Energy Systems Catapult Response to the Scottish Government Consultation:
Heat & Energy Efficiency Strategies, and Regulation of District Heating
Introduction
1.
This response is submitted on behalf of the Energy Systems Catapult (ESC). The ESC
is an independent company whose remit is to enable innovation in UK energy markets
and to create business opportunities. The ESC is looking at a “whole systems
approach” and is responsible for the delivery of the Smart Systems and Heat (SSH)
Programme on behalf of the Energy Technologies Institute (ETI).
2.
The ESC is working with the UK government and local to deliver the SSH Programme,
determining the most effective means of decarbonising the UK’s 27 million homes and
contributing to the target of an 80% reduction in the UK’s Greenhouse Gas emissions
by 2050. An analysis framework (“EnergyPathTM Networks”) has been developed that
take a multi-vector approach to design the most cost-effective energy system in a local
area, including energy efficiency interventions for the homes in that area. We have
worked with Newcastle City Council to develop a Local Energy Plan that seeks to
reduce carbon emissions from buildings by 90% by 2050. We are also working with
Bridgend County Borough Council and the Greater Manchester Authority (specifically
Bury Council) to develop similar local energy plans. We believe that this approach can
lead to a significant reduction in carbon emissions from heat in buildings.
3.
Another key element of the SSH programme is the development of a Home Energy
Management System (HEMS). This will build insights into service delivery/consumer
behaviour etc, enabled by the data and functionality that HEMS provides, enabling
innovative new business models, allowing the householder to automatically control
energy usage and potentially help to balance the energy system. To realise the full
potential of HEMS could lead to the need for new supply licences and consumer
protection, to allow energy service providers to offer levels of comfort rather than
merely supplying kWh of energy. Digitalisation may also have a key role, with ICT
enabling integration and sophisticated customer interaction through the acquisition and
use of data and information.
4.
The ESC is also leading the Future Power System Architecture (FPSA) project in
collaboration with the Institution of Engineering and Technology (IET). This project
seeks to determine the functions that will be required to enable a future, low carbon,
power system to operate in the face of transformative change, and hence to enable
recommendations to be made that will inform policy and regulatory considerations.
5.
If you wish to discuss the contents of this submission, please contact Tony Dicicco at:
[email protected]
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Summary
6.
The ESC believes that the heat vision and heat hierarchy for Scotland has merit and
should reduce heat consumption, supply heat efficiently and at least-cost to
consumers and move to reduce reliance on fossil fuels by using more low carbon and
renewable generation. Reducing the carbon intensity of heat is central to helping
Scotland to reduce its greenhouse gas emissions, whilst using heat more efficiently
will help to reduce fuel poverty and provide commercial opportunities both in Scotland
and in other parts of the UK.
7.
Decarbonising heat is essential if Scotland is going to meet its 2050 CO2 reduction
targets. To do this will require a move away from natural gas-fired boilers towards
low-carbon forms of heating such as heat pumps, heat networks and biogas- or
hydrogen-fuelled heating systems.
8.
Clear and consistent policy is critical to ensuring a supportive environment for
investment in low carbon alternatives but there is considerable uncertainty in the UK
energy policy environment. Decarbonisation of heating will also require close
involvement of Local Authorities, who have access to much of the information, and
some of the powers, required to execute local heat decarbonisation strategies more
effectively, as well as a democratic mandate.
9.
The ESC believes that consumer engagement is key to effecting significant
behaviour change in both homes and non-domestic buildings. Consumer insights
programmes across all projects need to be linked to real consumer needs and
behaviours in order to help to help decision making.
10. The Smart System and Heat Programme is developing a cost-effective area-by-area
deployment approach. The ETI has developed the EnergyPath™ Networks (EPN)
analysis framework that allows any local area in the UK to take a multi-vector
approach to design the most cost-effective local energy system, including energy
efficiency interventions for the homes in that area. EPN balances low carbon heat
supply with demand measures, on an area-by- area basis – so the solution in Balloch
may look different to Glasgow city centre. This will allow carbon targets to be met in
the most cost-effective way, ultimately benefiting all of Scotland’s population.
