Decarbonising heat is the biggest challenge the UK faces in terms of transforming the energy system to meet carbon reduction targets and achieve our clean growth ambitions.

Energy Systems Catapult delivered the UK’s largest smart, consumer-focused project aimed at overcoming the barriers to the decarbonisation of residential heat – the Smart Systems and Heat (SSH) programme.

Smart Systems and Heat: Phase 2 (SSH2), focused on running consumer trials of smart energy services, exploring new business models and market structures (including interoperability) and developing Local Area Energy Plans with three local authorities.

SSH2 was delivered by Energy Systems Catapult and funded by the Department for Business, Energy and Industrial Strategy.

The Challenge

Heating accounts for 37% of  total UK carbon emissions, with heating for our homes and buildings responsible for around 20%.

To achieve our Net Zero targets, the UK’s 27 million households will need to rapidly adopt new low carbon heat solutions through the 2020s and 2030s.

Attractive solutions will need to meet consumers’ varied needs so that people will want to install them in homes and properties. The transition to low carbon heat will be challenging but the UK supply chain can also benefit from major opportunities for innovation in technologies and business models.

The Project

The SSH programme focused on delivering the UK’s largest smart, consumer-focused project addressing the decarbonisation of residential heat, by building:

• Deep understanding and evidence around consumer needs and how to harness low carbon solutions;
• Key tools and capabilities to help industry, local authorities and policymakers.

SSH phase 2 was funded by the Department for Business, Energy and Industrial Strategy and delivered in partnership with Newcastle City Council, Greater Manchester Combined Authority and Bridgend County Borough Council.

SSH Phase 2 (2017-2020) focused on developing capabilities, tools and insights on:

• Consumer trials of smart energy services – a 100-home trial in our Living Lab investigating how consumers use heat and testing their interest in buying ‘heat as a service’.
• Market transformation (new business models and market structures) – looking at new business models for energy services, the importance of interoperability and consumer protection, and the policy and regulatory context to enable this.
• Local Area Energy Planning – taking the local energy system modelling work from SSH1 and developing targeted, specific projects that demonstrate the ideas in practice, including Smart Energy Plans in the three local areas.

Key points

1. Consumer trials of smart energy services

SSH2 trials confirmed that smart energy services enabled by digital controls can transform mainstream consumers’ experience and control of heating at home, and thus better enable them to adopt lower carbon solutions.

Usage data can reveal consumers’ preferences and underpin improved design of low carbon solutions. Better design, integration and attractive propositions can address key barriers to the uptake of low carbon heating solutions and drive a stronger consumer pull for them:

• Around 50% of Living Lab households elected to trial Heat as a Service;
• 78% of Living Lab households confirmed that smart heating controls improved or maintained comfort levels (eg. 56% improved, 22% maintained and 22% worse).
• 85% of Living Lab households trialling Heat as a Service were open to switching to low carbon heating when it came time to replace their boiler – compared to around a third of the general population – as long as current levels of comfort and cost could be guaranteed.
• Trials confirmed the complexity, cost and challenge of building real understanding of the home environment, consumer needs and behaviour; but the trial experience equally demonstrated the value and insight generated by testing new propositions and technologies in mainstream consumers’ homes.
• This suggests that the creation of a large-scale trial environment in mainstream consumers’ homes will be a major national asset both for innovators and business in the UK supply chain, and to inform future UK heat decarbonisation strategy.

2. Local Area Energy Planning

Local area energy planning could be a key tool to enable the UKs transition to a low carbon future, by enabling local government to identify the most promising, cost effective options for decarbonisation whilst highlighting where investment is needed.

• Local area energy planning can build on the insight and understanding gained from whole systems analysis and modelling applied at a local area level.
• Developing actionable Smart Energy Plans like those developed under SSH2 helps local authorities to define a concrete agenda for decarbonisation, aligned with the specific local infrastructure requirements, socio-economic priorities (e.g. job creation, fuel poverty, etc.) and emission reduction targets. Three Smart Energy Plans developed for Newcastle, Bridgend and Greater Manchester are available on our website.
• The experience in working with three local authorities (Newcastle, Bridgend and Bury in Great Manchester) has shown the value of planning at a local level to identify the most cost-effective mix of low carbon choices tailored to local circumstances.

3. Market transformation (new business models and market structures)

Digitalisation of home energy can enable radical new ‘smart energy service’ business models. These could combine deep and differentiated learning about consumer needs with smart and targeted control. Smart controls coupled with data analytics can reveal the varied detail of consumer preferences and building requirements, enabling better outcomes for households and for the wider energy system. This includes greater system flexibility, better management of peaks in the power sector and cost-effective decarbonisation.

• Smart energy service business models can also align incentives throughout energy product and service supply chains, to improve integration and deliver better consumer experience. The way that service propositions are presented to consumers, and their early experience with them, is crucial in building demand for smart energy services that can enable low carbon solutions.
• Ensuring the interoperability of controls, devices and interfaces will be vital to support consumer choice and competition by reducing the risk of lock in to proprietary platforms. The example of other industries suggests some form of industry standards or regulation may be needed to unleash the full potential of a digitalised energy systems.
• An outcome-based decarbonisation standard or obligation on future retailers or home energy service providers could incentivise the market to deliver tailored and integrated solutions that work for consumers, localities and the broader energy system. There is a strong case for further detailed exploration and trialling of policy options.

Events

SSH2 hosted four events to disseminate the findings with local partners in Manchester, Newcastle and Bridgend; with a policy-focused event held in London, including a keynote speech from Minister of State for Energy and Clean Growth the Rt Hon Claire Perry MP.