27 July 2019

Electrification of power is an essential part of moving to a low-carbon future. But looking at the issue in detail has exposed my naivety and challenged my view about the right solution. Gas and electricity will need to work in tandem to heat homes for the foreseeable future. The question is how to do it most efficiently.

The carbon content of UK electricity is dropping fast

It's widely accepted that electrification is a critical part of the transition to a low carbon economy. Electricity can be generated from low carbon sources in ever greater amounts. While the carbon content of electricity generation in the UK in 2018 was, according to DEFRA calculations, about 50% higher than for natural gas, it's falling fast. The UK Government's projections show that over the next decade, the carbon-intensity of UK electricity will fall to around half that of gas. Electrifying domestic heating and car travel could therefore play a significant role for individuals seeking to reduce their carbon footprint.

Through our combination of a green energy tariff and solar panels, I would argue that our own electricity supply is essentially carbon free already. So in my plan to cut our carbon footprint by half by 2025 I'd identified 5 Tonnes pa of carbon reduction for our family - around 7% of our household footprint - by switching from gas to electricity for home heating and hot water.

The economics and carbonomics of electric heating

So I started to investigate switching to electric heating. The simplest solution seemed to be to switch to an electric boiler. This means keeping the same water-based radiator and hot water tank but replacing the gas boiler with one powered by electricity. Electric boilers are even more efficient than their gas counterparts, and with my carbon-free electricity supply, Bingo! We save around 5 Tonnes of CO2 pa. However, there are two problems with this.

1. Gas is cheap, electricity is expensive

Electricity costs around 4x the amount of natural gas. I've estimated that switching direct from gas to electricity would increase our energy bills by nearly £4,000 pa, equating to a cost of nearly £1,000 per Tonne of CO2 saved. Principle 2 of our middle class approach to decarbonisation requires us to act as if there's a carbon price fo £100 per Tonne, not £1,000 per Tonne. Some well-chosen offset projects costing £4,000 per year must have a more positive carbon impact than rather expensively driving down our own footprint.

Heat pumps are advertised as a way of closing this gap. Using the magic of thermodynamics they use heat exchangers to take heat energy from outside the house and move it inside (the reverse of air-conditioners). They can convert one unit of electricity into 2x to 4x the heating impact of an electric boiler. Ground-source heat-pumps do this by accessing the year-round temperature of c. 10-degrees that is maintained several meters below the earth's surface. However, ground source heat pumps are expensive to install and prone to installation error. They also work best with a fundamental change to low-power heating mechanisms such as underfloor heating, which can make use of the warm (but not hot) water they supply. They are most effective in highly insulated new-build properties, designed to stay warm in response to low but steady heat output. Therefore they are generally not a great options for retrofitting to older properties.

Air-to-air heat pumps (in effect air-conditioners operating in reverse) are a more practical option and much cheaper to install, even though in theory they provide lower gains then a well-installed ground-source system. However, they again work best the smaller the difference between the outside temperature and what is being heated. As a result, they don't heat water efficiently to the temperatures we're used to for our showers and baths, and at low external temperatures they plummet in efficiency for home heating and can end up using the same amount of electricity as an electric boiler or even more across the year.

So overall, a fully electric solution seems unlikely to be an economic alternative to gas, and the extra money would almost certainly be better used on high quality offsets.

2. Electricity is probably unsustainable as the primary long-term home heating solution

Our Principle 3 states that we'll seek to adopt approaches consistent with zero carbon from 2050. This means that while we'll seek to be early adopters, we'll use consumer influence to send market signals in favour of solutions that are sustainable over the long-term.

I had thought that electric heating was one such solution. However, Chris Goodall has argued persuasively that pursuing electric heating is barking up the wrong tree due to the heavy seasonality and sheer scale of peak heating demand, which can be 5x the current grid capacity. Even if we assume renewable electricity becomes close to limitless, there will be significant issues with matching generation to demand, with a requirement for large-scale storage. He argues for developing capability to use renewable electricity to manufacture gas, which could be distributed over the existing gas grid.

What will the answer to the home heating problem be? Will it be electricity with the seasonal and temporal demand problem solved through some breakthrough in battery or other storage technologies such as hydro? Will it be a significant increase in the proportion of green biogas in our natural gas supply? Or will it be gas or hydrogen manufactured using plentiful supplies of renewable energy in the summer when energy demand is low, which is then stored for winter usage? Or will it continue to be natural gas, but with carbon capture and storage techniques operating at power stations? The truth is we don't really know.

A hybrid solution to a complex problem

Ben Yeoh's performance lecture Thinking Bigly highlights the importance of second order thinking when looking at 'wicked' climate problems. It certainly seems that my first order assumption of a jump to electrification is flawed and violates three of our principles relating to an evidence-based approach, carbon price, and consistency with zero carbon from 2050. So what's the right approach?

