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Net Zero Strategy – the heat is on for UK businesses

Published October 26, 2021

Net Zero Strategy – the heat is on for UK businesses

With only days to go before the COP26 climate conference in Glasgow, the UK government has published its Net-Zero Strategy. The Strategy sets out the policies and spending which will enable the UK to decarbonise its economy by 2050. 

While the Net Zero Strategy reiterates a number of previously announced policies, such as the 10 Point Plan, and the Energy White Paper, it made it clear that business and the market rather than regulation must do much of the heavy lifting to reach net zero.

As Gianluigi Corbani, Head of Sustainability and Asset Management, Alfa Energy Group said: “ All indications of the Net Zero strategy point to a low investment, light-touch regulatory approach by the Government. This will mean that UK businesses will be expected to take the lead in the UK net zero effort. Whether by helping households to decarbonise or by directly investing into their own activities to reach individual net zero targets, it is now clearer than ever that the UK will not reach net zero if industry and businesses do not step up and take the initiative.”

For UK businesses wondering how the strategy will affect their efforts to decarbonise their own operations, the main news was to be found in the government’s Heat and Buildings Strategy, published one day before and then included in the main Net Zero Strategy. In both documents, the Government makes the commitment to phase out the installation of natural gas boilers in workplaces by 2035.  Alongside this, the Strategy aims for cost parity between heat pumps and gas boilers by 2030 with cost reductions of 25-50% by 2025. The government will also consult on phasing out the installation of new oil, coal, and LPG heating, and replace with low carbon alternatives such as heat pumps in off gas grid non-domestic buildings from 2024.  Market-based incentives will be introduced for heating system manufacturers, helping the market for heat pumps to reach up to 1.7 million a year by 2035.

“The strategy to decarbonise heat will be applicable to business buildings,” commented Jeremy Nicholson, corporate affairs officer at Alfa Energy. “The government is still hedging its bets on hydrogen vs heat pumps, but there’s no doubt hydrogen will be needed as an alternative for decarbonising gas in some locations. The transition is going to cost: business premises may be less problematic when installing low carbon boilers than domestic properties, but it depends on the nature of the building whether this will be straightforward. However, the sense of direction is powerful: yes, there are gaps and subsidies will be needed, but the UK government has gone further than any other developed economy and this is another significant step forward.”

To ensure all heating systems are compatible with net zero by 2050, the government also said it will work with industry to assess the feasibility of hydrogen to heat workplaces. A strategic decision will be made on the role of hydrogen in decarbonising heat in 2026. A consultation will take place on the case for requiring new gas boilers to be convertible to use hydrogen by the same date. Meanwhile, the strategy document repeats an earlier commitment from the Health and Safety Executive to work with industry partners to enable the blending of 20% hydrogen in suitable areas of the gas networks.

For privately rented commercial buildings, the Energy White Paper set a minimum energy efficiency standard of EPC Band B by 2030. The government plans to consult on regulating non-domestic owner-occupied buildings, possibly in line with private rented sector standards. Next year, the government pledged to pilot a scheme introducing a performance-based policy framework in large commercial and industrial buildings.

SMEs could benefit from the Small Business Energy Efficiency Scheme (SBEES) which aims to enables small business to access energy efficiency measures, improve buildings performance and meet regulatory standards.

The Strategy also mentions the current consultation on ESOS, the mandatory energy assessment scheme for large businesses’ energy use. The Strategy also includes previously confirmed £1.425bn for Public Sector Decarbonisation. The aim is to reduce emissions from public sector buildings by 75% by 2037.