UKDEA welcomes Government’s heat policy proposals but questions whether DECC have gone far enough to deliver the required growth in low carbon heat networks.

DECC today released its latest salvo of proposals to decarbonise the nation’s heat supplies.

Heading up the charge of the Department of Energy and Climate Change’s developing Heat

Strategy was their new policy document titled “The Future of Heating: Meeting the

challenge”. Following on from last year’s “Strategic Framework for Low Carbon Heat”, this

action plan has done well to translate loose aims into concrete policy proposals, though

there will plenty of work to do, to turn these proposals into successful action.

Heat is responsible for about a third of UK’s greenhouse gas emissions and it’s clear that

DECC still have the necessary ambition for low carbon heat in the UK; Secretary of State,

Ed Davey, stated in his forward, “Without changing the way we produce and consume heat,

we will not meet our long-term climate change target.”

 

District energy remains central to the Government’s low-carbon heat policies, with one of the

policy paper’s four chapters devoted to Heat Networks. Also considered are uses of Low

Carbon Heat in Industry, Heat and Cooling in Buildings, as well as Grids and Infrastructure.
UKDEA Chairman, Simon Woodward, said earlier “We are delighted that the Department of

Energy and Climate Change recognise greater use of low carbon district energy is a

necessity for this country, and we are very positive about the announcements today.

However, we’re left waiting until 2014 before consultation commences on any fiscal support

for implementation and therefore, we question whether the growth DECC are seeking will be

delivered by this policy paper when only development and not capital cost implementation

barriers are being addressed. We will of course continue to work with Government, to

identify ways to overcome these barriers and rapidly expand district energy networks in the

UK”.

What are the Proposals?

The flagship heat networks policy proposal is a new Heat Networks Delivery Unit (HNDU),

operating within DECC, providing support to local authorities that want to deliver district

energy schemes. HNDU will work closely with local authorities’ project teams, providing the

expertise that they may lack in-house. As part of this £9m programme, a total of £6m will be

available (for up to two financial years) to support early stage development costs and ready

projects for procurement.
However, at this stage, no funding or financial support is available to support capital costs of

delivering schemes. Although next year, DECC will look at the potential to provide

renewable heat networks with specific financial incentives, through the Renewable Heat

Incentive (RHI). This is welcome news, even though the initial aim had been to include such

support in the RHI from the start and further delay to consultation in 2014 remains

frustrating.
DECC intends to endorse industry-led consumer protection later this year and will also

consult on options for mandatory installation of heat meters as part of heat network

developments. DECC has continued to make clear that it does not wish to stop the growth

of the UK’s district energy sector through unnecessary regulation.
The DECC Policy Paper draws heavily on quantified evidence, including referenced

contributions from the UKDEA. Results from the recent Databuild research are included,

which estimated that there are around 2,000 DH networks in the UK, serving approximately

210,000 dwellings as well as 1,700 commercial and public buildings, all delivering around

2% of national heat demands. BRE’s recent work for DECC on barriers to District Heating

informs the proposals and is covered in more detail in a separate paper, also released today,

that is over 100 pages long. A further 48 page long Evidence Annex adds to the evidence

base.
The UKDEA will spend time considering the supporting evidence and ensure that any

necessary peer review forms part of our response to Government, alongside continuing

advice and submission of relevant evidence. Analysis of the policies will be carried out with

the input of the UKDEA’s diverse and experienced member base, so that the genuine

potential of the proposals can be understood.
Further Government action in this area isn’t limited to Whitehall and the UKDEA also eagerly

awaits the forthcoming Heat Generation Policy Statement from the Scottish Government

later this year, taking things forward from January’s Heat Vision (link below).

www.scotland.gov.uk/Resource/0041/00413386.pdf
The DECC Policy Proposal and associated documents can all be downloaded from DECC’s

website:

https://www.gov.uk/government/publications/the-future-of-heating-meeting-the-challenge

–ENDS–

Notes to Editors:

The partners, owners and operators of the largest district energy schemes in the UK have

aligned themselves in the creation of the UK District Energy Association (UKDEA); with the

aim of not only promoting district energy as a means to deliver significant carbon savings,

but also to establish a direct link between the Government and the industry’s small market

base.
The Association is a not for profit, non-trade association of companies and public sector

organisations involved or interested in district energy schemes of all sizes, from village

scale, community based ‘micro district energy’ schemes to city wide district heat energy

networks.
Still in its infancy, the UKDEA has attracted leading players in the industry, with the

UKDEA’s Full members comprising of 14 major organisations:

• Birmingham City Council

• Cofely District Energy Limited

• Coventry City Council

• ENER-G Switch 2 Limited

• Enviroenergy Limited

• E.ON Energy Solutions Limited

• Leicester City Council

• Newcastle City Council

• Newport City Homes Limited

• Shetland Heat, Energy and Power Limited

• Southampton City Council

• SW Energy Limited

• Thameswey Limited

• Veolia Environmental Services Limited
Together, these 14 organisations represent the: Birmingham, Coventry, Exeter, Leicester,

Liverpool Manchester, Milton Keynes, Newport, Newcastle, Nottingham, Sheffield, Shetland,

Southampton and Woking District Energy schemes, together with a number of schemes in

London including Olympic Park and Stratford City, Bloomsbury Heat & Power, Whitehall,

Hatfield, Dalston Square, Greenwich Millennium Village, Barbican Arts Centre, Guildhall,

Bastion House, Ontario Tower, Pan Peninsula, Baltimore Wharf, Wapping Lane, High Point

Village and London Central Markets.

