The project will utilise the three policy options above, but as the variations of up front contribution, RHI and carbon tax would be infinite, some of the variables will be fixed to aid the analysis:

Carbon tax – three variables will be analysed on a cost per tonne basis.• Zero – as is• £12 per tonne – the approximate market rate of carbon and that which consumers can ‘offset’ their emission now.• £70 per tonne – the approximate DECC non traded rate representing the societal damage caused by carbon.

Upfront government contribution• Zero – as is• £5k – the current rate applied to electric vehicles (this represents between 25%-10% of the cost of a typical electric car, and between 25% - 50% of a low carbon heating system).• Other variable payment e.g. to be assessed during the research

This will leave the unit subsidy variable and would represent the level of RHI needed to satisfy the consumer willingness to pay for air source heat pump and heat network. Heat network is split between those with a carbon source and those without as the carbon reduction is significantly different.In addition, illustrations with zero RHI will also be modelled to understand if either standalone carbon tax or up front subsidy would be feasible or sufficient to persuade consumers to switch.For the purposes of the study and to keep the variables within reason, the research will focus on an average property in Bridgend. It was noted in phase 1 that some discrepancy existed between national average consumptions and the actual gas used in the Bridgend network. This will be researched in this phase to understand how local variations may affect consumer behaviour.Phase 1 identified that the standard of insulation has an impact on the investment a consumer may have to make and the payback period. For this study, it will be assumed that ‘lower cost’ insulation has been fitted, such as loft insulation. These typically have a faster payback, whereas solid wall insulation payback may be between 60 and 90 years, and hence seem extremely unlikely to be fitted.For a carbon sourced heat network, it is assumed (per the Bridgend proposals) that a natural gas CHP engine will be installed, providing a 30% carbon efficiency gain compared to centrally generated electricity and locally installed gas heating appliances.

Benefits

A report that examines current policies and details potential considerations e.g. incentives, grants, loans and taxation on carbon emissions that may facilitate a low carbon energy future for GB.