Heatrae Sadia Comment: Q1 2019

Jeff House, Head of External Affairs Baxi Heating UK (incorporating Heatrae Sadia) is BMBI’s Expert for Water Heating.

So far 2019 has seen a positive start in the residential sector. Q1 figures from the Energy & Utilities Alliance (EUA) show domestic boilers up 11% year on year and hot water storage cylinders also up 2%. This would appear to be largely driven by Repair Maintenance and Improvement (RMI) activity and preparatory pre-Brexit stock intake.

Latest analysis from the Construction Products Association (CPA), however, reveals a less promising general outlook. The CPA’s total construction figures have been revised down slightly from their winter forecast of 0.3% down to -0.4%. This is largely connected to continued investment uncertainty, exacerbated by the Brexit situation. Infrastructure is the only sector now showing a positive forecast. Two sectors predicted to have a double digit decline for 2019 are new office build (-11%) and retail (-20%).

As mentioned in last quarter’s report, we expect the launch later this year of a Government consultation on revisions to Building Regulations Approved Documents L (conservation of fuel and power) and F (ventilation). When these regulation change, the associated Standard Assessment Procedure (SAP) V10 framework will come into effect.

This is expected to alter the product mix in commercial and residential new build designs. In particular, there is likely to be more interest in electric heating and subsequently more potential use of hot water cylinders – products whose usage will impact positively on the compliance calculations for new build properties.

Looking slightly further ahead the Chancellor of the Exchequer, in his 2019 Spring Statement, proposed a “Future Homes Standard” to be introduced by 2025. The standard commits the industry to “future-proofing new build homes with low carbon heating and world-leading levels of energy efficiency.” In a slight deviation from the written ministerial statement, Phillip Hammond also stated to the house in his speech that new homes from 2025 will be built without ‘fossil fuel heating’.

Again, this would see a shift in product specification with hot water and smart, grid-addressable, local energy storage expected to become more prevalent. Demand for heat pumps is also likely to increase in the 2020s particularly in off-gas grid retrofit as the policy intent of the Clean Growth Strategy is realised. In preparation for a potential regulatory change in the mid-2020’s work has already started on SAP V11 to explore new technology propositions that may become commercially available.

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