A short summary

The SEA’s new white paper develops a proposal for a stepped approach to the final phase-out of new fossil fuel heating systems through a Carbon Intensity Standard (CIS) for future retrofit domestic heating. It proposes what the SEA believes are sensible, implementable, step changes in carbon intensity of future replacement heating systems, which progressively reduces the permitted carbon emissions from new installations or the replacement of major components of heating systems over the 2029 – 2036 period.

This policy proposal sets out a long-term, technology-agnostic, market-driven decarbonisation of domestic space and water heating. It avoids picking winners and would give investors the confidence to invest in the technologies and infrastructure that will take the future place of today’s fossil fuel boilers, against a stable and predictable regulatory background. 

This proposal complements the early-stage subsidy schemes designed to support the uptake of individual technologies by regulating for step-change reductions in a technology-agnostic cap on carbon emissions per kWh of delivered heat. At its core, the Standard provides both a clear and implementable pathway from fossil fuel-based heating systems to low-carbon alternatives such as heat pumps, infrared, storage heaters and other forms of smart electric heating, benefiting both consumers and industry.

It is designed in to allow the existing heating industry to adapt at each milestone by continuing, for the first two steps, (2029 and 2032) to allow today’s dominant technology – condensing gas boilers – to continue to be installed, but progressively to require changes to their heat distribution systems (typically radiators) to ensure a new boiler operates to its maximum efficiencies. This approach lowers bills for those customers wishing to replace an existing boiler with another, but also ensures that existing hydronic central heating systems’ operating temperatures are lowered, thereby making heat pumps more competitive by comparison and future-proofing the homes of those still choosing a boiler for the future installation of a heat pump.  

The key findings of the modelling are that all the proposed stepped changes provide an overall benefit to society due to the reduction in carbon emissions. Heat pumps and direct electric heating technologies become more competitive once levies on electricity bills are removed and when the technologies utilise Demand Side Response (DSR). The Scenario without green levies on electricity bills and 50% DSR shows heat pumps to be the cheapest form of heating in the first stage of the policy (Step 1). A gas boiler at 55°C has a consumer Net Present Value (NPV) of £21,344 whilst a heat pump has a consumer NPV of £19,985. 

For the substantial minority (around 20%) of homes that do not currently have hydronic central heating systems, or where such systems are not cost-effective, the technology-agnostic nature of this policy also allows for competitive market entry for alternatives such as smart storage heaters, infrared, and other forms of low carbon heating, including biomass.  

We believe this proposal, if implemented with the steps placed into legislation at the outset, would provide a clear and certain regulatory framework against which existing and new heating industry actors can have the confidence to invest in the technology development and associated installer capacity necessary to transition away from fossil fuel boilers over the next decade or so.  

Finally, for full clarity, this proposal does NOT propose anyone should need to remove a well-functioning existing boiler. The proposal only applies to where a new boiler or other major component (such as the majority of the radiators, for example) requires changing.