Author: Nigel A-F

Introduction

This article is an update on recent UK Government policy developments regarding net-zero, especially concerning the heating of buildings. The purpose is to highlight those issues that will most influence what independent schools need to be doing over the next few years.

UK national policy remains to achieve net-zero by 2050. This is enshrined in legislation. (Interesting nugget: at the time of writing the UK Government was facing legal action by ClientEarth for failing to have included enough measures in the most recent round of policy papers to be on track to achieve net-zero by 2050).

There is also now an interim target of reducing emissions by 78% by 2035, based on 1990 levels. This was introduced in 2019. The purpose of that interim target is to encourage a steady reduction in emissions and avoid the UK leaving it all to the last minute.

Issued Policy Documents

Three long-awaited policy documents were issued in October 2021. These are:

• The Heat & Buildings Strategy: lays out how the UK’s domestic buildings and non-domestic sites are to be rendered net-zero. The latter includes school estates.
• The Net-Zero Strategy: lays out how the UK is to achieve net-zero across all forms of energy usage and carbon emissions.
• The Treasury’s Net-Zero Review: lays out how all the above is to be supported and balanced financially.

The government has also started issuing consultation documents to explore the detail of how best to implement the intended policy. Note that it is the consultations that are often the more important part of the legislative cycle, because good intentions can founder on difficult details. The consultation now under review of most relevance to the Independent Education Sector concerns the implementation of legislation for sites off the gas-grid. This is considered one of the most pressing issues in government circles, partly because sites off the gas grid are usually burning coal, oil, or LPG for heating and certainly the first two are high carbon emitters. The other factor is that the government is already clear about the technology options for sites off the gas grid, whereas it is still hedging its bets for technology options on the gas grid.

Main Policy Points

These three documents amounted to some 1000 pages of detail. It’s quite a tall order to distill all that into digestible nuggets, but the section below is an attempt to do that. Note that this is just the headlines: analysis and comment is in the next section of the article.

Underlying Philosophy in UK Policy:

• The 2020s will be key to delivering a step change in progress.
• The UK needs to intensify efforts to eliminate emissions from buildings: heat decarbonisation is the hardest task, within the built environment.
• The UK should avoid rushing into acts which may make the situation worse in the longer term; or may close off options that later turn out to be useful. Conversely, the UK now needs to accelerate ‘low- and no-regrets’ action.
• Fairness and affordability is to be at the heart of the UK approach.
• The UK should use the natural replacement cycle to phase out fossil fuel plant. This means that there will be no forced removal of existing heating plant: instead, from a declared operational target date, as replacements fall due the outgoing plant will have to be replaced by a low-carbon alternative.

Operational Targets:

• From 2024: to phase out the installation of fossil fuel plant off the gas grid. Rural schools take note! There are nuances but in principle this means that any oil or LPG plant that needs to be replaced beyond that date will need to be replaced by a low-carbon alternative.
• From 2025: all new buildings in England to be ready for Net-Zero.
• By 2026: the government will take strategic decisions on the role of hydrogen in heating.
• By 2028: whatever the role for hydrogen, the electrification of heating plant will be widespread, with a target of 600,000 heat pumps deployed per year for the domestic market.
• From 2030: end the sale of new petrol and diesel cars.
• From 2035: phase out the installation of new natural gas boilers.
• By 2035: the national power grid is to be net-zero, subject to security of supply.

Financing the Transition. The UK will endeavour to:

• Use market forces to drive change, but with some carrot and stick.
• Invest now, to drive innovation, build up the supply chain, and drive down costs.
• Rebalance energy prices so that heat pumps are no more expensive to buy and run than gas boilers. (This will also help the business case for sites running on oil and LPG, but in national policy terms the main concern is actually the disparity between grid gas and grid power prices).
• Lead by example in the public sector estate, through the Public Sector Decarbonisation Scheme (PSDS).
• Offer financial incentives for early adopters in the domestic market.
• Require the commercial sector to pay its own way, based on the principle that ‘the polluter pays’.
• Use Building Regulations and other legislation to drive improved building efficiency.
• Make increased use of carbon taxing.

