In a shock move, last autumn the chancellor allocated £300m to heat networks to be spent over the next 5 years. This funding presents a golden opportunity, but there’s a real danger it will be spent delivering more of what we’ve already got.
Largely driven by planning policy, the district heat market is currently made up of tens of thousands of small networks, each on its own little island with few connections to bigger sources of low carbon heat. Poorly delivered and rarely checked, many of these networks suffer from dismal efficiency.
As I pointed out in my last post, the industry is busy grappling with just getting the basics right: reducing heat losses from networks and protecting end customers. But time is short: the UK’s looming carbon targets mean that even at this early stage in market development, we have to stay focused on the endgame of CO2 reduction.
So how should DECC spend the money? Here are my suggestions:
There are tens of thousands of heat networks in the UK. The best thing that DECC could do with the £300m is to link these customers together, and connect these larger networks to sources of low or zero carbon heat. Actually I’ll go farther than that: DECC must focus on connecting networks to each other and to better heat sources or they will fail to achieve the scale of carbon reduction required.
What kinds of heat networks should receive support?
- Networks that provide a means of interconnecting existing schemes
- Networks connecting to or incorporating low or zero carbon sources of heat generation
- Networks that include both district heat distribution pipework and communal (i.e. in-building) pipework
While local authorities have been the main recipients of grant funds through HNDU, DECC should now look more widely.
Who should be eligible for support?
- privately-owned companies
- community-owned vehicles
- …and local authorities
On an island, you can control everything from generation to supply. But connecting up systems to create larger networks will depend on specialisation and cooperation. This in turn will require new commercial models, including an essential new addition: companies that just own pipes and charge for transport of heat.
What commercial models should be supported?
- Dedicated pipe-ownership companies (PipeCo)
- Traditional ESCOs
- Community or customer-owned ESCOs
- Local authority-owned ESCOs
What prerequisites should be required for funding?
- Projects must demonstrate compliance with the CIBSE / ADE Code of Practice (just as soon as there’s a compliance regime!)
- Projects must adhere to Heat Trust Rules where relevant.
- They should also have to regularly report operating data to DECC to demonstrate ongoing delivery of value.
Under past programmes, funds have generally taken the form of a grant. That’s worked reasonably well, but another option is for DECC to offer a guarantee of anchor load over the first X years of the project. This could reduce risk and cost of finance, unlocking private funds to deliver more networks.
Which funding mechanisms should DECC offer?
- Capital grants, with payment milestones on proof of delivery and performance
- Guarantee of anchor load
So there’s my view. What have I missed?
carbon limited 
How about in-building networks?
Building final heat load is the one of the hardest parts of delivering heat networks and the final customer connections are by far the most costly element of any district heating scheme.
I think there’s value in supporting networks that include only this “communal” pipework that makes future “district” pipework viable.
Utilities all started out as islands that later joined into a grid. Build the islands and the bridges will come…
Hi Marko,
I agree, the funds should also support in building networks. My third bullet in the network list was:
“Networks that include both district heat distribution pipework and communal (i.e. in-building) pipework”
Or do you mean pipework inside single buildings that don’t connect to the wider world?
It is good to hear that some funding was allocated, although, will £300m suffice for what needs to be delivered in practice to address the networks? The performance (incl. design, built and operation) of most of the heat networks could be better, if they are to form part of the low carbon infrastructure.