What will the Future of District Energy be in the UK?

Transcription

1 What will the Future of District Energy be in the UK?

2 Who are we? Why is the UK interested in District Energy? History of District Energy in the UK What is happening now Market Structure Types of Schemes and the Future

3 Who are we?

4 Who are we? UKDEA is a Non Trade not for profit association, working together to: Offer guidance to other organisations, particularly LA s Raise awareness of district energy as a low carbon solution and the benefits that it can deliver Members of the UKDEA gain the tools & support they need to develop & expand their schemes Started in 2010 with 6 Founder Full Members from the main LA led schemes in the UK Now over 150 members and growing rapidly All major district energy schemes in the UK are represented by the UKDEA

5 Our Work Our Work Streams include: Free help and advice to members Members are happy to help each other and often work together on issues Market Surveys understanding the existing extent of DE across the UK Policy research identifying the impacts of EU & UK policy, on DE Consultation responses & Government engagement making sure members views are effectively represented Technical R&D Design and Information Notes Information & Raising Awareness APP which is a Guide for local authorities and other organisations seeking to develop DE in the UK Customer Protection - important industry wide issue and UKDEA are members of the Steering Committee overseeing the Heat Trust

6 UKDEA Today Lerwick Our ~ 150 Members supply over 700 GWh of low carbon heat each year via over 200 km of buried networks Newcastle 4% Sheffield Manchester Birmingham Newport Southampton Exeter Nottingham Leicester Coventry Milton Keynes Woking London Olympics and Stratford City Bloomsbury Heat & Power Whitehall Citigen Energy from Waste, 54% Gas Fired CHP, 42%

7 Membership Categories Full Members Equipment Suppliers Associate Members Education & Research Installers Scheme Developers, Owners & Partners Service Providers Consultants & Advisors Interested LA s & Developers

8 Why is the UK interested in District Energy

9 Heat in the UK? Energy Usage for Heat, Transport, Other: % 13% 39% Transport Heat Other, including power UK has the most extensive gas grid in Europe, covering c80% of houses UK has largest market for gas boilers in Europe, around 1.6 million installed in homes each year 9

10 Why District Energy? our messages Using a network can bring economies of scale that a single building cannot deliver -> captures the potential to use low carbon heat sources on a wider scale Can use many different energy sources i.e. not just a gas fired CHP Can use waste heat Connecting buildings together with differing energy demand profiles, i.e. dwellings and offices can present a flatter demand profile which is more efficient for most heat sources Can deliver operating cost savings on a whole life cycle basis

11 CHP District Energy is Technology Agnostic Energy from Waste Facilities Gas fired CHP Possible Sources of Energy Biomass, i.e. wood boilers, anaerobic digestion Waste Heat from industry Geothermal and ground source or water source heat pumps

12 History of District Energy in the UK

13 Is this a new concept? Government were encouraging local authorities to develop district heating schemes Over 45 years later.. the government is still encouraging local authorities to develop district heating schemes percentage of heat supplied by networks ~ 2%

14 What Happened? Historically, district energy in the UK had a very bad reputation due to poor: o installation joint failures o pipe systems insulation/pipe failures o control poor heat distribution across the network o water treatment internal corrosion and pipe failure Many urban areas contained a scheme in 1950s/60s > most now removed New breed of schemes leading the way - earliest commenced in 1980s Still only a small number of large scale schemes in the UK...

15 How Many Networks are there? Government levels of research have been poor to date 2013 national survey, but necessary disclosure agreements were not put in place hence little could be published new more detailed survey, but still to be published 2013 survey results 1765 individual District Heating Networks (focused on housing) in the database. Heat networks in the UK are predominantly small. 75% average of 35 residential dwellings Majority (85%) of small networks were built before 1990 with a small increase post 1990 (10%) 70 per cent of large networks were built before 1990 but a further 30 per cent were built after 2000 London has over half the heat networks in the UK (55%) Size category No. of Networks Average number of dwellings per network 1 Average number of nondomestic buildings per network 1 Small 1,280 75% 35 - Medium % Large 75 5% 1, Not classified 90 5% Total 1,765

16 Split of Existing Heat Networks Source BSRIA Private - Commercial & Industrial, 20% Universities, 5% Hospitals, 15% Public Networks, 60% Mainly older existing Local Authority housing estate Schemes

17 Geographic Spread of Dwellings with District Heating (as % of dwellings in area)

18 How do we compare to Europe?

19 What happened for over 40 years? Lack of clear targets Limited and variable fiscal incentives Poor standards of design, materials and installation meant many schemes were removed No real clear indicator to the market that the UK was really interested in district heating Therefore market and levels of expertise required failed to develop Has this changed yes!

