Decarbonising heating - economic impact: report

Appendix C FTT:Heat - Data input and treatment

C.1 Scope of FTT:Heat

The version of FTT:Heat used to analyse decarbonisation of the supply side of heating in Scottish buildings is largely based on FTT:Heat as developed by Dr. Knobloch and operated by Cambridge Econometrics (Knobloch, Mercure and Pollitt, et al. 2017). Whereas the standard model looks solely at domestic buildings, here a distinction was made between non-domestic buildings (combination of public and commercial buildings) and domestic buildings which were separated into flats and houses explicitly.

The spatiotemporal coverage is 32 local authorities that cover all of Scotland and it runs from 2018 (end of historical data, start of simulation) until 2030. FTT:Heat includes 11 heating technologies.

C.2 Data inputs and treatment

Techno-economic data

The supply-side of heat decarbonisation means substituting heating technologies for technologies that do not generate (direct) emissions. Substitution only occurs when consumers consider the alternative renewable technologies as a viable option. Among others, this depends on techno-economic data as represented in Table C.1. Decision-making to substitute technologies depends on upfront investment costs and operational costs, such as repair & maintenance (termed O&M in the table), fuel costs, and any policy cost or benefit if applicable. To capture gaps in the input data and get a measure for intangible costs, gamma values are estimated. These also cover unlisted limitations of technologies. The table below lists the technologies included in this analysis.

Historical energy use for heating

The "Scottish Energy Statistics Hub" (SESH) reports non-electrical heat demand for domestic and non-domestic buildings by fuel and local authority for the period 2005 to 2018 (Scottish Energy Statistics Hub 2020a). SESH draws the data from the "Sub-national Total final energy consumption data" (Department for Business, Energy & Industrial Strategy 2018) and "Energy Consumption in the UK: end use" (Department for Business, Energy & Industrial Strategy 2020). The former reports electricity consumption by sector and by local authority for the period of 2005 to 2018. The latter reports end-use energy use by fuel and by sector for the years 2016 to 2019, but as a UK aggregate. These numbers are used to estimate the electrical demand for heating purposes. See Table C.2 for final energy demand in domestic buildings and Table C.3 for final energy demand in non-domestic buildings.

Through the ongoing Renewable Heat Incentive (RHI), installation of renewable heating technologies is supported. This data is tracked and reported on by SESH (Scottish Energy Statistics Hub 2020c). It also reports the number of accreditations per local authority which guides the regional allocation of renewable technologies (Scottish Energy Statistics Hub 2020b, Scottish Energy Statistics Hub 2020f).

Mapping energy to local technology composition

Finally, the non-electrical final energy demand, the electrical final energy demand, and the renewable heat generation need to be harmonised and mapped to specific heating technologies and local authorities. Some of the technologies included in the RHI use the same fuel as listed in the final energy demand figures (both electrical and non-electrical).

First, the regional final energy use was mapped to technologies. Second, the share of flats and houses connected to the grid, the number of accreditations, and the flats/houses composition of a region were used to allocate renewable technologies to local authorities (National Records of Scotland 2017). If the renewable technologies used the same energy carrier as technologies already filled based on the final energy use figures, then this amount was subtracted from those technologies.

Communal heating for non-domestic buildings was allocated based on the share of regional non-domestic GVA to the country Total. A similar approach was followed for communal heating for the domestic buildings.

C.3 Projections for useful energy demand

The demand-side perspective is important in the context of heat decarbonisation. Heat demand can be split in terms of heat required and the energy demand needed to generate that heat. The former is called useful energy demand (UD) while the latter is called final energy demand (FD) (Madureira 2014). The UD can then be further divided in heat required for hot water (UD_w) and heat required to elevate indoor space temperatures (UD_s).

Historical UD figures were obtained by scaling the FD (by technology) figures with estimates for efficiency as obtained via the process described in C.3 for each of the building types. Projections of UD for each building sector are discussed below.

Non-domestic demand

The historical UD values for non-domestic buildings were divided by the historical GVA timeseries for each local authority. This gives UD intensity (in units of GWh/£2019m). The UD intensity is then connected to GVA projections that include estimated effects due to the COVID-19 pandemic (Cambridge Econometrics produces these projections per local authority on an annual basis). Non-domestic buildings are assumed to decrease their UD intensity by a rate equal to the annual compound rate between 2010 and 2018 and this rate was continued into the projected time period to mimic efficiency gains (i.e. insulation improvements) of non-domestic buildings. Improved insulation is a heating demand-side solution which will contract the need to supply heat. Therefore, this is reflected in the UD projections.

Domestic demand

The regional historical FD (by technology) is scaled to UD through technological conversion efficiencies. The National Records of Scotland reports shares of flats and houses of the Total number of dwellings for each local authority. This was combined with building archetypes developed by Element Energy for the Scottish Government from which the average UD for flats could be extracted. Combining the shares of dwelling types (flats and houses) with the dwelling specific UD, the Total UD could be split into a UD specific for flats and a UD specific for houses.

Element Energy also reported on average UD by dwelling type in 2035 by assuming that all dwellings are upgraded to EPC band C. In combination with household projections per local authority and by assuming that the split between houses and flats remains constant, projections of UD for houses and flats per local authority up to 2030 were obtained.

This settles the heat demand side, which serves as a fixed input for each of the scenarios, to which FTT:Heat matches the supply side.