Pump up the volume: Heat pumps for a decarbonised future

The most powerful tool for rapidly decarbonising heating in buildings and homes is the humble heat pump. How powerful? The International Energy Agency’s recently released analysis estimates that potential global carbon dioxide emissions reductions from heat pumps can reach at least 500 million tonnes in 2030. This would be akin to eliminating the annual CO₂ emissions from all of the cars in Europe today.

Evidence from the IEA underscores the ‘why’ of switching to heat pumps while the Regulatory Assistance Project (RAP), CLASP and the Global Buildings Performance Network offer further insights on the ‘how.’ The three organisations collaborated to create a toolkit to help policymakers develop packages to drive the heat pump market and deployment of the technology at scale.

On 15 December 2022, the Electrification Academy welcomed the lead author of the IEA report, Yannick Monschauer, and two of the heat pump toolkit authors, Richard Lowes of RAP and Matt Malinowski from CLASP. They shared:

• Highlights and conclusions of the IEA study The future of heat pumps, including examination of barriers and solutions for heat pump deployment.
• The principles and tools in A policy toolkit for global mass heat pump deployment.
• Examples of actual policies and best practices for coordination.

We were delighted to have Caroline Haglund Stignor from RISE moderate the session.

A policy toolkit for global mass heat pump deployment

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.

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.

The RAPPORT, Europe edition, September 2022

The clash with gas: Should it stay or should it go?

Europe’s stated goal of achieving a net-zero power system by 2050 is inherently replete with enormous opportunities and challenges. High energy prices and Russia’s invasion of Ukraine have now ratcheted up the urgent need for action to emergency levels. Policymakers are facing the challenge of a lifetime to secure the supply of energy and protect disadvantaged consumers while maintaining momentum towards long-term climate goals. The events of 2022 have made evident to many experts that the transition away from fossil gas will figure prominently in all of these objectives.

To support policymakers and the numerous stakeholders in planning for a deliberate reduction in the use of fossil gas in the coming years, RAP has developed five fundamental guiding principles. The principles are general in nature due to the breadth of this gas transition and the various policy instruments that governments will need to reform such a large part of our energy economy. In light of the current crises, the authors have also applied these best practices specifically to the European Commission’s proposed Hydrogen and Decarbonised Gas Market package and Hydrogen Strategy, as well as to the hydrogen strategies of selected Member States.

To achieve an efficient and cost-effective transition away from fossil gas, we offer policymakers the following recommendations:

A Clean Heat Standard for Massachusetts

The burning of fossil fuels for heat accounts for a significant portion of greenhouse gas emissions and burdens many families and businesses with high energy costs. Meeting climate and equity goals requires that we find effective and affordable pathways to rapidly revamp the thermal sector.

This policy brief — prepared as an appendix to the Massachusetts Clean Energy and Climate Plan for 2025 and 2030 — describes the concept of a new requirement on heating energy providers, which we call a clean heat standard. The paper explores the major design choices that would be necessary to implement this concept.

At the highest level, a clean heat standard is a credit-based performance standard that would be applied to suppliers of heating energy. In the Massachusetts context, that includes gas utilities and providers of heating oil and propane, and possibly electricity suppliers. These parties would be obligated to serve their customers with gradually increasing percentages of low- or zero-emissions heat, earning tradeable clean heat credits while sales of fossil fuels are phased down.

Just as a renewable portfolio standard requires electricity providers to replace coal- and gas-fired generation with wind, solar and other clean electricity generation, the clean heat standard would replace fuel oil, propane and fossil gas heat with weatherization, energy efficiency improvements, heat pumps, clean district energy and other verified low-carbon options.

The E3-India model: It’s come a long way

In 2016, the Regulatory Assistance Project approached Cambridge Econometrics about building a new macroeconomic modelling tool for India. The rationale for the model was simple: India needed to reduce its greenhouse gas emissions, but much of the policy to do so is set at the state level. A model that could identify the impacts of policies to boost state-level sustainable growth was therefore required.

