BEIS compromises on renewable heat support, announces new heat network funding

The UK Government is seemingly beginning to take heed of advice to focus on delivering low-carbon heating systems, with two new announcements which could effectively reduce emissions from heating demand in towns and cities and begin to restore investor confidence in the neglected sector.

The Department for Business, Energy and Industrial Strategy (BEIS) has this month launched the first part of a £320m fund to supply low-carbon and recycled heat in towns and cities across England and Wales; and proposed to soften changes to renewable energy subsidy support, which were abruptly announced in the summer.

The new funding comes in the form of a £39m pilot scheme of the Heat Networks Investment Project – part of the Government’s ‘central heating for cities’ funding package which will be delivered over the next five years.

This initial funding, announced by Energy Minister Baroness Lucy Neville-Rolfe, will seek to accelerate the growth of communal and district heating schemes through the development of infrastructure allows municipalities to recycle wasted heat produced from the likes of factories, power stations and even the London Underground, and pump that heat back into homes and businesses to keep them warm.

“Heat networks can significantly improve the efficiency with which heat is provided to our towns and cities, as well as helping to develop local infrastructure and reduce carbon,” said Neville-Rolfe. “The new scheme will help us to develop viable reforms to make the most of the heat we produce and use it effectively to bring bills down for people across the country.”

Heating networks, which refer to the system of pipes and other transportation methods to deliver hot water and steam from the point of generation to end users, can deliver significant carbon savings when compared with using gas-fired boilers to generate heat at individual sites – particularly in built-up urban areas, as around half of the energy consumed in UK cities currently stems from heating and hot water needs.

The Committee on Climate Change recently reported that low-carbon heat networks could provide 20% of the UK’s heating requirements by 2050, helping to achieve a 450% reduction in associated emissions over the same period. But currently, around 2% of the nation’s heat is supplied via heating networks, compared with approximately 6% in France, 10% in Germany and 63% in Denmark.

This first injection of new heat network funding has therefore been welcomed by Britain’s heating industry as a much-needed boost for the nascent low-carbon heat sector. Kirsty Lambert, director of community heating firm Switch2, said: “This funding package will accelerate the growth of communal and district heating schemes that are so vital to decarbonising UK energy supplies and making heat more affordable.

“By building more heat networks using low-carbon and recycled energy, the UK can take effective action on both climate change and fuel poverty.”

Welcome compromise

Meanwhile, in a separate but related announcement last week, the Government acknowledged the need for a “transitional period” to be put in place for changes to Renewable Heat Incentive (RHI) for biomass combined heat and power (CHP) plants.

The changes, which were put in place by BEIS’s governmental predecessor the Department of Energy & Climate Change (DECC) in July and came into effect in August, effectively reduce RHI subsidy payments for biomass CHP plants that produced 20% of power – known as ‘power efficiency’, with the remaining 80% being heat. This will “close a loophole” in existing regulations, according to ministers.

But neither DECC nor BEIS formally consulted with the industry on this RHI amendment, and companies developing low-carbon heat infrastructure were apparently given just 21 days’ notice before the changes took effect, despite many of the projects being under development for up to two years.

This angered trade associations and other industry stakeholders and, according to the Renewable Energy Association (REA), has left as much as £140m of low-carbon investment at risk. In September, an Early Day Motion led by Labour Leader Jeremy Corbyn was put forward, calling for the Government’s RHI changes to be annulled.

Now, BEIS has not gone so far as to completely scrap the changes, but has agreed to introduce a transitional period as the heating sector moves towards the lower RHI subsidy tariff. During this transitional period – which runs until 31 March 2017 – the RHI tariff reductions will only apply to plants that have a power efficiency of less than 10%, rather than 20%.

Parliamentary Under-Secretary for Industry and Energy Jessie Norman MP reportedly acknowledged the need for the transitional period last week in a Seventh Delegated Legislation Committee Debate.

Commenting on the compromise, the REA’s renewable heat analyst Frank Aaskov said: “Transparency in Government decision-making is key to maintaining the confidence of investors developing the UK’s much-needed low-carbon infrastructure.

“We welcome the proposed compromise announced by Norman. Critically, the transition period should create a runway in which projects that have been under development or construction, some for as much as two years, can be completed. This proposal is a constructive step towards restoring the previously damaged confidence of investors in the biomass CHP sector.”

The 2009 EU Renewable Energy Directive sets a mandatory target for the UK to achieve 15% of its energy consumption from renewable sources by 2020. The Government proposed to achieve this across the electricity, heat and transport sectors by ensuring that 30% of electricity, 12% of heat and 10% of transport demand are met by renewable sources.

While progress towards the UK’s overall share of renewable electricity in the energy mix is on track (15% of electricity came from renewable sources in 2013), Eurostat data  reveals that green energy sources only provided 4.5% of the UK’s heat  and 4.9% of the UK’s total transport energy  in 2014 – meaning both areas will need to more than double their renewable energy contributions over the next five years in order to hit target.

Luke Nicholls


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