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An Anglo-Dutch conversation on heat decarbonisation

Challenges, opportunities, and cooperation

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Duthc and UK flag side by side

The Netherlands and UK are neighbours with much in common, beyond the grey tides of the North Sea.

During London Climate Action Week 2020, E3G and the Embassy of the Netherlands in the UK hosted a virtual exchange of ideas on the challenges – and opportunities – in the race to zero carbon heating.

Expert speakers from national and local government, as well as private sector representatives, discussed experiences of efforts to decarbonise heat in the Netherlands and the UK – from commonalities such as the extent of gas network necessary for heating, to differences such as regulatory frameworks.

There was consensus around the shared challenges and opportunities:

The Netherlands and the UK are two of the most prevalent gas users, with well over 80% of homes connected to the grid. We have similar climates and building stocks, with both countries needing large scale retrofit for energy efficiency. Both countries are seeking to scale up heat pumps and networks, which in turn presents opportunities for the private sector, as well as benefits for local communities and economies.

Key themes arose during the discussion, where stakeholders can continue to explore synergies and share lessons as North Sea neighbours:

  • A common national framework that provides certainty for private sector and local authority action: Long-term strategy and funding from national government is key to enable local authorities to design and implement successful heat decarbonisation strategies, as well as provide confidence for the private sector to invest in skills, technologies and supply chains. Policy signals work – the Netherlands saw a 50% increase in demand for heat pumps after they announced their intention to phase out gas boilers.
  • A ‘no regrets’ approach: There’s a ‘need for speed’ to get on track climate targets in both countries – at a national and local level. There’s a need to prioritise technologies and solutions which are available today; with energy efficiency improvements also key to bringing down overall costs. ‘No regret’ options are being identified at a local level, and learnings can be taken to inform national policy and private sector approaches.
  • Reducing costs through innovation and scale: A key hurdle to heat decarbonisation in both countries is the high cost: particularly in comparison to the relatively cheap price of fossil gas. Reductions can be achieved through scaling supply chains – which can be done at a local level through identifying appropriate solutions, using social housing as a launch pad. The private sector can underpin these offers, including through platforms and services that help aggregate demand.
  • Bringing consumers on the journey: Changing people’s homes and behaviour will be a challenge in both countries. For strategies to be successful, it will be essential to place consumers at the heart of the transition. Local Authorities are well placed to engage with citizens, and the private sector can offer personal finance to support the journey. National government must ensure protections are in place to support the whole population: with incentives and quality standards for those ‘able to pay’, and additional support for lower income homes. There needs to be a discussion over fair allocation of costs.
  • Governance and system infrastructure: Such a substantial systems shift must be underpinned by robust governance structures, coordinating changes to infrastructure in a way which is fair, efficient, and aligned with climate targets. This can be achieved within a coherent national framework and locally crafted approaches – seen for example with zoning. There can be a role for national oversight bodies in ensuring the sum of local actions add up to a coherent and comprehensive whole in terms of emissions, transmission infrastructure, sharing of fair allocation of costs and benefits and learning.
  • Managing the risk of failure: Given the need for speed and importance of public buy-in into the heat transition, the risk of failure is important to manage. Public involvement in decision making, starting with the easier regions and municipalities and establishing a learning governance are all important elements of minimising the risk of failure.
  • The role of hydrogen in residential heat decarbonisation throws up many unanswered questions. The discussion highlighted that it may be an option for some places, but sustainably sourced green hydrogen will be a scarce resource this decade.

The Ambassador’s welcome

The Dutch Ambassador to the UK, Karel van Oosterom, opened the event by highlighting the importance of decarbonising heat in the fight against climate change. The challenge is substantial for both countries, given the high number of homes currently heated by gas. After outlining the Dutch approach, the Ambassador emphasised that the shift to climate smart heating cannot be achieved without cooperation – making the conversation underway particularly vital. While there are more upcoming changes such as Brexit, there remains much to be gained from continued dialogue and mutual learning because it is the partnership between the UK and the Netherlands that binds both countries as North Sea Neighbours.

