Neil Kitching on Green Heat, Net Zero Goals, and Lowering Energy Costs

So there's been this sea change. Scotland now has 100% equivalent renewable electricity, and you know, that's been a massive change in 10 years, one of the fastest changes in any grid anywhere in the world.

Hello and welcome to Rethink What Matters. The podcast dedicated to aligning the economy with the ecology and everyone for improved business performance, stronger families, and a greener, cooler planet. And today I'm joined by Neil Kitchen of the Scottish Enterprise and we're going to be talking about green heat. Neil is the energy specialist for green heat and water technologies supporting a low carbon economy in Scotland, also supporting Scottish companies to take advantage of opportunities of the green heat revolution. Separate to that, separate to the work with the Scottish Enterprise, Neil is the author of Carbon Choices on the common sense solutions to our climate and nature crises. Welcome, Neil.

Thank you, Paul. That's a comprehensive introduction.

Okay, great, great.

Yes, so I work for Scottish Enterprise. That's an economic development agency supporting the Scottish government policy, and our role is to go out and speak to companies and help them with innovation investment and internationalisation, like helping them with exports. So we're now encouraging all companies that we give a grant to, to either have a net zero plan or be working towards a net zero plan. And so that's now a condition of awarding a grant to a company, and if they don't have a net zero plan, we will work with them and support them in that journey to create one. So it's a really strong move forward.

Okay, is there— are there any examples you could give us, some, some, something that you'd be looking for? I mean, you could have a plan, you can say I'm doing something, but is there something you might be looking for specifically that shows they're actually serious about their net zero plans?

So the first year, I guess a lot of it's based on trust. We will ask the company, do you have a net zero plan? Are you working towards a net zero plan? Of course, it's very easy for them to say, oh yes, of course we're working towards a net zero plan, and we might accept that in the first year. But obviously, if they come back to us and ask for a grant again and they've said they're working towards a net zero plan, we would be asking to see a copy of it before giving any future grants. So this is a journey, it's something we'll ramp up and tighten over time.

Right, you know, what was your journey to working for Scottish Enterprise and, you know, getting involved in green heat? Have you always been interested in green heat?

I don't think I knew what green heat was until about 8 years ago. So, yes, I studied geography at university. I then, believe it or not, trained to be an accountant in London and worked as an accountant for 20 years in a career which was all right, but I didn't feel terribly fulfilled. So I then made a big step change to Scottish Enterprise, working in the sustainable development policy team. And that's where I really learned all about sustainability and all these different technologies. So a really good place to be. And then I moved into the energy team and been working on green heat for the last few years. So yes, a bit of a change.

I think you've been there for about 15 years or so.

That's right, yes.

And how have you, over those 15 years, what's been your impression of the importance or the interest in green heat over those 15 years? Have you seen a significant change in the last few years?

It's been a massive change. So when I started working in sustainability, um, the big thing was how do we change our electricity grid? Because at the time it was, it was from coal and the electricity was quite dirty. And gas, as I mentioned earlier, was deemed to be quite clean relatively. So nobody talked about heating because they all thought heating is done by gas and that's okay. So there's been a sea change. Scotland now has 100% equivalent renewable electricity, and you know, that's been a massive change in 10 years, one of the fastest changes in any grid anywhere in the world. Okay. But now we're realizing that that's not enough. We've got to tackle transport, and that's probably being done primarily through electrification, electric cars. But the big elephant in the room is heat, where 85% of our homes are still heated by fossil gas, and that's got to change.

Could you tell us a little bit more about what green heat means to you?

Green heat— so that's any heat for heating our homes, heating our businesses, that doesn't involve emitting carbon emissions to the atmosphere. So there's quite a few different types of green heat. The most obvious are things like heat pumps, also heat networks and biomass heating. So there's a number of different technologies, but basically it's moving away from burning natural gas, or what I call fossil gas, and also from burning fuel oil and other things that are damaging to the atmosphere.

