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By ADE Director, Tim Rotheray
As part of the Comprehensive Spending Review last November, the Chancellor announced an extension of the budget for the Renewable Heat Incentive. The good news in the announcement is that the extension helps keep heat firmly on the policy agenda. The bad news is that defining the objective for heat around renewable deployment rather than carbon reductions will drive perverse impacts.
The UK’s 2020 renewable targets are based on the Renewable Energy Directive, which defines renewable as those heat inputs which are not “man-made” (or anthropogenic if you like your syllables). So zero carbon waste heat captured from data centres, industrial manufacturers and power plants is not considered renewable. Logical you think? Not when this waste heat offers some of the lowest cost forms of carbon saving; yet it is not eligible for subsidy under the RHI. The lost opportunity is significant. The UK’s wasted heat, lost up through the cooling tower, is worth more than £3 billion a year, the equivalent of £116 on every householder’s bill!
In contrast, heat pumps use electricity to concentrate heat in lower temperature sources like the air, lakes, the sea and the ground. For every one unit of power they use they can generate between 2.5-4 units of heat and can be a great way of producing low temperature heat. However, in the European Renewable Energy Directive, heat pumps are considered renewable even if all their power comes from fossil sources. So a coal-fired heat pump is renewable!
So to review. A coal-fired heat pump? Renewable but high carbon than gas. Capturing waste heat from a data centre? Zero carbon* and not renewable.
But it gets worse... a heat pump that concentrates ambient air temperature to make heat, such as by capturing the air from a refrigeration system vent, can boost its efficiency and save more carbon by using warmer air sources. Yet if the heat pump does this, it is no longer classed as renewable. So by making a heat pump more efficient with lower carbon emissions you make it ineligible for renewable subsidy. I am a fan of heat pumps - they are clever ways of increasing efficiency but we are currently making sure we minimise their efficiency!
The (unintended) consequence is a policy that penalises efficiency.
DECC is currently reviewing the RHI and its focus, with an aim to reform it to improve value for money. Given the European rules on renewable heat support, DECC needs to consider what constitutes a good outcome for its reforms.
I would suggest that a good outcome would achieve two aims:
- Least cost achievement of our renewable target. We have a 2020 target we are bound to meet, and we should always do so at least cost. Spending money unnecessarily is bad value for the taxpayers that fund it. This means considering everything on the basis of pound of subsidy per MWh of renewable energy, supporting the lowest cost options first.
- Tie the RHI support to carbon abatement. The point of renewables is to reduce the carbon impact of energy, and we must ensure the RHI actually achieves this aim and at lowest cost. The RHI should ensure that only good value carbon abatement is procured.
What would these proposals look like in practice?
It means that there should be a clear measure in any Impact Assessment of the cost per kWh of renewable heat generation and cost per tonne of carbon abated for each technology supported (off and on the gas grid). It would also mean a carbon abatement price ceiling – perhaps £200/tonne – to prevent subsidising the most expensive forms of carbon abatement. DECC should also develop proposals to see how heat recovery could receive equitable support as technologies classed as renewable.
Decarbonising heat, which is half our energy use, is already set to be a difficult task, so we must do it with a very sharp eye on cost. The current RHI provides support for carbon abatement in excess of £800/tonne. This is poor value for customers. The government's review offers the chance to ensure that taxpayers get better value for their money to deliver what we’re actually trying to achieve: A lower carbon economy.
*zero carbon as the heat has to be removed and will be rejected. Capturing and using that heat has no net increase in emissions.
By Hanaé Chauvaud de Rochefort, Policy Manager at the ADE, as featured in the February issue of Energy in Buildings and Industry. Visit www.energyzine.co.uk to get your copy.
For many years, the traditional approach to generating energy centrally has dominated, with the vast potential for local authorities to play a role the UK’s low carbon energy transition overshadowed. Yet forward thinking local authorities, from Aberdeen to Southampton, have quietly begun to develop and operate their own energy projects.
In the November 2015 Spending Review, Government announced £300m in funding will be made available for up to 200 heat networks, providing a starting block for district heating opportunities across the UK. With the right policy framework in place, district heating could revolutionise the way Britons heat their homes and other properties in the years to come.
