The Chancellor’s Budget statement confirmed the following funding commitments for Low Carbon Heat:
- To introduce a levy on gas suppliers to support green gas injection to the grid. This will accelerate the decarbonisation of the UK’s gas supply, by increasing the proportion of biomethane in the grid. This is expected to be implemented in autumn 2021. The Government expects these costs to be passed onto gas bill payers. The expected impact is relatively small; around £1 a year on the average household energy bill, rising to around £5 by 2025; that’s c.0.5% of an average household’s dual fuel bill. The Government will implement a robust cost control framework, which includes an annual budget cap to ensure impacts on bills do not rise unexpectedly;
- £100 million of exchequer funding in total for 2022/23 and 2023/24 for grant-funding for households and small non-domestic buildings, to install heat pumps, or biomass in limited circumstances, to replace fossil fuel heating. This will form part of government action to help build supply chains ahead of future measures to phase out high carbon heating; and
- £270m for a Green Heat Network Fund to run from 2022 to 2025, to follow on from the Heat Network Investment Project. This new targeted fund will ensure that heat networks adopt the most cost-effective low carbon heat sources and will avoid locking in gas generation in the sector.
Ahead of these schemes being established, the Budget announcement has confirmed that the Government will:
- Extend the Domestic Renewable Heat Incentive (DRHI) for a year in 2021/22, maintaining support for heat pumps, biomass and solar thermal; and
- Introduce a third allocation of Tariff Guarantees under the Non-domestic RHI (NDRHI). These will be available for all technologies that have been eligible for the previous two allocations.
Graham Wright, chairman of the HPA, said: “This is exactly the type of pro-active investment we need to see from government if we are serious about meeting the aim for net zero carbon emissions by 2050. We have frequently stated that the low carbon heating technology is there and available, but only with the right policies, investment and awareness will we see the major uptake required. However, this is just the beginning. Industry must also fulfil its commitment to producing sufficient heat pumps, in both quality AND quantity, and working with government to ensure the installer base has the necessary skills to install them correctly.”