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Archive for the ‘ESCO’ Category

Some customers on UK heat networks pay way over the odds for their heat but because heat networks are natural monopolies there’s little they can do about it. Sure, we can introduce some direct competition on heat networks (for example by making it possible to switch out the metering and billing provider) but the opportunities are pretty limited.

While direct competition between suppliers is limited, it is possible to introduce virtual competition between suppliers by making the cost to customers transparent and available to everyone. In fact our best opportunity by far to apply competitive pressure in the heat market is to publish tariffs, including unit and standing charges, in a central, publicly available register.

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Capital contributions, the payments made by ESCOs to developers in exchange for long-term concession agreements, are a hangover from the days when everyone thought onsite generation would be highly profitable.

We’ve since discovered that it isn’t as lucrative as expected. Nevertheless developers continue to demand these upfront payments, leading to higher standing charges, longer contracts and unhappy residents. Isn’t it time for the practice to stop?

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A few weeks ago, my business partner and I were walking to a meeting in Stratford when we realised we were surrounded by several heat networks (seven actually): each one standing alone, isolated from its neighbours, each dependent on its own small boilers or CHP, each its own tiny monopoly. Seven networks right next to each other, brazenly missing the opportunity to reduce cost and carbon by linking together.

Here he his, pointing them out:

 

 

The scene on that Stratford street corner highlights a failure of coordination on the part of planners and a lack of incentives to link small heat networks to each other and to larger-scale sources of low-carbon heat.

But what if we put it right? Imagine for a minute that we do stitch together groups of small networks, perhaps using the £320 BEIS funding to do it. Technically it might be straightforward, but what about commercial structure? What do you do with all those little monopolies?

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Last week, Bill Watts at M&E practice Max Fordham wrote a passionate rant against CHP and heat networks on the Construction Manager website.

The crux of Bill’s message is that real world losses on new build projects are higher than losses calculated using manufacturers’ specs and SAP. How much higher? Bill’s not sure – he says that only ESCOs know how well or how poorly heat networks are working. But in any case “much higher than we’ve been led to believe.”

A few days after the original article appeared, Construction Manager ran a follow up piece in which people from the building industry try to rebut Bill’s argument. In general the respondents make the case that CHP and DH have an important role to play in decarbonising heat, with several highlighting that the Heat Network Code of Practice should improve the performance of new networks.

But in my view the industry respondents missed the key point.

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I’ve done a blog post for the CHPA in the run up to the Heat 2014 conference on 5 November. Here’s the intro and link:

Metering and billing (M&B) is often seen as a necessary but rather dull cog in the district heating machine. For many heat network operators, heat metering is nothing more than a tool for ensuring customers are billed for the heat they consume. But it’s far more important than that. Heat metering can be used to monitor network efficiency, which can spell life or death for district heating schemes. Unfortunately, getting this performance data out of heat meters isn’t always easy…

Read the rest here.

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This is the fifth post in a series on district heating. Here’s where to find  1, 2, 3 and 4.

So far we’ve looked at how poor design, installation or commissioning can doom a DH network to poor efficiency. In this post, I’ll briefly outline why it’s important to monitor and look after a DH network throughout its life, and what can go wrong if you don’t.

Most DH systems are commissioned and then ignored. It may be many months or even several years before anyone revisits the scheme to look closely at how it’s operating, usually prompted by something going badly wrong. The first casualty of network neglect is efficiency.

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This is the second post in a series on DH. The first can be found here.

As I mentioned in my previous post, cost of heat on DH schemes is directly tied to system efficiency. The more efficient the system, the less fuel is needed to meet the heat requirements of the customers. And of course the reverse is also true: lower efficiency means higher cost of heat. This relationship between efficiency and cost is hugely important: it’s real cash, coming from residents to pay their heating bills and from the landlord or ESCO to pay the fuel bill.

In fact, I’d go as far as saying that efficiency is the single most important issue for DH schemes. This post explains why efficiency matters so much.

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