So it's also solar panels and it's renewables, it's wind as well?

In terms of green heat, it'd be solar thermal panels for heating hot water. We don't include solar PV and wind, which is producing electricity. We don't include that in our definition of green heat, but obviously it's all part of our green, low-carbon future. Okay.

Let me just understand that a little bit more then. So why would solar PV and wind not be a part of green heat?

So we were looking at the way we heat our buildings, not the way we generate our electricity. Okay, so that's the, that's the distinction here.

That's an important distinction, right?

And it's important because we use more energy to heat our buildings than we use generating and using electricity. So heat's a kind of hidden emissions that people don't seem to be too aware of, but it's bigger than electricity. So just by decarbonizing the electricity grid and creating 100% renewable or low carbon electricity That's not going to solve our climate problem. We also need to solve our transport emissions, our agriculture, and the way we heat our buildings.

Should we talk a little bit about heat pumps and the Scottish Enterprise's view of heat pumps?

Yes, I think the first thing to say about heat pumps is they're not a new technology. They were invented over 100 years ago. Most of us have a heat pump of sorts in our homes already because fridges are basically a heat pump. Some people say it's a heat pump in reverse, but it's the same technology. And then in countries like Norway and Sweden and now France, heat pumps are being rolled out at scale. And yet in Britain, we seem to be laggards, and we still seem to think that heat pumps are some strange new novel technology that's maybe a bit strange.

Now, you're right, you're right about that. It just, it does come across like that.

Yeah. So the problem in Britain is— I guess it is down to policy and just an accident of geography. So the UK benefited from access to fairly cheap natural gas from the North Sea. And as a result, we relied on that for decades. And it kind of enabled us to build houses to a fairly poor energy efficiency standard, because it was still fairly cheap to heat them. And we got lulled into that. And that's very different from countries like Denmark. So they went through the oil crisis, same as we did in the 1970s.

Right.

We then developed the North Sea oil and North Sea gas. The Danes didn't have access to that. And so they went down the heat network route. And they've been busy installing heat networks their cities, towns, and even villages from the 1970s onwards. And we just didn't do anything like that here.

Right, right, right. And so is Scotland able to, you know, operate differently to England, if you like, in the way that it sets these— I think that one of the challenges is this spark gap, isn't it? The spark spread, the difference between the cost of electricity and the cost of gas. And that's the challenge that the heat pumps face. Is the pricing set differently in Scotland than it is to England?

That's a great question. It's a complicated landscape. So most heating issues are devolved. So the Scottish government has a lot of authority and powers around, say, creating heat networks and giving subsidies and grants and creating a good business environment for heat pumps and heat networks. But there's a couple of big things that are, that are across the UK. So one is running the gas pipeline, the gas grid, that's all UK. And also the price of electricity and gas is, and taxes on it are all from central government. So it's a bit of a complicated picture.

Right.

But you mentioned the spark spread. That is fundamental. And just to explain what that means, that's the difference in price between gas and electricity. And in Britain, for a number of years, the gas, as I mentioned earlier, has been very cheap and electricity has been reasonably expensive and made even more expensive by Treasury taxes. So a lot of environmental taxes were put on electricity but not on gas. And I think that stems from the time when, if you go back 10 years, when we were burning coal for electricity, electricity was actually higher carbon than gas was, and gas was considered at that time to be relatively good and relatively low carbon. But that situation is completely reversed now. So the gas is stayed at the same carbon intensity, but the intensity of the electricity grid has plummeted through all the new renewables and nuclear. And so it's an anomaly that we tax electricity and we barely tax gas.

I know that I think in the UK there is— they're looking at that. I think it's called REMA, the Review of Electricity and Market Arrangements. And I believe that this is to be decided this year and come into force October or November '24 in England anyway, where hopefully this spark spread will be addressed.

Hopefully. I think that would apply across the whole of the United Kingdom.

Okay.