11. The ESC has worked with Newcastle City Council to develop an Energy Transition
Plan that seeks to reduce carbon emissions from buildings by 90% by 2050. We are
also working with Bridgend County Borough Council and the Greater Manchester
Authority (specifically Bury Council) to develop similar energy transition plans. We
believe that this approach can lead to a significant reduction in carbon emissions
from heat in buildings and can be used to help produce Local Heat & Energy
Efficiency Strategies (LHEES) in Scotland. The ESC would be happy to explore this
with the Scottish Government.
12. Given the immature supply chain, the costs of heat networks are relatively high in the
UK and payback periods are long – this imposes financial risk on developers. This
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financial risk can be mitigated by offering tax-breaks to developers and by facilitating
increased partnering of developers with local authorities who may have lower finance
costs. There are also difficulties around planning approvals which may act as barrier
– this can be overcome by fast-track planning for DH Networks and the provision of
standardised guidance and encouragement of information sharing between LAs for
planning issues.
13. We should always be open to opportunities to incorporate industrial heat. However,
businesses are inevitably driven by their own commercial imperatives, and so the
opportunities to create mutually attractive commercial arrangements that provide heat
when required are often very limited. The use of the substantial quantities of heat
from thermal power generation, that would otherwise be wasted, offers significant
commercial attraction, and customer benefits. Therefore, there is a need to be
realistic, and in most cases, treat any industrial heat availability as an opportunistic
benefit.
14. Setting carbon targets would be an effective means of incentivising low carbon
interventions. There is currently no System Integrator role in the Home Heat Market,
and hence no effective co-ordination of CO2 emissions reductions. One option might
be to place an obligation on Energy Suppliers/Energy Service Providers (ESP) to
reduce CO2 emissions in domestic properties, similar to that placed on car
manufacturers to reduce CO2 emissions in cars. This could be achieved by applying
a Carbon Intensity Threshold (CIT) which would be an average gCO2/kWh target
for the ESP’s domestic supply portfolio. The target would be set at a level that would
incentivise the ESP to introduce a number of low-carbon interventions across its
portfolio.
Detailed Response to Questions 1 - 15
Section A: Local Heat & Energy Efficiency Strategies to support delivery of energy
efficiency and heat objectives of SEEP
Q1. Do you agree that local authorities should have a duty to produce and implement
a Local Heat & Energy Efficiency Strategy (LHEES) as outlined above? Please explain
your view.
15. The ESC is working with 3 local authorities in England and Wales: Newcastle,
Greater Manchester Authority and Bridgend to develop local area strategies, using
the ETI’s EnergyPath™ Networks (EPN) analysis framework. EPN develops a costeffective approach to designing and implementing local energy solutions, balancing
low carbon heat supply with demand measures, on an area-by-area basis – so the
solution in, say, Balloch may look different to Glasgow city centre. This will allow
carbon targets to be met in the most cost-effective way, ultimately benefiting all of
Scotland’s population. This approach could be used by local authorities in Scotland to
produce Local Heat & Energy Efficiency Strategies (LHEES). We agree, therefore,
that local authorities in Scotland should have a duty to produce and implement a
LHEES.
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Q1b. What are your views on the appropriate geographical scale for the preparation of
LHEES? Should each local authority produce a single strategy for its area, or would it
be possible for local authorities to work together to prepare strategies jointly for a
wider
area?
16. In general, strategies across larger areas minimise the number of boundary
interfaces, but may lead to less well-defined outputs relating to actual infrastructure
needs. In addition, it may not be possible to collect consistent data or effectively
process the large data volumes. Another important aspect is consensus-building
around local stakeholders – this may be less successful if carried out across larger
areas. However, the approach has worked effectively for Newcastle, a city of around
305,000 people, with around 130,000 domestic dwellings.
Q2. Do you agree with the proposed scope and content for LHEES? In particular, do
you agree LHEES should (a) set targets for energy efficiency and decarbonisation and
(b) include a costed, phased delivery programme that will meet local targets? Please
explain your views.
17. We support, in principle, an approach that set targets for energy efficiency and
decarbonisation and also includes a costed, phased delivery programme to meet
local targets – this is the exact approach used to produce a local energy plan for
Newcastle using the EPN analysis framework, as part of the Smart Systems and
Heat Programme. This approach is currently being adopted also for Bridgend and
Bury in the GMA area.
