IGEM response to the Heat Strategy for Wales

Response from the Institution of Gas Engineers & Managers (IGEM) to the Heat Strategy for Wales: The path to net zero heat in Wales by 2050 across all sectors

Licenced by the Engineering Council, the Institution of Gas Engineers & Managers (IGEM) is the professional engineering institution for gas – representing thousands of engineers, technicians and managers across the UK and overseas, and hundreds of businesses that are a significant part of the emerging hydrogen supply chain.

As advocates of excellence, IGEM’s core aim is to help all those involved with gas to achieve and maintain the highest standards of professional competence. Working with stakeholders from across the industry, we seek to inform current and future energy policy whilst representing the views of our members and the wider gas community.

IGEM fully supports the transition of the energy system to meet a net zero future and are playing a key role in supporting the evidence base for the application of low carbon gases in the gas network. As well as developing the first Hydrogen Technical Standards, IGEM facilitated a change in regulations on the quality of gas allowed to be injected into the transmission and distribution network, to enable a higher proportion of greener gases such as biomethane and hydrogen.

Our role across various industry and governmental groups sees us working directly with gas network companies, manufacturers, contractors, safety experts, academia, regulators, policy advisors and policy makers, to assess the evidence base and develop informed recommendations on the future of the gas grid.

We welcome the opportunity to respond to this consultation and aim to represent the collective views of IGEM Members and our gas industry stakeholders. We have selected questions from the consultation which are of greatest relevance to our members and provided our responses below.

Section 2 – A vision for heat in Wales

2.) Objectives: The Heat Strategy for Wales policies are broken down into 17 objectives within six groups. Do you agree they adequately cover the areas where Welsh Government needs to focus? (Yes/No) If you think there are any areas missing, please explain what they are.

No.

The Heat Strategy’s objectives do not include hydrogen for domestic heating as an option for decarbonising homes. It is missing any recognition that Local Area Energy Plans (LAEPs) are already modelling hydrogen for domestic heating as a viable alternative to other low carbon technologies, with the support of local authorities and Wales & West Utilities.

There are many benefits associated with the use of hydrogen boilers and hybrid solutions, particularly to service the harder to heat, older housing stock and heritage buildings across Wales. Heat pumps may not be suitable for many properties and are too costly to install where significant improvements are needed to the thermal properties and internal systems of a building. Alternatives must be made available to allow consumers optionality.

The Strategy’s objectives also do not adequately address the critical need for flexibility and resilience in our energy networks and the importance of mitigating the pressures on the electricity grid from increasing and competing demands.

Section 3 – Our enabling framework (page 15-24 of the strategy)

4.) Planning: Each local authority in Wales is producing a local area energy plan (LAEP).  This strategy proposes the LAEPs should be used to help deliver place-based heat decarbonisation. Do you agree with this approach? (Yes/No) Please provide evidence, where relevant.

Yes.

Which heating decarbonisation plan is adopted should be based on local assessments, looking at factors such as local infrastructure/supply, electricity grid constraints, building type and fabric, carbon savings potential, consumer preferences and costs. Local authorities, with the support of LAEP partners and Wales & West Utilities are perfectly placed to review, consult, plan and deliver energy decarbonisation across the whole energy system in their areas and put the needs of local communities at the heart of their plans.

It is our view that hydrogen, biomethane, heat pumps, hybrid technologies and heat networks, all have a role to play in the decarbonisation of heat – the combination of which will vary by area.

To inform area-specific plans, a careful assessment of the local context should take place:

• Gather data on existing heating systems, energy consumption and emissions.
• Identify the housing stock, including types of buildings, ages and energy performance.
• Evaluate available low-carbon heating technologies that suit the local context and housing stock.
• Consider resource availability, infrastructure requirements and compatibility with existing systems.
• Involve local governments, community organisations, housing associations, energy providers and residents in the planning process.
• Hold workshops, public consultations, and surveys to understand local needs and concerns.

These local factors should also be considered through a national lens, ensuring that a phased, area-by-area approach is adopted to minimise strains on appliance supply, materials, labour and network capacity. Local desire to invest in some technologies may be appropriate for a least cost system, whereas some solutions may be better invested in elsewhere.

