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by Liz Warren, SE2

There has been much talk recently about devolution: greater powers for nations and increased budgetary control and scope for cities and counties too. But what are the implications of devolution for heat?


 

Let’s consider the story of Scotland: in June 2015, the Scottish Government published its Heat Policy Statement, which aims to remove almost all carbon from the heat system by 2050. Figures announced in October 2015 show that renewable heat generation has increased by 36% in just one year, with almost 10,000 micro renewable heat systems up and running.

Nationally driven policy and programmes have certainly helped. The Home Renewables Loan Scheme, the Low Carbon Infrastructure Transition Programme and support from Resource Efficiency Scotland are all driven by the Scottish Government. If anything, UK policy uncertainty is putting the brakes on further development.

Scottish Energy Minister Fergus Ewing, quoted in Holyrood Magazine, said: “We are committed in helping support households and business across become more energy efficient and use more low carbon and renewable heat sources.

“There is however continuing uncertainty about the Renewable Heat Incentive, which the UK Government have not commitment to beyond March 2016. We will continue to press for commitment to the long term sustainability of the RHI beyond next year to provide confidence for funders and stimulate investment in renewable heat technologies.”

Elsewhere, devolution discussions carry on apace. In Greater Manchester, district heating is already very much on the agenda, with several authorities undertaking development work supported by the national Heat Network Delivery Unit, an example of a national programme supporting heat in a devolved future world.  The devolution of health budgets to Greater Manchester could provide an interesting link into the rollout of affordable and lower carbon heat sources particularly to fuel poor households or those more at risk from living in cold homes.

Cornwall is at the vanguard of county-level devolution discussions. Alastair Mumford of Regen SW told us:

“Overall devolution should enable Cornwall to develop initiatives better fitting with local resources and issues, developing synergies between council and government priorities. The devolution package states agreement by government and the council to investigate how local and neighbourhood plans can support local ownership models, including heat networks.  The deal references a ‘community heat pilot’ and the council has an excellent track record in supporting community renewable electricity.

“The deal should help the council in setting up a Low Carbon Enterprise Zone which aspires to develop geothermal, an important priority for the area, and other renewable technologies.  The scheme could see new build and retrofit heat networks as well as attracting in industries with high heat demands.”

Devolution is not the same as divorce: Mumford believes that while devolution helps councils to shape policies that best fit their geography, there is also opportunity for closer engagement with Government Departments. And there are things which are best driven at the national scale. Says Mumford:

“Change in basic infrastructure such as the way we generate heat does require an overall national framework to drive down costs and risks. If we end up with regions pushing forward with initiatives that are specific to their area and don’t join up, they won’t create an overall market that the supply chain can react to and invest in. Whilst devolution is a positive opportunity for renewable heat, therefore, we do not think government can simply wash its hands of the need to provide that framework.”

As Scotland and Cornwall are both demonstrating, a clear ambition and policy statement can make all the different. Alastair Mumford explains:

“Devolution can dramatically improve low carbon heat in an area but it needs to go hand-in-hand with a detailed strategy.  This strategy needs to be developed with the community and reflect best practice within and outside the region. The strategy needs to enable the supply chain to develop its skills and capacity.”

Greater Manchester meanwhile has carried out extensive citywide heat mapping and through its Energy Plan has identified how changes in energy generation and supply can contribute to the City-Region’s ambition to reduce CO2 emissions by 48% by 2020 compared to 1990.

The future of heat is local – district heating networks and local renewable heat generation are starting to feature more and more in our energy mix – though they have a long way to go! Devolution can help place the power to deliver change in the hands of local communities, though it will be interesting to see how this is balanced with national enthusiasm for developing fracking and our ongoing commitments to a robust and interconnected gas network.

How will all the pieces of the puzzle fit together? Join the debate at the Heat Conference on Wednesday 25 November to have your say. You can book your place at www.heatconference.co.uk.

