Priming the (heat) pumps: Can the Roadmap help us reach net zero?

The Government’s Heat Pump Investment Roadmap is a late addition to the mass of ‘Green Day’ announcements. Whilst the commitment to heat pumps is clear and welcome, the reliance on private investment may be overly optimistic, argues Niamh O Regan.

Following the raft of announcements that landed on government websites on “Green Day” at the end of March, last week came the Heat Pump Investment Roadmap. To be clear, it is not an announcement of new policies or investment plans, but a summary of the Government’s targets for heat pumps, and the polices it is pursuing to achieve those goals.

Encouragingly, the roadmap shows the Government is committed to heat pumps as a technology. It believes they are suitable for the vast majority of British homes and sees an opportunity for heat pumps to not only provide energy security but also economic opportunity. Reaffirming the commitment to install 600,000 heat pumps by 2028, the Government also wants to see 300,000 heat pumps manufactured in the UK by then too. It is worth questioning whether the level of support provided in policy to achieve these aims is enough to actually do it.

The roadmap acknowledges that there is substantial investment needed to get to these figures in the next five years and continue growing the numbers beyond then. The Government predicts that reaching its targets will require cumulative investment across the supply chain of £28 billion. It remains unclear where that money will come from. Government direct investment is focused on the consumer end of the supply chain, encouraging families to invest in new technologies through programs like the boiler upgrade scheme. The extension of the scheme from its original 2025 to 2028 is welcome, however with no additional funding to the current £450 million pot, the number of households it helps is still fairly limited.

The Government’s heat pump investment accelerator competition will provide up to £30 million investment in the earlier part of the supply chain, but for the most part, the heavy lifting is expected to come from a significant influx of private investment. Some of this may be effectively forced through regulation, like the Clean Heat Mechanism which the Government has committed to implementing in 2024. Although the design is still being consulted on, the mechanism is designed to influence the market by way of obliging fossil fuel heating manufacturers (such as those that make gas or oil boilers) selling in the UK to increase the share of their sales of low-carbon heating systems. Manufacturers that do not meet the target will face a financial penalty.

Mechanisms like this that influence market forces have already been successful in stimulating industry to transition manufacturing. In California, a “Zero Emissions Vehicle (ZEV) Mandate” requires automotive manufacturers to sell an increasing proportion of ZEV vehicles. As a result of the mandate, California’s sales of battery electric vehicles are three times higher than the US average. The upcoming ban on the sale of new petrol and diesel cars in the UK and an ZEV mandate have already increased electric car sales. Implementing such a policy for home heating could prove  equally successful in increasing heat pump manufacturing to 300,000 units a year (in 2019 a little under 11,000 heat pumps were manufactured in the UK), especially once the ban on fossil fuel boilers in new build homes comes into effect from 2025.

To attract further investment, the Government is hoping that the promise of a large market combined with recent Budget measures such as investment zones, freeports, R&D tax breaks and capital allowances, will be sufficient to attract new players to invest in UK industries even without the lure of subsidies. However, this may be optimistic given that some of the world’s biggest economies are offering subsidies. In the US, the Inflation Reduction Act (IRA) has promised a contribution of $369 billion (approximately £296 billion) to help spur investment in green technologies, including the manufacture of heat pumps. Following the announcement of the Inflation Reduction Act, several manufacturers paused European manufacturing plans, in favour of manufacturing in the US instead, and to take advantage of subsidies. Since then the EU has made its own commitments to supporting green manufacturing through its Green Deal Industrial Plan. Chancellor Jeremy Hunt’s decision not to go “toe-to-toe” with the US on subsidies, and instead opting for regulatory changes risks deterring further external investment in green manufacturing.

The recognition that there is a need to invest across the supply chain is good to see. But the success of the roadmap and Government’s approach to heat pump investment really depends on whether industry sees the same opportunities (and in the same light), that government does. The SMF is currently conducting a project trying to answer this very question, and going forward will certainly be asking how (and if) the measures summarised in the investment roadmap are sufficient for bolstering industry investment.


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