Combined Heat & Power

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Latest evidence reveals local energy key to setting path for homes & businesses to net zero carbon

3 July 2019

The Association for Decentralised Energy (ADE) has launched new analysis, setting out the future of the UK’s energy sector. Reviewing the latest evidence, the ADE says, that a zero-carbon energy system can only happen when energy customers and local energy are placed at the heart of the way that the UK meets its energy needs. 

  • Local onsite generation and energy management from thousands of businesses and millions of homes key to a net zero future - customers should be placed at the heart of the way the UK meets its energy needs 
  • Ultra-low carbon onsite combined heat and power, capturing otherwise wasted heat, could increase to 15 GW, the equivalent of more than 7 large power stations1 
  • Recycling of waste heat through heat networks will have a key role delivering clean, green cities heating 1.5 million homes by 2030 rising to 5 million by 20502
  • Energy efficiency could cut as much as £400 a year from households’ energy bills3 and cut £6 billion from business energy bills between now and 20304  
  • £800 million of value to homes and businesses through helping to reduce peak power demand; a market that could triple in size to match other leading nations

The ADE’s analysis and vision responds to the Government’s recently adopted legally binding Net Zero target, and the Committee on Climate Change’s Net Zero report, published in May.  

The energy revolution will see the UK moving away from the traditional silos of gas and electricity and into an integrated system where power, heat and transport systems work together, designed around the user’s needs. It is a revolution where the customer uses, but also generates, stores and even shifts the timing for the energy they need.   

According to the ADE, the future smart, user-led system will replace the traditional purely centralised approach and enable users to participate in and benefit from the energy system.  The ADE sets out the case for an energy system with energy users at its heart:  

  • On-site flexibility and energy storage enable energy customers to support the grid. The market for flexibility services from homes and businesses is set to grow; The value for reducing peak demand by 5% alone is estimated to be worth at least £800m if unlocked for consumers.  Flexibility helps us to keep the lights on with a reduced need for investment in generation and wires. If we achieve comparable levels of flexibility to other leading countries, peak power demand could be reduced by up to 15% by energy users5. Over half of domestic, a third of commercial, and almost a quarter of industrial energy demands can be flexible6. Using this flexibility to help manage the power system drives down cost and provides new revenues to energy-users. 
  • Widespread efficiency measures deal with the UK’s leaky housing stock, slashing household energy bills by up to £400 a year7, about a third off their current annual energy bills. 
  • Driving business competitiveness through investment in cost-effective energy efficiency technologies and industrial processes could cut £6 billion from energy bills between now and 20308
  • By 2030, up to 1.5 million homes could be heated by heat networks, and by 2050 this number could be more than doubled meeting almost a fifth of total heat needs and 5 million homes9.  Heat networks deliver cost effective, low-carbon heat, in the form of hot water, from the point of generation (usually an energy centre) to the end user through a network of insulated pipes. These networks will unlock a range of low or zero carbon heat sources, including waste heat that we currently don’t make use of. 
  • Flexible combined heat and power (CHP) located onsite at businesses and using the heat that is normally lost could triple from over 5 GW today to over 15 GW by 2050, the equivalent of 7 large power stations. All this CHP would use low-carbon fuels in line with the Net Zero goal10.  

Dr Tim Rotheray, Director of the ADE said:  

Whether through onsite generation, storage, energy efficiency, capturing waste heat or smart vehicle charging, the next stage of the energy revolution centres on the energy user.  From homes to industrial sites, we need to help energy users drive a dramatic change in our energy system. Those same users will benefit from lower bills, cleaner air and even a rebate on their power bill for helping the system. Facing the climate emergency is a challenge for everyone. Our analysis shows it can be an opportunity for everyone too.

Lord Deben, Chair of the Committee on Climate Change (CCC) said:  

Local onsite generation and energy management will play a central role in delivering the UK’s net zero carbon future.  Giving customers the power to help drive the UK’s low carbon transition is vital and we need credible UK policies, across government, that inspire a strong response from business, industry and society as a whole.

The transition from the UK’s decades-old, inefficient and purely, centralised system is already happening at pace: 

