Comment
In review: The proposed Future Homes Standard
The consultation on the Future Homes and Buildings Standards[1] was launched just before Christmas. Our Sustainability and ESG team have now digested it thoroughly and below provide a review of the Future Homes Standard (FHS). Watch this space for our review of the Future Buildings Standard.
The FHS at a glance
Overall, the broad method will be the same as previously. Buildings will have to meet targets set by a notional building. This is a building with standard insulations, heating system, controls, solar power, etc. The proposed building must match or exceed its performance in terms of energy efficiency and CO2 emissions, allowing variation in how that is achieved. The notional building is normally a reasonable estimate of the standard most builders use.
Most of the consultation content is positive, this includes:
- the requirement for heat pumps,
- updates to the carbon emission factors,
- discussion on ramping up quality control,
- all-electric change to ensure homes are future ready, and
- a switch to software that can consider smart energy technologies and methods.
However, there will be controversy about there being no improvement in fabric standards and there does not seem to be a clear plan to use variable energy prices and emission factors in the software for smart energy. Also, there is a lack of preference for one of the options proposed; it would be good to have clarity on what the Government favours.
We explore the content in more detail below.
Two options
The consultation offers two options, the first includes solar power, mechanical extract ventilation and a slightly higher air tightness standard. The cost difference is substantial, the higher spec. is around £6k more for a three bed-semi than current regulations, whilst the lower spec. is only £1k more. Strangely the Government offers no preference, making it difficult to advise clients or be confident with cost projections.
Fabric standards
The fabric standards are interesting, particularly for what they say about our perception of how the retrofit market will work and the move away from the fabric-first mantra.
The fabric standards proposed are identical in both options, only differing in air permeability. They are unchanged from the current regulations and are nowhere near as high as suggested in 2021, when they indicated a standard for the Future Homes Standard. For example, in 2021 the suggestion was wall U-values of 0.15W.m2.K and 0.8 for windows. In the consultation, that is now 0.18 and 1.2; quite a difference. We think this will be controversial with some responders.
The reason given for the lower spec. in the consultation is that increasing fabric standards have ever smaller impact and significantly increase cost. We agree; the fabric standards proposed are reasonable for a mild climate like ours. What is increasingly important is not how much energy you use, but when you use it, (see smart energy management below).
We believe they could be more ambitious on the air permeability, partly because it shouldn’t add much cost, and partly because it is a reasonable proxy for construction standards more generally. There is also discussion around post-occupancy evaluation being used to test homes. Housebuilders who allow it and pass would be allowed to use a Future Homes Standard badge. We like the idea.
One area where there has been significant lobbying is the inclusion of embodied carbon in Building Regulations. We’re not convinced Building Regs. is the place, but it is a significant issue. If you look at lifetime CO2 emissions from a new house, about 80% will be from the embodied carbon. That will reduce over time, but slowly. There is confirmation the Government are looking at the issue separately, so it looks like something policy/regulatory will be coming.
Heating systems
The biggest change for most of us is that gas boilers will be effectively banned and heat pumps required. Whilst domestic heat pump installations have been growing in the UK, it has still been in the tens of thousands a year. This is going to be a game changer for the supply chain, with the new build market of around 200,000 homes a year added to the market.
The market and supply chain has been developing on this and there is good awareness of what is required.
There has been much written about the impact of heat pumps and electric vehicle chargers on grid connections.
There is still a standard analysis that this will increase peak demand hugely, but our analysis suggests this is overblown. Although it seems incredible to say with all that extra electricity being used, the evidence is increasingly clear that there is only a small increase in peak demand over traditional homes with a gas boiler. We have been working on the evidence around this and will have more to say, but we expect it to make a radical difference to the perceived challenge of all-electric homes with EV chargers.
Heat networks
There is a growing realisation that heat networks will play a smaller role in the future of heating than has been suggested. Most current heat networks operate using gas CHP engines and gas boilers. These are so high carbon that they couldn’t have complied even with the current Building Regulations, but the Government gave them a special allowance. In the new proposals any heat network would have to be a heat pump system to comply or be an existing network that has had equivalent heat pumps added. This is a great improvement and will eliminate the situation where planning policy is forcing new development to connect to high carbon heat networks, rather than use individual low carbon heat pumps. It will be interesting to see how the Greater London Authority respond; they have been the most insistent on developments connecting to heat networks.