District heating is the provision of heat and hot water to multiple properties from a single community energycentre. The energy centre houses the heat generators and the electrical pumps which pipe the hot water to connected properties via a network of insulated pipes. Any source of heat can be connected to district heating with common options including gas-fired combined heat and power (CHP), biomass boilers, energy from waste and large heat pumps. District heating can help consumers access more local, lower carbon and more cost effective sources of heat.
Heat networks are not new in the UK, with the majority of existing schemes developed in the 1960s. The rise of the individual gas boiler in the 1970s and 1980s saw the number of new schemes decline, until now where they are growing in prominence once again.
According to government estimates, just short of half a million UK households are already connected to district heating systems with the figure predicted to rise to as many as 4 million by 2030. But it is not just homes that can be connected; commercial properties, public buildings, schools and swimming pools can all receive their heating and cooling needs from heat networks. The value of the total UK district heating market is estimated to be £400 million in 2012, and district heating delivers additional value through carbon savings.
District heating is already delivering at scale in cities such as London, Nottingham, Edinburgh, Sheffield or Exeter and is in planning in excess of 150 local authorities thanks to strong planning regulations and recent Government backed feasibility studies funded through the Heat Networks Delivery Unit (HNDU).
In London alone, Mayor Boris Johnson has committed to ensuring that 25% of London's energy is delivered by decentralised energy by 2025. The mayor's office actively supports a programme identifying potential district heating opportunities and helping the boroughs implement them through planning policies that encourage or even require decentralised energy use in new developments.
Increasingly, local authorities are seeing district heating as a key tool to control energy costs and tackle fuel poverty while reducing carbon emissions and providing jobs for local people. Seizing the opportunity of decentralised energy generation can provide new long-term income streams for communities and councils, particularly in an environment where local government budgets are under pressure.
The ownership and operation of heat networks often fall upon two or more stakeholders from various backgrounds such as local authorities, private companies, building developers, contractors and investors. Resources to bring together these stakeholders, and the time and energy to learn new skills to deal with the necessary planning and financing of a district heating project, often come as a challenge which deters many Council officers and Councillors.
The introduction of HNDU to provide resources to local authorities in the early stages of planning has helped get the ball rolling on over 180 projects, with 15 now ready to attract circa £112 million in investment. The total pipeline of projects created through HNDU could attract over £2 billion in capital infrastructure investment, thus placing the UK in pole position to develop the local supply chain and create more jobs.
But the successful deployment of district heating in the coming years will rely on the implementation of policies that will continue to address the barriers that prevent the multiplication of heat networks and ESCo businesses.
The £300 million funding is great news for this fledgling industry, but the question now is how to spend the money cost effectively to progress from plans to pipes. We have identified three key policies to ensure the opportunities from this new funding are maximised:
1- HNDU needs to be pursued to ensure strong coordination that helps bring interested stakeholders together. The Unit's role should be continued and extended to support development all the way from securing planning agreement through to commercialisation and financial close. This recommendation is central to maintaining a pipeline of investable projects. Investors will only develop internal knowledge in district heating if concrete investment opportunities exist. This recommendation is central to maintaining a policy pipeline.
2- A Government guarantee on heat demand for a pool of local authority projects is key to getting larger, better-value schemes into development at low cost to taxpayers.
Uncertainty over the timing and scale of new heat users connecting to the network is often cited by infrastructure investors as a barrier to their market participation. For investors to secure returns on their long-term investment, contracts must address the risks inherent to the project and allocate risks to the stakeholders that can better manage them.
Local authorities willing to leverage long-term finance can take some of the offtake risk, which they can mitigate by connecting public sector buildings to the network, such as civic buildings, schools and affordable housing.
3-Exempt district heating networks from punitive business rates: District heating networks do not have the same status as gas and electricity networks. Heat network customers are subject to business rates not applicable to gas and power infrastructure. These costs increase heating bills by as much as 20%. These punitive costs can be particularly damaging when projects are aimed at cutting fuel poverty. This is the most immediate issue facing district heating networks.
By implementing these three policies capital costs will fall enabling heat projects to compete fairly with other infrastructure, and stimulate the level of investment needed to realise Government’s ambition to secure a low carbon and secure energy system in the most cost effective way.
As Combined Heat and Power (CHP) systems continue to grow in popularity, Edward Garside, Project Engineer at Bosch Commercial and Industrial, explains how to stay compliant with power generation legislation.