The UKDEA also has 31 Associate Members, including international members, sharing and

contributing information to our district energy knowledge base.

UKDEA Key Facts:

Together the UKDEA members represent:

• Over 120 MW of low carbon generation plant (CHP, biomass, EFW etc)

• Supported by over 600 MW of conventional back up boiler plant

• Delivering over 700,000,000 kWh of heat each year

• Across energy networks which, if combined, would extend for more than 200km
Through Full and Associate membership, the UK District Energy Association’s aim is to

represent current and potential owners, developers, consumers, partners, operators, product

suppliers and interested parties of District Energy schemes throughout the UK.

The UKDEA welcomes new members. Be part of our district energy information sharing loop

and apply for membership of this forward thinking Association today.

Biomass and the Code for Sustainable Homes (CSH)

Background

The Code for Sustainable Homes is the national standard for the sustainable design and construction of new homes. The Code aims to reduce our carbon emissions and create homes that are more sustainable in the long term.

Benefits of CSH Certification
With a more environmentally-conscious public, aware of the urgent need to limit their
effects on climate change, there is a growing appetite amongst consumers for more sustainable products and services. With greater demand for homes that offer reduced environmental impact, lower running costs and features that enhance health and well-being, there is an increased need for home builders to demonstrate their capacity in sustainable home building, and to market the sustainability of their homes to homebuyers. The Code offers a tool for home builders to demonstrate the sustainability performance of their homes, and to differentiate themselves from their competitors. The Code is also mandatory of new build public sector projects and for developments over £300,000.

How the Code For Sustainable Homes Works

The Code measures the sustainability of a new home against categories of sustainable design, rating the ‘whole home’ and its Total Efficiency Rating (TER) as a complete package. The sustainability categories by which new homes are measured are outlined below, along with the relative weightings and points available.

The Rating System

The code works by awarding new homes an overall efficiency rating from Level 1 to Level 6, based on their performance against the 9 sustainability criteria above. These are combined to assess the overall environmental impact of the dwelling. The levels of energy efficiency are the standard percentages set out in Part L1A of the 2006 Building Regulations) http://www.planningportal.gov.uk/uploads/br/BR_PDF_ADL1A_2006.pdf

Note; The maximum emission levels set out in PartL1A of the 2006 Building Regulations is changing in summer 2013 to 30g/GJ particulate matter and 150g/GJ nitrogen oxides 30mg/Mj. This will also become the standard requirement for inclusion of a biomass boiler project into the Renewable Heat Incentive.

The code levels, based on minimum percentage reduction in Dwelling Emission Rates over Target Emission Rates are;

To reach CSH Code Levels 5 & 6, the architects have designed the properties to be airtight, with high levels of insulation and many sustainable features including low water use, roofs designed to maximise solar PV energy collection and biomass boilers.

To reach the different code levels, a quantity of points is required;

Biomass and the Code for Sustainable Homes

Biomass can be very beneficial to CSH Projects, as the Energy and Carbon Emissions Category Number 1 carries the greatest overall weighting of all the factors at 36.4%.

The Biomass Energy Centre shows that biomass as a fuel type offers the highest CO₂ reductions against fossil fuel types of 96-98%;

So, if a high 92%+ efficiency biomass boiler is installed in a new build project, with emissions below 30g/GJ particulate matter and 150g/GJ nitrogen oxides 30mg/Mj, it can contribute towards and increase the overall CSH Level of the project to Code 5/6 level.

However, an architect or suitably qualified building professional should be consulted in order to assess the specific CSH values of your project, as this is a highly specialist area.

For more information on the Code for Sustainable Homes;

http://webarchive.nationalarchives.gov.uk/20120919132719/www.communities.gov.uk/documents/planningandbuilding/pdf/codesustainhomesstandard.pdf

The REA has published the first ever renewables industry confidence survey, please read the press release below

Modest optimism short term, but some doubts over key policies. Overall score: 47%

The REA has conducted this survey in order to better understand the current state of the UK renewable energy sector [1].

The survey takes place at a time of major policy upheaval for the renewable power and renewable transport sectors and follows several analyses suggesting that investment in the renewables project pipeline has slowed [2]. This morning’s Financial Times [3] reported the concerns of REA members responding to the survey about the new Contracts-for-Difference mechanism under the Energy Bill.

