Written evidence submitted by UK District Energy Association (UKDEA) (DHH0127)
The UKDEA was formed 10 years ago to create an association which could link organisations operating across the sector. The drivers were to raise awareness and disseminate good practice, as well as acting as the voice for the district energy sector. We were founded by a majority of Local Authorities who were already active and from that founding group of 6 we are now rapidly approaching over 120 members.
The reason for our response is to highlight the very important role low carbon heat networks must play in decarbonising both new homes and where appropriate i.e. in dense urban areas in retrofit.
Heat networks, i.e. buried districting heating pipework, are a vehicle for the transmission of low carbon heat. Heat networks are not an energy generation technology solution but a delivery mechanism to supply low carbon heat from a wide variety of energy sources at scale across a wide area. They are therefore generation technology agnostic. One of the key benefits of a heat network is that they can then respond to changing generation technologies through implementation of these in the energy centres for each heat network, to deliver increasing levels of decarbonisation. This is as opposed to the laborious subsequent conversion/addition of some a new energy source/conversion technology to each building or home as technologies change. With the resultant impact that repetitive implementation of new measures on a building by building basis would have.
Although we recognise that the installation of heat networks are a high initial capital cost solution due to the cost of the buried infrastructure, it is when they are analysed on a whole life cycle cost against alternative solution that their benefits are clearly demonstrated. A physical heat network once installed will last for 50 plus years and there are many examples where they are successfully operating for a much longer period without major replacement.
Importantly during that time they can act as a delivery mechanism for a wide variety of heat sources which can be progressively decarbonised over time and in many cases heat sources which cannot be delivered on an individual property by property or site by site basis. Examples of this include the use of the wide variety of sources of waste heat which are available at various temperatures across the UK. These range from high temperature industrial waste heat or heat recovered from energy from waste plants, to lower temperature heat rejection from sources such as data centres, water treatment works etc…
There have been a number of studies which have shown that together, these sources can provide more heat than is currently used to provide heat from in dwelling gas boilers to all of the homes in the UK. Realising the use of this heat will not be practically possible for all these sources, but the Governments own Clean Growth Strategy published in 2017 identified that for all pathways heat networks have a key role to play. This document set out that around a fifth of all heat in the UK should be supplied from low carbon heat networks by 2050. Our own an analysis of the sector aligns with this and we support the numbers shown by these pathways as being realistic and achievable subject to the correct framework being put in place to support this growth from the current circa 2% of heat from heat networks.
We firmly believe that any strategy for decarbonising heat in homes should focus on picking generic area of country wide winners i.e. individual home solutions as opposed to district heating networks. Instead the strategy should focus on what are the most appropriate solution for that local area. This will need to consider a wide range of factors including but not limited to:
It is important to understand that heat solutions need to be developed to meet these local factors and whilst there are area wide typologies that can be identified there is no one solution fits all approach.
In terms of barriers to implementation and what needs to be done to see heat networks play the role envisaged by Government in decarbonising homes and business across the UK, there are a number which include:
Addressing the Comparative Costs and Financial Viability of Low Temperature Heat Sources – It is widely recognised that the use of low temperature waste heat, upgraded in temperature through heat pumps, and delivered by district heating networks is one the best ways to deliver long term decarbonisation of urban areas. However, with the loss of the only ongoing fiscal support mechanism in the NDRHI, the viability of these sources means that they cannot compete against heat from gas fired boilers. The cost differential between gas and electricity, even assuming free or very low-cost waste heat, means that a unit of heat from a heat pump will be higher cost than that of a gas fired boiler. Surely this makes no sense, and fiscal/policy mechanisms have to be put in place to address this. Thus, encouraging and enabling transitioning at scale for this much lower carbon heat source via heat networks in housing retrofits of suitable density. Ensuring that the move from a higher carbon gas boiler heat to very low carbon waste heat does not have this “green premium” for customers.
We recognise that in some areas of the UK decarbonisation of heat will be easier to achieve than others. Therefore consideration needs to be given to whether fuel levies on a national basis are used to drive this decarbonisation particularly in those areas where decarbonisation is more complex due to housing density or typology or distance to these waste heat sources.
However, what is clear is that the current “signals” being sent by energy pricing, even when including the resultant existing environmental levies is that gas is the fuel to use. This clearly needs to be addressed when the impact of this is that large amounts of heat continued to be expelled to atmosphere from these various commercial and industrial heat sources.
