Could Heat as a Service be a solution to financing our transition to Net Zero?
Innovations to decarbonize buildings have brought the goal of Net Zero within reach. To achieve it, industry and government must work together to implement them. Eric van Oossanen of Trane looks at the issues.
As Prime Minister Rishi Sunak addressed other world leaders in Egypt during COP27, his remarks nodded to the dilemma being faced by the world. “I know that for many, finances are tough right now,” he said, referring to commitments to ease the transition to lower-carbon energy and infrastructures in the developing world. Even as he travelled to Egypt, however, some UK observers have become more vocal in asking whether the country can afford to pay for the transition at home.
Innovations to decarbonize buildings have brought the goal of Net Zero within reach. To achieve it, industry and government must work together to implement them. Now the Prime Minister has returned from Egypt, his government should embrace the opportunities in the coming months to accelerate the transition by enabling the public sector to lead the way.
We must remember, we have made changes of this scale before. The technologies to decarbonise built infrastructure exist today. The benefits of moving away from fossil fuels is not just for the climate, but will pay for itself with lower-cost heating and cooling in the medium term. And where the size of investment is a challenge, we must bring the same level of innovation to financing the changes that we have brought to developing the lower-carbon technologies themselves.
According to the Climate Change Committee, nearly 20% of all UK greenhouse gas emissions come from buildings. Most of this is derived from the burning of fossil fuel to keep those buildings warm, including the 1.9 million manufacturing facilities, offices, schools, hospitals, leisure centres, and other public buildings.
The technology to move away from fossil fuels to warm and cool buildings exists today. Moving away from separate systems to achieve that not only can reduce emissions, but is more efficient. Much in the same way that you wouldn’t step on the brake and accelerator in a car doesn’t improve the efficiency of a car, separate systems for heating and cooling doesn’t improve the efficiency of buildings. And in the same way that increasingly we are making the move to electric vehicles that use braking to recover energy that can be used later for acceleration, heat pumps save energy in the switches between heating and cooling that in a larger building can occur several times a day. Instead of venting that energy to the atmosphere, it is recycled. While a gas boiler has maximum potential efficiency of 100%, heat pumps are able to achieve even greater than 100%, since boilers convert chemical energy into heating energy whilst heat pumps transfer energy from the source to the target temperature level.
The UK is behind some of its neighbours in the adoption of these more efficient heating and cooling technologies. On the residential side, government started to address this deficit a year ago with the incentive program to provide up to £5,000 per household in relief for moving to heat pumps away from gas boilers.
Some organizations have made the transition from fossil gas boilers even without a similar incentive.
Broomfield College in Derby is one good example. The project replaced the college’s existing fossil fuel boilers with a Thermal System combining both Air and Water Sourced Heat pumps, reducing energy consumption by 790,000 kWh and 160 tons of CO2 emissions, annually. The project earned a People’s Choice Award from the European Heat Pump Association earlier this year.
Broomfield College is just one of many organizations, public and private, that is making the transition, even in the absence of an incentive scheme similar to the one government offers to residential property owners. But extending the scheme to non-residential buildings is something government should consider as part of how it considers the means to achieving Net Zero targets across the built environment.
Some aggressive targets have been set. By 2037, for example, government has set the target of reducing emissions from public buildings by 75%. Before the Prime Minister left for Egypt, media reports revealed an estimate of up to £30 billion to decarbonise public buildings would be required between now and 2037 to meet those targets.
Some have looked at the scale of change required and found it daunting. But we have made changes at a similar scale before.
After the discovery of North Sea gas in 1965, government undertook a wholesale transition to new energy technologies that could take advantage of this new supply, moving away from the “town gas” derived from oil and coal. More than 13 million buildings across the UK were retrofitted to install gas boilers. At the time, there were objections to the scale of the change. But by 1977, the chairman of British Gas hailed the completion of the project as one of the greatest feats of infrastructure ever accomplished in peacetime.
The scale of the transition away from burning fossil fuel to heat buildings to more efficient technologies is even greater. However, other solutions exist to finance that move.
So-called “heat-as-a-service” (HaaS) is a novel method of reducing the up-front investment required from the customer to install an entirely new heating and cooling system and smooths out the cost over time. It works in much the same way as leasing, rather than buying, a car.
Using HaaS, an organisation agrees to a long-term contract with an energy services company to install and maintain low-carbon heating and cooling systems. Rather than having to absorb the capital cost of the equipment, the costs to the customer are classed as operating expenditure over the lifetime of the equipment.
Earlier this year, the World Business Council for Sustainable Development published (https://www.wbcsd.org/Pathways/Energy/News/Heat-as-a-Service-how-companies-can-use-this-innovative-solution-on-their-decarbonization-journey) an extensive guide aimed at facility owners and finance departments to explain the approach in more detail and its benefits for energy efficiency, long-term cost savings, and as an accelerator for national Net Zero targets.
At a time when public and private balance sheets are under pressure, HaaS represents a way to leverage financial solutions that enable us to maintain momentum toward Net Zero while also freeing up needed capital for other needs.
Public sector organizations have an opportunity to lead the way. HaaS is a relatively new concept and its uptake has significant room for growth. But greater adoption will enable us to continue making progress toward Net Zero.
Erik van Oossanen is Portfolio Leader, Applied Heat Pumps at Trane Technologies