What next for net zero?

OFTEC’s head of public affairs, Malcolm Farrow, takes a deep dive into the recent announcements from the Government and what it could mean for the heating industry.

What next for net zero?

Has the Government really abandoned some of its key net zero policies? From the reaction to Prime Minister Sunak’s speech in September, where he set out the Government’s new approach to net zero, you might be forgiven for thinking so. The speech met with considerable criticism and was widely condemned for watering down the policies needed to achieve net zero – effectively making a difficult task even harder.

At first glance the criticism looks justified. Sunak’s announcement appears motivated more by short-term political need than strategic policy thinking. With a General Election due next year, the Conservatives need to shore up their support, so delaying policies that will be unpopular with motorists, or householders in Conservative-held rural areas, seems like an obvious self-serving move.

Excessive cost

Sunak’s explanation, that it is unreasonable to expose households to excessive cost and that policies needed the consent of the public, were largely overlooked in the wave of criticism that followed. Yet these are important considerations. If tough action is needed – and it clearly is – it’s vital that citizens support the plans. If they don’t, things can quickly unravel, as we’ve seen with the protests about extending the ULEZ scheme in London. Indeed, that issue seems to have been the catalyst for at least some for the recent heat policy rethink.

What does this mean for the future of the renewable heating industry? The Government appears to be pivoting to an approach designed to minimise the impacts on consumers but has retained the target of 600,000 heat pump installs a year by 2028. How can both these aims be possible? 

Clearly, without new regulations, net zero targets will be more difficult to achieve, so more financial support will be needed to encourage action. The Government has already announced an increase to the funding available through the Boiler Upgrade Scheme (BUS). The grant for a heat pump is now £7,500 – which is likely to be attractive to consumers – so does that mean the changes are good news for heat pump installers? 

Unfortunately, the funding pot for BUS has not been increased, so fewer installations will be supported overall. Other policies targeting new build and fossil fuel appliance manufacturers may help, but significant additional funding support will be needed if heat pumps are going make significant inroads, let alone reach what most agree is a virtually unachievable target. And it’s difficult to see where the money can come from.

How does this affect heat pumps?

This might all seem like bad news for the heat pumps sector, so it’s worth pausing for a moment to consider if the roll back of the proposed 2026 off-grid phase out date might not be such a bad thing as it seems. Are enough heat pump installers likely to be ready to take on 60,000+ new installations each year in just two years’ time? Many of these would have been distress purchases in old, poorly insulated rural homes, all requiring a fast response and a good outcome. What could possibly go wrong? Problems could have quickly multiplied and some in the industry have privately admitted that the potential fallout might have dealt a terminal blow to consumer confidence in heat pumps, so perhaps it’s just as well that the plans were scrapped. 

Amid all these changes, it’s easy to forget that making progress with decarbonisation is what matters, so it is vital that the Government gets its act together quickly. That means completing the consultation on renewable liquid fuels, so that HVO can be offered to the public at an affordable price. It also means a long-term commitment to funding energy efficiency measures and heat pumps, and reforming the bureaucratic requirements on installers to encourage more small businesses to enter the market. By now adopting a more pragmatic, technology inclusive policy approach, rapid progress could be made if the Government seizes the opportunity. 

A change of government

What impact could a General Election in 2024 or a change of government have?  If the Government drags its feet with the renewable fuel obligation consultation, it could become held up by the General Election and delay plans to deploy HVO, so OFTEC and others within industry will push hard for the consultation to happen quickly. Until Labour publishes its manifesto, it’s hard to predict what impact a change of government could have on heat policy – but any significant changes will be designed to accelerate progress. However, contacts with Labour so far suggest they are unlikely to bring the off grid phase out date forward again, but that remains to be seen.