I've concluded that the purity of a simple one-dimensional solution is illusory. What we need is a hybrid approach that drives our carbon footprint on a downwards trajectory at reasonable cost while keeping options open for the future depending on how the market develops. My conclusion is that this involves the following:

• Retain our gas boiler for hot water and heating, but with continued monitoring of the gas market for green gas supplies. My current supplier creates about one-sixth of its gas supply through green biogas and is building supply. There may be options to improve on this in the future.

• Install an air-to-air heat pump to operate alongside the gas boiler in our home. Paul Dodgshun has written on the economics of this on Chris Goodall's blog. Moreover, last year BEIS published a study into the use of what they call Hybrid Heat Pumps, operating in tandem with a gas boiler. The heat pump would provide the majority of home heating, supplemented by the gas boiler on the coldest days when the efficiency of the heat pump drops dramatically. The gas boiler would continue to provide the majority of hot water needs (typically 15% of a household's gas usage), given that heating water to 60-degrees plus is inefficient with a heat pump.

• The BEIS study indicates that such a use of heat pumps as part of a retrofit can lead to the majority of household heating needs being met by the heat pump, other than on the coldest days of the year. This reduces the carbon footprint of a detached house by half at a cost of between £200 and £250 per Tonne of CO2 over a 15 year assumed system life, based on the current carbon content of electricity. Using our carbon-free electricity source the result will be even better: a reduction in our carbon footprint of home heating of around 75%-80%. This also brings the cost per Tonne of CO2 saved down to between £100 and £150. This is consistent with the second of our footprint reduction Principles, which states we will act as if there is a carbon tax of £100 per Tonne of CO2.

The potential saving of 4 Tonnes of CO2 per annum is significant, cost-effective, and consistent with our guiding principles, even though it falls short of the 5 Tonnes I'd targeted. Hybrid systems are a good transition approach and create optionality in response to future policy direction. In the event of low carbon gas sources being developed, we can make more use of the boiler. In the event of improved long-term electricity storage mechanisms we can make more use of the heat pump. A hybrid system even leaves open the option of dynamic grid management whereby signals from the grid determine the balance of electric and gas heating used in our home, depending on the mix of energy sources driving the grid at any point in time.

There will be additional costs over and above the heat pump. Downstairs we may need to change our radiators to operate with the lower flow rate provided by the heat pump, which efficiently heats water to around 40 degrees as opposed to the 80 degrees common in gas-fired central heating systems. But as we tend to keep our thermostat on a relatively low 18 degrees, it is likely that we will be able easily to adapt to the 'always on' heating approach that enables heat pumps to operate most effectively.

Total installation costs are likely to be around £5,000 to £6,000. The BEIS study indicates that there should be a small long-term saving in electricity bills. But even if I prudently assume cost-neutrality, this results in a cost of around £130 per Tonne of CO2 reduction, assuming a system life of 15 years and a 3.5% discount rate. In line with our principles this is a reasonable price to pay, particularly given the additional stimulation of market demand through our choices.

More difficult than I thought

With intelligent use of hybrid approaches, I estimate we can save 75%-80% of the 5 Tonne footprint from our home heating and hot water, at reasonable cost. Not as much as I'd hoped, which means more savings need to come from elsewhere. But this is an approach that makes a significant difference and is consistent with our principles.

Our domestic dilemmas mirror the debates happening in the corporate world about energy transition. The question of pace of transition was a prominent theme in my interview of Michael Lewis, CEO of E.ON UK, at a recent London Business School Sustainable Business event. Purist solutions can be counterproductive if they come at too great an economic cost, resulting in write-offs of significant assets (in my case a fairly new and efficient gas boiler), investment in excessively expensive technologies (pure electric heating), or solutions that are inherently unscalable (100% electric heating on a country-wide basis). Moreover, transition approaches need to maintain optionality in the face of uncertain technological and market developments (electricity storage versus green gas versus carbon capture and storage). At the same time, the pace of change clearly needs accelerating to hit acceptable climate solutions and early adoption and consumer signals are a necessary part of that. The same dilemma is faced by governments and energy-intensive corporates across the world.

Addressing my own family's impact has been a useful education in the difficulty of striking this balance. There are no easy answers to the 'wicked problem' of climate change. But bringing the debate down to a personal level has helped me to understand some of the trade-offs and policy implications better. It has also shown me how the apparently simple answers can in fact be counterproductive, and second order impacts need to be carefully considered. I'm pleased that the principles we've adopted have helped me think it through. At the same time, it's exposed my own naivety and made me realise that it's' going to be harder to hit our own commitments than I thought. Altogether an educational experience!

This blog is part of a series sharing our learning and experiences as we adopt a Middle Class Approach to Decarbonisation