New zero carbon heating report to help green economic recovery

22 December 2020 by Grace Coleman
blog author

The Green Finance Institute has released a report to open opportunities for the finance sector and a green economic recovery.

The organisation unveiled the ‘Financing zero carbon heat: turning up the dial on investment’ analysis which looks at the barriers to the widescale decarbonisation of the UK’s domestic heating.

Last year the institute established the Coalition for the Energy Efficiency of Buildings (CEEB) – a cross-sectoral collaboration of over 200 individuals, with support from E3G.

Their new report gives details of a portfolio of 12 financial solutions and policy, regulatory and data enablers to overcome them.

One of the largest contributors to emissions in the UK is heating the built environment, which accounts for 21 per cent of the national total, according to the Department for Business, Energy and Industrial Strategy (BEIS).

Two-thirds of these emissions are caused by housing, and a near complete decarbonisation of heat is essential to achieve the government’s net-zero target by 2050.

Boris Johnson’s newly launched ten-point climate plan for a green industrial revolution has envisaged an annual installation of 600,000 heat pump by 2028, and a widescale programme for zero carbon heating could also support the UK’s green economic recovery.

The CEEB has assembled the Zero Carbon Heating Taskforce, an expert group of more than 50 member organisations from the finance, energy and construction sectors, as well as local and national government.

The report assesses the investment obstacles to zero carbon heating across the UK housing market – including on and off gas grid homes, new builds and district heating networks – and presents a portfolio of 12 ‘demonstration projects’, designed by the Taskforce members to directly address the identified challenges. 

Dr Rhian-Mari Thomas, chief executive of the Green Finance Institute, said: “The finance sector has a critical role to play in enabling the decarbonisation of our heating: it must offer products that make the decision affordable.

“The Zero Carbon Heating Taskforce’s solutions are practical, scalable and focussed on presenting homeowners, landlords and institutional investors with attractive ways to access funding and new savings options. They’re also backed by recommendations for the fiscal and policy incentives required to support their roll-out.”

The demonstration projects, which will be brought to market from 2021, include:

  • Green Home Salary Sacrifice Scheme – A tax-efficient mechanism for employees to pay for a heat pump via a loan from their employer

  • Green REITs – Embeds environmental criteria into a popular asset class and provides a scalable mechanism to attract significant volumes of institutional investment into zero carbon heating systems

  • National District Heating Fund – A specialist investment fund focussed on investing in district heating networks across the country, that could sit independently or as part of a new National Infrastructure Bank

Members of the Zero Carbon Heating Taskforce includeThe Association for Decentralised Energy, E.On, Grantham Research Institute on Climate Change and the Environment, Lloyds Banking Group, National Centre for Decarbonisation of Heat, OVO Energy and SSE.

Caroline Bragg, head of policy, The Association for Decentralised Energy, said:“Decarbonising the UK’s heating will require us to be bold in our approach, and to consider solutions that are scalable, investable and in line with net zero.

“Our success or failure in decarbonising heating by 2050 will depend on the actions we take in the next five to ten years. Therefore, we welcome the report published today by the Green Finance Institute, which provides much needed examples of how we can make low carbon heat solutions an attractive, low risk option for investors. We look forward to working with the Coalition for the Energy Efficiency of Buildings further in 2021 to make these demonstration projects a success.” 

Adrian Letts, CEO, OVO Retail, said: “The work of the Green Finance Institute in unlocking the investment that will help make this happen is a critical piece to reaching net zero, and we’re delighted to be working together.”