Fix SAP, Fix VAT
“Fix SAP, Fix VAT” was the four word slogan used by Thermal Storage UK at the launch event of the Sustainable Energy Association’s new heat report.
The SEA report sets out that we need multiple approaches and a range of technologies to decarbonise heat. Heat pumps, which are always installed with a thermal store, can provide amazing efficiencies and cost as little to run as a fossil gas boiler. But heat pumps alone cannot decarbonise every building and government policy should reflect this.
As highlighted in the report, smart thermal stores can work in buildings where heat pumps can’t. For instance in flats or homes where higher flow temperatures are required or space is limited. Smart thermal storage can provide flexibility to the grid and reduce peak electricity demand. Smart thermal stores can maximise the use of renewable energy, reducing carbon and bills.
There were a few consistent themes during the launch event’s panel discussion, chaired by PRASEG’s Bim Afolami MP. The panel consisted of Thermal Storage UK, the Department for Energy Security and Net Zero, Naked Energy, the ECA and the Active Building Centre.
Theme 1. Decarbonising heat and buildings is hard.
Indeed, it is one of the hardest challenges of decarbonising the UK. It’s up there with decarbonising agriculture and decarbonising air travel. There are 28 million homes out there. It has taken the energy sector 10 years to install smart meters in half of them. To decarbonise heat, we need to go deeper into almost all of those 28 million homes.
Theme 2. We need a tailored approach to each building type.
Whatever technology we use, we need to consider whether to change the heating system, change the pipework and radiators, whether to insulate walls or carry out other energy efficiency measures.
Theme 3. People need to know about these technologies.
People need to have confidence that their hard-earned capital is well spent. That their running costs are lower and that they’ve reduced their carbon emissions. We need proper advice from independent bodies about the best solution for each home. This might mean Citizens Advice or the Energy Saving Trust or council-level one stop shops.
How to overcome the challenges
The government can make heat decarbonisation easier by prioritising the following in the next 18 months:
Reform Energy Performance Certificates and SAP to properly consider the flexibility of low carbon electric heating products. Today, electric heating is often penalised. Consumers need good information.
Reduce VAT on smart thermal storage in all circumstances in the Spring Statement. At the moment, smart thermal storage only qualifies for the VAT reduction if installed with a heat pump. The tax regime should treat different heating technologies equally.
You could capture the above as “Fix SAP, Fix VAT!”
Over the medium-term, the regulatory framework should ensure that the energy system values flexibility. This means system changes such as sharper network charges, market-wide half hourly settlement and suppliers offering time of use tariffs.
Decarbonising buildings and heat might be hard but it is also important. We can decarbonise through dedicated and deep government support, private sector innovation and delivery, good regulation, and private sector financing combined with government grants and R&D.
Thermal Storage UK co-authored the SEA report and co-sponsored the PRASEG launch event on 21 February 2023.
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