18. Building a strategy against phased targets helps ensure that expensive changes in
direction might be avoided by following a coherent strategic path to ultimate
decarbonisation.
19. However, setting specific targets for individual LAs turns out to be highly complex.
For example, areas with high emissions from industrial processes should not be
expected to deliver the same percentage reduction as areas with little or no industrial
emissions. Similarly, it is hard to set a clear target that relates to 1990 emissions (and
the Climate Change Act) as the data for local emissions at this date is not available.
Q3. Please provide any evidence you have regarding the data available (or that could
be available) to local authorities that would be useful or key to preparing and
implementing such plans beyond the Scotland Heat Map and the EPC Register
(including data held both within and outwith the public sector).
20. The data used by the EPN analysis framework includes: Ordnance Survey (OS) data
showing the location of housing and other geographical features; housing survey
data; population data (including indications of fuel poverty) and energy network
information including the location of electricity substations. The type of housing is also
important, as is the location of any heat sources that might be useful for supplying a
local heat network. The future cost and performance of heating systems and fabric
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retrofit measures must also be considered alongside the costs to build, reinforce and
operate energy networks.
Section B: District Heating Regulation
Q4. What are your views on the broad principles for regulation outlined above? What
else do we need to consider? What should be prioritised in cases where principles
may not always be compatible?
21. The ESC believes that the broad principles to guide development of a regulatory
framework, as set out in paragraph 47 on page 20 of the consultation, are
appropriate. These principles seek to introduce district heat regulations that are fair,
transparent and robust and provide the right balance between choice and compulsion
– we believe that achieving this balance is key to successful customer acceptance of
district heating schemes.
22. Where there is potential conflict between choice and compulsion, we believe that
customer choice must be paramount. This can be achieved by offering a range of
well-designed value propositions and business models offered to those connecting to
heat networks. With DHN, the economics are improved by high levels of uptake and
so the benefits should be stressed of connecting to a heat network from a
consumer’s perspective i.e. a small in-house unit, heat on demand, no safety
concerns, and quite likely the cheapest overall cost per kWh.
Q5. What are the key principles or approaches that should inform how our regulatory
approach manages risk for district heating across the whole system?
23. The costs of heat networks are high in the UK and payback periods are long – this
imposes financial risk on developers. Research by Robert Sansom1 has found that
the economic viability of district heating is “..crucially dependent on a financing
regime that is compatible with other regulated network based assets. If not its costs
will be higher, the risks greater and its viability for large scale deployment
substantially weakened”. This can be addressed by creating a “level playing field”
and encompassing heat networks within a regulatory framework comparable to that
presently used for electricity and gas. In this way, investments in networks to support
heat decarbonisation can take account of the local impact, including reinforcing
electricity networks versus investing in heat networks as well as the consequential
impact on the gas network which may ultimately mean decommissioning.
24. Financial risk can be mitigated further by offering tax-breaks to developers and by
facilitating increased partnering of developers with local authorities who may have
lower finance costs. There are also difficulties around planning approvals which may
act as barrier – this can be overcome by fast-track planning for DH Networks and the
provision of standardised guidance and encouragement of information sharing
between LAs for planning issues.
Sanson R., “Decarbonising low grade heat for a low carbon future”; PhD thesis (submitted to
Imperial College - October 2014)
1
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Q6. What are your views on local authorities having the power through LHEES to zone
areas for district heating? Please provide any relevant evidence.
25. Local authorities, working in partnership with developers and energy service
providers, are well-placed to develop local area plans. An important element of these
plans is the provision of different solutions in different areas: it is likely that district
heat will be a key solution in many areas. The ESC would agree that the agreed
solutions in the LHEES should be administered by the LA working with key
stakeholders such as developers, ESPs and consumer groups.
Q7. How should district heating zones be identified? For example, how should
national targets, socioeconomic analysis, local priorities feed in to the designation of
zones within the strategy?
26. As already stated above, the EPN analysis framework can be used to identify the
most appropriate low-carbon heating and energy efficient interventions for a local
area, as part of a decarbonisation strategy, using a range of data including the
location of heat sources from the Heat Map for Scotland. The ETP for Newcastle,
developed by the ESC on behalf of the ETI with Newcastle City Council, identifies
areas where heat networks are the most appropriate heating solution and provides a
costed decarbonisation programme to meet Newcastle’s 2050 targets. It is being
used by Newcastle City Council to identify possible district heating zones in the city.
