Ahead of the UK Chancellor's budget tomorrow, Paul Burnett, managing director of Johnson Controls business Asset+, shares his thoughts on what he'd like to see come out of the announcements.
In last year’s autumn budget, the government announced that new funding for energy efficiency worth £6 billion will be made available from 2025 to 2028.
This is in addition to the £6.6 billion already provided for 2020 to 2025.
I welcome the government's ambition to reduce the UK’s energy consumption from buildings and industry 15 per cent by 2030 against 2021 levels.
However, we need details on how this ambition will be met or how the new funding will be spent.
We’ve already seen real success through the Public Sector Decarbonisation Scheme that was launched in Autumn 2020, and I would like an announcement of the continuation of this scheme within the Chancellors update on Wednesday.
An update would give hope that success of the previous rounds can be built upon, whilst providing confidence of the continued investment of the decarbonisation market.
Incentivising landlords to invest in decarbonisation
The Minimum Energy Efficiency Standards (MEES) were introduced by the government to improve the quality and increase the energy efficiency of the worst performing privately rented houses and buildings.
The requirement has been increasing since its launch in 2018 and currently, buildings that do not have an EPC rating of E or above will not be able to be traded or leased and this rises to a C in 2027 and B in 2030.
This policy, however, mitigates the decarbonisation measures it’s trying to promote.
An exemption to meet the required standard is available through the so-called ‘7-year payback test’ where the energy improvement works need to pay for themselves by way of energy bill savings over a 7-year period.
Most decarbonisation measures that switch from the use of gas to electric, such as heat pumps will not meet this test due to the differential in cost between a unit of gas to electricity.
Therefore, we would like to see an extension to a 15-year payback test, which will incentivise landlords to invest in decarbonisation measures and provide market confidence that this government are serious about meeting their Net Zero Carbon commitments.
Phasing out of fossil fuel boilers
I would like to see a firm commitment from the government on the phasing out of fossil fuel boilers in the commercial sector.
This will give investors and supply chains greater visibility when the demand for heat pumps start to properly ramp up.
Ensuring the grid can accommodate increased demand
There are also major concerns about the capacity of the grid to accommodate the huge increase in demand as more and more people are switching to EV’s, and more buildings start to be heated with heat pumps.
Significant investment will be required to ensure the system can accommodate increased electricity demand to enable heat pumps to connect to the network.
This is already a cause for major delays and cost uncertainty on a number of our decarbonisation programmes.
