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The third episode of our six-part podcast series Net Zero Nudge explores the choices that will need to be made to meet the challenge of finding low-carbon ways of heating housing.
Frances Warburton, Partner, Economic Advisory, Ernst & Young LLP, is joined by Matt Hindle, Head of Net Zero, Wales & West Utilities, Clem Cowton, Director of External Affairs and Ed Reed, Editor at Energy Voice, for an insightful discussion around the following questions:
How will the UK achieve the objective of making all heating appliances in homes and workplaces low carbon by 2050?
What are the competing technologies for decarbonised heating, and which ones are making the most progress?
What key decisions need to be made by the government and others to support heat decarbonisation?
Key takeaways:
Understanding which technologies are winning the race for domestic heating solutions.
The potential impact that decarbonised heating solutions will have on UK consumers.
The need for collaboration across the industry to drive change.
Podcast transcript: How UK housing can contribute to the 2050 net zero target
42 min approx | 9 February 2023
Ed Reed
Hello and welcome to this episode of Net Zero Nudge, a podcast boxset series by Energy Voice in association with EY. I’m Ed Reed, an editor at Energy Voice. Over the course of this series, we’re taking a look at various different aspects of how the UK is working to achieve its net zero goals and today we’re going to be looking at insulation and building efficiency. I’m grateful that we’re joined today by Frances Warburton, partner, EY, Clem Cowton, Director of External Affairs at Octopus Energy, and Matt Hindle, Head of Net Zero and Sustainability at Wales & West Utilities.
It feels like a particularly timely point at which to have the discussion given the ways in which we’ve seen gas prices rise this year with Ofgem recently bumping up the price cap and really no signs of better things ahead in 2023. The current gas price crunch has been driven largely by the Russian invasion of Ukraine and a clear risk premium oversupply into Europe. That said, gas prices were already on their way up last year. The point when Liquefied Natural Gas (LNG) was an economical fuel seems long distant now.
Given this price challenge and the country’s legal commitments to get to net zero in 2050, this may be an opportunity to take more of a step towards reducing domestic demand and shifting to lower-carbon options. The country does seem to be more and more in favour of renewable energy opportunities despite some of the political rhetoric of recent weeks.
I think there are clearly technological options that we can bring to bear to shift our demand to alternatives, but I think it’s also worth pointing out the decidedly unsexy option of insulation. While putting solar panels on the roof or a heat pump in the shed are a more exciting choice and certainly appealing to my inner energy geek, most houses in the UK would benefit the most, and possibly at the lowest price, from letting less cold in and less warm out.
But, Frances, I’m going to start with you. Is there a single answer when considering a best choice for future heating?
Frances
Warburton I think it’s a bit too early to say yet whether we could achieve all of that with a single technology choice. I think if you put aside heat networks for a minute and you look at heat pumps and hydrogen, I think both have got promising starts. Obviously heat pumps are being rolled out now at scale, but I think it’s too early to say whether we could rely on one or the other of those other than heat networks.
The reason for that is, some of the work that’s been done to date suggests that although you can get hybrid heat pumps as well as pure heat pumps into most homes, some of the space considerations, some of the consumer acceptability challenges … There’s still an awful lot to do to overcome those. If we genuinely want consumer choice to sit at the heart of this, I think we need to continue pursuing all options for now. At some point, we’ll have to come up with a firm approach on how choices will be made at either a system level or consumer level, but I don't think we’re yet ready to select a single solution to home heating.
Reed
Clem, you’re in the heat pump business. What are your thoughts? Is that a clear best choice?
Clem Cowton
We are in the heat pump business, but before that we were in the energy retail business. That’s an important point to state because what Octopus has done historically is prove our capability of dramatically, drastically driving down prices of technology and bringing them to a wider consumer audience. So, our cost to serve of Octopus Energy is less than a quarter of that of our closest rival.
What that means is that through technology we have completely shattered expectations of what was possible in terms of the cost of a technology in the energy supply, the energy retail business. It may not sound like that’s hugely relevant to the more physical technology of heat pumps. What it does mean is that we know how to go back to first principles, take everything apart, put it back together, and end up with a result that is not only cheaper for customers but overwhelmingly popular.
