Issue 42 : Scotland the Brave

Editorial : Scotland the Brave

A New Year and welcome news. Two days after the annual celebration of Robert Burns the Scottish Government launched a consultation on its proposals for local heat & energy efficiency strategies and the regulation of district heating.

In it the following statement leaps out of the page:

“As the capital investment is the largest investment in any heat network, and finding low cost capital is currently a major hurdle for any new project, reducing the cost of capital to something akin to that seen in other regulated utilities could support the development of more networks. District heating which costs less to build should also result in cheaper prices for heat users. The Scottish Government is seeking views on whether a regulatory framework can be established in support of this vision in which heat network development can be coordinated, risks can be managed to reduce the cost of capital and heat users and other relevant parties are satisfied with the system”.

Whilst this statement refers to Scotland it equally applies to the whole of the UK. But seeing it in black and white feels like we have finally reached a damascene moment or tipping point where the interaction of control, risk and return on capital has been understood and action proposed.

What actions does the Scottish Government propose to address the challenge? In its consultation it outlines a possible scenario:

To begin local authorities would be required to develop heat and energy efficiency strategies for their areas. The data collected in developing these strategies would be used in a socio-economic analysis using criteria such as decarbonisation, fuel poverty and system resilience to determine district heating zones. Local authorities would have to power to obligate building owners, particularly of large ‘anchor’ buildings, to connect to a heat network. Next, a system of licensing of appropriate heat network operators would ensure that licensees are competent, financially sound and adopt appropriate technical standards and mandatory customer protection standards. These licensed entities would then be eligible to apply for a concession to operate exclusively within a given zone. Applications for concessions will be assessed according to their ability to achieve the objectives set out in the local heat and energy efficiency strategies.

Taken together this scenario would have a major impact in reducing demand risk for heat network developers and impact on the cost of capital whilst retaining enough control to protect the public interest through setting the criteria for licensed concession holders to meet.

Will it lead to uniform heat prices across Scotland? Unlikely I feel. Consider the following paragraph on Swedish energy market data:

“The price differences between municipalities depend on factors such as the district heating companies’ ownership structures, yield requirements and input fuels. Geographical conditions for district heating installation also affect the price, as well as the age of the installations. The customer’s options in the heating market thus depend, to a large extent, on where they live”

Unpacking this statement, it is saying that the form of ownership, return on capital and cost of input fuels are the major determinants of price differences. Geographical location will affect the cost of input fuels – for example biomass in forested areas or energy-from-waste in urban areas – as well as the size of the capital investment required – presences of anchor loads, low or high building density and soft or hard dig. Such issues are fixed by the physical environment in a given locality. But form of ownership and return on capital are not and are open to adjustment.

Does this mean that transparency on the setting of heat prices needs to be maximised? Whilst recognising the issue the Scottish Government does not presently have an answer but promises “further investigation” and “policy development and consultation”.

Additionally they recognise that “heat users that have become accustomed to a certain level of choice in the liberalised energy market”. How does this sit with an obligation to connect? Once again the Scottish Government does not have an answer but seeks responses. Presumably the customers reported in the Observer last weekend would like to exercise a level of choice although it would be a mistake to assume that such poor customer service is exclusive to district heat networks, particularly as some companies sit across gas, electricity and heat markets. However, is it necessary to provide individual retail competition when collective action might achieve more muscle in the competitive energy market? Maybe instead customers on a heat network could have the power to collectively move to a new licensed concession holder or adjust their ownership model to one that is more responsive to their needs if the incumbent is failing to deliver an adequate service.

Whilst these questions need to be addressed the Scottish Government is to be congratulated for their work in developing these regulatory proposals. I hope that it will have a ratchet effect on other countries within the UK to up their game in this particular space.

Michael King
Editor

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UK News

E.ON Heat no help after we moved into a new apartment without heating or hot water (The Observer)
12 February 2017
I purchased an apartment from London & Quadrant as part of the Elephant Park development in London and moved in in mid-December. But, as an early buyer in the scheme, I’ve experienced terrible problems with the heating and hot water supply. To make the new development more sustainable, the site benefits from a central hot water and heat supply provided by E.ON Heat. My neighbours in the other four flats and myself are now in the eighth day of having no hot water or heating, at the height of the freezing January weather.

IEA-DHC announces new Call for Proposals
The International Energy Agency Technology Collaboration Programme on District Heating and Cooling (IEA-DHC) is the only global research programme for this technology. Supported by BEIS, the UK is a member of IEA-DHC. The Call for Proposals for Annex XII of this programme has just been launched and full details can be found at www.iea-dhc.org. The deadline for proposals is 15 February 2017. Potential bidders are encouraged to contact the UK representative Robin Wiltshire at robin.wiltshire@bre.co.uk

MSP visits Knightswood district heating energy centre in the Gorget (Clydebank Post)
9 February 2017
KNIGHTSWOOD residents welcomed an MSP visit last week to see how a new heating energy centre could save money on fuel bills. Bob Doris MSP, convenor of the Scottish Parliament’s local government and communities committee, visited Cube Housing Association’s innovative district heating energy centre near Gorget Quadrant.

