January 25 2021:
Stuart Elmes, Viridian Solar.
It may come as a shock to some readers of this blog to learn that solar is not universally and unconditionally loved and appreciated. When the benefits of solar are this obvious we ask ourselves, why would any new homes be built without solar?
With the exception of around 20,000 self-builders that pursue their own personal Grand Designs each year, the UK new housing market is 90% delivered by commercial organisations building homes to sell. The person building the house is not the same person that will move into it and pay for its energy bills.
Developers only add things to the homes they build that are either absolutely necessary (for example walls to hold up the roof), or that they believe will increase the sales price by more than the cost. Although awareness of climate change and energy efficiency has increased among the public in recent years, the energy rating of homes still comes well below considerations such as how good the local school is and whether the worktops in the kitchen are made of sparkly marble.
I believe that it will not be too long before building a new home without solar will be seen to be as quaint and old-fashioned as putting a house on the market with an outside toilet, but in the meantime this ‘market failure’ to deliver low energy buildings for customers has created the need for regulation. Building Regulations are intended to do just this job – enforcing a minimum level of energy efficiency on new homes.
The Current State of Play
England and Wales has seen a lost decade of progress with the cancellation of the Zero Carbon homes policy, an unambitious update in 2015 and complete inaction since. Regulated carbon emissions from a home built in 2020 are only 29% below that of the same home built in 2006. Housebuilders can easily achieve the energy efficiency requirements in a gas boiler heated home with modest improvements to fabric (thermal insulation).
In 2015 the Scottish Government brought in new building regulations that tightened the required energy performance well beyond that in England – a 45% reduction from 2006. This level is difficult to achieve with a gas boiler and fabric measures alone. So housebuilders either added PV and carried on with gas boilers, or replaced the boiler with a heat pump.
Four years later, Solar Energy Scotland was estimating that 80-90% of all new homes in Scotland were being built with solar PV panels.
By contrast, the only bright spots for the solar industry in new build in England has been provided by Local Authorities using their planning powers under the Planning and Energy Act 2008 – normally to require a percentage of the energy demand of a new development to come from renewable energy. Despite a Solar Energy UK report highlighting the good work of many Local Authorities, we estimate that only around 10% of homes built in England have solar PV as a result of such planning policies.
Future Homes Standard
Step forward the government’s “Future Homes Standard”, proposing a road map for building regulations that will result in homes in England being built to, yep, you guessed it, “World Leading” standards of energy efficiency. Details were published this week following a much-delayed consultation process. Here are the headlines:
The changes will be made in two steps. New 2021 Building Regulations Part L will be written into law in the Autumn and will come into force from June 2022, followed by a second update to Part L to deliver the Future Homes standard with a target that this is in force by 2025. This may be coupled to separate legislation that prevents the connection of new developments to the gas network, which the Energy White Paper published in December proposed.
Changes to the Targets
A new requirement based on the Primary Energy consumption of the house will become the main target for designers. The main reason for this change is that as the grid decarbonises, a target based on carbon emissions can be achieved by building a house without any glass in the windows but heating it with zero carbon electricity from the grid.
The Carbon Emissions target remains, but is relegated to become a secondary target.
Proposals to ditch the Fabric Energy Efficiency target in favour of a Householder Affordability target have been dropped as a result of the consultation, with many respondents concerned that it could result in homes being built with lower levels of insulation.
These changes, particularly the move towards Primary Energy was argued for by Solar Energy UK. This should be welcomed by the solar industry, which faced a situation where the benefit from on-site generation of heat and electricity would reduce as the carbon intensity of the grid falls.
New Performance Levels
For the 2021 Part L changes, two options were consulted upon. Option 1 was for a specification that resulted in a 20% reduction in Carbon Emissions compared to Part L 2015, whereas Option 2 was for a 31% reduction.
With financial assistance from members, Solar Energy UK commissioned in-depth modelling of the two options by consultancy Think Three. The resulting report concluded that developers could meet option 1 with modest changes to building fabric plus a combi boiler with flue gas heat recovery. By contrast Option 2 would absolutely need PV if a gas boiler was retained for heating but could also be reached changing over to a heat pump which would then not need solar PV.
Our modelling also suggested that gas plus PV resulted in significantly lower energy bills for residents than heat pump alone. Government seems to agree – stating in the consultation response that annual bills for regulated energy in a gas plus PV solution would cost £168/year whereas a heat pump would cost the resident £369 per year.
Government has decided to go for Option 2, which is excellent news for the solar PV industry.
For the 2025 standards the government will be setting at a level that mandates electrical heating and expects this to be delivered by heat pumps.
For all previous versions of the Building Regulations, take up was a lengthy process because they only applied to whole development sites. Developers rush to submit planning applications in the run up to new regulations coming into force, banking large numbers of homes to be built under the old regulations and large sites of many hundreds of homes are built out over many years.
The 2015 Scottish building regulations change took around four years to feed through to a point where all new homes were being built to new standards.
The 2021 regulations will instead apply on a house by house basis. Any development that was started before the new regulations come into force has 12 months to build to the old standard before new plots have to move over to the new regulations, so the ramp up in demand for solar could be much quicker than we experienced in Scotland after 2015.
What Does This Mean for Solar?
It’s not possible to say that these regulations will definitely result in solar on all new homes in England, because the standards are technology-neutral. Although the defined specification includes solar, the developer is free to try to find alternative specifications so long as they result in a house that equals or exceeds the same house if it were built to the specification defined in the regulations – the so-called “Notional House”.
Technical departments at housebuilders will be busy now exploring different packages of measures that achieve the new regulations at minimum cost. It’s a ferociously complex optimisation calculation, but they will eventually settle on their favoured specification to meet the new regulations.
I’m going to stick my neck out and predict that there will be solar on almost all new homes in England under the new regulations.
My reasoning is based on experience from the introduction of the 2015 regulations in Scotland.
- Supply Chain. An immature heat pump supply chain could not scale to meet demand caused by the regulations. Constraints fed through into installation costs. The consultation response acknowledges that there is much work to do before heat pumps are ready for the big time in 2025. By contrast subcontractors from solar, roofing and electrical backgrounds scaled up to meet the increased demand with comparative ease.
- Customer Acceptance. House-buyers are familiar with responsive heating systems that run intermittently at higher temperature. Housebuilders found that they were having to spend time convincing people that their heat pump heating system was actually working. Solar PV has proven out to be fit and forget technology.
- Running Costs. Unless installed with PV alongside, heat pump technology will increase heating costs compared to boiler plus PV, by nearly double according to the governments consultation response. Housebuilders will be wary of complaints from customers about high energy bills.
- Capital Costs. The government reckons that a heat pump package has a lower capital cost than gas boiler plus PV. However, the costs that were assumed for PV in the Impact Assessment were already out of date and will be further out of date by 2022.
Every major housebuilder that we have discussed the new regulations with thinks that the answer to the question posed by the 2021 regulations is gas plus a PV solar system.
I’m going to go further and predict that the size of PV system installed in England will be higher than we currently see in Scotland. A comparison of the specifications shows that the solar on the notional house is higher in England than Scotland (2.6kWp vs 0.8kWp for an 85m2 house) plus the English housebuilders have less scope to exceed in insulation, which is tighter or equivalent to Scotland in almost all building elements.
With all this in mind, it’s easy to make the case that the market for solar PV on new homes in England will grow to around 300MWp per year by 2024.
Bring it on!