(688b) The Impact of Policy Instruments on Deployment of Low-Carbon Heating in the UK: A Whole System Optimisation Study

As part of the UK’s commitment to emitting net zero greenhouse gases by the year 2050, the country must decarbonise the space heating sector, which currently contributes 17% of these emissions. This will involve retrofitting 24 million residential buildings, currently using natural gas, to a low carbon form of heating. The main options to achieve this are either hydrogen based, such as hydrogen boilers, or electricity based, such as electric heat pumps and electric resistive heating. Each option involves considerable costs along the supply chain, including upgrading infrastructure and installing new equipment in homes.

One of the key challenges facing policymakers is that, at present, natural gas heating is often the cheapest form available to households. In addition, considerable investment will be required in hydrogen production and transportation before it becomes available to consumers. Consequently, the transition away from natural gas heating is likely to require financial incentives. Each of the strategies is likely to present different costs to different stakeholders and so policies will be required targeting different points of the supply chain to incentivise the uptake of low-carbon heating.

The aim of this study is to assess how policy instruments, designed to promote the uptake of renewable heating, might impact both the heating technology mix and the supporting infrastructure when considering the least cost solution to decarbonisation. The Value Web Model, a mixed integer linear programming model for integrated energy value chains, was developed to optimise the deployment of heating technologies alongside energy generation, transportation, and storage to meet energy demands in the UK. This model considers natural resource availability (including wind, solar, land, and natural gas) alongside energy demand with high spatial and temporal resolution to determine not only which technologies should be used, but where they should be located. The results will show how different incentives applied at different points along the supply chain and in different amounts impact both the penetration of the technology they are aimed at and the overall technology mix. This work will highlight the impacts of incentives on the wider energy system and add to the discussion, relevant to policymakers and researchers, on how to decarbonise energy systems at the lowest cost.