Combined Heat & Power

Demand Side Services

Energy Efficiency

Heat Networks

Heat networks are ready to compete to be the heating source of choice

27 February 2018

Lily Frencham, ADE Senior Policy Manager

It is often said the best heat networks are those you don’t hear about. The ones operating so well that customers don’t even realise they’re on one. And there are plenty of those to be found across the UK. 

Take Citigen’s City of London heat network. A tardis-like energy centre with supporting infrastructure that weaves its way around some of our most historic landmarks like an expertly played game of Tetris. Supplying 11,300 homes and 17 commercial buildings in the Square Mile, many of these customers are largely unaware of the way in which their offices and homes are heated. 

Islington’s Bunhill energy centre is a second. In operation since 2012, this site takes waste heat from the Underground to provide cost-effective, low-hassle, low-carbon heat to more than 700 homes and leisure facilities in the London borough of Islington. 

But in the past year, after years of hiding in plain sight, there’s a feeling that the heat network industry is ready to step out of the shadows, embrace the challenges and opportunities ahead and make heat networks a heat energy source of choice.

This profile change isn’t happening by chance. The UK’s urban centres have always provided the perfect backdrop for heat network investment – densely populated, with high demand for heat. What has been missing from the narrative until recently is Government support for heat networks and acknowledgement that rapid growth of the heat networks market is essential if the UK is to meet its decarbonisation goals.  

So what changed? Government recognition and support has been received and this seems to have triggered the necessary boost. Recent Government research revealed heat network customers pay on average £100 less than those supplied through gas, and the Clean Growth Strategy identified potential growth of the market from an estimated 2% today, to 17 % by 2030. Not only that, the flagship Heat Network Investment Programme (HNIP) is launching this autumn, which has made available £320 million in grants and low-cost loans to eligible heat network projects.  

The heat network industry has also stepped up, recognising that as an industry with limited regulatory intervention, customers aren’t guaranteed the same rights as those supplied through gas or power and have introduced measures to address this; including publishing a Code of Practice setting out minimum standards and best practice and establishing Heat Trust, the voluntary customer protection scheme.

While all this paints a rosy picture, we know that if heat networks are truly to become a preferred heat supply choice, both industry and Government have more to do. Industry must acknowledge that, at times, customer transparency and service standards on some heat networks operate at an unacceptable level. Government and industry need to work deliver the changes we need. Industry is learning from mistakes and calling for standards across all networks, Government needs to implement mechanisms to reduce investment risk to drive down the cost of heat networks.  

The way to address this challenge, according to the Heat Network Industry Taskforce led by Association for Decentralised Energy, is through the creation of a regulatory framework. This would provide investors in heat networks with an assurance of demand for future heat network development in order to de-risk their investment, in return for a commitment to meeting minimum standards for pricing and customer services, as well as plans for decarbonisation.

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

The proposals contained in the report seek to address many of the same challenges identified by the CMA as part of its current market study into heat networks – transparency of customer information, how to boost competition and examining the issue of customer contract length – with industry mindful that customer satisfaction and reduced investment risk truly do go hand-in-hand.

Initial feedback to the recommendations has been positive, with government reviewing the potential of what has been recommended as it examines the measures necessary for the creation of a sustainable framework beyond HNIP.

While there are supportive noises from key stakeholders, it is vital that momentum isn’t lost if we are to meet our decarbonisation commitments. To do so will require a five-fold increase in deployment. Industry is poised to deliver and is excited about the future.

Now is the time to set the framework for a thriving heat network market for decades to come – one that delivers for customers, delivers for investors and delivers for the environment. Calling for regulation isn’t a case of industry going cap in hand to Government for hand-outs, but is about putting the appropriate framework in place so that heat networks are treated comparably with other utilities and are able to deliver the benefits they are able to.

And if we manage to get it right? Then Government’s ambition to connect up to 8 million people by 2030 to heat networks will be a reality and most importantly, those customers will be assured of cost-effective, low-carbon and hassle free heat. 

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