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Inventive incentive

Introduction

Financial incentive

Quality installations

Stick and carrot

Introduction

Although there is an urgent need to decarbonise heat in order to achieve net zero emissions by 2050, the truth is that many homeowners cannot afford the upfront cost of upgrading to low-carbon heating solutions. Mark Wilkins, head of training and external affairs at Vaillant Group, explores how financial incentives along with a greater availability of qualified installers, could persuade more homeowners to adopt renewable heating solutions.

As part of efforts to cut carbon emissions, the Government has started to consult on changes to the energy standards required in part L of the Building Regulations. However, the consultation only covers new dwellings. The challenge of how existing homes should make the transition to low-carbon technology remains.

Although past government schemes have improved the fabric of houses and increased efficiency as a result, there needs to be new incentives designed to meet the evolving needs of UK homeowners. In its report, Net Zero: The UK’s contribution to stopping global warming, The Committee on Climate Change also highlighted the knowledge gap amongst engineers, specifiers and installers for low-carbon system solutions.

Financial incentive

Whilst the prospect of significantly cheaper energy bills offers an attractive incentive, not all households can afford the upfront cost to retrofit low carbon solutions. Although the Renewable Heat Incentive (RHI) scheme had been set up to encourage householders to take up renewable heat technologies, it is currently due to end in March 2021. Thereafter, no major government funding initiative – whether in the form of scrappage schemes, subsidised financing options or tax incentives – has been confirmed.

For homeowners who are concerned about the capital cost of a low-carbon heating system, funding which covers a significant percentage of the upfront cost of low carbon technology could make the difference between choosing another fossil-fuel based boiler or a renewable solution. To reach the 2050 targets, homeowners need operational-incentives, for example, to encourage efficient operation post-installation. Other measures such as tax breaks or stamp duty reduction, which are given according a property’s EPC rating, could be implemented.

When discussing the matter at a recent Vaillant forum, Howard Porter, CEO of the British Electrotechnical and Allied Manufacturers’ Association, even suggested a future scenario where heat could be provided as a service in a similar way to the mobile phone industry. A different operator in the market would bear the capital cost of the equipment required to generate heat sustainably, therefore take the financial risk away from households.

Quality installations

Whether or not attractive financial incentives are available to drive up demand for low-carbon heating solutions, there would still need to be enough qualified installers to carry out the work. There are currently around 135k gas safe registered installers who work in domestic gas boiler installations. In comparison, there are only just over 800 Microgeneration Certificate (MCS) registered installers.

But whilst we wait for long-term government policies to determine how the provision of heat in our homes should be decarbonised, the industry is faced with a stalemate situation; businesses are reluctant to spend the cost and time for training to break into new technologies without enough market demand, yet it is difficult to make the industry investable if there is a shortage of skilled engineers and installers. In the opinion of some contractors, upskilling is unnecessary until opportunities for this type of work increase. A contractor recently told us that he sees no point in training up large numbers of engineers because they don’t have the work to do. That’s why for him, there must be market demand first.

However, if 10 million heat pumps are needed by 2035 to stay on track and achieve net zero as highlighted in the Committee on Climate Change’s Net Zero - Technical Report, this stalemate will need to be broken. With installers being squeezed on price in their conventional markets, training and upskilling would enable them to get ahead of the game and capitalise on new market opportunities quickly.

Stick and carrot

Whilst regulations can push households to take action to decarbonise their heating sources, it needs to go hand-in-hand with financial support and competent professionals to carry out the installations. The combination of these factors would not only help consumers manage the cost of low-carbon solutions, but would also offer confidence in the reliability of these technologies. What’s more, driving demand for sustainable heating technologies in this way would give the industry encouragement for further investment. The journey towards a cleaner, greener world will not be easy, but putting in the right incentives would be a good start.