But if you compare that with countries like Norway that I mentioned earlier and France, in those countries, electricity is relatively cheap. So Norway from hydropower and France from nuclear power. And in countries like Norway, they don't have such an extensive gas network. So the spark spread there is much lower. And there's a direct correlation between the spark spread and the deployment of heat pumps.

I know that you yourself have installed a heat pump. As well.

Yes, so I was looking at my carbon footprint and the biggest thing that I can affect is the energy use at home. And so I ordered a heat pump. I was helped by Home Energy Scotland with advice and then with a grant and also a loan.

So let me just come in there. Sorry, just to interrupt. Is that— so that's something which anybody in Scotland Scotland can apply for then?

Any householder, that's right. Yeah, so there's a £7,500 grant. In England and Wales, there's a boiler upgrade scheme that would offer a £5,000 grant for heat pumps as well. Okay. So I went through the process, got 3 quotes from installers, and mine was a bit complicated because I wanted solar panels and a battery as well.

Right. And air source or ground source?

An air source heat pump. So it's a box in the wall outside the house.

Yeah, okay. And tell us more. I mean, how did it go? How's it going? Is it all completed now?

It's all completed. It was installed in November. We were immediately plunged into a cold snap last December, if you remember. Yeah. But our house was kept warm. Even by a 7-kilowatt output heat pump, which, you know, doesn't sound very much, but that's enough because you run it for more hours a day than you would a gas boiler. Right. And as I said earlier, the price of running a heat pump versus gas would be fairly comparable. But there's 2 or 3 tricks that you can employ with heat pumps, which brings the price crashing down. And I estimate that my energy bill now is half of what it was before. So maybe £2,500 before, which was in line with the national average under the price cap. And this year, my estimate is my total energy bill— that's electricity for heating, lighting, hot water, and appliances— will be £1,200. So I could perhaps explain a little bit why that is, because that might surprise your listeners.

Yeah, please do. Did you say it was half the price? Is that half the price against gas as it was before?

What I'm saying is my total energy bill, electricity and gas, has halved. I no longer have a gas bill because the gas has been disconnected from our house.

Alright, okay. So please, yeah, tell us the tricks.

So really, 3 tricks. One, with electricity you can move to cheaper overnight tariffs. So companies like Octopus. So the first thing I did was try to fire up the heat pump as much as possible during the cheap rates and then try and not use it during the expensive rates. So that reduced the price a bit. But also having the solar panels that obviously provides some free electricity to the house. So that helps a bit. But I think even more importantly is having the battery. So in the summer, the battery is charged up for free from the solar panels, and then that's used to run our electricity in the evening. So that works really well. But in the winter, and this is a bit that people might not be familiar with, we managed to charge the battery overnight at cheap rates. So come the morning, the battery is fully charged, and then that will help to run the heat pump during the day, producing most of the electricity required for the heat pump. So instead of paying 35 pence a unit for all my electricity for the heat pump, I'm paying 20 pence a unit. And so that's a big saving. And so you put all these things in combination in a rather complicated way, and my energy bill has halved. Okay. And that's a really important message.

That's a very important message. It's a great case study to have on this podcast. And I think we're going to be building on this, you know, in other podcasts as well. So that's great. Thanks very much for sharing that, Neil. So let me just go back a moment though. So you are taking some electricity off the grid still, obviously, to power the pump. You've got the, the, you've got the solar panel charging the battery, but, um, there are— but the battery, that Does that drive the pump as well?

So the battery can be used to provide electricity to the house, which includes running the heat pump, running your showers, running your oven, your lights.

Okay, the whole thing. Sometimes you've got to, you know, you have a car battery in your head. How big is this battery?

It's 15 kilowatt hours capacity. It's 3 batteries stacked on each other. In the garage are quite discreet.

Okay, and aesthetically, how pleasing or otherwise, if I may be so bold to ask, is your heat pump?

