Wednesday, 4 August 2021

Fabric first is not the cheapest path – is it the best?

Greater Manchester has declared a climate emergency and set itself a target of delivering net zero housing stock by 2038. Now they have published a report detailing what is needed to get there. This shows that the fabric first approach is not necessarily the cheapest or even the fastest strategy to decarbonise houses in Manchester. However the authors still recommend it for a variety of reasons. They make some very good points, although there are going to have to be some trade-offs made in practice.

The report has been prepared by a consortium of very respectable consultants: Parity Projects, Energy Systems Catapult, ADE research and Bays Consulting. Their findings are in line with the results of work I have been involved in for BEIS (Cost Optimal Domestic Electrification - CODE) but frustratingly this is still not published - and nor is the government’s Heat and Buildings Strategy, probably delayed due to concerns over cost [2]. In any case, the Manchester report covers policy as well as costs.

The nub of the problem is illustrated by this one chart, representing an ‘average’ house. The height of the coloured bars shows carbon emissions, the yellow coins at the top show the capital costs and the black diamonds show annual energy bills.

Chart from the Manchester report [1]

Installing a heat pump with no other changes has the greatest carbon save/capital cost.

The baseline bars (red) don’t get very far with carbon savings; energy efficiency measures (blue) do better and also reduce bills; installing a heat pump brings carbon down to practically nothing. A heat pump on its own is more effective than the most extreme fabric measures because heat pumps (green) use electricity and by 2038 this will have far lower emissions than gas. In terms of carbon saved/capital cost, the heat pump by itself is definitely the best. However the fabric measures make a big impact on bills and have other benefits too, for comfort and health.

Business as usual means little more than boiler upgrades.

Let's go into this in a bit more detail. Starting on the left, in the do-nothing scenario there is a small decrease in emissions which is due to electricity supply getting cleaner. However, most homes in Manchester are heated by gas or oil and these emissions remain the same. The business as usual scenario includes some energy saving measures which are likely to happen without any new policies. This means boiler upgrades to homes that don’t already have condensing boilers, plus a few fabric measures - cavity wall insulation, some loft insulation, double glazing (all affecting less than 1% of homes) – and vanishingly small numbers of heat pumps and solar panels. This does not get us very far.

In this report, cost effective means pay back in the lifetime of the measure.

The blue bars show emissions with fabric measures but still using a gas boiler – possibly upgraded. CE stands for 'cost effective’ and that means only measures where the energy savings over its lifetime are likely to cover installation cost. The report says this is a conservative assumption – but most people consider financial investments over 5 years, maybe 10; the lifetime of most of these measures should be much longer. The Manchester report finds that solid wall insulation - either external or internal - are both cost effective, as is floor insulation. In the CODE project we used a 15 year time horizon with discounting and we found floor insulation was not cost effective. Solid wall insulation was sometimes, depending on the proportion of heat loss due to solid walls and on the price scenario. 

Fabric first has benefits for residents and society.

The fabric first strategy is more expensive but it has a lot of other things going for it. This includes benefits to the household as well as benefits for the electricity grid. Keeping winter peak time demand under control is key to limiting the need for grid upgrades. As well as expensive, these are going to be very disruptive, and they take time.

For an inefficient home, switching to a heat pump will increase energy bills.

For the household, firstly there is a benefit in keeping energy bills down. Would you take a grant to install a heat pump if you knew it meant your bills would increase? Well you might, but for a lot of people the prospect of increasing bills is frightening. For an inefficient home, switching to a heat pump costs more because the price of electricity per kWh is 4-5 times that of gas, while heat pumps are only about 3 to 3.5 times as efficient. There are additional savings from not having to pay the gas standing charge, but that only gets you so far. Fabric efficiency is all important in keeping bills low.

Calls for shifting tax from electricity bill to general taxation - add your signature.

Increasing bills are a disincentive to reduce emissions. The problem is that gas is cheap but has high emissions and electricity is the other way round. It could be partly fixed by shifting some of the environmental tax burden from electricity to general taxation. Utility companies are calling for this [3]. Also there is a petition (which I have signed).

Fabric upgrades improve health and could save the NHS £1.6 billion/year.

As is the case in most cities, Manchester has a proportion of households in fuel poverty, often living in ‘F’ or “G’ rated homes that are already expensive to heat. Switching these to a heat pump without fabric improvements would be very bad for the families living there, doubtless leading to more hospitalisations with cold related health problems and even deaths. (They currently have about 500 cold related deaths per year). The Manchester report estimates that fabric upgrades in their area could save the NHS £1.4 billion/year.

Ventilation and fabric upgrades bring comfort, and also flexibility for the electricity grid.

Even if you are not in fuel poverty, homes that are not leaking heat in a major way are more comfortable to live in. Attention to draught proofing and ventilation also pays dividends, by reducing bills and giving you improved air quality – great for allergy sufferers and asthmatics. A well designed ventilation system ensures healthy fresh air without unnecessary heat loss. This can include heat recovery, using the outgoing air to warm up air coming in. Or it can control the air supply according to need. Either way it can use filters (and you should see what mine pick up, on the front of the house on a busy road). 

