Phasing out the installation of fossil fuel heating systems in businesses and public buildings off the gas grid

Overview

Achieving net zero will require almost all buildings in the UK to transition to low carbon heating by 2050. Around a third of commercial, industrial, and public buildings (“non-domestic buildings”’) off the gas grid currently have a fossil fuelled heating system in use for producing heating and hot water, making a significant contribution to their carbon emissions. The government committed in the Clean Growth Strategy[1], published in 2017, to phase out the installation of these systems in new and existing businesses off the gas grid during the 2020s.

This consultation sets out our proposed approach to deliver on that commitment by phasing out the installation of new oil, liquefied petroleum gas (LPG), and coal heating systems in non-domestic buildings off the gas grid. These fuels have a negative impact on our environment by emitting high levels of carbon and lowering the quality of our air. We propose to use the natural replacement cycle as the trigger to transition around 100,000 buildings[2] that are in scope; at the point their existing system requires replacement, they will install a low carbon one instead.

We believe that we will need to introduce this policy for the largest buildings in the mid-2020s to ensure those organisations are on the pathway to decarbonise their buildings by 2050. Our package of policies to grow heat pump deployment in the coming years, as set out in the Heat and Buildings Strategy[3], will enable smaller buildings to be brought in scope from 2026.

The government proposes to favour heating technologies that are energy efficient and compatible with net zero, and electrification offers the most realistic pathway to achieving this. We recognise that there may be a strategic role for other low carbon heating systems, including bioenergy, hybrid heat pumps, solar technologies, and heat networks. We expect a greater mix of technologies to be necessary for non-domestic buildings than for homes, due to their more varied uses of heat and hot water.

While some cost reductions are likely, the overall cost trajectory for low carbon heating technologies is uncertain; and this consultation invites evidence from respondents on the likely trajectory for non-domestic heating systems. Even with reductions in upfront costs and a flourishing green finance market, the cost of moving to a low carbon heating system is likely to be higher than what businesses have become accustomed to when installing fossil fuel heating. This means businesses must start to consider the cost of transitioning to low carbon heating in the coming years as part of their long-term decarbonisation plans.

Setting out our proposals for these buildings is part of our plan to provide a long-term framework for the decarbonisation of heat, which we believe will support market development and enable businesses to make informed investment decisions when planning improvements to their buildings.

Why your views matter

This consultation sets out policy proposals for phasing out the installation of fossil fuel heating systems in businesses and public buildings off the gas grid. We invite stakeholder views on our approach and seek further evidence in specific areas to help shape the design of the policy, including on our proposals to:

• Use the natural replacement cycle to phase out oil, LPG or coal heating systems in businesses and public buildings off the gas grid.
• Take a heat pump first approach to the replacement of those fossil fuel systems.
• Allow the limited use of alternative low carbon systems, such as solid biomass, where a heat pump is not suitable.
• Introduce the policy using a phased approach with the largest buildings first (from 2024 at the earliest), followed by smaller buildings (from 2026).
• Consider whether it may be appropriate to end the use of fossil fuel heating in all non-domestic buildings off the gas grid, potentially in the 2040s.

What happens next

We want to engage with the owners and users of non-domestic off-gas grid buildings on the policy approach set out in this consultation; their input is essential for shaping its final design. In social research with non-domestic consumers around 50% were unaware of the government’s commitment to phase out the installation of fossil fuel heating systems in off-gas grid buildings[1]. Although there will be several years before the policy is introduced, we intend to use the consultation process as a valuable opportunity to increase awareness and encourage businesses to consider transitioning to low carbon heat in advance.

This consultation will close on 12 January 2022, after which responses will be analysed and we expect to provide a response to this consultation in spring 2022.

As stated earlier, this will be followed by a further consultation to engage stakeholders on the technical details of the policy in advance of its introduction.