by the Secretary of State for Business, Energy and Industrial Strategy

Potential impacts to different types of building _________________________________ 85 3.3. Wider system impacts ________________________________________________ 93 The role of hydrogen ____________________________________________________ 93 Carbon capture _________________________________________________________ 95 Electricity system _______________________________________________________ 95 Chapter 4: Planning for Net Zero _______________________________________________ 98 4.1. Planning for strategic decisions _________________________________________ 98 What Net Zero means for buildings _________________________________________ 98 Decisions to be made – an illustrative overview _______________________________ 101 Progress on national-level decisions _______________________________________ 101 Balancing national, regional and local decision-making _________________________ 106 Using data to deliver an informed and co-ordinated approach ____________________ 106 4.2. Local action _______________________________________________________ 107 Energy planning and mapping for decarbonisation ____________________________ 110 Tackling the worst performing buildings first and supporting those in fuel poverty ____ 111 Support voluntary uptake of low-carbon sources of heat and energy efficiency measures ____________________________________________________________________ 111 Making climate change a priority __________________________________________ 112 4.3. Research and innovation _____________________________________________ 112 Priorities _____________________________________________________________ 114 Current research and innovation activities ___________________________________ 115 Chapter 5: Reducing emissions in the 2020s ____________________________________ 124 5.1. Measuring energy performance ________________________________________ 125 Why is it important? ____________________________________________________ 125 Measuring whole-building energy performance _______________________________ 126 5.2. How to improve our buildings __________________________________________ 132 Future-proofing new buildings ____________________________________________ 132 Improving our existing homes _____________________________________________ 134 Improving public sector buildings __________________________________________ 143 Improving commercial and industrial places of work ___________________________ 145 5.3. Kickstarting the transition to low-carbon heat ______________________________ 151 Phasing out unabated fossil fuels __________________________________________ 152 Building a market for heat pumps __________________________________________ 156 Transforming the market for heat networks __________________________________ 158 Heat network zoning ____________________________________________________ 160 Chapter 6: Creating the conditions for change ___________________________________ 164 6.1. Cost distribution and fuel prices ________________________________________ 165

Fairness _____________________________________________________________ 165 Driving down capital costs _______________________________________________ 166 Sharing the costs ______________________________________________________ 166 6.2. Green finance ______________________________________________________ 166 Government financial support _____________________________________________ 167 Private green finance ___________________________________________________ 167 6.3. Consumer protection ________________________________________________ 171 Quality of work delivered – skills and standards _______________________________ 172 Protecting vulnerable consumers __________________________________________ 175 Information and advice __________________________________________________ 175 6.4. Public engagement __________________________________________________ 176 The importance of public engagement ______________________________________ 176 Inward engagement ____________________________________________________ 177 Outward engagement ___________________________________________________ 180 Current public awareness and understanding ________________________________ 182 6.5. Continuous improvement _____________________________________________ 183 Chapter 7: Conclusion ______________________________________________________ 186 Annex 1: Descriptions of key heat sources ______________________________________ 189 Annex 2: Current and planned activities for the 2020s _____________________________ 190 Decarbonising heat ______________________________________________________ 190 Improving building energy performance _______________________________________ 195

In 2019 the UK became the first major economy to pass laws to reduce its greenhouse gas emissions to net zero by 2050.1 In April 2021, we enshrined an ambitious target to reduce emissions by 78% by 2035 on 1990 levels into UK law. We must intensify our efforts and eliminate virtually all emissions arising from heating, cooling and energy use in our buildings. The UK has already shown that environmental action can go hand-in-hand with economic success, having grown our economy by more than three-quarters while cutting emissions by over 40 per cent since 1990. The sixth carbon budget is another indication of this government’s dedication to Britain’s green industrial revolution, positioning the UK as a global leader in the green technologies of the future.2 Decarbonising energy used in buildings is a key part of our Clean Growth Strategy3 and underpins the Prime Minister’s Ten Point Plan4 for a Green Industrial Revolution to “build back better and build back greener”. This means improving our buildings’ fabric efficiency, changing the way we heat and cool our buildings and improving the performance of energy-related 1 For the purposes of this publication, we will focus on the UK’s trajectory towards net zero total greenhouse gas emissions across all four administrations by 2050, henceforth referred to as ‘Net Zero’. 2 We have set a series of targets to reduce greenhouse gas emissions through legally-binding ‘carbon budgets’. The sixth carbon budget covers the period 2033-2037. 3 BEIS (2017), ‘Clean Growth Strategy’ ( 4 BEIS (2020), ‘The ten point plan for a green industrial revolution’ (

products5. It will involve large-scale transformation and wide-ranging change to energy systems and markets, including the development of UK-based, green industrial capability and capacity. It is a challenging undertaking that has no single solution and will require a combination of leading-edge technologies and innovative consumer options. However, it also presents enormous opportunity. The Confederation of British Industry, Climate Change Committee, National Infrastructure Commission, and International Energy Agency, and many others, have highlighted the importance of decarbonising buildings as part of a post-COVID economic response. We agree, decarbonising buildings will help the economy grow, create new green jobs and deliver greener, smarter, healthier homes and workplaces with lower bills. Delivering energy performance improvements and low-carbon heating systems will create new jobs in all parts of the UK – offering enormous potential to support our ‘levelling up’ agenda. The transition to low- carbon buildings could add £6 billion GVA (gross value added) and support 175,000 skilled, green jobs by 2030. It will create new markets and supply chains for innovative products fit for a Net Zero future, and as these markets grow, the UK may have greater export opportunities in sectors where we have particular knowledge, experience or expertise. In driving this change, we are focusing support on the households and businesses that need it most. For example, in England we are delivering policies such as the Home Upgrade Grant and the Social Housing Decarbonisation Fund. These grants and funds are not only vital for meeting our Net Zero target, but also represent a key part of our strategy for tackling fuel poverty. We also announce the new £450 million Boiler Upgrade Scheme to support households who want to make the switch to low-carbon heat pumps with £5,000 grants. Our ambition is to phase out the installation of natural gas boilers beyond 2035. Much like the move to electric vehicles, the move to low-carbon heating will be a gradual transition from niche product to mainstream consumer option. No-one will be forced to remove their existing boilers.
Heat pumps are already a predominant technology in some other countries, and have high levels of customer satisfaction; however, work needs to be done to build UK supply chains and drive down costs. Meanwhile we will continue to invest in hydrogen heating through the neighbourhood and village trials, and the plan for the town pilot. This will allow us to take strategic decisions on the role of hydrogen in heating by 2026. Across our diverse buildings landscape, we all have a role to play. The changes needed will be different depending on the type of building, building owner or occupier, and wider energy system considerations. An NHS hospital requires different solutions than a rented terraced home, and our policy package reflects this – tailoring our approach to different types of buildings and their occupants. This is the common-sense approach – putting consumers at the heart of our action to transform our buildings. This strategy brings together the government’s work on energy efficiency and clean heat. It ensures that we have a consistent and coherent approach across different markets, buildings and occupancy types, and that we have robust plans which offer a credible pathway to achieving carbon budgets and lay the foundations for Net Zero buildings in the UK by 2050. Secretary of State for Business, Energy and Industrial Strategy 5 Energy-related products are products which directly consume energy (such as washing machines, lighting and heating appliances) or indirectly impact energy consumption during use (such as taps and non-electric showers). 1.2. Our Heat and Buildings Strategy – at a glance The strategy sets out the vision for a greener future, which creates hundreds of thousands of green, skilled jobs, drives the levelling up agenda and generates opportunities for the growth of British businesses. The transition to high-efficiency low- carbon buildings can and must take account of individual, local and regional circumstances. Interventions need to be tailored to the people and markets they serve. The strategy outlines a transition that focuses on reducing bills and improving comfort through energy efficiency, and building the markets required to transition to low-carbon heat and reducing costs, while testing the viability of hydrogen for heating. This will provide a huge opportunity for levelling up – supporting 240,000 skilled, green jobs by 2035, concentrated on areas of the UK where investment is needed most. This section • the rationale behind our approach • the principles and phasing of the policy package that delivers them To meet Net Zero virtually all heat in buildings will need to be decarbonised. The benefits of more efficient, low-carbon buildings for consumers are smarter, better performing buildings, reduced energy bills and healthier, more comfortable environments. Additionally, studies indicate that more energy efficient properties typically have a higher value than less efficient ones. Evidence from a study commissioned by BEIS indicated that properties with an EPC C rating were worth around 5% more than those currently at EPC D rating, after controlling for other factors such as property size and archetype. The 2020s will be key to delivering a step change in reducing emissions from buildings and establishing the foundations of a pathway to Net Zero. This means improving the efficiency and flexibility of our buildings, and developing the UK supply chains and technology options needed to save carbon throughout the decade and put us on a cost- effective pathway to Net Zero. The buildings transition presents huge opportunities for jobs, growth and levelling up. Decarbonising buildings can provide a major economic stimulus, creating new highly-skilled jobs, products, markets, and supply chains in the UK, fit for a Net Zero future. As building improvements are labour-intensive, upgrading our homes and workplaces could rapidly create new opportunities and support over 240,000 low- carbon jobs by 2035 across the sector (from manufacture to installation and modelling to project management) as part of a green recovery, while also reducing energy bills and delivering better, greener, and healthier homes and workplaces.6 As the global market for low- carbon heat, smart products, and energy efficiency grows, UK businesses can make use of export opportunities in sectors where we have developed particular knowledge, experience and expertise. We are working to ensure that these opportunities are available across the UK, especially where they can help level up certain areas. 6 As stated in the Energy White Paper and Ten Point Plan, based on BEIS analysis of the Energy Innovation Needs Assessment, Vivid Economics et al. (2019) ( y-innovation-needs-assessment-building-fabric.pdf). Fairness and affordability are at the heart of our approach. Investing in energy efficiency will bring down bills for millions of households and businesses – with Government support for low income households to pay for improvements. Meanwhile we are acting to reduce the costs of low-carbon heat – with the ambition of working with industry to reduce the costs of heat pumps by at least 25-50% by 2025 and towards parity with boilers by 2030, and supporting consumers who switch early with £5,000 Boiler Upgrade Scheme grants. Alongside action to remove distortions in energy prices, heat pumps should be no more expensive to buy and run than existing boilers and we are investing in innovation to make them smaller, easier to install and beautiful in design. Ultimately, Net Zero will mean gradually, but completely, moving away from burning fossil fuels for heating. Which is why we are setting the ambition of phasing out the installation of new natural gas boilers from 2035. The future is likely to see a mix of low-carbon technologies used for electrification of heat for buildings using hydronic (air-to-water or ground-to-water) heat pumps, heat networks and potentially switching the natural gas in the grid to low-carbon hydrogen. While there is work to be done to identify the best solutions for different buildings and regions, there are also areas where the solution is clear and we can take decisive, ‘no-regrets’ action now. No or low- regrets’ means actions that are cost-effective now and will continue to prove beneficial in future.
For example, installing energy efficiency measures reduce consumer bills now, while making buildings warmer and comfier, but have the added benefit of making future installations of low-carbon heating more cost-effective. For example, hydronic heat pumps will be a key technology for new buildings and buildings not connected to the gas grid, and heat networks will be a key technology in areas of high-density heat demand and where there are large low- carbon heat sources. Consultations published alongside this strategy propose how regulations can encourage the transition in these segments We will take major strategic decisions on the role of Hydrogen for heat by 2026. The infrastructural and regulatory implications that will come with mass adoption of different low-carbon heat sources – such as new electricity generation capacity and network reinforcement and additional hydrogen production plants – will be transformational. Strategic decisions will be required to enable a co-ordinated, efficient, effective and affordable mass decarbonisation by 2050. These decisions will need to be informed by a comprehensive programme of research, development, planning and innovation over the coming years. In particular, we will explore the potential to use hydrogen for heating buildings in the next few years to inform a strategic decision on the role of hydrogen in decarbonising heat in 2026. Along our journey to Net Zero, we will need to take co-ordinated decisions across all levels – national, regional, local and individual – to ensure we deploy the most suitable low-carbon heat source for that area or building. We need to act now to develop the market and bring down costs for energy efficient low-carbon heat. Heat pumps and Heat Networks are proven scalable options for decarbonising heat and will play substantial roles in any Net Zero scenario, so we need to build the market for them now. A UK market with the capacity and capability to deploy at least 600,000 hydronic heat pump systems per year by 2028 can keep us on track to get to Net Zero and set us up for further growth if required. This means ramping up UK-based supply chain and deployment from approximately 35,000 heat pumps a year7, to potentially being able to replace around 1.7 million fossil fuel boilers per year 7 BSRIA (2020), ‘Heat pumps market analysis’ (

by the mid-2030s.8 We are also working on and investing £338 million over 2022/23 to 2024/25 into a broader Heat Network Transformation Programme to scale up low-carbon heat network deployment and to enable local areas to deploy heat network zoning, which will create a step- change in low-carbon heat network market growth. The journey to Net Zero buildings starts with better energy performance. Increased awareness of energy use and the need for greater efficiency is the first stepping-stone to enabling consumer decisions to improve building energy performance and use smarter, more efficient products and systems. Improving energy efficiency by adopting a fabric-first approach is key in ensuring the transition to low- carbon heating is cost-effective and resilient. ‘Fabric-first’ means focusing on installing measures that upgrade the building fabric (e.g. walls/lofts) itself before making changes to the heating system. We are committed to supporting businesses and households to upgrade as many buildings as possible to higher levels of energy efficiency and flexibility, in a way that will ensure long-term compatibility with low-carbon heating systems. We need to take a co-ordinated system-wide approach to decarbonise cost- effectively. To deliver Net Zero in a way that delivers value to consumers, we need to consider the measures needed to decarbonise heat alongside the decarbonisation action needed in other sectors. This includes the generation, distribution and storage of energy (such as electricity and hydrogen), and the associated investment and reinforcement of infrastructure required. We will need to consider this at a national and local level. To minimise generation demand and thereby reduce costs, we need to create a smart and flexible energy system, and ensure buildings use energy in a smart and We have developed a set of five core principles to guide action in the 2020s and longer-term 1. We need to take a whole-buildings and whole-system approach to minimise costs of decarbonisation - We will consider the heating system in the context of what is most appropriate for the whole building, as well as considering local and regional suitability and how best to manage system-level impacts (this is explored in Chapter 3). This will also deliver UK jobs across a variety of specialisms. 2. Innovation is essential to driving down costs, improving options and informing future decisions - We will ensure that regional, local and national decisions can be informed by the latest data and research and we will continue to work with industry to refine processes and technologies to deliver value for money and value for the UK economy (this is explored in Chapter 4). 3. In parallel, we need to accelerate 'no- and low-regrets' action now - Prioritising action improve buildings with low energy performance and high-carbon emissions, futureproof new-builds to avoid the need for later retrofitting, adopt a fabric-first approach to improve building thermal efficiency, increase the performance of products and appliances, ensuring climate change resilience by mitigating risks of overheating and poor air quality, build the market by developing our technical expertise, growing 8 BSRIA (2020), ‘Domestic Boilers (World Market for Heating Boilers 2020/R2019)’ (

the workforce, and expanding the UK's manufacturing capacity and capability. This includes building the market to install at least 600,000 hydronic heat pumps per year by 2028, which we know will be needed in all paths to Net Zero (this is explored in 4.
We will balance certainty and flexibility to provide both stability for investment and an enabling environment for different approaches to be taken to address different buildings - We will provide long-term signals to investment by setting requirements and embedding flexibility in how they are achieved, so businesses and the public can prepare to decarbonise in a way that suits them and maximise the opportunities this presents, including investing in training in greener skills (this is 5. Government will target support to enable action for those in most need - We will make sure that our policies support those who are hardest hit by COVID-19, such as small businesses and the fuel poor. We will also use taxpayer money efficiently to transform public sector buildings and improve the support and protection available for consumers (this is explored in Chapter 6). What we will do – key commitments Upgrading our building stock will require a comprehensive package of measures to be implemented in the next decade. This strategy outlines how we plan Deliver the Ten Point Plan9 ambition to develop the markets and consumer choices required to achieve Net Zero 1. Signalling our intention to phase out the installation of new natural gas boilers from 2035: Given the lifetime of a natural gas boiler is around 15 years, in order to reach Net Zero in a cost-effective consumer-friendly way, we aim to phase out the installation of new natural gas boilers beyond 2035, once costs of low-carbon alternatives have come down. No-one will be forced to remove their existing boilers. Instead, we will grow the market for heat pumps through incentivising early adopters through Boiler Upgrade Scheme grants, proposing introduction of a market-based regulation on manufacturers10 similar to that which has been successful in growing the market for electric vehicles, and phasing out the installation of the dirtiest and most expensive fossil fuel systems and deployment in new buildings. This would be in line with the natural replacement cycle, including any hydrogen ready boiler in any areas not converting to hydrogen, to ensure all heating systems used in 2050 are compatible 2. Setting a clear ambition for industry to reduce the costs of installing a heat pump by at least 25-50% by 2025 and to ensure heat pumps are no more expensive to buy and run than gas boilers by 2030: We understand that capital costs can act as a barrier and that investment to refine technologies, supply and installation requires clear signals and market certainty. Therefore, working with industry, we are setting out our ambition to see significant cost reductions. We know that industry is ready to back these ambitions in response to the package of measures in this strategy and accompanying publications. 3. Improving heat pump appeal by continuing to invest in research and Together with industry we must continue to innovate to reduce the barriers to installation, making heat pumps beautifully designed, smaller, and easier to install and use. We are investing in new innovation opportunities - as part of the Net Zero Innovation Portfolio - aimed at advancing heat electrification to support the decarbonisation of homes. The £60 million Net Zero Innovation Portfolio (NZIP) ‘Heat Pump Ready’ Programme will support the development of innovation across the heat pump sector, including to improve the consumer experience in installing and using a heat pump. This will build on our previous Energy Innovation Programme activities, such as the Electrification of Heat Demonstration Project and Green Home Finance 4. Ensuring affordability by providing financial support to meet capital Our ambition is to ensure that the costs of decarbonising heat and buildings falls fairly across society. Consumers who choose to switch to a heat pump will be supported in making the transition to a heat pump. We have published our government response on 9 BEIS (2020), ‘The ten point plan for a green industrial revolution’ ( 10 BEIS (2021), ‘Market-based mechanism for low carbon heat’ (

