The Hidden Gauge of U.K.’s Zero-Carbon Drive Is Sitting in Your Cellar

(Bloomberg) -- Tired of the crowds and air pollution in London, Amy Willis bought an 18th century house in a Suffolk village two and a half hours away from the city and immediately started renovations. Two years later, she's stuck on modernizing the heating system—and so is, in some sense, climate progress for the entire U.K.

Her home isn't connected to the gas grid, so Willis relies on trucks to deliver gallons of oil that fill a boiler. The process is expensive, and Willis doesn't like that she's among the millions of British households contributing to global warming by burning fossil fuels to keep warm. She was looking to upgrade without a gas line. “I liked the idea of being off the grid for cost and environmental reasons,” she said. 

That's where heat pumps come in. Willis discovered the climate-friendly technology on a home-improvement TV show. Instead of burning oil or gas, heat pumps use electricity to absorb heat from the air and transfer it into radiators and underfloor heating. It's the same technology that's been used in refrigerators for decades, repurposed as a low-carbon source of heat for homes and offices.

The adoption of heat pumps by homeowners and landlords will play a pivotal role in the U.K. meeting its commitment to achieve carbon neutrality by 2050. Progress on them can serve as a near-term benchmark for the nation as a whole. Prime Minister Boris Johnson wants to install 600,000 heat pumps annually by 2028, a 20-fold increase from the current rate in a country where less than 1% of the homes use the technology. That means convincing millions of people to rip out their oil and gas boilers and adopt a technology most people haven't heard of—and many can't afford.

Willis ran into that obstacle. Heat pumps typically cost almost three times as much as a gas boiler, and they only work in well-insulated homes. Her old house with thin walls and leaky windows would have to be fortified before it could ditch fossil heat. “It would have been unfeasibly expensive. Not only in installing but also in the long run,” she said. “I'd be paying extortionate bills.”

Cleaning up home heating has become a global issue in the decades-long movement to eliminate climate pollution, particularly in countries with colder climates like Canada and Germany. Heating accounts for 40% of energy-related carbon dioxide emissions and worsens local air pollution. Rooftop solar panels can help make heat pumps more cost effective in the long run, although that's incompatible with Britain's grey weather. Hydrogen boilers could also be a solution, but only if the fuel is one day cheap enough and readily available. 

It's not just homes the British government has to worry about. Buildings account for a third of greenhouse gas pollution in the U.K., with more than 23 million buildings connected to its gas network through 176,500 miles of pipelines. And unlike cars and coal-fired power stations, many people don't feel guilty about their fossil-fuel boilers. A government survey found that almost a third of gas users thought they already had environmentally friendly heating. Another poll found that 70% of people hadn't heard of heat pumps.

“Heat is a huge source of emissions, there's very low public awareness of the problem and it's one of the most expensive sectors we need to decarbonize,'' said Mike Hemsley, team leader for carbon budgets at the independent Climate Change Committee, which advises U.K. government officials on meeting their targets.

The CCC says that in order to meet its heat pumps target, the U.K. will need to ban the sale of all new gas boilers from 2033, similar to the prohibition on new internal combustion engine cars beginning 2030. The government will also have to boost annual spending on decarbonizing heat to 9 billion pounds ($12.3 billion) a year in the next decade, up from the 6 billion pounds currently allocated.

Johnson's administration is set to publish a heat and buildings strategy in the coming weeks outlining how it plans to meet its heat pump installation target and says it's carefully considering the CCC's recommendations. It's already working on new rules to phase out fossil fuels in off-grid homes, and in January the government banned new homes from being hooked up to the gas grid starting 2025. But new buildings are low-hanging fruit, in part because they don't require persuading existing homeowners to spend money switching to heat pumps. New buildings are also more energy efficient to begin with, making heat pumps more appealing.

This sets up a looming impasse for Britain's mid-century pledge to zero out emissions. Based on its current policies and budgets, the U.K. is on track to reach less than a third of its target. By 2030, at the current rate there will be just 1.36 million heat pumps installed nationwide, according to the clean-energy research group BloombergNEF. That equates to 159,700 in the year 2028, far short of Johnson's target. Missing the mark for heat pumps could also doom the British commitment under the Paris climate accord, which requires a 68% reduction in emissions by 2030 compared to 1990 levels. 

The CCC's suggested ban on gas boilers might force people to make the switch, but there's still the question of who pays for it. An existing subsidy policy, called the Renewable Heat Incentive, offers homeowners quarterly payouts for seven years to reward them for using clean energy. So far that's spurred nearly 45,000 people to invest in a heat pump, and the program is due to end in March 2022.

It doesn't help that a political scandal in Northern Ireland has given the policy a bad name. Costs spiraled after the local government failed to include proper budget controls, leading to the resignation of Northern Ireland's deputy first minister. This in turn triggered a three-year government shut down that was only resolved last January.

Johnson's government is planning a new grant program that will cover the upfront costs of installing heat pumps up to 4,000 pounds. It's trying to rectify inequalities in the current system, which is more likely to benefit wealthier homeowners who can get subsidies for installing renewables, something renters and apartment dwellers usually can't do. So far, officials have set aside 100 million pounds, with no funding available after 2024. That's a start, but only enough to support about 25,000 heat pumps over its three-year term, according to BloombergNEF.

“Asking households to foot the bill of the transition may not be acceptable, particularly for vulnerable households or those in energy poverty already,'' said Meredith Annex, an analyst at BloombergNEF. “Subsidies are underfunded or non-existent from 2022,” she said. “It won't get them anywhere near where they need to get.'” —With Rachel Morison

©2021 Bloomberg L.P.