Leading on from that, we have to understand that the costs and the technology options that are on the table today have been provided by a small-scale industry that has not historically been customer-focussed. It has been built around a subsidy scheme that was designed to get a very small number of installations of heat pump technology to a very niche demographic of people and a very niche building type. What we are doing is rapidly scaling up to the mass-market heat pump technology by dramatically reducing the cost of both the technology itself, both the hardware and of the installation process, and making it intuitive and easy for customers to make that shift today.
Now, when you’re asking the question about, what are the options on the table, I think it’s worth noting that Energy Systems Catapult has, on behalf of the government, released a report saying that there are no buildings in Britain that are not suitable for a heat pump. That said, it may be that some of the electrification technology options for some types of buildings come a little bit later than right now.
But what we can say is, for the vast majority of homes, the technology that we have at our fingertips today is suitable for the vast majority of homes in Britain and that we can do about 40% of those homes without any real upgrades in terms of insulation or radiator size and very tiny modifications need to be made, very low cost, and that in doing so, we can today install a heat pump for the vast majority of homes at roughly the same cost as a new gas boiler. That’s with the boiler upgrade scheme grant from the government, but within a few years, as we scale, we’re going to be able to do that without the grant.
Reed
Matt, bringing you in for this discussion of best choices, what are your thoughts? I suppose also, when we talk about best choice, what do you think we mean? I think we talk about price. Is it the avoidance of emissions? Is it security of supply?
Matt Hindle
It’s all of the three and it’s many more considerations above. What we are going to need as we decarbonise heat is think about what’s going to work for consumers, what’s going to work for individual homes. How do we do that in a way that doesn’t just allow those most able to pay for new technology to benefit from new technology?
But we also need to be thinking about the sort of energy system that we want in the future as well. About 40% of energy demand in the UK is currently met through gas. To meet net zero, we need to change that. We need to change what’s met through oil as well and that means designing an energy system which can do that and which can meet security of supply, be as reliable as consumers, whether that’s domestic, industrial, or transport expected to be. We think that means a multivector solution. We think it means electricity. We think it means biomethane. We think it means a big role for hydrogen to provide that resilience and to provide that consumer optionality.
When it comes down to the technology choice on heat, really we need to pull every lever that we have going. Over 28 million homes are going to need change of some form, virtually every home in the country. We’ve got 28 years to meet our 2050 target. So why wouldn’t we be pulling every lever trying to get all of these technologies installed now? Really ramping up heat pumps, really progressing the trials and deployments of hydrogen, getting hydrogen-ready boilers into homes, supporting hybrid solutions to make a difference in a range of homes now, and also developing heat networks, too.
Cowton
I think it’s worth noting actually that while it’s understandable that those who have an incumbent interest in maintaining an asset base that is gas-based and I know that EY’s clients are very interested in potential of hydrogen as well, there is going to be no role for hydrogen in heating because the physics of the situation simply demand that it won’t happen. It’s inconceivable that we would voluntarily decide to spend resources burning a fuel that is six times less efficient in order to heat our homes.
It’s a fuel that, by the way, is a very long way off being available at scale, at least 10 years, if not longer, when we have the solutions today that are always going to be cheaper. No matter how cleverly you try to attempt the counting, on a levelised basis, if you have a level playing field, a heat pump is a dramatically cheaper way and more energy-efficient way of heating a home compared with a hydrogen boiler.
In fact, it’s more efficient to heat a home with hydrogen via electricity, i.e., burn the hydrogen in a power station and then transmit that electricity to the home and use that electricity to power a heat pump, than it is to burn hydrogen directly inside the home. That’s before you even start getting into the safety elements of that and the concerns about burning such a highly explosive gas within the home.
Hindle
Undoubtedly, we’re all coming from our organisations’ perspectives as we sit around the table in this podcast and looking to what we think the future might be from that perspective. In terms of scale, we’ll have 300 homes in our partners in the Scottish Gas Network on hydrogen next year. We’ll have 2,000 homes on dedicated hydrogen by 2025. As networks, we’ll also be supporting hydrogen blending into the existing gas grid over the next couple of years as well. But I think the point on the system wide is to not just take a narrow look at efficiency but think about storability, think about what we’re going to need in terms of seasonality.