 

 

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By Professor Jim Skea CBE FEI, President – Energy Institute, Research Council’s UK Energy Strategy Fellow and Professor of Sustainable Energy at the Centre for Environmental Policy, Imperial College


 Energy decision-making is widely varied. There are mega-decisions about nuclear reactors, gigawatt-scale offshore wind farms and interconnectors that criss-cross the North Sea. Then there are the literally millions of decisions, each modest in itself, which collectively shape energy needs and markets. Policymakers and headline writers love the big stuff. Nevertheless, it is the more humble things which will shape out the energy future and which really challenge policymakers.

“Heat” has become a catch-all term to describe all forms of energy use that are not electricity and not transport – and that’s a very large share of energy demand. There is a tendency to describe heat as a “sector”. Winston Churchill once famously said that India was no more a country than the equator was. Well India is certainly a country now but, in my view, heat is no more a sector than a kettle of boiling water is. And talking about heat markets is also bizarre. There may be some district heating schemes where heat is priced and traded but, for the moment, heat largely stays within the premises where it is generated and used.

It is also odd that the energy labelled “heat” in commercial buildings is more often used to keep us cool. Hence, the not entirely facetious title of this blog – we could really do with a catchy term, which covers the energy needed to keep us comfortable, whether it involves nudging temperatures up or down. “Heat” makes it sound as though policy is all DECC’s job. Something round “buildings” or “built environment” would make it clear that other government departments, notably Communities and Local Government who look after building standards have a rather important role to play.  Suggestions welcome!

One of the consequences of regarding heat as a sector on par with real sectors, such as electricity, is the temptation to mimic policy mechanisms that work well where there are functioning markets, c.f. the complexity of the Green Deal. Smaller consumers do not make decisions with the same degree of sophistication as finance officers in major utility companies – and nor should they. If we want to promote energy efficiency and renewable heat then simple, understandable rules and incentives are needed. I was talking to a Swede yesterday who pointed out that Scandinavians value simplicity in all things from furniture design to energy policy. They look with bemusement at the elaborate mechanisms that the UK uses to shape electricity markets and energy consumption patterns.

So where does this rather grumpy rant take us? First, I think we need a holistic approach to keeping people comfortable in indoor environments. It is basically about minimising energy use and maximising inputs from environmentally sustainable energy sources. Second, a joined-up vision of where we are going would help. Top-down views of UK low carbon energy futures suggest a big role for heat pumps for example – but it is fair to say many energy professionals remain sceptical.  Every time an old boiler is replaced by a modern combi boiler we lose the hot water tank – the cheapest form of energy storage for buildings – that would be needed to get heat pumps installed. Are we locking ourselves out of a low carbon future in the longer-term for more incremental gains in the short term? Finally, we need rules and incentives that match the needs of households and businesses and the way they make decisions. When DECC presses control-alt-delete on energy policy after the Spending Review is concluded, let’s hope “heat” is one of the areas that gets the attention it deserves.

 

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We asked Lesley Rudd, Policy and Public Affairs Manager of the Sustainable Energy Association, for her views on the policy landscape for renewable heat. The Sustainable Energy Association (SEA) is a member based industry body offering innovative policy solutions that link up building-level technologies and the wider energy system to achieve a low carbon, secure energy future for the UK, benefits for UK consumers, and commercial growth for businesses working in the sector.


 Over the last few months - as disappointing announcements relating to the low carbon sector have been made - we have had calls from concerned members asking for advice.  Policies causing immediate impact on business include:

  • The end of further funding to the Green Deal Finance company
  • The scrapping of the Zero Carbon Homes scheme
  • DECC consulting on ending Renewable Obligation support for solar farms
  • DECC consulting on huge reductions in Feed in Tariff payments and huge reductions in the overall budget.

These announcements have caused considerable uncertainty in the market place and are having an immediate impact on business, with both investors and potential customers getting cold feet (excuse the pun)!

The proposed considerable reductions in the feed-in-tariff for solar PV is impacting businesses in the low carbon heating sector as  there is a knock-on effect which pervades other business activities and other businesses.  Customers are unwilling to close orders because those announcements already made have created a pessimistic outlook for them, pending new policies being announced on heat policy and energy efficiency (both of which Amber Rudd has indicated will not be concluded until after the Chancellor’s Autumn Statement).

