CCC Mitigation Monitoring Framework

3. Buildings

Key messages

• Demand. The headline indicators for the buildings sector on the demand-side are a reduction in heat demand, increased energy efficiency retrofits in homes and lower energy intensity in non-residential buildings.
• Supply. The headline indicators on the supply-side are the share of low-carbon heat supply, annual heat pump installations and costs, the ratio of electricity to gas prices and low-carbon heat delivered through networks. The supply-side measures contribute the largest share of abatement in the buildings sector. We are particularly interested in indicators that give a forward indication of the potential scale-up of the heat pump market, given its low starting level in the UK and the need for a rapid scale-up. However, data is a barrier for effective monitoring of this.
• Enablers. There are a range of enabling factors that have a significant bearing on the potential success of the Government’s policies in the buildings sector. We track indicators against some of these, including homeowners’ stated willingness to replace their existing heating systems with heat pumps and the share of buildings using smart or advanced meters. Data is also a major issue in tracking progress against enablers, in particular the growth of the labour market and skills base.
• Contextual factors. We also track a range of factors which provide valuable context for building decarbonisation policy. These include gas prices, the proportion of people working from home and the number of households in fuel poverty.
• Future improvements to monitoring. The buildings sector is very fragmented and made up of a diverse and localised set of actors, which makes access to aggregated, reliable data particularly challenging. In many cases we have used proxy indicators due to a lack of data (e.g. energy intensity of non-residential buildings) or have indicators that only show a partial picture (e.g. energy efficiency retrofits). We will continue to develop this framework over time with new information and data.

How we monitor buildings

Energy consumption and emissions in the buildings sector are strongly influenced by weather conditions – particularly temperatures during the winter. To allow meaningful evaluation of trends in emissions, the figures need to be temperature-adjusted. We temperature-adjust emissions figures by analysing the relationship between emissions data and quarterly Heating Degree Days (HDD). We use the difference between actual and 15 year moving-averages of quarterly HDD figures to calculate the adjustment required. The use of moving averages means that annual fluctuations in emissions due to changes in weather patterns are removed, while the impacts of longer-term climate trends on emissions from buildings remain visible.

The transition to Net Zero in the buildings sector will rely on a combination of action on the supply side (i.e. replacing heating systems in homes and other buildings with low-carbon systems), and on the demand side (i.e. through fabric efficiency and other demand-side measures). The monitoring map for the buildings sector reflects this through its two main branches and shows how Government policies, supported by relevant contextual factors, can put in place the conditions for success required to realise the outcomes that deliver the transition (Figure 3.1):

• Energy demand in buildings. Energy demand in buildings needs to fall by 30% from 2019 to 2035 in the CCC pathway (CCC, Sixth Carbon Budget). This requires action and improvements in two key areas:
  • Increased energy efficiency. An increase in the number of annual fabric efficiency upgrades is required, which will result in improved energy performance and ultimately reduced energy demand. Policies to drive this include minimum standards in existing and new buildings and a small amount of grant funding to upgrade fabric efficiency in fuel poor homes, social housing and public buildings.
  • Other demand-side measures. Measures to reduce demand include the use of smart tariffs (tariffs differentiating the cost of energy by half-hourly intervals) and greater efficiency of household appliances. Policies to drive these changes include smart meter roll-out and efficiency standards for products.
• Supply of low-carbon heat. 50% of heat demand in buildings must be met by low-carbon sources by 2035 in the CCC pathway, at which point all new heating installations and replacements should be low-carbon. This requires improvements across three areas:
  • Uptake of heat pumps. We expect heat pumps to make up the majority of low-carbon heat supply in future. Achieving a sustained increase in the annual roll-out of heat pumps will require a reduction in heat pump installation costs and running costs (relative to gas boilers). Policies to drive this change include the Government’s proposed obligation on boiler manufacturers for a certain proportion of their sales to be heat pumps , a proposed phase-out of new gas boilers from 2035, a small amount of grant funding through the Boiler Upgrade Scheme, and an intention to rebalance gas and electricity prices.
  • Roll-out of low-carbon heat networks. The amount of heat demand delivered by low-carbon heat networks needs to increase substantially from less than 1 TWh in 2018. In the CCC pathway, low-carbon district heating supplies nearly 50 TWh of heat in 2035, while the Government benchmark is for 29 TWh of heat to come from heat networks by this date (with no specific target for the low-carbon share). Policies to drive this change include public funding for heat networks and designating heat network zones.
  • Other low-carbon heat sources. Hydrogen, biomethane and other low-carbon sources may also play a role. Policies in this area include an expected decision by Government on the role of hydrogen in 2026 and grants to support biomethane injection into the gas grid.
• Enablers. Reducing energy demand and increasing heat supply is dependent on a wide range of enablers including widespread public engagement and access to information, ensuring that enough people with the right skills are in place to deliver buildings retrofits and access to private finance for households and business.
• Contextual factors. Some indicators are not required for building decarbonisation policy but do provide valuable context. The Government may have its own targets for some of these – such as new homes built or reduction in fuel poverty – which are separate but linked to its Net Zero ambition. These contextual factors offer useful explanations for trends which are directly relevant to decarbonisation or adapting buildings to a changing climate.

 

Figure 3.1 Monitoring map for buildings Source: CCC analysis. Notes: We use the following acronyms: EPC – Energy Performance Certificates. H2-ready boilers – hydrogen-ready boilers. LAEP – local area energy planning. DAs – Devolved Administrations. LAs – Local Authorities. PRS – private rented sector. HPs – heat pumps. EE – energy efficiency.

