Earth Notes: Can Smart Technology Help Decarbonise the UK's Heat System?

Updated 2019-04-17 15:09 GMT
Brief notes on learnings from the Energy Systems Catapult Smart Systems and Heat (SSH) programme.
Claire Perry

SSH2, 2019/03/21, Central Hall Westminster 10:00 to 16:30.

With less than a month to go until our showcase event in London, 'Can smart technology help decarbonise the UK's heat system?', we thought you'd like to know that The Rt Hon Claire Perry, Minister of State for Business, Energy and Industrial Strategy (BEIS), will be delivering a keynote looking at the importance of decarbonising heat to meet our carbon reduction targets and clean growth ambitions.

Decarbonising heat is the biggest emissions challenge the UK faces. Since 2015, Energy Systems Catapult has been delivering the UK's largest smart, consumer-focused project aimed at overcoming barriers to the decarbonisation of residential heat – the Smart Systems and Heat (SSH) programme. SSH Phase 2 [SSH2], funded by the Department for Business, Energy and Industrial Strategy (BEIS), is coming to an end, and we are now seeking to share the findings and build partnerships to put them into action.

10:00 Start: Tim German (ESC)

Heat decarbonisation is a huge challenge.

80% of homes around now will still be with us in 2050.

10:07 Welcome: Philip New, ESC

The various Catapults exist to increase innovation across the UK.

Decarbonising domestic heating is especially tough.

The Future Homes Standard — from 2025 new build will have low-carbon heating.

It's a signal to business to be ready for the low-carbon transition.

10:15 The Rt Hon Claire Perry, Minister of State for Business, Energy and Industrial Strategy (BEIS)

Claire Perry

She reported herself pleased to be able to take a break from some short-term politics elsewhere and concentrate on things such as saving the planet!

Start with where you are, rather than where you'd like to be.

UK is highly-centralised gas-based heating system.

Chancellor's Spring Statement has some clear incentives.

Whole-system Approach

Heat is 45% of energy demand.

Demand on electricity grid will double.

Other approaches such as CCUS and green gas need to be looked at in parallel.

Hybrid (digitised) systems can switch very dynamically between gas and electricity.

Consumer-friendly is Key

Why don't people invest in insulation, better boilers, etc? Because it's hard.

Often make choices when moving in to a new home.

People are willing to embrace change when they see the benefits.

Eg central heating went from 25% of UK homes in the '70s to 90% in 2006.

Also got to be BAU so that it just happens...

Less than 10% of public are familiar with renewable heating systems.

Bottom-up Localised Solutions

Living labs in homes across the UK.

40k+ in CP's constituency not on the gas grid!

ECO now pivoted to fuel-poverty and pushing harder on innovation.

Q: when does government have to make some big decisions and cut off some options?

A: energy white paper will help with some of this. Challenges in turning off gas, soaking up more off-shore wind, CCUS, etc: too big for industry to do in its own. But don't want to cut off options too early.

Q: network operators have price controls and have to invest, and need strong signals to direct that investment. Also need public debate.

A: agreed to need for public debate and roadmap. Many interacting elements. Gov will need to make some centralised decisions, but innovation also needed.

Q: what is timeline on stamp duty and council tax to support clean energy?

A: Treasury sets tax policy, but look at green mortgages for example. Want to make sure that energy ratings for homes more visible. Any incentive has to fit when people are doing stuff to their home; moving, having kids, ... SEG Smart Export Guarantee to make sure that export is worth something.

Q: how can government provide certainty for business? What faith can we have given that CSH was lauded and then scrapped? How do you duck builder/FF lobby?

A: CP was an environmentalist long before being an MP. Merger of DECC and BIS has been beneficial. 400k workers in low-carbon economy. So there is straight economic and carbon value in doing this stuff. Also government bidding for COP 2020, is further evidence of support. Would be a foolish minister to roll back...

Q: if demand is for heat then a heat-pump user shouldn't pay the social levies (on electricity) that gas isn't. Can that be fixed?

