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

Unlocking trust is key to unlocking heat networks: lessons from the Westminster Forum

16 July 2020

The ACE’s Researcher, Stephanie Hacker, attended the Westminster Energy, Environment & Transport Forum on the 25th June. As is now the norm, the conference was held online, but attracted a wide array of participants including trade associations, regulatory bodies, leading heat network operators, local authorities, and members of government from the department for Business, Energy and Industrial strategy (BEIS). Below, Steph shares her thoughts and learnings from the event.

The overwhelming consensus from speakers and attendees was that the key to unlocking the huge potential of heat networks was trust within the sector. There needs to be trust from consumers that heat networks are a reliable, cost effective and a low carbon option to heat buildings. Heat network operators must embed trust by ensuring consumer protection, transparency in operations and high-quality installations. There needs to be trust in government that they will fully support the implementation of heat networks by mandating that existing, non-domestic properties must connect to a local heat network; implement a regulatory market framework and tax higher carbon alternatives. Private finance needs to trust that there is sufficient demand to invest in heat networks nationally and have transparency of the financial pipeline. With trust from these key players heat networks could effectively provide a low carbon renewable solution to decarbonising the UK’s building stock and take huge strides achieving the ultimate goal of reaching net zero emissions by 2050. 

Adhering to the CCC’s decarbonisation trajectory to achieve net zero emissions by 2050 needs to remain at the forefront of our endeavours to mitigate the worst impacts of climate change. John Saunders, the Interim Project Director of Heat Networks at BEIS, echoed this stating: “The CCC have been clear in what we need to do to prevent the worst impacts of climate change. Systems are beginning to break down and collapse. 1.5 degrees is brilliant. 2 degrees is okay. Anything more is not acceptable”. Heat networks have a pertinent role to play in achieving this. It is estimated that 17% of the UK’s heat will need to come from heat networks by 2050 if we are to meet carbon targets cost effectively. Insightful presentations from industry leaders, explored the barriers and offered sound solutions around investment, infrastructure, and the development of a regulated heat market to be able to achieve this ambitious target.  

The UK heat networks represent one of the biggest growth potentials for energy networks in Europe, with the Heat Networks Delivery Unit (HNDU) and Heat Networks Investment Project (HNIP) providing a pipeline of £1.3 billion. Simon Woodward, the Chairman of UK District Energy Association, passionately highlighted the unique issue that heat networks face, and why learning from other energy sectors may not be the only key to unlocking the potential of heat networks. “In what other business sector do you have to find your customers, who are within a defined area and ask them to enter into a very long term contracts and then carry out major infrastructure works to deliver the core service i.e. heat supplies for a small turnover of £5 or £10, pa”. Visibility of the market pipeline is essential to encourage private investment and create trust that demand for heat networks will be prevalent. Considering in May 2020 the UK’s borrowing was estimated at £55.2 billion, diversifying revenue streams away from government reliance, to achieve environmental outcomes has never been so important.  

A delicate balance needs to be struck between future and near team policy and processes for decarbonisation. With the introduction of HNIP providing the standard for strategic heat networks, based on the carbon content of heat, quality of service, price and terms, government could feasibly mandate that existing public buildings connect to a heat network. This would instil trust that government really see heat networks as the cost effective and carbon saving technology solution for decarbonising the UK’s heat sector. The Association of Decentralised Energy’s (ADE) Charlotte Owen highlighted that the Planning and Energy Act 2008 gives local authorities the power to require that new development be connected to a heat network but there are very few policy levers over existing buildings. The ADE’s position is that, for heat networks, the retro gap should be addressed by the obligation to connect. This would be applicable for new buildings and for existing non-domestic buildings within a heat network zone. This was reiterated by Paul Barker, the Energy Infrastructure Manager, The Energy Service for Bristol City Council. He highlighted that there is a drive from households in Bristol to connect to heat networks as they recognised this is the low carbon option but there needs to be more power and policy to allow existing buildings to connect.  

The 2050 vision from government is to have a developed self-sustaining heat market with an investment potential of up to £22 billion. A clear market framework for heat networks needs to be devised to enhance consumer connections and provide a low carbon option of heat provision. This was echoed by Laura Nell, Head of Future Retail Market Design at Ofgem who added: “The framework has to ensure that consumer protection is key and take learnings from the energy sectors”. Consumers have to have a good understanding of how a heat network operates and then accept that using this technology to heat their homes and buildings will be crucial to decarbonising the heat sector. Brian Tilley, Head of Energy Policy & External Affairs at E.ON, called for greater transparency to ensure that heat network customers are fully aware of the heating system they are buying into, receive a fair price and experience similar levels of protection as other energy consumers. 

Thomas McMillan of Savills took the view that to support the strategic implementation of heat networks zones there needs to be the movement away from capital expenditure to focus on the operating expenditure to accurately inform the pipeline. This can be calculated through the Levelized Cost of Energy (LCOE) which measures the lifetime costs of energy infrastructure divided by the energy production -and (importantly) informs the price of energy, allowing for comparison between different development options. A reciprocating thought was offered by Dhara Vyas of Citizens Advice, who stated that the problem lies with the value and engineering of the capex as it doesn’t reflect the life time cost, to ensure people are living and working in high efficiency heat network zone in the long term. Decarbonisation must also encompass emerging technologies such as hydrogen and ensure that installations are adaptable and be supported by mapping of local energy demand and evaluating local energy resources. Considering the lifetime costs would also account for how heat networks and their associated infrastructure can adapt to emerging fuel sources, placing trust in the quality and longevity of their implementation. 

The continuation of events such as these throughout a period where contact has been limited has been crucial in maintaining momentum for environmental issues. The opportunity to attend the WEET enabled a clear insight into the work being done within the sector and informs where research can be best place to make the case for further investment from the public and private sector; high quality infrastructure which accounts for new fuel sources such as hydrogen; a regulated market framework which benefits and protects consumers and mandatory connections to heat networks. The conference exuded passion for the future of heat networks and the opportunity that they present to exploit larger scale – and often lower cost – renewable and recovered heat sources that otherwise cannot be used.  With this passion came a forthrightness from speakers who strongly identified the current barriers blocking the technologies success. One resounding message was clear. Trust is essential in allowing this renewed technology the opportunity to fulfil its huge potential in providing low carbon and affordable heating.  

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