The electricity grid benefits too because an efficient home needs less power, plus you can still be comfortable after a few hours with less power demand, when the grid is struggling.

A proposed Future-Ready home rating system – could be simplified.

The Manchester report proposes a new standard for Future Readiness of homes – which is a bit different from the existing EPCs though there are some shared elements. This standard would include:

  • Future CO2 emissions – based on future electricity carbon factors
  • Fuel bill affordability – like the current EPCs
  • Fabric efficiency in kWh/m2/yr – a simpler measure than the current EPC rating system
  • Indoor air quality – based on presence of ventilation systems.
  • Demand response potential – an index of flexibility for the grid.

I can see the advantages to this rating scheme, although EPCs are complicated enough already. One problem with EPCs is that though they actually include an environmental impact rating and a primary energy rating as well as an energy cost rating no-one ever looks at them. So adding two more elements to the rating is probably not going to help. Also, affordability depends on energy prices, which change over time, and ditto CO2 emissions depending on carbon factors. 

I would simplify this, and base the primary rating scheme on just energy use and indoor air quality. Furthermore I would base the energy use rating on heating demand, not actual energy use. This means that getting a more or less efficient heat pump makes no difference, ditto PV panels and heat storage systems. These devices are also useful but do not last as long as the main fabric of your house.

None of the suggested policies come close to the target savings.

The Manchester report has a chapter on policies to deliver carbon savings. Unfortunately, most of the options either affect a tiny proportion of homes (e.g. community delivery schemes) or do not achieve very much in emissions savings in each home (e.g. the existing MEES policy which is a minimum energy efficiency standard for rented homes). The best one seems to be grants, which they modelled based on the Green Homes Grant – assuming that it was run for at least five years rather than just the one. I am sure they are right that this approach has most potential. They predict around 40% of homes taking up the grants. However even this is not enough to deliver the target savings. Their most optimistic scenario, with a whole stack of policies, brings 61% reduction in CO2 emissions. So for the moment the 2038 target looks to be well out of reach. But that is not an excuse to do nothing.

What if my boiler is old already, and I don’t have time for fabric first?

The Manchester report takes a policy perspective, not a personal perspective. What does fabric first mean for you? The 2038 target date is only 17 years away and your boiler might be near end of life now. Should you just replace it for now, on the grounds that you want to install some more insulation or window upgrades before you get a heat pump? You could, but you do not have to. You could get a big heat pump now, accepting the higher bills and knowing it will be over-sized after those fabric upgrades (and hence a bit less efficient). Then do the other upgrades over time and when your first heat pump needs to be replaced you can get a smaller one. Or, you could buy a small heat pump now and rely on secondary heating to keep you warm on very cold days until you have done the other upgrades, also accepting the higher bills in the interim. Obviously it is a bit more complex than this so you should get some proper advice!

What if I already have loft insulation, double glazing and filled cavity walls?

Most homes do not have all the measures that the Manchester report consider cost effective‘. However, the effect of each measure varies from house to house and they are not worthwhile in every case. The chart above was based on an average house and your house might be good enough already. In the Manchester modelling the average home with just the heat pump measure used 63 kWh/m2/year for heating (equivalent to 198 kWh/m2/year gas, or 14000 kWh/year for a typical 70m2). With cost effective upgrades this was reduced 16% and with all the fabric measures it was reduced 27%. This is quite a significant saving on bills, however, it may be less (or more) for you. 

My view - there are big benefits to fabric first but ultimately it is our choice.

In general fabric first is best, but it is more important for some households (e.g. fuel poor ones) than others. What is best for you depends partly on how much you care about energy bills versus capital costs. It may be that you are happy to invest some savings (hopefully topped up with a grant) to reduce carbon emissions and could tolerate a small increase in bills, at least for a while. If so then the direct heat pump approach might be best for you, but it does increase your risk exposure to energy prices. The Treasury predictions are for energy prices to remain fairly steady in real terms – but none of us have a crystal ball. Investing in fabric improvements (also hopefully with some grant support) reduces this risk and makes your house more comfortable and healthy to live in.

You may also be concerned about disruption, though just putting in a heat pump is usually somewhat more disruptive than a replacement boiler. Or you may be horrified at the idea of insulation covering up period features. 

We all need to aim for zero carbon as soon as possible, if only for the sake of the generations to come who have to live with climate change - but you should have some choice about how you get there.

[1] Pathways to Healthy Net Zero Housing for Greater Manchester (Greater Manchester Combined Authority) Feb 2021

[2] Heat and Buildings Strategy to be Delayed (Elmhurst Energy) July 2021

[3] Utilities call for gas' ‘thumb to be taken off the scale’ with changes to levies (Current News) Feb 2021

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