a clean heat grant11, called the Boiler Upgrade Scheme, to support deployment of low- carbon heat in existing buildings. This will provide households with £5,000 grants when they switch to an air source heat pump or £6,000 when they switch to a ground source 5. Rebalancing energy prices to ensure that heat pumps are no more expensive to buy and run than gas Clean, cheap electricity is an everyday essential. We have seen the impact of overreliance on gas pushing up prices for hardworking people but our plan to expand our domestic renewables will push down electricity wholesale prices. However, current pricing of electricity and gas does not incentivise consumers to make green choices, such as switching from gas boilers to electric heat pumps. We want to reduce electricity costs so when the current gas spike subsides we will look at options to shift or rebalance energy levies (such as the Renewables Obligation and Feed-in-Tariffs) and obligations (such as the Energy Company Obligation) away from electricity to gas over this decade. This will include looking at options to expand carbon pricing and remove costs from electricity bills while ensuring that we continue to limit any impact on bills overall. We know that in the long run, green products are more efficient and cheaper, and we are putting fairness and affordability at the heart of our approach. We will launch a Fairness and Affordability Call for Evidence on these options for energy levies and obligations to help rebalance electricity and gas prices and to support green choices, with a view to taking decisions in 2022. 6. Significantly growing the supply chain for heat pumps to 2028: We will go from installing around 35,000 hydronic heat pumps a year12 to a minimum market capacity of 600,000 per year by 2028.
This will be supported by the introduction of a market- based mechanism to establish the incentives for industry to take the lead in transforming the consumer market in low-carbon heating, which we are consulting on alongside this Strategy.13 In all future heat scenarios - including if hydrogen is proven to be feasible and preferable to use in heating some buildings - 600,000 hydronic heat pump installations per year is the minimum number that will be required by 2028 to be on track to deliver Net Zero. Hydronic heat pump systems will be the key technology for many properties in the future, properties that are not connected to the gas grid, new-builds requiring low-carbon heating, and existing buildings where consumers ultimately opt to switch to heat pumps in preference to other low-carbon heating options. To ensure we can build the UK low-carbon heat market sustainably towards the 1.7 million heating systems per year needed by 2035, further policy would be required to phase out installation of new fossil fuel heating. We could grow the heat pump market and transition consumers in stages, while continuing to follow natural replacement cycles to work with the grain of consumer behaviour. 7. Ensuring all new buildings in England are ready for Net Zero from 202514: We are bringing in the Future Homes Standard and have consulted on the Future Buildings Standard for new-builds in England. Government’s ambition is to build 300,000 new 11 BEIS (2021), ‘Government Future support for low carbon heat’ ( 12 BSRIA (2020), ‘Heat pumps market analysis’ ( 13 BEIS (2021), ‘Market-based mechanism for low carbon heat’ ( 14 New buildings consented from 2024 for Scotland and 2025 for Wales. homes a year by the mid-2020s.15 We anticipate at least a third of our 2028 heat pump target to be installed in new build domestic properties annually. To enable this, we will introduce new standards through legislation (such as Building Regulations) to ensure new homes and buildings will be fitted with low-carbon heating and high levels of energy efficiency, so that new buildings do not have to be retrofitted in the future. We will also consult on ending new connections to the gas grid. 8. We intend to start by phasing out the installation of fossil fuel heating systems in properties not connected to the gas Alongside this strategy, we are consulting on ending the installation of high-carbon fossil fuels to heat homes that are not connected to the gas grid in England from 2026 and non-domestic buildings not connected to the gas grid from 2024. Households will not be forced to remove their existing boilers, instead we will be taking an approach that goes with the grain of markets and consumer behaviour to minimise costs and disruption. We are keen to hear views on this approach, and in particular whether there are sectors or building types with specific needs that should be taken into account, for example, heritage buildings or those occupied by voluntary sector organisations. 9. Growing UK-manufactured technology and We want manufacturers to scale-up UK production to help meet UK demand and we are aiming for a 30-fold increase in heat pumps manufactured and sold within the UK by the end of the decade. This ensures the UK gets the full economic benefit of investment including benefits to businesses and customers, through reduced costs and emissions from supply chains and shipping. Growing UK manufacture and supply of heat pumps to over 300,000 units a year by 2028 could increase the rate of installation, grow opportunities for exports, and create more than 10,000 manufacturing-related UK jobs. Recent investments into low-carbon technology manufacture and supply are welcome early steps in this direction. 10. Ensuring the electricity system can accommodate increased electricity demand and heat pumps can be quickly and affordably connected to the We will work with Ofgem, distribution network operators, and other local actors on the approach to planning the network in Great Britain and delivering smart, secure, cost- effective solutions. We will also consider carefully the role of flexibility within buildings, including the potential for storage and hybrid technologies in combination with flexible Deliver the Ten Point Plan16 commitment to develop hydrogen for heating 11. Developing hydrogen for heating buildings by thoroughly assessing the feasibility, safety, consumer experience and other costs and benefits, by the middle of the We will work in partnership with industry and other key stakeholders to test and evaluate the potential of hydrogen as an option for heating our 15 HM Treasury (2017), ‘Building the homes the country needs’ ( 16 BEIS (2020), ‘The ten point plan for a green industrial revolution’ (

12. Establishing large-scale trials of hydrogen for We will support industry to conduct first-of-a-kind 100% hydrogen heating trials, including a neighbourhood trial by 2023 and a village scale trial by 2025. We will also develop plans by 2025 for a possible hydrogen town that can be converted before the end of the decade. Earlier this year BEIS and Ofgem wrote to the gas distribution network operators inviting them to develop proposals for a village trial.17 We also published a consultation on facilitating a grid conversion hydrogen heating trial18 in August 2021. 13. Enabling blending of hydrogen in the gas As stated in UK hydrogen strategy19, we are engaging with industry and regulators to develop the safety case, technical and cost-effectiveness assessments of blending up to 20% hydrogen (by volume) into the existing gas network. This has the potential to deliver up to 7% emissions reductions from the grid, whilst supporting the development of the UK Hydrogen Economy. We aim to provide an indicative assessment of the value for money case for blending by autumn 2022, with a final policy decision likely to take 14. Consulting on hydrogen-ready soon, we aim to consult on the case for enabling, or requiring, new natural gas boilers to be easily convertible to use hydrogen (‘hydrogen-ready’) by 2026, in line with our timelines to take broader strategic decisions about the role of hydrogen in heating buildings.
This would mean that new boilers would be fit for the future, minimising later disruption and costs to consumers. We will also use this consultation to test proposals on the future of broader boiler and heating system efficiency and explore the best ways to reduce carbon emissions from gas heating systems over the next decade. 15. Developing the evidence base necessary to take strategic decisions on the role of hydrogen for heating buildings in 2026: Local trials and planning work, together with the results of our wider research and development and testing programme, will inform and enable strategic decisions about the role of hydrogen for heating in delivering Net Zero, and the actions that will be required to support this. We anticipate that conclusions from our ongoing research will be available in the mid-2020s and we intend to take strategic decisions on the role of hydrogen in heating buildings in 2026. Deliver the Ten Point Plan20 commitment to Greener Buildings 16. Improving the performance of existing Continue to drive improvements to poorer performing homes throughout the 2020s, in line with the commitment we made in our Clean Growth Strategy21 for as many homes as possible to achieve EPC band C by 2035 where cost-effective, practical and affordable, and our commitment to reduce fuel poverty by ensuring as many fuel poor homes in England, as reasonably practicable, achieve a minimum energy efficiency rating of band C by the end of 17 Ofgem (2021), ‘Hydrogen Consumer Trial - Open Letter to GDNs’ ( 18 BEIS (2021), ‘Hydrogen for facilitating a grid conversion hydrogen heating trial’ ( 19 BEIS (2021), ‘UK hydrogen strategy’ ( 20 BEIS (2020), ‘The ten point plan for a green industrial revolution’ ( 21 BEIS (2017), ‘Clean Growth Strategy’ (

203022.23 We have also consulted on driving energy efficiency improvements in the private-rented sector and aim to publish a response before the end of the year.24 17. Supporting social housing, low income and fuel poor We will continue to ensure financial support is targeted to those who need it most, supporting the most vulnerable in society in switching to low-carbon heating and improving the energy efficiency of their homes. We are boosting funding for the Social Housing Decarbonisation Fund (investing a further £800 million over 2022/23 to 2024/25) and Home Upgrade Grant (investing a further £950 million over 2022/23 to 2024/25), which aim to improve the energy performance of low income households’ homes, support low-carbon heat installations, help to reduce fuel poverty and build the green retrofitting sector to benefit all homeowners. 18. Leading through the public We aim to reduce direct emissions from public sector buildings by 75% against a 2017 baseline by the end of carbon budget 6. We will encourage public sector organisations to monitor and report their energy use, develop and deploy plans to decarbonise, including by applying for government funding, and to lead by example to build demand and encourage other sectors to decarbonise. We have already made available over £1 billion through the Public Sector Decarbonisation Scheme25 which will provide critical support and drive whole-building interventions that deliver energy efficiency and low-carbon heating at the same time. We are investing a £1425 million into this scheme over 2022/23 to 2024/25. 19. Setting long-term direction and clear We will build on our 2020 consultation on improving the energy performance of privately rented homes26 using minimum standards to ensure the UK housing stock is on track to meet EPC band C by 2035 where practical, cost-effective and affordable. Our approach to raising minimum standards will work with the grain of the market, using natural trigger points to help minimise disruption to consumers. We will consider different segments of our building stock individually, helping to ensure we take a tailored pathway to improving our homes, workplaces and public spaces. There is no one-size-fits-all solution to heat decarbonisation, and our approach to regulation demonstrates this. For example, the Decent Homes Standard review will consider how the standard can work to support better energy efficiency and the decarbonisation of social homes, and we are also exploring opportunities to improve the energy performance of owner-occupier homes. We are considering how we can kick start the green finance market and have consulted on introducing mandatory disclosure requirements for mortgage lenders on the energy performance of homes on which they lend, and on setting voluntary improvement targets to be met by 2030. In addition, we will consider the case for 22 In accordance with our ‘Fuel Poverty Energy Efficiency Rating Methodology’ (2014) ( 23 As stated in their 2021 policy programme ( green-party-shared-policy-programme/), Scottish Government are seeking to upgrade the majority of homes in Scotland to at least EPC Band C by 2033, where feasible and cost-effective. 24 BEIS (2020), ‘Improving the energy performance of privately rented homes’ ( 25 BEIS (2020), ‘Public Sector Decarbonisation Scheme’ ( sector-decarbonisation-scheme-psds). 26 BEIS (2020), ‘Improving the energy performance of privately rented homes’ (

setting a date to ensure that all homes meet a Net Zero minimum energy performance standard before 2050, where cost-effective, practical and affordable. 20. Significantly reducing energy consumption of commercial, and industrial buildings by 2030: This will deliver significant emissions reductions and deliver cost savings for businesses setting privately-rented commercial buildings a minimum efficiency standard of EPC band B by 2030 in England and Wales, introducing a new and innovative performance-based energy rating for large commercial and industrial buildings, over 1,000m2 which use more energy than all other commercial and industrial buildings, while only accounting for about 7% of the stock27 and can deliver significant energy and emission reductions, consulting on regulating the owner- occupier sector later this year 21. Launch a new world-class policy framework for energy-related We will continue to pursue and explore policies that increase use of energy efficient, smart and sustainable products and maximise their associated benefits, following our departure from the EU.
We plan to launch our new Energy Related Products Policy Framework which will be published in due course and include illustrative proposals on a range of products including cookers, boilers (including consideration of hybrids), showers, taps and heat emitters. The introduction of this new framework will reduce consumer bills, reduce energy consumption, and reduce emissions by ensuring that when consumers invest in new products, they are buying products that have been made to high 22. Considering how to ensure flexible demand and supply (including through smart technologies and energy storage) is taken into account across the full range of energy performance, fuel poverty and heat policies, including regulation and subsidy We will build on existing work to consider how to recognise technologies in the Standard Assessment Procedure (SAP) methodology, so that buildings are decarbonised in a way that works for the consumer and the wider energy 23. Developing a workforce pipeline with the skills to meet the requirements of Net Zero Government is working closely with industry to ensure that installers have up-to-date, high-quality training and that they are not undercut by installers who offer cheaper, low-quality installations. This involves developing new core competencies and agreed training criteria for installing low-carbon heating systems and ensuring energy efficiency improvements are delivered to high standards, using quality and certification schemes, and specification standards. 27 BEIS internal analysis of BEIS (2016), ‘Building Energy Efficiency Survey’ ( Private buildings only. Excluding energy used for manufacturing and refining. Deliver further critical carbon savings and Energy White Paper28 commitments 24. Accelerating growth of the low-carbon heat network market through a series of complementary We will continue to provide funding through the Green Heat Network Fund and Heat Networks Investment Project to support current market growth, and develop the heat network zoning approach in England.29 This is part of a broader Heat Network Transformation Programme, in which we are investing £338 million (over 2022/23 to 2024/25). We will develop regulations to drive decarbonisation and deliver better consumer protections, all as part of a comprehensive transformation 25. Increasing the proportion of biomethane in the gas grid in Great We will deliver the Green Gas Support Scheme (GGSS) to support the injection of biomethane from anaerobic digestion (expected to deliver 2.8TWh of renewable heat per year in 2030/31). In the long term, we will explore the development of commercial-scale gasification and a potential biomethane support scheme to replace the GGSS after This Heat and Buildings Strategy aims to set out the immediate actions and long-term signals required to reduce emissions from buildings to near zero (between 0 and 2 • sets the context for decarbonising buildings • introduces other key aims to be progressed in parallel when decarbonising In 2019, the UK government set out a target to achieve net zero greenhouse gas emissions across the whole UK by 2050.30 This commitment, enshrined in the Climate Change Act (2008), means that we have 30 years to completely decarbonise the economy. But this presents substantial opportunities for the to grow skills, build diverse job markets, level up across the country, reduce bills by improving efficiency, tackle fuel poverty, have warmer and better buildings, and ensure our energy system is secure and fit for the future. We will take a phased and targeted approach to ensure a gradual transition to Net Zero. 28 BEIS (2020), ‘Energy white Powering our net zero future’ ( 29 Scotland uses district heating zones to identify priority areas to implement energy efficiency measures and enable coordinated action to develop and deliver long-term district heating plans ( district-heating/). This activity is regulated by Heat Networks (Scotland) Act 2021 ( 30 In this strategy we refer to this target as ‘Net Zero’. We have measured emission reduction by comparing all greenhouse gases to their equivalent tonnage of carbon dioxide. MtCO2e = mega tonnes of carbon dioxide

To ensure continued progress, we have set a series of targets to reduce near- and medium- term greenhouse gas emissions through our legally-binding carbon budgets. The fourth, fifth and sixth carbon budgets cover the periods 2023-2027, 2028-2032 and 2033-2037 respectively. In December 2020, the UK committed to an interim target to reduce economy- wide greenhouse gas emissions by at least 68% (compared to 1990 levels) by 2030 as part of our Nationally Determined Contribution towards delivering the goals of the Paris Agreement.31 Decarbonising buildings is central to that challenge. To meet our Net Zero goal, we urgently need to address the carbon emissions produced in heating and powering our homes, workplaces and public buildings. Energy is central to our lives, providing comfort and entertainment in our homes, as well as enabling healthy and productive workplaces. We use energy for heating and cooling, cooking, hot water, and other energy-using products. And while the electricity that powers our lighting and appliances is decarbonising fast, the majority of buildings still rely on burning fossil fuels for heating, hot water and cooking. There are about 30 million buildings in the UK.32 In total, these buildings are responsible for around 30% of our national emissions.33 The vast majority of these emissions result from 79% of buildings emissions and about 23% of all UK emissions.34 31 Further details about the Paris Agreement can be found agreement/the-paris-agreement. 32 ONS (2020), ‘Households projections for England’ ( BEIS (2020) ‘Non-domestic National Energy Efficiency Data-Framework (ND-NEED), 2020’ ( 33 BEIS (2021), 'Final UK greenhouse gas emissions national 1990 to 2019' ( And BEIS (2020), ‘Energy consumption in the UK 2020’ ( 34 BEIS (2021), ‘Final UK greenhouse gas emissions national 1990 to 2019’ ( Includes indirect and direct emissions but excludes international aviation and shipping. mega tonnes of carbon dioxide equivalent (MtCO2e) total emissions, 23% were due to heating buildings, with the largest proportion of this stemming from homes.35 35 Percentages are given to the nearest whole number. BEIS (2021), ‘Final UK greenhouse gas emissions national 1990 to 2019’ ( BEIS (2021), ‘Energy Consumption in the UK 2020’ ( consumption-in-the-uk). Includes indirect and direct emissions but excludes international aviation and shipping.
commercial, public sector and residential.36 36 BEIS (2021), 'Final UK greenhouse gas emissions national 1990 to 2019', ( Includes indirect and direct emissions but excludes international aviation and shipping. reasonably practicable to a minimum energy efficiency rating of band C45 by the end of 2030. This will mean warmer, healthier homes and lower energy bills. We have also set interim milestones for England, aiming to improve as many fuel poor homes as is reasonably practicable to band E by 2020 and band D by 2025, and in 2019 97.4% of low income households were living in properties with a fuel poverty energy efficiency rating of band E or better.46 Our approach to drive energy efficiency improvements in fuel poor households recognises that improving efficiency can help those in fuel poverty afford to keep warm. We published an updated fuel poverty strategy on Sustainable protecting vulnerable households in England47 in February 2021. In this Heat and Buildings Strategy, we consider how we can continue to reduce emissions from buildings while delivering economic and wider benefits, such as tackling fuel poverty and creating new jobs. This strategy builds upon the foundations set by the Ten Point Plan with initiatives such as the Public Sector Decarbonisation Scheme, already supporting 30,000 jobs across the sector since its launch. The UK’s Presidency of the 26th Conference of the Parties (COP26) under the United Nations Framework Convention on Climate Change, which will be hosted in Glasgow in November 2021, provides an opportunity for the UK to showcase the pioneering work being taken forward in the buildings sector, demonstrating our leadership in this sector to other countries. As action to decarbonise the buildings and construction sector is critical to meeting our Paris Agreement goals, we have organised a dedicated Cities, Regions and Built Environment Day on 11 November at COP26, which will showcase ambitious best practice from around the world. Leading up to COP26 we have published a comprehensive Net Zero Strategy48 – a cross- sector strategy that will set out the Government’s vision for transitioning to a net zero economy and making the most of new growth and employment opportunities across the UK. We hope that this strategy, along with other documents that have been and will be released this year, will help to raise UK and global ambition to tackle climate change by decarbonising buildings. 45 In accordance with our ‘Fuel Poverty Energy Efficiency Rating Methodology’ (2014) ( 46 BEIS (2021), ‘Annual fuel poverty statistics 2021’ ( poverty-statistics-report-2021). 47 BEIS (2021), ‘Sustainable protecting vulnerable households in England’ ( 48 BEIS (2021), ‘Net Zero Strategy’ (