“As a CHP module is effectively a power supply embedded within a building that is connected to the national grid, there are parameters surrounding its safe installation. Set out by the Energy Networks Association, G59 is a set of provisions ensuring the module will operate in a safe manner compatible with the National Grid.
“To combat inadequacies in the electrical infrastructure, G59 regulates generator applications so they cannot be connected to the grid without the knowledge and permission of the local electricity authority.
“The legislation, specifically ‘G59/3’, is programmed into a device called a G59 protection relay which has the ability to automatically disconnect the CHP unit in the event of a power cut or fault on the network, and as such keeps the wider supply safe and secure. Any generator rated above 16 Amps per phase and connected to the national grid must be fitted with a G59 relay in order to comply with G59/3 legislation.
“Put simply, the protection relay monitors the quality and stability of the mains electricity in accordance with the District Network Operator (DNO) and assesses the voltage, frequency, and phase angle. Should any of these areas go outside the predetermined limits, the relay will cause a protective circuit breaker to open and thereby disconnecting the generator from the grid.
“As part of the connection process of a CHP module or power generation source to the National Grid, there are a number of aspects the DNO will consider. The result feeds into what is called a G59 Parallel Running Agreement document, which permits the operator of a CHP system to generate electricity with the National Grid. It is important to remember that this agreement is needed regardless of whether or not a generator will export electricity.
“Often the DNO will wish to see proof of G59/3 compliance in the form of a witness test, whereby a representative of the DNO, a G59 test engineer and CHP engineer attend the site and to observe the testing of the G59 relay.
Importance of pre-planning
“After a G59 application has been submitted the DNO has up to 45 working days to send out the results of their network study and provide a formal quotation for any fees required. If the DNO requests a G59 witness test, this will have to be booked following payment of any fees listed on their quotation. They typically attend the site for a witness test within a few weeks of notice however, there is no set notice period and with limited availability of staff it is advisable to book well in advance.
“There can be a lot to take into account when installing CHP modules, but by working closely with those involved in the supply and installation of a CHP system, compliance with regulations such as G59 needn’t be a mystery.”
For more information on Bosch Commercial and Industrial and its market-leading range of CHP systems, visit www.bosch-industrial.co.uk or call 0330 123 3004. Alternatively, follow Bosch Commercial and Industrial on Twitter (@BoschHeating_UK) and LinkedIn (Bosch Commercial and Industrial UK).
Press Enquiries to:
By Gareth Jones, Managing Director of FairHeat
The Heat Networks: Code of Practice, developed by the Association for Decentralised Energy (ADE) and Chartered Institute of Building Services Engineers (CIBSE), was launched to much fanfare last year. The timing couldn’t have been better. Largely prompted by the new Heat Networks (Metering & Billing) Regulations, there had been much discussion, then angst, over what ‘normal’ levels of network losses were. As those discussions continued there seemed to be a dawning realisation that we haven’t been particularly good at doing heat networks in the UK, with network losses of over 50 per cent being fairly common place.
As such, it was taken as very welcome news that there was a better way of doing things and the Heat Networks Code of Practice was widely seized on as being the solution.
Now some of the party euphoria has dissipated and people are starting to grapple with the issue of how to make it all work in practice, the question needs to be asked: Is the Heat Networks Code of Practice actually going to make a difference?
Having just worked on several projects in which the Code of Practice has featured heavily, I am pleased to report that the answer appears to be “yes”.
The PI problem and the Code
One of the key reasons that the Code of Practice is having an impact, is that it provides a counter balance to the pressure from professional indemnity (PI) insurance to be conservative.
Historically there have been a number of factors that have prompted M&E designers to take a conservative approach when designing heat networks (read: “designing systems that are grossly oversized”). However, the single most significant factor in oversizing has been concerns over PI insurance.
As one person put it “no one ever got sued for delivering too much heat to the furthest flat in the network”.
That might be about to change.
In the introduction to the Code of Practice, there is some welcome wording about how the Code of Practice’s Minimum Requirements have been set to achieve minimum acceptable standards. This effectively flips the whole PI issue on its head.
If I, hypothetical chartered engineer, design a heat network that does not meet the minimum requirements of the Code of Practice, then I am effectively failing to meet “minimum acceptable standards”, as set out in black and white by the authority on building services engineering.
Given that much of the Heat Networks Code of Practice is focused on ensuring that systems are efficient, engineers who design systems that deliver “abundant heat” to the furthest flat of a heat network without taking into consideration overall efficiency may well find their PI insurance getting a work-out, as disgruntled clients sue them for the cost of elevated losses over the lifetime of that heat network.