On the same issue, the heat network zoning consultation for England has just been released . In the impact assessment there is an estimation that the amount of heating and hot water that will be better on a heat network than on individual/communal heat pumps is 11%, rather than the 18% or 20% often quoted. For Great Britain, that probably means it is less than 10%. That means 90%+ of building heating and hot water will come from individual or communal heat pumps in the long term. We need to ensure the policy and investment is focused on that.
Solar
One big area of uncertainty is the need for solar power. The main difference between the two options proposed is that one has solar and one doesn’t. From the perspective of CO2 emissions, solar does make relatively little difference. Because the electrical grid has become cleaner and will continue to do so, the electricity rooftop solar offsets is increasingly low carbon. From the Government perspective, providing the homes are all-electric, they are future ready.
From the perspective of running costs, however, solar will make a big difference. The 3kWp type system that would be included on a three bed-semi will save the residents around £500 a year, even when electricity prices drop back to normal rate. That will be a halving of their bills.
The challenge is that these systems will also add around £3k to the price of building a house on what is already a significant increase in build cost.
It will be interesting to see how the responses go. In the end, we can’t see how the FHS cannot include solar, especially because the current Building Regulations do include solar. Right or wrong, it would look like a backward step. Imagine two houses across the road from each other, where the one with the solar was the older one.
Carbon emission factors
Most fuels other than electricity have similar emission factors to the previous system, but it is only really going to be electricity that matters in future development and that has changed a lot. It has gone from 0.136kgCO2 per kWh to 0.086, nearly halving. In some senses this will make little difference, because the notional building will also be using low carbon electricity, so the target will get more challenging at the same rate as the one being developed reduces emissions. One area where it will make a significant difference is around carbon offset payments. For areas like London, Greater Manchester and others with carbon offset payment schemes it will mean the amount to be paid has just halved.
There are variables in how these are calculated, but in many cases it will mean an offset, even if required, will be fairly small.
The smart energy mystery
Changing when you use energy and storing energy in batteries and hot water tanks to use later is the essence of home smart energy management. It is hard to overstate how significant this is. As our electrical supply comes increasingly from intermittent or inflexible sources it will become increasingly important that our homes become flexible to reduce the cost of back up generation and grid reinforcement. That intermittent generation issue also means the carbon intensity of electricity and the cost of it varies a lot, even over the course of a day.
It is already common for consumers to have variable energy tariffs, paying very different amounts for energy even over the course of a day in a normal home with a gas boiler and no electric vehicle charging. In a FHS home, with a heat pump and EV charging, overall electrical demand will be around 3 times what it is currently. In this situation, it would be prudent to have a variable electricity tariff to heat your hot water tank and charge your car cheaply. You will even be able to use your EV to power the house at times when electricity is expensive. This is how we avoid peak demand increasing.
On this subject, the Government are consulting about a software system to replace the current SAP (Standard Assessment Procedure). Their proposal is for a new software system called the HEM (Home Energy Model). The exciting thing about this new method is that it is half-hourly. That is, it considers energy demand and supply every half an hour. This contrasts with SAP, which measured everything monthly. The change means that the new software can work out what the benefit is if you heat your hot water tank at 3am rather than 7am, which SAP couldn’t do. The benefits will be lower bills, but also lower CO2 emissions, because energy tends to be cheap when it is low carbon.
We are really pleased to see this change in the software, as in the future when we use energy will be as important as how much. What is worrying from the consultation is that how the new software will be used is still very vague; and the implications of what we can see is that the default method will use static energy prices and static carbon emission factors, which are unrealistic. If the Government sticks with this, it will negate a lot of the benefit of the half-hourly system.
Summary
Overall, most of what is in the consultation is positive; the requirement for heat pumps, updates to the carbon emission factors and discussion on ramping up quality control. The all-electric change is the fundamental one needed to ensure homes are future ready. The switch to software that can consider smart energy technologies and methods is great.
As we have said before, this change could bring a real cachet to new homes. These new homes won’t need retrofitting and will benefit from variable energy tariffs and long-term electricity price reductions. Up to now, there has been concern in the industry about whether customers would resist heat pumps, (a bit like solar before), but we may be moving fast to a world where the public mark down homes without one. The post-2025 housing stock could be higher value than homes built before.
Our main concerns are that there does not seem to be a clear plan to use variable energy prices and emission factors in the software for smart energy (this is a consultation, so it may change). The other concern is around the lack of preference for one of the options proposed; it would be good to have clarity on what the Government favours.
Watch this space for our review of the Future Buildings Standard and please contact Barny Evans if you would like to discuss either the FHS or FBS.
12 January 2024
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