1.4. Devolution and decarbonisation Decarbonising heat and buildings will require joined-up change throughout the UK, but also represents different opportunities and challenges across the four nations. This • introduces the current devolution arrangements across the UK • highlights the work of devolved administrations that sit alongside this strategy To tackle climate change while maximising economic and wider benefits across the UK, collaboration across England, Wales, Scotland and Northern Ireland will be essential49. We will continue to work closely with the devolved administrations, and with local leaders and businesses across the UK, as we develop the policies and proposals set out in this strategy. Decarbonising our heat and buildings is a joint endeavour across the United Kingdom. 49 Commitments in Scotland can be found in the ‘Energy Efficiency route map’ ( (2018) and Scotland’s Heat In Buildings Strategy (2021) ( scotlands-buildings/). Commitments for Wales can be found in their Energy Efficiency Strategy ( (2016). The Department for the Economy in Northern Ireland is currently leading the development of the Northern Ireland Executive’s new Energy Strategy ( to be launched by end 2021. The devolution settlements for Scotland, Wales and Northern Ireland50 are all unique, including some matters relating to heat and buildings policy.51 Given the balance between devolved and reserved competencies, there are opportunities for collaboration and leadership across all nations. Working together and coordinating our efforts where appropriate will help us achieve shared objectives relating to local government, planning, housing, the environment, and electricity and gas policy. In developing this strategy, we recognise that there is great variation across the UK in terms of the building landscape, with differences in the housing mix and the proportion of public sector and commercial and industrial buildings, as well as the activities by businesses. The way we heat our buildings also differs, with a much higher proportion of buildings in England connected to the gas grid than in Wales, Scotland and Northern Ireland. These differences bring different opportunities and challenges for decarbonisation. In recognition of the different opportunities for emission reductions across the UK, in their publication ‘Net Zero – The UK’s contribution to stopping global warming’52 (2019), the Climate Change Committee (CCC) recommended that the UK as a whole should reach net zero greenhouse gases by 2050 and that Scotland should reach net zero greenhouse gases by 2045.53 In 2020 the CCC also provided a recommendation for Wales to reach net zero We have set out the geographic extent of the policies covered in this strategy in the Current and planned activities. In addition to UK-wide strategies and policies, devolved administrations have previously developed, or are in the process of developing, their own strategies and detailed policy frameworks to best decarbonise their building stock. 50 Cabinet Office, Office of the Secretary of State for Scotland, Northern Ireland Office, and Office of the Secretary of State for Wales (2013), ‘Devolution of powers to Scotland, Wales and Northern Ireland’ ( 51 Heat network policy is devolved to Wales, Scotland, and Northern Ireland. Scotland recently enacted the Heat Networks (Scotland) Act 2021 ( which includes regulation related to heat network zoning, while Wales has introduced heat network policy in the context of the spatial planning document ‘Future The National Plan 2040’ ( 2040-0). We work closely with the devolved administrations in Scotland, Wales and Northern Ireland on heat network policy and regulation to secure consistency for the sector across Great Britain.
52 CCC (2019), ‘Net Zero – The UK’s contribution to stopping global warming’ ( 53 The UK and Scottish targets were legislated in 2019 in Westminster and Holyrood respectively. Northern Ireland does not currently have a separate target and is included within UK targets. Legislative policy proposals which would set emissions targets are currently being developed in Northern Ireland. 54 CCC (2020), ‘The path to Net Zero and progress on reducing emissions in Wales’ ( The Senedd legislated this Net Zero target in March 2021. Heating and cooling networks, but not the regulation of them, renewable energy incentive schemes, and encouragement of energy efficiency are devolved, therefore Wales is responsible for its own heat policy in relation to these matters. Wales’ net zero target is set in legislation alongside a series of 5-yearly carbon budgets (aligned with electoral cycles) and The Welsh Government published the Energy Efficiency Strategy55 in 2016, which set out the 10-year strategy for the period to 2026. The role of decarbonising buildings in delivering carbon targets for Wales is set out in the Welsh Government’s Low Carbon Delivery Plan, Prosperity for A Low Carbon Wales56.57 The next delivery plan for 2021-2025 will be published in November 2021. Welsh Government published a strategy on ‘Tackling fuel poverty 2021 to In 2018 the Scottish Government published the Energy Efficient Route Map59,which set out their plans for Scottish homes, businesses and public buildings to become more energy efficient over the period to 2040. Scottish Government agreed a new policy programme, which includes several actions to decarbonise buildings,60 and published a Heat in Buildings Strategy61 for Scotland in October 2021. This strategy sets out the longer-term vision and actions being taken deliver Scotland’s climate change commitments, maximise economic opportunities, and ensure a just transition which helps to address fuel poverty. The Fuel Poverty Act62 (2019) sets statutory targets for reducing fuel poverty, introduces a new definition of fuel poverty, and requires Scottish ministers to produce a comprehensive strategy to show how they intend to meet the targets. The final Fuel Poverty Strategy will be published in due 55 Welsh Government (2016), ‘Energy efficiency strategy’ ( 56 Welsh Government (2019), ‘Prosperity for A Low Carbon Wales’ ( 57 In line with the duties of public bodies under the Wellbeing of Future Generations Act (to set and publish objectives to show how they will achieve the well-being goals). 58 Welsh Government (2021), ‘Tackling fuel poverty 2021 to 2035’ ( 59 Scottish Government (2018), ‘Energy Efficient route map’ ( efficient-scotland-route-map/). 60 Scottish Government (2021), 'Scottish Government and Scottish Green draft shared policy programme' ( 61 Scottish Government (2021), ‘Heat In Buildings achieving net zero emissions in Scotland’s buildings’ ( 62 The National Archives (2019), ‘Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019’ (

In Northern Ireland, a consultation on policy options for a new Energy Strategy63 concluded in July 2021. Responses from this consultation have supported the development of a new Energy Strategy, which is due to be published before the end of 2021. The new Northern Ireland Energy Strategy’s vision is to achieve net zero carbon and affordable energy by 2050. The strategy will also provide detail on the strategic direction for decarbonising buildings and heat. Northern Ireland published their Fuel Poverty Strategy64 in 2011. The Department for Communities is responsible for developing a new Fuel Poverty Strategy, which will need to reflect a fair and just transition to net zero carbon and the role housing and energy efficiency plays in reducing carbon emissions. To ensure alignment with the content and timeframes of a number of new and emerging strategies in Northern Ireland, responses to the consultation on policy options for a new Energy Strategy65, as well as a call for evidence for a new Housing Supply Strategy66, will help inform future development of a new Fuel Poverty Strategy. Given the scale of infrastructural change, and the rate at which we typically renovate our buildings and replace our heating systems, meeting Net Zero by 2050 requires • create new, green jobs to boost our economy, drive growth and level up all parts • keep us on track to meet our carbon budget and fuel poverty commitments • raise public awareness and buy-in to change • build the capacity and capability of markets needed to achieve Net Zero • drive the evidence and innovation required to inform key infrastructural decisions 63 Department for the Economy (2021), ‘Consultation on policy options for the new Energy Strategy for Northern Ireland’ ( 64 Department for Communities (2011), ‘Warmer Healthier Homes – a new Fuel Poverty Strategy for Northern Ireland’ ( 65 Department for the Economy (2021), ‘Consultation on policy options for the new Energy Strategy for Northern Ireland’ ( 66 Department for Communities (2021), ‘Consultation on the new housing supply strategy call for evidence’ (

As well as offering rapid job creation, action on buildings also offers sustained employment opportunities in areas that will be essential for the transition to Net Zero. It is estimated that the UK low-carbon economy could grow more than four times faster than the rest of the economy between 2015 and 2030 and support up to 2 million jobs.67 Building on the projections stated in the Ten Point Plan,68 we project that the heat and buildings domestic market could support over 175,000 direct and indirect jobs by 2030 and 240,000 by 2035. We will see job creation across a range of sectors – from manufacturing to services, installation to research and development. While different technologies and different pathways to Net Zero can deliver different social and economic opportunities, in every scenario we expect significant levels of job creation across the whole of the UK. The more we can increase the energy efficiency of our buildings, and the sooner we make the switch to low-carbon heating, the greater the reduction in lifetime emissions we can achieve.
Delaying action could prevent us from meeting near-term carbon budget and fuel poverty targets, making it harder to achieve our targets in later years by increasing the emissions We want our transition to low-carbon heating to provide social and economic benefits. Our policy paper on Sustainable protecting vulnerable households in England69, published February 2021, sets out our plan to meet our fuel poverty targets while decarbonising housing.70 This means that fuel poor households will be among the earliest to benefit from our Minimising disruption and using trigger points We plan to transition to Net Zero in a way that minimises disruption and maximises consumer choice. For example, we will look to avoid scrappage and unnecessarily ripping out fully 67 Ricardo Energy and Environment for the CCC (2017) ‘UK business opportunities of moving to a low-carbon economy’ ( 68 BEIS (2020), ‘The ten point plan for a green industrial revolution’ ( 69 BEIS (2021), ‘Sustainable protecting vulnerable households in England’ ( 70 Fuel poverty strategies have been published by Wales ( Scotland ( and Northern Ireland (

functional heating systems before they come to the end of their lifecycle. We will help smooth this transition by using natural trigger points where possible, such • When people replace heating appliances as they come to the end of their life • When there are changes to building use or occupancy or ownership • When building and renovation works are carried out We know that these trigger points vary across sectors, may not occur very frequently, and take time to produce results – traditional domestic heating systems last approximately 15 years and homes are sold on average every 18 years. Therefore, we need to act now if we are to make the most of these trigger points throughout the 2030s and 2040s. From 2035, we intend to phase out the installation of new and replacement natural gas boilers71 in line with replacement cycle timelines, to ensure that almost all heating systems used in 2050 are low-carbon.72 When a new technology is introduced, it can take time to understand how consumers interact with it, and therefore deployment can start slowly. Some technologies can take more than 30 years to reach near saturation.73 Therefore, action to encourage uptake of low-carbon heating and energy efficiency measures (supported by enabling measures and regulation) is needed and are being put in place now, to encourage uptake of deployment by 2050. Whilst we are working on boosting deployment of existing low-carbon products, such as heat pumps and heat networks, in areas that are low-regrets (including new-builds and off gas grid properties), we are also researching whether hydrogen for heating is a viable consumer proposition. By 2026, following trials, we will have more certainty about whether hydrogen for heating is a suitable, low cost and attractive technology, and will take strategic decisions on its role. We will take a gradual approach to ramping up deployment will ensure that consumers have time to prepare themselves for the transition to low-carbon heating, and our long-sighted regulations will give consumers clarity about the direction of travel. We will also need to introduce minimum building energy performance requirements and start to phase out the worst-polluting fossil fuel heating in the 2020s, so that we can prepare buildings for only installing low-carbon heating systems by the early to mid-2030s. We need to ensure that changes to minimum standards for buildings are communicated well in advance, so that businesses and households have time to prepare. 71 In the next decade we will have taken important strategic decisions on the role of hydrogen in heating and will know more about its regional suitability, therefore we aim that by 2035, hydrogen-ready boilers are not installed in areas that do not and will not have access to a supply of low-carbon hydrogen in the future. 72 Subject to technological developments and reserved decisions, Scottish Government are looking to phase out the installation of new replacement fossil fuel boilers from 2025 in off-gas-grid areas and from 2030 in on-gas-grid areas ( 73 Les Shorrock (2011) ‘Time for Change’, Proceedings of the European Council for an Energy Efficient Economy (

Building and preparing markets and infrastructure Supply chains will need time to grow. This decade we will need to prepare and grow the market, so that low-carbon technologies can be deployed across all buildings in the 2030s and To help meet increasing UK demand, we need to begin to scale-up UK production, manufacture and supply. This may range from entire systems to specialised high-value components of low-carbon heating systems, such as heat pump housing and controls, valves and pipework. Growing UK manufacture and supply of heat pumps to over 300,000 units a year by 2028 could increase the rate of installation, grow opportunities for exports, and create more than 10,000 manufacturing-related UK jobs. In consultation with stakeholders, we have therefore identified an ambitious minimum market capacity – to be able to deploy at least 600,000 hydronic heat pumps74 per year by 2028 – to galvanise industry to increase UK heat pump deployment.75 This is a ‘no-regrets’ target as it is necessary even if hydrogen were to become the primary fuel source for heating buildings. We also believe that developing the market for low-carbon heat networks will be a no- regrets action, in recognition of the Climate Change Committee’s recommendation for around 18% of UK heat to come from heat networks by 2050 as part of a least cost Large-scale infrastructure, such as electricity, gas and heat networks, can take time to develop and install. Therefore, we need to take action early to prepare, develop and invest in this With this preparation and growth, the UK aims to become a world-leader in low-carbon heat and building technologies, bringing new products to the market, industrialising and scaling-up production in the UK. We will look to grow our exports of goods and services, so that the rest of the world can also benefit from UK innovation and expertise.
Informing decisions and future policy Leaving the decision to invest in hydrogen for heat later than the mid-2020s would bring considerable risk of limiting its potential role. This is because there is a likely need for both major construction and operation of new infrastructure. Therefore, we intend to make strategic decisions by 2026, including whether hydrogen is safe and feasible to use as a heat source and the key enabling steps required. More broadly, the action we take in the 2020s can be used to test and evaluate different approaches to decarbonisation. This will inform our evidence base, from which we can develop new policies and make informed decisions regarding the best pathway to Net Zero. We need to start the transition now to meet our emissions reductions targets cost- effectively, minimise disruption and maximise benefits for everyone. 74 Hydronic heat pumps are those that use air-to-water or ground-to-water systems. 75 We anticipate approximately 200,000 of the 600,000 target to come from new build domestic properties. Decarbonising how we heat our buildings will create significant demand for low-carbon technologies and skills. This demand will need to be matched by the key markets manufacturing, supplying and installing these materials and measures. The UK will look to industry to invest here in the UK, to scale-up UK manufacture and production and to share the rewards of UK investment through export opportunities, which will support global decarbonisation efforts and could support over 240,000 jobs across the sector in • the creation of new specialist low-carbon roles suiting new entrants to the job • existing electrical and heating-related professionals, and those in high-carbon industries, to upskill and retrain to acquire jobs in the growing low-carbon market • investment into increasing the capacity of existing UK-manufactured solutions • forward-thinking investments into new UK facilities, bringing new technologies to the UK market, with a view to export • investment into deprived UK regions as part of the levelling up agenda • improvements to residents’ standard of living and health, reduced costs of bills, and reduced levels of unemployment • UK leadership, sharing our expertise and technologies with countries across the Setting out the importance, urgency and scale of opportunity for buildings decarbonisation to drive green recovery. The transition to Net Zero represents a huge economic opportunity for the UK. We have the oldest building stock in Europe76, which will need to be almost completely decarbonised to We will need to deploy energy efficiency improvements and install new, low-carbon heating systems on an unprecedented scale, creating new employment opportunities across the 76 Buildings Research Establishment (2020), ‘The Housing Stock of the United Kingdom’ (

country, new skills, new and expanded factories, and enabling the UK to seize the benefits of exporting our low-carbon goods and expertise. Work tends to be labour-intensive, so scaling- up delivery supports more jobs per pound spent than in most other areas of the transition. Upgrading our building stock offers significant benefits beyond jobs and carbon greater comfort, improved health outcomes, and reduced energy bills. These benefits will be felt by households and businesses in all corners of the UK. The economic benefits of upgrading our building stock have been brought into sharp relief by the COVID-19 pandemic. The Confederation of British Industry77, CCC78, and International Energy Agency79 have all highlighted the importance of decarbonising buildings as part of a post-COVID economic response. An Ipsos MORI survey in April 2020 found that 58% of respondents feel that UK government actions should prioritise climate change in the post- We are dedicating significant government funding to tackle heat and energy efficiency in a way that will boost the economy, improve the lives of individuals, and maximise emission reduction – while minimising the overall public expenditure on Net Zero in the long run. Our full list of activities is included at the end of this strategy, in Annex 2: Current and planned activities for In his Plans for Jobs speech in July 202081, the Chancellor set out a suite of measures to support buildings upgrades. This included funding for the Green Homes Grant scheme (of which £500 million was for the Local Authority Delivery (LAD) scheme in England), £1 billion to decarbonise public sector buildings, including schools and hospitals, and £50 million to test innovative retrofitting approaches in social housing. Further funding for action on buildings in 2021-22 has been made available through the 2020 Spending investing £1 billion to make our homes and public sector buildings greener, warmer and more energy efficient; allocating funding to help some of the poorest households improve their building’s energy performance and switch to low-carbon heating through the Home Upgrade Grant (HUG) in England; and retrofitting social housing as part of the Social Housing Decarbonisation Fund (SHDF). We also extended the Domestic Renewable Heat Incentive82 for an additional year at Budget 2020. The scheme is now due to close at the end of March 2022. 77 CBI (2020), ‘Priorities for a green recovery following the coronavirus pandemic’ ( 78 CCC (2020), ‘Take urgent action on six key principles for a resilient recovery’ ( 79 IEA (2020), ‘Sustainable Recovery’ ( 80 Ipsos MORI (2020), ‘Two thirds of Britons believe Climate Change as serious as Coronavirus and majority want Climate prioritised in economic recovery’ ( climate-change-serious-coronavirus-and-majority-want-climate-prioritised). 81 HM Treasury (2020), ‘A Plan for Jobs speech’ ( 82 Domestic Renewable Heat Incentive (RHI) (

We boosted energy efficiency spending to £1.3 billion83, providing an additional £300 million extra funding for home energy efficiency and low-carbon heating upgrades to help lower income households cut emissions and save money on bills, in March 2021. This funding provides an additional £100 million for Wave 1 of the SHDF and £200 million for a third phase of LAD. LAD Phase 3 forms part of a single funding opportunity, alongside £150 million of funding for HUG Phase 1, through the Sustainable Warmth competition.
84 The competition was launched on 16 June 2021, and we are aiming to grant funding to successful Local Authorities towards the end of 2021, with delivery continuing through to March 2023. We are boosting funding across schemes to help decarbonisation across the UK building stock, we are investing a • £800 million into the SHDF over financial years 2022/23 to 2024/25 • £950 million into the HUG over 2022/23 to 2024/25 • £1425 million into the Public Sector Decarbonisation Scheme over 2022/23 to 2024/25 • £450 million into the new Boiler Upgrade Scheme over 2022/23 to 2024/25 • £338 million into the Heat Network Transformation Programme over 2022/23 to 2024/25 We remain committed to reviewing and improving our suite of schemes, to deliver the greatest overall benefits to the economy, society, and the environment. Investing in the green recovery can support up to 240,000 low-carbon buildings-related jobs by 2035, with a huge range of skills and opportunities for new entrants and experienced workers looking to transition to the green buildings sector. As well as offering rapid job creation, action on buildings also offers sustained employment opportunities in areas that will be essential for the transition to Net Zero. It is estimated that the UK low-carbon economy could grow more than four times faster than the rest of the economy between 2015 and 2030 and support up to 2 million jobs.85 We will see job creation across a range of sectors – from manufacturing to services, installation to research and development. While different technologies and different pathways to Net Zero can deliver different social and economic opportunities, in every scenario we expect significant levels of job creation across the whole of the UK. 83 BEIS (2021), ‘Government boosts energy efficiency spending to £1.3 billion with extra funding for green homes’ ( 84 BEIS (2021), ‘Apply for the Sustainable Warmth competition’ ( 85 Ricardo Energy and Environment for the CCC (2017) ‘UK business opportunities of moving to a low-carbon economy’ (

