Fossil Fuels – Their Future In UK Commercial Buildings

The future of fossil fuels is a key issue that needed to be addressed by the government’s Heating & Buildings Strategy report which was published late last year. Statistics (PDF) from the Non-Domestic National Energy Efficiency Data-Framework (ND-NEED) from the Department for Business, Energy, & Industry Strategy (BEIS) defined more than 1,656,000 non-domestic buildings in England and Wales at the end of March 2020. 278,000 or 17% of this building stock is off-gas grid. It is estimated that these non-domestic buildings are responsible for nearly one-fifth of the UK’s carbon emissions, a scenario that will be further exacerbated by a predicted one-third rise in non-domestic floor space by 2050.

A major function of the campaign to Build Back Greener, the report outlines the near and long-term ambitions for phasing out unabated fossil fuels and a transition to low-carbon heat in order to achieve net zero in the UK. The intention is to use ‘natural replacement cycles’ and seek ‘trigger points’ to set long-term expectations within the building sector.

For commercial on-gas-grid buildings, this means putting in place a process to phase out installation of new natural gas boilers from 2035, with a caveat that the costs of investing in low-carbon alternatives have been suitably reduced. To achieve this will require the development of the market for replacement low-carbon sources of heat. The core technology for driving these new markets will be heat pumps, but there is also to be a consideration for other natural gas replacements. By 2026 the government intends consultation to be completed on the case for gas boilers/water heaters to be hydrogen-ready. The process of ‘greening the grid’ is perhaps the most interesting and least disruptive option, improving efficiency and replacing the current supply for those already connected to the gas grid with alternative low-carbon fuels, whether biomethane or hydrogen injection into the gas supply. The government has already committed to enabling the blending of hydrogen in the gas grid (up to 20% volume) and continuing to support the deployment of biomethane through the Green Gas Support Scheme as a method for decarbonising the gas grid.

To support early adopters in the small business space and lure them away from appliances that burn fossil fuels it has been proposed that a new Boiler Upgrade Scheme be launched this year which will support the installation of low-carbon heat pump based heating systems with a payment of £5,000, in line with domestic applications. Given the current additional complexities of commercial systems, with higher temperature demands, this may not be enough to encourage early adoption without the support of higher temperature devices designed specifically to meet commercial DHW demands. To further drive early adoption, the intent is to limit support for the construction of new gas grid connecting heating systems, effective this year. That does not apply to existing legacy structures with a grid-gas connection. Replacement boiler or water heater connections should be, as a minimum, more efficient than those being replaced. This it is proposed will be driven by the application of smart controls and supported by a new Boiler Plus standard that reflects improved efficiency and carbon savings. This should ape conditions set in ERP standards in 2018 for new boilers and emissions set under SAP10. Given that the latest generation of gas-fired condensing boilers and water heaters already greatly exceed the mandated requirements this policy could be seen to be redundant before it ever comes into law.

For the moment if your business uses gas, then you can upgrade to new gas appliances up until 2035, with hydrogen-ready options extending that window well into the 2040s based on current appliance lifespan. If you are considering upgrading a boiler of water heater, you could opt for a natural gas appliance, one that is not considered hydrogen-ready, for at least the next ten years without concerns of breaching new regulations, so long as the new unit is more efficient than the unit being replaced. This provides a safety net while assessing new technology options prior to the 2035 deadline. It would also be well worth considering the implementation of solar thermal preheat for gas-fired systems if you wanted to make sustainability commitments with proven and genuinely renewable technology.

Off-Grid, But Still Being Watched

For the 17% of commercial buildings currently operating off the gas grid, many of which will use LPG variants of boilers or water heaters versus oil, the report proposes phasing out the installation of new fossil fuel heating systems and switching to low-carbon alternatives. Plans would see the introduction of regulations to address large off-gas-grid non-domestic buildings (over 1,000m2) no earlier than 2024, followed by small and medium non-domestic buildings from 2026. Where low-temperature heat pumps cannot be reasonably or practicably accommodated other low-carbon heating options (such as high-temperature heat pumps, and potentially liquid biofuels) may be accepted as an alternative.

The wider aim is to support this near term change with greater investment in heat pump innovation, reducing footprint and making them easier to install. This process is, however, already front and centre for heat pump manufacturers without requesting government support. Better, more efficient, more environmentally and cost-friendly appliances is a clear market driver. At Adveco the recent introduction of the FPi-32 ASHP is a case in point, being extremely compact and better for the environment whilst being more efficient and therefore more cost-effective to operate. Despite being off-grid, potential developments in hydrogen delivery could also be a significant development for the future of fossil fuels, especially in more rural areas, although commercial off-gas grid sites are not uncommon in larger urban areas.

To further encourage this adoption, support for new LPG and oil heating systems could well be refused from this year onwards, with the potential for limited commercial funding support for replacement schemes, depending on scale, coming from the Public Sector Decarbonisation Scheme or the proposed Boiler Upgrade Scheme.

The process of transitioning commercial buildings from fossil fuels to low-carbon will, the report accepts, be gradual. It describes a process similar to the electrification of vehicles, which has depended on a mix of incentives and reducing the cost of entry.

Details of any incentives and clear evidence of where cost reductions are to come from remain hazy. Currently, production and operational costs of heat pumps remain high in comparison to traditional gas appliances that make use of lower-cost fossil fuels. The report, however, anticipates aggressive cost reductions of at least 25-50% by 2025 leading to parity with boilers by 2030. This then anticipates the natural replacement cycles of heating systems throughout the late 2030s and 2040s’ where capital expenditure on low-carbon replacement technology should it believes have lowered substantially. This is why 2035 has been set as the date when all new heating system installations should be low-carbon or hydrogen-ready (at least in those areas where future hydrogen supply has been established) effectively reducing the broad use of fossil fuels across a wide span of the commercial built environment.