Indicators

This section sets out the indicators we will use in our progress monitoring for the sector. For each indicator we assign an ID number and identify a current data source. We explain why each indicator is important and what we are looking to see in our monitoring. The historical data and, where available and relevant, the benchmark trajectories against which we compare them are presented in the supporting data alongside our Progress Reports. We first cover the demand side – the need to reduce the energy used in buildings – and then the supply side – the need to replace high-carbon with low-carbon heat sources. We then cover the lower levels of the monitoring map (Figure 3.1): enablers and contextual factors.

Policy needs for the buildings sector were set out in our March 2022 Independent assessment of the UK Heat and Buildings Strategy. Where touched on below, alongside the most relevant outcomes and enablers, policy points are flagged as ‘Policy’. Specific recommendations are made in our annual Progress Reports to Parliament.

a) Demand-side indicators

Required outcome: Reduced energy demand in buildings

Reducing the amount of energy used by buildings in the UK will reduce the amount of emissions produced by the sector. It can also ease the switch to low-carbon fuels. It will reduce the pressure on supply chains for low-carbon energy, and transmission networks (e.g. reducing the need to dig up roads for local electricity network reinforcement) and reduce system costs. Improved energy efficiency also reduces energy bills for consumers and improves comfort levels.

Indicators: Energy demand in buildings

ID: D101, BD138, BD139
Source: DESNZ, Energy Consumption in the UK: End uses data tables
Unit: TWh

• Total energy demand is a key reference indicator for the buildings sector. This is expected to fall significantly, due to energy efficiency improvements and the greater efficiency of low-carbon heat sources (e.g. heat pumps). This top-level indicator effectively merges all demand-side progress, as improvements in the indicators set out below will result in a reduction in energy demand.
• We split this into sub-indicators for residential and non-residential buildings to track progress. While we expect the pace of the transition to low-carbon energy to be correlated across the various building types to some extent, the impact of different policies and external factors acting on the different building types may mean that actual progress diverges over time.
• The Net Zero Strategy sets out a benchmark for demand reduction as a result of energy efficiency measures of 15-20% by 2050. Government targets in related areas (e.g. heat pump uptake) would also result in falling energy demand.
• In the absence of an overall Government target for demand reduction we compare progress in this indicator against the CCC pathway, which is based on a range of similar measures to those in the Government pathway.

Indicators: Domestic energy consumption by end use type

ID: BD142, BD143, BD144, BD145
Source: DESNZ, Energy Consumption in the UK: End uses data tables
Unit: TWh

• Currently the majority of energy in homes is used to generate heat, but there are other end uses which make up smaller proportions of demand, including hot water, appliances, lighting and cooking.
• We track each of these sources to identify where progress in demand reduction is being made and where it might be falling behind. These indicators should all follow a downward trend.

Indicators: Median annual electricity and gas consumption in buildings

ID: BD149 – BD168
Source: DESNZ Regional and local authority electricity consumption statistics, DESNZ Regional and local authority gas consumption statistics
Unit: TWh per property

• These indicators track the median annual gas and electricity consumption for residential and non-residential buildings in the UK, GB, England, Scotland, Wales and Northern Ireland
• These indicators provide a different way of considering the trends in energy use below the headline final consumption values.

Indicators: Consumer energy prices

ID: BD233 – BD236
Source: DESNZ Annual domestic energy bills, QEP 2.1.2
Unit: £/kWh

• Consumer energy prices have a direct impact on the affordability of buildings decarbonisation.

Required outcome: Increased energy efficiency

The UK’s buildings need to become more energy efficient as the UK transitions to low-carbon sources of heat to meet the Net Zero target by 2050. In the CCC pathway more than 20% of emissions reduction in buildings in 2035 will come from making them more efficient.

Indicators: Share of buildings rated EPC C or better

ID: D301, BD310, BD311
Source: DLUHC, Live Tables on Energy Performance of Buildings Certificates; ONS, Energy Efficiency of housing, England and Wales, cumulative financial years
Unit: Percentage

• Energy Performance of Buildings Certificates (EPCs) provide an assessment of the energy efficiency of a property on a traffic light system of A to G. Much of the Government’s policy approach to drive energy efficiency improvements relies on setting target dates for buildings of certain types to reach a minimum EPC standard (generally EPC C):
  • The Government has set out its intention for all homes to reach EPC C by 2035 ‘where practical, cost-effective and affordable’ (DESNZ, Heat and Buildings Strategy).
  • The Government has set an intention for most energy efficiency renovations for commercial buildings to be completed by 2030, with privately rented commercial buildings reaching EPC B by the same date.
• The benchmark for this indicator is based on the Government target for homes and was constructed by Eunomia for the CCC. We do not yet have data for the share of non-residential buildings with EPC B or higher.
• We track both the annual[1] and cumulative proportion of homes that are rated EPC C or higher. The data for both draws on DLUHC data from EPCs lodged since 2008. It does not cover every dwelling in England and Wales because not every dwelling has an EPC. For the annual proportion, the data is taken directly from DLUHC publications. For the cumulative proportion, the data is taken from an ONS publication which has used DLUHC data.
• EPCs are an imperfect measure of buildings energy performance – they focus on cost rather than carbon, are often performed inconsistently, and are based on assumptions rather than in-use performance, which can lead to inaccuracies (CCC, UK Housing: Fit for the Future?). However, they are currently the best widely-used metric for tracking the performance of buildings. We intend to replace or supplement this indicator with a measure of in-use performance once that is available.
• Policy. The Government is taking some steps to improve the accuracy of EPC ratings, and is exploring how to incorporate data from smart meters to measure in-use performance. The Government is also developing plans to introduce a performance-based rating system for large-commercial buildings.

