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Taking the burn out of heating for low-income households

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The future of heat in buildings is not fossil fuelled. The urgency of the climate crisis, Europe’s 2030 climate targets, the current war in Ukraine and the resulting skyrocketing energy prices all mean we need to massively accelerate efforts to move away from burning fossil fuels in our homes. This is no small task as fossil fuels currently account for over 75% of heat supply, and the residential sector is Europe’s single biggest fossil gas user, responsible for 40% of gas consumption.

The recent energy price volatility and the cripplingly high gas prices make the economics of switching from fossil fuel heating to heating with a heat pump better in 2022 than before the crisis. Those households that can afford it may well be considering the switch.

For lower-income households, however, the high prices make all forms of heating – and most other household expenses – less affordable. For these people, the switch to clean heating is further away than ever. But the risks of remaining locked into expensive fossil fuel use are more acute due to high and volatile prices, rising costs of redundant infrastructure and, potentially, exorbitant costs for hydrogen.

RAP analysis establishes the upfront investment and running costs to switch to heating with a heat pump, before and after the price crisis. Based on this assessment, Louise Sunderland and Duncan Gibb set out strategies to make the switch to clean heating affordable and safe for lower-income households. Targeted subsidies for upfront investment in clean heating technologies are essential, alongside reforms to electricity pricing to help ensure bills are affordable. The study also explores a range of other strategies to secure affordable clean heat such as bringing together combinations of building-level technologies, services and the benefits of cheap renewable electricity generation. We present five recommendations for:

  • Prioritising lower-income households in heat decarbonisation strategies.
  • Ensuring an ‘energy efficiency first’ approach to reduce heating needs.
  • Providing targeted subsidies for clean technologies.
  • Rebalancing burdens away from electricity bills and directing social support to electricity bills.
  • Focussing Europe’s innovation attention on the needs of lower-income households.

Good COP/Bad COP: Balancing fabric efficiency, flow temperatures and heat pumps

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Heat pumps are widely recognised as the key technology to decarbonise building heat demand in Ireland. To receive grants for heat pumps, homeowners in Ireland are required to have a heat demand per unit of floor area, known as a ‘heat loss indicator’ (HLI), below a certain level. The HLI requirement was designed to protect households from high bills if they switched to a heat pump.  

There is a concern that the HLI is limiting heat pump deployment, thereby hindering Ireland’s goal of net zero in 2050. This review of the HLI policy and associated rules was undertaken alongside a discussion of heat pumping technologies and their operation, optimal performance and innovation. While there is still a major role for building fabric energy efficiency upgrades, innovation in heat pumping technologies means they may be able to more easily replace combustion-based technologies than has been previously assumed due to better performance and higher output temperatures.

To achieve more rapid and potentially smoother deployment of heat pumps, current HLI grant requirements should be reevaluated. Initially, the HLI requirements could be loosened, subject to relevant consumer advice and protections. In the longer term, a focus on flow temperatures and in-situ performance may be more appropriate. Building fabric efficiency requirements could be maintained but simplified. Finally, trials and programmes to evaluate heat pump performance in Irish buildings should be expanded and expedited in order to provide accurate and local data on this strategically important technology.

Czyst(sz)e ciepło: Zmiana uwarunkowań ekonomicznych dla pomp ciepła w Polsce

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W ciągu ostatnich dwóch lat Polska znacząco przyspieszyła transformację systemów ogrzewania w budownictwie jednorodzinnym, zwłaszcza jeśli chodzi o rozwój pomp ciepła. Postęp ten zawdzięcza silnemu wsparciu politycznemu w zakresie wycofywania węgla do ogrzewania indywidualnego. Jednak zależność Polski od paliw kopalnych w ogrzewaniu jest nadal bardzo wysoka, a inwazja Rosji na Ukrainę pokazała, że kraje silnie uzależnione od paliw kopalnych są narażone na ekstremalne ryzyko cenowe.

W niniejszym opracowaniu Duncan Gibb i Monika Morawiecka pokazują, że inwestycja w pompę ciepła ma sens dla polskich gospodarstw domowych z punktu widzenia ekonomicznego, środowiskowego, ochrony klimatu i bezpieczeństwa energetycznego. Analiza przedstawia także kilka rekomendacji, które pozwolą upewnić się, że polityka w zakresie czystego ogrzewania uwzględnia długoterminowe cele dekarbonizacji, jakości powietrza i skutków społecznych. Rekomendacje odnoszą się m.in. do właściwego uwzględnienia kosztów zewnętrznych paliw kopalnych, wzmocnienia przepisów dotyczących jakości powietrza oraz wdrażania skutecznych regulacji dla dekarbonizacji ogrzewania.

