Government incentives for pumps and solar panels look like token gestures when the real focus should be on making existing homes more energy efficient

Alan Fogarty, Sustainability Partner at Cundall

Existing buildings are the biggest challenge we face when it comes to decarbonising the built environment. With approximately 25 million households in the UK at present, we must retrofit 75,000 homes a month to meet the government’s ambitious 2050 net zero target.

In the discussion about how we achieve this, heat pumps are often talked about as a silver bullet solution that will solve all our problems. However, with the constant evolution of technology and energy prices on the rise, is this really the solution we should be laying all our hopes on? Or should we be focusing our efforts on upgrading building envelopes instead?

On 23 March, the government’s Spring Statement announced that it would remove 5% VAT from solar panels, heat pumps and insulation. The move is clearly meant to incentivise homeowners and landlords to take responsibility for lower admissions.

While heat pumps can be very effective in the right conditions, they don’t suit every situation

While I don’t disagree that we all should take ownership, it seemed like an empty gesture that moved responsibility away from the government and on to consumers. As many of my industry colleagues have been quick to point out, it’s far too small a gesture for a commitment that can only be achieved through significant government investment.

The government also published its energy security strategy on 7 April which did not address demand reduction as a means of reducing our need for energy. This was the waste of an ideal opportunity to reduce long term energy costs while investing in the UK economy.

Right now, there is huge concern over rising energy costs and our ability to reach net zero. Pressure is mounting to keep the global temperature rise to below 1.5 degrees and the 2050 net zero targets are creeping ever closer. While it’s tempting to consider heat pumps as the solution, the government and the public need to understand that while they can be very effective in the right conditions, they don’t suit every situation.

Heat pumps are the right answer when talking about decarbonisation of the grid and new builds, but for existing buildings, you need to first improve the facades. For a well-insulated new building which requires very modest amounts of heat, heat pumps can be very effective. This is less true for existing buildings, which make up 90% of our building stock.

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Existing buildings with gas boilers have much greater heat losses and need the higher water temperatures delivered by gas boilers to effectively heat the home. Directly replacing the gas boiler with a heat pump would require, at a minimum, the replacement of existing radiators with larger ones to suit the lower water temperature. This is because lower water temperature has less concentration of heat and therefore needs a bigger surface area to provide the same amount of heat. At this point, we really need to consider the cost story associated with heat pump installation, including the cost of new radiators, pipework and redecorating.

Essentially, when it comes to heating costs, it’s not just the cost of energy that needs to be considered. Installing a heat pump would cost around £7,000 more than the cost of replacing a gas boiler. A heat pump also runs on electricity which is currently five times the cost of gas, and although it is more efficient than a gas boiler, your energy costs will still double. This is not an affordable solution for most households, and even for those who can afford it, what is the incentive?

To mitigate the cost increase, extensive upgrades to the building envelope - costing tens of thousands of pounds - are required. These include improving insulation and reducing air leakage and, for older buildings, it’s unlikely that the costs could be reduced to the same level as would have been experienced had a gas boiler been fitted.

The government’s current focus on subsidies for heat pump installation puts the responsibility and much of the cost on the end user. However, heat pumps cost more to buy and to run than a gas boiler, so a well-insulated airtight building envelope is essential to limiting the rise in energy bills. Unless subsidies are provided to help homeowners reduce heat loss through the building facade, there is little incentive to install expensive heat pumps.

Significantly more incentive will be required to breach this gap, and we need a realistic and well-researched solution to tackle this problem. It will be interesting to see whether the government manages to find the funding to upgrade their own buildings.

Alan Fogarty is sustainability partner at Cundall