The ETP also contains a socio-economic analysis that evaluates the financial
benefits from reduced carbon emissions, improved health, a reduction in fuel poverty
and increased employment, against the costs of implementing the plan.
Q8. What are your views on taking district heating zones, or parts of district heating
zones, and establishing an exclusive concession for either private- or public-sector
heat network developers to fulfil that part of the LHEES? How will this alter the risk
profile of district heating development?
27. The economics of installing and operating a heat network will be improved by
connecting more customers as fixed costs can be better recovered and development
and operational risk reduced. Therefore, it makes sense financially to establish an
exclusive concession for heat network developers. However, this financial advantage
is partially offset by concerns about restricting customer choice, however, as stated
above, well-designed value propositions and business models and effective
regulatory oversight can (partly) mitigate any concerns about customer choice.
Q8b. Do you agree that local authorities should be responsible for issuing and
enforcing concessions in their areas? Please explain your answer.
28. The LA already as a critical role in the potential development of heat networks
through the planning process. The issuing and enforcing of concessions could be
seen as a natural extension of this planning authorisation – the ESC believes that it
seems logical that LAs could be responsible for issuing and enforcing concessions as
long as there are effective appeal procedures in place for developers, ESPs and
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customers. Ofgem would seem to be the most appropriate body to design and own of
any appeals process.
Q9. What considerations should inform the design of concessions (target users,
envisaged network growth, concession length, etc.)? Please provide any evidence
you have to support your views.
29. The ESC has no evidence to inform the design of concessions but it seems obvious
that concessions will have to be of long enough duration and enable connection of a
high proportion of local customers to allow developers to recover high capital costs of
installing the network. The issue of oversizing the heat network to meet any future
growth in customers would have to be carefully managed in order to prevent stranded
assets and potential financial over-recovery. However, district heating is a ‘push’
technology: once a heat network is installed, demand to use the network should
increase.
Q10. What are the implications of zoning and concessions for existing district heating
networks?
30. Existing heat networks may not provide the optimum local solution: they may be in the
wrong place, incorrectly sized and/or use high-carbon heat source. Incentives could
be provided to remedy these issues but existing contracts and financial rights should
be respected.
Q11. Do you think the broad rights and responsibilities of concession holders set out
in this document are appropriate? Why? Please provide any examples or evidence.
31. Yes, the ESC believes that the broad rights and responsibilities of concession holders
set out in this document are appropriate.
Q12. How can a balance be struck between ensuring LHEES are responsive to
changing conditions while ensuring security and stability in long-term district heating
development models?
32. It is important to ensure that LHEES provide coherent strategic options for transition
that meets 2050 objectives, enabling consultation and consensus building, and
importantly adapting to changing conditions and requirements. We believe the
EnergyPathTM Networks analysis framework supports this ongoing process.
Q13. What should happen to long-term ownership of heat network assets, postconcession?
33. The rights should be sold off to another concession holder with responsibilities for
upgrading and maintaining the network as appropriate. Part of the money from the
sale should be kept by the LA to reduce fuel poverty in its local area, potentially
through a targeted reduction in council tax.
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For existing buildings
Q14. What are your views on the opportunities and challenges in connecting anchor
loads to new heat networks? In your view, will the scenario set out address these
issues and accelerate district heating development? Please explain your answer.
34. Anchor loads are important as they can be used to balance out seasonal demand for
a local heat network and thus improve the viability of heat networks. We believe that
the scenario as set out in B3.2 (p. 26/27) will accelerate district heating development
as long as the socio-economic effectiveness tests used are appropriate and the
connection would not impose any detriment to the building occupants in comparison
with a standard alternative.
Q15. What are your views on the proposed power to compel existing buildings to
connect to district heating?
35. Any power to compel existing buildings to connect to district heating must be
balanced by appropriate incentives and not impose any detriment to the building
occupants in comparison with a standard alternative.
Q15b. Are the broad principles and criteria appropriate? Should other principles or
criteria also apply? In particular, what approach should be taken to socio-economic
assessment at the project level, prior to a compulsion to connect?