Indicators: Annual number of energy efficiency measures installed in homes through Government-backed schemes

ID: BD313, BD314, BD315
Source: DESNZ, Household Energy Efficiency Statistics; DESNZ, Green Homes Grant statistics
Unit: Number of installations

• There are a range of measures which can improve the fabric of buildings to reduce their energy use or make them more efficient. Making buildings more energy efficient is a key enabling step to reduce the amount of energy the UK uses. These efficiency upgrades also have other benefits, making homes more comfortable places to live in, cheaper to run, and better for health.
• Both the CCC’s Balanced Pathway and the Government’s plans for buildings suggest that a growing number of homes should be receiving energy efficiency improvements over the next decade. Annual installations peak at nearly 2.4 million in 2028 in the CCC pathway or at 1 million in 2030 in the Government pathway, and then fall as the share of existing homes which need to be retrofitted declines.
• This indicator allows us to monitor the progress of Government schemes aimed at improving the energy efficiency of fuel-poor homes and social housing. Existing data allows us to track annual loft, cavity wall and solid wall insulation in homes, where these upgrades have been funded by Government schemes.[2] It also allows us to track the total number of homes receiving an energy efficiency upgrade through Government schemes.
• There are data gaps for energy efficiency retrofits that are not delivered by Government schemes. We do not expect these to be significant yet, with the exception of loft insulations which are low-cost. The same applies to retrofits occurring in non-residential buildings.

Indicators: Energy intensity in non-residential buildings

ID: BD302, BD303
Source: ONS, Energy use: by industry, source and fuel; VOA, Non-domestic rating: business floorspace statistics; DESNZ, Non-domestic national energy efficiency data framework (ND-NEED)
Unit: kWh/m²

• This indicator measures the gas intensity (i.e. kWh of gas consumption per m²) in office and retail buildings used for commercial purposes. It is a proxy measure for wider non-residential buildings energy intensity. We use this measure because the Government has not yet published a full set of disaggregated energy intensity data for all non-residential buildings. We use energy intensity rather than total energy demand due to the heterogeneity of non-residential building sizes, which make energy intensity a more meaningful measure of energy efficiency.
• There is not a specific Government pathway for this indicator. This may change if the Government’s planned performance-based rating scheme for large commercial buildings constructs benchmark energy intensities for different building types. We constructed a CCC pathway for this indicator based on the change in gas consumption in commercial buildings in the Sixth Carbon Budget Balanced Pathway for non-residential buildings, factoring in the proportion of energy demand that retail and office buildings comprise.
• The source for gas consumption is ONS data on energy use by industry, source and fuel. We sort this by SIC code to identify gas consumption for heating corresponding to offices and retail buildings. The source for floorspace is historic Valuation Office Agency (VOA) data for offices and retail buildings. We have looked at the change relative to a 2018 baseline to allow for comparability, as the levels of energy in the ONS data do not align to the levels in the CCC pathway, due to differing scopes of buildings considered.
• A limitation of this indicator is that it does not cover all non-residential buildings, such as buildings used for education, health and hospitality. It also assumes a direct link between buildings counted as retail/office in ONS data and buildings counted in the VOA dataset.
• To cover a broader scope of sub-sectors, such as hospitality and health, we also include an indicator showing the weighted average of the median energy intensities of different non-residential building types. This draws on ND-NEED data. Ideally we would track the median energy intensity of all non-residential buildings in the ND-NEED dataset excluding factories, however, this data is not yet published. So for now we use the weighted median energy intensity as a temporary proxy indicator.

Indicator: Energy efficiency measures in SMEs

ID: BD304
Source: DESNZ, Longitudinal Small Business Survey
Unit: Number of installations

• This indicator measures the reported roll-out of energy efficiency measures in buildings used by SMEs in the last 12 months. It is a proxy measure for actual installations.
• The Government aims to have significantly reduced energy demand from businesses by 2030. SMEs comprise most businesses in the UK and a substantial proportion of emissions from businesses. Although there is not a detailed trajectory for this indicator, we would expect to see a steep rise in reported energy efficiency measures in SMEs in the next decade.
• This indicator is limited as it is based on survey data, relying on SMEs accurately reporting whether they have installed energy efficiency measures. It is also a relatively small sample of around 2,400 SMEs in 2021 (one cohort of the main survey). The other responses SMEs can give to the survey question is ‘no’, ‘don’t know’ or they can refuse to answer.

 

Required outcome: Other demand-side measures

The energy efficiency of buildings is also influenced by systemic and behavioural factors. These include temperature settings, demand that is responsive to price signals and the efficiency of energy consuming appliances. We have also included in this category buildings technologies that help with the flexibility of the energy system, such as energy storage and solar PV.

Indicator: Share of households using smart tariffs

ID: BD403
Source: None

• Smart meters provide real-time information on energy use to households. They are a valuable tool to enable individuals to both understand their energy use and make informed choices about efficiency improvements in their home. Households with smart meters are able to use variable tariffs depending on the time of day and plan their energy consumption accordingly (either actively or through smart appliances) to reduce costs. This helps to smooth the profile of energy demand and reduces the need for capacity increases.
• While we would expect an increase over time in this share, there are no Government targets on use of smart tariffs to measure progress against. There are targets for smart meter roll-out, for which we have an accompanying indicator (see the ‘building information’ enabler section).
• An indicator on the share of households actually using smart tariffs would allow us to assess the proportion of the population which is optimising its energy consumption and contributing to demand reductions. However, we do not have data against this indicator at present.