That’s where hydrogen for heat plays a particularly big role on the system level but also of course on a consumer journey. The prospect of hydrogen-ready boilers, meaning virtually zero change for the consumer in terms of the way they use their heat, in terms of the system they have in the home, and divorcing the transition so that while we should still be doing energy efficiency and absolutely prioritising that at the moment, we don’t have it as a dependency in the way that much of existing housing stock would now.
Warburton This is really a fascinating debate. Just to be clear, we work across the whole gamut of solutions, so we don’t have an organisational preference for any of these solutions. I would say a couple of things. First of all, I completely agree on the cost side. Currently the evidence to date does suggest that the cost effectiveness of a very high electrification of heat scenario looks promising. So I think the trajectory that Clem has mapped out does look very encouraging and the costs coming down and the building of the supply chain. So I think if we’re focusing on the cost element, I think that looks pretty strong on the electrification side.
I guess it comes back to why and how consumers will choose their future heating solutions. Absolutely, cost will arguably be probably the most important factor, so that’s hugely important. However, there is a couple of other things and I think there are some parallels here with the smart meter rollout. I’m sure we can all remember back in 2015 or so. We were all hoping for 100% smart meter rollout by 2020. We’re now going to be lucky to get 80% by 2025.
But I think the issue is, as you move away from price and cost effectiveness, I think it is thinking about how it’s going to impact consumers in their own homes. So from a personal perspective, I got a heat pump last year and I think one of the reasons I got one was, I was really interested in the fact that heat pumps in future can become a lot more flexible, the same ways we’re expecting electric vehicles in future for a lot of people to use them in a flexible way, charge them with the system has got excess power, and perhaps recharge them back onto the system when we’re low on power.
So, the bundling together of a heat pump with flexibility is one of the things we’re really hoping to do to drive a more efficient and smart system. So, I wanted to go ahead, get the heat pump, and see whether or not the technology was as good as some people were saying it was. I would say on the positive side, operating really well, highly effective in terms of heat production, kit and technology seems to be working very well.
I think the big thing that struck me was the size of the actual equipment itself. So I was prepared for the outside unit of course, how big that was going to be, but there’s also an awful lot of kit you need in your home to run the heat pump, the heat exchanger, the pressure valves, etc. So from my perspective, I did have some places that could be tucked away, but a number of people who have come to see it have commented on, they just wouldn’t have the space. So I think one of the big challenges going forward on heat pump innovation is, how do we tackle making the mechanics of the system much more efficient and less intrusive inside people’s homes? So I think there’s still an awful lot of work to do on that front.
But, yes, overall I think for maybe 70% or 80% of consumers it’s probably going to be a really good technology. The key question is, is that last 20% or 30% ... Are we going to get enough innovation to get heat pumps working in every single home? The work that Energy Systems Catapult has done to date suggests it can work if a significant proportion get a hybrid heat pump. So that’s not a 100% heat pump. It’s a heat pump working alongside a traditional gas boiler. So still a number of big questions to answer on the heat pump front.
Cowton
I always find it quite entertaining when organisations who don’t serve consumers and don’t speak to households every day talk about the consumer journey. I think it’s fair to say that Octopus has revolutionised the consumer journey across multiple vectors and multiple technologies already and that we are already doing so with heat pumps.
So I’m sorry, Frances, perhaps that your early heat pump experience was reflective of the old world rather than the new world. That’s exactly the challenge that we’re in the market to solve, but we are now taking that process… A bit like a Formula 1 pit stop, we are taking that process apart, putting it back together again in a way that is going to be vastly more convenient and indeed reflective essentially of the kind of combi-boiler installation process that you see today.
I think it’s also really interesting hearing industry experts talking about consumer journey in terms of what customers are going to want, what customers are used to using and enjoy using. I think it was attitudes like that, I believe, that meant that when Nokia first considered creating a touchscreen phone, they did a bunch of research and determined that actually customers preferred buttons and shelved plans to launch a smartphone. Then a few years later, Apple came along, launched the iPhone.
Experts, in air quotes, at the time all thought that was hilarious. Why on earth would you want a £1,000 piece of kit in your pocket when all you really needed was to make phone calls and send text messages and you had a perfectly good camera at home and a perfectly good modem with a dial-up Internet connection? What we’ve seen actually is that that technology has become not only ubiquitous across all demographics, including some people who are often touted as an excuse not to roll out technology, for example, the elderly, but it has also become cheap. Through scale, costs have come down. So, we now have £40 Androids. We have smartphone technology ubiquitous across the world.
