Economic Report 2013

b) Heat It still remains notable how little of the energy debate, in public at least, is about heat, especially given the size of the heat sector in this country. Gas dominates heating in Britain, most particularly in the domestic and small commercial sectors where individual boilers are the preferred choice of providing heat. According to National Grid’s Future Energy Scenarios 18 published in September 2012 , gas demand for these purposes is declining as a result of better insulated buildings and higher efficiency boilers. These changes, while not rapid, accumulate steadily as the years go by. DECC published its heat strategy, The Future of Heating: meeting the challenge 19 , in March 2013, having consulted on the matter during the spring of 2012. It has divided its strategy for this large subject into four main categories: • Efficient low carbon heat in industry • Heat networks • Heat and cooling for buildings • Grids and infrastructure The most important characteristic of heat is the extent of the change in demand between summer and winter. While industrial demand for heat used in various production processes is reasonably constant and predictable, seasonal demand for heating (and cooling) in domestic and commercial premises is almost wholly weather dependent. During the winter peak, demand for heat – mostly supplied by gas in Britain – is about five times the demand for electricity. This simple multiplier gives a clear indication of the scale of the transformation which

the government foresees, especially when DECC’s strategy envisages the spread of heat networks in towns and cities and greater use of electricity in heating through air and ground source heat pumps; in this regard, it is worth noting that heat pumps perform best in thermally efficient buildings. Furthermore, increasing requirements for air conditioning in commercial and, probably, domestic premises in future will add to the demand for electricity for heating and cooling. The biggest difficulty lies in the lack of energy efficiency in much of this country’s buildings stock. Modern buildings to the latest standards are part of the answer, but in the domestic sector the turnover is slow (100+ years), whereas in the large commercial sector it is much faster and the opportunities to invest in the latest technologies considerably greater. According to National Grid’s Future Energy Scenarios , the domestic insulation market will start to saturate in the next ten years, with the residual housing stock being much harder and more expensive to treat. In like manner, the replacement of older gas boilers with modern, high efficiency ones – one of the simplest and most beneficial changes which is being made now – will have largely run its course by the mid-2020s. Nonetheless, it is almost impossible for an upgraded, older building to reach the thermal efficiency standards of a new building. It is likely, in our opinion, that effecting the changes in the nation’s heat supplies implicit in the four main categories listed above will require substantial investment and will only happen slowly. Therefore, gas will continue to play a substantial role in providing heat for several decades to come.

18 See http://www.nationalgrid.com/uk/Gas/OperationalInfo/TBE/Future+Energy+Scenarios/ 19 See https://www.gov.uk/government/publications/the-future-of-heating-meeting-the-challenge

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