A: can't respond now, but good suggestion.

10:42 Richard Halsey (ESC)

How do we speed up (will take thousands of years at current rates) while keeping bills acceptable for users?

No silver bullet.

Also huge opportunity.

Heat is Cinderella of the energy story.

(26M homes in UK: huge market.)

4% have low-carbon today. 90% prefer gas central heating.

Lots of barriers to get to low-carbon heating? Eg how to retrofit, finance?

But, ... energy world is changing very fast.

SSH2 Programme has been thinking about heat for a long time.

People care about being warm and comfortable at home, but not about the fuel.

Advanced control and retrofit is critical.

System engineering can help.

ESco seems a promising business model.

Energy services + policy may create the right market.

SSH2 started May 2017.

ESC hypothesis:

10:52 Matthew Lipson: Creating a Living Lab to test decarbonisation

How many people in the room even have low-carbon heat at home? Maybe 25%?

Rapid change is possible if consumers want it.

So make low-carbon as good as or better than existing solutions.

But three big consumer challenges (even if the costs are equivalent):

No good research on what good heating experiences are worth to consumers.

And consumers don't know what they'll like until they've experienced it!

Most (2/3rds) people experience damp, drafts, overheating.

In living labs, people enjoyed control, but in different ways, and six different groups emerged (see old DECC 5-way partition).

Almost everyone agreeing that they don't want to heat all rooms at all times.

Sectors such as automotive apply usage data to improve system design.

ESC made participants more active by showing costs of choices like heating whole home or more selectively.

HaaS scheme had consumers eg buying warm hours rather than kWh, eg 11p per warm hour in a small efficient house.

People already think that they are paying a fixed price, and they had to be told that costs depend on the weather. Some people now wanted a fixed bill and variable warm hours to fit, with some extras on demand.

Three plans from fixed (with extras) through to unlimited.

Astonished that half homes in trial wanted to try heat plan; very few picked unlimited.

Most paid more for their plans than before: too expensive for some.

2/3rds said they recommend their supplier if they offered a heat plan.

Cohort groupings: comfort focused (62%), value (17%), cost (21%).

The data lets you see the building physics, eg if living room can't hit 21C on cold day: targeted retrofit interventions can be offered.

Lots of opportunities for retailers, mfrs, and networks.

People care more about outcome/experience than details of its delivery.

So, could government set heating CO2 intensity target on service providers for ex?

Have consumers at heart of fairer lower-carbon system.

(Questions for Matt and Richard.)

Q: (Installers will be the ones offering and fixing HaaS, but don't exist yet.) Do you think that ESC needs to work with industry to strengthen the supply chain?

A: yes, but start with consumer [to provide pull].

Q: is there another benefit ... can discovered expressed preferences inform policy?

A: feeding data across to building physics to build systems solutions. Often no-regrets solution is to improve controls.

Q: has ESC done any work into how people might change behaviours and what changes would be acceptable?

A: very different group preferences, and different levels of flexibility. Some simple things already done; more complex things have to added. Some will want to actively watch ToU rates, some want to set an outcome and not engage with the detail (ie more automation).

11:34 Panel session: Guy Newey (host): Is there a Better Way to Sell Heat?


Will the new smart technology work in the real world?

(Will this stuff work for people that don't happen to grow beards?)

Rajni Nair (CAB), Samantha Nicol (Bristol Energy), David Willetts (Baxi).

(Plus Matt Lipson.)

SN: Bristol Energy has real customers on HaaS with ESC. Gaining live experience.

SN: most customers want an easier life, not more engagement with their heating!

SN: seeing lots of enthusiasm and interest in HaaS.

SN: weather risk (eg warm hours vs kWh) is manageable and not huge challenge.

DW: is there a better way to sell heat, yes, but supply chain transactional model needs movement. Moving from trad value chain to network/ecosystem/partnerships.

DW: talking about warmth is more human than talking about kWh.

DW: when you have a working business model, how do you make the leap to a new one?

