Treasury reinforces main priorities of new Heat and Buildings Strategy, with industry bodies critical at a lack of fresh support to cover the costs of retrofitting homes to support cleaner heat

The 2021 Autumn Budget and Spending Review has reiterated government plans to support an expansion of heat networks and heat pumps over the coming decade and beyond.  However, there was some criticism from a range of building engineering groups over a lack of fresh funding or a recognition of a need to replace the now defunct Green Homes Grant to fund energy efficiency improvements in buildings.

The majority of commitments set out by Chancellor Rishi Sunak in the Budget that will directly impact heat were already detailed in the delayed Heat and Buildings Strategy published last week.

This includes the previously stated £3.9bn commitment to building decarbonisation that is claimed by the Treasury to be made up fully of new funding. The money will be focused on drastically reducing carbon emissions from building stock across the UK over a three year period.

The £3.9bn will be put towards the Social Housing Decarbonisation Fund, the Home Upgrade Grant scheme, the Boiler Upgrade Scheme and the Heat Networks Transformation Programme. A public Sector Decarbonisation Scheme is also being introduced by the government.

Heat electrification is set to be a major beneficiary of current funding plans, notably with the recent announcement of £5,000 grants to aid 30,000 homes to install heat pumps.

The Autumn Budget stated, “The government is investing £450 million to grow the heat pump market in England and Wales as part of the ambition to work with industry to reduce the costs of heat pumps by 25-50 per cent by 2025. The Budget and Spending Review continues support for heat networks in England with £338 million to encourage private investment. These measures will help meet the government’s target of installing 600,000 heat pumps per annum by 2028.”

However, a range of trade associations and oversight bodies in parliament have questioned the scale of spending plans in the heat strategy, now confirmed in the Budget, to ensure lower carbon heating systems are installed at a sufficient scale in the UK.

Business rates and energy cost reforms

There was some mention in the Budget of the planned introduction of 100 per cent business rate exemptions between 2023 and 2035 for heat networks that can help support the decarbonisation of non-domestic buildings.

Yet no further details were given in the Budget about a possible timeline or plan to reduce current electricity prices that are seen by some in the heat pump and heating sector as a vital step to improve consumer interest in these systems.

The Government’s Net Zero Strategy, also published last week, suggested that the shifting or rebalancing of energy levies could be introduced as a means to cut the costs of renewable electricity and build demand for electric vehicles and heat pumps.

A Fairness and Affordability Call for Evidence to gain feedback on how best to cut electricity costs in comparison to natural gas prices is scheduled to be launched shortly, with a decision on reforming levies expected in 2022.

However, the Budget did not set out any plans for curbing the price of electricity costs over the next decade.

Insulation challenge

The building and construction sector have responded to the Budget by expressing disappointment at a failure to set out clearer plans and financing to retrofit the existing UK housing and building stock to better support low carbon heat.

Julie Hirigoyen, chief executive of the UK Green Building Council (UKGBC), said that the lack of a specific plan to drive a national retrofit focus was egregious, particularly with Glasgow set to host the COP26 International Climate Change Conference later this month.

She said, “Whilst we welcome changes to business rates to incentivize investment in renewable technologies, new research and development funding, and grants for local authorities, there were no big announcements to fill the clear gap that has emerged around decarbonising existing buildings.”

Ms Hirigoyen said she had hoped to see the Chancellor address some of the policy shortfalls identified by the UKGBC in both the net zero and heat and buildings strategies last week,

She added, “By supporting the industry’s plan for a national programme to retrofit our homes, the government could have delivered substantial progress towards net zero and unlocked a new wave of green jobs to help level up the country.”

“Instead, attention to net zero was tokenistic, repeating old announcements alongside incongruous headlines around carbon-intensive investment in roads, cutting air passenger duty and fuel-duty freezes.”

The Federation of Master Builders (FMB) meanwhile said it welcomed commitments made in the Budget to address issues around industry skills, business rates and a £24bn homebuilding plan, as well as £5bn commitments to remove unsafe cladding.  However, the FMB was also critical of the limited focus on making homes more energy efficient for purposes such as reducing heat demand and costs.

FMB chief executive Brian Berry cited the global scale of the upcoming COP26 as a missed opportunity for the UK to play up widescale green commitments in building policy.

Mr Berry said, “With nothing on retrofit for owner occupiers in last week’s Heat and Buildings Strategy, I’m struggling to see how the country will reach its legally binding net zero targets by 2050 if it doesn’t fix the UK’s 29 million leaky homes.”


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