A policy toolkit for global mass heat pump deployment

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Heat pumps, a critical technology for clean energy systems, are poised to become the most important technology for heating decarbonisation. Currently, the vast majority of heat is provided by fossil fuels. In order to promote and encourage heat pump installations across the globe, the Regulatory Assistance Project, CLASP and the Global Buildings Performance Network have developed this heat pump policy toolkit, which provides a suite of tools, and advice on how to use them, for policymakers interested in promoting this critical technology.

The structure of the toolkit is loosely based on that of a Greek temple, with foundations and pillars, supporting a rapidly growing heat pump market. The interactive toolkit (which includes clickable links throughout) also features short videos that give an overview of each relevant element of the toolkit. These videos make up a short series which complements this document.

This toolkit works as a synthesis of policy approaches to heat pump deployment and a guide to designing the best packages of policies. As you’ll see in the toolkit (and in the graphic below), a complete policy package needs to consider foundational elements and must also take account of each pillar. We provide details, examples and potential issues, and solutions within the various policy elements discussed.

Heat Pump Toolkit temple

Foundational elements of this toolkit recognise the need for coordination and communication around heat pump policy efforts and strategies.

Pillar 1 considers economic and market-based instruments. These instruments are fundamentally associated with balancing the economics of heat use towards clean options, such as heat pumps, so that their lifetime costs are cheaper than fossil-based alternatives.

Pillar 2 considers financial support. Within this pillar, we identify three key elements of financial support for heat pumps — grants and tax rebates, loans and heat-as-a-service packages.

Pillar 3 considers regulations and standards. We look at buildings codes and standards, appliance standards and heat planning and zoning.

To build an effective heat pump policy package, policymakers must consider foundational elements as well as each of the pillars. And even within each pillar, combinations of elements may be appropriate.

Cleaning up heat: The changing economics for heat pumps in Poland

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Over the past two years, Poland has become a remarkable success story for deployment of clean heat systems, especially heat pumps. Its progress is due to strong policy support for phasing out coal for individual heating. However, Poland’s dependence on fossil fuels for heating is still high, and Russia’s invasion of Ukraine has shown that countries heavily reliant on fossil fuels are exposed to extreme price risk.

Duncan Gibb and Monika Morawiecka show that investment in a heat pump makes sense for Polish households from an economic, environmental, climate and energy security standpoint. This analysis investigates two current economic cases and makes several recommendations to make sure that policies for clean heating consider long-term objectives of decarbonisation, air quality and social impacts. These include properly pricing externalities into fossil fuels, strengthening clean air legislation and effectively regulating to decarbonise heating.

Getting the hydrogen network we need for decarbonisation

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Clean hydrogen provides a tool that can open up new opportunities for decarbonisation. But it is just one tool, and an expensive one at that. If policymakers allow, or even support, continuation of the current ‘hydrogen rush,’ we will end up with a larger hydrogen network than needed — with high costs for consumers.

Policymakers have the right tools in their toolbox — including unbundling, transparency requirements and regulatory oversight — to ensure that hydrogen supports rather than hinders decarbonisation efforts. The regulation of the fossil gas sector provides important lessons to be considered for hydrogen regulation. Megan Anderson and Andreas Jahn explain how independent, unbundled ownership can allow for the hydrogen network to be efficiently planned, developed and operated.

Sem Oxenaar

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Turning off the gas: Stronger and coherent EU policy to accelerate the fossil gas phaseout

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Rapidly phasing out fossil gas demand has become a top priority in Europe. Existing European legislation is expected to achieve only moderate reductions by 2030. The ongoing energy crisis has provided an opportunity to aim for even more extensive decreases in fossil gas demand. Legislation under negotiation, informed by the European Commission’s REPowerEU plan, is expected to go further, yet more ambitious targets and a unified policy approach could achieve potential reductions currently left on the table.  

RAP’s analysis finds that even with full implementation of the REPowerEU plan, by 2030 natural gas demand in Europe will remain roughly equivalent to Russian gas imports in 2021. A stronger energy efficiency target in the Energy Efficiency Directive (EED) and a higher renewable energy target in the Renewable Energy Directive (RED) could reduce gas demand and eliminate Russian gas imports. 

Furthermore, the Hydrogen and Decarbonised Gas Market package should emphasize integrated planning and targeted applications of alternative gases to ensure its consistent with a fossil gas phaseout. 