While this has not yet been put to the test in the courtroom (to my knowledge), it is already influencing behaviour.
The Code as substitute for missing Employer’s Requirements
As an example, earlier this year FairHeat (the specialist heat network consultancy I co-founded) was engaged by a private developer in London to assist them on a project where they felt that the design was oversized. Apparently the process had reached an impasse, with the client demanding change on one side, but with the consultant holding their ground on the other side and simply pointing to their PI insurance.
The starting point was to review the client’s Employer’s Requirements. Unfortunately these were substantially absent from a heat networks perspective and as a consequence there was no real contractual lever in place.
There was, however, the draft version of the Heat Networks Code of Practice in circulation (this was in February). So we produced a report that set out the implications of the “minimum industry standards” wording in the introduction (as it was in the draft), then produced a table showing all of the Minimum Design Requirements (Part 3) from the Code of Practice, along with an assessment of whether the consultant’s design met those requirements.
Which it didn’t.
To the consultant’s credit, they assessed the situation, took the points on board and entered into constructive dialogue, with the result being that the final system will be significantly more efficient, have lower operating costs and cost less to build (smaller pipes cost less).
The most interesting feature of this whole process was the fact that, from a contractual perspective, the Code of Practice effectively stepped into the breach for the missing Employer’s Requirements and provided a lever for ensuring compliance to “minimum industry standards”.
Specifying the Code
However, while acknowledging that the Code of Practice stepped into the breach in the case above, it is no substitute for a tight set of Employer’s Requirements. While the Code of Practice provides an excellent framework for guiding behaviour, it requires further structure for it to be useful within a contractual framework.
Recently FairHeat has been assisting a number of private developers and social housing organisations in ‘specifying’ the Heat Networks Code of Practice.
Rather than trying to replicate existing documents, we have worked with each client to produce a ‘Design Supplement’ for heat networks on their developments. This Design Supplement acts as a bridge between clients’ existing Employer’s Requirements and the Heat Networks Code of Practice.
The great thing about having the Code of Practice as a framework is that it has allowed our clients to focus on the key questions and determine what approach they want to take in relation to those specific issues, with the remaining bulk of issues being covered by the Code of Practice minimum requirements.
It has also helped to focus attention on the fact that it is not just the design approach that needs to change, but rather the whole end-to-end process. Indeed, we have found that getting the design right has proved to be the easier part of the equation. The real challenge is in assisting clients to put in place the requisite processes and organisational structures in order to ensure that designs are implemented correctly. This is as much about organisational change management as it is about engineering.
Achieving this change is vital if we are to deliver efficient heat networks.
In work that Guru Systems (FairHeat’s sister company) is carrying out as part of a Government-funded project to improve the efficiency of heat networks, we have identified that approximately 50 per cent of the ‘efficiency gap’ on schemes we have reviewed has been due to poor design (mainly oversizing), with the other 50 per cent due to issues with implementation – e.g. failure to properly insulate, poor HIU commissioning, etc.
As such, we (as an industry) need to work on getting both the design and the process right.
Which is why the Heat Networks Code of Practice encompasses the whole end-to-end process.
Pleasingly, I can report that the Code of Practice is providing a good framework for implementing change. Indeed, several developers and social housing organisations we are working with are making fairly radical adjustments to the way they are tackling new developments thanks to the Code of Practice.
Thinking back only two years, this represents such a seismic shift in attitude that I can’t help but feel confident that the Code of Practice will end up providing the enabling framework that we have needed for delivering highly efficient heat networks in the UK.
So, unlike a number of other initiatives that have faded away into the ether, it looks like the Heat Networks Code of Practice is living up to its star billing.
Written by Dr Steven Fawkes and kindly republished with his permission.
For more fantastic articles on energy efficiency/productivity and finance check out Steven's blog onlyelevenpercent.com where this article was originally published.