Indicator: SMEs using smart or advanced meters to control energy use

ID: BD305
Source: DESNZ, Longitudinal Small Business Survey
Unit: Percentage 

• Smart or advanced meters can be an effective tool to reduce consumption of gas or electricity in buildings. Smart meters provide half-hourly electricity and gas data to both the energy supplier and the customer. Advanced meters provide similar data to the energy supplier, which can be accessed on request by the consumer.
• The Government intends to reach market-wide coverage of smart meters by 2025. In 2021 it consulted on plans to standardise and improve data provided to non-domestic smart meter users.
• It is possible for businesses to have a smart or advanced meter and not use it to control their energy use. This indicator seeks to capture the extent to which smart and advanced meters are informing energy use in commercial buildings.
• This indicator tracks the proportion of surveyed SMEs who answered ‘Yes’ to the question ‘Does your business make use of any technologies that use smart/advanced meter data to help control your energy use?’.
• This indicator is limited as it only covers SMEs, not large businesses. In addition, it is based on survey data, relying on SMEs accurately reporting whether they are using smart of advanced meters. It is also a relatively small sample of around 2,400 in 2021 (one cohort of the main survey). The other responses SMEs can give to the survey question is no or don’t know.

Indicators: Solar installations on buildings

ID: BD401, BD402, BD407
Source: DESNZ, Solar photovoltaics deployment; MHCLG (now DLUHC), English Housing Survey
Unit: Number of installations

• Solar technologies are an increasingly affordable way to meet demand for electricity in buildings. Consumers can use rooftop photovoltaic panels to generate electricity or solar-thermal panels to generate heat.
• While the adoption of these technologies will not directly improve the energy efficiency of a home, they can be factored into EPC ratings. Like energy storage, these technologies can help increase the flexibility of the energy system.
• Policy. Growing adoption is most likely to be driven by rising standards in buildings, in particular new build homes. Policy to reduce costs of solar technologies (e.g. VAT cuts) could also incentivise uptake in existing buildings.

b) Supply-side indicators

Required outcomes: Increased supply of low-carbon heat to buildings

Demand for heating and hot water accounts for most of the energy used in buildings. Currently most of this heat is derived from carbon-intensive sources, primarily gas and some oil, but in future will need to come from low-carbon sources. Tracking the share that comes from low-carbon sources is a key high-level measure of progress towards reducing emissions from buildings.

Indicator: Percentage of energy for heat supplied by low-carbon sources

ID: BD202
Source: DESNZ, Digest of UK Energy Statistics; DESNZ, Energy Consumption in the UK
Unit: Percentage

• This indicator is the aggregate measure of the UK’s transition to low-carbon heat in buildings. It will reflect changing heat supply brought about by policies to encourage a shift to low-carbon technologies including heat pumps, low-carbon heat networks, hydrogen or biomethane boilers, direct resistive heating, infra-red heating, and others.
• The CCC pathway requires 50% of heat in buildings to come from low-carbon sources by 2035, rising to 100% before 2050. The Government’s Net Zero Strategy assumes that almost all buildings will be completely decarbonised by 2050, but there is no published Government trajectory for the share of low-carbon heat supplied to buildings.
• The share of heat from low-carbon sources is calculated using figures for the supply of energy for heat, including the renewable element of heat supplied by heat pumps. The share is calculated as the direct use of low-carbon energy in buildings (from Digest of UK Energy Statistics (DUKES) data) plus electricity used for heating and hot water, divided by the total energy consumed for heating and hot water (both from Energy Consumption in the UK (ECUK) data).

Indicators: Energy consumption in buildings by main fuel source

ID: BD102-BD137
Source: DESNZ, Energy Consumption in the UK: End uses data tables
Unit: Thousand tonnes of oil equivalent

• To reach Net Zero the UK will need to stop burning natural gas and oil in homes. These currently account for a significant share of domestic energy use (73% in 2020).
• We expect that electricity will displace gas as the main fuel source in homes in time. If the Government determines that hydrogen is a viable fuel source for home heating then we would expect the ultimate energy mix in the 2040s and beyond to be split between hydrogen and electricity. Currently there is no appreciable amount of hydrogen in the domestic energy mix.

Indicator: Share of emissions from public buildings covered by Greening Government Commitments

ID: BD201
Source: Defra and Cabinet Office, Greening Government Commitments
Unit: tonnes of CO₂

• Public buildings produce nearly nearly 10% of UK buildings emissions. Currently Government publishes data in the Greening Government Commitments (GGCs), which show a five-year emissions reduction target and progress made towards that target. For the first time in 2022 when a new five-year target was introduced, this included a target for direct emissions (rather than just total emissions). However, data was only published on the percentage reduction in direct emissions, without providing the baseline. It is also not clear what ‘direct emissions’ covers.
• The GGCs cover less than a fifth of emissions from public buildings, as they only cover central government departments. The baseline should be published, and a clear outline of what ‘direct emissions’ definitionally covers is needed. A proportionate way to track progress across the whole public building stock, split into types (e.g. schools, hospitals, barracks) would help identify progress and bottlenecks in decarbonisation. This could include drawing on existing and planned datasets such as the new Non Domestic Buildings Survey, ND-NEED and Greenhouse Gas Inventory.
• This indicator will be affected by both demand and supply, but is included here as the majority of emissions reduction is expected to come from replacing fossil fuel heating system with low-carbon alternatives.

