Combined Heat & Power, District Heating & Cooling, Demand Side Services

Heat network industry says investment risk can be reduced and customer benefit assured

31 January 2018

The UK heat network industry has given Government its recommendations for growing the sector and protecting its customers.

The recommendations, released today as part of the industry collaborative Heat Network Task Force, calls for a regulatory framework to reduce investment risk. The recommendations also set out how to ensure customer protection and heat network build and operation standards.

The report recommends a regulatory framework that would see heat network developers commit to meeting minimum standards for pricing and customer services, and also sets out plans for decarbonisation, and reducing investment risk.

The Association for Decentralised Energy (The ADE), which led the Task Force, said the creation of a regulatory framework would provide a significant boost to the market, while reducing risk, and the cost of capital investment.

The Task Force report is the culmination of wide ranging industry stakeholder collaboration, and is the first time a holistic set of proposals and principles around which the role of heat networks in a decarbonising economy can be considered.

The framework also sets binding service standards and aims to drive increased competition which would deliver clear customer benefits.  

The ADE’s Director, Dr Tim Rotheray, said:

Government recognises heat networks as a key tool for cost effective heat decarbonisation. This report sets out how to build on current policy support to create a long-term sustainable investment market for heat networks.

Claire Perry Energy and Clean Growth Minister said:

 Heat networks offer huge potential to reduce carbon emissions from our homes and businesses, deliver significant cost savings for consumers and create thousands of skilled jobs.

Our ambitious Clean Growth Strategy sets out how we will support the market to build and extend heat networks across the country. That’s why we are investing £320 million in the Heat Networks Investment Project and why we welcome the Heat Network Task Force report which sets out clear proposals on how to reduce investment risk and develop a market which provides strong protections for consumers.          

Government support for the industry through its flagship Heat Network Investment Project has been key to growing heat networks in the immediate term - this report sets out what needs to be in place when that funding ends.

The report coincides with new research undertaken by the ADE that reveals a growing industry which is decarbonising through increasing renewables and heat generation efficiency.

Enabling cost effective levels of deployment under a range of scenarios set out in Government strategies1 will require a six-fold growth in heat networks up to 2030. This growth in heat networks will contribute to the creation of an estimated 64,000 new jobs annually, during the peak employment period, which typically lasts for five years from design to commission of a network project.

Recent research by BEIS2 has also revealed that UK heat networks are on average £100 cheaper than alternative available heating solutions.

Rotheray continued:

Securing investment and protecting customers are two sides of the same coin.  Contented customers are key to investors being confident and willing to invest. This in turn drives down investment cost and, in turn customers’ heat bills.

Zoe Guijarro, Task Force member and Policy Manager for renewable heat and community energy at Citizen’s Advice, said that industry recognition giving heat network customers more confidence was pleasing to see.

Heat accounts for nearly half of all energy consumption in the UK and there is huge market potential for the heat network industry. Consumers must have confidence that they are getting a fair deal for this market’s potential to be realised.

 While further progress is required on the role of regulation to deliver fair heat prices for customers, the proposed customer service obligations and the introduction of competition into the heat sector is a good start to providing customers with the assurances they need.”

Dr Rotheray concluded:

As an industry we have been proactive in driving up standards, through establishing customer protection through the Heat Trust and the creation of the ADE & CIBSE Code of Practice, this report is a vital next step to meeting Government’s ambitions to cost effectively decarbonise heat.”

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Notes to editors

Download the full Task Force Report.

Heat networks comprise a network of insulated pipes which carry hot water from a central point to end users in multiple buildings. Heat networks are an attractive and cost effective solution in areas of dense population where heat demand is concentrated. Heat sources on a heat network can be added and changed, allowing the introduction of new heat sources, and low carbon technologies and fuels, with little to no disruption to the end-user.

Government has identified heat networks as a key technology to decarbonise heat and has allocated £320m of funding to 2021 through the Heat Network Investment Project to grow the heat networks market. This funding is expected to draw in up to £2 billion of additional capital investment and lead to the construction of hundreds of heat networks in England and Wales. Scotland has set an ambition to connect 40,000 homes to heat networks by 2020, and 1.5TWh of heat delivered by heat networks .

The ADE’s Market Report: heat networks in the UK reveals there are already around 17,000 heat networks in the UK supplying c. 12,000GWh of heat annually to 500,000 customers. The energy savings from these schemes are significant: the ADE estimates that heat networks save approximately 3,065GWh of gas imports per year, equivalent over a year to 216,000 households’ gas consumption. If the UK meets 17% of its overall heat demand with heat networks, as is modelled in the Government’s 2017 Clean Growth Strategy, it could deliver 32-46GWh of annual energy storage, the equivalent of four hours of space heating and hot water demand for one million households in the UK, demand that could be shifted away from peak time and potentially reduce the amount of additional power generation capacity that would be required to meet this additional load.

References

1 Clean Growth Strategy (October 2017)

2 Heat Networks Consumer Survey: consumer experiences on heat networks and other heating systems (December 2017) revealed heat network customers on average pay £100 less than gas customers and enjoy similar satisfaction and reliability.

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