We also have it disrupting industries that otherwise might not have been expected, for example, the global taxi trade, which has been totally disrupted by digital technologies like Uber. All of that happened organically as a result of consumer-driven, consumer-focused businesses. I think that if, for example, Ofgem had been in charge of consumer interests in the smartphone world, we’d have still been sitting here talking about whether people would really be prepared to pay £1,000 for an iPhone when they had a perfectly good dial-up modem in their homes.
I think we need to remember that we can take the same approach with heat pumps and, for example, the same experience that we’ve seen with electric vehicles. It was not very long ago where everyone was telling everyone else with absolute certainty that electric vehicles were all very well and good, but they couldn’t drive very long distances. People just weren’t used to it, weren’t used to the experience, and would never really get used to it, and so we should just stick with hybrid vehicles. We’re at a point now where the market share of hybrid vehicles is absolutely plummeting because people absolutely love electric vehicles.
It’s the same with heat pumps. When people get a heat pump, they absolutely love it because it gives you a better experience. You’re heating your home lower and slower, which means that it feels warm and snug all the time rather than the too hot, too cold, burn your fingertips on the radiator, have drafty spaces in your house that you have with a gas boiler. I think that’s what we’re expecting to roll out for customers and make sure that that consumer experience is absolutely top.
Reed
Sure. I think this is probably a good point to pause. I think we’ve had a lot of discussion about heat pumps. We’ll have a quick pause and then we’ll be back after this short message.
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Reed
Fantastic. So obviously we’re going into winter now and the mind is turning to those December and January evenings, but I think it’s not too long enough since we had a 40-degree heat. I managed to survive by tinfoiling my windows, much to my wife and my neighbour’s disgust. But I wonder, is this a sign of things to come? Are there steps that we could take? Do I have to buy more tinfoil? Frances, what are your thoughts?
Warburton Yes. Really good question, especially if we’re trying to future-proof buildings into the 2050s and beyond, where temperatures are certainly going to be rising further. I think there’s three things here. First of all, energy efficiency helps. So energy efficiency helps to keep heat in in the winter and also keep homes cooler in the summer. So all the activity we’re going to do to make homes more energy-efficient to facilitate decarbonising heating will help produce the demand for air conditioning.
Having said that, there will certainly be homes that will still want to have air conditioning or acquire air conditioning in the future. Broadly, there’s two options. You treat cooling separately, and that’s what we’ve seen largely happening in the UK to date where people are buying standalone air conditioning units either for individual rooms or individual floors and they’re adding them onto the fabric of the home.
The other alternative is to have a combined heating and cooling system and the technology that comes to mind here is air-to-air heat pumps. So currently we have air-to-water heat pumps and some ground source, but we’re largely extracting heat from the air, converting that into hot water for the home. If you go air-to-air, you’re extracting heat or cooling from the air and transmitting that into cool or warm air within the home.
The key question then becomes, how do you get that warm or cold air around the home? If you want an even heating or cooling experience, you need vents in every rooms or in most of the rooms. That becomes more difficult on a retrofit basis. However, for flats or new build where you can install the ducting required to move the hot and cold water around the house, it’s an easier solution. So I’m certainly expecting to see more interest in air-to-air technologies going forward, particularly in those market segments, but it’d be great to hear what Clem and Matt also think on that topic.
Reed
Matt, let’s get your thoughts.
Hindle
Well, as Frances has said, as the climate changes, as our summers get hotter, you’ll expect this to become a bigger topic. Just like with the heating question, Frances’s answer shows how it’s a lot easier if you’re able to design things from scratch, if you have new build, if you’re able to design these systems in. A lot of the challenges around retrofit demonstrates how we need to be thinking very holistically about the building fabric that we have, the energy system that we have, the options for individual homes. But undoubtedly it’s going to be a bigger challenge as climate changes and our summers get hotter or we get more extremes of heat in summer.
Reed
Clem, it sounds like I should buy tinfoil at least for the near future, but any insights you can share?
Clowton
Not only tinfoil but actual reflective insulation I put on the windows of my house over the heatwave.
Reed
Excellent.