20 What is Happening Now?

21 2010 -> (same year as we were formed!)

22 What s happening now? DECC have a Heat Focus a Heat Infrastructure Team and a Head of Heat Infrastructure Local Authorities are best placed to lead projects and over 10M awarded to ~ 140 LA s (20% of all in UK) to explore the development of 180 projects (HNDU) Independent Consumer Regulation CODES of Practice And! 330M of Capital Grant/Loan Funding to support the development of networks over the next 4 years (Heat Network Investment Project HNIP)

23 Structure of UK Government in relation to heat networks? UK Government (BEIS) Heat Infrastructure Team Heat Network Delivery Unit (HNDU) Heat Network Investment Project (HNIP) Heat Policy 23

24 The Public Sector Opportunity anticipated funding sources and commercial structuresheads of terms with anchor load customersfinancial modeldelivery plandetailed technical design and carbon savings- HNDU application Continuing Fund (already expended over 10M -securing remaining investment -locking down contracts with anchor load customers -finalising financial modelling -procuring and negotiating delivery contract -commissioning final design if procured separately HNIP application Next Funding Rounds Late 2017 total fund 300M

25 Other Support for Heat Networks Many Local Authorities have planning obligations which encourage the development of and connection to heat networks, i.e Southampton and Leicester London is particularly well developed > two levels Greater London Authority (GLA) London Boroughs Planning and Building regulations in London now require new schemes of any size (essentially any high density/apartments) to be fitted with a centralised system and made ready to connect to a wider network Gas fired CHP was favoured until recently but due to NOx issues are now less favourably than other sources, i.e. waste heat EfW etc..

26 Market Structure

27 Market Structure Equipment Suppliers Equipment Suppliers includes pre-insulated pipe suppliers (~ 12 in UK), HIU s/metering equipment and energy centre generation equipment (biomass and gas fired CHP s etc ) a varied and rapidly expanding segment O&M Contractors ESCO s, Developers and General D&B Contractors Installers Installers limited market dominated by one player with a number of small companies and emerging players O&M Contractors limited number of companies with expertise for energy centres and networks who want to offer a O&M with no ESCO contract, although there are a wider range of generalists who tender for O&M of existing LA housing schemes Consultants & Advisors Consultants a key element of the UK market but with limited detailed knowledge. However clients rely heavily on their advisors.

28 Types of Schemes and the Future?

29 What types of Schemes have historically been developed? A. Small number of existing large scale LA led or partnered concession schemes Other varied development methods/ownerships Nottingham (160 GWh) originally a partnership between the Council and private sector, now wholly owned by the Council Southampton (40 GWh), Birmingham (60 GWh) Leicester (100 GWh) Coventry (10 GWh) Olympic Park (40 GWh and rising rapidly) developed by private sector under long term concession Sheffield (160 GWh) developed by the Council and other partners now owned by private sector waste contractor Citigen London (20 GWh) private sector developed under a LA concession Woking and Milton Keynes developed by Woking Borough Council Newcastle Council owned and controlled large scale schemes Byker Estate B. Large number of local authority owned and controlled schemes of varying sizes serving LA owned housing across a range of sizes generally < 500 dwellings per network Generally still operating with originally installed systems Limited addition of low carbon energy generation

30 A. Large Scale LA led or partnered scheme e(e.g. Southampton Started in the late 1980 s Typically to date will have been facilitated by the local authority with private sector development lead Local Authority provides core anchor loads and is prepared to contract for energy supply on a long term basis Funding, development and operation with private sector This is one possible model for many of the HNDU schemes ABP IKEA Parkview Civic Centre Energy Efficiency in Action BBC Energy TV Studio s Efficiency in Action Energy Efficiency in Action The Heat Station Skandia Life RSH Hospital DeVere Hotel Southampton Solent University West Quay Carnival Quays