With regards to the opportunities that hydrogen presents to local planning, the development of hydrogen hubs presents an opportunity to maximise the use of hydrogen infrastructure and supply, to support the widest possible remit across industrial, flexible power generation and domestic uses.

It is often not recognised that gas distribution pipes serve a range of demands through a shared network. Distributed industry outside of clusters, flexible power generation and homes are all located together in cities, towns and villages and share the same infrastructure. As such, it would be prudent for Welsh Government to avoid a siloed approach on home heating technology. There are other local demands that are dependent on hydrogen which balance local electricity supply and provide local employment for people in the area. It truly is a whole system, economy-wide matter, rather than a sector-by-sector (power, industry, buildings, transport) consideration.

Consumer optionality plays a crucial role in the future planning of energy networks for home heating and the success of heat decarbonisation. Demonstrated by recent examples from both the UK and Germany, when plans to replace conventional gas boilers with low carbon alternatives resulted in considerable public backlash. In the UK, customers campaigned to stop plans to change their natural gas boiler to a hydrogen boiler or a heat pump, and in Germany, consumer backlash, dubbed the ‘heating hammer’, led to hydrogen-ready boilers being included in the green heating law following opposition to banning traditional gas boilers from 2024.

As we transition towards cleaner and more sustainable energy systems, involving well informed customers in the energy planning decision-making process can lead to more efficient, equitable and environmentally friendly outcomes. Different households have different energy needs, preferences, and financial circumstances. Allowing customers to choose from a range of heating technologies, such as hydrogen-ready boilers, electric heat pumps, hybrid systems, solar thermal systems etc., empowers them to select solutions that best align with their requirements and financial circumstances, and crucially, will support public ‘buy-in’.

5.) Understanding and engagement: Does the strategy suitably address the advice needed to install low carbon heat? (Yes/No) Please explain which groups should be involved in awareness and providing advice.

No.

The Strategy, quite rightly, highlights the challenge of addressing knowledge gaps across consumers and businesses, and acknowledges that collaboration with multiple agencies, charities and civic societies is essential in engaging with the public. However, the Strategy is lacking a suitably pioneering public engagement approach, to underpin what is a complex and contentious societal transition, and fails to address the issue of consumer choice.

Although the Strategy is designed to be a high-level, evolving document, it must signal that a comprehensive and ambitious approach to engagement and consumer advice will be developed to address a transition of this magnitude – an approach that is governed and coordinated by a central authority, to ensure consistency and quality in delivery across all activities, campaigns and partners. This is an approach recommended by Policy Connect, following a nine-month long enquiry into delivery leadership for the net zero transition^[1]. Their report called for:

1. A Net Zero Delivery Authority to work with local authorities and relevant businesses, such as energy suppliers, to deliver a public information campaign about the path to net zero.
2. The government to establish a network of independent consumer information hubs, which would provide information about net zero, consumer protections and offer tailored advice, ensuring no one is left behind.
3. Local government and its partners, who have the reach into local communities and businesses, should be empowered to plan the transition and resourced to make it happen, street by street.

There must be very clear and consistent information on how consumers and businesses can access impartial information, advice, funding, technical support and details of qualified installers/suppliers.

Energy network companies and energy suppliers also have an important role to play in providing awareness and advice.

Lessons can be learned from the UK transition from Town Gas to Natural Gas in the 1960’s, where over 13 million homes and over 30 million appliances changed fuel. Recognising that a major sustained public relations programme was required, an exhaustive engagement and marketing campaign was delivered. It involved public meetings, demonstrations, technology showrooms, home visits as well as TV and print advertising. More detailed information and analysis can be provided on this transition if required.

7.) Skills: Do you agree that Welsh Government has a role in understanding and subsequently supporting the development of the necessary skills for heat decarbonisation? (Yes/No) Please highlight any emerging skills/roles which we should support.

Yes.

The labour force currently installing and maintaining domestic boilers is very well placed for retraining on hydrogen-ready and hydrogen appliances, a contrast to the workforce available for other key technology pathways. Work is underway through the UK Government’s Hydrogen Skills and Standards for Heat programme to establish the technical standards for domestic and non-domestic hydrogen gas installations, and associated competence frameworks and training specifications for installers.