Clowton
I live in London and it was quite something. Yes. Insulation will help with that to an extent. There’s also some mitigation that can be done that’s specific to cooling that has less of an impact on heating. So, for example, the biggest problem are in cities where you create these urban heat islands because of the extent of absorbent surfaces like concrete which pull in heat during the day and pump it out again in the evening.
So, the answers to that are not necessarily just about thinking about the home. They are things like planting trees, having sustainable drainage systems in place so that you’ve got fewer tarmacked areas. They are things like putting external shutters on buildings and also, really crucially, having fewer vehicles in cities. So not just thinking about shifting over to electric vehicles but also thinking about shifting to micro-mobility and more walking and cycling so that we don’t have quite so many vehicles pumping out heat on the roads and in our towns and cities.
But that said, some of our customers did post photos of themselves sunbathing next to their heat pump during the heatwave because of course a heat pump kicks out cold air while it’s heating your water. There was a certain amount of innovation competition, some DIY, about trying to duct that back up into people’s windows so that they could have a kind of rigged air conditioning system.
On the whole I agree because we have largely wet heating systems in the UK. Obviously in smaller buildings, for example, flats or very small cottages or in new builds, air-to-air makes an enormous amount of sense because of that extra cooling ability in terms of the existing housing stock. It’s almost laughably easy to switch over a boiler to a heat pump today because they are so compatible. So there’s no need to add layers of complexity unnecessarily.
Reed
Sure. So I think talking about this rollout to a new generation of heating, which I think is really the name of the game… Obviously we can have different opinions about whether that’s any of those three options that Frances set out at the beginning, but it seems like there’s a need for collaboration, but at the same time, obviously with companies competing against each other, this seems to go against much of the nature of how companies work.
So, Matt, I’m interested in getting your thoughts. How can we drive change at the speed that we need to? Obviously there’s a question about whether the right choices are available, but driving that speed of change through collaboration, through companies that may not be naturally willing to cooperate …
Hindle
If it’s not too banal an answer, we’re going to need both collaboration and competition, collaboration to deliver the scale of projects, the pace of projects that’s required, and competition to bring down prices, to develop novel technology, do things we probably can’t even imagine with home energy, heating, and services at the moment.
But to give an example of how that’s working now, how we’re seeing collaboration in action, we’re working with Northern Gas Networks on the delivery of the Redcar Hydrogen Community, which is proposing to take about 2,000 customers in Redcar onto hydrogen or indeed onto an electrified solution by 2025. That’s a collaboration between the hydrogen producers, the gas network, and also energy suppliers in order to support customers through that journey, develop the end-to-end system to produce or supply the hydrogen into homes, support the customers transitioning their own system.
So that’s a real project that’s happening now. We’ve got teams on the ground engaging with the customers in that area to bring them on that journey, understand what their preference is, what their needs will be. Yes, it’s about proving a sort of technology solution and demonstrating that end-to-end hydrogen system, but it’s also very much about the customer, the customer engagement, and what they will want from their system. That’s where that collaboration is particularly important as we help people understand more about the energy they use, their heating, the options that they’re going to have in the future.
Reed
Frances, obviously the companies are, by their very nature, competing with each other, but I suppose at the same time we need a degree of collaboration. How can we get these two seemingly irreconcilable problems to work out? Is it a question of government-enforced cooperation?
Warburton Yes. I think that’s a really good question and probably almost one of the biggest challenges we’re facing right now, is that I think the competition side is working really well. So I think everybody is … Whether it’s heat networks, heat pumps, hydrogen, biogas, I think all of those technologies are being pushed forward with a high degree of enthusiasm and commitment. So the competition side, I think, is working really well.
I don't think there has been as much collaboration. There has been some, some projects where you’ve brought different technologies together, but I think the two areas where collaboration is needed is around customer engagement and the customer experience and the question of customer choice in these technologies and, secondly, the hybrid technologies. Are there some more opportunities to develop hybrid technology so that it’s not all one or the other?
Now, the question is, how do you actually get that collaboration? I think Ofgem has been working hard to try and put obligations on particularly network companies to collaborate better, but I think as the old saying goes, you can lead a horse to water, but you can’t make it drink. So I think hopefully what we’ll start to see is a genuine recognition that the best outcomes for getting to 100% decarbonised heat is going to require a degree of collaboration and we need to see more of those interests start to align to deliver that.