Years later, the outputs of this work are presented in the book Economy-Wide Assessment of Regional Policies in India, edited by professor Kakali Mukhopadhyay. The book covers a range of topics relating to sustainable economic development in India, always with a focus on realistic (i.e., feasible) policy at the state level.

The model that was built came to be known as E3-India — “E3” for energy-environment-economy. It was developed by experts at Cambridge Econometrics, Professor Mukhopadhyay and former RAP colleagues Ranjit Bharvirkar and Surabhi Joshi. Without this collaboration, it is unlikely the model would have advanced to its present state.

The foundations of the model follow the Cambridge tradition, drawing on the demand-driven framework originally developed by Michal Kalecki and John Maynard Keynes. This approach provides several advantages over the more common equilibrium approach to modelling; it does not make assumptions about perfect information, rational behaviour or frictionless markets. In addition, it models labour markets, including involuntary unemployment — matters of particular importance to policymakers.

This demand-driven approach requires that behavioural parameters be informed by econometrics — that is, it requires, among other things, time-series historical data. With the model disaggregating India’s economy into both states and economic sectors, a substantial exercise in data collection and processing was required. Professor Mukhopadhyay led this herculean effort, yielding a tool that researchers today can download and use free of charge.

Another important feature of the model is its tight integration of energy consumption and greenhouse gas emissions within the wider economy. The model ensures consistency between physical and economic measures of energy consumption and prices — something that is critical for effectively assessing sustainability.

The power sector, which will play a crucial role in decarbonising India’s economy, is modelled in additional detail using an advanced framework developed by Jean-Francois Mercure. This allows the user to test policies such as feed-in tariffs, renewable subsidies and coal phaseouts, along with the standard energy and carbon tax policies that other models typically examine.

Each chapter of the book is dedicated to a different sector of the economy. A set of scenarios is used to explore different possible outcomes by implementing combinations of policies. The demand-driven nature of the model allows the analysis to start from a position in which the Indian economy has been set back by COVID-19; many of the scenarios look at ways to restore jobs and prosperity.

Eleven authors, experts in their respective fields, were involved in the production of the book. They put the E3 model to rigorous use, testing its capabilities and performance, and with it have revealed some important truths about the Indian economy and good news about its ability to transform itself into the sustainable, low-carbon powerhouse that it aspires to be.

The book is by no means the end of the E3-India project; in many ways, it is just the beginning. E3-India is a tool that policymakers can use for many years to come as they embark on the journey of promoting sustainable development. The model will continue to be updated. We encourage readers of the book to work with the model themselves, to challenge its conclusions and to examine other scenarios, all with the aim of developing public policies dedicated to improving the long-term welfare of Indian society and the environment. If India is to contribute to meeting global climate targets, much work remains to be done.

Where Do We Go From Here: Visions for a Clean Heat Standard

In a webinar discussion, panelists discussed efforts across the country to put in place clean heat standards or other mandates for reduction of emissions from thermal end uses.

Where Do We Go From Here: Visions for a Clean Heat Standard

The term “transition” implies moving away from one thing and toward something else. The energy transition in the United States has challenged utility regulators to ensure that the movement away from fossil-fuel-dominated resources, and the adoption of lower-carbon resources in their place, will not put at risk the economic benefits, security, and reliability associated with our current energy system.

As part of this transition, states across the country are exploring ways to lower the emissions associated with a particular energy demand: building heat. In a webinar discussion, panelists took a closer look at a variety of these efforts under way. Policies adopted or being considered by Northeast and Western states illustrate how cleaner heat does not need to be an “either/or” proposition, but instead can provide everyone — suppliers, consumers, and grid operators — with choices and a path toward a lower-carbon future.

Grid Operations and Why They Matter for Air Quality — Part 2

In the second part of a training for the Mid-Atlantic Regional Air Management Association (MARAMA), Nancy Seidman explored the air quality and health benefits of energy efficiency and electrification.

Clean Heat for a Cooler Planet: Vermont’s Clean Heat Standard