The development of standards and assessments will need to be underpinned by:

• Clarity in government policies and strategies that influence investment in domestic heating technologies. This is needed for industry to make confident investments on which workforce numbers can be predicted and for workforce competencies and skills needs to be fully understood and planned for, in order to avoid skills shortages.
• Robust, industry-led, flexible and responsive skills systems. Skills systems need to be able to support agile and responsive delivery that does not compromise quality and that can keep pace with technological and regulatory requirements.

A good example of an industry-led responsive approach is SGN’s H100 training facilities, delivered through a local college, which is developing all that's needed for network engineers and installers, that can be replicated for nationwide readiness and delivery.

Operating and maintaining an increasingly decentralised energy system on ever greener power and gas will require a spectrum of skills across a whole range of experienced workers.^[2]

• Digital and data skills:
  To harness AI to maximise the reliability, responsiveness and accuracy of the UK’s energy system, the sector will need to attract experts in machine learning. Digital skills and data analytics will become core skills for the Net Zero Energy Workforce, with big data used for network planning, more efficient maintenance and improving risk mitigation.

• Designing and implementing new technologies:
  The Net Zero Energy Workforce will require highly skilled scientists, engineers and designers to design, test and maximise the potential for new technologies such as effective carbon capture, hydrogen gas, and to enable growth in networks that deliver energy from source to people’s homes.

• Scientists and engineers skilled in renewable energy:
  From installing new wind farms to building solar capacity, huge changes to how the UK generates its electricity are required if we are to increase low carbon generation by c.50% this decade.

• Skilled technicians to install and maintain clean energy solutions:
  Project managers, technicians and skilled trades people will be needed to change how millions of Britons heat their homes.

8.) Costs: Do you agree with the position set out in the strategy that the UK Government should move environmental levies from electricity bills to general taxation? (Yes/No)

What additional policies should be implemented to ensure a fairer distribution of costs?

Yes.

IGEM favours the use of general taxation as a funding lever, as this most fairly takes into account a household’s ability to pay.

Section 4 – Transforming our networks (page 25-35 of the strategy)

13.) Hydrogen for heat: The strategy states that based on evidence gathered, heat pumps will be the championed solution for most building heat. Hydrogen’s role will be in defined zones for high-temperature industry, as well as for wider net zero solutions prioritised by how useful hydrogen will be (known as ‘the hydrogen ladder’).

Do you agree that a clear statement is needed on hydrogen’s role in meeting Wales’ heat decarbonisation ambitions? (Yes/No) Please explain.

Yes.

IGEM agree that a clear statement on hydrogen’s role in Wales’ heat decarbonisation is necessary, however the position that statement conveys should not prematurely dismiss hydrogen’s role in domestic heating and lock-in a one size fits all heat decarbonisation pathway (one that the German Government recently came to regret). A statement on hydrogen’s role must also not contradict the work of the LAEPs, many of which have either already considered or are in the process of considering hydrogen within their modelled scenarios.

It is disappointing to see that the ‘hydrogen ladder’, used by those lobbying for electrification, has found its way into this draft strategy. This message over simplifies the energy system and incorrectly assumes that industry is located in one part of a gas network, power generation in other parts, and homes elsewhere on their own. The reality is that the demands on this ‘ladder’ are located together, sharing the same pipe, and therefore presents efficiency and cost saving opportunities by coordinating demand across multiple end uses.

Although a hydrogen energy island may be appropriate in some industrial demand use cases, history teaches us an important lesson. For the first 20 years of the gas industry from 1792, gas was manufactured, stored and consumed at individual industrial locations. When centralised gas production and distribution was established from 1812, these energy islands were abandoned in favour of a cheaper networked supply that also passed the security of supply responsibility to someone else. These networks also brought about opportunities for other demands to use the supply. Parallels are being drawn with hydrogen today, and is the reason we have been hearing many industries asking for a hydrogen pipeline, including the NHS.