Reed
Clem, you’ve voiced some, shall we say, concerns about Ofgem earlier. What do you think Ofgem can do to help drive this new way of working, I suppose?
Clowton
I’d say the energy system, as a whole, has been enormously collaborative over the last few decades and look where it has got us. Collaboration always sounds like an apple pie concept until you really dig into it and, firstly, where it sits, but also who pays for it. When we talk about projects, they are generally funded through customer bills and they can be astonishingly expensive. They often collaborate endlessly on the same thing.
So we get, for example, different distribution network operators endlessly testing out consumer propositions when they are not in fact consumer businesses and don’t know how to then take those propositions to market. We also get opportunity costs from businesses who might want to launch product in that space and find that they’re swamped out by government programmes or innovation budgets. So I think we just need to be really careful about where it sits.
I think the bias should always be, can we create an environment in which private capital can compete to bring a solution to market? There are some places, particularly in such a regulated sector, where that is simply not possible. That’s particularly in the networks where competition is more or less non-existent. At that stage, it is of course incredibly important that, for example, regional monopolies are collaborating in the sense that they are making the data that they have open and available to the private companies that want to then compete with it. But that’s an exceptional circumstance.
It’s also of course really important that companies collaborate with government to determine the best way forward for policy and that that doesn’t get in the way of competition but it actually enhances the competitive landscape by helping government to understand what the incentives should be and where they best sit. I think in general you get the best outcomes for customers by having companies competing like crazy to win market share and build the best products and get the best services out.
Here’s a good example. A journalist yesterday on Twitter was complaining about the fact that they’ve been trying to talk to HMRC for six years endlessly having 900 pounds removed and put back and removed and put back that they supposedly owe and then don’t owe. They’ve spent hours of their life. They can’t get through on the phone.
Actually, what that describes is the collaborative approach that you might see if we, for example, had a more monopolistic energy environment. You end up with incredibly sludgy bureaucratic processes that do not in fact benefit the consumers. Now, there are places where that’s necessary, for example, HMRC, where it would not be appropriate to have that competitive environment, but anywhere it’s possible for that to sit, for example, in energy, for example, in heat, we need to be harnessing the consumerisation and competition to get those products out as fast as possible.
Reed
Just as a final question, I think clearly we’re looking at a point where Ofgem has just put price caps up. We’re looking at higher prices ahead in winter. I think we talk about 2050 sometimes and decarbonisation and some of those challenges and obviously there is a very current real problem that a lot of people are facing. We’ve talked about that consumer challenge earlier.
So just in terms of that near-term challenge, Clem, I’m going to start with you. What should government be doing? What should companies be doing? What can we do to tackle this near-term challenge?
Clowton
In the very near term, we need to be having conversations about direct support on bills. That’s the most important priority of the day. There is no solution, no structural solution, that can fix energy prices this winter. It is simply going to be a case of government support and it’s going to be a case of universal government support.
Reed
So in terms of when you think, I suppose, some of these technologies we’ve been talking about might start to make a difference on bills, is it 2023? Obviously the gas market is still looking pretty tight for 2023 as far as I can see. Are things going to start looking better next year? Obviously I’m asking you to make a prediction, which I think people in general try and steer away from. But have you got any thoughts about when this net zero, this decarbonisation drive may start to pay off?
Clowton
It already is to an extent. We are already seeing… Prices today are not as high as they would have been due to the payback of renewable energy technology. Now, there is further structural change needed to make sure that prices aren’t always set by the cost of gas, which is … In reality, while we shouldn’t see the same kind of crisis levels of pricing that we’re seeing today, it’s always fundamentally going to be an expensive commodity and indeed was before this particular crisis.
The dividends we’re also seeing today is that today it is cheaper to run a heat pump in general versus a gas boiler. So if you install a heat pump in your home today, you are likely to be paying lower heating bills compared with your gas boiler. That is likely to continue in particular as government is looking to rebalance some of the taxes and policy costs that are put onto electricity bills and move them either into taxation or locate them more appropriately onto gas bills. So we have the opportunity to drive technologies that are fundamentally more efficient through price signals and through government policy in order to start alleviating that gas dependency which is of course driving the gas crisis.