  • Local energy systems
    • We already have 500,000 homes connected to heat networks, saving connected households an average of £100 per year compared with using a gas boiler11
    • There are 5.8 GWe of highly efficient combined heat and power (CHP) systems across 2,000 sites in the UK.  These CHP plants provide 6.4 % of all the UK’s electricity generated and 42 TWh of heat - around 7% of total UK heat demand12 and saved 10 million tonnes of CO2 in 201813
  • Customer owned energy generation and energy efficiency:
    • Solar power can be installed on homes and businesses meeting their needs and nearby communities. Between 2013 to 2017 solar has grown by 330% from 499MW to 2.1GW compared to centralised generation which has fallen by 8% over the same period. There are around 1 million solar PV installations with a capacity of less than 4kWe – the sort of size you see on the roofs of homes across the country14. That is the equivalent of two large power stations. 
    • UK energy use decreased by 10% between 2000 and 2014.  Without energy efficiency improvements, economic growth over the period would have resulted in energy use increasing by 6%15 
  • And the UK can go further through better use of smart technologies: 
    • Smart and flexible energy systems, using the ability of customers to respond to peak grid energy demands by either reducing their energy usage or selling back their energy, will be vital in this new energy system.  Onsite smart energy, using technologies such as smart meters has the potential to grow and help reduce GB peak power demand by up to 15%16. Energy users managing their energy to reduce UK peak power demand by 5% would reduce the power system cost by £200m a year, and give £790m a year in consumer benefits17

Businesses are already making this happen across the UK: through thousands of district heat systems; onsite combined heat and power generation plant at over 2,000 sites; improving the energy performance of millions of homes and business premises; and working with customers to offer flexibility services to the system.   

However, for the UK to achieve net zero, the ADE, is calling on the Government and the regulator, OFGEM, to allow energy customers to fully realise the benefits from this energy revolution through:   

  • Opening-up access to markets to ensure all homes and businesses can be paid, just like power stations, for helping to keep the lights on and the grid stable through onsite generation and energy management. This may be through moving their energy use to different times of the day, permanently reducing demand through efficiency, or providing very short-term power system stability through onsite batteries or demand flexibility.  
  • Unlocking infrastructure investment in heat networks to recycle wasted heat in Britain’s towns and cities. This has already been done in other energy networks and needs to be extended to heat through a similar regulated investment framework. One that gives heat energy customers clear rights and protections and drives down the cost of heat. 
  • Efficiency requirements for new power stations to ensure they capture wasted heat for industry, businesses and heat networks. 
  • A clear road map to deliver the Clean Growth Strategy promises of EPC C for all homes and a 20% improvement in business energy efficiency, including robust, enforced minimum efficiency standards, fiscal incentives and public sector action that sets a clear example for others to follow 

Dr Tim Rotheray, Director of the ADE said:  

Local energy is growing at pace and has the capacity to expand rapidly. If Government puts customer-led energy at the heart of its policy making and works alongside business, we can put power back into the hands of customers and meet our net zero in a fair way. Saving customers money and radically cutting CO2 emissions. Now is the time to focus on the role of local energy as key, alongside other energy solutions, safeguarding the UK’s energy future.   

ENDS 

Notes to Editors 

For further information and interviews please contact Kate Hinton kate@taylorkeogh.com / mobile 07714 708416 or Paul Taylor paul@taylorkeogh.com / mobile 07966 782611 

The ADE report, ‘Solving the energy policy puzzle for users’ was published in January 2019 and is available here: https://www.theade.co.uk/resources/publications/solving-the-energy-policy-puzzle-for-users  

Case studies 

We have the following case studies available to be supplied on request: 

Combined heat and power:  

Heat networks:  

Energy efficiency:   

  • City Electrical Factors were able to save 20% of their electricity bill by making some quick and easy changes including changing timers on the water heater, different timer settings on external and counter lights and office heaters. See: https://www.theade.co.uk/case-studies/demand-reduction/city-electrical-factors 
  • The Warm Homes Oldham scheme offers comprehensive advice and support to local Oldham residents who are struggling to pay their energy bills and heat their homes. A subsequent study found that investment in energy efficiency led to significant improvements in general health and wellbeing, life satisfaction, and the condition of homes. See Warm Homes Oldham Page 17 -18 in the ADE Greater Manchester Local Story
  • Salix - working in partnership with the public sector in Greater Manchester.  Schools in Greater Manchester benefited from funding of £328,760, which resulted in £773,264 savings annually and £1,096,543 over the lifetime of the projects. See: The full case study here on Page 22

Demand Response:  

  • Existing #1: This year, Limejump was the first company to combine many batteries, generation and demand flexibility into a virtual power station that can help balance the electricity network very close to real-time in the Balancing Mechanism https://limejump.com/limejump-enters-balancing-market/  
  • Existing #2: United Cast Bar are a metal foundry based in Chesterfield. Working with an aggregator, they are ready to change the power that their furnaces need very rapidly in response to a big change in the frequency of the grid. Through doing this, they help the stability of the electricity network and earn money. https://www.theade.co.uk/case-studies/demand-response/united-cast-bar-metal-foundry  
  • New: The Ubiquitous Storage Empowering Response (USER) project funded by BEIS will trial the use of AI-led hot water tanks to provide domestic demand flexibility; earning money for households and reducing demand on our networks     

Descriptions of key elements of local energy systems 

Combined heat and power (CHP) 

CHP generates electricity whilst also capturing usable heat that is produced in this process.  This contrasts with conventional ways of generating electricity where vast amounts of heat is simply wasted. 

