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Why it makes sense to back heat pump provision

The best return for the Government's investment has to be financial support for the encouragement of heat pumps of all types, plus insulation, says Julian Brunnock
While we all applaud the Government for finally getting behind heat pumps, my question is, why is it not doing more?

We are all familiar with the environmental reasons for reducing energy consumption; to tackle global warming by reducing CO2 emissions. Using oil or gas directly as a fuel source obviously generates CO2, as does electricity to a large extent at the moment.

In addition, there are valid strategic and economic reasons for reducing energy consumption.

After spending most of the previous 25 years as a net exporter of energy, the UK became a net importer in 2004. We currently source a net 10 per cent of our coal from abroad and we are projected to be getting 20 per cent of our oil and gas from foreign sources by the mid-2020s, growing to more than a quarter by 2030. Much of this is from areas of the world where stability is less than guaranteed, so switching to non-imported fuels, such as biomass, nuclear or renewables makes strategic sense.

Biomass for power generation and biofuels for transport are both strategically desirable and carbon neutral in themselves, but they are net carbon producers when the fuel used for growing, harvesting and transport is taken into consideration.

For individual premises, biomass boilers can only be used for heating, require considerable construction and outlay, regular deliveries and constant tending.

Electricity has to be the green fuel of the future, as it is the only energy that is capable of powering heating, lighting, cooling, transport and the hundreds of gadgets and appliances we all have now.

Of course, at the moment, most electricity in the UK is still generated by carbon-producing fossil fuels. According to the Department of Energy and Climate Change, in the last quarter of 2012 fuel used to generate electricity comprised 35.4 per cent coal, 28.3 per cent gas, 22.3 per cent nuclear and 11.7 per cent renewables.

In the past year, gas use has declined by 18pp (percentage points), but coal has increased by 12pp. However, the good news is that nuclear and renewables have both increased by 3pp in the same period.

So the best way to take advantage of low carbon fuels now and in the future is to use electricity, as long as it is used as efficiently as possible. This is where the Government comes in.

In the current economic climate, the Government needs to ensure that any money it spends on lowering carbon emissions is spent in the right place and not wasted.

So why has it introduced the Green Deal? The aim of the Green Deal is to persuade householders to invest in measures to reduce CO2; ie energy saving initiatives. Around 60 per cent of energy used in UK homes is accounted for by heating and a further 24 per cent by the provision of hot water. So it makes the most sense to concentrate spending on these two areas.

As I hope I have demonstrated above, the best way to reduce carbon emissions is the efficient use of electricity and the biggest area for the potential reduction of CO2 emissions is heating.

Call to back heat pumps
The most efficient form of electric powered heating is the heat pump, for both space heating and the provision of hot water. The accepted formula for coefficient of performance for heat pumps results in 3-5kW of heat produced from every 1kW of electricity used.

So, again, logically, the best return for the Government's investment has to be financial support for the encouragement of heat pumps of all types, plus insulation.

To be fair, the newly announced Green Deal, does seem to generally include heat pumps of all descriptions, which again is a good thing. The Green Deal initiative provides a comprehensive building audit via the assessment scheme, resulting in a number of recommendations to reduce energy. It also provides a loan, so that the householder can benefit straight away from energy improvement measures, however, he has to sign up to what is effectively an extra mortgage of up to 25 years at a 7 per cent interest rate; about 2 per cent above the rate of a much simpler commercial loan.

Additionally, the loan will stay with the house, so when the house is sold, any buyer will have to take on the loan. While taking out a loan to fit heat pumps and benefit from lower energy costs, for example, is obviously a good idea, it seems to me that doing it outside the Green Deal would be a better option.

For some, personal loans may prove difficult to obtain due to credit scoring, which means the Green Deal provides the opportunity to a much wider audience and, applying the 'Golden Rule', means that the monthly cost of the loan is covered by the energy savings obtained from any initiative undertaken.

A better arrangement, as far as promoting heat pumps is concerned, is the proposed Renewable Heat Incentive (RHI) scheme, which gives real financial incentives to householders to reduce their carbon emissions. Unfortunately, the current proposals only cover air to water and ground source heat pumps.

If the Government is to make a real impact with the limited resources at its disposal it needs to encourage the provision of much more attractive financial packages for home and business owners than those available under the Green Deal.

// The author is sales and marketing director of FG Eurofred //
16 April 2013


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