Tackling home heating emissions

While the UK is making great strides at cutting its emissions, through renewable sources of electricity, replacing inefficient lightbulbs, going for the most efficient appliances and making the switch from petrol and diesel to electric vehicles, we still need to tackle the biggest source of emissions, which is heating. We know what needs doing, and how to do it.

Britain has a great story to tell on cutting carbon emissions. As a country we produce about half the carbon we used to in 1990, whilst at the same time the UK economy has grown by three quarters.

That’s a great result for Britain but take a closer look and it’s clear that result rests on the success of turning off coal-fired power stations and turning on renewables like wind and solar.

This is exactly what E.ON has done across Britain over the last 20 years. In the early 2000s we built the world’s first offshore wind farm, on the North Sea coast at Blyth, Northumberland, and since then we’ve invested billions building similar projects around Britain. That investment in Britain must continue but we also need to open a new chapter and concentrate on cutting emissions in the rest of the economy – starting with how we heat our homes.

We’ve swapped out our old, inefficient lightbulbs, we’ve upgraded to A++ kitchen appliances and we’ve opted for renewable electricity from our suppliers. But what about tackling the biggest source of emissions and the largest element in our energy bills – heating.

Almost all of the emission reductions in Britain so far have been achieved without much disruption in our homes and businesses. Recent research shows most people don’t consider their gas central heating as something that contributes to climate change and fewer than one in five are considering low emission alternatives for their home heating.

"We need to start with levelling up the costs of alternative heating systems and giving householders a better solution than those commonly available today."

If we take a look at how much it costs to run one of the best low carbon alternatives to gas central heating today, a heat pump, then bills for a typical home will rise by a few hundred pounds a year compared to continuing with a gas boiler. That’s a hard sell to customers and without action it’s hard to see how the UK can meet the Prime Minister’s target to increase heat pump installations from c30,000 a year right now to 600,000 a year in just seven years’ time.

Part of the problem is that someone’s got their thumb on the scales when it comes to the relative costs of gas and electricity. Most people support the ‘polluter pays’ principle and with electricity generation the Government implemented this through a cost on emissions which helped drive the switch away from coal.

In sharp contrast, there is no such charge on gas used for heating. The problem is that practically everyone still heats their home or business using gas (or sometimes even oil or coal) so in order to manage the move away from gas heating fairly we can’t simply make gas more expensive, even if we make electricity cheaper in the process. It’s difficult to see any politician voting for that – and it could hurt the poorest in society.

However, what we can do is make changes to the market framework that makes running a heat pump cheaper than staying with a gas boiler and won’t cost those people who continue to use gas for heating any more than they’re paying today (it even creates revenue for the Treasury so should interest the Chancellor).

Almost a quarter of the average domestic electricity bill is made up of ‘Government policy’ costs, compared to similar costs that make up less than 2% of the average domestic gas bill. Removing some of these costs on the electricity bill (specifically the costs of CfDs, RO, and FITs, about 19% of an average electricity bill) while at the same time adding a new carbon price to the cost of gas roughly balances out in terms of the dual fuel costs to an average home.  This means a typical household continuing to use gas for heating and electricity to power the rest of their home won’t see a change to their cost of living.

In contrast, if that family starts using a low emission alternative for their heating, a heat pump for example, then they get a financial bonus: the unit cost of their electricity is now about 20% less than it was and they’re using now more efficient electric heating rather than gas – so in a way they get that benefit twice over! It also delivers on making the energy transition fairer as the cost of running a heat pump is now comparable to what people are used to paying with their gas boiler. 

Those additional policy costs taken from the electricity bill still need to be paid of course, but the revenue the Treasury gains from the new carbon tax more than makes up for that and it means we kick-start a low emission heating revolution and stimulate a green economic recovery while protecting the status quo and the hard-pushed public purse.

Of course, this is only one part of the jigsaw of changes needed if we are to deliver a compelling case for homes and businesses to switch away from what they are used to. Nonetheless, it’s an essential step on the way to net zero emissions and it’s a policy that would be truly world-leading. Something that might be in the mind of the Prime Minister as Britain prepares to host the global climate change conference, COP26, in November.

Written by Michael Lewis

Michael joined E.ON UK as CEO in 2017, having worked in the energy industry for over 25 years. He joined Powergen in 1993, originally working in technical and environmental roles, before moving into corporate strategy and development. Following E.ON’s acquisition of Powergen in 2002, he moved to E.ON’s headquarters in Düsseldorf as Vice President Corporate Development. In 2007, Michael was appointed Managing Director for Europe on the Board of E.ON Climate and Renewables, before becoming Chief Operating Officer in 2012 and then CEO of E.ON Climate and Renewables in 2015. Michael is a Chartered Engineer (CEng) and a Fellow of the Institution of Mechanical Engineers (FIMechE).