Consumer Protection Needed for Heat Networks – Which?

In the wake of the UK Government’s Heat Strategy and subsequent investment in heat mapping, feasibility studies and heat networks “the need for the UK’s district heating industry to be properly regulated has been emphasised by a survey from leading consumer watchdog, Which?

“The watchdog has called on the British government to reconsider allowing the UK’s emerging district heat market to operate without regulation, after research revealed that many customers feel ripped off and confused by contracts they cannot escape from.”

In the UK, regulation has hardly kept energy companies on track but consumers are likely to seek some protection when committing to long term connections with sole suppliers of heat. My experience of networks in Sheffield suggests this to be the case. Even if the product is good, the price stable and the infrastructure sound, consumers (led, often, by their insurers interest in liabilities) will seek protection. The cost of this will be borne by the end-user without doubt and this might mean some marginally economic schemes will fall by the wayside.

The report, unveiled yesterday, said some district heat providers effectively create monopolies because properties linked into the networks cannot switch suppliers if they are unhappy with the service. This is, in most cases, fact. Many UK heat networks have heat supplied from one source, or one supplier. Only when you start to see integrated heat networks with multiple technologies and suppliers will you see genuine competition that will self-regulate. Heat networks are a long way from that position.

The news, which comes just at a time when the Association for Decentralised Energy is pushing its new code of practice, called Heat Trust. Around 210,000 homes in the UK are currently connected to the networks and this is expected to rise to eight million by 2030 as part of efforts to reduce greenhouse gas emissions from the heat sector.

£3 million funding to boost low carbon heating

The cynic in me isn’t surprised that this announcement comes less than 60 days before the General Election, but I am not a cynic really. It’s good to see DECC’s continued support for district heating. If there is one thing this Government can be applauded for its understanding of the importance of ‘heat’ and the opportunity for heat networks to reduce carbon emissions and provide cost-effective heat. Well done to Davey and his team in carving out £3 million of funding to boost low carbon heating.

DECC has done some useful enabling work to support the uptake of heat networks. It has established the Heat Network Development Unit (HNDU) to lead this and has produced some useful studies to demonstrate the untapped potential out there – such as the report produced in 2014 on heat opportunities from rivers.

The Government’s own Heat Strategy states that producing heat is the biggest user of energy in the UK and in most cases we burn gas in individual boilers to produce this heat. This is a wasteful method of producing heat and a large emitter of CO2, with heat being responsible for 1/3 of the UK’s greenhouse gas emissions. Household heat demand has risen somewhat over the past 40 years from 400 TWh/y to 450 TWh/y, despite a marked improvement in the energy efficiency of homes and a slight reduction in the severity of winters. The average internal temperature of homes has risen by 6°C since the 1970s, and this combined with growth in housing – the number of households has risen by around 40% since the 1970s – has offset energy efficiency gains in terms of total energy used to heat homes Some studies suggest these temperature increases are due to factors including the move to central heating, rather than householders actively turning up their thermostats.

Heat networks in the UK use a range of heat sources including biomass and gas boilers, combined heat and power (CHP) plants and heat from energy-from-waste plants and, where conditions suit, such as is the case of Southampton, a small amount of geothermal heat. Networks are currently estimated to provide less than 2% of the UK’s heat demand supplying 172,000 domestic buildings (predominantly social housing, tower blocks and public buildings) and a range of commercial and industrial applications (particularly where high temperature heat in the form of steam is required). Despite being of a significant size, Sheffield’s city centre district energy network is estimated to provide 3% of the entire City’s total heat needs.

By comparison, district heating is widespread in many other parts of Europe, in China, Korea, Japan, Russia, and the USA, although the level of sophistication and reliability is very diverse. While having an average market share of 10% in Europe, district heat is particularly widespread in Scandinavia (Denmark nearly 70%, Finland 49%, and Sweden around 50%). It also has a substantial share elsewhere in Europe. For instance, district heat provides around 18% of heat in Austria (and 40% of heat in Vienna). European networks are currently growing at around 2,800 km per year, about 3% of current installed length. With the right planning, economic and market conditions it is clear district energy can play a more prominent role.

Whilst this funding announcement is showing funding going to new players in the district heating community as well as some established ones (Coventry, Leicester, Manchester, for example) there is a need to put money in to those long-established networks in cities that were at the forefront in decades past (Sheffield, Nottingham, Southampton). These ‘4th generation networks’ need to be reviewed, refreshed and developed as much as those ‘greenfield’ sites where district heating is all too new.

All the schemes developed to date have been local authority led. This round of funding allocates £3m across 55 local authorities in England and Wales. I would urge DECC to look at other types of organisation who might exploit heat networks at a medium scale where the conditions are right to do so. Those organisations with a long term stake in the city or town in which they are based are well placed. For example, NHS Trusts, universities and colleges, whilst not as big as an entire city or town often have enough scale in them to warrant district heating networks. Indeed, some of them already do. My own organisation, The University of Nottingham, has two of significance as well as several smaller, interconnected systems on its campuses. Most of them follow the model of high temperature, high pressure systems and don’t allow for storage, cooling or consider CHP. 

In the recent round of HEFCE/Salix Revolving Green Fund projects awarded interest free loans there were a good number of CHP schemes and a smaller number of district heating schemes put forward. I believe there would have been more had these organisations had sufficient revenue to develop shovel-ready projects for capital investment. Like the public sector, universities are often capital rich and revenue poor. That means that complex, integrated and multi-faceted feasibility studies can often become un-affordable – even if the capital is available for it to be delivered in time. I would like to see HNDU looking to other large organisations and helping them in the way that they have helped local authorities. If they could do it in partnership with the funding council and with their established partners, Salix Finance, even better. 

 

 

4th Generation Heat Networks

In an earlier blog I discussed how cities in the UK were finally stepping up their investment in energy generation and distribution with a particular emphasis on heat networks in Sheffield, Nottingham and Stoke.

The presentation I made in July 2013 set out what a 4th Generation, 21st Century, heat network should achieve. It should seek to achieve a number of improvements on existing networks, including:

  1. Greater resilience, through heat storage, back-up and optimisation;
  2. Lower carbon heat, through the adoption of lower carbon fuel sources, such as geothermal heat, biomass, biogas, solar;
  3. Choice and product differentiation, offered through multiple heat providers inputting to a singular (independent possibly) network over which consumers buy their heat. Products could be differentiated by temperature (return temperatures are lower than those temperatures leaving central plant), carbon intensity (fuels of varying intensities of heat can command different prices and values shaped by carbon markets and carbon targets).

The presentation made in July 2013 set out a city-wide vision for heat networks across Sheffield, blending together heat sources from domestic and commercial waste incineration (Veolia) biomass (E.ON), industrial waste heat (Forgemasters), gas and oil (Veolia, Sheffield City Council and others).

At the time of writing, it is encouraging to see the links between E.ON’s 25MW heat plant at Blackburn Meadows being built out to connect to South Yorkshire Police, Sheffield International Venues and Forgemasters. More disappointingly is the apparent inertia in connecting to the Veolia and Sheffield City Council plants. The potential to reduce carbon emissions, cost and develop greater resilience can only be delivered if ambition, long term vision and commercial differences can be resolved. The City has a key role to play in making this happen and the City Council has a significant asset base to de-risk this investment, including the 50KM+ network operated by Veolia on its behalf. So, it is disappointing that connections proposed originally 3 years ago to Veolia and the Greenland housing estate in Darnall are still to be connected.

 

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