UKDEA Media Release
Another missed opportunity for low carbon heat networks?
DECC's Delivering UK Investment in Networks:
21st January 2015
As DECC release their report on Delivering Energy UK Investment: Networks, the UK’s leading association focusing on heating and cooling networks, the UK District Energy Association (ukDEA), question whether enough is being done to realise the potential that heat networks can really deliver.
The DECC report sets out what the Government have been doing to deliver resilient and low carbon national energy infrastructure. Simon Woodward, Chairman of the ukDEA, welcomed the ten pages of the document which were devoted to heat and low carbon heat networks, but expressed concern that policy is not in place to back up the government’s ambitions.
He commented that “The Association is keen to ensure that the UK government’s previous foray into heat networks nearly a decade ago, where a small number of schemes were delivered locally but very little was actually achieved in terms of widespread long term uptake is not repeated”
The previous Community Energy Program (CEP), a scheme which closed in 2006, was instrumental in the delivery of a small number of key heat networks. However, the CEP offered not only feasibility but also capital funding, and as a result, a small number of key schemes were delivered such as the large scale district energy scheme in Birmingham which is now being linked to across the City via New Street Station. None of these would have been possible without this additional capital grant funding.
Currently over 120 projects are having feasibility co-funded by DECC via the HNDU. However, in the DECC report, very little is indicated as to how capital funding gaps will be overcome to deliver actual schemes in practice. As stated by the outgoing head of the HNDU, Stephen Brooks, at the ukDEA AGM in 2014, the true test of the HNDU and indeed DECC's Heat Policy will be the level of networks actually being installed four years after the program started.
District energy projects are very capital intensive. The high cost of installing networks in the UK means, as was the case during the Community Energy Program, that the HNDU projects will almost certainly need financial support if they are to ever become anything more than a consultant’s feasibility study. Undoubtedly these feasibility studies will identify a delivery funding gap, and without government financial support in place, this is probably as far as these studies will go.
Local Authorities do have the ability to use cheaper sources of funding than the private sector, but schemes which don’t have funding gaps are few in the current UK marketplace. These funding gaps are driven by the fact that the UK heat network market has never been allowed to mature to an extent comparable with Europe, where installation costs are much lower, and is unlikely to ever reach that point unless this issue is addressed by government support for a significant period of time.
Until such time, the ukDEA can only predict that history will be repeated and schemes where only those sponsors who are prepared to accept extremely low returns or projects where the energy density is so high that the heat sales can justify the level of investment in the heat network will come to fruition, leaving the rest of the UK to miss out on the opportunities this low carbon, future proof technology can provide.
Simon commented that “the ukDEA are concerned that nothing in DECC's document identifies the next steps to be taken after the HNDU funding ends. With no clear pathway for potential projects to follow, there is nothing to stop ukDEA's predictions becoming a reality. The ukDEA urge the government to learn from past experiences, and to realise that fiscal support is needed in order to mature the market and drive down installation costs for the delivery of this key part of the UK’s energy infrastructure”
Within a number of press releases that have been issued by DECC on heat networks, the quoted figure for market penetration of heat networks is cited as 14%. This is in comparison to the current UK figure of just 2%. However, the 14% was identified through research undertaken by the ukDEA, and was based on a low carbon heat network incentive being in place to achieve this level of penetration which isn’t currently planned by DECC”
Notes to Editors:
The partners, owners and operators of the largest district energy schemes in the UK have aligned themselves in the creation of the UK District Energy Association (ukDEA); with the aim of not only promoting district energy as a means to deliver significant carbon savings, but also to establish a direct link between the Government and the industry's small market base.
The Association is a not for profit, non-trade association of companies and public sector organisations involved or interested in district energy schemes of all sizes, from village scale, community based 'micro district energy' schemes to city wide district heat energy networks.
The ukDEA has attracted leading players in the industry, with the ukDEA’s Full members comprising of 16 major organisations:
- Birmingham City Council
- Brookfield Utilities/GTC Limited
- Cofely District Energy Limited
- Coventry City Council
- ENER-G Switch 2 Limited
- Enviroenergy Limited
- E.ON Energy Solutions Limited
- Leicester City Council
- Newcastle City Council
- Newport City Homes Limited
- Shetland Heat, Energy and Power Limited
- Southampton City Council
- SW Energy Limited
- Thameswey Limited
- Veolia Environmental Services Limited
- Viridor Waste Management Limited
Together, these 16 organisations represent the: Birmingham, Coventry, Exeter, Leicester, Liverpool, Manchester, Milton Keynes, Newport, Newcastle, Nottingham, Sheffield, Shetland, Southampton and Woking District Energy schemes, together with a number of schemes in London including Olympic Park and Stratford City, Metropolitan Kings Cross, Bloomsbury Heat & Power, Whitehall, Hatfield, Dalston Square, Greenwich Millennium Village, Barbican Arts Centre, Guildhall, Bastion House, Ontario Tower, Pan Peninsula, Baltimore Wharf, Wapping Lane, High Point Village and London Central Markets and others
The ukDEA also has 74 very knowledgeable Associate Members, including Local Authorities, Colleges & Universities, leading industry companies as well as several international members, sharing and contributing information to our district energy knowledge base.
UKDEA Key Facts:
Together the ukDEA members represent:
- Over 120 MW of low carbon generation plant (CHP, biomass, EFW etc)
- Supported by over 600 MW of conventional back up boiler plant
- Delivering over 700,000,000 kWh of heat each year
- Across energy networks which, if combined, would extend for more than 200km
Through Full and Associate membership, the UK District Energy Association's aim is to represent current and potential owners, developers, consumers, partners, operators, product suppliers and interested parties of District Energy schemes throughout the UK.
The ukDEA welcomes new members. Be part of our district energy information sharing loop and apply for membership of this forward thinking Association today.
For more information and membership details contact:
Secretary & Administrator for the ukDEA
Thames Head Wharf
Office: 01285 770615
Mobile: 07773 457941