The government's strategy for rural heating: it's time to deliver on fairness
Malcolm Farrow, Head of Public Affairs
| OFTEC
When the government launched the Heat and Buildings Strategy, it announced consultations on phasing out high carbon fossil fuels in homes and businesses off the gas grid. The outcome of these consultations is yet to be published and the deadlines proposed for the transition to start are getting closer. With the economic situation changing for the worse, is the delay a sign of a shift in the government’s thinking? It’s vital that it is.
When the government first published its decarbonisation plans, much of its supporting evidence was already aging badly or open to question; in the year since publication, things have only got worse. The Covid pandemic, and the economic impact of the Ukraine crisis, have created the kind of economic headwinds that should force any sensible government into a rethink.
For example, the idea that the cost of installing a heat pump will fall by up to 50% by 2025 was always doubtful for rural off-gas grid homes because they are often old and difficult to retrofit. But with the cost of heat pumps rising rather than falling, it’s surely unreasonable to expose these already hard-pressed households and businesses to further financial shocks, should they need to replace their boiler in the next few years.
The government also claimed that over 80% of off-grid homes were heat pump ready, but few in the sector believe this to be credible – a survey of over 200 rural heating businesses suggested that the opposite is the case – just 20% were thought to be ready for the transition without additional energy efficiency retrofit work. Even if the true figure lies somewhere in between, that’s sure to cause a lot of uncertainty and difficulty once the new regulations come into effect from 2026 (or 2024 for large non-domestic buildings). Just how will the government’s idea of “reasonably practical” be assessed in practice?
Worse still, the heat pump installer base isn’t ready. With government financial support for heat pumps limited, massive increases in business costs and orders for work drying up as consumers tighten their belts, few installers are currently willing to risk diversifying until customer demand picks up. The slow start to the new Boiler Upgrade Scheme demonstrates the impact of this perfectly.
While the government is providing some limited financial support, it’s clear that it’s main tool to drive change will be regulation. Alongside the grant, it thinks that compelling off-gas grid households and businesses to install them first will help the heat pump market grow, eventually bringing down costs for everyone else. But given the now grave economic situation, this approach is now fundamentally flawed.
Even if we disregard the fact that rural homes and businesses are being treated extremely unfairly – facing the highest costs, greatest disruption, and most uncertain outcomes – it’s clear that the approach is psychologically wrong. In the face of the energy price shock and inflationary pressures, what consumers are looking for most is reassurance – they want to be protected from price rises and additional expense. Forcing off-grid households and businesses to buy much more expensive heating systems sends out the wrong message and risks eroding the trust of rural communities in the government.
It's hard to believe that the government would risk alienating such an important group of voters who typically live in Conservative areas. With the cost of living known to be higher in rural areas, it must show that it is sensitive to the challenges faced by these communities, whether it be responding to the current cost of living crisis or achieving the goal of net zero. To date, the omens have not been promising, but there is still time for that to change.
It doesn’t have to be like this
With some simple tweaks to its strategy, the government could provide the support and reassurance that rural communities need over costs, while making more rapid progress with its decarbonisation plans.
Firstly, off-gas grid homes and businesses have a similar need for support to those that rely on gas, so it’s perverse to leave them under-funded at a time of acute crisis. While the decentralised nature of off-gas heating is a challenge when it comes to delivering support, it isn’t insurmountable. Establishing a constructive and effective dialogue with the rural heating industry is a critical first step. Delivering support at an appropriate level would help to establish trust.
Secondly, it makes little sense to install a heat pump in an energy inefficient building, yet that’s exactly what the government is proposing. Off-gas grid homes are typically less energy efficient and thus more expensive to heat than those on the gas grid. Support for energy efficiency measures, including for the so-called able to pay sector, would help to show that the government is really on the side of these consumers, and understands the challenge posed by both the buildings and high energy prices. Few households and businesses have the spare cash to invest in this vital work, so the government needs to step in.
Finally, the heat pump first approach needs to be tweaked. On-gas grid homes are typically better suited to conversion than old, draughty rural buildings. Installation cost economies are easier to achieve if the buildings to be retrofitted are similar in age and construction – as you find in most urban and suburban streets – so it makes sense to prioritise these. That doesn’t mean you should ignore off-gas grid buildings, but a more pragmatic approach is needed here. By adopting a technology-neutral strategy, incentivising a wide range of heating and retrofit options, progress can be made without exposing rural communities to the kind of excessive cost and disruption they currently face. It’s a fundamentally fairer way to go and doesn’t risk alienating support.
Discussion of the best policy approach will, no doubt, continue to rage. However, it’s worth considering that a failure to support rural communities adequately, or to treat them unfairly, could become politically divisive. The next election is two years away, and these seats will be hotly contested. The government has spoken previously about working with the grain of public opinion and being committed to a fair transition to net zero. There’s no better time or place for it to demonstrate that it practices what it preaches.
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