Building on the projections stated in the Ten Point Plan86, we project that the decarbonisation of the heat and buildings sector, through installing energy efficiency measures, more efficient products and low-carbon heating systems, could support up to 240,000 direct and indirect jobs The efficient products sector already supports the largest number of full-time employment opportunities (about 114,000 FTE) of any sector in the low-carbon and renewable energy economy.87 HM Government’s 2019 Energy Innovation Needs Assessment on building fabric estimated that the growth of UK exports in fabric efficiency alone could add over £720 million The increase in deployment of low-carbon heating systems over the coming decade will require industry to rapidly increase the number of trained, high-quality installers. However, social research with installers of heating systems in off gas grid areas of England and Wales (May 2021)89 has shown that existing heating installers are likely to retrain in response to growing demand. In addition, the Heat Pump Supply Chain Research Project published in December 2020 has shown how confidence in demand can create jobs by encouraging manufacturers to move operations to the UK or expand existing operations.90 We have demonstrated opportunities for job creation through some of our current policies and • BEIS estimates that the Local Authority Delivery (LAD) Scheme, Phases 1 and 2, will support on average 8,000 jobs per year in England between April 2020 – March 2022. The Sustainable Warmth competition, covering LAD Phase 3 and HUG Phase 1, will support almost 8,000 jobs between January 2022 and March 2023. 91 • One of our whole-house retrofit projects (WHR-104) is estimated to require the equivalent of over 50 FTE to retrofit 100 homes by March 2022. This covers a variety of specialisms, including project management, production and construction, as well as any • The £1 billion Public Sector Decarbonisation Scheme is projected to support up to 30,000 jobs in the low-carbon and energy efficiency sectors.92 86 BEIS (2020), ‘The ten point plan for a green industrial revolution’ ( 87 This covers the design, manufacture and installation of energy efficient products such as building materials and heating appliances but excludes smart products such as TVs and refrigerators. ONS (2020), ( 88 Vivid Economics et al. (2019) ‘Energy Innovation Needs building fabric’ commissioned by BEIS ( y-innovation-needs-assessment-building-fabric.pdf). 89 BEIS and Impact Research (2021), ‘Social research with installers of heating systems in off gas grid areas of ( research-installers-off-gas-grid-heating.pdf). 90 BEIS (2020), ‘Heat pump manufacturing supply chain research project’ ( 91 BEIS (2021), ‘Apply for the Sustainable Warmth competition’ ( 92 BEIS (2020), ‘Public Sector Decarbonisation Scheme’ ( sector-decarbonisation-scheme-psds). Government intends to create jobs by providing a long-term framework for transformational change, which will help UK markets grow. We will look to the market to drive this work forward, while government will seek to provide certainty and stability for businesses by setting clear and timely targets and standards. We will also continue to invest in the development of innovative approaches to decarbonisation, such as hydrogen, and employ a range of enablers to support delivery, including green finance and skills support. Creating the low-carbon workforce we need will require investment in skills – both through retraining the existing workforce and developing the next generation of skilled • highlights the case for investing in skills • sets out the ways in which government and industry can work together to achieve There are over 140,000 plumbers and heating and ventilation engineers in the UK93, there are 114,000 FTE jobs in the efficient products sector94, and 2.4 million in construction95. Approximately 80% of people who will be working in the UK in 2030 are already working today.96 We know that the transformational change needed to deliver the quantity and quality of building improvements by 2050 will impact those currently working in built environment and heating-related roles, including natural gas engineers. We predict that, as low-carbon markets’ demand for specialist skills grows, the current need for natural gas boiler installers will reduce.
Together with industry, we need to encourage current natural gas engineers, electricians, and those with transferrable skills in complementary sectors, to retrain and specialise in smarter, greener and cleaner technologies. As industry provides new training opportunities for key buildings-related sectors to learn ‘green skills’, this can help preserve and grow key sectors of the economy.97 According to a recent Construction Industry Training Board (CITB) survey, approximately 90% of builders stated they would be willing to retrain, as demand for new roles and skills’ changes in the future. We will use the findings of social research with installers of heating systems in off gas grid areas of England and Wales (May 2021)98 and our Heat Network Skills Review Report 93 NOMIS (2020), ( 94 ONS (2020), ‘Low carbon and renewable energy economy, 2018’ ( 95 C. Rhodes (2019), ‘Construction statistics and policy’ ( 96 Industrial Strategy Council (2019), ‘UK Skills Mismatch in 2030’ ( 97 C. Rhodes (2019), ‘Construction statistics and policy’ ( 98 Impact Research (2021), ‘Social research with installers of heating systems in off gas grid areas of England and ( research-installers-off-gas-grid-heating.pdf). (September 2020)99 to better understand the existing skills base and how we can grow these In response to advice from the CCC in their 25 June 2020 progress report100, we are collaborating between departments and across administrations to ensure skills match the needs of Net Zero. We launched the independent Green Jobs Taskforce101 with key industry bodies to deliver 2 million Net Zero jobs by 2030 by producing an action plan for Net Zero skills across a range of sectors. The taskforce will pinpoint the skills needed in the near and long term, create high-quality green jobs and a diverse workforce and manage the transition for those working in high-carbon industries. The action plan for England will be published next In October 2020, the Department for Education announced that the National Retraining Scheme102 would be integrated with the new £2.5 billion National Skills Fund103. The National Skills Fund will help adults to train and gain the valuable skills they need to improve their job prospects. It will support the immediate economic recovery and future skills needs by boosting the supply of skills that employers require. The National Retraining Scheme includes the Construction Skills Fund, which supports the development of construction onsite training hubs. We have also made £18 million available to support technical bootcamps for training professionals in clean growth, electrotechnical, welding or engineering. An invitation to tender for skills bootcamps104 across England was published in January 2021 and the available bootcamps can be found on our List of Skills Bootcamps105. We are delivering specific policies and funds to support high-quality training, which will enable energy efficient low-carbon heating to be deployed. • Alongside the Green Homes Grant Voucher Scheme, the Government launched a £6.9 million Skills Training Competition106, designed to get tradespeople professionally trained to deliver the Government’s current and future home decarbonisation schemes. Eighteen successful applicants have received funding to train individuals with existing skills and those new to the sector, along with support for installation companies to gain PAS 2030 or MCS accreditation and Retrofit Assessor and Coordinator training.107 99 BEIS (2020), ‘Heat Network skills review’ ( 100 CCC (2020), ‘Reducing UK 2020 Progress Report to Parliament’ ( 101 BEIS and DfE (2020), ‘UK government launches taskforce to support drive for 2 million green jobs by 2030’ ( 102 DfE (2019), ‘National retraining scheme’ ( 103 DfE (2020), ‘National Skills Fund’ ( 104 DfE (2021), ‘DfE - Skills Bootcamps - Digital & Technical’ ( tender.service.gov.uk/Notice/000239-2021). 105 DfE (2021), ‘List of Skills Bootcamps’ ( 106 BEIS (2020), ‘Green Homes Grant skills training competition’ ( 107 BEIS (2021), ‘Green Homes Grant skills training details of successful applicants’ (

• To support delivery of the £1 billion Public Sector Decarbonisation Scheme, we also launched a £32 million Public Sector Low Carbon Skills Fund108 to ensure that public sector organisations have access to the expert skills needed to identify, develop and deliver decarbonisation projects. • As part of BEIS’s £25 million Hy4Heat programme, Energy and Utility Skills has delivered a competence framework for training, accreditation, and registration of gas engineers working with hydrogen.109 There are many factors we need to consider to ensure that this transition is as smooth as possible and tackle any barriers to training. We understand the importance of encouraging and incentivising attendance at training. The Centre for Sustainable Energy’s Future Proof pilot in Bristol (one of our selected local supply chain demonstration projects110) has partnered with the Green Register to produce a training programme that ensured individuals were paid when they attended training. It saw positive outputs as a result. We will continue to set quality standards, that can guide and be embedded into training, and provide consumer protection by ensuring workers are sufficiently skilled and delivering the high-quality standard interventions required. Further information on quality standards is detailed in section 6.3 Consumer Protection. We are committed to communicating signals for investment to provide certainty and stability for businesses to invest in training. We include projections for technology-specific skill demand in the tables on Skills demand per technology-type to provide a clear trajectory for demand. We will also look to manufacturers to continue to provide quality training to installers. Examples of industry exemplifying the action needed to upskill the workforce • Nordic Heat, LOGSTOR and the Swedish Energy Agency are sharing their expertise with the workforce of Stoke-on-Trent by training over 200 students a year in designing, supplying and installing district heating through a new academy. They are also working with Bridgend County Borough Council, Energy Systems Catapult, innovative heat businesses and the local college to develop an academy to support smart system and heat decarbonisation training and skills in the area.111 • In August 2021, the Heat Pump Association (HPA) launched a new heat pump installation training course for existing heating engineers112.
This course can be completed in one week, including a low temperature heating and hot water qualification 108 BEIS (2020), ‘Public Sector Low Carbon Skills Fund (closed)’ ( 109 Energy & Utility Skills (2021), ‘Hydrogen Competency Framework Report’ ( 110 BEIS (2020), ‘Selected demonstration summaries’ ( demonstration-projects/local-supply-chain-demonstration-projects-summaries). 111 Stoke-on-Trent College (2021) ‘New academy will heat up region’s job prospects’ ( prospects/#:~:text=Stoke%20on%20Trent%20College%20has,the%20UK's%20newest%20energy%20infrastructu re.&text=Peter%20Anderberg%2C%20founder%20of%20Nordic,partners%20involved%20in%20the%20project). 112 Heat Pump Association (2021), ‘New training course launched by the Heat Pump Association’ (

developed by the Chartered Institute of Plumbing and Heating Engineering (CIPHE). These courses have support from both heat pump and boiler manufacturers. As well as upskilling the existing workforce, we will also need to attract new entry-level workers. This is partly because, according to the Gas Safe register Decade Review, a significant proportion of the current workforce are nearing retirement age and therefore may be less incentivised to change specialism.113 Attracting new entrants to the sector also provides a great opportunity to diversify the workforce. With this in mind, we are working with the Department for Education to review the existing apprenticeship framework for heating and plumbing and developing a Heat Network Skills Programme to increase the recruitment pool and capability of the workforce for Great Britain. We are working with the Institute for Apprenticeships and Technical Education to convene a sustainability advisory group • encourage trailblazers to align apprenticeships to Net Zero and wider sustainability • identify which apprenticeships directly support the green agenda • identify where there are opportunities to create new green apprenticeships In September 2020, the Prime Minister announced the Lifetime Skills Guarantee.114 This was launched in April 2021 and backed by £95 million in government funding in 2021/22. This will provide an opportunity for adults in England without an A-Level or equivalent qualification aged 19 and over to be offered a free, fully-funded college course – providing them with skills valued by employers. This represents a long-term commitment to remove the age constraints and financial barriers for adults looking for their first level 3 qualification. A list of available courses, eligibility and how to apply can be found on GOV.UK.115 Skills demand per technology-type Building fabric – energy efficiency Where we are now Sparse and inconsistent educational provision for new entrants as thermal efficiency retrofitting does not generally feature in formal skills There are no Standard Industrial Classification (SIC) codes specific to the energy efficiency retrofit sector. A current lack of installers, retrofit assessors, and retrofit co-ordinators is a major barrier to decarbonising the UK's building stock. 113 Gas Safe Register (2017), ‘Decade Review’ ( 114 Prime Minister’s Office, 10 Downing Street (2020), ‘Major expansion of post-18 education and training to level up and prepare workers for post-COVID economy’ ( post-18-education-and-training-to-level-up-and-prepare-workers-for-post-covid-economy). 115 DfE (2021), ‘Free courses for jobs’ ( 116 BEIS (2020), ‘Selected demonstration summaries’ ( demonstration-projects/local-supply-chain-demonstration-projects-summaries). According to a Construction Industry Training Board (CITB) survey, approximately 90% of builders stated they would be willing to retrain, as demand for new roles and skills’ changes in the future.117 Although one- third of those surveyed stated that their business had not, to date, provided them with any decarbonisation-related training.118 Retrofit jobs are typically undertaken by a combination of highly specialised professionals and generalist builders. • Energy efficiency installers, levels 2-4: 105,000 • Energy efficiency assessors, levels 2-4: 15,000 • Retrofit co-ordinators, level 5: 10,000 Estimated training demand timeline (according to CITB)120 • 1-4 training facilities and courses to 12,000 people per year • 5-10 training to 30,000 people per year There are British Standards Institution (BSI) standards in place for energy efficiency retrofit. PAS 2030 and PAS 2035 for domestic buildings and PAS 2038 for non-domestic buildings. We will look to incentivise certification to this standard and will work with industry to support training and new routes of entry in key skills shortage areas. There are a wide variety of courses available, some examples • Nationally accredited Retrofit Co-ordinator course by the Retrofit • Online Carbonlite Retrofit course122 by the Association for Environmentally Conscious Buildings • Energy Efficiency Measures for Older and Traditional Buildings course, by the Environment Study Centre (quality-assured by CITB, resulting in an award from the SQA) • Green Register also provide a range of ‘middle-level’ courses 117 Eunomia (2021), 'Building Skills for Net-Zero' for CITB, p. 126 ( 118 Eunomia (2021), 'Building Skills for Net-Zero' for CITB, p. 127 ( 119 BEIS analysis based on the Energy Innovation Needs Assessment. Vivid Economics et al. (2019) ( y-innovation-needs-assessment-building-fabric.pdf). 120 Eunomia (2021), 'Building Skills for Net-Zero' for CITB, p. 37 ( 121 The Retrofit Academy ( 122 The AECB CarbonLite retrofit online training course (

Where we are now According to the Microgeneration Certification Scheme (MCS) database, the UK currently has approximately 1,100 qualified heat There are 50,000 F-gas certified installation engineers covering all sectors124 , however very few in the heat pump sector. To deploy more split heat pump systems125, more heat pump installers will need F-gas According to the Gas Safe Register126, there are over 130,000 registered gas engineers and our analysis suggests 50% would be willing to retrain to install low-carbon heating systems, if there is Heat pump installation must be compliant with Part L and Part P of the Building Regulations. These regulations relate to energy performance of buildings and electrical safety respectively, and installers have a duty to ensure compliance. Existing heating engineers can be upskilled to install heat pumps in one week or less. For new entrants with no heating installation experience, it is expected to take around three to four years to train as a heat pump installer via an apprenticeship or managed To become an MCS accredited heat pump installer • level 2/3 NVQ in domestic plumbing • on-the-job training for around 6 months Estimated demand timeline (according to CITB)130 123 According to the MCS installer database.
124 BEIS (2020), ‘Heat pump manufacturing supply chain research project’ ( 125 Split heat pump systems have separate units (indoor and outdoor) that can be up to about 30 metres apart, circulating a refrigerant to heat or cool a building. Many split heat pump systems use hydrofluorocarbons – a type of fluorinated gas (F-gas) – as their refrigerant. Conversely, monobloc systems house most components in an exterior unit without the need for refrigerants to enter the building, and therefore do not require F-gas certified 126 Gas Safe Register (2020), ‘Gas Safe at a glance’ ( 127 CIPHE, GSHPA, HPA, Liquid Gas UK, OFTEC and SEA (2019), ‘Installer Survey October 2019’ ( 128 BEIS estimate based on BPEC Level 3 Diploma in Plumbing and Domestic Heating ( 129 BEIS analysis based on the Energy Innovation Needs Assessment, Vivid Economics et al. (2019) ( y-innovation-needs-assessment-building-fabric.pdf). 130 Eunomia (2021), 'Building Skills for Net-Zero' for CITB, p.40 (

• 1-4 up to 7,500 installers trained per year • 5-10 up to a peak of 15,000 installers trained per year Analysis conducted by the Heat Pump Association, based on deployment of 300,000 heat pumps installed in 2025 and 1 million installed in 2030, suggests that we will need at • 12,400 heat pump installers by 2025 Government is working closely with industry to ensure that appropriate high-quality training is available, both for new entrants to the sector and existing heating installers who do not have heat pump experience. In August 2021 the Heat Pump Association launched a new course, which aims to improve consistency of training for installers with previous heating experience (such as oil and gas engineers).132 Manufacturers have said that they have capacity to train 7,000 heat pump installers We are working with the further education sector to increase and improve the availability of training and apprenticeships. We have also commissioned and conducted research to improve our understanding of the existing installer workforce. Previous BEIS research found that 72% of off-gas-grid heating installers without heat pump experience would upskill to install heat pumps, if demand for fossil fuel heating decreased.134 Therefore, we anticipate that, if training is taken up by existing heating engineers, current training capacity is sufficient to ensure we have enough heat pump installers in the future. BEIS has also established an Electrification of Heat Task Group and a Net Zero Buildings Council to consider any barriers to upskilling heat 131 Heat Pump Association (2019), ‘Building the installer base for net zero heating’ ( 132 Heat Pump Association (2021), ‘New training course launched by the Heat Pump Association’ ( 133 Heat Pump Association (2019), ‘Building the installer base for net zero heating’ ( 134 BEIS (2021), ‘Heating systems in off gas grid installers’ experiences and attitudes towards low carbon heating’ ( experiences-and-attitudes-towards-low-carbon-heating). Where we are now There are no standard industrial or occupational codes (SIC/SOC) specific to the heat network sector and no heat network specific qualification is currently available. UK heat network companies already upskill their workforce through in- house training programmes (including Guru Systems, Ramboll UK, and Sweco) and have seen significant staff growth (Engie, E.ON, SSE and However, our Heat network skills review noted potential intensified gaps due to individuals moving out of the sector, and a lack of science, technology, engineering and mathematics graduates and diverse talent Heat networks require a multi-disciplinary skillset. Skills needed • control systems and programmable logic controller (PLC) Estimated demand timeline (according to CITB)136 • 1-4 9,500 additional FTE per year, predominantly specialist • 5-10 reduction rate of training to 866 additional FTE per • Over 10 reduction in numbers required - 1,200 FTE per year The Heat Network Industry Council estimates that the heat network sector could create between 20,000 and 35,000 direct additional jobs by Some indirect upskilling is being enabled through the Heat Networks The Heat Network Skills Programme seeks to create a competitive fund for supply chains and training and increase the recruitment pool and its 135 BEIS (2020), ‘Heat network skills review’ ( 136 Eunomia (2021), 'Building Skills for Net-Zero' for CITB, p. 41 ( 137 Heat Network Industry Council Offer (2020). 138 BEIS (2017), ‘Heat Networks Delivery Unit’ (

capability. A full appraisal to identify the most effective delivery route will be carried out over the course of 2021/22. The Green Heat Network Fund will require applicants to make commitments, aligned with Build Back our plan for growth, and result in the projects investing in local infrastructure, skills, and Where we are now Hydrogen boiler engineers and home retrofitters will likely require similar expertise and training as natural gas boiler engineers. However, existing natural gas boiler engineers may still require some additional training to familiarise themselves with the differences between using and installing products that use hydrogen as a fuel source, in contrast to natural gas. As part of BEIS’s Hy4Heat programme, Energy and Utility Skills developed a competency framework which included an initial analysis of the additional skills, knowledge and understanding which would be required for natural gas engineers to transition to hydrogen.139 Further complementary training to improve consideration of other energy needs of the whole building (such as fabric efficiency, smart technologies and storage systems), alongside their heating appliance, could be beneficial to some installers. All gas installers (registered with Gas Safe) would require additional Estimated demand timeline (according to CITB)140 • 1-4 existing gas installers will be able to retrain, with an additional 200 FTE per year on average • 5-10 existing gas installers can continue re-fitting with hydrogen-ready boilers and begin conversion as hydrogen becomes available. An average of approximately 1,500 additional BEIS’ Hydrogen Skills and Standards for Heat programme is further developing standards for hydrogen gas installations and installers to re- purpose existing natural gas infrastructure to be used with hydrogen downstream of the emergency control valve (ECV). The standards developed will define the required criteria when using hydrogen to safely repurpose existing natural gas equipment, design and install new pipework and appliances.
This work will include engaging with potential training providers. 139 Energy & Utility Skills (2021), ‘Hydrogen Competency Framework Report’ ( 140 Eunomia (2021), 'Building Skills for Net-Zero' for CITB, p.34 (

