Heat Networks – a route to heat decarbonisation and how to get involved

July 6, 2018

By Beatrice Williams, policy placement student at Ecuity

Heat currently accounts for around a third of UK carbon emissions and almost half of the total energy usage. Therefore, meeting legally binding climate change targets outlined in the 2008 Climate Change Act will not be possible without the complete or near complete decarbonisation of heat. The Clean Growth Strategy, published in 2017, recognises the significance of heat networks and increased decentralisation of the energy sector in achieving this goal.

Heat Networks supply heating or cooling from an energy centre to consumers via a network of underground pipes. Heat networks are particularly attractive for high-density, metropolitan areas as one network can supply a range of buildings of varying sizes and use, from small residential buildings to large, commercial office blocks[1]. This characteristic has led to heat networks being referred to as “central heating for cities”[2]. The heat generated at the energy centre can facilitate the use of low or zero-carbon renewable energy sources such as biomass, solar power and heat pumps with the potential for cost-effective emissions reduction.

Figure 1 – What is a Heat Network? Source: BEIS, 2018 – developed by Ecuity Consulting LLP

It is not just the prospective environmental benefits that have contributed to the rising popularity of heat networks. Advocates suggest that connection to a heat network may help to address the problem of fuel poverty by offering more vulnerable residents lower and less volatile energy prices.   The maintenance requirements for structures on a heat network may also be less compared to each building having an isolated, individual heating system which contributes further to reduced costs.

Policymakers are convinced that Heat network expansion is advantageous as it exploits economies of scale and often allows those connected to the network to benefit from lower energy costs. In addition, the growth of heat networks will help to convince investors of the longevity of such infrastructure thus reducing risk expectations.

The Committee for Climate Change (CCC) has estimated that around 18% of UK heat will need to come from heat networks by 2050 if the UK is to meet its carbon targets cost effectively[3]. The Clean Growth Strategy sets out decarbonisation pathways two of which, electricity and emissions removal, require one in five buildings to use a largely low-carbon district heat network[4].

The transparency of metering and bills of heat networks has been questioned with concerns that they fail to set out the key information for customers. The Competition and Market Authority’s (CMA) provisional view is that the sector will require regulation that outlines mandatory rules and criteria on price and quality to ensure consumer protection[5].

I have been fortunate to witness a number of case study presentations in the past few months and there is a common thread among them – specifically the need to put the consumer first and to start early with communications with all community stakeholders

In order to encourage heat network development, the Department for Business, Energy and Industrial Strategy (BEIS) have set up the Heat Networks Investment Project (HNIP). HNIP will deploy £320m to fund heat network projects in Local Authorities across the UK. The hope is to create a sustainable market that can function efficiently without direct government subsidy after 2021. Currently, significant barriers still exist that make the development of heat networks costly and it is hoped that additional funding will help to overcome some of these issues. Applications for HNIP funding are due to open in the Autumn of 2018.

Ecuity are hosting a series of stakeholder workshops on behalf of the Department for Business Energy and Industrial Strategy. Events have been held in London, Cardiff, Birmingham and York. There will be further events in Newcastle and Exeter. To register your interest and get involved email Kristina.rafnsonhall@ecuity.com or take a look at the event page here.

Further information:

[1] https://www.gov.uk/guidance/heat-networks-overview

[2] https://www.gov.uk/government/publications/clean-growth-strategy

[3] https://www.gov.uk/government/news/cma-considers-regulation-for-heat-networks

[4] https://www.gov.uk/government/publications/what-is-a-heat-network

[5] https://www.gov.uk/government/news/new-central-heating-for-cities-to-help-reduce-energy-bills