Analysis & Comment

Heating is the Hardest Part. The government recognises that for most buildings, including clusters such as school estates, the major technical and financial challenge is to convert the provision of heating and hot water to low-carbon alternatives. Comment. We would agree. Having now considered the conversion of many school estates in some detail, in ReEnergise, we have found that it is always the heating that provides the main technical and financial challenge, along with those changes to the power supply that are usually necessary to make the new heating system viable.

Technology for Heat: heat pumps preferred. Government policy now states that heat pumps are preferred to biomass, as an option for low-carbon heat generation, because in net terms heat pumps generate less pollution and greenhouse gas emissions than biomass. Comment. Note that heat pumps generate no emissions at source. When the heat pumps are driven by renewably sourced power, be it via an appropriate grid supply contract or via local on-site generation, the overall system is net-zero.

Biomass by Exception. The government notes that some buildings may need to be heated by biomass because of their poor thermal properties and the related high flow temperatures that the heating plant needs to provide. Comment. A cause of some heated discussion in engineering circles. Some heat pumps can achieve similar flow temperatures to combustion-based heating plant, e.g, 70 degrees C (or higher). However, these high-temperature machines are more expensive to install than their more widespread lower-temperature counterparts. Ultimately the choice between heat pumps and biomass in schools is often driven by local constraints of a more pragmatic nature, such as space available; and, of course, the available budget.

Role of Hydrogen. The government has stated that it intends to make strategic decisions about the role of hydrogen in the national net-zero plan, by 2026. Comment. Given the wealth of material to be considered, and the extent of conflicting vested interests on the supplier side, it is not surprising that the government has declined to commit to a firm plan at this stage. That said, the clear consensus amongst the majority of impartial experts on the supplier side is that hydrogen will not play a major role in the heating of buildings in the UK. It will play a major role in net-zero, but primarily in those situations where there is no other more cost-effective alternative available. This could include bulk transportation and will certainly continue to include manufacturing processes, where hydrogen is already a key player. Don’t be fooled by media reports about village trials for delivering hydrogen in the gas-main (e.g. Winlaton in County Durham). These are trials of hydrogen being blended with natural gas, at a proportion of not more than 20%, and most reports fail to point out that this is not actually ‘green’ (zero-carbon) hydrogen; nor that the calorific value of the fuel is lower and that bills will need to rise to achieve the same heating levels. The nub of the issue is that there is still a developmental and commercial mountain to climb before we get anywhere near extensive use of clean hydrogen for heating buildings. I would not bet on it; nor would I build a school net-zero strategy based on it.

Domestic Market (included here because we’re all home-owners; and school estates usually also have some domestic staff premises). The government will offer financial incentives to encourage the conversion of domestic premises, whilst incentives remain necessary because of the higher price of the low-carbon alternatives. The intent and hope is that the price differential will rapidly decline, through innovation, mass production, and a marked increase in the supplier/installer base. Initially, price parity will be achieved through grants, under the Boiler Upgrade Scheme which launches in April 2022. Those grants are set to be £5000 for a new domestic scale air source heat pump (ASHP) and £6000 for a new domestic scale ground source heat pump (GSHP). Comment. For many homes, which are suitable targets for ASHP, that cost-reduction outcome is probable. Octopus Energy, a fast-growing energy supplier that is branching out into various conversion markets, has already stated that by April 2022 it expects to offer conversion from gas boilers to ASHPs for the domestic market at the same price as merely installing a new gas boiler, once the government grant has been factored in. However, the same outcome is unlikely to be achieved for housing requiring a GSHP. GSHP projects entail significant groundworks: the groundworks often account for about half the overall cost in a domestic setting and there is nothing in the marketplace currently to indicate that groundworks will become much cheaper. If anything, groundworks could rise in price. Note also that by implication the grants will not be available for long.

Public Sector. The government will also allocate funding for the conversion of the public sector estate. This is being done by means of the Public Sector Decarbonisation Scheme (PSDS) which will provide some £billions of funds over the coming years. The PSDS has now been operating for over a year and is on its third tranche of funding. It is now configured so that it covers the price differential between the outgoing fossil fuel plant and the low-carbon alternative. Comment. Unfortunately this funding is not available for the Independent Sector schools.