Understanding and Supporting the role of gas fired CHP as an enabling technology - at this time the most financially viable method to provide heat to a district heating network is gas fired CHP. However, there are very mixed messages in relation to the use of this technology coming from Government. Furthermore, based on a marginal carbon factor, this technology still has a significant role to play to decarbonise heat in the UK. On the basis that the use of gfCHP as an enabling technology is one of the best ways to deliver the rapid role out of low carbon district heating networks, which can then be further decarbonised as set out above, we firmly believe that the Government should recognise the role this technology still has to play in the medium term and send very clear signals to the market on this.
We urgently need this messaging and clarity from Government to remove this uncertainty which is a major barrier to the deployment of this technology. Also, without additional fiscal support for the use of waste heat, therefore a major barrier to the wider implementation of heat networks in the short term. As an example the GLA have made it clear that when used as an enabling technology to deliver strategically important larger scale district energy schemes in London to ensure development opportunities are not missed, gfCHP is a technology they support.
Zoning for Low Carbon Heat Networks – although it is important to decarbonise heat in homes a similar approach is clearly required for non-domestic buildings. Furthermore, the blend of heat demands across the day and week by linking domestic and non-domestic loads across a heat networks means that the low carbon heat source will have a much greater utilisation, hence increasing viability. We would ask what the point is of putting an individual heat pump in a person’s dwelling and another one at their place of work… Why not have the same unit undertaking both roles which is effectively achieved by connecting a range of buildings across a heat network.
However, to drive this we need to remove the current barrier that there is no requirement that building owners/developers should connect to a heat network even when it is clearly the most logical solution to decarbonise site or building i.e. at time of boiler retrofit. We recognise this must be subject to certain safeguards such as pricing and quality of service. However, the introduction of zoning and policies to support this as practiced in Denmark, where the role out of low carbon heat networks has been achieved on a very large scale to decarbonise homes and businesses, is therefore critical.
Although considerable effort has been made to smooth the transition from a traditional gas fired boiler to a heat network, i.e. through the use of HIU’s which mimic the size and appearance of a gas fired boiler, we must recognise that fundamentally we are moving from generation of heat in the home to supply of heat to the home. This lack of control by residents and the inability to switch heat suppliers (as they would for a gas or electricity supplier) can be perceived as an issue. However, considerable work has been done by many of the ESCo’s operating in the sector to develop documents which convey to new heat network customers exactly how the system works, what the differences are to a heat source (such as a gas fired boiler) and importantly what the costs are before they rent or take ownership of that property or before conversion works are undertaken. Therefore, whilst there is a need to engage customers our members have the tools to do this
Whilst heat supply is a different service compared to a fuel such as gas for a domestic boiler, our members work with customers to ensure they understand they are buying a delivered service they can directly use, and hence the comparative costings. For conventional gas fired boilers these costs include gas, a service and repair contract and then the costs for the replacement of that heat source. Our members find that in general customers can understand that with fairly priced heat against these alternative costs (i.e. the counterfactual) makes sense and that in fact it removes the burden of worrying about whether the heat source in your home is working and dealing with issues when it fails or needs to be replaced.
Furthermore, internal disruption during initial works is minimised by using a HIU to interface with the heat network which effectively mimics their gas fired boiler in size and appearance, and the existing radiator system can generally be kept in place without material alteration.
To deliver decarbonisation of homes at scale particularly through heat networks there needs to be a much greater interaction between national and local government.
It is central government who will make the necessary policy changes to make this happen. However, it is at a local level that heat networks are created and delivered. This is either directly through LA action via for example a LA owned ESCo as in Barking, Enfield, Sutton, Cardiff, Bristol, Leeds, Gateshead etc…., or through enabling and supporting as in Southampton, Birmingham, Leicester and Coventry.
Therefore, central government, who will be setting the policy to create this framework for decarbonisation, needs to support local government in providing them with the tools, support and resources that they require to enable this to be delivered. For example to implement zoning LA’s will need the necessary support, potentially by way of a national zoning delivery body, to work with LA’s in identifying those areas which are appropriate for heat networks and then assisting them to providing the necessary governance to ensure these are respected and nurtured so that low carbon heat networks can be delivered at scale
The Key policy asks/decisions required are:
December 2020