Paul Leedham is the Managing Director of Matrix Energy Systems141, a Sheffield-based MCS certified installation company. He has a passion for heat pumps and has grown to become a leading provider of intelligent renewable energy, heating and cooling solutions in both domestic and Matrix are certified to install several renewable technologies air source heat pumps, ground source heat pumps, biomass boilers, and solar thermal and solar photovoltaic panels. To date, Paul and his team have delivered more than 1,000 renewable energy projects across the UK. He supports consumers on their journey to adopting renewable energy solutions, from design to installation. They install on 30 to 50 sites per year, most of which are integrated systems with more than one technology. Approximately 50% of these installations are not connected to the electricity or gas grid. Matrix have won ten national awards over the last six years in recognition of their quality heat pump installations. They recently scooped both Air Source Heat Pump Installer of the Year and Ground Source Heat Pump Installer of the Year at the National ACR & Heat Paul aims to grow his business organically while developing new talent entering the market. Paul authored the BPEC (British Plumbers Employers Council) Heat Pump Installation Training Course and is working with MCS to identify the skills requirements for the growing heat pump installation sector. “When I first launched the business, it was really challenging due to the immaturity of the market but I’ve worked really hard to make a success of it and grow the business to where we are now. There is lots of opportunity on the horizon and we are working with MCS to make it simpler and easier for others to join the sector. I’m now giving guidance to fossil-fuel-based installers on how they can make the move into renewables. Heat pumps are a well-established, proven technology that offer immediate and substantial carbon savings compared to fossil fuel heating systems.” “Heat pumps not only maintain a comfortable and stable temperature throughout the day but can also allow for the ‘smart’ consumption of heat. I’ve worked with several consumers to tailor their heating installation to their own preferences and help them lower their fuel bills and save money by shifting heat demand.” Paul Leedham, Managing Director of Matrix Energy Systems. 141 Matrix Energy Systems ( 142 ACR stands for air-conditioning and refrigeration. Improving our homes and buildings comes with huge benefits to quality of life and economic activity – offering a unique opportunity to level up deprived regions across the • sets out the opportunity and ambition for using buildings as a lever for levelling up • gives examples of how policy action is targeted to achieve this We need to decarbonise and support clean growth in every region of the UK. This means substantial opportunities for local investment and job creation. The Northern Powerhouse, Midlands Engine, and rural communities represented by Britain’s Leading Edge have all highlighted the importance of low-carbon investment to their future economic growth. The Government will ensure that the benefits of our growing low-carbon economy are shared fairly in every region. We will target areas of greatest need by encouraging manufacturing and training to provide jobs and we are already providing funding where it is most appropriate, supporting low income and fuel poor households, social housing tenants, and vulnerable Tangible, targeted benefits can be achieved through action to upgrade poor-performing buildings. This is supported by research conducted by the Energy Efficiency Infrastructure Group143, which found a correlation between areas of deprivation and homes with low thermal efficiency and high-carbon heat sources in England. The same report explored the incidence of fuel poverty in England and found it to be typically higher outside of the South East, particularly in rural areas including Cornwall, Cumbria and Lancashire. Therefore, our ambition (as set out in the Clean Growth Strategy144) to upgrade as many homes as possible to EPC band C by 2035, where practical, cost-effective and affordable, and action to phase out high-carbon fossil fuel heating in off-gas-grid buildings, can deliver broader benefits to deprived areas. By its nature, installing energy efficiency measures and new heating systems requires local supply chains. It can also tap into the network of UK supply chains and SMEs, supporting the 143 EEIG (2020), ‘Rebuilding for Resilience - energy efficiency’s offer for a net zero compatible stimulus and recovery’ ( offer-for-a-net-zero-compatible-stimulus-and-recovery/). 144 BEIS (2017), ‘Clean Growth Strategy’ (

support for low income and fuel poor homes can help to level up different regions across the UK. 145 BEIS (2021), ‘Fuel poverty detailed tables 2021’ ( detailed-tables-2021). In our policy paper on ‘Sustainable protecting vulnerable households in England’, BEIS (2021) ( in-england), we announced an update to the fuel poverty metric (from Low Income High Cost to Low Income Low 146 For Scotland, fuel poverty is defined in section 3 of the ‘Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019’ ( According to this definition, Scottish fuel poverty averages at 25%. Scottish Government (2020), ‘Scottish house condition 2018 key findings’ ( based on a sample size of 2,905. For further information please also ‘Scottish House Condition methodology notes 2018’ (

efficiency of buildings in specific regions can help level up the region. 147 Source for EPC data for DLUHC (2020), ‘English Housing Survey 2018: energy report’ ( 148 According to 2018 Scottish house condition 2018 key findings’ ( based on SAP 2012 (RdSAP v9.93) with a sample 2,964, 43% of homes in Scotland are rated EPC C and above.
The UK will continue to support vulnerable and fuel poor households as they decarbonise their • Through utilising the latest metrics and communicating clear strategies to tackle fuel • Following a public consultation, in February 2021 we updated the fuel poverty metric for England, to better track progress towards our statutory fuel poverty target, and have published a policy paper on Sustainable protecting vulnerable households in England149. • Welsh Government published a strategy on ‘Tackling fuel poverty 2021 to • The Fuel Poverty Act151 (2019) sets statutory targets for reducing fuel poverty in Scotland, introduces a new definition of fuel poverty, and requires Scottish ministers to produce a comprehensive strategy to show how they intend to meet the targets. Scottish Government’s new Fuel Poverty Strategy will be published in • Northern Ireland published their Fuel Poverty Strategy152 in 2011. The Department for Communities is responsible for developing a new Fuel Poverty Strategy, which will be informed by responses to the consultation on policy options for a new Energy Strategy153 and the call for evidence for a new Housing • Through providing targeted support for social housing residents, and low income and fuel poor households through government-funded • The Green Homes Grant voucher scheme for England offered vouchers to fund up to two thirds of the value of energy performance and low-carbon heat measures up to the value of £5,000 for homeowners and residential landlords (or 100% up to the value of £10,000 for low income owner-occupiers). More than 133,700 applications were received, and more than 79,200 vouchers have been issued.155 All vouchers issued will be honoured in line with the terms and 149 BEIS (2021), ‘Sustainable protecting vulnerable households in England’ ( 150 Welsh Government (2021), ‘Tackling fuel poverty 2021 to 2035’ ( 151 The National Archives (2019), ‘Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019’ ( 152 Department for Communities (2011), ‘Warmer Healthier Homes – a new Fuel Poverty Strategy for Northern Ireland’ ( 153 Department for the Economy (2021), ‘Consultation on policy options for the new Energy Strategy for Northern Ireland’ ( 154 Department for Communities (2021), ‘Consultation on the new housing supply strategy call for evidence’ ( 155 On average, more than one voucher has been requested per application. • The Local Authority Delivery (LAD) scheme provides funding to local authorities across England, supporting low income households in all English regions. • The Home Upgrade Grant (HUG) is intended to be introduced in 2022 and will support upgrades to the worst-performing off-gas grid homes in England. £150 million funding was granted for the first phase of HUG, and a further £950 million funding is available over 2022/23 to 2024/25. • The Social Housing Decarbonisation Fund (SHDF) for England aims to upgrade a significant amount of the social housing stock that is currently below EPC band C up to that standard. We are investing a further 800 million into the SHDF over financial years 2022/23 to 2024/25, In taking action to address buildings with poor energy performance, we can tackle fuel poverty and improve residents’ health and wellbeing. Additionally, market growth and increased demand for smart, low-carbon and high-efficiency buildings can drive supply and generate new skilled jobs. Decarbonising buildings can deliver four benefits when levelling up deprived COVID-19 has highlighted the importance of ventilation for good health. Improving the energy performance of our buildings, without creating airtight spaces, presents an opportunity to ensure our buildings provide warm, well-ventilated spaces and healthy environments from which people can live and work. This can help avoid many physical illnesses, including heart and lung conditions.156,157,158,159,160 Energy reducing energy bills and business operating costs – as inefficient homes are more expensive to run, the Energy Efficiency Infrastructure Group estimate that upgrading all UK homes to EPC band C could provide annual energy cost savings of £7.5 billion.161 156 Curl and Kearns (201 6), ‘Housing improvements, fuel payment difficulties and mental health in deprived communities’, ( 157 Grey et al. (2017), ‘Cold homes, fuel poverty and energy efficiency A longitudinal focus group approach’ ( 158 Liddell C., C. Morris and S. Langdon (2011), ‘Kirklees Warm The Project and its health A Cost- ( 159 Public Health England and UCL Institute of Health Equity (2011), ‘Local action on health Fuel poverty and cold home-related health problems’ ( w7_Fuel_poverty_health_inequalities.pdf). 160 Institute of Health Equity Team and Friends of the Earth (2011), ‘The Health Impacts of Cold Homes and Fuel Poverty’ ( 161 IEEG (2020), ‘Rebuilding for resilience - energy efficiency’s offer for a net zero compatible stimulus and recovery’ ( offer-for-a-net-zero-compatible-stimulus-and-recovery/). Assumes EPC band C by 2030 with cost savings at 2020

addressing the areas of highest unemployment and providing a diverse range of job opportunities, including more technical and specialised skills. Enhancing local skills can improve the prosperity of families in deprived regions.162 setting standards and improving the quality of buildings can improve the quality of living in warmer more comfortable buildings.163 Energy efficiency improvements targeting fuel poverty (and the financial stress of coping with high energy bills and debt) can help improve mental wellbeing. In the long-term, energy performance improvements also provide benefits such as increased productivity and improved life expectancy. Air pollution is the largest environmental health risk in the UK164,165, which is why the UK’s Clean Air Strategy166 sets out how we will tackle all types of air pollution, making the air healthier to breathe and protecting nature. The transition to low-carbon heating and improvements to energy efficiency will need to take into account the air quality and public health impacts of different technologies. The electrification of heat is, in general, highly beneficial for air quality, offering significantly reduced emissions of harmful pollutants in comparison to fossil fuel heating.167 However, some forms of low-carbon heating, such as biomass and hydrogen, involve emissions of pollutants such as particulate matter and nitrogen oxides.
Therefore, air quality controls and monitoring will need to be put in place to protect public health and meet our statutory air quality targets, alongside collecting further evidence to fully understand the air quality impacts of biomass and hydrogen More widely on domestic heating, the Government is already taking action on air pollution. We recently legislated to phase out the sale of coal, and wet wood sold in small volumes for immediate use, for domestic burning.
This will help reduce a major source to the UK’s emissions of fine particulate matter. We also recognise the importance of reducing the build-up of harmful levels of air pollution within homes.
Adequate ventilation is required to ensure a healthy indoor environment and prevent creation of increasingly airtight spaces, which may trap pollutants indoors. 162 IEEG (2020), ‘Rebuilding for resilience - energy efficiency’s offer for a net zero compatible stimulus and recovery’ ( offer-for-a-net-zero-compatible-stimulus-and-recovery/).
163 NICE (2015), ‘Excess winter deaths and illness and the health risks associated with cold homes’, 4.23-4.25 ( 164 Public Health England (2020), ‘Air applying All Our Health’ ( 165 Public Health England (2018), ‘Associations of long-term average concentrations of nitrogen dioxide with mortality’ ( 166 DEFRA, DLUHC, DfT, DHSC, HMT, and BEIS (2019), ‘Clean Air Strategy’ ( 167 This is dependent on the way that the electricity is generated, with renewable sources of electricity – such as wind and solar – offering the most significant benefits for air quality. 2.5. Helping shape a ‘Green Global Britain’ As a world-leader in low-carbon technology, we can position Great Britain both as a destination for investment and as an exporter of low-carbon products, skills and To meet Net Zero, new products, services and markets will be needed across the UK. We need to develop a robust UK supply chain for the manufacture, installation, and use of low- carbon, high-efficiency technologies. This can provide a major economic stimulus in the UK. Energy efficiency measures alone could support up to 6 billion GVA per year by 2030.168 In light of the impacts of COVID-19 on the UK economy, this has never been more important. This market growth presents an opportunity for • Significant investment has been made by insulation manufacturers operating multiple factories across England and Wales. Analysis by McKinsey and Company estimates that a €50 billion to €80 billion post-COVID investment in retrofit building energy efficiency measures could deliver between 800,000 and 1.7 million jobs, and provide a • Industry studies suggest that the UK’s heat network investment potential presents between £30 billion and £50 billion by 2050 depending on deployment.170 Some regions offer particularly attractive opportunities for investment, such as the North East and Tees Valley Combined Authority’s £200 million pipeline. This pipeline offers potential for investment in pipe facilities, design offices, and heat network training centres. • The use of hydrogen in heating could provide significant additional investment opportunities into major infrastructure (for the production, storage and distribution of hydrogen). More details on our approach to attracting further investment across the hydrogen value chain can be found in our UK hydrogen strategy171. If established early, these energy efficiency and low-carbon heat markets can take advantage of additional export opportunities for goods and services and demonstrate our ability to be a • Though the global market for insulation production and components is extremely competitive, in 2016 the construction sector exported over £8 billion of products and services.172 The UK’s expertise in pre-construction and design (including building 168 BEIS analysis based on the Energy Innovation Needs Assessment, Vivid Economics et al. (2019) ( y-innovation-needs-assessment-building-fabric.pdf). 169 McKinsey Sustainability (2020), ‘How a post-pandemic stimulus can both create jobs and help the climate’ ( both-create-jobs-and-help-the-climate?cid=eml-web). Exhibit 4 – Estimated capital mobilised and impact of low- carbon stimulus measures for a European country – based on a European country with a population of 50 million to 70 million with an estimate deep retrofit of 2 million homes. 170 Heat Networks Industry Council ( 171 BEIS (2021), ‘UK hydrogen strategy’ ( 172 CCC (2019) ‘UK Fit for the future?’ (

information modelling) could lead to the capture of 18% of the EU market, and a 14.6% share in the rest of the world market by 2050.173 • Building operations, including the development of smart controls using the UK’s expertise in IT systems, could plausibly lead to capturing 10% of the global market by • According to our Energy Innovation Needs Assessment, heat pumps offer the greatest low-carbon heat export opportunity, due to the large existing market in Europe. The UK currently exports heat pumps across Europe, in particular to France, the Netherlands and the Republic of Ireland, and globally, to countries such as New Zealand. 175,176 • Export opportunities relating to heat network engineering, procurement, and construction management services are projected to expand and accelerate. The UK’s strength in innovations and engineering services, such as automatic monitoring, could lead to opportunities to boost global exports, despite strong competition. • Countries are developing sector strategies for hydrogen. If the UK pioneers the use of hydrogen for heating buildings, other countries may follow, creating new markets which could benefit from the UK’s hydrogen products and expertise. For example, Worcester Bosch177 and Baxi178 have both developed prototype hydrogen boilers in the UK, supported by BEIS’s Hy4Heat programme. • The UK has competitive strength in anaerobic digestion, supported by an expanding domestic market. This industry has grown by more than 350% in the last 10 years, with UK firms already exporting specialist components within and beyond Europe.179 Gasification, engineering, procurement, and construction management services provide Industry will have a key role in investing to drive down costs, create more green jobs, provide necessary training for the existing workforce, scale-up UK manufacturing and production, innovate to improve affordability, and ensure products are smart-enabled that deliver high 173 Vivid Economics et al. (2019) ‘Energy Innovation Needs building fabric’ commissioned by BEIS ( y-innovation-needs-assessment-building-fabric.pdf). 174 Vivid Economics et al. (2019) ‘Energy Innovation Needs building fabric’ commissioned by BEIS ( y-innovation-needs-assessment-building-fabric.pdf). 175 Vivid Economics et al. (2019) ‘Energy Innovation Needs building fabric’ commissioned by BEIS ( y-innovation-needs-assessment-building-fabric.pdf). 176 BEIS (2020) ‘Heat pump manufacturing supply chain research project’ ( 177 Worcester-Bosch, ‘Hydrogen-fired boiler’ ( bosch.co.uk/hydrogen?gclid=EAIaIQobChMIorepndqz7AIVia3tCh1hLQD5EAAYASAAEgKdmfD_BwE). 178 Baxi (2019), ‘Nigel Evans visits Baxi Heating to see the company’s first pure hydrogen boiler’ ( 179 Vivid Economics et al. (2019) ‘Energy Innovation Needs building fabric’ commissioned by BEIS ( y-innovation-needs-assessment-building-fabric.pdf). To support green recovery, a significant escalation in the number of trained, high-quality installers will be required. The Heat Pump Association estimates we will need an additional 12,400 heat pump installers by 2025 and 50,200 by 2030180 and the Heat Network Industry Council estimates that the heat network sector could create between 20,000 and 35,000 direct additional jobs by 2050.
We need to attract new entry-level workers to the low-carbon heat and buildings sector and upskill the existing workforce – encouraging current gas engineers, electricians, and those with transferrable skills, to retrain and specialise in smarter, greener and cleaner technologies. Industry already has capacity to upskill thousands of heating engineers to install heat pumps every year, and this is set to grow. For example, Octopus Energy is investing £10 million in a new training centre in Slough.181 We are also working with the Department for Education and the further education sector to ensure heat pump training is offered more To help meet increasing UK demand, we need to scale-up UK production of heat pumps. We are therefore aiming for a 30-fold increase in heat pumps manufactured and sold within the UK by 2028. Currently about 10,000 units are manufactured in the UK each year, which represents only 30% of heat pumps of those sold in the UK. Growing UK manufacture and supply to over 300,000 units a year by 2028, could enable a greater rate of installation as well as grow our opportunity for exports. This could create more than 10,000 manufacturing-related jobs in the UK. According to our independent assessment of the supply chain’s ability to scale-up to meet demand182 and our direct engagement with manufacturers to date, we think that an ambition for 30-fold increase in UK manufacture and supply is a realistic and achievable goal. There is also an opportunity to grow the supply chain for high-value components of low-carbon heating systems, such as heat pump housing and controls, valves and pipework. 180 Heat Pump Association (2020), ‘Building the installer base for net zero heating’ ( 181Sources: The Times (2021), ‘Octopus Energy prepares for air-source heat pump revolution’ ( The Mirror (2021), ‘Half price heat pumps and ‘£4,000 grants’ coming under plans to ban gas boilers by 2025’ ( The Sun (2021), ‘GREEN WIN Millions of Brits can soon afford to rip out boilers & install eco-heat pumps’ ( 182 BEIS (2020), ‘Heat pump manufacturing supply chain research project’ (

We are already seeing signs that manufacturing capacity will increase. For example, Vaillant has announced their intention to invest £3 million to expand their Belper manufacturing facility to produce heat pumps from 2022.183 We want to challenge industry to innovate and improve the affordability and appeal of heat pumps. As part of this challenge, industry should aim to seek significant reductions in the capital and running costs of low-carbon heating and energy efficiency technologies, and promote green finance to increase accessibility and affordability. Our ambition is to work with industry to reduce installed costs by 25-50% by 2025, and towards parity by the end of the decade. This could be achieved through product innovations that improve efficiency, and therefore reduce running costs, or that reduce manufacturing and installation costs. Finding ways to reduce heat pump installation times will make installations not only cheaper, but also a more appealing choice for consumers replacing their existing heating systems. Meeting our target of at least 600,000 installations a year by 2028 is contingent on the market finding ways to reduce the upfront cost of the systems, while continuing to improve consumer experience and appeal. Using competition and economies of scale, and developing new financing models for consumers can also improve affordability. Mortgage lenders and other organisations offering grants and loans will have a key role to play, alongside government-funded grants and subsidies. In parallel, government has a role to play to ensuring the affordability of running low-carbon heating systems, and we will work to address energy pricing that can act as a barrier to heat decarbonisation. 183 Valliant (2021), ‘Vaillant Expands UK Manufacturing Facility to Produce it's aroTHERM plus Heat Pumps’ (