Commercial Sector. In contrast, the government will not allocate significant financial support to the conversion of the commercial sector. Instead, the policy will largely shift from carrot to stick. The current subsidy system for the commercial sector – known as the non-domestic Renewable Heat Incentive (RHI) – is already drawing to a close and has not been open to new entrants since April 2020. There will not be an RHI phase 2: commercial buildings will all eventually be required to be converted, through regulation. Comment. Independent schools sit in the commercial sector, in this context, even though most are also registered charities. The thrust of this policy is that independent schools will have to finance the required capital outlay from their own resources, in the same way that new-builds and other estate developments are funded.

Timescales for Conversion. Recognising that the conversion of heating nationally represents a huge transitional financial burden – whether paid for by grants or met by corporate commercial entities from their own funds – the phasing out of fossil fuel plant will be done using the natural lifecycle of existing plant. In other words, no existing fossil fuel plant will have to be removed before its end of life; but from a certain date, when fossil fuel plant fails or has reached the end of its useful economic life, owners will no longer be permitted to replace that plant with like-for-like new fossil fuel plant: it will have to be done using a low-carbon alternative. For sites currently connected to the gas grid that cut-off date is currently set at 2035; for sites off the gas grid that date is from as soon as 2024, depending on size of buildings. Likewise, new-builds will not be allowed to incorporate fossil fuel plant, whether on or off the gas grid: in theory from 2025. Comment. The off-grid policy is in principle as previously briefed by ReEnergise, although it remains to be seen if the cut-off date of 2024 will stand once the current consultation has been reviewed. But even if it slips a bit, it is imminent in strategic terms.

Summary of the Key Implications for Independent Schools

This is a long-term business, which could take at least a decade for most schools: probably more.

It’s no longer a question of if a school will choose to decarbonise the estate, but when it will need to do it.

The domestic market will be shielded to some extent, financially; but there will be no significant financial support for the conversion of school estates.

The driving factor on school estates is the conversion of the heating; plus the work on power needed to enable the heating to be converted.

For schools off the gas grid it is imperative to draw up a decarbonisation plan urgently, if not already done. But it would also be prudent for schools on the gas grid to draw up their decarbonisation plan sooner rather than later: it will avoid a financial shock in later years.

Given the nature of most school estates, the most cost-effective design concept for the conversion to low-carbon heating is likely to be based around the installation of a district heating system. The implication is that from the moment when one item of major plant requires replacement, that school will have to face up to a major project, i.e. the installation of a district heating infrastructure – even if not all buildings are put onto the district in the first instance.

Current project prices – at the scale required for schools – are unlikely to reduce significantly. In practice, they may well rise. Schools should plan and budget accordingly.

The net effect in strategic terms is that for the next two decades the conversion of a school’s heating plant has become akin to undertaking a new-build in terms of physical and financial scale. It will need to be given due consideration within the school’s development plan. Once the new low-carbon estate infrastructure has been established then the funding of further next generation replacement plant – in the timeframe 2050 and beyond – will be of the same order of magnitude as it has been in the fossil fuel era, because the plant itself is not particularly expensive. But the transition at some point between now and 2050 will be expensive and intrusive, because it entails developing the required infrastructure.

Nigel Aylwin-Foster is a director at ReEnergise. If any reader needs further advice about the points raised in this update please contact him direct. [email protected]

In September 2020 ReEnergise was approached by the governors of St James School – a local Surrey school which is grant maintained by the Diocese of Guildford. A screenshot of the overhead view of the school estate is shown above, to give a sense of the scale and layout. It is a straightforward site in decarbonisation terms; but like most public sector small schools, it is short on resources and finding reliable project support is a challenge.

There is one main building, served by a single original plant room; additional heating and hot water systems have been added on as the original building has been extended over the past 20 years. In September 2020, the main plant room housed a failing mains gas boiler; but also a pellet biomass fuel store and boiler. There is also a smaller building adjacent to the playground, served by a separate air source heat pump. The biomass plant had not worked reliably for some years. The mains gas plant was ageing and in need of urgent replacement. The Diocese plan was to decommission the biomass plant and use Diocese funding to replace the ageing gas plant and upgrade the heating controls more generally (definitely the most affordable option, but not low-carbon).

The school governors wanted an alternative low-carbon system, whilst also looking at ways to render the estate’s power supply net-zero: in other words, to decarbonise the estate. The school had a very slim budget for this work. It had already had quotes from local installers for the main building heating conversion project, based on stripping out the gas plant and converting the site to a ground source heat pump, using the school playing field for the ground array site. The governors were concerned by the wide disparity in the prices and technical solutions offered and sought our impartial opinion. Accordingly, we undertook a full feasibility study, covering heat and power options and solutions (the school has no integral transport fleet) and providing the governors with a full decarbonisation strategy and plan to cover the journey from the current situation to achieving net-zero in Scope 1 and 2 emissions.

The final comprehensive report, at 42 pages of non jargon explanatory text, with supporting technical and business case charts and graphs, gave the school clarity. It covered: zero-carbon energy strategy; responsible energy procurement, usage, generation; project financing options; design concepts for low-carbon heat and power generation; financial modelling; advice on planning permission, next steps and recommendations.

As a result of the high-grade support provided to the school, the Diocese has now taken us on as their framework net-zero consultancy and we are now embarking on providing heat decarbonisation plans for 41 other schools in the Diocese.

In January 2020 ReEnergise was tasked to undertake a feasibility study for the decarbonisation of heat at Kingston Maurward College, a Further Education college in Dorset with an aspiration to achieve net-zero by 2025. The college intent was to get the entire estate converted to a low-carbon heat technology. We followed our now standard study methodology, which matches industry best-practice and Public Sector guidelines.

Our 68 page report included: a Board level executive summary; assessment of the current baseline and condition of the estate; current energy usage; provision of an energy strategy; design concepts for biomass and heat pump solutions; full business case analysis for each technology and various funding options including capital outlay/operating costs etc; discussion of the pros and cons of each option; sensitivity analysis for the financial modelling; illustrative installation programmes; details of next steps for the pursuit of projects arising from this decarbonisation plan; and recommendations on the way ahead.

The next step was to support the College staff in securing funding for implementation, to follow our step-by-step risk reduction process. This includes technical confirmation and project definition, detailed design, tendering for installation contractors, and finally the construction phase of the programme, handover to the College and establishing a viable O&M programme.

Several months later, and courtesy of grants from the Public Sector Decarbonisation Scheme and Low-Carbon Dorset, the project is now in the final stages of tendering for installation, which is also being managed by ReEnergise. Note that our innovative approach to tendering for the construction phase has achieved a reduction in required capex from £2.4m to £1.6m – a saving to the College of some £800,000.

Keeping this programme going, to implement what came out of the original highly-regarded HDP, has required enormous effort and resilience within the project team, given significant site-specific technical challenges and also funding uncertainties at key moments. This is an excellent example of a practical and pragmatic HDP being used to convert an idea into action, which is the ultimate point of the exercise

Walk with me a moment, Dear Reader, and I’ll share a useful nugget or two about how to approach the climate change issue in your school, college, or trust.

Foraging around the media recently I found some useful snippets. The first is a note from our own Public Accounts Committee in parliament. For context, remember that in June 2019 the government committed in law to achieving ‘net zero’ greenhouse gas emissions by 2050, to deliver on the commitments it made in signing the Paris Agreement in 2016. So, the PAC has a legitimate interest in gauging our national progress towards that goal. On 5^th March this year it published the findings of its recent review. Obviously the government is in for a bashing in any PAC review and we have to recognise, Dear Reader, that people can be trying their very best and still not get it all right, so I am not publishing this to knock the government.

The key extracts from the PAC report are:

‘As much as 62% of the future reduction in emissions will rely on individual choices and behaviours, from day-to-day lifestyle choices to one-off purchases such as replacing boilers that use fossil fuels or buying an electric vehicle.’

