Currently 115 local authorities have received financial support from DECC to investigate 180 district heating opportunities across the UK. These investigations have been bolstered further by an announcement in November 2015 that the UK government would be dedicating a further £300 million to unlock up to £2 billion worth of investment into heat networks in the UK by 2020.
In order to deliver this ambitious target, the UK will need to invest in building capability and skills which do not yet exist at scale within the market. To fill this gap the country is turning to Northern Europe, where technology providers and installers have established track records in building and operating low carbon district heating schemes in similar market conditions.
Simultaneously, the UK will need significant amounts of investment capital geared towards long term energy infrastructure. Innovative business models, designed to meet the quirks of the UK market, are necessary to reduce actual and perceived risks associated with heat network investment.
Meeting this gap in technical skills and funding will provide a secure long-term investment platform for pension funds and insurance companies, connecting a stable economy with stable climate legislation. These developments in the UK are an attractive and safe opportunity for businesses and investors.
This renewed policy emphasis on low carbon heat will fill the gap identified by the UK government’s third Progress Report on Renewable Energy published by the Department of Energy and Climate Change (DECC).
Although renewable generation in electricity is on track to meet a 30 percent share in 2020, there are long-term concerns about the 12 percent share of renewable generation in heating and cooling. In 2014 this share was less than 5 percent and there is a need for additional policy support to accelerate deployment, which was recommended for 2016 onwards.
Unlike the transport sector, where progress in meeting the future low carbon targets is dependent on technology innovations – which are rapidly developing – the technology to meet the demands for low carbon heating have existed for decades and have been deployed with great success outside the UK. District heating in particular has been successful in increasing the share of renewable and low carbon heat generation in Scandinavia, and is currently being deployed at scale in Germany through its CHP Act 2016.
The UK has been resistant to introducing district heating in the past due to some bad experiences with inefficient and expensive experiments in the 1960s and 1970s. However, the Heat Networks Delivery Unit (HNDU) at DECC has been working since 2013 to assist local authorities with accelerating the identification and investigation of heat network opportunities in their areas. Landmark schemes, such as the Bunhill Energy Centre in Islington in North London, or the Aberdeen Heat and Power Company in Scotland, are helping to shift a persistent public perception that district heating is an inferior alternative to individual gas boilers.
There is a convergence of conditions that create a favourable market: a clear commitment from government; significant scope for project development; and a varied group of stakeholders united in saying and doing the right things. We hope that this brings about an unprecedented acceleration of deployment, which will enable the UK sit alongside other northern Europe nations and become a leading example of how to develop an economically and environmentally sustainable system for low carbon heat.
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