Heat networks are a distribution system of insulated pipes that take heat from a central source and deliver it to a variety of customers. These typically include public sector buildings, shops and offices, sport facilities, universities and homes. A well designed and operated heat network can be both cheaper and more efficient than traditional buildings-level heating solutions. For example, heating costs for flats can be more than 30% lower on a gas-supplied heat network than using individual gas boilers. Such networks also have significant potential to reduce carbon emissions for heating as the distribution system enables the use of low carbon heat sources that can only be used at scale.

In the UK, only about 2% of heat is supplied via such networks; one of the lowest levels in Europe. As a result, the Department of Energy and Climate Change’s (DECC) Heat Networks Delivery Unit has been supporting local authorities to explore heat network opportunities since 2013. This Unit is already supporting over 200 development stage projects sponsored by over 100 local authorities across England and Wales. Despite this support, the large amounts of capital investment required to see this infrastructure built.

The Heat Networks Investment Project (HNIP) aims to bring about an increased and sustained build rate for heat networks and influence the types of heat network built, and help stimulate a self-sustaining heat networks market. There is also a need for new, innovative technologies to be developed, combining the latest in smart technology, storage, balancing and demand-management to optimise the efficiency of networks, reduce carbon emissions and increase the benefits that they provide to customers.

In last year’s autumn statement the Chancellor announced that the Government will provide £320m of funding for heat networks over the next five years (2016/17 – 2020/21). This is expected to draw in around £2 billion of additional capital investment and to lead to the construction of hundreds of heat networks in urban and rural areas that will generate enough heat to supply the equivalent of over 400,000 homes across England and Wales. This capital funding is the subject of the consultation.

Alongside investment in innovation and development of the appropriate legislative framework, the aim is to help to create the conditions for a self-sustaining heat network market that does not require continued Government funding after this programme of investment support has ended.

The Government intends to run the first funding round as a Pilot. Independent evaluation of the project will be commissioned in parallel which will allow us to improve the design of the project and increase its effectiveness over the period to March 2021. To enable the proposed Pilot phase of funding to be deployed quickly, the Pilot is likely to be narrower in scope than the full scheme, for instance, in terms of who would be eligible for funding.

The consultation asks a series of questions to gather stakeholder views on the deployment of the £320 million capital funding for both the proposed Pilot and the full scheme:

  • Who should be eligible to apply directly for the capital funding?
  • What should the Heat Networks Investment Project provide capital funding for?
  • Through which funding mechanisms should the capital funding being deployed?
  • What decision-making criteria should be used to assess the capital funding applications?
  • How should the Government monitor these impacts?
  • Are there any other factors to consider that may affect the transition to a sustainable heat networks market?

The consultation closes on 3rd August 2016. We are formulating our response to the consultation and would welcome your feedback to incorporate into this. To have your say, please email the compliance team at compliance@carbon2018.com or alternatively complete the contact form. To discuss this further please call Melanie Kendall-Reid on 01252 87 87 22.

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