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District heat networks: an alternative solution?

District heat networks are increasingly being recognised by local authorities, the NHS, registered providers and the wider public sector as a vehicle that can play a positive role in empowering communities and establishing greater energy cost certainty and security. 

Although the amount of heat supplied to buildings in the UK via heat networks is only 2%, estimates show that approximately 15% of UK heat demand could be met by heat networks by 2030 and around 43% by 2050. If distribution via a district heat network improves energy efficiency, this would go some way to assisting the UK in meeting its carbon reduction targets. 

Not only does the UK needs more secure energy networks and sources, but as the current UK government rebalances economic priorities, local authorities and registered providers have a real opportunity to identify schemes that can act as a catalyst for urban renewal and economic growth. Could district heat networks be the answer to both? 

What is a district heating scheme?

A district heating scheme is a network of insulated pipes used to deliver heat. The heat is transported in the form of hot water or steam from where it is generated to multiple buildings or sites so that it can be used to heat or cool those buildings.

District heat networks are going to be increasingly used for dense urban areas. There are around 450 currently in the development stages and it has been estimated that even if only 25% proceed, that will mean investment of around £400 million. According to the GLA by 2030 there will be £8 billion district heating network contracts.

The inherent flexibility of district heat networks means that they can: 

  • be embedded as part of new and ambitious development projects; 
  • be developed to rejuvenate existing estates and transform the lives of residents; 
  • unlock solutions for other issues such as providing credible energy solutions in densely populated areas where space may be at a premium; and
  • deliver innovative and cost effective alternatives. 

District heat networks have proven that they are a workable concept which can realise savings and generate a return. The public sector is embracing the concept of district heat networks as a key response to our need for greater energy security. 

In addition, local authorities and registered providers are looking to district heating solutions as a way to reduce their own ongoing energy costs. 

When considering a district heating network scheme it is important to understand not only the opportunities that scheme will bring but also the potential challenges in implementing it. We have set out a practical toolkit to help you start identifying and developing schemes. 

Why district heat networks?

Most of the UK’s electricity is generated at large power stations, faraway from the areas they supply. These isolated locations mean that the amount of heat generated that can be recovered is drastically reduced and the long distances of the transmissions contribute further to energy inefficiency.

This has led us to a growing decentralised energy market. We are seeing an increasing amount of energy generated and distributed from closer to the locations where energy is needed. There is currently a nationwide shift towards supplying heat through district heating networks and electricity via private wire or the grid.

The distance a network is able to reach can be extended by adding ‘heat sources’ to the network including power stations, geothermal sources, biomass and CHP plant and solar thermal arrays, to name but a few.

Additionally, a district heat network can incorporate a wide range of technologies, ensuring a more flexible and robust delivery solution.

Multiple sources provide security of supply for the customers of that network and can introduce an element of competition into the supply chain.

Over the next decade we will see major changes in the way in which local authorities deliver energy to their commercial and residential buildings, and district heat networks have been identified as the way forward. Success in Denmark means that nearly two-thirds of people there receive their heat via networks.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

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