36. We believe that the broad principles and criteria are appropriate. In terms of the
approach to the socio-economic assessment, the approach used in the Energy
Transition Plan for Newcastle looked at a number of potential benefits including the
financial benefits from: a reduction in carbon emissions; improved health benefits;
improved air quality and a reduction in fuel poverty and increased employment from
low-carbon interventions.
Q15c. Do you agree that this socio-economic assessment at project level should
include an assessment of the impacts on consumers of requirements to connect?
37. Yes, the impact on consumers should be a central consideration. Research by
Wilson, Chryssochoidis, and Pettifor2 shows that when renovating their properties or
choosing heating solutions, fewer than 10% of people are driven primarily by energy
savings versus other considerations. Therefore, it is unlikely that most consumers will
accept additional upfront costs to reduce energy bills and benefit the environment.
38. Heat network providers (working with local authorities) should encourage and
facilitate collective decisions for collective solutions like DHNs, and individual
decisions where cost-effective choices exist for individual properties.
Q15d. Do you agree that local authorities should exercise powers to compel
connection of existing buildings (for example when requested by relevant concession
holders)? Please explain your answers.
Wilson, C., Chryssochoidis, G., and Pettifor, H. (2013) Understanding Homeowners’ Renovation
Decisions: Findings of the VERD Project.
2
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39. Local authorities should have the power to compel connection but this must not
impose any detriment to the building occupants in comparison with a standard
alternative. There should also be a well-defined appeals procedure, administered by
Ofgem or the Energy Ombudsman.
Q16. Do you agree that mitigating risk by establishing exclusive concessions will
lower financing costs and heat prices?
40. Yes, exclusive concessions should lower financing costs and heat prices, assuming
that there are adequate safeguards in place to prevent abuse of dominant positions.
Offering tax-breaks and partnering with LAs will also reduce financing costs/risks.
Q16b. How can these regulations be designed to best ensure this happens?
41. This can be achieved by the Scottish Government working with a range of
stakeholders including Ofgem, developers, financial institutions, energy service
providers and consumer groups to develop appropriate and effective regulations.
Q16c. What are your views on the time length of concessions in order to attract
investment?
42. District heat networks have high capital costs and long payback periods and so the
concession periods must be long enough to allow developers the opportunity to make
a fair return on their investment. This must be balanced by introducing a range of
performance criteria that the concession-holder must meet: consistent failure to do so
should involve penalty payments with the ultimate sanction of losing the rights to the
concession.
Q17. Do you agree that compelling existing buildings to connect to district heating
would mitigate heat demand risk, lower financing costs and help create an attractive
investment proposition for district heating developers and financial institutions?
43. Yes, we agree that compelling existing buildings to connect to district heating would
mitigate heat demand risk, lower financing costs and help create a more attractive
investment proposition. However, other measures such as tax breaks and partnering
with LAs may also be required to improve the financial viability of many schemes.
Q17b. Could you provide evidence of how much they would be lowered?
44. No, we do not have any evidence.
Q17c. How can these regulations be designed to best ensure this happens?
45. No additional comment.
Q18. What are your views on the relationship between LHEES and local development
plans and how planning policy and development management should support the
anticipated role of LHEES for new
buildings?
Please explain your answer.
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46. No additional comment.
Existing industrial plant
Q19. What challenges and opportunities do you see for existing industrial plant to
connect and sell waste heat to nearby district heat networks, both now and in the
future?
47. We should always be open to opportunities to incorporate industrial heat. However,
businesses are inevitably driven by their own commercial imperatives, and so the
opportunities to create mutually attractive commercial arrangements that provide heat
when required are often very limited. The use of the substantial quantities of heat
from thermal power generation, that would otherwise be wasted, offers significant
commercial attraction, and customer benefits. Therefore, there is a need to be
realistic, and in most cases, treat any industrial heat availability as an opportunistic
benefit.
Q19b. What barriers have industries experienced in the ability to sell their heat under
current market conditions?
48. It’s unlikely that the waste heat temperature, quantity, time of availability, seasonality,
risks etc. align.
49. The energy market is designed around selling units of gas and electricity - there are
no similar arrangements for selling heat. It might be helpful if a heat market were
developed with standard contractual terms for heat provision. In terms of selling heat
to the consumer, the ESC is developing a number of business models which look to
offer a level of comfort to customers rather than selling them energy on a kWh-basis.