Industry must push ahead with developing more efficient heat pump models, but crucially these must also be smart-enabled • Being able to learn consumer preferences and maximise comfort • Being equipped with innovative forms of energy storage • Being cyber-secure and interoperable with other devices in the home • Being responsive to local and national energy system needs • Taking advantage of time of use energy tariffs • Being able to participate in grid services to meet demand at lowest cost Survey research conducted between September 2017 and February 2018, showed that amongst domestic RHI applicants with an air source heat pump, 86.3% were satisfied with it. Similarly, 82.5% with a ground source heat pump were satisfied184. Further findings on consumer perceptions of heat pumps will come from the evaluation of the Electrification of Heat Demonstration project. However, industry must continue to innovate to reduce the barriers to installation that exist today, aiming for the smallest, quietest, easiest to use products, which can be installed in a day or less. Consumers should be as satisfied – or more satisfied – with a low-carbon heating system as they are with a fossil fuel equivalent. By developing new innovative products, industry should aim to tailor technologies to operate effectively in a broader variety of buildings, thereby maximising the potential heat pump market. Targeted government funding to support innovation and product standards will help to support industry in driving the necessary 184 BEIS (2019), ‘Applicant survey data Domestic’ ( stic-RHI-Retrospective-Survey-Data-Tables.xlsx). Based on 2,331 responses given by domestic RHI applicants who submitted their application between 1st of April 2016 and the 20th of September 2017. Responses weighted to the population of successful applications. Due to the diverse UK building landscape and the variety of technologies available, there are many different ways that we can decarbonise. However, we need to take an approach which keeps us on track to deliver Net Zero and reflects both building-level considerations (such as size and location) and system-level considerations (mindful of action to decarbonise other sectors).
• list the core technologies available to improve energy efficiency, provide low- carbon sources of heat, and create a smart and flexible energy system • review the current state of UK buildings and the different approaches that will encourage decarbonisation across the whole of the building stock • highlight the roles of hydrogen, carbon capture and storage, and electricity in the We need to take a whole-building and whole-system approach to minimise costs of To maximise performance and ensure solutions are suitable, we need to consider the heating (and cooling) system of the building as a whole. This thermal efficiency and ventilation needs, efficiency of energy-related products, energy storage, smart technologies, heating appliances, and internal distribution systems. We will need to accommodate local and regional variations in the building landscape and energy demand. We also need to actively manage the system-level impacts of decarbonising the heating of many buildings so we can build a smart flexible energy system, guarantee energy supply, and complement decarbonisation in other sectors, such as transport. Decarbonising heat and buildings will require the adoption of new, smarter technologies • sets out the key technologies for improving buildings, decarbonising heating and • highlights key factors affecting the suitability of these technologies to different • provides an illustrative vision of ‘buildings of the future’ to explain how these technologies can work together to create an energy efficient, low-carbon, smart and flexible system, compatible with Net Zero

There are many different ways that the heating and cooling of buildings can be decarbonised. However, these technologies cannot deliver the same results in isolation. Across a single • the fabric and thermal efficiency of the building • internal heat distribution systems (such as radiators and pipework) • heat sources and heating appliances • energy-related products that directly or indirectly affect energy consumption (such as lighting, appliances, and electronics) • energy storage (such as hot water tanks or batteries) • meters to measure energy use • controls to modify energy use, including smart technologies The combination and integration of these different measures, alongside the behaviours and demands of the building users, define the energy performance of a building and, in turn, the impacts of that building on the energy system. Buildings that successfully integrate energy efficiency, smart technologies and low-carbon heating and appliances can maximise comfort while minimising cost. They can also offer energy system benefits and offset extra demands. Some technologies will work in a way that is similar to existing products and systems, and some will look and feel very different. Given the diversity of buildings and building use, no single solution can provide the best option for everyone. The appropriateness of installing and using technologies included in this section will be dependent on the building itself. Key characteristics of buildings in the UK in detailed in section 3.2 UK buildings landscape. A mix of technologies and consumer options will need to be available to enable us to

This section provides a summary of some of the key technologies available. Improving the energy efficiency of our buildings will play an important role in increasing thermal comfort and reducing energy the cheapest energy is the energy we don’t use. By reducing our energy demand, we can reduce energy bills and contribute towards reducing the size and cost of the whole energy system. This in turn helps to reduce the transition to Net Zero’s overall cost to consumers. Energy efficiency can also increase the ability to shift heat demand to periods when costs and carbon intensity are lower, for example by pre-heating a home before the evening peak (see Energy efficiency measures in buildings are wide-ranging, but key interventions insulation, controls, energy-related products and heat distribution systems. Improving the energy efficiency of the fabric of the building, the appliances used, and the heat distribution system will reduce wasted energy and therefore reduce carbon improving thermal efficiency There are many simple yet effective ways to insulate buildings, which can significantly reduce heat loss while lowering heating bills. Insulation options • This can increase comfort and slightly reduce energy bills by using simple and cheap methods to prevent cold draughts. Methods might include blocking or sealing gaps around windows, doors, and skirting boards, and chimneys when they are • Loft and floor Insulating lofts, roofs and under floorboards (especially on the ground floor) can significantly reduce heat loss and reduce heating bills. • Insulating heating Insulating behind radiators, lagging pipes and hot water tanks can help heating systems operate more efficiently and reduce the amount of heat lost in a building’s heat storage and distribution system. • Insulating Many buildings, such as houses built before 1990, were not constructed with wall insulation, though this may have been retrofitted later.185 • Cavity walls have a gap between the inner and outer brickwork. An installer can fill this cavity with insulating material by drilling small holes in the brickwork, which are then repaired afterwards. According to the Energy Saving Trust, an installer can do this in around two hours for a regular-sized home with easy access and it will not create any mess.186 • Solid walls have no gap and therefore need to be insulated on the inside or the outside of the wall. Though this typically costs more than insulating cavity walls, it 185 Energy Saving Trust, ‘Cavity wall insultation’ ( 186 Energy Saving Trust, ‘Cavity wall insultation’ (

delivers bigger energy and bills savings, as more heat is lost through uninsulated • Windows and Both double and triple glazing can decrease energy loss and save money on bills. There can be other benefits too, such as soundproofing and Energy-related improving appliance efficiency We use energy for far more than just heating our buildings. Choosing more efficient energy- related products can also contribute to reduced greenhouse gas emissions and lower energy bills.
Energy-related products can be anything that has an impact on energy consumption during use (such as lighting, heating and cooling systems, household appliances, and commercial products) as well as products that have an indirect impact on energy consumption (such as water-using products). Products with higher energy efficiency (which may be displayed on an energy label) use less energy and therefore further reduce bills and emissions. We will be publishing an updated energy-related products policy framework later this year. Heat improving distribution efficiency Heat distribution systems determine how heat is distributed within a building. These commonly consist of pipes and radiators. Operating at low flow temperatures187 delivers benefits to all heating systems. We are considering how we can support and build on the Department for Levelling Up, Housing and 187 The ‘flow temperature’ is the temperature of the fluid entering a heat emitter (radiator or underfloor heating system) from a heat source (such as a boiler or heat pump) and the ‘return temperature’ is the temperature of the fluid returning from the emitter to the source. Communities (DLUHC) recent proposal to ensure that heat distribution systems being installed are designed to operate at low flow temperatures below 55°C.188 When condensing boilers operate at flow temperatures below 55°C, they have lower return temperatures, meaning they condense a greater amount, and so are more efficient than when operating at higher temperatures. It is currently best practice to operate condensing boilers with a return temperature below 55°C, which usually means a maximum flow temperature of about 75°C.189 However, according to our Boiler Plus consultation, many boilers “never achieve condensing mode, as the operating temperature is set too high.”190 The majority of heat pumps only provide low temperature heat, with an optimal flow temperature of about 45°C. However, higher temperature heat pump systems, with 65°C flow temperature, are available, and these may be more suitable for some harder to treat buildings. To maintain levels of thermal comfort at low flow temperatures, changes may be required to heating distribution systems, such as installing larger or more efficient radiators, alongside thermal efficiency improvements, such as draught-proofing and insulation. Through the Boiler Plus Standards (2018), we encouraged use of technologies and practices which can help heating systems operate effectively at lower temperatures, • Weather and load compensators, which reduce flow temperatures based on either on the external temperature or temperature within a home. These can be installed alongside new combination boilers to meet the Boiler Plus regulations. • Hydraulic balancing is an installation practice which ensures that central heating systems’ radiators heat up at the same rate. The Boiler Plus consultation response made clear that balancing is an expected practice when installing a new boiler.191 • Regular maintenance, alongside a hydraulically balanced system can support a heating system to operate as efficiently as possible, raising overall system performance. We recommend that consumers prioritise the most cost-effective energy efficiency measures, in particular those measures that payback within 20 years. However, we appreciate that many households and businesses will be interested in going further, for example for increased comfort or to coordinate with other planned building 188 DLUHC (2021), ‘The Future Buildings Standard’ ( 189 HM Government (2018), ‘Domestic Building Services Compliance Guide’ ( 190 BEIS (2017), ‘Heat in Buildings - The Future of Heat’, Boiler plus consultation response, p. 11 ( 191 BEIS (2017), ‘Heat in Buildings - The Future of Heat’, Boiler plus consultation response, p. 16 (

Low-carbon heating and cooling As well as increasing the energy efficiency of our buildings, we need to decrease the emissions from heating and cooling them. Overall, the majority of our buildings use natural gas (methane) for heating, emitting carbon dioxide (CO2) at the point of use, with 86% of homes in Great Britain192 connected to the gas grid and around 63% of non-domestic floor area193 being As discussed in Clean Transforming Heating194, the main heating solutions currently in • gas boilers burning natural gas (primarily methane) supplied through the national gas grid (made up of the National Transmission System and eight gas distribution • low-efficiency direct electric heating, such as economy-seven or plug-in space heaters, provides less than one unit of heat for every unit of electricity consumed • high-carbon oil and liquefied petroleum gas (LPG) boilers, with large storage tanks, used by many homes that are not connected to the gas grid • solid fuel, either biomass (wood, wood chippings or pellets) or coal To transform the national heating system, we need to replace many of the existing sources of heat with a variety of energy efficient, low-carbon technologies. We see heat pumps, heat networks and hydrogen as potentially playing a pivotal role in decarbonising heat. But we recognise that other technologies such as bioenergy, geothermal heat, and storage heaters may be a more viable alternative in some cases.196 We need to prepare to switch to low-carbon sources for heat, such as heat pumps, heat networks and potentially hydrogen. All of these technologies have their costs and benefits, which we are seeking to address through research and innovation (see section 192 BEIS (2013), ‘Sub-national estimates of properties not connected to the gas network’ ( network), last updated 2021. Scottish Government ‘Scottish Household Survey’ ( Welsh Government (2019), ‘Welsh Housing Conditions Survey (energy efficiency of dwellings): April 2017 to March 2018’ ( 2018). Housing Executive (2021), ‘House Condition Survey’ ( 193 BEIS (2016) ‘Building Energy Efficiency Survey (BEES)’ ( 194 BEIS (2018), ‘Heat overview of current evidence base’ ( 195 There are also a small number of gas smaller networks (known as ‘separate independent undertakings’). Though these use natural gas as a heat source, as they are not connected to the National Transmission System, in this strategy they will be treated as ‘off-gas-grid’ properties using fossil fuel heat sources. 196 We will continue to monitor developments in geothermal heat in the UK and assess whether the technology provides a cost-effective option to help decarbonise heat.
Installing a low-carbon heating system alongside or after other building energy performance improvements can avoid oversizing the system, which leads to lower efficiencies and higher running costs, and more pressure on the energy system as a whole. Description Hydronic heat pumps can be both energy efficient and cost-effective, as they work by drawing heat from the air, ground, or a nearby water source – even Types There are many types of heat pump, which differ • their source of heat (e.g. air, ground or water) • the refrigerant they use (or if they use any) • how the heat is distributed in the building (e.g. changing the air temperature or heating water in a central heating system) Some heat pumps are much larger, designed specifically for bigger buildings such as office block or industrial sites, and some heat pumps are suited to communal use such as in a block of flats. Typically, the majority of domestic-scale heat pumps only provide low temperature heat. Higher temperature systems are currently more commonly seen in large-scale applications (such as commercial buildings Heat pumps are a proven technology and are ready to deploy at scale. Electric heat pumps are ultra-efficient, producing several units of heat for every unit of electricity consumed. They use electricity, rather than fossil fuels for power, so they do not produce carbon emissions at the point of use. In time, as the electricity grid decarbonises further, the delivered electricity used to power the heat pump will be net zero carbon. Heat pumps can also provide efficient cooling, making them an ideal choice in many domestic buildings, particularly as we face a hotter climate in the Insulation, heat storage and heat emitters may need to be installed or replaced for low temperature heat pumps to work efficiently and maintain a comfortable level of heat. Therefore, many buildings would benefit from first making improvements to their thermal efficiency before installing a heat Heat pumps may not be the most suitable technology for all buildings, for example where there is little outside space or separation distance from neighbouring properties, or where the building has very poor thermal efficiency that cannot be addressed cost-effectively. However, BEIS analysis suggests that around 80% of fossil fuel heated off-gas-grid homes in

England have sufficient energy efficiency and internal fuse limit electrical connections to accommodate a low temperature heat pump system.197 Oil and gas heating systems typically operate at higher temperatures, so switching to a heat pump may also require behaviour change from users. Many heat pumps use hydrofluorocarbons (HFCs)198 as their refrigerant. The UK has committed to phase down HFCs and will be considering whether we should be more ambitious in light of our commitment to Net Zero by 2050.199 Therefore, manufacturers should look to use alternative refrigerants. If deployed at scale, this may affect electricity demand. Therefore, we need to consider wider system impacts (see section 3.3 Wider system impacts). Our approach Our 2028 minimum market capacity target of installing 600,000 heat pumps per year specifically focused on hydronic (air-to-water or ground-to-water) heat pump systems. This is because this type of heat pump is able to supply hot water and therefore can fully decarbonise heating of that building. We will continue to support the growth of the UK heat pump market (including production and supply) and work to ensure the installation and operation of heat pumps is accessible and affordable (for example through the new Boiler Upgrade Scheme). Description Heat networks use hot water in pipes to deliver heating (and in some cases cold water for cooling) to many consumers from a centralised heat source. As this pipe infrastructure can be used to deliver heating from a range of different heat sources, they can be decarbonised by switching to a low- Types Low-carbon heat sources for heat networks can • ‘waste heat’ sources (supported in some cases by large-scale heat pumps to upgrade the heat temperatures) 197 BEIS internal analysis, using the ‘National Household Model’ (2017) ( 43b6-4d8d-b931-8594cb346ecd/national-household-model), based on consideration of thermal and electrical constraints at dwelling levels. 198 Fluorinated gases (F-gases), such as HFCs, are man-made. Though they do not damage the atmospheric ozone layer, they are greenhouse gases with a far greater global warming potential than carbon dioxide. 199 Guidance on current and upcoming bans on F-gases can be found

• large environmental, subterranean and geothermal sources (such as ambient air, the ground, rivers, the sea, and water in o low-carbon hydrogen boilers and fuel cells o solar energy (to provide hot water) • combined heat and power systems (including some energy from waste) Once in place, heat networks can reduce heating bills and the costs associated with maintaining and repairing individual heating appliances. In most cases heat networks can be decarbonised (by switching their heat source) after installation with minimal disruption to the end user. Depending on their heat source, they can deliver cooling, which means that they can be used throughout the year and enable cities to adapt to climate change and the heat island effect, or offer a similar user experience to gas boilers by providing high temperature heat to rapidly raise the temperature of Heat networks are particularly cost-effective low-carbon heating solutions in Heat networks provide flexibility through their thermal storage. District heat networks can be complex and expensive to build and connect multiple buildings in a local area. They typically require an organisation to design promote and install and are not normally initiated by individual Sufficient heat demand is necessary to make the investment required for a heat network economic as is co-ordination between a number of different The sector has been growing and is currently experiencing shortages in delivery professionals with experience of delivering heat networks.
Our approach We are working with local actors to deploy low-carbon heat networks in suitable areas, developing our zoning approach, and providing capital support through Heat Networks Investment Project and Green Heat Network Through our transformation programme we will develop regulations to drive decarbonisation, improve consumer protection and performance of legacy networks, grow supply chains and upskill the workforce. Description Unlike methane, hydrogen does not release CO2 when it is burned, and can be produced through a range of low-carbon methods. It is therefore being explored as a low-carbon alternative to natural gas. Types Low-carbon hydrogen can be produced through multiple methods. To deliver the level of hydrogen needed to meet Net Zero, the UK is committed to a ‘twin track’ approach, with initial production mostly expected • steam methane reformation with carbon capture – sometimes referred to as ‘blue hydrogen’ – this involves using steam and catalysts to break natural gas into hydrogen and CO2 which is captured and permanently • electrolysis (predominantly powered by renewables) – sometimes called ‘green hydrogen’ – this involves using electricity to break water into Low-carbon hydrogen boilers are likely to display similar variation to natural gas boilers; they could be standalone or combined with a hot water tank, they could differ in size to supply a range of heat demands (domestic properties, larger commercial properties or powering a heat network), they could be combined with heat pumps to create a hybrid system. Hydrogen-ready boilers are heating systems that can operate with a natural gas supply or a low-carbon hydrogen supply. Hydrogen gas may be able to be distributed using all or parts of the UK’s extensive gas network, which currently services 70% of the UK’s total heat demand with natural gas (methane).200 Hydrogen could deliver a similar user experience to our current heating system, subject to further testing. Hydrogen-ready boiler may be able to be installed and used prior to conversion to a low-carbon hydrogen supply, reducing disruption to We still need to undertake a significant programme of work to build on the outputs of BEIS’s Hy4Heat programme to ensure hydrogen is cost-effective, safe, feasible and compatible with Net Zero. This will include considering if and how the existing gas networks would need to be reinforced or replaced. Hydrogen has been identified as an indirect greenhouse gas.201 As government, industry and regulatory bodies work together to design systems for the production, distribution and use of hydrogen, we will seek to minimise 200 BEIS (2021), 'Energy Consumption in the UK' ( 201 Derwent (2018), ‘Hydrogen for Atmospheric Impacts. A literature review. BEIS Research Paper ( gen_atmospheric_impact_report.pdf). emissions to the atmosphere. BEIS is funding research to better understand the atmospheric impacts of hydrogen (including refining modelling of its Global Warming Potential), and the potential sources of emissions across the system. Based on this, we will assess how hydrogen infrastructure and processes can best be designed and regulated to minimise releases to the atmosphere and the related impacts. Widespread use of hydrogen for heating would considerably increase the amount of low-carbon hydrogen production required, on top of the likely requirements in other sectors (like industry and heavy transport). This adds to the challenge of upscaling from the minimal levels of production low- carbon hydrogen available today. Our approach The role of hydrogen in heating will need to be joined up with our broader strategic planning for hydrogen. We communicated our cross-cutting approach to the role of hydrogen in our UK hydrogen strategy202 in August Currently, we are looking consult on mandating hydrogen-ready boilers, conduct technical research and analysis, deliver consumer trials, explore hydrogen blending, and make strategic decisions on the role of hydrogen in Description Hybrid heat pumps combine an electric heat pump with a combustion boiler (using fossil fuels or low-carbon alternatives). Controls can be used to manage how the different technologies operate together and can be used to optimise on the basis of cost or efficiency. Types The market for hybrid systems is developing rapidly and a range of products are available to consumers today. Hybrid systems can range in design and size of heat pump and boiler elements; from heat pumps installed alongside existing boilers (standard hybrid), to compact hybrids consisting of a small heat pump and gas boiler integrated within a single unit. Current hybrids use fossil fuels and electricity, but in future there may be Initial research indicates that all hybrid heat pumps have a lot of potential • reduce dependence on natural gas (when compared to natural gas • reduce overall peak electricity demand (when compared to standalone heat pumps) – therefore reducing the amount of electricity grid reinforcement needed (as well as the costs and disruption associated with 202 BEIS (2021), ‘UK hydrogen strategy’ (