Now, there are ways that we make that faster. I mentioned decoupling the price of gas generation from renewable generation in the electricity market. That will help to insulate us from some of those costs. But there are thing that are already happening today. Insulation, I think you’ve raised previously, is an important point of that for perhaps next winter, but it’s important to also understand that insulation generally reduces energy cost for a household by about 20%.
So it’s not life-changing. Every little helps, but there are smaller measures that can have big impacts. For example, making sure that you’re closing your curtains at night, making sure you have curtains in the first place that are much lower-cost and can be effective very quickly, and also in the longer term making sure you are not effectively burning 10 pound notes by having a gas boiler or, even worse, a hydrogen boiler in future will help to insulate you against those costs as we go forward.
Reed
Matt, what are your thoughts on the near-term future? What do you think we’re looking at?
Hindle
We’re looking at a really hard winter and there’s no getting away from that. It’s going to affect every individual in the country. It’s going to affect businesses and we are going to need a scale of response to that that is probably unprecedented. Just looking at one of the areas we serve, Bristol City Council have announced they’re creating 26 warm banks this winter, so warm places that people can go to if they’re in need. That scale of impact of energy cost is just something that most of us can’t remember and relate to in our lifetimes, so we can’t underestimate the scale of that near-term.
So we’re going to have to find big-scale solutions to that to get people through, but we also of course can’t take our eyes off the long term in doing that as well. Delivering the transition, as we’ve said throughout this podcast, whatever your view on the technology mix, means moving quickly because we’ve got 28 million homes in 28 years to reach 2050. We’ve got to pull every lever to do that. Technology is going to evolve. We can’t always predict exactly how it’s going to evolve, so we’re going to need to create some space to make mistakes and that’s not always comfortable in a regulatory space when we’re thinking about the consumer protections that need to be in place.
But fundamentally, I think we need a diverse energy system. We need a range of net-zero solutions. That’s going to include hydrogen. It’s going to include heat pumps. It’s going to include heat networks. The only question is, what proportions of each? That will only play out as we deliver, so we need to get on and start delivering.
Reed
Frances, what steps do you think we should take? Is there something that government should particularly be focusing on?
Warburton
Yes. So I think the near-term crisis that we’re facing now, particularly with bills rocketing up and affordability, etc.… I think it pushes in two directions. On one hand it’s creating a huge incentive for energy efficiency measures, whether it be temporary ones or changing building fabric more permanently. It’s important to remember that all of the heat decarbonisation technologies need energy efficiency to make them more economical. So whether you’re putting in a heat pump or a heat network or planning a hydrogen network, all of those will be lower-cost if homes are more energy-efficient.
So some of the short-term reactions we’re seeing… And hopefully we’ll see this taken forward in government announcements to come. The drive we’re going to see with the high cost of heat and power will hopefully bring about some of that facilitating energy efficiency which we need anyhow, but I think pushing in the other direction that obviously affordability is going to make consumers’ decisions to invest now in decarbonising their homes harder. So unless we start to see more offers coming through in terms of green mortgages from mortgage providers to actually help consumers with the affordability challenge in the short term of going further than just energy efficiency and taking action now, I think it’s going to be a challenging period.
Reed
Right. Well, that seems like a good point to end on, I think. Clearly there is a near-term driver and there are these longer-term goals, aren’t there? I know it would be great to see these two mesh and it does seem like there’s an opportunity for that and I think it’s clearly concentrating some thinking in government. So let’s hope that that bears fruit. So thank you so much, Frances, Clem, and Matt.
To our audience, please let us know what you think to some of the ideas we’ve raised. You can email us at outloud@energyvoice.com. If you’d like to be part of the conversation and share your story with the energy industry, you can email outloud@energyvoice.com, too. You may already know that every week the Energy Voice team get together to highlight important stories from the world of energy in our regular podcast episodes. So if you’re not already, please do follow Energy Voice Out Loud in Apple Podcasts, Spotify, or wherever you get your podcasts to get this free essential briefing every Friday.
This is the third of the six-part Net Zero Nudge. Next up, we’re going to be talking about electric vehicles, so please keep an ear out for that. For today, I’ve been Ed Reed. Thank you for listening.
Voice over
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External presenters:
Matt Hindle, Head of Net Zero at Wales & West Utilities Ed Reed - Editor at Energy Voice
Clem Cowton, Director of External Affairs at Octopus Energy