Q20. What are your views on requiring existing industrial plant, with the potential to
supply surplus heat, to make data available to public authorities? Please provide any
relevant evidence.
50. Industrial plant operators could be reimbursed for making appropriate data available
to public authorities – this may improve participation.
Q21. Under these proposed new arrangements, do you think that an enabling
approach, perhaps using voluntary mediation, will be successful? How can we best
encourage existing industrial plant to supply waste heat to a district heating network?
51. We believe that incentives work better than compulsion: industrial plant operators
should be made aware of the potential commercial opportunities from supplying
waste heat. There could also be business rate reductions for plant operators. A
voluntary mediation process could help.
Q21b. Which public authority should carry out the role of voluntary mediation?
52. This could be carried out by Ofgem or the Energy Ombudsman.
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Q22. Do you agree that in some circumstances (if requested), compulsory mediation
is needed?
53. Compulsory mediation should be a last resort - we believe that incentives work better
than compulsion.
Q22b. Do you agree that if compulsory mediation was not successful, then a more
directive approach should be used?
54. We do not believe that forcing privately-owned industrial plant owners to supply
surplus heat is appropriate and may lead to legal challenges.
Q22c. Which public authority should carry out the role of compulsory mediation or
direction?
55. We believe that this would need to be done by a body with legal powers of
enforcement such as Ofgem.
New industrial plant
Q23. What are your views on requiring new industrial plant to be ‘district heatingready’?
56. This would seem appropriate but may require upfront capital contributions and/or taxbreaks.
Q24. What would be the most appropriate way of ensuring that new industrial
buildings connect to district heating networks? What role can zoning within LHEES
play in this?
57. The creation of a local area energy plan such as the LHEES can identify the least
cost heating solutions in particular areas. An analysis framework such as
EnergyPathTM Networks determines where the most suitable locations are for district
heating, or heat pumps or biomass boilers etc. If the LHEES has identified a
particular location (zone) where district heating is the most appropriate solution then
any new industrial buildings in that zone could be targeted to determine any potential
anchor load or potentially any usable surplus heat. It could be a condition of obtaining
planning consent for new industrial buildings to submit potential heat requirements or
any usable surplus heat as part of the planning application.
Q25. Do you agree that as district heating becomes more widespread it will need to
become a licensed activity? Please explain your answer.
58. District heating is not currently regulated but increasing adoption may require new
regulation, especially where a network provider has a dominant position. However,
any regulation must not delay or deter investment.
Q26. What technical standards and consumer protection measures should be part of
standard district heating licence conditions? How should these relate to existing
schemes?
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59. The ESC is currently evaluating consumer protection measures for district heating
schemes as part of its Smart Systems and Heat (SSH) Programme. We aim to test
these as part of a large-scale demonstration of the SSH concept – this is Phase 2 of
the programme and is likely to take place from 2018/19. Our early thoughts are that
consumers should not face any detriment when connecting to a district heat network
in comparison with a standard alternative, and adequate safeguards must be
included in licence conditions to prevent abuse of dominant positions.
Q27. What are your views on using a licensing system to confer enabling powers on
operators, and on what enabling powers are required?
60. No answer.
Q28. What principles, objectives and other considerations should guide the
development of a Scottish district heating licence?
61. No answer.
Q29. What drawbacks or challenges might a licensing system create? How could
these be minimised?
62. No answer.
Q30. Do you have views on who should issue District Heating Licenses and ensure
that technical standards are being met?
63. It would seem appropriate for Ofgem to issue District Heating Licences as per other
energy licences.
Q31. Would the benefits of the concession area outweigh the costs of the licensing
arrangements?
64. It is difficult to say at this stage without knowing what the costs of licensing would be.
Q32. What are your views on the best approach to ensuring that potential customers
understand the differences as potential customers of a heat network, and who do you
think is best placed to convey these messages?
65. It would seem appropriate that local authorities play an active role in informing
potential customers of the benefits of connecting to a local district heat network. This
could be done in conjunction with heat network developers, energy service providers
and Ofgem.
Q33. Please provide any evidence you have regarding:
a) analytical skills, resources and techniques that could support development of
LHEES, particularly where these are not currently used by local government.
