Heat networks have received further support with round 6 of Heat Network Delivery Unit (HNDU) funding open for applicants, and news that consultation on the £300 million heat network delivery fund (announced in the budget) has begun and will include specific events.
Firstly, the Renewable Heat Incentive (RHI) consultation document has provided insight into how DECC views the future pathway of renewable heat. DECC states that they are looking to focus on ‘a small number of large biomass systems, biomethane based on food waste and heat pumps for domestic households’. The changes proposed are designed to reform the scheme in order to deliver and prioritise those outcomes. See the full document here.
• Remove the overall budget cap– the cap increases risk for an investor/customer base that has already lost considerable confidence in the consistency of policy during this parliament, emphasised in a recent Energy and Climate Change Select Committee report. Increasing the risk to investors will inevitably put up the costs of projects. Degression has been shown to manage the budget successfully since the scheme was started and there is no evidence put forward by DECC that a cap and the potential closure of the scheme to new applicants (within 21 days) is required. We recommend that the budget cap be scrapped.
• Sustainable biomass (domestic, small and medium commercial) – these schemes have been shown to deliver renewable heat in a cost-effective manner in a large variety of household/commercial circumstances. Woodfuel can be sourced locally, offering local economic benefits and stimulating sustainable woodland management. The proposals put forward do not allow for the continued development of a successful industry that is already under pressure from very low RHI tariffs and a low heating oil price. Small-scale biomass is often the optimal renewable heat solution and the changes put forward would limit the viability of that choice in the future. Enforcing the proposed changes, is likely to result in significant job losses. We recommend a higher rate of 3-4p/kWh within a small and medium commercial biomass
• Heat pumps need more support to fulfil growth pathway– heat pumps offer a viable option for many households. However, there is still work to be done to show how they can deliver cost-effective, renewable heating in much of the aged and inefficient UK housing stock. In addition, there needs to be better joined up thinking in DECC on the growth of heat pumps and how this will impact on a constrained electricity distribution network.
We recommend a tiered system with an initial tariff for the first 20,000 -25,000 kWh and a lower tariff thereafter. We also recommend a coherent strategy is needed on how heat pumps can be developed in ways that help match supply and demand on the electricity distribution network rather than adding to the severe constraints on the network.
• Anaerobic digestion has great potential in rural areas – we welcome the support for the anaerobic digestion put forward in this consultation. We recognise that government needs to make sure that the carbon saving potential of schemes is extended. We recommend Option 1 for the limit in payments derived from energy crops.
If you would like to discuss the consultation in more detail please get in contact.
Community-led heat network toolkits for DECC
In addition, we have been working on behalf of DECC to develop an introduction to Community-led heat projects and a toolkit for heat networks. These guides aim to help community energy groups and local authorities understand some of the opportunities, and challenges associated with community-led heating projects. The toolkit is designed to de-mystify some of the aspects of community heat network projects, as well as provide signposting and links to additional resources.
HNDU and HNIP funding
The government is relying on heat networks to deliver a significant amount of carbon savings required in the fourth and fifth carbon budgets by developing the feasibility work, funded by HNDU in conjunction with local authorities. Round 6 of the HNDU funding opened to applicants on 5 April and is open until 4 May 2016. The fund is only open to local authorities and can cover up 67 per cent of the estimated eligible external costs of the development of heat networks, including: heat mapping, energy master planning, feasibility studies, detailed project development, and commercialisation.
The process of consulting industry on the £300 million of new funding for heat networks that was announced back in the comprehensive spending review in November 2015 – named the Heat Networks Investment Project (HNIP) – has started. DECC has been informally discussing the project with some in the sector and will announce formal consultation events very soon. The scheme is due to launch in autumn 2016, with the first payments in March 2017.