The Techno-Economics of Small-Scale Residential Heating in Low Carbon Futures

Existing studies that consider the techno-economics of residential heating systems typically focus on their performance within present-day energy systems. However, the energy system within which these technologies operate will need to change radically if climate change mitigation is to be achieved. This article addresses this problem by modelling small-scale heating techno-economics in the context of significant electricity system decarbonisation. The current electricity market price regime based on short run marginal costs is seen to provide a very weak investment signal for electricity system investors, so an electricity price regime based on long run marginal energy costs is also considered, using a case study of the UK in 2035. The economic case for conventional boilers remains stronger in most dwelling types. The exception to this is for dwellings with high annual heat demand. Sensitivity studies demonstrate the impact of factors such as price of natural gas, carbon intensity of the central grid and thermodynamic performance. Fuel cell micro combined heat and power shows most potential under the long run electricity price regime, and heat pumps under the short run electricity price regime. This difference highlights the importance of future electricity market structure on consumer choice of heating systems in the future.