Businesses are now facing the  very real prospect that customers, with whom they  have been in contractual discussions for some time, are considering pulling out as they are concerned that the Renewable Heat Incentive scheme (RHI) will close before contracts are in place, leaving their  investment facing fiscal uncertainty.

The SEA supports the Government’s aim to ensure value for money for the taxpayer and avoid cost overruns in its policies.  However, we believe that the cuts proposed to the FIT regime and rumoured to the RHI will be counterproductive for the Government’s long term economic plan.  We agree that subsides should be phased out over time and should only be in place for a period necessary to allow new industries to compete effectively.  However, there is a real risk that if the investment in a permanently lower future cost base for the provision of our country’s energy is removed before the transition to competitiveness is complete, not only will we lock the country in to a higher energy cost than necessary for the long term, but we will also render stranded the good work and public funds that have been invested so far. The RHI is a national investment which will lead to a more cost effective heating market tomorrow. Removal or significant cuts to the RHI now will hinder our efforts to reduce costs and negate much of the Government and industry’s investment to date.

We believe bringing industry and Government together to find a solution is the way forward.  To this end, the SEA has carried out a significant amount of modelling to assess the value for money delivered by government policies such as the RHI compared to other alternatives and to identify ways in which the scheme could be improved to cost less and deliver more.  

Much has already been achieved by industry and Government working together to develop a market and a supply chain for renewable products - so let’s finish the job. As the market develops, volumes increase, costs and emissions reduce, customers get cheaper energy and the UK gets a sustainable industry with lower costs locked in for the future, thereby permanently reducing future needs for imported fossil fuels, and providing the most cost-effective way of meeting the Conservative manifesto commitment to meet the carbon budgets set under the Climate Change Act.  A win-win!

 Our thanks to Lesley Rudd, Policy and Public Affairs Manager at the Sustainable Energy Association.


 

 You can have your say on renewable heat at the Heat Conference on Wednesday 25 November - click here to book your place.

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By Ian Marchant FEI, President, Energy Institute


The simplest questions are usually the best. By many measures, heating accounts for around half our total energy use. The cost of that energy has gone up significantly in recent years. Less than 5% of our heating is from renewable sources.

We all know the problem, how to get the first two of these measures down and the third one up. So here's where the simple question comes. What is the one thing we should focus on?

It would be tempting to use this opportunity to lobby on the political environment and support mechanisms or to wax lyrically on new technologies but I don't believe that either of these important areas are the one big thing. So what is it? I believe it’s Behaviour. 

Let me explain. The reason why we don't insulate our homes or set our thermostats and time clocks correctly is behavioural or to put in bluntly, we can't be bothered.  The reason why district heating is so hard to get going in the UK is because we all want our own boilers in the corner of our house. The reason that biomethane struggles to make inroads is that we don't regard organic waste as a valuable fuel and just throw it away. The reason we don't install new technology such as heat pumps is because the old ways are easier. 

We don't need more engineers and lobbyists taking part in the heat debate we need behavioural economists, anthropologists, psychologists and socialists to work out how to get us off our backsides and actually do something.

 

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We’re delighted that Matthew Pencharz, Senior Advisor on Environment and Energy to Mayor of London Boris Johnson, will be joining us at Heat 2014. We took some time to catch up with him ahead of the event:

How did London go about placing heat as a specific issue in the energy policy debate?

London’s high use of public transport means that a great proportion of our CO2 emissions come from buildings; nearly 80 per cent, in fact. With expected decarbonisation of the electricity grid, the greatest impact in CO2 emissions is to be found in addressing buildings’ energy efficiency and the use of fossil fuels in heating.

Retrofitting these buildings is a priority for London. To maximise CO2 emissions reductions in the most cost-effective ways, the Mayor’s approach is to retrofit these buildings with energy efficiency and energy supply measures through programmes such as RE:NEW, RE:FIT and the decentralised energy programme of work.

Increasing concerns over the affordability and security of London’s energy supply have focussed attention on delivering an energy future for London with a triple bottom line: to be more secure, more affordable and lower carbon. Our research shows that placing heat at the centre will deliver the greatest benefits.