And yet…

‘There is a disconnect between people’s concern about climate change and their understanding of what is required to achieve emissions reductions in the UK.’

I recognise that issue. It’s my job to brief school governors and senior managers about the art of the possible on their school estates. A regular initial exchange goes a bit like this:

“I’m keen to make the school more sustainable. What do we need to do?”

“There is a wide range of things but the things that really make the difference are expensive.”

“How expensive?”

“The most challenging task is to decarbonise the estate. That means that your use of power, heat and transport on the estate no longer generates any greenhouse gas emissions. To achieve that on this estate would cost about {insert any amount from £150,000 to £15M, all depending on the size of the school estate}.”

Stunned silence…

“OK, can we talk about the bits that don’t cost quite as much as that?”

Setting aside my desire to evoke the drama of the encounter, there is a serious issue here: school leaders are increasingly concerned about climate change but for the most part they have no grasp of the extent of the challenge. And why would they have? Until now, the way in which a school sources and uses its energy has not been a strategic issue: but all of a sudden it is. Coming hard on the heels of Covid-19, and alongside other lesser but still significant challenges like – well, just running a school on a tight budget in normal times – schools are also now going to have to make a significant adjustment because of climate change; and the scale of this task is only just starting to sink in, I believe.

In another recent snippet, Joss Garman, the European Climate Foundation’s director responsible for overseeing the Foundation’s strategy and grant-making in the United Kingdom has noted:

‘Climate action in Britain is moving into more politically fraught terrain because the next phase of carbon cuts involves front of house decisions about how we heat our home and what kind of car we drive. And these bring with them tricky questions about individual freedoms, who pays for these changes and who benefits.’

In other words, although we’ve achieved a fair bit as a nation already, so far it’s been the easy bits: the public’s real appetite for action has not been well tested. Now it’s going to have to be tested.

This begs the question: if it’s all going to be so expensive – and yet it must be done – who is going to pay for it? That question obviously applies on the domestic front and must be a cause of consternation for any governing party in a democracy; but it also applies to public sector organisations like schools and colleges. I believe it is set to become a major concern for every school governing body in the country.

The news for school budgets is mixed. In short, money is available but it’s still proving hard to secure it. Here’s a summary:

Over the past 10 to 15 years various financial incentives have been introduced to encourage decarbonisation, by the UK government and – to a lesser extent – from other sources. The two largest schemes have been based on subsidies, which enable capital outlay to be recouped after the work has been done: the Feed-in-Tariff (FiT) for power-generating installations; and the Renewable Heat Incentive (RHI) for renewable heat installations.  However, the FiT closed for new applications in 2019 and the RHI closed for new applications on 31^st March this year, (although there has been some scope for heat projects to secure extensions for completion until 31^st March 2022).

For the public sector, the problem with the subsidy approach is that there is still the requirement to find the initial capital outlay. In contrast, grants and interest-free loans – mainly available from Salix Finance – avoid this need. But until recently it has proved difficult to configure Salix financing in a way that suits the greatest challenge of them all, which is the decarbonisation of heat on school estates. And school leaders will know that competition for Salix financing has always been fierce, for every category of project.

Things may be starting to change, although it’s still too soon to tell by how much. In September last year the UK Government introduced the Public Sector Decarbonisation Scheme (PSDS), with an initial budget of £1Bn, to be administered by Salix. This was partly an initiative to generate work again, as part of the post-Covid recovery, which is no doubt what led to the government stipulation that the money was to be allocated and spent by no later than 30^th September 2021, and ideally by 31^st March 2021. At the time of writing, £932M of that first £1Bn had been allocated to public sector bodies, including schools and colleges. More recently, PSDS2 has been launched, with another £75M being released as a top-up for 2021/22. PSDS2 opened for bids at 2pm on 1^st April this year. Within a week the scheme had been over-subscribed.

Some themes are emerging, for schools and colleges:

• It is the decarbonisation of heat that poses the greatest challenge: there is no easy way to do it, at the scale required. The government has recognised that: PSDS1 grants cover everything from efficient ovens to LED projects, whereas PSDS2 has been focused much more on supporting projects specifically intended to decarbonise the provision of heat into public sector buildings.
• The PSDS budget currently available amounts to a tiny fraction of the total demand.
• Just increasing the supply of finance will not be the answer, because the low-carbon heat installation sector in the UK still has a limited capacity. The supplier side also needs to be built up, in tandem with the supply of finance.
• Competition for grants will remain a part of the landscape, as Salix will continue to scrutinise applications carefully before allocating grants.
• There will be further rounds of the PSDS, or similar, for the public sector. Grant applications for these future funding rounds will need to be submitted as promptly as possible, when a new round opens: late applications will result in disappointment as the budgets will be hoovered up quickly across the nation. However, applications will also need to be well prepared: Salix have a remit to ensure – as far as possible – that money allocated can be spent by the required deadline. This means that Salix staff need to be convinced that an application is credible, i.e. well researched and properly planned: ‘shovel-ready’ is a term I’ve heard used by some school governors, which is a good way to describe it.

So what to do? I would offer these suggestions:

• First, draw up a plan. In the trade we would call this a Decarbonisation Plan. A good Decarbonisation Plan will provide a clear description and understanding of the opportunities, costs, timescales and impact of the decarbonisation work required on the school estate, and ultimately in the school’s supply chain. It will indicate the potential benefits in terms of reductions in greenhouse gas emissions and potential reductions in operating costs. This generally means going as far as identifying the most cost-effective technologies and related design concepts for their installation on a particular school estate. A good plan will also determine the dependencies between projects: the nature of low-carbon technologies, especially the available heat technologies, means that no requirement should be considered in isolation.
• Having identified the required projects, the highest priority ones will need to be further researched, to a level that enables a credible grant application to be submitted as soon as a funding round opens.
• In short, the plan is not just a list of work, pulled together in a hurry. Depending on the size and expertise of the in-house team, most schools or trusts will probably need help with researching and drafting it.
• It would also be wise to nominate somebody in the leadership team to keep a close eye on developing national policy, so that new funding opportunities can be seized upon quickly.

Remember, the early bird catches the worm.

ReEnergise has joined the Pump it Up Campaign as the education specialist, to highlight the challenges and issues schools face in trying to decarbonise the generation of heat on their estates.

The Pump it Up campaign is calling on the government to do more to support large-scale heat pump projects. Heat pumps, allied with a rapidly decarbonising national electricity grid and on-site power generation to run them, represent the optimum low-carbon solution for many school estates for the foreseeable future. Compared to other heat decarbonisation options, these projects are characterised by their high efficiency, high flexibility and low emissions. But they are expensive to install and in most circumstances it will require some form of external financial support to generate a business case attractive enough to persuade a school to convert from the incumbent fossil fuel.

The evidence is clear enough: the government’s initiatives to date have helped to some extent but have failed to live up to the expectations of both consumers and policy-makers alike. Furthermore, heat pumps have recently been identified – by the government – as one of the key technologies that will need to be spread rapidly around the UK as part of the so-called Green Industrial Revolution: but the government is not yet doing enough in practical terms to make that aspiration achievable. What it gives with one hand, in schemes like the Renewable Heat Incentive (RHI) and the Public Sector Decarbonisation Scheme (PSDS), it takes away with the other by making it much too difficult in practical terms for most schools and other large-scale heat users to harness the support. The RHI is about to close, with no sign of any successor scheme on the radar. The PSDS – also now closed for bids – was headlined as support for heat pumps as well as energy efficiency measures to reduce energy demand; but in the event the PSDS has prioritised short-term, easy projects that are the work of a couple of months, meaning that heat pump projects have not made the cut. (It takes at least half a year to complete a large-scale heat pump project, if it’s going to be done with the necessary care and attention to detail).

The Pump it Up campaign has members from a wide variety of sectors, including retail, utilities, agriculture, housing and academia. We want the government to recognise that if it is serious about achieving net-zero by 2050 then it is going to need to do much more to support the proliferation of large-scale heat pumps, including in the nation’s schools.

For more information see https://www.pumpitup.today/