Since our last new energy letter, the European Commission has published its long-awaited Renovation Wave Strategy, revealing of the extent of Europe’s decarbonisation ambitions in existing buildings – arguably the most challenging sector to decarbonise. The renovation wave strategy is making ripples, which could become a tidal wave of transformation for our existing building stock, with energy efficiency and the uptake of low carbon heating standing to make vast gains.

But this scale of change will only be unlocked if the market is swept along too – if member states follow through on the strategy recommendations, and if private investment is unlocked at the scale envisaged. So which parts of the renovation wave strategy give me something to be optimistic about?

It’s almost 13 years since I first immersed myself in understanding the heating market, and began supporting Europe’s biggest energy suppliers and HVAC companies in navigating the heating transition. 2020 seems like a good time to reflect on what’s changed since then and consider what the next decade could bring. 

Thirteen years ago I had just completed a PhD quantifying the impact of climate change on Icelandic glaciers – and predicting how these impacts would play out in future decades.  The impact of continued warming – and the need for urgent action to stop it – was painfully clear.  This desire to solve the climate crisis was of course what drove me to the energy industry.  The science of climate change was clear – now to tackle action and adaptation.  I focused in very quickly on heat, as one of the most critical (if most challenging) parts of energy consumption to decarbonise.

Since our last new energy letter, the shift in focus has moved from the impact of the Covid-19 crisis, to how we recover – and how “green” this recovery is. I have growing confidence that the recovery will drive acceleration in some aspects of the energy transition. There will of course be major economic challenges ahead, and the energy sector is not immune to these - but the fundamental drivers of the energy transition remain unchanged. It is encouraging to see signs of a commitment to “building back better – and greener” from Brussels and in some European capitals. The decisions being made now will determine the speed and nature of the energy transition over the years and decades ahead – and as such, influence business models, strategies and opportunities for companies in new energy.

The most detailed glimpse so far of just what this recovery will look like, was revealed in the European Commission’s Recovery Plan to “repair and prepare for the next generation” – which sets aside €750bn for a Green Recovery (plus longer-term budget reinforcements). It clearly signals that this recovery should be clean, circular, competitive and climate neutral. So what does this mean for new energy? Five points catch my interest, which create fantastic opportunities for the energy industry, if it is ready to capture them.

Energy communities is emerging as one of the hot topics of the 2020s in the energy world.  This has been accelerated by the current Covid-19 crisis, which has made the need to find local solutions to global problems even more pronounced.  Many of the discussions around community energy are centred around electricity - but are we missing an opportunity by not talking about the benefits of a multi-vector approach which integrates electricity together with heat (and ultimately other vectors like mobility and hydrogen)? In this blog, we will focus on the opportunities for heat to be at the heart of energy communities.

The transition from “old heat” to “new heat” is making a community energy approach to heat more and more appropriate – and potentially more valuable.  We believe that working directly with communities on local heat decarbonisation strategies will be critical to the success of heating product and service providers in the future.  Energy communities with heat at their heart are not just the future – they are already here, and they are a growing opportunity not to be missed by the energy and heating industries.

The Netherlands is at the forefront of the move to decarbonise the European heating sector through electrification of heat, driven by a policy goal to phase out natural gas. In the Netherlands, this drive has been strengthened by a series of earthquakes in the north of the country that have been caused by natural gas extraction. This is quite a shift as, similarly to the UK, the Netherlands has previously been a country dominated by gas heating. 85-90% of homes currently use natural gas as their main heat source.  

Cate Lyon, manager of Delta-EE's Electrification of Heat research, says that building regulations have been the key to kick-starting the electrification of heat in new build housing.

In my last blog, I explained why I think now is the time for air/air heat pumps (A/A HP).  There are strong opportunities in the residential heating market in Europe. But in our conversations across the heating and energy industry, we still meet challenges from those not yet engaged in A/A HPs. Here are some of the major myths and challenges we hear - and why we still think A/A HPs should not be ignored.

Challenge #1: “A/AHPs are good for cooling but suboptimal as a primary heating solution”.