District Heating Heats Up in the U.K. (Energy Manager Today)
February 8, 2017
District heating is a hot item in the United Kingdom. Earlier this month, the Building Engineering Services Association (BESA) said that it will create the UK’s first test standard for heat interface units (HIUs).

Energy policy chief hails UK district heating boom (DecentralizedEnergy.com)
07/02/2017
The UK’s chief energy policy adviser at the Danish Embassy believes British district heating is booming. Ian Manders pointed to the rise in value of district heating contract tenders issued in 2016 for the public sector. That value quadrupled, rising to £350m from just £76m the year before. The Danish Embassy, which monitors contracts as part of its information service to Danish companies providing services to the UK, estimates that over half a billion pounds of public sector contracts have been awarded in the UK.

Energy customers locked into a costly scheme who have no right to switch (The Observer)
5 February 2017

District Heating is heralded as the way to a greener future. But, Anna Tims reports, it’s been rolled out without any regulation. Amongst those who feel trapped is Steve Wyatt, who bought a one-bed flat in Barratt Homes’ Jefferson Plaza in east London a year ago. He doesn’t recall the agent mentioning the District Heating scheme, but he was aware it was operated by e.on, which supplies 22,000 customers over 60 networks.

International News

Hamburg considers innovative heat storage scheme (energypost.eu)
February 8, 2017
Institutions in Hamburg are proposing to build a large underground thermal heat storage system that could supply roughly a quarter of the city’s heating needs with waste heat from industrial and power plants. If successful, it would make Vattenfall’s plans to realise a CO2-neutral district heating network superfluous. It could also serve as an example for other cities.

How district heating could help decarbonise 50% of Europe’s total energy demand (RE-update)
February 7, 2017
District heating currently accounts for 10% of Europe’s building heat supply, and a recently approved strategy by Heat Roadmap Europe wants to increase this to 50% by 2050 by a combination of demand reduction coupled with waste heat utilisation, thermal storage and grid integration. Overall, planners have realised that if Europe is to have any hope of meeting the targets set out during the Paris climate change summit, heating and cooling must fully decarbonise by 2050. This is because decarbonisation may be much more difficult to achieve in industries such as aviation and shipping, with aviation alone expected to treble its share of the 2°C carbon budget by 2050.

IEA Renewables & Cooling Workshop
7 February 2017
This workshop brought together key policy-makers, industry and experts to identify policy success factors, as well as challenges that need to be addressed. While renewable heat markets are very diverse and often location-specific, the workshop distilled some policy recommendations that are more widely applicable. The main focus was on renewable heat but we will also address broader low-carbon solutions for both heating and cooling.

EU Efficient district heating and cooling systems in the EU
January 2017
Based on a holistic case studies analysis of 8 efficient district heating and cooling systems in different European Member States (Denmark, Estonia, France, Germany, Italy, Spain and Sweden), the study identifies the key factors enabling to develop high quality, efficient and low-carbon DHC systems, discusses how these key success factors can be replicated in the EU and provides a better view on the role and features of these systems, which can provide an evolutive backbone to balanced energy transitions. Finally, it suggests some potential policy guidelines to support their deployment.

Events

PLANHEAT launching event: 3rd European Congress of Local Governments
Mar 27th, 2017- Mar 28th, 2017 | Krakow, Poland
Come to the 3rd European Congress of Local Governments, taking place in Krakow, Poland, on 27-28 March 2017. The PLANHEAT team will welcome you at a dedicated exhibition stand as well as at the panel discussion ‘Empowering public authorities in the development of sustainable plans for low carbon heating and cooling in Europe’ and two workshops. You will have a chance to learn about the project as well as discover the project validation cities: Antwerp, Lecce and Velika Gorica.

District Heating Workshop 2017
Thursday 23rd March 9am – 2pm Venue:The Building Centre, 26 Store Street, London, WC1E 7BT
Register Today: Email jasmine.wang@rehau.com or click on the link below Website: www.rehau.co.uk/districtheating

Following the success of the REHAU District Heating workshops in 2016, REHAU is returning in 2017 with a new format for their District Heating Workshops. The first stop is in London at The Building Centre in March.

Taking place on Thursday 23rd March, the free event will include a line-up of expert speakers from across the industry.

Can the Swedish district heating model work in the UK? (CIBSE CHP Group)
12 April 2017
CIBSE CHP-DH group and Heat Networks are happy to invite you to a special event at the Swedish Embassy in central London on the evening of Wednesday the 12th of April from 5.30pm to 8pm

Embassy of Sweden – Alströmersalen 11 Montagu Place, London, W1H 2AL

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