Andrew Selous is MP for South West Bedfordshire.
The imminent Heat and Buildings Strategy is the next step in the government’s climate and levelling up agendas. It will deliver the ambitions set out in the Prime Minister’s ten point plan, and bring certainty to the construction and retrofit sectors. Now’s the time to create a wave of construction jobs across the country by making our buildings fit for the future.
Decarbonising heat is a great example of where net zero and levelling up are one and the same. Meeting the Government’s target to upgrade all homes to Energy Performance Certificate C standard where possible means that 19 million homes will be retrofitted across the country.
By 2030, 50,000 new jobs can be created by growing our heat pump manufacturing base and expanding the installer supply chain. The sector can provide good, skilled, well-paid jobs to people everywhere as we build back better: companies like Grundfos, based in my constituency, are raring to get going on installing heat pumps.
Second, we will help people improve their homes, starting with households who are afflicted by fuel poverty who perversely pay the highest in energy bills. This means that people stay warmer and keep more of their money, simultaneously reducing strain on the NHS and wallets. Alongside Brexit and our vaccine programme, this partnership between net zero and levelling up was, without a doubt, a component of our thumping success in the local elections.
Then there is mitigating climate change, vital to the UK’s long-term prosperity. Following great success we’ve seen in the power sector with the dramatic rise in cheap renewables, decarbonising heat is the next step towards our net zero economy objective. Emissions from homes have already fallen by almost 20 per cent since 1990, but there is a long way to go and many people don’t realise that their gas boilers comprise a significant part (17 per cent) of the UK’s contribution to climate change.
Given the scale of the challenge, Parliament’s Climate Change Committee has urged the government to get on with decarbonisation of heat urgently. More than 23 million homes need to make the switch from gas boilers to zero or low carbon alternatives over the next three decades. While clean hydrogen boilers will play a role in the future around industrial clusters, experts believe that much of the progress in the next decade will come from installing heat pumps.
The Prime Minister’s Ten Point Plan accepts this challenge, with a target to install 600,000 heat pumps every year by 2028. Now that the Government has adopted the Committee for Climate Change’s sixth carbon budget, we must start scaling up the heat pump industry to bring their upfront costs (their main barrier to uptake) down and improve the technology. We’ll eventually need to phase out gas boilers altogether if we want to prevent dangerous levels of climate change. The Heat and Buildings Strategy is the place to begin.
As with decarbonising our power sector, leveraging private finance will be essential. Previous schemes like the Green Homes Grant have been stop-start, discouraging the private sector from investing in the retrofit supply chain. The Heat and Buildings Strategy should include bold targets for upgrading homes in all types of tenures, including owner-occupiers, and firm policies which rebuild investor confidence to utilise the financial muscle and competitive drivers of the free market.
For instance, consistent with our levelling up mission, we could frontload the funding in our manifesto promise of £9.2 billion for energy efficiency into social housing and fuel poor households, providing support where the need is greatest, while scaling up the heat pump manufacturing sector and energy efficiency supply chains.
Then, for owner-occupiers, the Government could offer attractive ‘Help to Improve’ loans through the new UK Infrastructure Bank. This would be a sister policy to the popular Help to Buy loans which have helped hundreds of thousands of people get onto the property ladder. These low-cost loans could be repaid from the savings on energy bills from the insulation measures.
Finally, the strategy could tackle the economically distorting, environmentally harmful distribution of taxes and levies on household energy bills. Currently, electricity bears nearly all the taxes and policy costs and gas none, making heat pumps costlier to run than boilers. Moving the legacy costs of renewable energy subsidies off electricity bills will make heat pumps up to £200 a year cheaper to run, according to a recent Public First report. Whether we move some of the policy costs on to gas bills or fund them from a new carbon charge on gas, we must make sure that the average dual fuel bill customer isn’t any worse off, and that fuel poor households are protected.
It’s crucial we decarbonise heat in a way that doesn’t punish people, especially those who will struggle to switch away from gas boilers straightaway. However, with the right policy package, the Heat and Buildings Strategy can bring tangible improvements and economic opportunities to people across the country.