• offer a good level of thermal comfort with little need for thermal efficiency • operate similarly to natural gas systems Standard (non-compact) hybrid heat pumps also have the wider benefits • support growth of heat pump supply chains • provide an opportunity for consumers to become familiar with using a heat Significant emission reduction is dependent on consumer behaviour, system design, and the building’s thermal efficiency. Our evidence base does not yet give us enough information about how consumers use hybrids for us to make firm conclusions about the potential carbon reductions that they can Like standalone heat pumps, some hybrids use hydroflurocarbons (HFCs) as their refrigerant, the use of which the UK has committed to phase down.
They are also dependent on the boiler fuel • natural gas-heat pump hybrids are still reliant on a natural gas supply and therefore are not compatible with Net Zero • hydrogen-heat pump hybrids are dependent on the safety and feasibility case for hydrogen, which is still under development Our approach Based on the current evidence, we acknowledge that hybrids could play a transitional role in the 2020s and 2030s, but currently remains too early to rule hybrid systems in or out of the 2050 energy mix, particularly in the context of the role of hydrogen for heat. To address this, we are prioritising activity to collect further data. For example, we are gathering data on the real-world use of the hybrid systems through the Electrification of Heat Demonstration Project203 and will use this data to better understand the effectiveness of hybrid heat pumps in reducing carbon emissions and peak Description Bioenergy spans all types of fuel of ‘biogenic origin’ (produced by living organisms), whether solid, liquid or gas. A range of bioenergy sources could be used to reduce our use of fossil fuels to heat UK buildings. Aerobic digestion of organic waste can produce renewable fuel, heat or energy, and digestate (which can be used as a fertiliser) as a by-product. 203 BEIS (2020), ‘Electrification of Heat Demonstration Project - successful bids’ (

Types • Biogas and biomethane (produced through gasification or anaerobic • Solid biomass (such as wood chippings) Bioenergy could play a valuable role in reducing emissions in difficult-to-treat properties not connected to the gas grid. Biomethane injection to the gas grid offers a cost-effective way of contributing to near-term legally-binding carbon budgets and in supporting the decarbonisation of the gas grid in the near-term. Anaerobic digestion also helps to reduce emissions from manure storage and waste disposal to landfill.204 In 2018, domestic burning through wood burning stoves and coal fires was the single largest contributor to national emissions of particulate matter. These particles can cause respiratory illnesses and heart disease. Burning of wood and coal also releases nitrogen oxides, which lead to ozone layer depletion, formation of acid rain, as well as causing respiratory diseases.205 Burning wet wood has a much lower heat output and can result in more than twice the amount of smoke emissions than from seasoned or dry wood. Additionally, bioenergy needs to be used in a sustainable way (for example – by prioritising use of biogenic waste) to prevent deforestation. Our approach We note the Climate Change Committee's advice206 to encourage the use of alternative low-carbon sources and limit the use of bioenergy in heating • Biomethane produced by anaerobic digestion • Part of hybrid heat pumps in hard-to-treat off-gas-grid properties • Local combined heat and power systems and small-scale district heat In line with DEFRA's Clean Air Strategy207, government has consulted on cleaner domestic burning of solid fuels and wood, restrictions on the sale of wet wood for domestic burning, phasing out the sale of traditional house coal and applying sulphur standards and smoke emission limits to all manufactured solid fuels. We include reasonable exemptions, including the ability to use waste plant material or untreated wood as fuel in a small appliance to produce heat or power.208 204 DEFRA (2019), ‘Clean Air Strategy 2019’, p. 73 ( 205 CCC (2018), ‘Biomass in a low-carbon economy’, p. 66 ( content/uploads/2018/11/Biomass-in-a-low-carbon-economy-CCC-2018.pdf). 206 CCC (2018), ‘Biomass in a low-carbon economy’, pp. 12-13, 15-16, 119 and 134 ( 207 DEFRA (2019), ‘Clean Air Strategy 2019’ ( 208 Environment Agency (2014), ‘U4 waste burning waste as fuel in a small appliance’ (

We will use biomethane to decarbonise the gas grid in the near-term, look to improve how we target use of bioenergy to address buildings unsuitable for alternative sources of low-carbon heat, and continue to ensure our policies have appropriate air quality and sustainability requirements for participants. For example, the RHI requires all applicants to annually submit evidence of their compliance with all environmental regulations. Energy storage, smart technologies and onsite renewables It is important that our building stock operates optimally alongside the electricity system, for example by shifting electricity demand away from peak periods to times when there is plenty of renewable electricity on the system, or by generating electricity onsite, in order to minimise overall demand on the electricity grid. As we continue to phase out fossil fuel generation from the electricity grid, reducing extreme high demands (which can only be supplied by fossil fuels where there is low renewable supply) will reduce greenhouse gas emissions in the short to mid-term. By reducing demand, this reduces the amount of network and generation capacity needed, and therefore reduces costs to consumers. As stated in our Smart Systems and Flexibility Plan209, a smart and flexible energy system can save up to £10 billion per year by 2050 (in comparison to 2012 prices), compared to a system with low levels of flexibility. Government is working with Ofgem to facilitate flexibility through the Smart Systems and Flexibility Plan and Energy Digitalisation Strategy.210 Traditionally, many buildings have been passive energy consumers. Smart, digital technology provides greater choice, flexibility and control to consumers. More detail regarding the importance of reducing peak demand is included in section 3.3 Wider system impacts. Flexible use of energy can help create a cost-effective, efficient and secure energy system. This can be achieved through installing smart and flexible technologies within a building. There are various means of facilitating flexibility in buildings, including smart meters and smart tariffs, home energy management systems and smart appliances, and energy storage. Smart meters and smart tariffs Smart meters are the next generation of gas and electricity meters which help to deliver accurate bills and enable pre-paying customers to conveniently track and top-up their credit. They are the enablers of a vital upgrade to our national energy infrastructure, and a critical tool in aiding the transformation of the retail energy market.
209 BEIS and Ofgem (2021), ‘Transitioning to a net zero energy smart systems and flexibility plan 2021’ ( 210 BEIS and Ofgem (2021), ‘Transitioning to a net zero energy smart systems and flexibility plan 2021’ (

As of 30 June 2021, there were 25.2 million smart and advanced meters in homes and businesses across Great Britain, representing 46% smart coverage.211 The consumption and price data recorded by smart meters enables innovative ‘smart’ tariffs when combined with half-hourly settlements for suppliers. These tariffs have variable rates depending on the cost of electricity – rewarding consumers with a cheaper rate if they use electricity at off-peak times or when there is excess clean electricity available. Energy suppliers may be more incentivised to develop and offer smart tariffs if their supply is settled on a half-hourly basis. In April 2021 Ofgem published a decision and full business case for implementing market-wide half-hourly settlement, with the new arrangements taking effect The availability of smart tariffs will allow consumers to take advantage of the flexibility afforded by heat pumps and storage; potentially shifting demand and reducing fuel bills. Home energy management systems and smart appliances Home energy management systems can be controlled remotely or automatically to optimise energy use and minimise costs to consumers. Smart appliances, including heating appliances, are able to respond to price signals such as those from smart tariffs, or from national or local flexibility markets. Government is working with industry to develop standards for these appliances, to ensure interoperability and cyber 211 BEIS (2021), ‘Smart meters in Great Britain, quarterly update June 2021’ ( 212 Ofgem (2021), ‘Electricity settlement reform’ ( and-reform/smarter-markets-programme/electricity-settlement-reform). The energy generated during off-peak periods needs to be stored so that it is available for use at peak periods. Heat and electricity storage technologies • thermal or fabric storage – using materials such as ceramic bricks (as used in storage • hot water storage – in tanks (as used to be common before combination boilers became the most common model in the UK) or in larger-scale district heating systems • battery storage – storing energy as electricity • phase change technologies – which contain a substance which releases or absorbs energy when transitioning from a solid to a liquid and vice versa, sufficient to provide Through the use of these technologies, energy consumers may also be able to provide contracted services to local or national networks – for example, shifting energy demand to help balance the system or alleviate a constraint. This will often be through an aggregator, who can bid into markets on consumers’ behalf using the flexibility from multiple buildings. We are working with Ofgem and the network companies to enable access to markets for smaller Some of the technologies that can be used at a household level can be scaled up to deliver local and regional benefits including large thermal stores or batteries. Consumers can also choose to generate electricity and heat onsite, for example through rooftop solar and solar-thermal. The energy created can then be used, stored for later use, or (following a payment to the consumer) provided back into the electricity grid. Taking a whole-building approach We will need a mix of efficient products, low-carbon sources of heat and electricity, and smart and flexible technologies to reduce peak energy demand and keep us on track for Net Zero. In some buildings smart technologies and flexible systems may be more cost- effective than some fabric efficiency improvements, and may offer similar benefits (such as decreasing energy bills). Though the specific technologies installed differ between buildings, given the diversity of the UK building stock (for example – those most suitable for a rural heritage property are likely to be different to those suitable for an urban low- rise 1950s flat), we maintain that most buildings will require a combination of energy efficiency improvements, a low-carbon source of heat and smart and flexible use of In order to reduce the overall costs of heat decarbonisation, energy efficiency and flexibility improvements should be made prior to or alongside the installation of a low- carbon heating system, wherever possible. What’s our a building of the future In the future we aim to see much more efficient and integrated use of energy in our buildings. We commend the innovative, forward-thinking designs submitted to the government’s Home of 2030 competition, in particular to the two +Home (designed by igloo Regeneration with Useful Projects, Expedition Engineers and Mawson Kerr) and Connector Housing (designed by Openstudio with Hoare Lea, LDA Design and Gardiner and Theobald).213 These designs include affordable, recyclable, adaptable features, in addition to being compatible with the efficient, smart, low-carbon technologies detailed in By 2050, buildings should make use of a combination of technologies described in this section to minimise their carbon emissions and maximise their energy performance, thereby achieving the best environmental impact rating possible for that building.
Measures • insulation, draught-proofing and double or triple glazing within buildings, which will reduce energy demand for heating through improving thermal efficiency • using low-carbon sources to heat all buildings • heat distributors (radiators, underfloor heating) that will ensure heating appliances can work more efficiently and provide lower temperature heat • smart technologies (that respond to price signals and give the consumer more control over their demand) and more efficient building management policies to manage building energy consumption, alongside measures to better monitor energy usage • energy storage, to help provide energy when grid electricity is expensive and carbon- intensive, through thermal storage, hot water tanks, phase change materials, or battery storage (either in an electric car or elsewhere on the property) 213 Home of 2030 (

• efficient energy-related products that will require less energy to run than their • Some buildings producing their own power through microgeneration, which can be sold back to the grid to generate income when the electricity is not needed in the home Currently, most buildings in the UK only have seasonal demand for cooling for a limited period over the summer214, but some buildings require cooling at all times (such as ventilation for supercomputers or chilled foods or medicines). However, as global warming causes temperatures to rise, we anticipate the demand for cooling to increase, across seasons and building types. We have already experienced increases in frequency and severity of local heat waves in recent years.215,216 It has been estimated that in the UK, the use of air conditioning increased by about 2% per year between 2012 and 2019.217 Therefore, the need for cooling is likely to increase in the coming decades. If appropriate ventilation measures are not implemented, some thermal efficiency measures made to building fabric (such as draught-proofing and window glazing) can create increasingly airtight spaces which may decrease indoor air quality and increase Heat pumps can provide cooling, in addition to heating, when operated ‘in reverse’, and therefore provide exciting potential to meet both heat and cooling demand in the future. Some cooling measures can improve ventilation and by extension, improve air quality in However, some cooling systems use HFCs, which have a far greater global warming potential than carbon dioxide.219 Therefore, cooling will need to be delivered in a way that takes into account the heating and cooling of the buildings as a whole, maximising the co- benefits and minimising the contribution to climate change. 214 CCC (2019), ‘UK Fit for the future?’ ( 215 CCC (2017), ‘UK Climate Change Risk Assessment 2017: Synthesis Report’ ( climate-change-risk-assessment-2017/synthesis-report/). 216 Lowe, J. A. et al. (2019), ‘UKCP18 Science Overview Report’, p.73. for Met Office; DEFRA; BEIS; Environment Agency ( 217 Maidment, G. et al. (2019), ‘Reducing energy demand using cooling efficiently (REDUCE)’ ( 218 McKinsey & Company (2020), ‘Can HVAC guidance help prevent transmission of COVID-19?’ ( 219 The UK has committed to phase down HFCs (the main type of F-gases). Guidance on current and upcoming bans on F-gases can be found

the use of a low-carbon source of heat, measures to ensure high thermal and energy efficiency, and the use of smart technologies. Our homes and buildings are hugely diverse, from their ownership and use to their location and design. This has implications for how we approach improving and decarbonising them. This • outlines the different types of buildings and how their primary use affects their • explains how different owners and occupiers can decarbonise in different ways • highlights how local parameters can affect the suitability of different technologies • summarises where we are today – in terms of sources of heat used and building • provides examples of impacts to different types of buildings Given the variety of technological options available to us, we need to consider which options are most suited to our diverse buildings stock. As the UK is effectively one climatic zone, buildings throughout the UK are impacted in similar ways by the climate. For example, wetter winters increase the chance of damp in many buildings across the UK. Affected buildings will therefore benefit from similar mitigations, such as double glazing and improved insulation alongside appropriate ventilation. However, there are many types of buildings within the UK, with different uses, owners, sizes, locations, fabric efficiencies and heat sources. The most effective way to decarbonise will be dependent on all of these factors. It will also depend on the building structure, and if there are any protections in place (historic or listed buildings). We need to develop an approach which is mindful of the diversity of the UK building stock, and which also allows individuals to tailor their approach to decarbonisation depending on Key types of building and their use There are two core uses of • Non-domestic (commercial and industrial, and public sector) However, there are many different individual uses which determine which types of measures may be most appropriate to install. There are approximately 28 million households in the UK220, roughly 90% of which currently use fossil fuels, predominantly for space heating, but also for cooking and hot water.221 There are similarities between the structure of some residences, which has an impact on which heating technology and energy efficiency measures may be the most effective to install. In comparison to the non-domestic sectors (commercial, industrial and public), domestic buildings have more in common in terms of how they are used – comfort, cooking, and cleaning – which results in more similar patterns of use. We largely see peaks in heat demand during mornings and early evenings, with much lower demand at night. We described typical energy use in greater detail in our earlier publication, Clean Transforming Heating222. However, we know that some trends in heating and electricity use have changed as a result of more people working from home during the COVID-19 pandemic, such as greater heat demand for domestic buildings in the middle of the day. This pandemic has highlighted the importance of good ventilation for health.
We will look into using regulations and standards to ensure that ventilation is improved hand-in-hand There are approximately 1.7 million non-domestic (commercial, industrial and public) properties in England and Wales223, from small businesses to global conglomerates. Of these, 17% are situated in areas with no connections to the gas grid.224 Non-domestic buildings account for around one-third of UK emissions from the building stock.225 Buildings in the private commercial and industrial sector have a wider range of uses including shops, factories, and offices. This means they have greater variation in heat demand. Public sector buildings account for 9% of UK building emissions.226 Public buildings, like commercial and industrial buildings, are very diverse and include hospitals, schools, and government buildings, each of which has different heating needs. The five largest non-domestic energy users are offices, retail, industry, health, and hospitality, which together account for approximately 71% of non-domestic building energy consumption in England and Wales.227 However, energy use also varies greatly within these sectors. It is ( ouseholdprojectionsforengland). 221 Estimate based on statistics for England. DLUHC (2020), ‘English Housing Survey 2018: energy 222 BEIS (2018), ‘Heat overview of current evidence base’ ( 223 BEIS (2020), ‘Non-domestic National Energy Efficiency Data-Framework’ ( 224 BEIS (2020), ‘Non-domestic National Energy Efficiency Data-Framework (ND-NEED) 2020’ ( 2020), geographical annex data tables. 225 ONS (2021), 'Final UK greenhouse gas emissions national 1990 to 2019' ( Includes indirect and direct emissions but excludes international aviation and shipping. 226 BEIS (2021) 'Final UK greenhouse gas emissions national 1990 to 2019' ( 227 BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’, figures 3.1 and 3.10 (

therefore important to build flexibility into how buildings with different uses can decarbonise, while maintaining overarching targets to set direction and keep us on track for Net Zero. The ownership and individuals using a building determines who may be incentivised to decarbonise, and when changes to energy efficiency and their source of heat will be least disruptive. There are four main Of the existing homes in England, in 2019 the largest proportion were in the owner-occupier sector (64%), with a much smaller proportion being socially-rented (17%), or privately-rented There are some correlations between building ownership and tenure and building energy performance. For example, the privately-rented sector has the highest concentration of fuel poor households (26.8%)229 and privately-rented properties cost over £6 billion in energy bills in 2019, and produce greenhouse gas emissions of around 11 MtCO2e per year.230 Socially- rented housing typically have higher energy efficiency (in 2019, about 60% of socially-rented homes in the UK were rated EPC band C and above), whereas owner-occupied buildings have the lowest EPC rating on average (with more than 60% rated EPC band D and below).231 228 Estimate based on statistics for England. DLUHC (2020), ‘English Housing Survey 2019 to 2020: headline-report). The English Housing Survey and refers to England only. We note that the proportion of owner- occupied, private- and social-rented properties varies across different regions of the UK and therefore the targeting of policies specific to that area may differ. poverty-statistics). In our policy paper on ‘Sustainable protecting vulnerable households in England’, BEIS (2021) ( in-england), we announced an update to the fuel poverty metric (from Low Income High Cost to Low Income Low 230 BEIS analysis using 'Energy Consumption in the UK 2020' ( consumption-in-the-uk), Consumption Data Tables C1, EHS (English Housing Survey) and National Energy Efficiency Data-Framework ( data-framework-nd-need-2020) 2018 data, tables 9, 10, 27 and 28. (

