A new £320m funding drive aimed at boosting low carbon sources of heating for homes and businesses has been officially launched by the government this week in a bid to stimulate private investment in expanding the number of heat networks in towns and cities across the UK.
The launch of the Heat Networks Investment Project (HNIP) was announced as part of Green GB Week, bringing together £320m of government loans and grants and additional investment from a host of energy companies, including Engie, E.ON, Vattenfall, SSE, and Metropolitan.
The aim is to leverage up to £1bn of private and institutional investment in accelerating the design and construction of low carbon heat networks in a bid to cut emissions from what is widely seen as a hard-to-decarbonise sector of the economy.
Investment manager Triple Point has been appointed by the government to deliver the project, and will be responsible for identifying viable low carbon heating projects in which to invest the money. Likely targets include residential and commercial property developments and industrial parks, where heating networks can be shared across multiple properties. Triple Point said projects would need to demonstrate long-term sustainable market returns in order to attract additional institutional and private investment. In the long term it estimates the full private investment potential of the low carbon heating market could reach between £16.5bn and £22bn by 2030. Consultants and legal services specialists supporting the project also include AECOM, Amberside Advisers, LuxNova Partners, BDO, Ecuity and GemServ.
Ken Hunnisett, project director at Triple Point Heat Networks Investment Management, welcomed the “hugely important” new initiative. “This will help to deliver the cost-effective carbon savings the UK government needs to meet the country’s carbon reduction commitments,” he said. There are an estimated 14,000 heat networks or district heating schemes in the UK helping to supply low carbon heating to hospitals, tower blocks and urban mixed developments of housing, commercial and public buildings. The heat can be supplied from a variety of sources, such as gas boilers, combined heat and power (CHP) plants, geo-thermal plants, and recovered waste heat from factories and infrastructure.
Chief executive of energy giant E.ON UK, Michael Lewis, also welcomed the new scheme. “As a country we need to tackle the issues of heating and transport if we are to meet our environmental commitments and to make our cities and streets healthier places,” he said. “At E.ON we want to play a key role in creating energy efficient communities for the future and heat networks are an important part of solving this challenge.” But the move comes as fresh concerns have been raised over the government’s wider green heat strategy. Firms have this week warned about the potential impact of proposed “knee-jerk” changes to the Renewable Heat Incentive (RHI) scheme, which were set out by the government in a consultation document released yesterday.
The proposed RHI changes seek to exclude further support for biomass installations in urban areas on the gas grid in a move designed to reduce the air pollution impact of such boilers, which can produce smoke particles, benzene, formaldehyde and other harmful hydrocarbons. “Although biomass boilers are significantly cleaner than burning solid fuel on open fires or in stoves, they still produce much higher levels of particulate matter than gas- or oil-fired alternatives,” the consultation document states. However, the Wood Heat Association – which is part of the Renewable Energy Association trade body – said the proposals could stop the installation of highly efficient and clean biomass boiler technologies in urban areas.
Neil Harrison, chair of the WHA, said he supported moves to address air pollution, but that a blanket ban rather than focusing on standards would be counterproductive. “The latest proposed reforms to the RHI risks being a knee-jerk policy reaction to the air quality crisis,” he said in a statement. “Modern biomass boilers, fitted with high-performance filters, achieve particulate emissions equivalent to that of conventional fossil fuelled boilers, while making significant carbon savings. The government should be promoting and enforcing quality standards, rather than applying a blanket ban.”
The move also comes as host of retailers confirmed they are backing the government-backed ‘Ready to Burn’ initiative, which aims to incentivise customers to switch to clean and smokeless wood fuels that can significantly reduce air pollutants. Over 50 companies, including Tesco, Sainsbury’s, B&Q, and Wickes, are now supporting the initiative and are seeking to label and promote the cleanest fuels.
The support for district heating and cleaner biomass fuels has been welcomed across the industry, but concerns are widepread that decarbonising heat remains one of the biggest challenges faced by the government’s Clean Growth Strategy. As Energy and Clean Growth Minister Claire Perry told delegates at the BusinessGreen Leaders Summit this week, she is not willing to pursue more demanding measures to drive the switch from gas boilers to cleaner alternatives until somone can explain how such a large scale national programme can be funded. The hope is that the accelerated roll out of district heating technologies could one day play a key role in providing that explanation.