Decarbonisation of heat: How SLES can contribute

Abstract

Decarbonisation of heat is an immense challenge. Despite accounting for over a third of the UK’s carbon emissions, little progress has been made in decarbonising heat. This is particularly in the case of space and hot water heating for buildings, which account for 75% of those emissions. Stop-start policies and delays to key decisions have resulted in a thermally inefficient building stock and just 8% of heat coming from renewable sources. There remain deep uncertainties about the technology mix that will make up the heat system in 2050. A smart local energy systems (SLES) approach could facilitate a transition to a zero-carbon heat sector that is faster, fairer, and more cost effective than current trajectories. However, the current policy and regulatory landscape means that SLES struggle to deliver their potential environmental, societal, and energy system benefits. The societal impacts and interactions of heat make decarbonisation much more than a technical challenge. Transformation of the sector must be done in a fair and just way – changes made could have major implications for fuel poverty and public health. Under current policy, regulatory and market structures, exacerbation of societal inequalities is likely. However, the transition also provides the opportunity to build a fairer system, bringing tangible societal and economic benefits across the country. Our review identifies five cross-cutting barriers that will need to be addressed regardless of the zero-carbon heat technology mix that is ultimately adopted. Thus far, successive governments have taken a predominantly centralised and top-down approach to tackling these challenges. However, the supply, demand, and storage of heat has inherently local aspects. Changing the way we heat our buildings is likely to impact our daily lives, demanding new behaviours from consumers. It will also require millions of decision-makers to choose based on their own, often unique, circumstances. There are technical challenges on both the demand side - including coping with seasonal variation and changing consumer needs - and the supply side - including increasing integration of intermittent renewables. This means that we need to move to smarter, more flexible systems faster than achieved so far with decentralised electricity and smart meters. The key findings of the report are summarised below. We show how each of the cross-cutting barriers identified through the review can be addressed by a SLES approach. We take this further by analysing the UK Government’s Heat and Buildings Strategy and Scottish Government’s Heat in Buildings Strategy, both published in October 2021. We identify missed opportunities, outline what SLES needs to succeed and make specific policy recommendations.