A joint, coherent policy approach — addressing more ambitious targets for the EED and the RED and complementary metrics applied to the Hydrogen and Decarbonised Gas Market package — would guarantee that fossil gas use is rapidly reduced and the infrastructure is in place to meet the remaining demand equitably and efficiently.

How the European Union incentivises inefficient renewable heating

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The EU’s renewables directives count what fuel is burned for heating, as opposed to the amount of heat produced.

Never has the spotlight shone so brightly on Europe’s heating and cooling sector. And for a good reason. Fossil gas makes up around 39% of the energy used to heat buildings and much of Europe wants to rapidly phase it out.

To help do so, the European Parliament recently voted in favour of a key amendment to the Renewable Energy Directive (RED): raising the annual target for the share of renewable energy in heating and cooling.

The new goal—a 2.3 percentage-point increase each year until 2030—is roughly double the one proposed in the Fit-for-55 package unveiled in 2021.

The clear signal has been set, yet there is something off with the way the metric is measured. By counting fuel burned instead of heat produced and not including electricity used for heating or cooling, the RED favours inefficient technologies.

Ignoring the mushy peas on the floor

Imagine a toddler having lunch. Her father has prepared a bowl of 300 grams of mushy peas and figures that this meal should meet half of the two-year-old’s nutrient needs for the day. She is a messy eater though and jettisons around half of her food on the ground. Once her dad sees the empty plate, he pats himself on the back, thinking that he filled her belly. He should look at the floor.

Measuring the renewable share of heating and cooling in the RED is simple. It tallies all the energy used to heat and cool from renewable sources, then divides it by the total. The key question is: which energy counts as renewable?

Unfortunately, the RED’s answer to this is flawed. It only counts final energy use or, in other words, the fuel that is delivered to the customer to use in their heating appliance. That means if someone burns a log in a fireplace at 50% efficiency and it produces 100 kilowatt-hours (kWh) of heat, how much “renewable heat” does that account for?

If you were thinking “100 kWh” you would be wrong. The RED counts that as 200 kWh, since that is the energy content of the biomass that was combusted at 50% efficiency.

That is a big problem because heating systems have different efficiencies. An electric heat pump typically produces 100 kWh of heat with 33 kWh of input electricity. The remaining 67 kWh is drawn from the ambient air for free. An 85% efficient pellet boiler needs 117 kWh.

The point: Less efficient technologies need more input energy for the same useful heat outcome. The RED discourages switching to more efficient heating appliances and electrification. It counts the full weight of the mushy peas, not just those that were eaten.

Anti-electrification policy

The other problem with the RED methodology is its scope. It does not consider the renewable electricity used for heating and cooling at all. Whether it is used to drive a heat pump or just an electrical resistance heater, it does not count toward the renewable heating and cooling target. Even for cooling, which is virtually only based on electricity.

This is an effort to avoid double-counting. The data wranglers do not want to count renewable electricity in both the power sector and the heating and cooling sector. As a data wrangler myself, I appreciate their commitment to neat allocation. But in this case, neatness has its downside.

Electricity providing a heating or cooling service should be considered towards the renewable heating and cooling target. Otherwise, heat pumps could be undervalued in terms of their contributions. If the methodology does not even consider where the electricity comes from, the heat output of the heat pump can never be fully renewable.

If the renewable share of electricity would be considered in the RED’s methodology as a heating and cooling service, the incentive to promote heat pumps would even be stronger. Member States will thus be encouraged to implement policies that aim to achieve the heating and cooling target, with the ancillary benefit of growing the deployment of efficient heat pumps to do so.

As it stands, the least efficient and least electric technologies are those that have the most potential to meet the goals under the RED. More efficient and electricity-based heating appliances risk falling behind.

The way forward

Getting metrics right is crucial to ensuring a rapid and balanced transition to clean heating and cooling. The Renewable Energy Directive’s goal should be to promote efficient heating and cooling technologies that maximise useful energy while minimising input energy.

This means counting the useful heat that is produced by a heating system, not the input energy needed. It also means including the electricity used for renewable heating and cooling.

Since electricity realistically contributes to both the headline renewable energy target (32% in the RED II and voted to increase to 45% by the European Parliament), as well as the renewable heating and cooling target. Both calculations should factor it in so that the statistics are accurate.

Double-counting can be avoided by ignoring the electricity used in the heating and cooling sector when calculating the headline target.

Metrics matter. Only by counting the useful heat produced can the Renewable Energy Directive provide the right incentives for phasing out fossil gas and spurring the clean electrification of heat.

 

A version of this article originally appeared on Foresight Climate & Energy.

Photo: Holger Schué from Pexels.