UK Energy and Net Zero: Solar Panels vs Heat Pumps

Last year I took a look at various options that we in the UK might use for energy conservation as part of a wider review of our energy crisis and its consequences. 

Since then, political parties of all hues have weighed in on the ‘greening’ debate and there appears to be a general consensus that we need to replace fossil fuels with renewables and nuclear for our energy generation and supply. The only dispute is over how quickly we should do it, and in the UK at least this is tied up with the pre-election tussle between the two major parties. (Sunak's recent 'go slow' initiative was designed primarily to wrong-foot Labour on their over-hasty introduction of Cameron's eloquently described 'green crap' and was I suspect largely based on the Uxbridge motoring electorate's by-election 'shot across the bows' against Labour in response to Khan's over-enthusiastic widening of London's ULEZ. It may in practice have given them few crumbs of comfort, given the abysmal by-election results in Tamworth and Mid-Beds., etc..)

One thing that has emerged from this pre-election squabbling is that it is going to cost….the infrastructure required to generate renewable energy is totally different from that used to burn fossil fuels, and you can’t replace all that wholesale without considerable resources, time and, of course…money. As I'll discuss later, we're also going to need a lot more power over the coming decades, and this will have to come from somewhere.

Government admittedly has ‘bitten the bullet’ to some extent already by promoting and sponsoring development of offshore wind and nuclear. Relaxation of the effective 2010 ban on UK onshore wind now also looks likely. These are, of course, large-scale commercial projects and can’t be undertaken by individuals.

Closer to ‘home’ for the rest of us is a realisation that our gas central heating systems, which are by far the most common form of home heating in UK, will all need to be replaced; no new gas fired systems will be on sale after 2035 (recently amended by Sunak from the original 2030 target), and thus replacement for our gas boilers will be necessary by 2040 if not before, as older systems come to the end of their lives. Domestic heat pumps are currently seen as the best option for this. (All developers of new build houses are already required to install heat pumps, or equivalent 'green' heating systems rather than traditional gas boilers).

Another obvious opportunity on the domestic front is solar panels. The vast majority of our external roof space in the UK is effectively standing idle all year round. Even in the UK, a vast amount of free solar energy which could be used to heat and power our homes is going to waste as a result.

However, there is a fundamental problem with retro-fitting both these options to our existing housing stock – cost.

The average cost of a replacement heat pump installation starts at around £12k and can be as high as £25-30k, depending on the heat source used and the size of the property. 

A typical 12-panel solar array with a 6kW storage battery system, which would be suitable for a 2-3 bed semi or detached, will set you back ca £10k minimum on the open market, although community auctions can reduce the cost by up to ca 20%. 

How likely is it then that a 'typical' household, beset by the ongoing cost-of-living crisis and struggling with ever-higher mortgage payments, will have the available funds even to consider investing in either of these ‘green’ options ?

If your answer to this question is ‘not very’ then it’s obvious that if government really wants to embrace net zero by 2050 (or any date in the future for that matter) it will have to put its money where its mouth is. The commercial sector can only assist in promoting uptake by discounting and providing the installation infrastructure at the lowest possible cost; the figures quoted above take this into account, so government help of some sort will be required, or it simply won’t happen....

What has UK.Gov done so far ? The only practical help that is not actively means tested is a grant of up to £7.5k towards the cost of a replacement heat pump system (this was also upgraded from £5k in Sunak's recent 'Green Crap' review as some are already calling it). 

There is still no provision at all generally available for solar panel installations. Apart from the usual heavily means-tested schemes, in practice only available to those on benefits or very low incomes, the only other direct funding available is discretionary local authority grants; as many of us will already know to our cost, trying to get anything out of a local authority nowadays is significantly more difficult than ‘trying to get blood out of a stone’, as the old adage goes. 

Apart from any 'free' power the consumer can use during daylight hours and any stored power saved if they have a battery system, the only current financial advantage to the consumer of installing solar at present is the Smart Export Guarantee which replaced the much more generous 'Feed-In' tariffs available pre-2019. This mandates that every supplier offers at least one tariff that supports feed-in. However, there is no lower limit set on the per-unit price, which can be as little as 2-3p per unit for the most parsimonious of suppliers, and is no more than about 12-15p/unit for the most generous of them. (Compare this with the 30p+ charged until recently per unit to supply power by many of these companies in response to the Ofgem price cap adjustment  in early 2023, together with the continuing hikes in the daily standing charge they have been introducing to compensate for the falling per unit price cap,  and you'll see where and how they make their not inconsiderable profits).

If we look at this funding anomaly in terms of net zero ‘compliance’ the discrepancy becomes even more glaring.