Those championing large scale electrification across the UK are urged to consider the risks and challenges associated with a predominantly electricity dependent energy system, and the opportunity that green gases offer in support of a flexible, secure and resilient energy portfolio. The Welsh Government’s Heat Workshop for Domestic Buildings held on 31^st January 2023 to inform this strategy involved a breakout session where electricity networks articulated the need for including hydrogen in domestic heating. It is very disappointing that this ask has not been reflected in the strategy.

An approach that fully electrifies heat is impractical due to the significant challenges of energy storage, intermittency, peak energy demand, energy demand ramp-rates and the scale of infrastructure required to fulfil needs both locally and nationally.

Recent energy cost crises and extreme weather events have emphasised the importance of energy security, flexibility and resilience. Storms, flooding and gales cause devastation during the autumn/winter period, with many temporarily living without power to their homes. Those with gas fires, gas ovens and wood burners were able to continue heating their homes and cook in such power outages, however those that were completely dependent on electricity were not able to do so. The vulnerability of the energy network during such events serves as a vital lesson for Wales’ net zero energy policy makers.

Previous analysis by The Carbon Trust and Imperial College London[3] placed a much greater emphasis on the need for flexibility across the energy system, with the inclusion of hydrogen and hybrid systems, so it is disappointing to not see flexibility embedded within the Strategy as a central theme.

We urge the Welsh Government to:

• Encourage those responsible for developing Local Area Energy Plans by 2024 to comprehensively explore the value of hydrogen infrastructure, to serve not only industrial uses, but for transport and domestic heating also. The work of the Energy Systems Catapult with Costain for Wales & West Utilities may be very useful to you – Regional Decarbonisation Pathways[4].
• Take into account the wider infrastructure capacity needed to meet an increased demand for electricity and peak demand.
• Allow for the learning from national and local hydrogen trials to unfold, before locking Wales into potentially more costly pathways, from a total system cost perspective. This includes your own funded hydrogen domestic heating trial funded by ORP.
• Conduct a detailed assessment of housing stock across Wales, including the measures and full costs associated with the installation of heat pumps and the associated building retrofitting requirements.
• Develop a clear understanding of the preferences and needs of local consumers. The Climate Assembly UK in 2020 showed a slight preference for hydrogen heating compared to heat pumps.
• Support a mandate on hydrogen-ready domestic and industrial gas boilers from as soon as is feasibly possible.

IGEM are supportive of the Future Energy Networks Wales work commissioned by Welsh Government and to be delivered by the Energy Systems Catapult, generating a set of whole energy system scenarios for Wales. We hope to see a more whole systems approach reflected in a future strategy update, presenting a flexible portfolio with major roles for hydrogen, wind, nuclear, energy efficiency and demand response that are optimised for lowest total system cost and balanced across local, regional and national levels.

Section 4 - Improving the energy performance of our homes (page 36-41 of the strategy)

14.) A clear framework: Do you agree that stronger regulation is needed to encourage the uptake of low carbon heat and more energy efficient homes? (Yes/No)

What other interventions must be implemented alongside stronger regulation to ensure no one is left behind?

Yes.

The transition to decarbonised heating must be affordable for consumers. Any upfront costs for customers associated with adopting new heating technologies or making homes more energy efficient must be carefully managed, with support schemes specifically designed to not disproportionately impact vulnerable and low-income households. IGEM supports the recommendations set out by Policy Connect[5] which includes:

• Any scheme that is driving uptake of a certain technology should be based on up-front grants, rather than on-going payments: or if the scheme is based on on-going payments, it should have a ring-fenced component to widen access to those who are fuel poor and vulnerable.
• Any scheme should be funded through general taxation where possible, as this most fairly takes into account household’s ability to pay. If it is levied on energy bills, a form of means-testing should be introduced to make household contributions to the scheme correlate to their income.
• Schemes must benefit the fuel poor at least proportionally compared to the general population: and ideally more. There should also be additional support for those in fuel poverty to cover a general increase in energy prices resulting from decarbonisation.
• Schemes should not penalise those who are late to switch, for example by ensuring that charging frameworks for energy networks are fit for expected changes in the future.