DW: big skills gap in installer knowledge at the moment (for low-carbon)

RN: right from start of customer journey, how does a supplier explain the value of a heat plan? How to compare plans: not deliberate confusopily of elsewhere, but genuinely different language and schemes. How does switching work? Who fixes problems with multiple aspects? How to protect consumers?

ML: takes a while to explain to consumer without experience of advanced controls how things can be.

ML: lock-in and comparisons of apples vs pears; need to help to settle on common language.

DW: while it can be cheap and easy to heat home with a gas boiler, working with partners and pooling abilities to sell hybrid systems and outcome-based sales will help.

Q: can HaaS (or energy as a service) be sold to landlords?

RN: bits of the system may be owned by tenant and some by landlord to complicate things...

SN: Bristol Energy trying to do this for social housing (Bristol Council 20k social housing units).

DW: challenges different between social and private landlords in obligations, incentives, motivation, but yes it can be made to work for the landlords if propositions tailored...

SN: may help align landlord and tenant interests.

ML: good heating can be a selling point to tenants.

Q: are there any requirements that go go into planning to support low-carbon given long time horizons and need to be technology neutral and outcome focused?

ML: yes, imperative.

Q: is it really true that consumers don't or can't understand kWh: they can understand gallons of petrol get you different distances under different conditions? Was a control test done on that?

ML: kWh was tried, but consumers didn't seem to to know how many would be needed and how much money does that mean too?

RN: consumers are not thinking about kWh, more focused on final bill, and kWh is a confusing unit. How many kWh to run this load of washing for example?

Q: is there a length-of-contract issue with some measures such as insulation?

SN: could if user could be locked in for long enough, or reduce risk of losing user before payback, maybe by improving service or good exit clauses?

Q: how does this work for installers?

DW: move from transactional model with less siloed supply chain? Examples of good recent moves such as move to condensing boilers and Boiler Plus regulations.

ML: service provider with good reputation will get more customers.

Q: for decarbonisation to happen as scale, if heating with elec more expensive than gas or oil, why should consumer do it?

RN: how to support people who cannot afford the higher rates?

Q: is there any appetite in the industry for non-upfront low-carbon heating system installation?

DW: Rolls-Royce "power-by-the-hour" contracts involving financial partners might be a hint.

RN: consumer challenges from contract length, consumer protection to allow escape eg if circumstances change.

SN: there is a wave of financiers who do want to work in this area!

12:15 Lunch

13:18 John Fox, Learnings Part 2

Many different business models examined.

Eg, could you bring heat demand time forward and make people warm with pre-heating if that's cheaper or lower-carbon? Yes, you can!

Majored on: user service, lifestyle services, ... Interaction with consumer protection and regulation?

Rolls-Royce: up to 1990s sold engines but made most money in aftermarket (eg spares). Reliability improvements nixed that. Now selling "power by the hour" - 90% of engines sold that way now.

Brought better alignment of interests: now good for RR to reduce downtime and fixes.

[Like an energy utility selling less gas while keeping their customers warm.]

Had to come up with new contractual framework and language...

What happens if a supplier takes over from a failed energy retailer which has HaaS customers?

Not every energy purchaser will want newer business/supply models.

Letting industry pathfinding new models has risks, eg Uber and airbnb.

Open interoperable standard benefit everyone...

GSM as an example of driving standards in a RAND (Reasonable And Non-Discriminatory) way.

Eg for decarbonisation:

All the business models evaluated needed some policy or incentive.

May however not reach all (eg vulnerable) users for example, or not cut enough carbon.

Portfolio obligation so that consumers do not have to chase many suppliers and providers to fix issues for example: should have maybe one point of contact.

That also makes it easier to measure actual aggregate outcomes.

Q: are you aware that comfort taking does not reduce economic value entirely?

A: !

Q: how do we get from here to installing effective integrated solutions?

A: testing is key, and potential policy should be given chance to fail fast. Design policy to fit the people it's aimed at.