So I think it looks quite good. It's a box, it's a meter and a half wide, a meter and a half tall, and with a fan on it. Yeah, and it's at the back of our house, nobody would see it from the house. But yeah, to me it's not an issue. It's complete— it's almost completely quiet. It makes about the same noise as a fridge.

So you can easily see how they could be on the side of every house. I mean, it's not a big deal.

Most houses could have a heat pump. I think one issue is you really need to have a hot water tank. And so some modern houses have been built without hot water tanks, so you need to find space for that. That could be in your house, it could It could be in your garage.

Right, right, right. Could it be next to the heat pump?

It could be next to the heat pump. Normally it'd be indoors because you don't want it to freeze.

Yeah, yeah, extra insulation required. Okay, so, um, oh, that's a really great case study. It's really good to hear that, hear, you know, hear that's working for you. And you had the grants, so you had a grant. You mentioned 3 things: a grant, And there was something else, an incentive and a third thing?

I got a grant and also interest-free loans. Okay. I think that was the two things.

Those are two things, grant and interest-free loans, brilliant. And overall then, the capital expenditure, was it reasonable or, you know, are you going to get your money back? I know it's cheaper for you now, I mean, what was the— does the business case stack up? I mean, environmentally it's obviously a no-brainer.

I think the first thing to say is yes, it's, um, it's all about cutting your carbon emissions. Yeah, you know, there's no point in us all burning gas and, uh, frying the planet. So yeah, to some extent, to push back on the question, does it stack up financially? Right, we, we have to do this. But obviously that's a bit of a dream world. Everybody Lives in the real world where they are interested in money. Without the grants, no, it wouldn't stack up at present for retrofitting a house because you're having to do quite a bit of work around the house. With the grants, I think it will pay back, but it's going to take, you know, 8 to 10 years would be my estimate. But yeah, it's got a bit complicated because of the heat pump, the solar, and the battery, and they all intermingle with each other, so it's quite hard to single out What's cost-effective, what isn't.

Okay, but it's a great system, great setup, really is.

It's a great setup, um, and you know, businesses can install heat pumps on their premises as well, and you know, that's something through work that we're trying to encourage.

Yeah, businesses, absolutely. I mean, you know, a solar panel with a battery and a heat pump just seems Like a brilliant, brilliant—

when you drive around, you see so many businesses with large roofs, warehouses, and you just think ideal for, for solar panels.

Yes, yeah, yeah, yeah, we've got, we've got the technology, haven't we? You know, we've got the solution, we've just got to, we've just got to put all the bits of the puzzle together. And part of that is going to be policy and incentives and grants just to get people over the hump of of getting it installed. And then obviously the more people that take it up, the cheaper it will become.

So the Scottish government's got strong policy in this area. So from 2024, the plan is to ban the installation of new gas boilers in new buildings, that's domestic and commercial buildings. And so developers will then have the choice of low carbon technologies, which is likely to be heat pumps. Or heat networks in the more built-up areas. So there's changes coming quite quickly. I believe England and Wales are likely to do the same a year later. Okay. And then there's tentative proposals to ban the replacement of gas boilers in existing homes, perhaps from 2030 onwards, but, but that legislation has not yet been agreed. But the You can see the direction of travel.

Yeah, absolutely fantastic. Let's talk about heat networks. I don't think they get talked a lot— people don't tend to talk about heat networks that often, I don't think, you know, because it's more of a community-oriented solution, isn't it? But I think it is something which is again invaluable because it just works better when more people are doing this together. So could you explain please what a heat network is?

So a heat network is a system of insulated pipes that run under the streets into individual houses to provide your hot water, and then heat is supplied from a central source. So if you go to Copenhagen, because I've visited there and been shown how it all works there, okay, they have one integrated network covering the entire city. 98% of the population, the city of I'm not sure what it is, 1.5, 2 million people. It's very impressive. It's been built out over the last 30, 40 years. And initially it was capturing the waste heat from the coal power stations and also from energy from waste incinerators.

Right.

