that requires large-scale improvements in energy efficiency, as well as millions of homes replacing their gas or oil-fired boilers with a new technology. There is no one-size-fits-all solution, since the fuel mix and the means of delivery to the end-user vary greatly from one area of the country to another. Multiple technologies will be required, including electrification using heat pumps, using sustainably-produced hydrogen as a fuel, and setting up district heating networks which can incorporate a range of low-carbon heat sources as well as waste heat from various industrial and urban processes. 

Decarbonising heat for UK homes, Energy Technologies Institute. 20 March 2015.

Industrial Decarbonisation and Energy Efficiency Roadmaps to 2050, Dept. for Energy and Climate Change & Dept. for Business, Innovation and Skills. 25 March 2015. 

Too hot to handle? How to decarbonise domestic heating, Policy Exchange. 2 September 2016

Next Steps for UK Heat Policy, Committee on Climate Change. 13 October 2016

Ofgem’s Future Insights paper 2 -The decarbonisation of heat, Ofgem. 14 November 2016 

Decarbonising heat, Michael Joos and Kinga Niemczyk, Energy World July/August 2017

Analysis of alternative UK heat decarbonisation pathways, Imperial College London for the Committee on Climate Change. 28 June 2018.

Hydrogen in a low-carbon economy, Committee on Climate Change. 22 November 2018

Net Zero – The UK’s contribution to stopping global warming, Committee on Climate Change. 2 May 2019

Heat in Buildings, Dept. for Business, Energy and Industrial Strategy on GOV.UK Accessed on 24 June 2019