Demand response 

Demand response is where energy users change their electricity consumption patterns in response to a signal or incentive from the electricity network operator.  Tapping into this flexibility ensures that power supply and demand are matched, that the grid is not overloaded and that supplies are at the correct voltage and frequency across the network. 

Energy efficiency 

Energy efficiency improvements can be delivered by a wide range of technologies, including building fabric improvements, better controlled heating systems and industrial processes, and more efficient lighting and appliances.  These improvements reduce demand for energy and can also provide energy users with benefits such as higher comfort levels or better control of processes. 

Heat networks 

Heat networks deliver cost effective, low carbon heat, in the form of hot water, from the point of generation (usually an energy centre) to the end user through a network of insulated pipes.  Networks vary in size and length, from carrying hear just a few hundred metres between homes, to several kilometres supplying entire communities and industrial areas. 

References for media release 

  1. This assumes an average size for a larger power station of 2GW 
  2. Estimate from the Committee on Climate Change: https://www.theccc.org.uk/wp-content/uploads/2019/05/Net-Zero-Technical-report-CCC.pdf p79 
  3. From Verco/Cambridge Econometrics, 2014, Building the Future: The economic and fiscal impacts of making homes energy efficient. Average gross energy bill reductions for able-to-pay households are £416 per year; net savings after cost of financing investments taken into account average £203 per year.  Average savings for low income households, after comfort increases, are £245. 
  4. BEIS, Clean Growth Strategy, 2017 p.65 
  5. National Infrastructure Commission, SMART POWER, 2016 
  6. CCC, Accelerated Electrification and the GB electricity system https://www.theccc.org.uk/wp-content/uploads/2019/05/CCC-Accelerated-Electrification-Vivid-Economics-Imperial-1.pdf 
  7. See note 3 
  8. See note 4 
  9. Committee on Climate Change, Research on district heating and local approaches to heat decarbonisation, 2015 
    1. The role of thermal capacity in 2050 – 
      1. Thermal capacity will remain important in a net-zero 2050 world to ensure system stability. 
      2. CCC net zero technical report estimates the need for 40-120GW of back-up gas plant by 2050, operating in over 15% of hours but providing less than 1% of generation. Such generation would either use hydrogen or CCUS. 
      3. This implies the addition of 1-2 GW/year of firm power plant in addition to 1-2 GW/year of mid-merit plant (which we assume would be CCS) in the Further Ambition scenario that reaches net zero. 
    2. CHP build rate and final capacity: 
      1. Ricardo analysis from 2013 found technical potential for CHP in the UK in 2030 to be 33.8GWe and the cost-effective potential to be 20.1GWe in 2030. This would be installed across different industrial and commercial sectors. 
      2. Their analysis assumed, under current policy, that 12GWe was likely to be built, of which 17%, or 2GWe, would be fuelled by renewables. Given the capacity at the time of the study was 6GWe, this implies a build-out rate of 6GW over 20 years or 0.3GWe/yr as the most conservative estimate. 
      3. CCUS trials are underway using industrial CHP and there are examples of hydrogen-fuelled CHP now. While the vast majority of CHP is currently gas-fuelled, a transition to low carbon CHP is possible. 
      4. The CCC technical report estimates that the majority of stationary industrial heat/combustion in manufacturing sectors will either be CCS, hydrogen or electrification. There will be a use for biomethane for residual gas demand – only 5TWh by 2050 
    3. Based on this our conservative analysis is:  
      1. 9GWe of new CHP to 2050; assumes that CCUS and hydrogen R&D and trials continue to show promise 
      2. All existing CHP to be replaced with new low carbon compatible units by 2050 
      3. Creating a total of 15GWe by 2050 
      4. All CHP to be highest merit among the non-nuclear thermal plant and using low carbon fuels from CCS, bioenergy or hydrogen. 
  10. BEIS, Heat Networks Consumer Survey: consumer experiences on heat networks and other heating systems, 2017 
  11. Digest of UK Energy Statistics, Chapter 7: Combined Heat & Power, 2018 
  12. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/736148/DUKES_2018.pdf (p199) 
  13. Digest of UK Energy Statistics 2018, DUKES 5.7 and Monthly Central Feed-in-Tariffs register confirmation statistics May 2019 
  14. Energy Consumption in the UK, 2015 update, overall data tables, table 1.13 
  15. See note 5, page 12.  A 15% reduction in peak demand assumes that the UK can achieve similar levels of reduction to countries like Australia. 
  16. See note 5, page 48. 
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