Energy software company PassivSystems has called on the government to bring in a Regulated Asset Base (RAB) model to help finance low carbon heat.
In a blog written by the company’s CEO and founder Colin Calder, he states that it is “very evident” that equipping homes to become low carbon is dependent on government intervention kickstarting the process and reducing supply chain costs, capturing the value of flexibility and digitalisation.
Given this, the company has called on the government and industry to consider adopting RAB,to help finance the deployment of low carbon heat. This would be mean an infrastructure investment under a government administered scheme to build momentum.
PassivSystems suggests supporting hybrid heating systems – as there is yet to be a long-term decision on the role of hydrogen – to respond to the Committee on Climate Change’s point that there is an immediate need for decarbonisation of heating.
The model requires the government to accept that more than 5 million heat pumps are a justified national infrastructure investment, with RAB allowing it to then identify and target the most vulnerable and fuel poor as the primary beneficiaries.
A RAB model is the cheapest and easiest way to support the rollout, the blog argues, and would support a nationwide market that will allow economies of scale to be realised allowing the model to taper off in time. Through supply chain efficiencies and value creation from the utilisation of the infrastructure, the scheme should become self-funding.
This scheme would work by Ofgem setting quoting parameters, and tendering out chunks of the works. Trades can then respond to the quotes and the winners can send details to DNOs and order heat pumps from UK manufacturers. These can then be installed, and academies around the country will need to set up or adapt training programmes, in partnership with industry to ensure the workforce is available.
Once the DNO has signed of on the work, the government can send the trades the money on invoice, and they then in turn pay the suppliers. As such, PassivSystems says there is no risk to either the government or Ofgem, which will need to set up a specification sheet for quotes and oversee the rollout.
The RAB model has been used for other aspects of the energy sector, and notably was proposed by the Department for Business, Energy and Industrial Strategy to aid the nuclear industry in 2019.
PassivSystems has been involved in a number of low carbon heating projects, including the 4D Heat project which was launched in May. Together with National Grid Electricity System Operator, Scottish and Southern Electricity Networks and a number of other partners, the project is exploring the potential of using surplus wind power to heat houses.