An urgent challenge for the heating industry
The replacement rate of older, less efficient heating technology is an urgent challenge for industry. Our upcoming European Heat Summit is the perfect place to discuss solutions.
The EU 2050 Low Carbon Roadmap requires a 90% reduction in carbon emissions from houses and office buildings by 2050. Over half of the currently installed heaters in Europe are old and inefficient: a base of 80 million (EHI, 2015). The current rate of replacement of these systems is approximately 4%, at about 3 million a year. This is not fast enough.
In recent research for Policy Exchange, we produced two scenarios for achieving major emissions reductions (Figs. 1 and 2) in the UK residential sector by 2050.
In order to meet 80% and 90% emissions reductions targets, there has to be a significant reduction in use of gas and oil boilers in the UK from 2025 and 2030 onwards (respectively). The more ambitious the target, the greater the rate of change required.
Given that the standard lifetime of a domestic boiler is 10-15 years, replacements carried out now both generate initial emissions reductions and allow for a second round of replacements with even lower carbon solutions in 2025 and beyond.
It is now too late to implement substantial technology change in 2025 without requiring early retirement of replacements installed in the next few years.
The replacement rates of old appliances will have to increase dramatically in order to meet carbon targets, and the longer industry takes to scale up sales and installs, the more backlog there is. The efficiency of the replacements is also key – condensing gas boilers are just part of the puzzle! At Delta-ee, we can see an intermediary role for appliances such
as gas and hybrid heat pumps, allowing gradual transition from gas boilers towards electric solutions.
The ultimate technology mix will depend on geography, as well as many other factors. Policy intervention has a large role to play here, but customer engagement through more effective propositions is also critical.
Our recent Business Models report from the Heat Pump Research Service explores some of the ways in which innovative companies are engaging with customers and exploiting new revenue streams, often through moving further down the supply chain. The market is ripe with opportunities, but existing players must react to avoid being threatened.
At our European Heat Summit in June we will bring together industry leaders to discuss these issues, and emerging business models will be a key topic. I, for one, am looking forward to it!