The Boiler Upgrade Scheme’s (BUS) statistics suggest that the average cost of replacing a boiler with a heat pump is £13,500; following a BUS grant of £7,500^[6], it leaves a £6,000 shortfall for consumers to pay. Conversely, boiler manufacturers have already guaranteed that hydrogen-ready boilers will have cost parity with existing gas boilers and will be effective without considerable retrofit of homes. Mandating hydrogen-ready boilers, as advised by the Climate Change Committee, is a no-regrets option that the Welsh Government can advocate for now, to help speed up the energy transition, pending a decision on hydrogen for domestic heating.

Other interventions are needed to address the issues of disruption for the consumer and the considerable expense involved in upgrading the thermal and system efficiency of properties. Some properties present more difficulties and disruption to change heating technology than others, including those which require replacement microbore piping (involving re-plastering, redecoration and re-carpeting), or building fabric retrofit prerequisites to installation.

In a 2021 report by the Environmental Audit Committee, they raised concerns over the significant underestimates which had been made in the UK Government’s calculations on the cost of retrofit measures and installation of heat pumps^[7]. According to a recent heat pump user survey^[8] over 55% of homes required some form of fabric upgrade: loft insulation (36% of cases), wall insulation (23% of cases), and/or double or triple glazing (23% of cases). While “53% of heat pump installations involved replacing the entire heating system”, new controls (72%), new radiators (68%) and new pipework (55%). The issues associated with this scale of retrofit are reflected in research by the Energy Systems Catapult^[9], which highlighted that a commonly reported reason for participants not wanting to proceed with a heat pump installation was “the disruption that the installation would cause to their home. This includes replacement of pipework, impact on décor, etc.”

Funding mechanisms and incentives are needed to cover, not only the cost of the heating technology installation, but the total cost of associated low carbon measures including thermal and system efficiency upgrades.

Engagement and education interventions will also be required to inform property owners of the environmental imperative of the upgrades and demonstrate the direct benefits to the consumer.

16.) Traditional buildings: Do you agree that demonstration projects for historic and traditional building retrofit are needed? (Yes/No)

Are there further interventions needed to grow the market for traditional building retrofit?

Yes.

There is still widespread concern over the effectiveness of certain low-carbon heating technologies for specific types of housing stock and some non-domestic buildings. The challenges of retrofitting traditional housing stock with low-carbon heating technologies are being overlooked.

Whether a heat pump is suitable within an older era property is not just an issue of feasibility, with extensive building fabric and internal system retrofit, the majority of housing stock can have a heat pump-based system installed – however the challenges of achieving this across all properties are extensive, with serious concerns over practicality, reliability, disruption and cost.

The Strategy highlights findings from domestic demonstrations indicating that there is no property type or architectural era that is unsuitable for a heat pump. IGEM urge the Welsh Government to carefully examine the detail beneath the headlines and the limitations of the research sample. Contrary to this research, one study on the suitability of low carbon heating technologies demonstrated that heat pump-only systems could be unsuitable for between 37% and 54% of existing UK housing stock, citing factors such as lack of exterior space and thermal properties of the building fabric[10].

Although the work of the Energy Systems Catapult on the Electrification of Heat project concluded that “all property types and eras were suitable for heat pumps”, they also acknowledged the challenge in successfully designing heat pump systems for older homes. The project report[11] stated that “many of the properties that had a heat pump installed already had suitable levels of loft and wall insulation, in part because harder to insulate properties were ‘triaged out’ at earlier stages of the project.” This demonstrates that the analysis is not truly reflective of the full range of housing stock, only the sample properties included, with the report stating that the “suitability of the wider UK housing stock for heat pumps should therefore not be inferred based on this data.”

We urge the Welsh Government to build on the existing research and conduct/commission a detailed assessment of the housing stock across Wales, looking at factors such as building fabric, feasibility of insulation measures, internal space for hot water cylinders or other heat storage assets, suitability of existing pipework and radiators, and other potential internal system change requirements.

As part of a whole systems approach, the results of this research can be used in conjunction with LAEP assessments of grid infrastructure and capacity, resources, industrial hubs, consumer needs and preferences etc. to coordinate the optimum heating solutions for each property/locality. Not accommodating these factors in the home heating transition could result in considerable disruption, lack of public buy-in, ineffective heating, higher energy bills, additional strain on electricity infrastructure and ultimately, a delay in decarbonising homes.