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66. The ESC has a dedicated team of around 8 analysts and engineers working on
developing local area strategies for Newcastle, Bridgend and GMCA. This has
included developing the EnergyPathTM analysis framework (when part of the ETI),
maintaining and updating the framework, and carrying out local area studies that feed
into LA energy transition plans. Each of the 3 LAs has committed significant resource
to working with the ESC to produce the energy transition plans. These working
arrangements could be repeated to produce LHEES plans for Scottish local
authorities. The ESC would be happy to explore this with the Scottish Government.
b) the anticipated cost of preparing LHEES
67. It is not possible to give a cost of preparing LHEES but there would be economies of
scale if a similar approach were used across Scotland, say using an analysis
framework such as EnergyPathTM Networks and a local area energy strategy. This
approach has been demonstrated effectively to prepare an energy transition plan
(including a socio-economic evaluation) for Newcastle, and is currently being used to
produce similar plans for Bridgend and Bury in the GMCA.
c) the additional skills and resources are needed to meet the requirements of the
potential local authority role of district heating regulation.
68. It is difficult to say precisely how many people and what skills would be required but it
is important for the local strategic planning process to be adequately resourced – this
includes obtaining data, overseeing the strategy development and managing the
consultation process, etc…. so, a sizeable commitment for a local authority.
Q34. What support and resources will local authorities need to produce LHEES and
implement the potential local authority role of district heating regulation, and which
organisations do you think these are best placed to provide these? Please explain
your views.
69. See answer to Q.33 above.
Q35. What are your views on how any support should change over the different
phases of development, introduction and implementation of any regulation?
70. Seems likely that some incentives required to kick start DH in UK, for existing homes
– so some sizeable demonstrators that show how well modern, well controlled DHN
can provide attractive heating packages.
Q36. What are you views on the wider regulation of the heat market to ensure
decarbonisation?
71. Clear and consistent policy is critical to ensuring a supportive environment for
investment in low carbon alternatives but there is considerable uncertainty in the UK
energy policy environment. Decarbonisation of heating will also require close
involvement of Local Authorities, who have access to much of the information, and
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some of the powers, required to execute local heat decarbonisation strategies more
effectively.
72. Setting carbon targets would be an effective means of incentivising low carbon
interventions. There is currently no System Integrator role in the Home Heat Market,
and hence no effective co-ordination of CO2 emissions reductions. One option would
be to place an obligation on Energy Suppliers/Energy Service Providers (ESP) to
reduce CO2 emissions in domestic properties, similar to that placed on car
manufacturers to reduce CO2 emissions in cars. This could be achieved by applying
a Carbon Intensity Threshold (CIT) which would be an average gCO2/kWh target
for the ESP’s domestic supply portfolio. The target would be set at a level that would
incentivise the ESP to introduce a number of low-carbon interventions across its
portfolio.
Q37. What are your views on when decisions should be taken on the future of the gas
network?
73. The ESC has been involved with the work currently being carried out by a steering
group led by Carbon Connect, looking at the Future of the Gas Network. The
steering group consists of a number of gas network operators, gas equipment
manufacturers and interest groups, a representative from the Committee on Climate
Change and is chaired by 3 MPs (including one from Scotland). The initial report is
likely to be published in the summer and will evaluate the options for re-purposing the
gas network, including the large-scale use of hydrogen and biogas. It will discuss a
possible timetable for when decisions need to be made on the future of the gas
network – the ESC would expect that a decision would need to be made by the mid2020s.
74. There are potentially some very significant issues to be resolved before hydrogen
can replace natural gas; for example: how could large-scale low-carbon production of
hydrogen be done; how can consumer acceptability and safety concerns be
overcome; the need for CCS; access to, and capacity of, storage; how much of the
existing gas network could be re-used for hydrogen and how would any new
hydrogen transmission network be financed and built? To prove that large-scale
hydrogen production and supply are viable, a large-scale demonstration would need
to be carried out: who would pay for the costs of this and when would it need to
happen? To make a fair comparison to electrification of heat, the full costs of
hydrogen need to be considered.
Q38. Please provide any evidence you have to inform the Scottish Government in
informing its thinking in this area.
75. No additional comments.
Q39. Please set out any further views on issues covered in this consultation that you
have not already expressed, providing evidence to support your views.
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76. No additional comments.
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