The RSL sector needs help to remain the largest market for microgen in the UK – manufacturers and utilities must provide the momentum government measures do not.
Registered Social Landlords (RSLs) in the UK are enthusiastic about and interested in microgen options for heating, but the market opportunity is becoming increasingly limited by policy changes and budget cuts. The outcome of the ‘Brexit’ vote has added an additional layer of complexity.
Choice of heating technology is driven by fuel poverty and meeting new build targets. In the current climate, high-efficiency gas boilers often provide the most cost effective solution for RSLs in on-gas areas, with direct electric heating the first option considered in off-gas homes.
The low-carbon opportunity remains strong, but is also vulnerable
Delta-ee recently conducted a series of in-depth interviews with RSLs (councils and not-for-profit housing associations) for our RSL Report as part of our Heat Insight Service. Five years of this research have shown that RSLs are increasingly aware of the benefits and appeal of microgen heating technologies, and are the driving force behind growth in this area.
In 2016, Solar PV remains the renewable technology of choice for RSLs, with air-source heat pumps (ASHP) a consistently popular second. Special interest was also shown in the following technologies this year:
- Innovation in thermal insulation. RSLs are aiming to maximise thermal efficiency in retrofitting (some have already met their targets).
- RSLs show real interest in small scale, low carbon, district heating (DH) technologies, especially for high density tower blocks. These are generally gas or biomass fuelled, but heat pumps are also considered an appealing alternative.
- There is excitement around the innovations that energy storage could bring: especially maximising the benefit of PV installations, alleviating pressure on the grid in areas with high strain, and simply storing electricity when it is less expensive. Could developments in storage mark a new era of electric heat – in addition to the renewed interest in next-gen storage heaters?
So, what’s the problem?
The impacts of welfare reforms such as the implementation of Universal Credit are still high on the risk register for both RSLs’ businesses and the welfare of tenants. Many of the organisations in our sample have whole departments dedicated to understanding and ameliorating the impact of welfare reform.
The four years of 1% rent cuts mandated by the Welfare Reform and Work Act 2016 have already resulted in cuts to staff and development programmes in England.
Reductions to the Feed-in Tariff available for PV installations have effectively removed the viability of crowd funding programmes for the sector (many of our contacts have cancelled large retrofit programmes following the reductions), and the Renewable Heat Incentive (RHI) is not a sufficient driver for individual renewable heating systems.
Brexit adds an extra level of uncertainty to the climate, with RSLs presenting a range of reactions to the result of the referendum, but all uncertain about the potential impact on their business and tenants. The immediate impact has been manageable; it is the longer-term result of the loss of funding that would really hamper the low-carbon opportunity in this sector. The use of grants and other EU-streams has been critical in establishing the social housing sector as the primary market for low-carbon heat in the UK.
Can we fix it?
Yes, we can!
In the absence of effective policy support over the next few years, key players in the microgen market need to support RSLs through these tough times, by adjusting offerings to meet their needs.
For example, solutions which complement gas and electric heating are likely to be better received than standalone options. RSLs are delighted when approached with funding options and trials, and may require other parties to take the lead on larger projects. Simpler projects with lower upfront costs are an ideal solution where RSLs are unable to make renewables add up.
As fuel poverty and efficiency concerns remain the focus, we are optimistic that the right technology offerings will help the market recover.
For more information about our research in this area, contact Steven Ashurst, manager of the Delta-ee Heat Insight Service: firstname.lastname@example.org; +44 (0) 131 625 1003.