As the UK Government is heading towards setting up a Renewable Heat Incentive, a Government commissioned study has significantly revised upwards the renewable heat potential offered by heat pumps. The document maintains that most renewable heat at low cost could come from the industrial and commercial/public sectors.

Research results aiming to improve the evidence base for developing the renewable heat incentive (RHI) have now been published. The UK Department of Energy and Climate Change has commissioned NERA Economic Consulting and AEA Technology to investigate how much renewable heat may be achievable under different scenarios, and at what cost in the UK. At the same time, the UK Government last week published its “UK Low Carbon Transition Plan”, according to which the Renewable Heat Incentive (RHI) will be introduced from April 2011.

NERA study finds increased role for heat pumps and the non-residential sector

The UK supply curve for renewable heat was constructed using a financial model of heat technologies that drew on, but also went beyond, previous work conducted for Government. The technologies covered include air-source and ground-source heat pumps, biomass individual boilers and district heating, biogas heat-only combustion and injection to the gas grid, and solar thermal.

Overall there appears to be significant potential for renewable heat to supply much of the market that currently is served by fossil fuels or electric heating. A mix of technologies is likely to be required to meet the share of renewables in heat required for the UK’s renewable energy commitments. The headline findings of the study include:

• Heat pumps offer significant potential: Heat pumps and biomass boilers offer significant potential, in some cases at relatively low cost, while the unit cost of solar thermal was found to significantly exceed that of other renewable heat technologies. The findings differ from previous research, which ascribed a smaller role to heat pumps, and a larger role to solar thermal and heat-only biogas because of constraints on other technologies.
   
• The industrial and commercial / public sectors generally offer lower-cost opportunities: depending on growth rates, the non-domestic sectors may be able to deliver most of the renewable heat required. This finding also differs from previous work, which indicated a higher contribution from the domestic sector instead.

• Most important constraint to mass-market adoption of renewable heat is likely to be on the supply-side: high uncertainty with regards to the rate at which supply capacity for renewable heat technologies can grow will have a significant impact on the costs of delivering a specific share of renewable heat. The study indicates that, with sufficient subsidy, there is no limitation to demand-side potential to prevent a mass-market adoption of renewable heat. The most important constraint therefore may be on the supply-side

UK Government to introduce a Renewable Heat Incentive from April 2011

The study is published at the same time as the UK government publicised its UK Low Carbon Transition Plan, a comprehensive plan to move the UK onto a permanent low carbon footing and to maximise economic opportunities, growth and jobs. The document plots out how the UK will meet the cut in emissions set out in the budget of 34% on 1990 levels by 2020. According to the document, a new Renewable Heat Incentive (RHI) that will significantly ramp up the level of support will be available from April 2011. This will provide households, communities and businesses with payment for getting their heat from renewable sources. The scheme will cover industrial through to domestic scale heat production.

Next steps

NERA Economic Consulting is inviting comments to the study until 14 August 2009. Comments may be sent at the following address: UK_Renewable_Heat@nera.com

As mentioned in the UK Low Carbon Transition Plan, the UK Government will consult on the detailed design of the Renewable Heat Incentive later this year.

A report led by former UK Prime Minister Tony Blair recognises heat pumps as one of the key technologies to provide significant emissions reductions. Being a technology for which pull factors for commercial investment are required already in the short run, heat pumps could achieve significant savings if deployed in 50 to 70% of buildings in the OECD by 2050.

The Climate Group has issued a report titled “Breaking the Climate Deadlock: Technology for a Low Carbon Future”. Led by former UK Prime Minister Tony Blair, the Climate Deadlock initiative seeks to bring consensus on a new and comprehensive international climate policy framework through working with world leaders in the topic.

The report concludes that the strategy that should be adopted in Copenhagen needs to focus on existing energy efficiency and renewable energy technologies, including heat pumps, along with efforts to halt deforestation, which can deliver major short-term cuts in emissions. Investing in next generation technologies - carbon capture and storage, new approaches to nuclear and solar, and emerging biotech based solutions – are other proposals that will drive down emissions through to the middle of the century.

Heat pumps can reduce 0.77 GtCO₂ in 2050

Heat pumps are 1 out of 17 key technologies which according to IEA’s BLUE Map Scenario will be responsible for approximately 80% of total emissions reductions needed to 2050, equivalent to 42 GtCO₂. Heat pumps have the potential to provide savings of 0.77 GtCO₂ (1.6% of overall energy-related emissions reduction), if the technology is deployed in 50-70% of buildings in OECD countries by 2050.

Commercial investment in heat pump technology is needed in the short run

The total global investment costs needed for the 17 key technologies identified by the IEA between now and 2050 is “significant but manageable”, reads the report. Total annual average investment for R&D, deployment and commercialisation is estimated at close to $1 trillion for both public and private investment, an equivalent to approximately 40% of global infrastructure investment or 1.4% of world GDP.

The balance between push (RD&D Investment) and pull factors (commercial investment) for key technologies is then discussed. “Between now and 2030, RD&D push is required for most technologies to drive them towards innovation. This is especially relevant for CCS, next-generation nuclear and renewable technologies. However, in the short run, pull factors for commercial investment are also required for energy efficiency, electric and hydrogen fuel cell vehicles and heat pumps. Beyond 2030, pull factors are expected to dominate nearly all the technologies”.

For the case of heat pumps, between now and 2015, R&D, demonstration and deployment investment (market push) of about $9bn per annum is required (total investment covering both public and private sector) to drive the technology to full commercial potential. Between now and 2050, commercial investment (market push) of about $96bn per annum is required to diffuse the technology globally.

Deployment pathways for heat pumps

According to the report:

• Further RD&D is essential to improve technical and economic performance of heat pumps by 2020. Their cost-effectiveness, energy efficiency and carbon footprint can be improved by 50% between 2020 and 2030. 50-70% of buildings in OECD will need to be fitted with heat-pumping technologies by 2050.
• Half of the emissions savings from heat pumps are expected to be captured in developing countries and the other half in OECDc ountries.
• Further RD&D is needed to develop more energy-efficient, sustainable and cost-effective heat pumping technologies.
• Actions on policies are required to ensure all building codes promote energy conservation and efficiency measures.
• Most countries should have policies that recognise the benefits of heat pumps.

About the Breaking the Climate Deadlock initiative and the Climate Group

Having been the first major head of government to bring climate change to the top of the international political agenda at the Gleneagles G8 summit in 2005, Tony Blair is now leading the ‘Breaking the Climate Deadlock’ initiative, a strategic partnership with The Climate Group, through which he is working with world leaders to bring consensus on a new and comprehensive international climate policy framework.

The Climate Group is an independent NGO working internationally with business and government leaders to advance practical policies and technologies necessary to cut global emissions and drive a prosperous low carbon economy.