20 August 2021 Cheryl Pick, Projects and Engagement Manager
Dear members
The Department for Business, Energy and Industrial Strategy (BEIS) have been consulting on the Standard Assessment Procedure (SAP) and the Association for Decentralised Energy (ADE) has fed into this regarding ongoing work regarding the treatment of heat networks in SAP. The key points to note are:
ADE also held a rebalancing gas and electricity pricing workshop. The objectives of the gas and electricity rebalancing session were to find common ground across the sector on a politically difficult question and agree concrete next steps for the industry.
A speaker from the Heat Pump Federation used a break down of a gas and electricity bill to highlight the little incentive to switch from gas to decarbonised heat source due to the taxes placed on electricity and the subsidies placed onto gas. They gave a comparison to our European counterparts and demonstrating how rebalancing in places such as France have facilitated the uptake of low carbon heating sources such as Heat Pumps.
The general consensus from attendees was that the taxes placed on electricity should be remove and put not gas was the best option for rebalancing. A speaker from the NEA highlighted however, that those who are already in fuel poverty should not be exempt from any changes to their bills which would result in them paying more for their incumbent fuel. They stressed that these decisions are very important to make with the very poorest in mind.
It was also suggested that there could be a proposed tax on fossil products again with exemptions to lower income households.
A speaker from EON highlighted that people feel they are already doing their bit and are happy with their current heating systems. Therefore the only way to really incentivise households to switch to low carbon heating sources is to make it cheaper than its counter factual, which could ultimately be achieved by rebalancing the costs of gas and electricity. They cautioned that there will be no simple solution and that changes will require very careful design.
Energy UK suggested the need to help customers avoid the cost increases of the rebalancing (and therefore potential increase in gas price which their incumbent heating systems use) by supporting them to switch to low carbon heating systems that require electricity. There was also a suggestion of using time of use tariffs in a better way to further mitigate the impacts of the cost rebalancing.
A speaker from Scottish Renewables highlighted the different impacts that Scotland will face due to devolution and the large amount of off gas/ biomass households. In addition, Scotland has a different definition of fuel poverty compared to the rest of the UK and therefore a different proportion of society will have to be considered when looking at the impacts of rebalancing.
Overall it was a fruitful discussion and something that was considered essential if the government is going to incentivise the switch to low carbon heating solution in line with net zero ambitions. However, industry stressed the importance of carefully considering the impacts of those in fuel poverty and ensure that it is fairly administered.