London has 32 Boroughs and the Corporation of London, a lot of stakeholders and Westminster watching on. How do you manage the dynamics between citywide policy and delivery, the national policy landscape and local delivery?

A major concern is the fall in national electricity generating capacity; we have an alarming lack of energy capacity headroom and therefore an unacceptably high risk of brownouts. This capacity crunch has been further exacerbated by the unplanned outages of a number of power stations and the intended closure of others.

The Mayor is doing all he can to increase the level of local generation that will take the stress off upstream generation, including initiatives such as Licence Lite (LL). LL is a junior electricity supply licence aimed at overcoming the cost and market barriers to distributed generators wanting to sell their power output at rates reflecting its true retail value. With Ofgem’s oversight, we intend to pilot the new licence that will allow local generators a better price for their electricity, which should help decentralised generators proliferate, further reducing stress on the national power system. He is also working hard to deliver smart systems in London to manage demand better and incentivise consumers – both commercial and domestic – to avoid the hours of peak demand.

London’s electricity distribution infrastructure has served the capital well. However, electricity demand is now increasing 1-4 per cent a year and a large number of the capital’s substations are, at times, at or near their maximum capacity. The current regulations severely limit strategic investment in electricity distribution infrastructure ahead of an immediate request for a connection. The Mayor is working with developers, the Government and Ofgem to investigate how the current regulations could be reformed to allow a much more strategic approach to investment in electricity distribution infrastructure while protecting consumers from any risk.

A lot has happened to deliver efficient, affordable, sustainable heat in London over recent years. How’s the market looking? 

The Mayor has a small development team that directs consultancy support to help others develop and deliver their larger-scale decentralised energy projects. The team has developed a DE project pipeline valued at over £300m, almost a third of which is expected to be brought to market by summer next year. The projects are characterised by their technical variety and disparate stakeholders. This points to the important role of the specialist energy development team in helping identify and structure projects with the stakeholders. Examples include

  • Supporting the London Borough of Camden to capture 2 MWth of unused heat from a new gas-turbine CHP installation at the Royal Free Hospital to heat their housing stock at Gospel Oak utilising a new heat network.
  • Supporting the London Boroughs of Enfield, Haringey and Waltham Forest establish a North London area-wide heat network. Enfield has established the Lee Valley Heat Network company that will initiate the start of the project based on heat from the Edmonton energy from waste project.
  • Supporting developers in the Vauxhall Nine Elms Battersea Opportunity Area to approach the ESCO market to invest in interconnecting heat network and provide heat supply services centred on the New US Embassy.

There’s some great work under way, but what are the ongoing challenges for London in terms of heat?

If London is to achieve its target of supplying a quarter of London’s energy from decentralised sources by 2025, then the supply of heat from CHP, waste heat and natural sources by means of heat networks will have an important role to play.

London’s complicated governance structure and the multiplicity of stakeholders mean that it is challenging for an individual private sector player to drive forward large-scale DE projects. We intend to use the planning, convening and influencing power of London’s public authorities, combined with expert support from the GLA, to drive forward market competitive projects, resulting in an energy supply for London which is more affordable, secure and lower carbon.

Finally, what are the key plans for the future? What should the heat industry know about what’s coming in London?

London is set to exceed its record level of population within months and risks losing its premier position unless a major programme of infrastructure investment is put in place.

The London Infrastructure Plan 2050 is the first attempt to set out the full range of infrastructure requirements for the capital over the next half century, during which time the population of London is forecast to increase by 37 per cent to more than 11 million people.

The plan builds on the Mayor’s campaign for greater fiscal devolution to cities allowing for investment in much-needed local infrastructure and boosting the whole of the UK’s economy. The Mayor believes that the model for investment set out in the plan could also be suitable for all of these cities, and others, providing a blueprint for how they might invest in locally-decided priority infrastructure needs.

Thanks to Matthew Pencharz for his contribution here. You can hear more from Matthew – particularly about the dynamics of cities operating in a national and local landscape – at Heat 2014 on Wednesday 5 November. To book your place now, visit www.heatconference.co.uk

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