For those of us who have worked in energy efficiency a long time it sometimes seems as if the moment has come, the moment when the world has finally recognized the value of improving efficiency, the fact that there is huge potential which is economic today using today’s technologies with no subsidies, and that improving energy efficiency brings with it massive non-energy benefits such as job creation, productivity and improved health and well being. All, and I say all lightly as it is no small task, we need to do now is work out how take advantage of that huge economic potential that we know is out there. We are advancing quickly on that journey with projects like the Investor Confidence Project, the continuation of the work of the Energy Efficiency Financial Institutions Group (EEFIG) on establishing a common under-writing framework for energy efficiency (supported by the EU), and new business models. An increasing amount of capital is committed to finding ways of investing into efficiency – now we just need to make if possible for that investment to flow by breaking down the institutional and cultural barriers.
In the UK the energy policy reset has dealt with supply options (mainly promoting new nuclear and shale gas) but remains silent on efficiency. For the record I am against new nuclear (especially with unproven French or Chinese technology) because of cost and security concerns. I am in favour of shale gas on energy security grounds assuming we can exploit it cheaply. In any event, these supply options will take at least a decade (almost certainly more in the case of new nuclear) to take effect. Meanwhile we are sitting on a huge reserve of very cost-effective energy efficiency potential that is not being exploited and which could be unlocked very quickly. Almost every day we see cases of buildings, in some cases very new buildings, making savings of 10 to 30%, often with little or no investment. Everyone talks about the declining cost of solar but we also need to recognize the declining cost of delivering efficiency. We need to build on that base of activity and accelerate demand, supply and financing of efficiency and hence rebalance the emphasis on supply options.
One way of doing that may be to stop using the term energy efficiency all together. Having worked in the field for so long, and finally having the subject get more recognition, this may seem like a strange proposal but energy efficiency has all kinds of problems as a label. It is a confusing technical term, it is boring to most people, it still has negative connotations of saving and getting by on less, it threatens energy suppliers, it is invisible, it does not lend itself to photo opportunities and big political announcements, and it leads to all kinds of pointless, endlessly resurfacing, debates based on the Jevons paradox.
We need to truly reset energy policy and focus on energy productivity –the amount of value we create out of a given amount of energy (GDP/energy input). Productivity is positive. Improving productivity generates wealth. No-one can be against improving productivity. Of course for any particular country energy productivity is made up of two elements, the overall structure of industry and the economy, and the level of actual energy efficiency.
In the UK tackling the country’s poor productivity record is core to the Chancellor’s economic strategy – we need to make sure energy productivity is part of that discussion and so far it clearly isn’t.
In July the Treasury published a document, “Fixing the Foundations: Creating a More Prosperous Nation”. Chapter 6 is called “Reliable and low-carbon energy at a price we can afford”. This does start by talking about “improving productivity in energy generation, production, supply and usage” (a good start). It then goes on to talk about more competitive markets and introducing the ability to switch suppliers within 24 hours. Competitive markets are generally good but the problem we have is that energy efficiency cannot compete with energy supply – there is no market for efficiency, only markets for stuff that results in efficiency. We now have the technology to meter efficiency and California is moving towards a market where efficiency can be measured, metered and truly compete in the energy market. We are developing new business models based on this idea. Personally I fail to see how 24 hour switching contributes to productivity. The rest of the points in this chapter mention supply, oil and gas, shale, new nuclear, and the EU’s Energy Union. In a strange final bullet point printed in red the now on-going review of business energy tax was flagged. It is almost as if they ran out of ideas and this chapter wasn’t quite finished.
So, apart from the statement “improving productivity in energy generation, production, supply and usage” there is no mention of productivity and no linkage to overall energy productivity – and no mention of energy efficiency. Efficiency is mentioned in the chapter on Planning and housing – flagging the decision not to proceed with zero carbon homes and saying they will keep energy efficiency standards under review. The energy chapter is the old 1970s style supply side dominated model in new clothes - “the economy will grow and we will provide whatever energy we need” – rather than focusing on improving energy productivity.
We need to start talking about energy productivity at the macro and the micro level, recognize the economic benefits that come from improved energy productivity (arising from energy cost savings, improved energy security, improved health, reduced need to invest in new supply options etc etc), and set national targets for energy productivity. To support that we need to aggressively promote energy efficiency (that is to say energy productivity at plant and building level) and really start to exploit the massive cost-effective energy reserve the efficiency potential represents, a reserve which is cheaper than any supply-side option, faster to bring on-stream, and by far cleaner than any other option.
So maybe we shouldn’t forget about energy efficiency all together, just rename it energy productivity.
Fixing the Foundations can be found at:
Information on the Investor Confidence Project: europe.eeperformance.org
The EEFIG report can be found at: