In London both Government and the Greater London Authority require developers of large scale projects to install district heating systems to comply with planning policy. Combined Heat and Power (CHP) and district energy schemes are now a common feature of mixed use developments and major estate regeneration schemes.
One example is the Bunhill energy centre, supplying heat to more than 850 homes and commercial buildings in the Bunhill Ward of Islington. This is now being expanded using waste heat from the tube network and new CHP engines as part of Islington Council’s aspirations of establishing a borough wide district heating and power network.
Another example is the Kings Cross Energy Centre supplying energy to new homes and commercial buildings across the Kings Cross Central Estate.
The Queen Elizabeth Olympic Park and Stratford City District Energy Scheme, was originally developed to provide heat to the Olympic Village but as part of the 2012 legacy is now providing energy to all new commercial and residential developments in the former athlete’s village.
One of the features of district systems is that it can help establish a sense of place and ownership within the community. It can help tackle fuel poverty by providing cheaper, cleaner heat and power, and generate income that can be invested back into the community to improve the environment by capitalising on the community’s assets.
However, the challenges of installation, operation and system maintenance can often be overlooked by developers. For commercial reasons these responsibilities are more often than not outsourced to a third party such as an Energy Service Company (ESCo). Issues about covenant strength, capitalisation, energy pricing and supply resilience are all material and aspects of concern for investors and occupiers.
Investors, purchasers and occupiers all need to give consideration to the legal structures and performance obligations vested in ESCo businesses when considering involvement in schemes served by district systems. The supplier’s business terms will not be same as those of a national utility and additional charges covering standing losses, maintenance and management of the network can significantly increase cost in the long term.
Whilst this is a growing initiative in the UK as a result of planning legislation, the technology is not new and has been used in some European countries for many years and the lessons regarding maintenance and life expectancy are well known.
District energy’s importance will grow in the coming years, with the need to improve energy security and find low carbon alternatives to combat climate change. However, careful consideration needs to be given to how district systems are installed, operated and maintained to ensure that the systems achieve the desired goals over the longer term and help ensure that the development creates a sense of place.