And then gradually these coal power stations have been closed down and they're now providing the heat still from energy from waste but also from standalone biomass incinerators, and there's some solar thermal input to it and some heat pumps. So they're diversifying the heat sources into that system. So that's a very impressive setup. They've decarbonised their heat across the entire city.

So this is like just delivering hot water like cold water gets delivered then?

It is, but it's in large insulated pipes, quite specialist technology.

Yeah, but you turn your tap on and hot water comes out.

No, you don't turn your tap on because this is feeding into your radiator, so it's all in a sealed system.

So we're not turning a tap on and hot water's coming out because this hot water is obviously feeding radiators, but in theory we could turn the tap on and hot water would come out in a similar way to the cold water.

Um, I think there'd be health and safety issues over that, I would say.

Yeah, I'm not suggesting anybody does this, but it's that kind of idea. This hot water is coming out from the ground, supplied sort of centrally, if you like, obviously of our community network. What a great idea. Didn't the Romans do something like this? I bet they did if we look hard enough.

Um, the Romans did, but on a very small scale and only for a few privileged You know, what a brilliant idea.

What a brilliant idea, really. It's not even rocket science, is it? That this is the sort of thing we do when we need to. You know, once we realize that we haven't got an endless amount of energy, then, you know, we start being sensible about the way we waste it, don't we? So it's a great idea. Do you have any more examples, Neil, of this, of green heat in Scotland?

Yes, so in Scotland, the Scottish government's been very supportive of heat networks. There's grants to help pay some of the capital costs, and I'll just give a few examples because everyone's been a little bit different. So there's one in Stirling near where I live, and that's taking the waste heat from the sewage works, the water wastewater flowing into sewage works is relatively warm. Not warm enough to heat your homes, but it's warmish water that then goes through a heat pump to be boosted up to 70°C to be then put into the heat network. And that makes a heat pump heat network more efficient. So my heat pump at home is taking tap water at 10 to 15 degrees whereas the one at Stirling is taking warmer water, and that makes the whole process more efficient and effective. So that's one example. And then at Queen's Quay in Glasgow, there's a really good example of a large water source heat pump that's taking water from the Clyde. It's tidal there, the River Clyde. And again, that water is warmer, particularly in winter. Than the air. So again, that's more efficient than an air source heat pump.

Okay.

And there's a big energy centre there, and that's then heating houses. There's a nearby college, and the plan is to then take it to the nearby hospital. So big, big plans for expansion there. Another example is at Shawfair on the outskirts of Edinburgh. In that case, it's taking the waste heat energy from waste plants. So it's very like the example I gave in Copenhagen. And a final one is the AMID scheme, again near Glasgow. That's a bit different. It's taking again the sewage water from the Scottish Water sewage plant, and rather than heating it up centrally, it's taking the water that's maybe 15 to 20 degrees pumping it through pipes. This time they don't need to be insulated because it's not 70 degrees, it's 15 to 20 degrees. The water goes into the nearby buildings, and then there's a heat pump in the individual building to heat it up to the required temperature. So that's a different model, and, you know, one that's quite exciting. You know, Scottish Enterprise is out there helping companies think about all these different technologies and solutions.

It's really joining the dots up, isn't it? Where's that waste heat? How can we get it, you know, keep it and put it somewhere useful?

Yes, well, you also got waste heat from data centres, from the London Underground, from supermarkets, you know, the fridges give out an awful lot of waste heat. So there's a lot of sources out there.

Yeah, and how unique is that solution, that, that solution you gave just then to Scotland?

That one I was just talking about is certainly unique in the United Kingdom, and there's only a handful across Europe. So yes, that's new.

What was the name of that one again?

Amids. Amids.

Okay, great. Okay, brilliant. Neil, it's been such a pleasure talking to you, such an insight into the Scottish enterprise and your approach to green heat there. And thanks very much for sharing your time with us.

Thank you, Paul. That was a good conversation. Thank you very much.

Brilliant. Thank you again.