Section 4: Evolving our businesses (page 42-48 of the strategy)

19.) Regulation: Do you agree that stronger regulation is needed to phase out fossil fuel boilers, on and off-grid, in commercial properties? (Yes/No)

What other interventions must be implemented alongside this stronger regulation to ensure this transition does not have adverse impact on businesses.

Yes.

Clear, long term, stable regulation is needed to ensure businesses can prepare adequately for the phasing out of fossil fuel boilers and supply chains can develop in time to deliver. Long term goals must be backed up with detailed plans on the timeline for phasing out and what alternative technologies will be made available, whether that be hydrogen boilers, heat networks, hybrid technologies or heat pumps.

Much like domestic consumers, businesses need the confidence that they will be supported through the transition, provided with guidance on the alternative low carbon technologies available to them and the financial support to make the change.  

Businesses need adequate time to plan and budget for the costs associated with the switch away from fossil fuels. With clarity on the incentives and funding mechanisms to support the move, especially small businesses.

The delivery of alternative technologies will need to be carefully coordinated with the infrastructure development needed to deliver the energy.

Section 5: Future-proofing our industry (page 49-53 of the strategy)

24.) Industrial hydrogen: Do you agree that Welsh Government has a role in understanding and mapping future demand for hydrogen from high temperature industrial heat, to ensure the infrastructure is in place to allow fuel switching? (Yes/No) Please explain and expand on Welsh Government’s role, if applicable.

29.) Costs and savings:  The costs set out in the strategy are drawn from the Climate Change Committee analysis.  Is there additional evidence on the costs and potential savings that we should consider? 

Yes.

Analysis by Imperial College London on scenarios for heat decarbonisation, found comparable 2050 annual costs across the four hydrogen and electrification scenarios modelled. All heat decarbonisation scenarios' cost were highest where the system had very low flexibility, with the fully electrified scenario being the most affected. As part of their sensitivity analysis, low gas prices were found to bring hydrogen and hybrid heat pumps with hydrogen or natural gas to the minimum cost. In this case, the hydrogen scenario could become the least-cost scenario.[14]

More recent analysis by Imperial College London builds on these findings using optimisation models of multi-energy systems (electricity, heat, hydrogen) to determine the least-cost solution (as opposed to the Strategy’s approach of considering hydrogen applications in silos).[15] It determines that, “although the overall efficiency of primary energy use in the Hydrogen pathway is 19% less than that of Heat Electrification, the Hydrogen pathway costs £5.4bn/year less than the Heat Electrification pathway. This study demonstrates that a system with higher energy efficiency will not always lead to a more cost-effective system.

These independent findings show cause for more careful consideration on what energy mix will be the most cost effective for Wales from a total system cost perspective. Scenarios where hydrogen for domestic heat is included provide the additional benefits of providing greater system flexibility, resilience and security, for when the wind doesn’t blow and to accommodate peaks in demand, as well offering more optionality for consumers.

31.) Our pathway: The strategy is based on the Climate Change Committee’s Balanced Pathway.  Do you agree with this approach? (Yes/No) Please explain.

Yes.

IGEM supports the CCC’s analysis, however, the Strategy does not fully reflect the CCC’s balanced pathway recommendations.

The CCC recommend that hydrogen application should be focused on areas of highest value, where electrification is less feasible, it also acknowledges that hydrogen may have a material longer term role in buildings, particular in those areas near hydrogen supply/industrial clusters. Analysis by Element Energy identified that 42% of gas grid connected homes are within industrial cluster supply areas, along with 39% of HGV registrations. This highlights the potential for multiple end uses for hydrogen around industrial clusters.

The balanced pathway highlights exceptions for the phasing out of gas boilers in areas where the gas grid is set to convert to low-carbon hydrogen – this is not reflected in the Strategy. Neither is the CCC’s consideration of hydrogen-hybrid heat pumps.

The Strategy also contradicts the Future Energy Grid Wales 2023 report, produced by Welsh Government and Energy Systems Catapult, which highlights the potential role of hydrogen in managing future peak heating demands and reducing pressure on electricity network infrastructure.