INDUSTRY INSIGHT
www.heatingandventilating.net
Growth agenda hinges on clear heat policies in the commercial sector
When the new Labour government was elected with a landslide majority there was an expectation that, after years of uncertainty and policy delays, a clear strategy for transitioning the commercial heating sector to low carbon technologies would emerge, alongside a renewed determination to make positive progress. However, six months on, a combination of economic headwinds, political push back and, it’s fair to say, a bit of bad luck, has resulted in a murky outlook and a sense of uncertainty from the new government. That’s the view of Malcolm Farrow, head of public affairs at OFTEC
L
abour’s overarching priority remains economic growth and the chancellor recently said it’s more important than delivering
net zero. The reality is, however, that the two go hand in hand. The off-grid commercial heating sector in particular is facing several challenges to decarbonisation and, without a clear policy agenda from the government, this will hold businesses back. So, what has Labour said so far? They’ve
confirmed they will not force businesses or homes to ‘rip out their boilers’ and will scrap the previous government’s proposed ban on the installation of new fossil fuel boilers from 2035. The government has announced an increase in the total funding pot of the Boiler Upgrade Scheme, which is available for small non-domestic buildings as well as homes. However, despite talk of further additional funding to support with the low carbon transition, specific policy detail and timescales is still lacking. For smaller businesses, particularly in hospitality, budgets are already very tight. They are facing a myriad of other pressures from rising costs, higher interest rates and changes to employee national insurance contributions. Spending and investment decisions are made
years in advance and uncertainty over potential costs for transitioning to low carbon heating is a growing concern.
Which technologies will we have to adopt? What
energy efficiency improvements will we have to make? How much government funding will there be? How will this impact day to day energy costs? These are all questions which, currently, are difficult to answer and, perhaps unsurprisingly, for many businesses, this means the choice to adopt low carbon heating is not a priority. For appliance manufacturers, integral to the
development and rollout of low carbon heating, it’s similarly hard to make investment decisions without a clear sense of what technologies will be supported. Labour appears to be continuing the heat pump first approach, but many non-domestic off-grid buildings will be unable to adopt this technology without significant cost and disruption. Manufacturers are having to balance delivering existing boilers for the current market but also heat pumps, without a clear sense of if or when they will be rolled out en masse. A further complication is the government’s Clean Heat Market Mechanism (CHMM) and proposals for a tightening of efficiency regulations for boilers. It means that boiler manufacturers may have
Left: The government needs to clarify its Net Zero policies in the commercial sector if it wants to deliver its commitment to economic growth
Below: Malcolm Farrow, Head of Public Affairs at OFTEC
to invest in product development while being squeezed financially by the CHMM, and without a clear indication of how long the market for boilers will remain, or its future size. The rollout of low carbon heating will also be
reliant on installers and technicians, but there remains a significant shortage in the industry, particularly for heat pumps. This adds wider uncertainty over the realistic timescales of the transition to cleaner heating. The government has continued funding for the Heat Pump Training Grant, which is driving more technicians to upskill, but we’re seeing from our own Heat Pump Training courses that the number who then go on to install the technology is low. It’s clear there’s uncertainty about the current size of the market. This isn’t going to change unless the government sets out its decarbonisation strategy. Labour is reforming the previous Apprenticeship Levy into a Growth and Skills Levy to incentivise more people to enter the industry, but again this will be more effective once the long term direction is clear. The commercial sector has demonstrated its resilience and adaptability. However, to deliver the growth the Chancellor has committed to, it needs long term certainty. This is particularly true for the heating sector which is making decisions today about an uncertain market in ten years’ time. That’s why we’re calling on the government to
urgently provide clarity, particularly in the off- grid space, where there’s additional challenges because of the greater barriers to overcome in adopting heat pumps. In many situations, a boiler may offer a better solution and we’ve demonstrated that renewable liquid fuels are a low cost, effective alternative solution for businesses, schools, churches, pubs and village halls. There’s been much talk about disagreements between the Chancellor, focused on economic growth, and the DESNZ secretary prioritising Net Zero. Supporting renewable liquid fuels, as part of a multi technology approach which includes heat pumps, is a win win. It provides clarity for businesses and supports the government’s commitment to cutting emissions. What we need now is for the government to publish its proposed consultation on renewable liquid fuels so we can take the next steps forward with a wider rollout.
26 March 2025
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