Heat pumps admittedly do provide more energy than they use (ca 2-3 times) but they are still heavy net consumers of electricity, and will increase the size of the average household's electricity bill by several fold. The average power consumption for a typical domestic air source installation varies with the size of the unit, but a typical small installation (10,000 BTU) suitable for a 2-3 bed semi will use an average of ca 3.5kW at all times when it is running. In practice this will be pretty much continuously during the winter months, given the lower radiator temperatures and available heat output compared with gas-fired boiler systems.

Contrast this with our 12-panel solar array, which consumes nothing and will generate up to 3.5kW in sunny conditions and at least 1-2kW during the day even when it’s cloudy during the winter months. This is effectively free power for the consumer, which they can either use at source, charge their battery system with if they have one,  or export as excess power to the grid to bolster supplies for the rest of us. 

Why then does the government provide no financial incentive whatsoever for domestic solar installations, and up to 60% of the cost for a heat pump ?

Looked at in this way, it becomes obvious that priorities have been allocated wrongly and should now be actively reconsidered by government. Since installing solar panels on a suitable roof  surface is much less disruptive than ripping out a whole heating system and installing a heat pump with all the necessary new plumbing, it wouldn’t take much of an additional incentive to persuade many more households to install panels as an initial 'green' investment. This could also pave the way for a less costly heat pump system at a later date, with the advantage that any power requirement for that would be amply covered by the panels, during daylight hours at least. I suspect the reason for this lack of government 'buy-in' to domestic solar is a treasury-inspired fear of opening the floodgates. They feel they would have more control on funding concessions with individual solar farm businesses and don't want to risk a flood of domestic grant applications.

It is no coincidence that incentives provided by our more enlightened EU neighbours are much more generous - in Germany, for example, not only is any income from panels free of tax for installations up to 30kW capacity, but installation cost is zero VAT-rated, and there are also tax credits and rebates available on the cost of both new and existing installations. This can reduce the cost of an installation by more than 30%.

Some may argue that we don’t really need the extra power, since the grid doesn’t have the capacity to deal with the output solar yields on sunny days. This is both short-sighted and quite frankly disingenuous. Modern solar panels generate power as long as there is sufficient light available, even on cloudy days in winter. As already discussed, we desperately need all the extra power we can get. Why ?

Our grid regularly teeters on the brink of shutdown on calm days in winter due to the predominance of wind generation in the existing supply mix and the ongoing phasing out of coal and gas fired power stations. Gas supplies on the open market are now both extremely costly and highly volatile, and we must wean ourselves off them as a primary source of energy, for obvious political reasons if nothing else. Existing nuclear reactors are coming to the end of their lives and will progressively go off-grid over the next few years. The few new nuclear projects already in the pipeline will take many years to come to fruition, and commercially viable fusion power is still merely an unattainable pipe-dream.

As a nation, we are also faced with swapping our petrol-driven cars with electric ones by ca 2035, and many are already ‘taking the plunge’ despite the ongoing inadequacies of the UK recharging network. The extra power required to charge all those new electric cars will have to come from somewhere as more and more domestic vehicle charging kicks in. Another less often considered future drain on our electricity grid is AI - the power required to feed the huge banks of servers that are required to generate AI even now, let alone when it really gets into its stride also has to come from somewhere, as does that required to support bitcoin mining. The acute need for grid upgrading has now belatedly been recognised and is already making headlines, as is the cost of not doing so.

It makes no sense, therefore to favour heat pumps over valuable domestic micro-generation when it comes to available grant funding. We should be actively promoting domestic solar as the untapped and locally applicable resource it is, if necessary at the expense of concessions to commercial solar farms. There is also the wider environmental land management question to consider - why on earth are we continuing to cover our green fields and crop-bearing agricultural land with unsightly commercial solar farms when we could be using our roofs instead ?

If Hunt's Treasury remains dead set against any new funding commitments involving grants, then financial incentives could instead be easily provided by HMRC through the tax system. Allowing tax relief, for example, on income equivalent to the full price of a solar array at the taxpayer’s marginal rate would effectively provide at least a 20% discount, and up to 40% for the ever-increasing number of higher rate taxpayers Hunt has created. Since many installers are already offering substantial discounts to promote new business, this extra incentive could well tip the balance for the hard-pressed consumer and ensure more households could become micro-generators.

I rest my case…..

Let’s hope UK.Gov see sense and reconsider……sadly, as in the case of the many changes we will need to ensure sustainability in the future, given this particular unhappy government's effective ‘lame duck’ status, I wouldn’t hold out too much hope…

 

First published 15.9.23