(499b) Decarbonising Residential Heating: Cost-Benefit Analysis to Support Policy Design

The UK’s legally binding targets to achieve “net zero” greenhouse gas emissions by the year 2050 may require full decarbonisation of residential heating. This will involve deploying low-carbon heating technologies (such as heat pumps, electric storage heaters, and/or various hydrogen heating technologies) across the country, including in the 24 million homes that currently use natural-gas-based central heating systems. A key challenge of this transition is that the capital and operating costs of low-carbon heating systems are often greater than current natural-gas-based systems. In addition, the UK has a wide variety of building stock, which defies a one-size-fits-all solution.

The aim of this study is to assess the suitability of various policy instruments to promote the uptake of low-carbon heating technologies. A cost-benefit model is being developed based on housing stock data from the English House Survey, performance data from field trials, and cost estimates from the literature. The model will be used to calculate the lifetime cost and levelised cost of heat for a wide range of households and the results analysed to consider how the costs of different low-carbon heating options vary with characteristics such as building type, number of occupants, thermal efficiency, and geographical location. In addition, an uncertainty analysis will used to evaluate the impact of different fuel prices, outdoor temperatures, and personal preferences and to identify the household types likely to be impacted most by these uncertainties.

The results of this study will be presented and discussed in relation to current policies designed to promote low-carbon heating. This study will consider what level of government support will be sufficient to promote low carbon heating over the current natural-gas-based heating systems and will identify if a targeted approach based on geographic location, building type, tenure type, or other characteristics would be more appropriate.