What do we need from Europe’s policymakers to accelerate the clean energy revolution?

?Today, the use of fossil fuels to heat our homes is Europe’s third-largest source of carbon emissions, accounting for 10% of its total - that’s five times more than cement production, and two and a half times more than iron and steel production. Electrifying residential heating is a vital step in our race to reduce emissions. Switching to a heat pump is the most impactful change consumers can make, and the most efficient and affordable decarbonization technology deployable at scale for European homes. Just last month, the International Energy Agency concluded that the goal of net zero by 2050 cannot be reached without the deployment of heat pumps.?

This was a key focus at the Heat Pump Forum in Brussels this year, led by Thomas Nowak, Secretary General of the European Heat Pump Association, and I was pleased to join an insightful panel session focused on what policymakers can do to accelerate growth for the heat pump market across Europe.?

During the event, Thomas shared his perspectives, and underlined the need to follow up the recognition that heat pumps have received at a policy-level with tangible action. With industry investments of more than €5 billion, Thomas highlighted the importance of fostering a robust EU home market through effective policy measures. This will not only encourage the success of the heat pump industry, but the overall health of the European heating sector.?

It’s clear that the complex landscape of policies, subsidies, and energy prices across European countries means that heat pumps are not yet accessible and affordable for all. That’s why the Aira team has been busy developing a series of recommendations for what policymakers in the UK, Italy and Germany - the markets Aira operates in - need to do to speed up the much-needed clean energy-tech revolution.?

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UK: Address the ‘spark spread’ and reduce red tape??

In the UK, it is essential that policymakers address the ‘spark spread’ issue - the difference in price between electricity and gas - and reduce unnecessary red tape.??

Among the three markets we analyse, the UK's spark spread stands out as the most unfavourable. While gas receives support from a government-backed subsidy for fossil fuels, the electricity sector, despite its growing green initiatives, faces burdensome taxes and environmental levies. In comparison to other European countries, the UK experiences one of the highest electricity prices, around at 41,3 EURc/kWh].?

To expedite the electrification of heating across Europe, we must address the spark spread to make heat pumps more economically beneficial. In my conversation with Thomas Nowak, he recommended that policymakers should aim for an electricity to gas price ratio of around two, to transform the cost of a heat pump into an attractive investment.?

?The level of red tape, such as local council planning permission and connection procedures, should also be minimised to make heat pumps more accessible. Energy Performance Certificates, which provide a graded energy efficiency rating of a property’s running costs, must be reviewed, and updated so that they accurately account for the energy savings created by heat pumps today.??

While the recent increase in subsidies for heat pump installations under the Boiler Upgrade Scheme is a positive step (now a subsidy of ￡7,500), more needs to be done to overcome the barriers to widespread adoption.?

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Italy: Stop subsidising gas boilers?

In Italy, policymakers must stop subsidising gas boilers and instead incentivise homeowners to transition to clean heating solutions.??

Italy’s spark spread is more favourable than in the UK, which means that households in Italy can lower their heating bills by up to 40% if they install a heat pump - a significant saving. Yet today, just 6% of Italian households have made the transition to clean heating solutions for their homes.?

The Italian government currently offers homeowners a subsidy amounting to 65% of the costs for the sale and installation of a clean-energy heat pump through its EcoBonus scheme. However, the scheme provides the same level of subsidy for the installation of new condensing gas boilers - which makes little sense. Condensing gas boilers provide only a marginal reduction in emissions compared to traditional gas boilers, and we are in no doubt that we need to urgently move away from heating our homes using dirty fossil fuels.?

Earlier this year, the EcoBonus scheme was changed so that it is now delivered as an income tax discount over a 10-year period, rather than an upfront payout - which has also slowed the market down considerably.?

The Italian government must do more to incentivise homeowners to move to clean heating solutions, and, crucially, must end the financial incentive for the installation of condensing gas boilers - which do not lower emissions anywhere near enough and prolong reliance on fossil fuels. Prioritising clean energy-tech for homes will not only reduce Italy’s carbon emissions but will also provide considerable savings for consumers on their energy bills.??

Germany: Set out clear, consistent policies to win consumer trust?

In line with its goal of becoming climate neutral by 2045, Germany needs to set out clear and consistent policies to drive the adoption of heat pumps.??

The transition to sustainable energy in Germany has faced challenges due to negative press coverage and a lack of clarity towards households. Legislation on the clean energy transition has been through multiple iterations in recent years, and this lack of consistency has negatively impacted consumer trust and long-term clarity.?

The government has introduced plans to phase out fossil fuels in the building sector, under the German Buildings Energy Act (GEG), which is a positive step. However, sales of oil and gas heating systems unfortunately increased significantly prior to the announcement of the updated GEG legislation, driven by consumer uncertainty around the implications of the new plans.??

There is currently a subsidy available to homeowners to make the switch to clean energy solutions, but the scheme is not as efficient as it needs to be: the application process is not digitalised, making it time-consuming and inefficient. Additionally, the grant level is currently set to change in 2024, creating greater uncertainty for consumers.?

The electrification of heating is absolutely essential to achieving Germany's emissions targets and will economically benefit consumers in the long-term. German policymakers and politicians must communicate effectively on the importance of heat pumps in reaching net zero targets, and set out clear, demonstrable solutions to make heat pumps accessible and affordable. Ultimately, consistent messaging and legislation will create a predictable landscape for households, and better incentivise people to switch to future-proof clean energy technologies.?

Heat pumps - the future of clean residential heating?

We have much to gain from the transition to clean energy-tech for our homes: phasing-out fossil fuel boilers will dramatically save European households money while vastly reducing carbon emissions.?

Heat pumps are the single most affordable and efficient decarbonisation technology deployable at scale, providing more than four times energy efficiency than gas boilers even in cold climates. Scandinavia – with one of Europe’s coldest and harshest climates - has already made significant headway. In Sweden, for example, 60% of households already have a heat pump installed and heat pumps account for more than 90% of new heating system installations. As a result, only 1% of Sweden’s carbon emissions originate from residential heating.?

In summary,? we need clear, consistent messaging both at a national and European level, policies that incentivise consumers to make the transition, and a level playing field when it comes to the cost of energy.??

For more information about Aira please visit: https://www.airahome.com/?