This month, both the EU and UK governments have come out with plans to phase out home gas boilers. This will bring big changes and should serve as a booster for heat pump manufacturers. However, in both cases, the plans have boiler-sized loopholes that will dampen the laws’ impact.
After months of negotiations, MEPs in the EU Parliament and national government representatives in the EU Council reached an agreement on the revised Energy Performance of Buildings Directive (EPBD) in early December, which will end financial incentives such as subsidies for the installation of stand-alone fossil fuel boilers by 2025, and require all new buildings constructed after 2030 to be ‘zero-emission’. This means they must have zero on-site carbon emissions from fossil fuels. Also, starting from 2030, governments will have to calculate the global warming potential (GWP) of all new EU buildings across their entire life cycle – including, for example, emissions embedded in the construction process and materials – and set national targets to reduce the climate impact of all buildings, including existing ones.
The agreed text, which must still be formally approved by final votes in the EU Parliament and Council, also sets minimum energy performance standards (MEPS) for buildings. All non-residential structures are mandated to exceed the performance of today’s bottom 16% by 2030, with a further increase to surpass today’s bottom 26% by 2033. Residential buildings must see a 16% reduction in average energy consumption by 2030, followed by 20–22% by 2035. More than half, or 55%, of the 2030 and 2035 energy reduction target is to be achieved through the strategic renovation of today’s least-efficient buildings.
Flexibility wins: EU boilers do not face a hard phase-out in 2040
Nevertheless, national governments insisted on a final version of the law that allows them more flexibility than was foreseen in the initial proposal by the European Commission. EU member states will only need to come up with road maps “with a view to phase out fossil fuel boilers by 2040”, rather than adhering to a firm target by that year. In reality, fossil fuel boilers can stay in homes until 2050, by which time all buildings will have to be zero-emission. They also added a loophole to allow financing to continue after 2025 to hybrid boilers partially running on fossil fuels or capable of running on hydrogen in the future.
“The [EU] buildings directive promised a renovation wave that could lift millions out of energy poverty,” lamented Laia Segura, energy justice campaigner at NGO Friends of the Earth Europe, in a press release. “Instead, the poorest are now left stranded, with no guarantees that the leakiest homes will get the renovations they need. Europe’s consumers are left hooked on fossil gas for years to come, with renovations too slow to keep within our climate targets.” Friends of the Earth had called for subsidies to support the installation of heat pumps in low-income homes.
According to Segura, MEPS for residential buildings have been so watered down that the framework does not provide sufficient ambition to speed up renovations beyond business as usual. The definition of “worst performing buildings” as the lowest 43% of a national building stock fails to target the lowest-performing buildings where the most vulnerable families live, she says, because the 43% threshold is too high.
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Despite the pared-down ambition of the EU’s EPBD, some still expect the new legislation to give a big stimulus to the home renovation market, particularly for heat pump installers. “Setting a date for ending fossil fuel heating in Europe’s buildings provides crucial clarity for consumers and charts the path for the heating sector,” said Thomas Nowak, secretary-general of the European Heat Pump Association, in a statement. “Thanks to this agreement, people will be able to decide in favour of heat pumps with confidence.” The Commission has said it will publish an EU Heat Pump Action Plan in early 2024 as a follow-up to the EPBD agreement.
Jan Rosenow from the Regulatory Assistance Project, a think tank, argues that the most important part of the new legislation is that it sends a signal to both public and private actors. “For decades, member states have subsidised fossil fuel boilers,” he said in a statement. “That ends now.” However, he also said climate campaigners need to watch the national transposition of this directive closely, because of the flexibility it gives member states.
“Every country will have in their hands [the ability to end] subsidies for false solutions that lock in fossil fuel heating such as hydrogen-ready boilers,” he said. However, it will be up to national governments to seize that opportunity. A provision to allow hydrogen-ready boilers has been added to the EPBD in much the same way as the door has been kept open to hydrogen-derived efuels for car internal combustion engines. The International Energy Agency has said that hydrogen boilers should have no role in home decarbonisation because they are not practical or effective.
Marco Grippa from the Environmental Coalition on Standards, an NGO, was also disappointed, calling the legislation, “a slow start with loose ends”. “A target and a clear path for phasing out fossil fuel boilers was urgently needed [and we got that], but it is unfortunate that the EU didn’t set the bar higher,” for instance by setting a mandatory phase-out for 2040, he said. The final rubber-stamp votes in the Council and Parliament are expected in the next two months, and national governments will then have two years to transpose the EU directive into national legislation.
