Green Finance Institute releases new report on zero carbon heating

In the UK, heating the built environment is one of the largest contributors to emissions and accounts for 21% of the national total1. Housing alone is responsible for two-thirds of these emissions, and a near complete decarbonisation of heat is essential to achieve the government’s net-zero target by 20502. The Prime Minister’s ten point plan for a green industrial revolution set an ambitious vision for 600,000 heat pump installations per year by 20283, and a widescale programme for zero carbon heating could also support the UK’s green economic recovery.In Autumn 2020, the CEEB assembled the action-focussed Zero Carbon Heating Taskforce, an expert group of over 50 member organisations from the finance, energy and construction sectors, as well as local and national government. The Taskforce collaboratively designed a portfolio of financial mechanisms and enabling policies, informed by in-depth analysis of the challenges that individual, social and institutional residential owners experience on their heat decarbonisation journey. In the next phase, the CEEB and its members will bring these scalable solutions to market.Dr Rhian-Mari Thomas, Chief Executive of the Green Finance Institute, said,The finance sector has a critical role to play in enabling the decarbonisation of our heating: it must offer products that make the decision affordable. The Zero Carbon Heating Taskforce’s solutions are practical, scalable, and focussed on presenting homeowners, landlords and institutional investors with attractive ways to access funding and new savings options. They’re also backed by recommendations for the fiscal and policy incentives required to support their roll-out.The report assesses the investment barriers to zero carbon heating across the UK housing market – including on and off gas grid homes, new builds and district heating networks – and presents a portfolio of 12 ‘demonstration projects’ that were collaboratively designed by the Taskforce members to directly address the challenges identified.  The portfolio includes financial mechanisms for consumers and institutional investors, energy service products and capacity building tools, supported by fiscal and policy incentives to bolster the commerciality and scalability. The demonstration projects include: Green Home Salary Sacrifice Scheme  – A tax-efficient mechanism for employees to pay for a heat pump via a loan from their employer, similar to the ‘Cycle to Work’ scheme. Green REITs – Embeds environmental criteria into a popular asset class and provides a scalable mechanism to attract significant volumes of institutional investment into zero carbon heating systems. National District Heating Fund – A specialist investment fund focussed on investing in district heating networks across the country, that could sit independently or as part of a new National Infrastructure Bank.The Green Finance Institute and its supporters will bring to market the portfolio of demonstration projects in 2021 and beyond.Caroline Bragg, Head of Policy at the ADE, said of the report:Decarbonising the UK’s heating will require us to be bold in our approach, and to consider solutions that are scalable, investable and in line with net zero. Our success or failure in decarbonising heating by 2050 will depend on the actions we take in the next five to ten years. Therefore, we welcome the report published today by the Green Finance Institute, which provides much needed examples of how we can make low carbon heat solutions an attractive, low risk option for investors. We look forward to working with the Coalition for the Energy Efficiency of Buildings further in 2021 to make these demonstration projects a success.Read the report here.