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Meet your obligations with heat network regulations

Posted by Ian Allan

Monday 21th March, 2022

The future of heat networks: how to manage challenges and risks in the transition to net zero

Posted by Ian Allan

The race to net zero is shaking up the UK residential heat network sector – driving the need for much higher levels of energy and operational efficiency on the journey to affordable decarbonisation.

Heat Networks are a proven and cost-effective method of reducing the carbon intensity of UK heating but are underexploited. District and community heating schemes currently meet just 2% of heat demand. The target is to increase this market share to 18% in the countdown to net zero.

With rapid decarbonisation of the UK electricity grid, the carbon saving benefits of many of the existing natural gas CHP heat schemes are reducing. There's a need to shift away from natural gas fuelled energy centres to lower carbon alternatives, such as heat pumps, waste heat and, potentially, hydrogen.

In this blog, Ian Allan, Head of Market Strategy for Switch2 Energy, discusses the big sustainability changes ahead for the heat network sector and the challenges this will bring. He outlines the proven strategies heat suppliers can adopt to improve decarbonisation performance on both existing and new heat networks and how to mitigate risk.


All change for heat networks

The biggest change ahead is the Heat Market Framework, which will bring formal regulation to the heat sector. In its October 2021 Heat and Buildings Strategy, the government states that it intends to introduce regulation as soon as possible, with primary legislation expected in 2022.

This will mandate new technical, environmental and customer protection standards to raise sustainability performance and underpin rapid industry growth. Ofgem will be appointed as regulator to enforce the changes, while Citizens Advice will become the consumer advocacy body for heat networks. In addition, the government intends to appoint the Energy Ombudsman as the independent ombudsman scheme for consumers.

It is widely expected that the ADE CIBSE CP1 Heat Networks Code of Practice, a standard that Switch2 helped to develop and already adheres to, will provide the basis for new technical standards for the industry

The revised new CP1 2020 version introduces a significant number of new enhanced minimum requirements and includes suggested best practice requirements that go beyond basic minimum standards. It will drive further improvements in the planning, design, development, commissioning and operation of UK district and community heating schemes.

One of the key components of the new regulation is zoning. In its Heat and Buildings Strategy, the government states that it proposes to introduce heat network zones in England by 2025. This legislation is likely to give Local Authorities the powers to demand that certain buildings within the zone connect to the network, where it is cost effective to do so. This will increase heat demand and provide investor certainty to encourage further market growth. This policy has already been adopted by the Scottish Government in its Local Heat & Energy Efficiency Strategies (LHEES).

The government also intends to introduce maximum CO2 emission limits for district heating by the early 2030s at the latest. The aim is to encourage heat networks to transition from gas generation to lower carbon heat sources.


Planning rules

The planning system is also driving sustainability improvements. This includes The Future Homes Standard, to be introduced in 2025, which will ensure that new networks supplying new buildings will be run on lower carbon heating.

London is leading the way on enforcing better environmental standards in new building. For example, the proposed London ‘Be Seen’ energy monitoring guidance will ensure that major developments, such as heat networks, deliver on their energy performance potential post construction and support compliance with the capital’s net zero carbon target.


Prepare for change

Doing more of the same is no longer an option for heat network owners and operators. There is no doubt that organisations involved in the operation and maintenance of heat networks both large and small will need to achieve a step change in efficiency and environmental performance, while also continuing to provide heat cost effectively and reliably to residential customers.

The big question is how can you manage the triple challenge of providing affordable, resilient, green heat?

It’s not enough to focus on future design and build standards of next generation networks. The UK’s 17,000 legacy heat schemes must also be future-proofed to raise cost and environmental performance and prepare to run on lower carbon fuels and technologies when commercially viable.


Improving existing heat schemes

How do you dramatically improve the efficiency those heat schemes built over the past five decades in readiness for a low and zero carbon future? Many run at high temperatures and low efficiencies, with poor insulation, poor plant room and network commissioning, and lack of energy control and visibility. A more intelligent approach is required and this can yield major benefits.

It's time to review and act by creating and implementing an improvement plan. This starts with assessing your scheme against best practice – defined by the CIBSE CP1 technical standard. It's important to find out what the gap is between your scheme and an acceptable industry benchmark.

Capturing and analysing relevant data is key to this task, which relies on gaining full real-time visibility of performance across the entire heat network. This can be achieved by combining complex data analytics from heat metering, Building Energy Management Systems (BEMS), sensors and other measurement points.

Switch2's (AI) enabled Optimise technology uses big data and remote connectivity to gain complete visibility of heat network performance and achieve dramatic efficiency improvements that are delivering average 35% savings on existing networks. Our Optimise technology can identify, diagnose and automatically remedy inefficiencies and faults across entire heat networks to decrease running costs and make sure that heat schemes live up to the performance expectations in financial models.

The Government has launched the Heat Network Efficiency Scheme (HNES) to help fund organisations to improve their existing heat networks. The scheme which funds 100% of heat network studies and 50% of capital improvement works focus on communal heating secondary and tertiary networks with the aim of improving efficiency and reliability making them fit for future decarbonisation, The main scheme is due to start in 2023 after an initial demonstration scheme which was awarded funding to over 100 schemes in January 2022. Switch2 have been engaged to carry out surveys and report on 9 schemes after supporting our clients in their applications.


See how Switch2's Optimise solution can achieve rapid cost and carbon savings for your heat network project


Future proofing new heat schemes for net zero

Building efficiency into renewable heat schemes at the design and planning phases is critical to minimising costs and maximising environmental performance to deliver long term value. Our Optimise technology is also critical in shaping the efficient, low carbon design and build of new generation heat networks.

It is important to involve operators at the design stages or, preferably, to partner with a heat network Design, Build and Operation specialist. In this way, you can ensure that your heat scheme provides long term value and delivers on its cost and carbon saving potential.

Selecting an ESCo partner will minimise risk, or you could use an energy performance contract to mitigate the risk of using a separate operator to run the network long term.

Procurement begins with a sustainability statement, setting out how the developer will satisfy 'lean, green and clean' planning criteria. The choices made at this stage are critical to long term performance and meeting the triple energy challenge of minimising carbon emissions, balancing costs and improving resilience.


A successful smart heat metering strategy is also key to the efficiency, compliance, and transparency of any project. Smart metering is helping to deliver major performance improvements and will ensure compliance with new requirements for final customer meters under the Heat Network Billing and Metering Regulations.


Offsetting higher costs of going green

Greener heat networks must be delivered cost effectively for the residents who ultimately pay from them. To this end, it's important to consider how to mitigate higher costs of transitioning away from gas to renewable heat schemes. One effective strategy is to integrate on-site solar generation into projects. In this way, you can reduce the cost of powering heat pumps with your own low-cost energy supply. You can also stack revenues by selling electricity to heat network customers. Another option is to use thermal stores for more cost-effective heat use.


Meeting the triple energy challenge

Change is here and there's much to think about in delivering greener, affordable, dependable heat schemes. Working with specialists who can mitigate risk and can take a coordinated approach to balance low capital costs with long term value is critical to success.


Download the Switch2 guide to new Heat Network Regulations and Policy: https://content.switch2.co.uk/guide-to-new-heat-network-regulations-and-policy


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