Required outcome: Heat pumps

• Heat pumps are expected to be the most widespread technology used to decarbonise heat.
• Policy. The Government is pursuing a market-based approach to drive widespread adoption of heat pumps in place of boilers and bring down their costs. It intends to incentivise a scale-up of the market from the mid-2020s, so that annual installations reach at least 600,000 by 2028. Government is also planning to consult on rebalancing consumer gas and electricity prices so that heat pumps are cost-effective to run, when compared to gas boilers.
• Simply tracking heat pump installations ahead of the market scale-up in the mid-2020s will not allow us to assess whether the Government’s policy proposal is going to plan. To do this would require forward indicators of market scale up. We commissioned Eunomia to develop heat pump indicators, including indicators of market build up – the core indicators developed in this project are included in this framework (Box 3.1).
• Data limitations in this sector mean that it is still not possible to have a complete picture. Government should develop indicators to keep track of whether its market-based approach is progressing to plan.

Indicators: Heat pump installations

ID: BD501, BD502, BD503, BD504, BD505, BD506, BD507
Source: BSRIA

• This is a headline indicator tracking the number of heat pumps installed each year across the UK. We track progress against the Government’s proposed trajectory, and whether the possibility of going further is being kept open:
  • The Government aims for the UK to be installing at least 600,000 heat pumps per year by 2028. The CCC pathway involves around 900,000 installations per year by this point.
  • By 2030 the CCC and Government pathways converge, reaching around a million installations a year. By 2035 the Government’s pathway implies up to 1.9 million annual installations are reached.
• Policy. Policies to drive this change include target dates for fossil boiler phase-out, improved standards in new builds, funding to support decarbonisation in fuel poor homes and limited public funding for boiler replacements in non-fuel poor homes. Government has set out an intent to introduce an obligation on boiler manufacturers to sell an increasing number of heat pumps each year, although the policy detail is still under development.
• The expansion of the heat pump market will initially be driven by new builds and some retrofits incentivised by a small pot of Government funding (the Boiler Upgrade Scheme). We therefore track installations in new and existing homes, as well as installations of large heat pumps which are predominantly in non-residential buildings.
• Currently, there are no Government statistics for heat pump installations across different building types. The data we use is compiled by a consultancy, BSRIA, based on market insights and not publicly accessible. An official, transparent and publicly available dataset on heat pump installations is required to properly track progress in this critical area.

Indicators: Average total cost of heat pump installation

ID: BD508
Source: BSRIA

• As supply chains grow and costs fall heat pumps should become the preferred choice for all homes, fitting into the natural replacement cycles for boilers. This indicator tracks progress in bringing down the total average cost of a heat pump installation, as well as the component costs (unit costs of a heat pump, installation costs and other ancillary costs (e.g. emitters, pipes, valves, thermostats).
• Policy. The Government has a target to bring heat pump costs down by between 25-50% by 2025, and towards parity with gas boilers by 2030. It intends to do this by working with industry to incentivise product innovation (including through a Heat Pump Investment Accelerator Competition worth up to £30 million) and find ways to reduce installation costs.

Indicator: Ratio of consumer electricity to gas prices

ID: BD232
Source: DESNZ, Annual domestic energy bills

• Policy. Government aims for heat pumps to be no more expensive to run than gas boilers by 2030. This will require consumer and electricity gas prices to be rebalanced, likely by removing existing levies on electricity prices, so that the cost of running a heat pump is comparable to that of a gas boiler, after taking relative efficiencies into account.
• This indicator is the ratio of average annual consumer electricity prices relative to gas prices. The ratio on its own does not tell us whether running costs have tipped in favour of heat pumps, due to differing heat pump and gas boiler efficiencies, which are not factored in.
• However, we estimate that as long as electricity prices are no more than 3.4 times higher than gas prices, heat pumps will be competitive with gas boilers in terms of running costs. The precise value for heat pump and gas boiler running cost parity will depend on assumptions around boiler and heat pump efficiency.[3] As the technology develops further, heat pump efficiency is likely to improve. This will bring the ratio of parity up closer to four (i.e. efficiency gains in heat pumps mean electricity can be four times more expensive than gas and heat pumps will still be cheaper to run).

Indicator: Average heat pump efficiency

ID: BD529
Source: DESNZ, Electrification of Heat Demonstration Project
Unit: Coefficient of Performance (CoP)

• This indicator tracks whether heat pumps are performing to the level of efficiency anticipated. We expect technological innovation to drive up the average CoP from around 3 to 3.5 by 2030.
• Efficiency is measured as the average coefficient of performance (CoP) – the ratio of heat produced to electrical energy inputted. A ratio of three means that three units of heat are produced for each unit of electricity consumed.
• There is no publicly available data on this yet, but data for 2021 may be published as part of the findings from DESNZ’ electrification of heat demonstration project. Tracking efficiency will also allow us to determine the ratio of electricity to gas prices required for heat pump and gas boiler running cost parity.

Required outcome: Low-carbon heat networks

Both the CCC and the Government expect heat networks to play a role in the future supply of heat to buildings. In particular in dense urban cores and in areas where there is an established facility which can serve as an ‘anchor load’ to create sustained demand, for example, large public buildings or industrial and commercial facilities.

Indicators: Heat supplied by networks

ID: BD601, BD605, BD606
Source: DESNZ, Experimental statistics on heat networks
Unit: TWh

• This indicator measures the total amount of heat supplied by heat networks across the UK, and the amount of low-carbon heat within that. Most existing heat networks use carbon-intensive sources of heat, such as natural gas, which will need to be decarbonised.
• We track both heat supplied by all heat networks (to mirror with the Government targets) and heat supplied by low-carbon district heat networks (to mirror the CCC pathway):
  • The Carbon Budget Delivery Plan and the Net Zero Strategy have benchmarks for heat supplied by heat networks in the UK; 35 TWh in 2035 and 70 TWh by 2050. The Government pathway does not specify targets for low-carbon heat networks, which would be the most relevant milestone for tracking progress towards decarbonising UK heating. It also does not set a target for district heat networks, which are a sub-section of heat networks.
  • The CCC pathway sees low-carbon district heat networks supplying nearly 50 TWh in 2030 and 80 TWh by 2050 (one fifth of heat demand for all buildings).
• Historical data for heat networks and low-carbon district heat networks is based on DESNZ Experimental Statistics data collected from 2015-18, under the Heat Networks Metering and Billing rules. It is limited to heat networks who complied with the rules by formally notifying of their existence. To estimate heat supplied by low-carbon district heat networks, we take the heat supplied by district heat networks in DESNZ Experimental Statistics and assume 10% of this is low-carbon. This is the assumption used in the Sixth Carbon Budget to model low-carbon district heat networks in 2018.

c) Enablers

Enablers: Workers and skills

The rapid roll-out of heat pumps, heat networks and energy efficiency retrofits will require thousands of skilled workers in construction and other related trades in areas such as heat pump and energy efficiency installation. The Government estimates that 80% of the 2030s workforce is already in employment. Most of the future demand will need to be met by reskilling or retraining the existing workforce.

Tracking how many people are training to enter into these professions through different pathways (i.e. upskilling and new entrants) can also provide a good forward indicator of market build-up in these areas (see indicators on heat pumps in section b). Data on this is not collated centrally, and often held by further education institutions or private companies.

Indicators: Number of trained heat pump installers and retrofit coordinators

ID: BD801, BD802
Source: Construction Leadership Council

Enablers: Public engagement

Reducing emissions from buildings requires awareness, acceptance and positive decisions from households and businesses. For example, increased awareness of the need to decarbonise, willingness to improve the fabric efficiency of homes, and decisions to replace boilers with low-carbon technologies when their boilers reach the end of life.

At present we have only started to track public engagement relating to low-carbon heat in homes. We would like also to track household’s attitudes to energy efficiency upgrades and business attitudes to buildings decarbonisation in more detail.

Indicator: Public knowledge about air source heat pumps

ID: BD812
Source: DESNZ, Public Attitudes Tracker
Unit: Percentage

• This indicator provides an overview of the general knowledge of households about air source heat pumps as a specific low-carbon heating . As low-carbon heating will have to be rolled out to all homes in the UK by 2050, knowledge about air source heat pumps (expected to be the most dominant low carbon heating system) must increase substantially ahead of that.
• Low carbon heating systems were introduced to respondents in the Public Attitudes Tracker as environmentally friendly heating systems, before they were asked how much they know about specific low carbon heating systems (including air source heat pumps). Knowledge is defined as people self-reporting that they know ‘a lot’, ‘a fair amount’ or ‘a little’ about a specific low-carbon heating system (it excludes ‘hardly anything but I’ve heard of this’ and ‘never heard of this’).

Indicator: Homeowner readiness to install a heat pump when their boiler needs replacing

ID: BD11
Source: DESNZ, Public Attitudes Tracker
Unit: Percentage

• This indicator tracks the proportion of homeowners[4] who state that they are likely to replace their heating system with a heat pump next time they need to change. This is important as a central part of the Government strategy relies on households choosing to purchase heat pumps when they are replacing their heating system.
• The Government’s pathways for heat is constructed around natural replacement cycles for technologies like boilers. The Government’s stated ambition is to install at least 400,000 heat pumps annually in existing homes by 2028 and 1.7 million by 2035. Our benchmark for this indicator is based on the proportion of owner-occupiers which would need to opt for a heat pump when replacing their gas boilers, in order for annual heat pump installation targets to be met.[5]
• Data from 2021 will cover the proportion of owner-occupiers (who make decisions about their heating system) who state that they are likely or very likely to install a heat pump next time they need to replace their current heating system. We do not include those who had already installed a heat pump. There is no historical data for this specific question before 2021, so trends cannot yet be tracked. It only covers homeowners, not all types of building occupants.
• While this is a useful indicator of stated willingness to change, it is not yet reflected by actions, so should be interpreted with caution. While almost a quarter of homeowners stated a willingness to replace their heating system with a heat pump, at most 3%[6] of those owner occupiers replacing their systems in 2021 actually did. In turn that reflects the need for wider policies and favourable conditions beyond consumer willingness to change.

Indicator: SME plans to install low-carbon heating systems

ID: BD813
Source: DESNZ, Longitudinal Small Business Survey
Unit: Percentage

• This indicator measures the proportion of SMEs who report either having already installed a low-carbon heating system, or are planning to do so in the next 12 months.
• This is important as a central part of the Government strategy relies on businesses choosing to purchase heat pumps when they are replacing their heating system.
• Although there is not a detailed trajectory for this indicator, we would expect to see a significant rise in reported SME plans to install low-carbon heating systems if the Government’s proposed policies to lower costs and raise demand for heat pumps are effectively deployed.
• This indicator is limited as it is based on survey data, relying on SMEs accurately reporting whether they have or will install a low-carbon heating system. It does not capture whether they actually do then install a low-carbon heating system; costs, practicalities and other considerations may come into play further down the process. It is also a relatively small sample of around 2,400 SMEs in 2021 (one cohort of the main survey). The other responses SMEs can give to the survey question are planning to install energy efficiency measures only, planning to install both heat and energy efficiency measures, neither, don’t know or they can refuse to answer.

Enablers: Finance

Private capital will be an enabler that helps homeowners and businesses overcome the upfront capital costs of energy efficiency and low-carbon heating installations. Once the market and demand has grown, we would like to track the level of uptake of green mortgages (i.e. the size of the green mortgage market), the difference in interest rates and other benefits offered by green mortgages, and the range of financial products on offer.

Enablers: Building information

The majority of buildings across the UK need to improve their energy performance. Information on buildings performance will be required to allow building owners to have the confidence to make major spending decisions regarding retrofits. It will also underpin the success of Government policies relating to minimum standards for EPC ratings.

Indicators: Share of buildings with smart or advanced meters

ID: BD832, BD833
Source: DESNZ, Smart meters in Great Britain
Unit: Percentage

• Smart meters are gas and electricity meters that record half-hourly price and consumption data, and provide automatic meter readings to energy suppliers. They also provide consumers with up-to-date information on their energy use. If linked up to smart tariffs, smart meters can be a useful tool for reducing and smoothing energy consumption (see ‘other demand-side measures’ section above).
• Smart meter data can help address the current limitations of the Standard Assessment Procedure (SAP) and EPCs by building in-use performance into the measures. In recognition of this potential, the Government is running the SMETER (Smart Meter Enabled Thermal Efficiency Ratings) programme, and has committed to considering the role of smart meters in SAP.
• For this to be widely used, smart meters have to be sufficiently widespread in homes and non-residential business, which is why tracking roll-out is important. We compare this indicator to the Government’s targets for smart meter roll-out.
• Within this indicator we also track the number of households with an operational smart meter. This is important as some households will have smart meters which are not used in smart mode.

Enablers: Other enablers

• Other enablers for the buildings sector include governance and planning, compliance and enforcement of standards and digital and data. We have not yet developed indicators for these enablers. In some cases it may not be possible to quantitatively track progress in these areas. We will return to this in future years.

d) Contextual factors

Contextual factors: Socio-economic

Indicators: Households in fuel poverty

ID: FF1, FF2, FF3, FF4
Source: DESNZ, Fuel poverty statistics; Scottish Government, Scottish Household Survey; Welsh Government, Dwelling Stock Estimates for Wales; Northern Ireland Executive, Northern Ireland House Condition Survey
Unit: Percent of households in fuel poverty

• The Climate Change Acts sets out that CCC recommendations to Government on carbon budgets must consider the likely impact of decisions on fuel poverty. These indicators are now covered in Chapter 11, under the fair funding and affordability theme.

Indicator: Percentage of people working from home

ID: BD945
Source: ONS, Homeworking in the UK labour market
Unit: Percentage

• Although this is not an indicator which relates to any targets set by either the CCC or the Government, patterns of buildings occupancy will have a direct bearing on energy use in buildings.
• The COVID-19 pandemic caused a marked shift in working patterns for many people, with the number of people working at home rising and staying at a higher level than before the pandemic.
• Homes tend to be less energy efficient than non-residential buildings, particularly compared to office spaces. The rise in home working during the pandemic resulted in an increase in total building emissions, as the increase in emissions from homes was not fully offset by a corresponding decrease in energy use in non-residential buildings. It is not yet clear the extent to which these habits will remain, but it will be important to track them going forward.

Indicator: Wholesale price of natural gas

ID: BD951
Source: ONS, System Average Price (SAP) of gas
Unit: p/kWh

• The price of natural gas is determined internationally. As the main fuel used in heating in the UK the price of gas affects the running cost of a boiler and its attractiveness as a heating technology. It will also matter for the relative price of a heat pump and other low-carbon technologies.

 

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[1] The annual proportion corresponds to EPCs lodged in that particular year.

[2] For example, the Energy Company Obligation, the Green Deal, and the Green Homes Grant Local Authority Delivery scheme.

[3] The range provided is indicative and based on gas boiler efficiency of 0.87 and heat pump efficiencies of 3.5 (efficiency reached by 2030 based on a flow temperature of 40°C) on the upper end, and 2.54 (efficiency in 2020 based on a flow temperature of 50°C) on the lower end.

[4]Respondents were individual homeowners, excluding those who said the choice of heating system was not their decision to make.

[5] We assume one in fifteen households have a heating system needing replacing each year, based on the average lifetime of a boiler.

[6] Only 54,000 heat pumps were purchased for homes in 2021, which is equivalent to 3% of households whose boilers it is assumed needed replacing each year.

[7] Government is currently reviewing the Decent Homes Standard: https://www.gov.uk/guidance/decent-homes-standard-review.

Future improvements

Planned updates to the indicator framework

Our approach for monitoring progress in buildings is evolving, and we anticipate adding the following indicators to our framework:

• Energy intensity in non-residential buildings. Once the government publishes further data on ND-NEED and their new non-domestic building survey model, we hope to have more comprehensive data to capture improvements in energy efficiency in non-residential buildings.
• Energy efficiency standards in new buildings. We plan to develop an indicator which captures whether new buildings are being constructed to higher performance standards.
• Appliances. We intend to consider indicators of appliance efficiency in future, which could include the average efficiency of the most common appliances. We would also ideally track the percentage of households and businesses using induction hobs.
• Finance. Once the green finance market is further developed we would like to track the level of uptake of green mortgages, the difference in interest rates and other benefits between green mortgages and their equivalents, and the range of financial products on offer.
• Other enablers. We have not yet developed indicators for enablers like: governance and planning; compliance and enforcement; or digital and data. We will return to this in future years, although it may not be possible to quantitatively track progress in all areas.

Data gaps

There are also areas where lack of up-to-date, comprehensive and aggregated data is impeding our ability to measure progress. This is true across many of the key indicators for the buildings sector:

• Annual home energy efficiency retrofits. Existing data only covers energy efficiency installations in homes which have been funded through Government schemes. While this is likely to cover the majority of retrofits at present, given the Government’s focus on a largely privately funded approach to buildings decarbonisation, a growing proportion of retrofits are expected to be privately funded going forward. While we recognise the challenge in collating data on retrofits that do not arise from Government grants, tracking progress against the Government’s ambition to retrofit 500,000 homes each year by 2025 will require a more complete picture of retrofits than we have at present.
• Annual commercial building energy efficiency retrofits. There is also no data on energy efficiency retrofits in non-residential buildings. Last year we recommended that Government make plans to address the data gap for insulation measure roll out in commercial buildings, but no progress has been made on this.
• Annual heating system installations. Heat pumps are expected to be the main source of low-carbon heat in future, yet there is no publicly available data on the number of heat pumps installed in the UK each year. There is similarly no annual publication on gas and oil boiler installations. Official Government statistics on installations of heat pumps and fossil fuel boilers are needed. These could be obtained by Government from industry or Local Authorities as part of building regulations compliance.
• Heat pump supply chains. Several of the indicators of heat pump market build up listed in this document are based on one-off pieces of analysis or publications, including indicators on heat pump costs, average lead time from order to delivery and installation times. Data on others, such as average heat pump efficiency and the percentage of heat pumps using weather compensation, is not available at all. Government should consider the practicality of producing data on these indicators more systematically, and at what frequency.
• Heat network size and low-carbon share. We do not have historical data against this indicator beyond 2018, as the Government was not able to share or publish the latest set of data from 2019-22. We hope to access this for next year’s Progress Report.
• Investment in heat networks. The Government’s policy for heat networks relies on public investment leveraging private finance, but there is no published data on this to assess whether the policy is achieving its objective.
• Existing workforce. There is no centrally collated data on the size of the existing workforce in areas like heat pump installation, heat networks and energy efficiency retrofits. This will be required to understand future workforce requirements.
• New entrants into the workforce. There is also no centrally collated data on people training into these areas, which is required to track how supply chains for these industries are building up.
• Emissions from public buildings by type. Current data coverage of emissions from public buildings is partial. Government published in its Greening the Government Commitments (GGC), including the percentage reduction in direct emissions from public buildings, without providing the baseline. The GGCs also only cover central government departments, which correspond to less than a fifth of emissions from public buildings.
• Number of homes adapted to high temperatures. While we have an idea of the number of homes that are currently overheating, we do not have data on the installation of adaptation measures, or the number of homes currently adapted. Tracking this will be critical in understanding progress in adapting UK homes to a changing climate.

We are aware of ongoing work within Government to develop data sources against many of these indicators. These will be added to our framework when credible data sources are available.

 

Source: CCC based on Eunomia (2022) Developing Trajectories for Forward Indicators of the UK’s Heat Pump Supply Chains.
Box 3.1 Developing indicators for heat pump market development
The Government’s market-based approach to low-carbon heat assumes that heat pump installations will scale up significantly from the mid-2020s, reaching 600,000 installations per year in 2028. The headline indicator for this policy is the number of heat pump installations. But we also need to track how well the market is developing as it ramps up. The core policies for the market-based mechanism are yet to be finalised and implemented. However other policies are, or will soon be, having an effect. We have commissioned Eunomia to develop a set of forward indicators to track the market as it develops. These indicators cover five areas: The enabling environment. Indicators tracking the number of heat pump models on the UK market, the trade balances for heat pumps and key components, capital investment in the heat pump market, the cost-effectiveness of heat pumps, consumer interest in heat pumps, and the number of suitable properties. Pre-purchase preparation. Availability of finance for low-carbon heat, number of homes using Time of Use Tariffs or Heat as a Service, and the volume of advertising for heat pumps. Manufacturing and sales. The number of installers available and in training, the number of heat pumps on order and the average lead time, and the relative market share of manufacturers. Installation. The number of heat pump installations, share and type of homes with a heat pump, time taken to install a heat pump, and the work rate of installers. Post-installation and maintenance. Types and durations of warranties, volume of services conducted, and the configuration of installed units. There is not yet data against many of the indicators that we would like to track. As well as constructing indicators where data is available, this project sets out data gaps that would need to be filled to track market progress. We have listed the most important of these data gaps in the section above. We have not included all indicators in our monitoring framework. As we continue to develop the framework and more data against these indicators becomes available, we will consider whether to incorporate or replace indicators suggested by Eunomia into our framework.