The Association for Decentralised Energy today launched a new task force on district heating; an industry initiative to deliver a subsidy free heat network market with strong protections for consumers.
The task force, which will represent a range of stakeholders, will provide recommendations on how industry and Government can work together to deliver an enduring market framework, where heat networks can compete for investment with other utilities and forgo the need for further subsidy by 2021.
A report to be published by the task force will look at the most effective ways to increase investor certainty for heat network investments in order to attract the same low-cost investor capital that other forms of network infrastructure such as gas, water, and electricity enjoy. It is widely accepted that heat networks need to see increased certainty and lower investment risk if the sector is to attract the low-cost investor capital it needs to become a self-sustaining market.
The task force will also consider how to build on the existing customer protection scheme, Heat Trust, including important consumer issues such as heat pricing, contract length and contract structure, areas which Heat Trust is not permitted by law to address.
Heat Trust, which operates a voluntary code of conduct protecting more than 28,000 households across 47 heat networks, was established in 2015 after two years of industry collaboration. It sets out a common standard in the quality and level of customer service for district heating customers and provides free access to the Energy Ombudsman.
The heat network industry has also been proactive in raising standards for every stage of a network’s construction. In 2015 The ADE and CIBSE jointly published ‘Heat Networks: Code of Practice for the UK’ which sets out minimum standards and best practice for feasibility through design, construction, commissioning and operation. The ADE is currently developing a compliance scheme to ensure the code is being effectively put into practice.
District heating networks are seen by the Climate Change Committee, the Energy Technologies Institute and Government as a key part of a cost-effective approach to decarbonise the UK’s heating supply, including delivering cost benefits for customers.
By accessing waste heat and connecting it directly to the end customer, heat networks can provide low carbon heat, control energy costs and contribute to security of supply.
Government has committed £320m in capital support for heat networks by 2021, which will help unlock up to £2 billion in new heat network infrastructure investments in towns and cities across the country, delivering lower carbon and affordable heat. Although this will be important in helping to develop the market, it is widely accepted that other interventions are required to deliver a self-sustaining market.
According to analysis by the Committee on Climate Change, heat networks could meet up to 18% of UK heating demand by 2050, up from its current level of 2% today. Achieving that ambition will necessitate a step change in heat infrastructure investment, and billions of pounds in private sector investment.
The task force will address three key challenges:
- Ensuring heat networks have similar risk profiles as new gas, water and power network investments, and therefore attract low-cost capital from institutional investors.
- Addressing the challenges created by the natural monopoly of district heating network, including the role for regulation in price, contract length and structure, and competition.
- Understanding the key strategic opportunities that will help facilitate the expansion of district heating at the local government level, including planning rules, access rights and wayleaves, and business rate treatment.
Underpinning these will be the need to develop a clear understanding of the actions the sector itself will need to take to transform its strategic prospects, and how Government can work with it to increase the prospects of success.
ADE Director Dr Tim Rotheray said:
The proposals that the task force are to develop will be an essential blueprint for enabling cost- effective investment and assuring robust consumer protection for UK heat networks.
Homes and businesses will always need heat and hot water, and heat network infrastructure offers a future-proof investment that delivers for consumers. But we need to get the investment framework right, ensuring effective customer protection and increased investment certainty.
Working with experts across Government, regulation, and industry, we can develop the right framework that can secure billions of pounds of infrastructure investment and create skilled jobs without subsidy. These can supply thousands more homes and businesses with low carbon, affordable heat, all accompanied by a high level of quality and customer protection.
The Government welcomed the creation of the task force, Minister for Industry and Energy, Jesse Norman said:
Heat networks are already helping to decarbonise our heat supply and provide affordable low carbon energy to thousands of homes and businesses across Britain’s towns and cities. The task force will play an important role in considering how to establish a sustainable and fair market as the sector expands. We look forward to receiving the recommendations