Energy Systems Catapult believes the UK risks missing a major opportunity, right now, to use the public estate to generate clean heat and power generation, offering energy system resilience and a testbed for scaling up the UK’s high potential innovators.
This week, the UK’s Climate Change Committee published its annual assessment of the UK’s progress in reducing emissions, warning that the transition to clean electricity is not happening fast enough.
With the UK having experienced the hottest May on record and dangerous heatwaves throughout June, the need for us to integrate cooling into our future retrofit building strategy is increasingly a priority.
Our public buildings can – and should – play a key role in turning this around. The government needs to improve certainty on policy support and make use not only of the grant funding that’s proved so helpful to date but also take advantage of other funding routes that can help local authorities, the public estate and innovators grasp this most urgent opportunity,
The public estate is large, visible and already connected into the communities that need the energy transition to work for them.
Schools, hospitals, colleges, leisure centres and community assets can do more than just cut their own emissions. They should tactically benefit the local community through the use of solar, clean heat, batteries, and flexibility services that dynamically store and release energy to the grid in a way that makes our local energy systems more resilient.
Unless the right choices are made on a place-by-place basis, the consequences will not be neutral. Our energy system differs across the UK. There are large areas that are constrained and at risk of outages. Public bodies need help understanding their specific risks and by extension their opportunities.
The decision to add generation – whether renewables or replacing existing fossil-fuelled boilers and how they take advantage of flexibility services – should be determined not just by the economics of the technology they have on site or could install but the value it offers to the surrounding area.
The stark truth is we’ll be unable to fully electrify heating and cooling until we reduce the energy price ratio between gas and electricity – known as the spark gap.
The Climate Change Committee continues to make the challenge clear. It recommends that government introduce a comprehensive multi-year programme for the decarbonisation of public sector buildings otherwise we’ll miss our future carbon budgets.
That recommendation needs to be taken as a clear signal for action and increasing levels of support.
The UK public sector manages more than 183,000 properties with a combined value of around £191.5 billion. Public sector buildings account for around nine million tonnes of carbon emissions or 2% of national emissions each year. Government policy continues to aim for a 75% reduction in direct emissions from public sector buildings by 2037, compared with a 2017 baseline.
While the case for action is clear, what we’re missing now is long-term certainty and government commitment.
The Department for Energy Security and Net Zero’s Public Sector Decarbonisation Scheme (PSDS) has demonstrated that when a clear route exists, public bodies do deliver.
Disappointingly, the PSDS, which was created to support green jobs as we came out of COVID restrictions has been stopped. It initially offered £1 billion for bundled projects that removed fossil fuel use through electrification.
Each project had to be delivered at speed whilst the funding was available. Subsequent phases saw a total of £3.7 billion distributed to 1,466 projects after they had demonstrated a carbon cost return.
Great British Energy has made a welcome start, backing rooftop solar for around 200 schools and nearly 200 NHS sites.
The Climate Change Committee has noted that in the last year there’s been little policy development for commercial and public sector buildings. In practice, this means the public-sector route to market is becoming less certain at the exact point when it should be scaling.
The solar opportunity alone shows the scale of what’s possible. Government has said only around 20% of schools and under 10% of hospitals currently have solar panels.
While a 200-school programme is a positive signal, it still reaches less than 1% of the total. The wider UK school estate has been estimated at around 32,000 schools, with a £16.3 billion decarbonisation investment gap and more than £1.7 billion of annual energy spending.
The issue is not a lack of need or viable projects. It’s the strength and continuity of the route to market. This should concern anyone focused on delivery, investor confidence and value for money.
Across the UK, public and public-facing sites contain legacy heating assets whose next investment cycle will shape emissions for years to come.
Our analysis shows that across the public sector there are 309 combined heat and power (CHP) plants, of which approximately three quarters are due for replacement within the next decade – with 70% of them in NHS settings.
As these systems age, decisions on the technologies we replace them with must be based on local needs, not just the lowest short-term capital cost for the site operator. Without that, sites may drift back towards gas boilers and gas CHP even though electrification might be best option for the site and local area.
This is where the government can intervene.
First, the government should build on the existing digital mapping of public buildings and areas of constraint – coupled with known aging plant such as CHP and rooftop solar potential – pinpointing the most advantageous projects for local areas. This would create a pipeline of opportunities for funding innovative projects, giving public bodies, investors and suppliers the confidence they need to plan beyond individual funding rounds.
The GridFlex project has shown the wide variability in energy constraints between locations, the way they need to approach their energy transition and where we are at greatest risk.
Second, funding also needs to evolve and overcome the spark gap otherwise electrification of heat will not be viable.
While government grants still have a role, particularly where projects are complex or early-stage, we must also make better use of energy performance contracting, low-cost public lending, guarantee-backed finance and blended finance options. The important point is not to recreate every previous scheme unchanged. It’s to build what comes next around what we now know works.
Third, it should use the public estate as a route to market for innovation. A public-sector retrofit accelerator, linked to Tier 1 delivery partners and regional programmes, could help trial and scale the innovations the UK will need.
The Climate Change Committee has explicitly highlighted public-sector building decarbonisation as a way to help grow heat pump supply chains. But industry is already warning that uncertainty around public-sector retrofit is putting current and future capability at risk.
When it comes to electrification, one of the barriers the public sector faces is the integration of low-temperature heat pumps with high-temperature heating systems. Organisations such as Kensa are now making this possible thanks to their progress on high-temperature heat pumps.
If demand falls away between policy cycles, the UK does not simply delay carbon savings. It risks losing the very clean tech SMEs, specialist installers, manufacturers and innovators that will be needed later at far greater scale. That also means missing the chance to build the industries, skills and export potential needed for long-term economic growth.
Energy Systems Catapult sees the opportunity through the businesses we support, that promise a more resilient energy system. For example, there are numerous innovations around energy storage from Caldera’s heat batteries to Brill Power’s battery efficiency software.
There are also opportunities to adopt novel approaches to energy system management, for example the proposed P441 modification to the Balancing and Settlement Code will remove barriers to community energy and local energy markets. This includes community solar or wind schemes.
It enables better aggregating of local generation and consumption, helping communities and households to realise greater benefits from locally generated renewable energy. Taking advantage of these changes will require new digital approaches, and we’re already seeing innovators such as GridEdge and UrbanChain offering solutions that focus on flexibility and smart grids.
There are already regions showing how such challenges can be addressed. The West Midlands’ Net Zero Neighbourhoods programme combines retrofit and local low-carbon generation, with areas selected on factors such as fuel poverty, regeneration opportunity, community links and local assets. That kind of systems-led logic should now be applied more widely across the public estate.
Our transition needs to be local and use the opportunity that public sector sites promise to help their surrounding communities have a secure and cheap supply of energy.
The UK has already shown that public sector decarbonisation can deliver. The task now is to stop that momentum narrowing into small, disconnected projects.
If we’re serious about cutting bills, modernising ageing infrastructure, supporting UK innovation, and getting more from public assets, the public sector must be at the heart of the solution – not treated as an afterthought.
It should be reinstated as a strategic national delivery platform.
This guidance was commissioned by the UK government to help public sector bodies and their decarbonisation partners. Discover how you can cut carbon emissions and energy bills with simplicity, speed and at scale.
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