Just a week after the EU deal, the UK Government published its Future Homes Standard consultation, setting out proposed requirements to ensure newly built homes are “net-zero-ready” by 2025. That means they will have the capacity to be hooked up to something like a heat pump. The consultation is a long-delayed follow-up to a 2006 proposal that would have gone far beyond EU requirements at the time and mandated that new houses be “zero carbon” from 2016. However, that plan was never turned into legislation. Current UK buildings standards are based on the existing EU EPBD and the UK Government needed to come out with its own strategy to update it, since the EU’s revision will no longer apply post-Brexit.
The UK consultation is a statement of intent by the current Conservative Government, which is likely to be voted out of office within a year, according to opinion polls, so should be taken with a grain of salt. However, analysts say they do expect an incoming Labour Government to use this consultation as a basis for future legislation. Critically, the consultation concludes: “We found no practical way to allow the installation of fossil fuel boilers while also delivering significant carbon savings. As such, we do not expect fossil fuel heating, such as gas, hybrid heat pumps and hydrogen-ready boilers, will meet these [low-emission] standards.”
Juliet Phillips, a senior policy advisor with the think tank E3G, says the document is a good sign for policy to come. “We are delighted that the government has finally confirmed that all new homes must be built to new-zero standards from 2025,” she said. “This is great news for home buyers, who will save money on energy bills and avoid the need for costly retrofits in the future. It is also great news for the UK’s cleantech industry, providing the long-term policy certainty needed to boost investment in skills and supply chains.” Phillips estimates that this kind of policy could unlock up to £1bn ($1.27bn) in investment in UK heat pump manufacturing by 2028. Major boiler manufacturers including Vaillant and Ideal Heating have already announced investments in British heat pump facilities.
Separately, the UK Government published a Hydrogen Strategy delivery update on 14 December, in which it said it would not go ahead with a proposed “Hydrogen Village Trial” in Redcar, England, “due to issues in obtaining a robust, local hydrogen supply”. This followed the cancellation in July of a proposed trial in Whitby, reportedly due to a lack of local support. Nevertheless, “we continue to recognise the role that hydrogen could play in home heating and we will decide in 2026 whether, and if so how, hydrogen will contribute to household heat
decarbonisation” the government adds.
However, at least some analysts are taking the village trial cancellations as a signal that the UK, unlike the EU, is not ready to endorse hydrogen-ready boilers – which can also run on natural gas – after gas boilers are meant to be phased out.
“Over the years since the Hydrogen Village Trial was first proposed, the case for hydrogen heating has become worse and worse from every perspective – cost, climate, safety, air quality, import dependency,” said Michael Liebreich, Bloomberg New Energy Finance founder, in a statement. “We now need, as a nation, to get serious about the decarbonisation of heating. To catch up with our European neighbours, who have forged ahead with electrification, heat pumps, district heating and insulation.”
Industry association Hydrogen Europe has said that it would be a mistake to rule out hydrogen-ready boilers because it would lock out the use of a potentially promising home decarbonisation technology. It has welcomed the EU’s more open approach.
“The [EPBD] deal will help the EU gradually phase out boilers powered by fossil fuels, enabling hydrogen-based heating solutions to contribute to this important objective,” it said in a statement after the EPBD agreement. “It also recognises the possibility of renewable hydrogen to be transported via grids tailored to local conditions, albeit as a last resort measure.”
The UK has one of the lowest rates of heat pump penetration in Europe, and Prime Minister Rishi Sunak recently cast doubt on their effectiveness. For this reason, there is concern that although the government has come out with some ambitious strategies, in the end future legislation will be subject to political whims. The opposition Labour Party has said that UK Government policy seems to be ignoring its own analysis, with wild swings that seem designed to make climate policy part of the culture wars. Miles Rowland, policy officer for the non-profit World Green Building Council’s European network, has said the UK is veering “way off track” with its decarbonisation plan for households and “lagging behind the major European economies”. France is deploying heat pumps ten-times faster than the UK.
Climate advocates from groups such as Green New Deal Rising have said they hope that a new Labour Government will take the analysis done by the current government and craft policy that follows its conclusions.