National Government: Setting the framework for success

The first pair of panellists were representatives of national government. Danny Newport, Head of Heat & Building Strategy at the Department for Business, Energy & Industrial Strategy reflected that the UK had always looked to the Dutch for policy inspiration. The UK’s new 10 Point Plan– released the same day as the event – will bolster ambition going forward, underpinned by the forthcoming Heat & Building Strategy. The Future Homes Standard will be brought forward to 2023, ensuring new homes are ready for net zero. And, with only two investment cycles away from net-zero, there is only space for one more replacement cycle for gas in existing buildings. A target for 600,000 heat pump installations per year by 2028 represents a step change, although still falls short of the 1.5m gas boilers installed per year. £100bn is needed to get UK buildings on track for net zero. Central government can’t do this alone: enormous collaboration with private sector and local actors is vital.

Ferdi Licher, Director Building & Energy of the Dutch Ministry of the Interior noted the Netherlands also looks to the UK for inspiration – for example, the Green Homes Grant voucher stimulus. Policy has required new homes to be built without fossil gas since 2018, while a ‘district orientated approach’ requires every municipality to have a plan by 2021 to move to zero carbon heating. This recognises the need for speed: with discussions already underway with citizens, focussing on ‘no regret’ solutions. Innovation is key: learning from municipality pilot projects and an “innovation accelerator” approach with social housing. The Dutch are investing in affordable, smaller, silent heat pumps which they hope to bring to the UK market. Despite progress, big questions remain – particularly concerning the economics, and the politics of fair access to zero carbon heating must be considered.

Local Government

Next up were panellists representing local government. Shirley Rodrigues, Deputy Mayor for Environment and Energy of the Greater London Authority made the case that heat decarbonisation is best coordinated at a local level, within the context of a coherent national framework. London – like many other UK regions – has a target for net zero by 2030 and is working toward a green and inclusive recovery. The challenge is large: by the mid-2020s, the city aims to retrofit 160,000 homes per year, with heat pumps set to play a major role. Local Authorities need the powers and resources from national government to do this, with multi-year funding and a long-term plan. London has a number of EU-funded pilots underway, but these now need to get to scale – with a role for both the private sector and national government to support and fund.

Wouter van Bolhuis, Programme Manager Energy at Municipality of Groningen provided insights into work underway to remove fossil gas, illustrating the power of local ‘zoning’ the heat transition through plans crafted at a municipality level. Groningen identified that a combination of networks, electrification and green gas would be required. However, it is for many places unclear where the green gas would be coming from.  In one pilot, there are two district heating systems: one for apartments, and ones for ground buildings. There are large cost disparities between homes, and no business case to decarbonise more expensive buildings. Groningen opted to use public funds to support this shift, levelling prices for everyone. A key question this raises is role of the role of the market versus public funds in financing the heat transition. Do you share costs across all users for a big basket no matter what heating technology is used?

Private Sector

Ryan Jude, Associate at the UK’s Green Finance Institute (GFI) began the discussion began by noting that not only do the UK and Netherlands have similarities in terms of heat decarbonisation, but also in terms of green finance –with Amsterdam recently beating London to top the Green Finance Index. Heat decarbonisation should be viewed as an opportunity for the private sector: 5m UK homes need connecting to district heat networks, worth £20- £30bn; and the market for heat pumps worth around £200bn. The GFI’s Zero Carbon Heating Taskforce is working to identify and overcome barriers by advancing demonstrator projects. These include demand aggregation financing platforms, scaling supply chains and driving down costs for consumers. A National District Heat Fund and National Heat Delivery Body could be established: central bodies to support local solutions, providing the expertise, capacity and scaled required to underpin a mass market at a local level.

Martin Mooij, Project Manager from the Dutch Green Buildings Council was the final speaker. Their Delta Plan has four objectives, around good data insights to underpin the approach; a clear end-goal which acts a long-term vision; a toolkit which provides best practices and examples, and cooperation between different parities in the supply chain. There are many benefits for businesses and homeowners for perusing a ‘Paris Proof’ strategy. While decarbonising heat and energy is key, so too is focus on energy efficiency, which accounts for a large proportion of the total carbon emissions from homes. 30 private sector organisations have committed to the strategy so far, and the Council is engaging with national and EU government to evolve these learnings into policy.

Next steps

We have much to learn from each other as North Sea neighbours, and E3G and the Embassy of the Netherlands hope this interaction energises continued dialogue and future conversations. We would be pleased to coordinate further exchanges, for instance:

  • Circular economy of buildings: Sharing learnings to inform policy recommendations following the release of the UK’s Heat & Building Strategy, advising on a truly sustainable approach to the built environment.
  • Identifying commercial opportunities in decarbonised heat: Translating policy outcomes into opportunities for businesses and investors.

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