Low-carbon technologies struggling to scale up

The absence of a clear policy, regulatory and market framework is making it difficult to scale up low-carbon technologies such as heat pumps and drive down costs, BEAMA has warned.

The trade body for manufacturers and providers of energy infrastructure has released a new report outlining the changes it considers necessary to achieve the government’s 2050 net-zero target.

“The technologies required to enable decarbonisation of the building stock, transport and energy system are largely available today,” said BEAMA chief executive Howard Porter in the foreword to the report.

“However, the challenge is deployment at scale. Government and industry now need to elevate the level of ambition in order to drive the dramatic step change needed to ensure the net-zero target can be met, through long-term policy and regulatory frameworks and market incentives.”

The report says although investment in the decarbonisation of the energy system is already significant, it will need to rise to an “unprecedented” level to achieve the net-zero target.

But BEAMA members are still reporting “a wavering investment landscape for their market”.

“It is becoming increasingly challenging for them to justify increases in R&D spend for certain low-carbon technologies, and to gain investment for projects linked to low-carbon generation,” the report adds.

“Evidence suggests this is linked to policy decisions in recent years and months and lack of overall long-term market clarity.”

The report, which is presented as a letter to ministers, urges the government to take the following actions:

• Strengthen building regulations and their enforcement.
• Set a carbon price for heating and a long-term trajectory for fuel subsidies.
• Replace the Renewable Heat Incentive (RHI) with a capex-based incentive scheme for low-carbon heating and hot water products.
• Maintain and enhance financial incentives through reduced VAT rates for low-carbon technologies. The report describes the government’s plans to the hike the VAT rate for some solar installations as “counterproductive”.
• Amend the Energy Company Obligation to stop the replacement of water cylinders, which can provide energy storage and flexibility, with combi boilers.
• Encourage the introduction of time-of-use tariffs and create a market framework for demand-side response.
• Determine a market framework for flexibility services as a matter of urgency: “Fudging the current regulatory framework is not enough and brings about gaps and uncertainty for the supply chain therefore limiting progress. Radical change is needed.”
• Open the market to new energy-as-a-service business models. The report says this presents “a viable solution to the capex issues associated with whole house retrofit and brings added benefits to consumers in terms of cost, comfort and overall experience”.
• Target innovation funding at large-scale projects to establish real world testing environments that can better facilitate the commercialisation of new business models.
• Ensure there is sufficient investment in network reinforcement to accommodate the electrification of heat and transport. Be realistic about the ability to avoid reinforcements using flexibility.
• Ensure network maintenance is more predictable and subject to longer-term planning.

The report concludes: “There are immediate actions that can be taken in the next two years to reform policy and regulation which will help our members make clear investment decisions.

“It is our firm belief that if we pass these without sufficient ambition the net-zero target may not be met, and the UK supply chain will struggle to deliver the UK requirements for this.

“Fundamentally what is needed is clear long-term market signals set out in UK law that will provide the confidence to manufacturers that the UK will deliver on the net-zero target.”