13:43 Panel session: Paul Jordan (host): Where are we seeing the Greatest Innovations in Heat?

Need to help innovators overcome common challenges, alongside accelerators, etc.

ESC has launched first innovator challenge in heating and cooling.

Challenges and opportunities in heating sector:

HP: lots of innovations around, but would be good to bring existing systems' controls up to par. Boring, but would make a big difference. There are too many complex systems already in this area that need to talk to the Internet, etc, and users will give up. Average age of an electrical installer is late 40s to early 50s: maybe not keen on understanding the new technology.

MMcK: could we for example charge less for electric DHW rather than for other uses to encourage move from gas? Could EV electricity be paid with car lease? And can we prioritise essential vs non-essential energy use?

AC: Could ESC aggregate multiple smart (IoT) systems to measure overall effect? How to deal with and understand interaction between different (retrofit) active and passive interventions.

IR: how do you get the new technology (etc) onto consumers' radar and into their homes? Energy supply landscape has changed: the big suppliers unow know about HaaS rather than just flogging kWh. Challenges: we're not capturing all the data we should for servicing, cost and comfort outcomes; connectivity is still a problem. Eg in Wales at £80pcm per home for broadband it prevents fitting out smart efficient connected social homes: a telco competition issue!

Q: how do you improve the (market) interface with the consumer?

MMcK: have to understand different customer groups' drivers; sometimes cost, sometimes eco. More automation will help. Need to talk to more consumers. How do we keep people engaged when novelty wears off?

AC: we were one of first in Living Lab. What sort of reactions will Airex get from users? Beyond testing energy impact, gain much more consumer insight.

IR: smart metering... Have to be ready to interact with fully smart meters in homes within next few years (finally). how to use the data. Will facilitate lots of new services, and will change a lot of consumer interactions.

Q: what are the common solutions for innovators' issues?

IR: most common barrier is trust; no market without it. Level of evidence required is different for early adopters vs mass market. When solutions become reliable and trustworthy enough they are good for the mass market, and will allow good consumer experience.

Q: how much transparency / API do we need to maximise (say) DSR revenue without damaging end-user's heat-pump?

IR: not that may things to do with a heat pump to drive value. There is a risk that DSR provider doesn't own asset and doesn't care about shortening its life. So have external owner of asset that also controls how hard it is worked, and the problem goes away from the consumer's point of view.

MMcK: need more transparency for consumers. It is really hard to get hold of smart-meter data, eg due to clunky security considerations, to get users to permit third-party access.

HP: low-carbon technology will probably cost more than current technology. And who is trusted in the market? Energy retailers in UK not great reputation at the moment for example.

Q: is there a risk that new models will cause PR backlash? (Eg Daily-Mail-esque knee-jerk response to Spring Statement's 2025 non-new-fossil-fuel--boilers announcement.)

IR: should be able to deliver clear positive messages and value, such as make your house work better and be more comfortable.

MMcK: who to we make it cool so consumers will tell their friends? Making something free doesn't get mental investment either.

HP: PR success should be getting DM to report that new houses just won't need much heating...

14:30 Panel on Learnings Part 3

14:30 Richard Halsey - Local Context

ESC worked in three local areas with LAs (Local Authorities) and electricity and gas suppliers in Bridgend, Newcastle, Greater Manchester.

Local area whole-system energy planning (eg infrastructure) is important to enable low-carbon heat.

14:40 Jan Webb - Social Dimensions of a Smarter Energy System

ESC (and ETI before it) have enabled a significant piece of social science.

Knowledge about local area energy planning is much more about the process more than the technology. Theory of how the energy system might be adjusted cost-optimally encounters local understanding and who has the most potent knowledge and what will local politics allow?

Multiple uses were found for the energy planning outputs, but all needed champions.

Actually not clear if, as assumed, local planning is useful. Is there a big-bang solution that would render it moot, for example?

Aiming for net-zero GHGs... needs social as much as technology solutions.

But there is a misfit between LAs being involved and energy regulation? (There is in law, currently.)