socially-rented homes in the UK were rated EPC band C and above in 2019, only about 40% of the total housing stock were EPC band C and above. 232 Our approach to decarbonising homes must be conscious of the different trigger points for each of these tenures. Incentives and opportunities for homeowners and landlords are different. Therefore, our approach should be tailored based on their tenure-type; using natural trigger points to improve buildings’ energy performance, such as when it is most cost-effective and least disruptive to occupants and owners. Our approach must also be conscious of the complexity in multi-tenure, multi-use buildings, where occupants – and even the owner – may be limited in the changes they can make. For example, there are particular challenges for leasehold property owners, who will have legal restrictions on what they can do to their property. We are exploring how to prevent this from acting as a barrier to upgrading homes. For these types of buildings, upgrading or treating the whole building at once can be more efficient and cost-effective, but the balance of costs and benefits may differ for different occupants. Around 40% of all energy consumed in commercial and industrial buildings in England and Wales is in the rented sector, placing more responsibility on landlords to make energy efficiency and heating improvements.233 The remaining 60% of energy consumed in commercial and industrial buildings are attributed to owner-occupied buildings. Owner- occupied buildings tend to be larger than rented buildings and therefore tend to use more ( 233 BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’ 234 BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’ ( tables 3.11 and C.1. We are developing policies and measures that cause minimum disruption by tapping into key trigger points. This includes considering the role of mortgage providers and other lenders and what appropriate requirements need to be met before commencing a new tenancy for a rented property. Making changes to the energy performance of buildings between tenants means that tenants are not disturbed and access is easier. Owners might be indirectly compensated for disruption associated with energy performance improvements, for example, through value added to their property, improved comfort, and lower running costs. The size of a building may impact which heat distribution system will be most effective and the scale of energy efficiency savings. For the majority of buildings, a combination of increased efficiency and low-carbon heating, plus more efficient energy-using products, will deliver Net Zero emissions most cost-effectively. The size of non-domestic buildings varies considerably compared to domestic homes.
This means that there is a far more uneven distribution of energy use across the stock. Only 5% of the total commercial and industrial building stock are over 1,000m2 in floor area.235 However, these buildings are responsible for over one-half of the energy used by commercial and industrial buildings (excluding process heat).236 At the other end of the spectrum are ‘dwelling-like’ buildings (less than 150m2), which make up around 15% of the commercial and industrial building stock by count.237 Because these buildings are likely to possess the same heating systems and building fabrics as domestic homes, they may benefit from similar interventions made in the domestic market. Proximity, density and location A building’s location and proximity to others may affect which heat source is most suitable. For example, it may be more cost-effective to convert the heating source of an entire block of flats, rather than addressing each dwelling individually – whereas a detached house in a rural area might be best considered in isolation. Some heat solutions, such as heat networks, may be better suited to higher density areas. This density of demand ensures that high capital costs can be recouped and means that less heat is lost on route to buildings that are far apart from one another. Therefore, heat networks can play a significant role in towns and cities, and new-build projects such as business parks, garden towns and villages. If heat networks are in close proximity to sources of waste heat, they can use and distribute this heat to buildings in their network. A cost-effective hydrogen system may be dependent to some extent on local geography. This may include how close it is to production plants, available storage options (e.g. in salt caverns), suitability of existing networks to transport hydrogen, availability of new dedicated hydrogen networks, and routes to store the carbon dioxide if hydrogen is produced using methane reformation with carbon capture. 235 BEIS analysis of BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’ ( 236 BEIS analysis of BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’ ( 237 BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’

Electric heat pumps may be easier to install in communities that are fully electrified, with reinforced distribution networks, electric vehicle charge points, and smart energy storage already built into the local area or individual premises. We recognise that there are different levels of fuel poverty and building efficiency in different areas. Therefore, we need to ensure that measures to decarbonise buildings in a given area are appropriate to that location. Where we are heat sources and energy efficiency Natural gas boilers are still the dominant domestic heating system in the UK (with 86% of homes using natural gas in England).238 However, a smaller proportion of commercial and industrial buildings are dependent on natural gas (heating 63% of the floor area), with about 29% using direct heating.239 Whether a building is connected to the gas grid is a significant consideration in terms of whether, when and which heat source changes would be most heating is used to heat 86% of homes in England.240 238 DLUHC (2021), ‘English Housing Survey 2019 to 2020: energy’ 239 BEIS (2016), ‘Building Energy Efficiency Survey (BEES)’ 240 DLUHC (2021), ‘English Housing Survey 2019 to 2020: energy’

Across the UK, in addition to homes using natural gas, 9% of the energy consumed to heat homes is provided by other fossil fuels, such as oil and coal.241 However, this 9% accounts for 13% of all domestic heat emissions.242 Bioenergy sources of heat provide a more similar fuel source to some traditional fossil fuel boilers and are likely to be an appropriate low-carbon alternative to methane for a small Therefore, the building’s current source of heat needs to be considered alongside their current and possible level of thermal efficiency to help determine which low-carbon source of heat would be most suitable to install. There is no single perfect level of energy performance that is appropriate for all buildings, and there are various ways to measure energy performance and use. For example, we published a consultation on a performance-based energy rating scheme for buildings larger than 1,000m2 (detailed in the section on Improving commercial and industrial places of work).243 However, we typically use Energy Performance Certificate (EPC) levels to indicate a building’s energy performance. In England in 2019, approximately 15 million (60%) of homes were below EPC band C,244 most or all of which will need to be upgraded between now and 2050. We recognise that this may be more challenging in some properties where it is not feasible, affordable, or cost-effective. The current heat source and energy performance of a building will affect the degree and urgency of changes and improvements needed. For example, some buildings will already be connected to a low-carbon heat network and may not need to change their heat source but could still benefit from improvements to energy efficiency. New buildings should be made fit for the future – fitted with low-carbon heat sources and high standards of energy efficiency (compliant with the Future Homes Standard and the Future Buildings Standard for England). This will remove any later need for retrofitting. Given the breadth of the buildings landscape, we need to tailor action so that it minimises the challenges and maximises the opportunities presented to different types of buildings. In section 5.2 How to improve our buildings, we set out our proposed approach to improving different 241 BEIS analysis based on BEIS (2020), 'Energy Consumption in the UK 2020' ( 242 National Atmospheric Emissions Inventory ( National Statistics (2020), ‘Final UK greenhouse gas emissions national 1990 to 2018’ ( 243 BEIS (2021), ‘Introducing a performance-based policy framework in large commercial and industrial buildings’ ( commercial-and-industrial-buildings). (

number of owner-occupied and private-rented homes with lower energy efficiency rating.245 Potential impacts to different types of building This section provides illustrative examples and real-world case studies to demonstrate the types of changes that may need to be made to different buildings.
The Government has committed to upgrading as many homes as possible to achieve EPC band C by 2035 where cost-effective, practical and affordable, and committed to reducing fuel poverty by ensuring as many fuel poor homes in England, as reasonably practicable, achieve a minimum energy efficiency rating of band C by the end of 2030. We have also consulted on driving energy efficiency improvements in the private-rented sector and aim to publish a response before the end of the year. (

The transition to low-carbon heating will be a gradual one, as we test options and bring down costs. For domestic housing types today installing an air source heat pump ranges in cost from £7,000 to £14,000. The wide range in heat pump costs is due to the characteristics of the mainly its floor area, fabric efficiency and whether it has already got central heating or not. This is why we are gathering views on how regulatory policy can provide certainty for industry and ensure that installing low-carbon heating takes place during natural replacement cycles at minimum disruption and cost to households; why government will be providing households with £5,000 grants to support consumer choosing to switch to a heat pump, through the new Boiler Upgrade Scheme; and why government will also be providing grant funding through the Home Upgrade Grant and Social Housing Decarbonisation Fund, which will cover the cost of upgrading home energy efficiency and installing low-carbon heat to households who are fuel poor living in poorly insulated off-grid properties and social housing However, as the market grows, industry is confident these costs will come down. We are setting an ambition to work with industry to reduce costs of installing a heat pump by 25-50% by 2025 and towards parity between heat pumps and gas boilers by 2030. Our ambition is to ensure that the costs of decarbonising heat and buildings falls fairly across Housing Type Energy Efficiency Heat pumps and low-carbon heat networks are likely to be the predominant solution Owners would not be required to change their heat source. However, our consultation246 proposes that from 2026, heating system, they should purchase a 246 BEIS (2021), ‘Phasing out fossil fuel heating in homes off the gas grid’ (

Moreover, due to the sufficient level of thermal efficiency, a heat pump could be installed without any fabric efficiency improvements. Replacing inefficient direct electric heating with a heat pump could lead to a more than 50% reduction in the household’s heating bills. This type of building is not suitable for hydrogen heating, as there is no connection to the For those who do chose to install a heat pump now, the Boiler Upgrade Scheme which can provide households with £5,000 grants. In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to work to address market distortions in Owners are not required to change their heat source before it comes to the end of its life. However, we intend that from 2035, needs replacing, they would choose a low- Due to the sufficient level of thermal efficiency, a heat pump could be installed improvements. This type of building may also be suitable for hydrogen heating, so may consider installing a hydrogen- For those who do chose to install a heat pump now, the Boiler Upgrade Scheme which can provide households with £5,000 grants. In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to work to address market distortions in The owner will not need to replace their existing boiler. However, our consultation proposes that from 2026, once costs have come down, when they require a new heating system, they should purchase a low-carbon one. With a suitable level of thermal efficiency, a low flow temperature heat pump could be

For those who do chose to install a heat pump sooner, the Boiler Upgrade Scheme which can provide households with £5,000 grants. In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to work to address market distortions Hydrogen is not practical for this building as it is not connected to the gas grid. Owners would not be required to change their heat source. However, we intend that from 2035, when their heating system needs replacing, they would choose a low- Due to the sufficient level of thermal efficiency, a heat pump could be installed For those who do chose to install a heat pump now, the Boiler Upgrade Scheme which can provide households with £5,000 grants. In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to work to address market distortions in As this property is connected to the gas grid, there may be the potential for use of hydrogen for heating. The occupier may have installed a hydrogen-ready boiler as a replacement for their natural gas boiler, which should make any future conversion

the electricity bills for this The owner will not need to replace their existing boiler. Our consultation proposes that from 2026, once costs have come heating system, they should purchase a low-carbon one. This type of home typically has high heating costs and therefore they may be best suited to a high temperature heat pump or may be eligible to choose a biomass system (hydrogen is not practical for this type of building as it is not connected to the gas grid). For those who do chose to install a heat pump now, the Boiler Upgrade Scheme which can provide households with £5,000 grants.
In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to work to address market distortions in The household would not be required to change their heat source. However, we intend that from 2035, when their heating system needs replacing, they would choose a low-carbon option. This type of building may in future be suitable for hydrogen heating, so may in future consider a hydrogen-ready boiler. If hydrogen is not an option, then very inefficient buildings such as these may be best suited to a high temperature heat pump, which could offset some need for more expensive insulation option. For those who do chose to install a heat pump now, the Boiler Upgrade Scheme which can provide households with £5,000 grants. In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to

work to address market distortions in Owners would not be required to change their heat source. However, we intend that from 2035, when their heating system needs replacing, they would choose a low- carbon option. As the home is already well-insulated, a low temperature heat pump could be installed without energy By installing a hydrogen-ready boiler the occupier could minimise later disruption and/or scrappage. Some remedial work to homes could be required to ensure suitability for hydrogen, but what changes might be involved is still being For those who do chose to install a heat pump now, the Boiler Upgrade Scheme which can provide households with £5,000 grants. In addition to government grants, homeowners can capitalise on falling prices of heat pumps, due to industry innovation, and a reduction in the price of electricity over the coming years, due to work to address market distortions in Case study 1: Unused off-gas-grid barn conversion As part of a broader renovation project to convert an unused barn in Lancashire built in the 1600s into a two-storey family home. The building had no insulation or heating Matrix Energy Systems conducted an appraisal of the property, location and client requirements, and concluded that an air source heat pump would be the most appropriate solution (due to local wildlife, ground shading, and accessibility). Matrix installed two Viessmann Vitocal air source heat pumps to deliver 28 kilowatts (kW) of high efficiency power to the farm (even in -10°C). Alongside this, Matrix installed a Vitotronic control unit, a hot water cylinder, and solar thermal and solar photovoltaic panels to provide the consumer with greater control and flexibility. The client noted that “Matrix made it easy for us to understand each option fully and therefore the decisions we made were fully informed. We have been through two winters now and have complete confidence in the system.” Some of the installation costs were offset by the Domestic Renewable Heat Incentive and the Feed-In Tariff. Overall, the renovation saved the consumer about £5,700 per year, a 70% saving compared to their previous property. Case study 2: Owner-occupied grade II listed building, using natural gas Some energy efficiency improvements were made to the building, which was originally constructed in 1853, while retaining its original character. Given the high thermal efficiency potential and limited outdoor space, Boss Model Management chose to replace their gas boiler with three 12kW air source heat pumps to provide underfloor heating and radiant ceiling heating for their 614m2 warehouse/office, which cost approximately £60,000 and was supported by a bank loan. Boss Model Management chose to operate their business remotely while the building was renovated. Case study 3: Small off-gas-grid office, using direct electric heating Ellergreen Hydro spent about £16,000 replacing their direct electric heating system with a 6kW water source heat pump, given their proximity to a water supply, to meet the heating demand of their 100m2 office. The building was already well-insulated, with underfloor heating and suitable heat emitters. Due to the building’s layout, the building did not need to close while the system was installed, and business activity could continue. Case study 4: Leased rural village hall, using an oil boiler A local environmental funder carried out an evaluation of Fringford Village Hall and recommended that they consider low-carbon heating. Given the limited outdoor space, the high efficiency potential and the heat demand of the building, a local renewable heating company recommended air source heat pumps as the most appropriate Two air source heat pumps (16kW and 12kW) were installed to replace Fringford Village Hall’s oil boiler. Renovation works also upgrading to a 3-phase electricity connection, insulation improvements, installing solar panels and energy efficient light fittings. This cost the organisation about £25,000, which was funded by local fund-raising. Plans were already in place to close the building for the renovation; therefore business Building type Energy Efficiency measures Heat technology suitability The current cost for a hospital’s gas consumption is about £250,000 per year. A Public Sector Decarbonisation Scheme grant can be used to cover a significant portion of the capital costs of installing a

intelligent automated building management controls, resulting operating costs for the hospital electricity remained constant. heat pump and any additional measures, such as electricity supply infrastructure reinforcement costs and heating distribution The total funding available under the Phase 2 Public Sector Decarbonisation Scheme to carry out all this work is capped at £325 per tonne of non-traded carbon saved over the lifetime of the measures funded, with a maximum grant award of £5 million per funding of £35,000 could install solar photovoltaic panels that generate sufficient electricity to with lighting upgrades to save resulting in no overall increase in operating costs if the fuel The cost of a school’s gas consumption is about £11,750 per year. The building is poorly insulated which is a significant source of heat loss.
Ahead of the heating system being replaced with a heat pump, £75,000 of Public Sector Decarbonisation Scheme funding could cover the full capital costs of improving the roof insulation and windows, providing an additional 30,000 kilowatt- hours (kWh) of heat savings per year, and allowing a smaller heat pump to be installed than would otherwise have been required. A £180,000 Public Sector Decarbonisation Scheme grant could be used to cover the increase in capital costs of the heat pump Case study 5: Gloucestershire Hospitals NHS Foundation Trust Gloucestershire Hospitals NHS Foundation Trust has been awarded £13,719,342 as part of Phase 1 of the Public Sector Decarbonisation Scheme to upgrade a range of buildings across the hospital’s main sites. Heat pumps, solar panels and battery storage will be installed. Lighting, pipework insulation, fans and air handling units, and transformers will be improved, and the building management system will be upgraded. These measures will support the Trust’s commitment to delivering on the NHS’s plan to reach net zero by Case study 6: East Midlands Education The Ripley Academy, Derbyshire, East Midlands Education Trust has been awarded £689,029 to deliver improvements across the Ripley Academy secondary school and sixth form. Coal fired boilers will be replaced with air source heat pumps and an ageing uninsulated roof will be replaced with a modern high performance insulated roof to reduce heat demand. To realise our Net Zero goal, we need to create a whole system that efficiently, effectively and securely produces, stores and delivers heat to all UK buildings. In this section, we explore key elements of a wider Net Zero-compatible system, A further challenge, beyond ensuring the technologies deployed are suitable for the building and its use, is how to co-ordinate with broader action to decarbonise other sectors. We recognise that elements of the energy system will influence and be impacted by how we decarbonise heat. Therefore, in the lead-up to 2050, decisions made for heat will need to be linked to other key decisions within the wider energy system.247 We will take a whole-system approach, which considers how changes to the broader energy system can affect the optimal route to decarbonisation, and how the combined behaviour and technologies used by individuals impacts the whole energy system. In light of this, and in the lead-up to COP26, we have published a comprehensive Net Zero Strategy248, setting out the government’s vision for transitioning to a Net Zero economy.249 By reducing and shifting energy demand, we can reduce the need to increase energy generation and reinforce network capacity. This can be achieved through reducing wasted energy and using our energy in a smarter way (for example, by improving buildings’ thermal efficiency and shifting demand to off-peak times). Hydrogen is one of the low-carbon solutions that will be critical for the UK’s transition to Net Zero. It could be a versatile replacement for high-carbon fuels used today – helping to bring down emissions and provide flexible energy for power, transport and potentially heat. Our UK hydrogen strategy250 sets out our plan to develop the production, distribution and storage of hydrogen as demand increases over time. We are clear that hydrogen will play a key role in delivering our Net Zero Target. To meet the demand from different sectors, we need to significantly increase the production of low-carbon hydrogen. Around 1,700 Terawatt-hours (TWh) of hydrogen is produced globally each year, of 247 We note the development of an Energy Strategy for Northern Ireland ( ni.gov.uk/articles/northern-ireland-energy-strategy-2050). We will continue to work together to deliver a Net Zero 248 BEIS (2021), ‘Net Zero Strategy’ ( 249 Welsh Government are also looking to publish a Low Carbon Delivery Plan in the lead-up to COP26. 250 BEIS (2021), ‘UK hydrogen strategy’ (

which the UK produces up to 27TWh.251 However, around 95% of global hydrogen production To deliver the level of hydrogen needed to meet Net Zero, the UK is committed to a ‘twin track’ approach, with initial production mostly expected • steam methane reformation with carbon capture – sometimes referred to as ‘blue • electrolysis (predominantly powered by renewables) – sometimes called ‘green Widespread use of hydrogen in heat decarbonisation would necessitate an increase in hydrogen production, which would require an increase in primary energy inputs (such as renewables, methane reformation with CCUS, and/or biomass). This issue is considered in the UK hydrogen strategy253 and will be further addressed in the forthcoming hydrogen production strategy (due in early 2022). This will include the actions we are taking to ensure supply can grow from a near-zero base at present to between 250-460 TWh of hydrogen by 2050, to meet Hydrogen gas storage is likely to be needed • help the early development of the hydrogen economy where demand takes time to build or if there is a change in the profile and nature of off-takers • help smooth the intermittency of renewable energy • meet seasonal heat demand variations (if hydrogen is used for heating) – hydrogen produced in the summer could be stored and used in the winter when demand is greater, to support flexible hydrogen production Natural gas and hydrogen networks Hydrogen offers the potential opportunity to repurpose all or parts of the existing gas network to a low-carbon alternative, which could reduce the need for new network infrastructure more broadly. However, further work is required to assess hydrogen network requirements as the hydrogen economy scales up, and how future decisions on heat might affect this.