How will Britain decarbonise heating?

A heat pump works like a refrigerator in reverse. It uses a refrigerant cycle to absorb heat from the outside air (or ground) and concentrate it for use inside the building. Even when outside air is at 0 degrees Celsius, there is still extractable heat energy. An air-source heat pump typically delivers a Coefficient of Performance (COP) of 3 to 4, meaning it produces 3-4 kWh of heat for every 1 kWh of electricity consumed. Ground-source heat pumps achieve higher COPs (4-5) because ground temperature is more stable, but they require boreholes or ground loops which add cost and disruption.

Denmark, Sweden, and Finland generate roughly 50 per cent of their heating from district heat networks, compared to about 2 per cent in the UK. The difference is historical and regulatory. Scandinavian countries invested in heat networks in the 1970s after the oil crisis, often driven by municipal utilities. The UK relied on cheap North Sea gas instead. Scandinavian heat networks also benefit from high-quality waste heat from combined heat and power plants, waste incineration, and industrial processes. The UK is now trying to build this infrastructure retrospectively, which is harder and more expensive than building it alongside new developments.

The current EPC methodology is based on estimated energy costs, not actual carbon emissions or energy consumption. A home heated by cheap gas can get a better EPC rating than an identical home with an expensive heat pump, which makes no sense from a decarbonisation perspective. The government has acknowledged this and plans to reform the EPC methodology, but the timeline is unclear. Until the metric is fixed, the target is flawed.

Roughly 8 million homes in England were built before 1919 with solid walls (no cavity). These cannot have cavity wall insulation and instead require either external wall insulation (EWI) or internal wall insulation (IWI). EWI costs 10,000-25,000 pounds per home, changes the external appearance, and requires scaffolding. IWI is cheaper but reduces room size and is highly disruptive. Without insulation, heat pumps must work harder, reducing efficiency and increasing running costs.

The ratio of electricity price to gas price is roughly 4:1 in the UK (24p vs 6p per kWh). A heat pump with a COP of 3 effectively delivers heat at about 8p per kWh, compared to roughly 6.7p from a 90 per cent efficient gas boiler. The saving is marginal. In a poorly insulated home where the heat pump achieves a COP of only 2.5, it costs more to run than gas. Until the price ratio narrows, either through shifting policy costs off electricity or through a carbon levy on gas, the economic incentive to switch is weak.

The Energy Act 2023 gives local authorities the power to designate heat network zones, areas where heat networks are the most cost-effective way to decarbonise heating. Within a zone, new buildings may be required to connect to the heat network. Zoning is common in Denmark and the Netherlands and is considered essential for giving heat network developers the demand certainty they need to invest. The first pilot zones are expected from 2025.