Can UK eliminate emissions from residential heating by deploying heat pumps as fast as Finland?
The United Kingdom has committed to eliminate net domestic emissions by 2050. 13% of these emissions come from use of natural gas in the residential sector. 85% of UK homes are currently connected to the gas grid and 80% of this gas is used for heating of space and water. Since 1990, the UK has only managed to reduce 16% of residential emissions. Only 4.5% of homes in the UK currently use low-carbon heating - if this were to increase to 90%, emissions from the domestic heating sector would reduce from 61 MtCO2e/year to 4 MtCO2e/year by 2050.
There are several options to decarbonise heating in homes. One is to rely on the existing gas grid but use hydrogen instead of natural gas. Unfortunately this is technologically complex and at the moment largely speculative. A more technically realistic option is to use heat pumps, which are essentially ‘reversed refrigerators’: they use electricity to extract heat from air, water or ground. For heat pumps to provide low-carbon heating, they should use electricity from low-carbon sources, which could be achieved by switching UK electricity to wind, solar and nuclear power, as currently envisioned. Heat pumps are a rapidly growing technology, with the European market expected to double every decade.
The primary government policy to promote low-carbon heating technologies is the 2014 Renewable Heat Incentive (RHI) which provides a fixed rate electricity tariff for households that have installed a heat pump. Despite the RHI and other government efforts, heat pumps are only installed in 0.2% of UK homes, which is much less than in several European countries. To explore why the UK uptake of heat pumps is so limited I will consider economic, technological and political factors, following the three perspectives on energy transition framework.
One of the largest constraints to heat pumps entering the mainstream market is that they are relatively expensive compared to gas boilers, especially with respect to the capital costs. In the future, the capital costs of heat pumps may decline due to economies of scale and learning (as much as by 50% by 2050), but currently, when faced with a choice between a boiler and a more expensive heat pump, homeowners typically opt for the boiler. Moreover, households usually only replace boilers when the old ones break. This means that the lifetime of the existing boilers constrains the speed by which they can be replaced. Though the RHI does not reduce the capital cost, it improves the heat pump economy by decreasing the operational costs through the fixed rate electricity tariff.
Technological and political perspectives on the adoption of heat pumps
To understand the adoption of heat pumps from the technology diffusion perspective, it is useful to draw upon the S-curve concept, which depicts several distinct stages of a technology’s ‘lifecycle’. Of the four phases of technology lifecycle, UK heat pumps are in the first, formative, phase. During the formative phase, a technology has only a niche application, and so the industries which surround the technology, such as manufacturing and installation, are limited. Knowledge, training and skills of technicians who install home heating systems have predominantly focused on gas boilers rather than on novel low-carbon alternatives such as heat pumps. This limited availability of adequately trained technicians has limited heat pump uptake. Additionally, low uptake has been attributed to the poor product performance of heat pumps following their installation by inadequately trained technicians. This has in turn damaged the technology’s reputation. The market niche for the heat pumps can be expanded by the government’s commitment to phase out gas boiler installation in new-build housing by 2025. This would provide impetus for technicians to focus their efforts on heat pump training, which would provide households with sufficient and reliable opportunities for installation.
To understand the uptake of heat pumps from the political perspective, it is necessary to consider the actors involved in political processes, the costs which might be incurred by different political decisions being made (both financial and political), and who might have to shoulder these costs. The government and the devolved administrations of the UK (England, Wales, Scotland and Northern Ireland) have made varying commitments towards the 2050 net zero target. All policies which are created in line with these commitments have the potential to be influenced by opponents and proponents who are external to the core political decision making but have vested interests. Gas within the UK is provided by six gas utility companies, who together comprise the major stakeholders of the country’s heat network. Such incumbent actors whose interests are embedded within, and benefitted by, existing socio-institutional structures are typically adverse to change: the implementation of policies which promote low-carbon networks would impinge on the viability of the gas network, incurring costs for these actors. The gas utilities can delay or block the implementation of new policies through exploitation of systemic inertia and/or lobbying such that the existing socio-technical system might be stabilised. Conversely, lobbying can also be undertaken by proponents of policies which seek to disrupt and destabilise the current regime. Whilst the gas companies focus their lobbying efforts on maintaining the status quo, the recent formation of a heat pump trade association has increased lobbying power of those actors who seek out change. Whilst destabilisation of the current regime through implementation of pro-low-carbon policies would cost incumbent actors, they would allow heat pump technologies and their associated industries to find their place in the market. Increased opportunity for heat pumps to enter the market would see the technology move into the second phase of the S-curve, the ‘sustained growth’ phase. Costs would be increasingly driven down, and technicians would become increasingly skilled.
Modeling feasible scenarios for heat pumps adoption
To construct feasible scenarios of heat pump uptake across the UK, we can model the S-curve by different growth functions. These growth functions may be exponential, logistic or logistic-linear. An exponential growth function would presume a certain rate of year-on-year growth, without eventual slow-down of heat pump uptake nor saturation of the market; a logistic growth function would presume an initial acceleration in the rate of heat pump uptake, followed by a subsequent slow-down; and a logistic linear growth function would similarly presume an initial acceleration in uptake, but only to the point at which a peak rate is achieved. This peak rate of uptake would then be upheld, and modelled as a continuous rate.
In order to obtain feasible parameters of the growth functions, it is possible to analyse how uptake of heat pumps progressed in another country, Finland. Heat pumps in Finland have experienced relatively successful uptake, currently accounting for 27% of the domestic heating market, one of the highest shares in Europe. Uptake of heat pumps in Finland experienced initial acceleration, with a growth constant of k=0.44 year-1. On reaching the maximum market penetration of 27%, the growth slowed. This pattern of uptake is consistent with the logistic growth model.
If the UK would introduce heat pumps as fast as Finland, a logistic growth model would predict approximately 20% heat pump penetration by 2050. If a logistic-linear growth model were followed, the penetration level would increase to 23% by 2050, with the inflection point occurring in circa. 2045. If, in contrast to the Finnish data, exponential growth were to occur in the UK, then heat pumps would reach 35-40% of domestic heating by 2050. In all cases, it does not appear that heat pump market penetration would be sufficient to replace the gas boilers which currently dominate 80% of the UK domestic heating market.
The current use of heat pumps in the UK and three scenarios using growth parameters from Finland.
To ensure significant adoption of heat pumps, a credible policy mix needs to be devised entailing policy strategies and instruments able to overcome the above mentioned constraints. A focus on consistency and sustained political commitment should begin to counteract previously observed discrepancies in the UK energy transition, for example the cancellation of two keystone low-carbon building policies prior to their introduction. The policy mix should be flexible enough to respond to changes in the nation’s heating landscape, and should be supported by a governance sub-system which has the capacity to exploit both technical and political windows of opportunity as they may arise.