31 B. Existing LA Group Heating Schemes (e.g. London Borough of Islington) LA owned stock of housing built in 1950 s to 1960 s which remains on district heating Largely in London but also in other main Cities, i.e. 3,000 homes in Leicester Generally LA controlled or managed but might be with housing association Most have only boilers with no low carbon energy supplies

32 Types of Schemes being developed now? Small number of energy companies focusing on new build (predominantly housing) schemes Residential housing/mixed use developers have planning obligation to install district networks Want to completely outsource this risk Generally ESCO s only become involved with delivery (construction, full long term adoption, heat supply, funding etc..) with schemes greater than 500 dwellings Predominantly in London Smaller schemes (larger number by volume) are being developed to varying standards with different outcomes Schemes being progressed with HNDU funding 180 schemes across over 100 LA s Currently at different stages HNDU funds from heat mapping/energy master planning to detailed development with HNIP now offering commercialisation and capital BEIS have published a project pipeline to provide a signpost to the industry of the potential coming out of the HNDU funded schemes Quality of the data is inconsistent and generally poor It is recognised that many of these will not be developed as potential in that specific area may actually be low or impractical to consider after initial investigation, but this will still bring a volume of projects to the market These will either be LA facilitated with private sector lead LA led and funded Heat Shipping Schemes/Schemes using waste heat BEIS/GLA promoting this concept

33 New Build Housing Schemes e.g. Greenwich Millennium Village Very efficient housing built to Code for Sustainable Homes Level 4 or above Each property individually metered ESCO has relationship with each end customer either via a deemed supply or individual agreement ESCO owns/adopts energy centre and complete on site network including repair and replacement of Heating Interface Unit (HIU) in dwelling Typically gas fired CHP with some biomass Particularly in London these schemes will have an obligation to connect to a wider network HIU

34 Local Authority led and owned scheme (e.g. Sutton) SDEN Outline Project Structure London Borough of Sutton Recession has been very hard on local authorities, the Conservative Government has slashed Council funding Predicted that Councils in many areas will not have enough money to meet all their statutory responsibilities. Opportunity Sutton Ltd Council s are therefore actively seeking opportunities for income generation or making substantial cuts in their costs Number are either considering or are already developing Municipal Energy Schemes to generate income/margins which can be recycled into general Council funds to backfill these cuts Funding might be required or it may be LA s sourced Public Works Loan Board with very low interest rates Contract with Viridor for heat supply Contract for Gas supplies to back up boilers on Felnex Site Contract for Electricity Supplies to Felnex boilers for pumps etc.. Sutton Decentralised Energy Network (SDEN) Ltd Heat Sale Agreement to Schroders & Felnex Occupiers including customer service standards etc.. Land and Asset Protection Agreements with Network Rail Land agreements for pipework with Viridor/Thames Water - Construction Contract for Network - Operation Contract for Network and Back up Boilers - Residential Customer Services and Metering and Billing Contract

35 Local Authorities as Heat Shippers?

36 The Next 5 years? Planning obligations to encourage the use of district energy are becoming more widespread Greater understanding of the benefits and wider acceptance amongst LA s and Developers Governments 330M fund to pump prime the sector Innovative new contracting structures: The economic climate has changed, many LA s want to retain any benefits from the development of the these schemes for the LA The role of the LA has changed they now have much wider powers There are many authorities already leading the way, i.e. LB Sutton, LB Barking and Dagenham forming local authority owned companies to take their schemes forward purchasing heat from third parties selling heat to private sector developers

37 Future Potential UKDEA have carried out detailed analysis to map the potential - could be 14% of heat from networks in the UK by 2050 BEIS now use this figure as their target but expect this now to be by 2030 BEIS clearly committed to district energy networks - HNIP The economic climate has changed, many LA s want to retain any benefits from the development of the scheme for the LA Next 5 years will be different and challenging with new business models emerging into a sector with very limited UK based experienced resource BEIS believe that their HNIP will deliver 2B of district energy development over the next four years

38 Simon Woodward Chairman