Smart Local Energy Systems and the Heat Decarbonisation Challenge

Smart Local Energy Systems and the Heat Decarbonisation Challenge

Dr Madeleine Morris, Research Associate, Grantham Institute for Climate Change and the Environment, Imperial College London

31 January 2022*

We have just published our report on how Smart Local Energy Systems (SLES) can contribute to heat decarbonisation. This blog is a summary of the findings.

The heat decarbonisation challenge

Transformation of the heat sector is ramping up, with both the UK and Scottish Governments publishing long-awaited heat strategies in October 2021. The main driver for change is decarbonisation, and with good reason -  a third of the UK’s carbon emissions can be attributed to heat, with 75% of these coming from buildings largely because of the prevalence of gas boilers.

While the urgency that underpins the challenge of decarbonising the heat sector is rooted in carbon reduction targets, the transition also provides an opportunity to address some of the wider societal issues that are present in the UK. For example, there are an estimated four million households living in fuel poverty, and nearly 17,000 annual excess winter deaths that can be directly linked to cold homes.  With the ongoing gas crisis leading to rising energy bills, there are fears that there could be a sharp increase in fuel poverty. Some estimates suggest that there could be over six millions fuel poor households in England alone from April this year.

If we get it right, the transition to a decarbonised heat sector should help to make homes warmer, improve public health, and alleviate fuel poverty. Crucially, though, these ‘co-benefits’ are not guaranteed. In fact, under current policy, regulatory and market structures, it is more likely that existing societal inequalities will be exacerbated as the transition progresses.

On top of this, we need to think about how a decarbonised heat sector can work in the context of wider energy sector changes. For example, with significant electrification of both the heat and transport sectors and an increasing reliance on intermittent renewables like wind and solar, smart and flexible principles must be baked into the decisions made now.

Heat is a local challenge

Successive UK Governments have tended to a favour top-down, national approach to the energy transition. While this has worked well for the power sector (which has seen carbon emission reductions of around 70% since 1990), it generally doesn’t account for the local context which will be important for heat decarbonisation. This is because people will need to make changes that will impact their daily lives in a way that hasn’t been required for the decarbonisation of power. That could be making improvements to the energy efficiency of homes, switching appliances or heating systems, or changing the way we use these systems. Citizens are also expected to foot a significant proportion of the bill.

Heat decarbonisation and SLES

In our heat report, we reviewed the literature on the current policy and regulatory landscape to identify the cross-cutting barriers to heat decarbonisation. We then systematically analysed the literature  through the lens of the ‘SLES’ prism, first introduced in the EnergyREV post-pandemic work. This analysis demonstrated how a smart and local approach could help to overcome each of these barriers. Finally, we analysed the recent heat strategies from both the UK and Scottish Governments, to identify what needs to be done to unlock the potential for SLES to contribute to heat decarbonisation.

Summary: The five cross-cutting heat decarbonisation challenges and how SLES can help

Challenge 1: Few people are aware of the link between gas boilers and climate change, and we’re a decade behind the power system in our understanding of how to effectively engage with consumers and businesses with the required changes – technological and behavioural – that will be required to decarbonise heat.

How SLES can help: A SLES approach can draw on the knowledge of trusted local actors like businesses, local authorities and community groups to enhance engagement, improve understanding, and develop approaches that prioritise positive societal outcomes.

Challenge 2: Stop-start, short-sighted government strategy has resulted in little progress being made on heat decarbonisation. Current top-down approaches don’t fully appreciate local resources and needs.

How SLES can help: As well as being potentially cheaper than top-down plans, a SLES approach could facilitate the development of co-ordinated plans which align heat decarbonisation strategies with local infrastructure requirements and socioeconomic characteristics.

Challenge 3: Without a clear long-term strategy, it’s difficult to make crucial decisions on what to do with existing infrastructure (like the gas grid and our inefficient building stock), planning where to build new infrastructure (like electricity generation), and how much of it is needed.

How SLES can help: A SLES approach can help to enable area plans which take into account local resources, challenges and capabilities across heat, transport, power and energy storage. This could inform and support national decisions on how to repurpose and better utilise existing infrastructure and decisions on how much and where new infrastructure should be built.

Challenge 4: The UK currently doesn’t have the capacity to deliver zero-carbon heating at the pace and scale needed. We need to build strong supply chains and ensure that we have the right skills needed to carry out high-quality work. Stop-start policies and a lack of clear direction from central government has instilled deep uncertainties across the sector, leaving businesses unable to invest in vital skills and training.

How SLES can help: A SLES approach recognises that different areas of the UK have different assets, opportunities, and needs, and that local leaders are well placed to align heat decarbonisation efforts according to these characteristics. Local authorities can also leverage their significant purchasing power to support the development of the supply chain.

Challenge 5: The costs associated with decarbonising heat are likely to be significant. The negative health and economic impacts of poorly insulated and under-heated homes disproportionately affect those who are already in, or at risk of, fuel poverty. 

How SLES can help: SLES could minimise the financial burden of decarbonisation by delivering £1.2—2.8 billion in cost savings by 2030, and £2.9-8.7 bn by 2040. A SLES approach could also help to unlock the societal co-benefits (e.g. health improvements and alleviating fuel poverty) of zero-carbon heating through smarter planning, like combining energy efficiency upgrades with clean heat technology installation to minimise disruption and ongoing costs, helping to decarbonise and improve health of occupants. 

Whilst it is clear that SLES based approaches could bring multiple benefits to the decarbonisation of heat, unfortunately, the current policy and regulatory landscape hinders their emergence. For example, while the UK Government’s Heat and Buildings Strategy explicitly highlights the potential for local government to be key players, a lack of sufficient resources (including time, money, and skills) means that this potential is not being realised. In the report, we make 12 recommendations to enable SLES approaches to heat decarbonisation to deliver the environmental, economic, and societal benefits they are capable of.

In summary,  a SLES approach is one with that can tap into the strengths of local resources, actors and supply chains. It applies whole-systems thinking too, facilitating the implementation of solutions that work for particular regions and communities, as well as contributing to an efficient, integrated, zero-carbon energy system. A SLES approach could deliver a transition to decarbonised heat that is faster, fairer, and more cost-effective than the UK Government’s predominantly centralised, top-down approach.

The research setting out our full findings and recommendations is available here.

The report authors discussed their findings and insights as part of our Governance Insights Lunchtime Seminar Series on 9th February 2022, you can view the seminar and download the slides here

* The blog was updated on 2/2/2022 to include links to the heat report and on 10/2/2022 to include a link to the recording of its launch.