When it comes to housing provision, social landlords have some tough decisions to make; how to transition their housing stock so it is fit for a net-zero world, while continuing to deliver social value for their tenants.
For heating homes, the aim is to make heating low carbon, and affordable, without compromising comfort. The challenge, however, is how to achieve low carbon heating without incurring costs that could inadvertently tip tenants into fuel poverty.
The introduction of the Future Homes Standard in 2025 mandates the use of low carbon heating for all new-build homes in England. Similar rules are also proposed for Scottish and Welsh homes by their respective governments. However, there are over four million existing social homes in the UK that also need to move away from fossil fuels if we are to achieve our net-zero ambitions. How we electrify the UK’s domestic heating is one of the country’s most challenging problems.
All-electric heat pumps offer a low-carbon technology solution to replace traditional boilers, but the cost to retrofit the UK’s four million social homes is estimated to be almost £35bn. With most homes expected to undergo two or three boiler replacements before 2050, the UK needs a transition plan that avoids leaving registered social landlords (RSLs) with stranded heating assets and guards against saddling them with unaffordable capital costs.
Today, capital costs for low carbon heat technologies are subsidised through a government scheme called the renewable heat incentive (RHI). This scheme, however, will end in March 2021 and, as yet, the Government has not announced if – or how – it will replace the subsidy. Savvy landlords are looking to make changes to their heating systems while incentives are still available.
The increasing value of flexibility
Electrifying our domestic heating and transport systems will increase overall electricity demand. BEIS forecasts that we will require 80GW of new capacity by 2035, a substantial increase from the current capacity of around 100GW.
New capacity is increasingly met by renewables in the energy mix. This is good as renewables are low carbon, but they are also inherently variable; the availability of power is dictated by how much sun and wind there is, and other environmental conditions that do not necessarily match variations in demand. This makes balancing supply and demand more challenging. In order to balance the network, therefore, grid operators are looking to improve their control of demand rather than supply.
This requires a more flexibile electricity system.
Energy storage and demand management (such as demand side response – DSR) are important contributors to flexibility, which is why Britain’s electricity system operator, National Grid, currently offers financial incentives to businesses who actively manage their demand.
National Grid uses a number of instruments, such as the Capacity Market and Balancing Mechanism, in order to dynamically adjust supply and demand so that the country has a stable grid. Traditionally, these instruments were designed with large generators and businesses in mind – not residential consumers. With the introduction of new consumer technologies like smart heating systems and electric cars, however, there is growing interest in the role UK homes can have on balancing our electricity networks. To truly access the flexibility in our homes, policy and incentives need to change to reward contributions from domestic technology in helping to balance the grid.
A pathway to decarbonisation
A hybrid heating system operates an electric heat pump alongside the existing gas or oil boiler. It uses smart controls to switch between the gas and electric supply. This reduces demands on the electricity grid at peak times and turns homes into ‘peaking plant’ able to reduce the amount of electricity in use when the grid is under stress.
This offers significant benefits to grid operators and also offers potential savings to tenants as electricity usage is switched away from periods of peak tariffs without compromising comfort levels in the home.
In turn, RSLs benefit as it offers an effective pathway to decarbonising heat across their property portfolio. With the right policies in place, however, and the opportunity to deploy this approach at scale, RSLs also have the potential to benefit from future payments inherent in residential demand response i.e. the ability to dynamically switch heating between electicity and gas across a portfolio of properties to help balance the grid.
Hybrid heat and demand response
A hybrid heating system is typically easier and cheaper to retrofit than an all-electric heat pump. It does not require a change to the existing radiators and a smaller heat pump can also be fitted.
A typical scenario would see the heat pump warm the house using cheap electricity overnight ready for the morning. Come mid-afternoon, the smart controls call on the gas boiler to quickly increase heat in the property. During early evening, the smart control system can switch between the gas boiler and electric heat pump to avoid adding to peak electricity demands on an overloaded grid.
This shift of electricity use away from peak times and peak prices helps residents to reduce their energy bills and improves grid stability.
Hybrid heating systems can move as much demand to gas as they like – they have complete load flexibility. With a gas boiler always available, the system need never compromise the comfort of the occupants.
The strategy for controlling a hybrid heating system is to utilise the boiler to provide bursts of heat to warm the house up quickly, with the heat pump providing temperature maintenance and a ‘base load’ during periods where a fully warm house is not required.
Hybrid heating is proven technology, which is in use today. Unlocking the value of demand response across residential property portfolios, enabled by hybrid heating, would provide the means for RSLs to fund their transition to low carbon heat.
Ian Rose is professional services director at PassivSystems