14:53 Experiences of Bridgend County Borough Council

140k population, 95 sq miles.

Microcosm of all of Wales, and with severe health issues for example.

Context: Well-Being Future Generation (Wales) Act 2015, Environment (Wales) Act 2016.

Smart energy plan has been adopted (2018-2025).

Shows support for a mixed heat approach by area, electric and district.

Why is Bridgend doing this? Huge (95%) carbon reductions 2025-2050.

Q: what is needed to roll this stuff out for the whole UK?

A: RH: even the willingness is there, eg from the network operators.

A: JW: there might be new powers for local planning and energy needed.

Q: how do we make [London EV plan] applicable/useful to other cities in the UK? Is this the same? Is there an urban / rural split? What is most important to push local learnings to national scope?

Q: huge binary question on green gas grid or no gas grid: how robust is this planing depending which way that falls?

A: RH: planning did see and understand the range of options and uncertainties.

A: JW: there are tensions between various teams around local vs national view; are we making the best enemy of the good?

15:32 Panel: What Low-carbon Policy is Needed to Drive Heat Decarbonisation?


Host: Guy Newey

RT: no one policy to solve heat decarbonisation, need a national conversation. Cannot be just government and industry. Sort out new-build homes. Banning new fossil fuel heat.

JD: what are the underlying things stopping change? In UK 85% on gas grid, in DK 11%, so conversation starts in different place. We could do far more with solar. New technology is great, but will customers want them: make them appealing. Look at behavioural side. Non-successful policies are good to learn from (eg Green Deal).

RT: we have to retrofit 26M homes by 2050 to meet targets. A hugh challenge. Need to get consumer pull, but can't just wait around for it to happen. Need national infrastructure priority. Government capital investment. Think big.

RT: having government minister on TV telling people to switch tariffs to save money is no good, we need to be saving energy.

TG: agree with RT we need national debate. Forty billion pounds of infrastructure assets out there. Decarbonise gas grid with bio methane, eg from domestic black-bag waste.

Q: is any government minister every going to be brave enough to choose future for gas grid?

TG: says shadow minister accepts need to keep gas grid.

JH: CCC looked at what works around the world. Heartened that conversation is starting on "Are our gas boilers damaging the planet?"

Q: how can we use as little public money as possible in the transition?

JD: get pricing right: now home could have zero energy running costs. How are you pricing the home? What discount rate is applied? All low-cost homes should be zero carbon to protect vulnerable people in them, which has other benefits.

Q: what does the government to with/after RHI?

RL: need to think about value, and government not very good about value. Could reduce UK energy demand 25% cost-effectively (ie net zero cost). Think about value as well as cost.

TG: what is most cost-efficient decarbonisation route?

RL: mortgage lenders already have to look at EPC before lending.

JH: skills (performance gap: paying £200 per year too much per new home on bills), storage, etc. 1% of GDP total costs of decarbonisation.

Q: is Ofgem moving in wrong direction for allowing as much zero/low per-MWh generation onto grid as possible?

RL: Ofgem doesn't care about low carbon heat. Doesn't have any position on heat.

JD: make better use of existing networks to keep consumer costs down - Ofgem is scared of letting consumer prices rise.

Q: why aren't we talking about district heating in UK?

JH: CCC proposes 20% of UK heat being low-carbon networks.

RT: may be sidelining district heat by accident. London has rules about district heat, but also about installing CHP which will be out of date quickly. Need to future-proof. And link up existing buildings.

TG: there is a role for heat networks, esp new build in urban areas. Will need to be a public debate about linking existing buildings, eg because of the street works if nothing else.

Q: what one thing would make biggest difference to heat decarbonisation?

JH: heat strategy

TG: decarbonisation of the gas network with clear policy statement

RT: get different sectors to talk to one another

JD: smart thermostats in every home with carbon readout (smart meters only do money) so you can set your home to 'low-carbon' mode.

RL: carbon tax on fossil fuels with escalator

GN: a decarbonisation obligation