Senior managers from 68 companies responded to the survey. Findings confirm the Energy Bill is cause for concern with 51% of renewables executives believing that Contracts for Difference will not be effective in bringing forward new renewable power capacity. 69% believe that the lack of an emissions target in the Energy Bill sends a ‘poor’ or ‘very poor’ signal to investors. Only 4% believe the UK has a ‘good’ or ‘excellent’ chance of meeting its 2020 renewable energy target.

However, the survey shows no significant overall deterioration in employment over the past six months. Just under a half of companies reported broadly stable employment levels and nearly as many firms recruited staff as have laid them off. Looking forward over the next six to twelve months 62% of companies expect employment levels to stay the same, and twice as many firms expect to see employment increasing, compared to those expecting a decrease in employment.

REA Chief Executive Gaynor Hartnell comments:

“We will repeat this survey every six months in order to build up a comprehensive picture showing trends in confidence levels. Billions of pounds of investment needs to flow into renewables infrastructure. Our aim is to provide Government and stakeholders with a tool to gauge how policies are being received.

“The UK has to achieve a higher growth rate than any other Member State in order to reach its 2020 renewables target. Mixed messages remain a problem and industry needs policy certainty and political consistency. The prize is up to 400,000 jobs by 2020, economic growth and greatly improved energy security.

The REA has combined short term business outlook with confidence in meeting the 2020 target and confidence in the regulatory framework to give an overall ‘Renewables Industry Confidence Index’.

The ‘Renewables Industry Confidence Index’ score for this first iteration of the survey is 47% [4].

While 100% would constitute absolute certainty and a flourishing industry, we believe a score of around 75% would indicate a healthy and confident industry likely to meet the 2020 renewable energy targets. The UK has one of the lowest renewable energy targets in Europe at 15% of total energy, but also one of the most challenging given our low starting point.

The survey reveals serious concerns around Contracts for Difference, as set out in the Energy Bill, and dissatisfaction with the functioning of the Renewable Heat Incentive. It also makes key recommendations for improving investment going forward, including sending a clear signal to investors; ensuring CfD proposals in the Energy Bill work for independent generators; setting an RTFO trajectory to 2020; and introducing new RHI tariffs on time.

A selection of comments from survey respondents is set out below to illustrate industry perspectives.

General comments on UK policy and political landscape

An anonymous respondent from a leading UK manufacturer said:

“Too many conflicting signals have been given recently causing doubt as to whether the Coalition has a unified position on promoting a balanced mix in the future UK energy supply, including renewable technologies. There is also doubt that the Government is convinced that renewables have a long term role to play, and a widespread belief that HM Treasury has the upper hand in determining the ultimate rate of market adoption of renewables.”

An anonymous financier said:

“There is no shortage of capital for energy projects but it is an international market and many other countries are perceived as more predictable and trustworthy than the UK.”

Craig Ibbetson, Director of Regen Energy, said:

                “Simplify the regulatory framework. It is too complex.”

James Astor, Managing Director at Agrivert Biogas, said:

“Recent Government actions mean that private equity and banks see Government renewable policy as a “risk” that has to be priced.”

David Williams, Chief Executive at Eco2, stresses that this uncertainty goes back further than the past six months:

“Investor confidence has deteriorated with the many changes in legislation seen in the UK over the last two years.”

Tim Jackson, Geothermal Development Manager at Sinclair Knight Merz, said:

“The UK is falling behind other countries in Europe and Africa in terms of attractiveness for investment in new renewable generating technologies.”

Energy Bill & Electricity Market Reform

The REA is not surprised that the electricity sector recorded the highest levels of ‘very poor’ confidence. The REA is currently urging Government to solve the critical route-to-market issue for independent generators, and will debate this issue at an open meeting on 27th March [5]. Independent generators are expected to deliver between a third and one half of necessary UK investment in the power sector to 2020. There is widespread concern that, as currently conceived, Contracts for Difference are not investable for independent generators. Ministers have committed to securing a solution and are expected to report back in June/July.

Andrew MacLellan, Director of ENER-G, said:

“Lack of regulatory and incentive stability, with a three to five year outlook, is proving a major obstacle to investment in the sector. Last year it was the RO review, this year it is EMR.”

Steven Edrich, Head of Strategy at 2OC, said:

“Continuing uncertainty over EMR and how the RO will be left to work beyond 2017 are crippling industry’s ability to look ahead and making it very difficult for banks to approve funding on projects now.”

Sector-specific concerns

There is more confidence in the small scale Feed-in Tariff than the Renewables Obligation or Renewable Heat Incentive. Overall, 65% of respondents in renewable heat and electricity had poor or very poor confidence in their sector’s regulatory framework.

While 100% would constitute absolute certainty and a flourishing industry, we believe a score of around 75% would indicate a healthy and confident industry likely to meet the 2020 renewable energy targets. The UK has one of the lowest renewable energy targets in Europe at 15% of total energy, but also one of the most challenging given our low starting point.

The survey reveals serious concerns around Contracts for Difference, as set out in the Energy Bill, and dissatisfaction with the functioning of the Renewable Heat Incentive. It also makes key recommendations for improving investment going forward, including sending a clear signal to investors; ensuring CfD proposals in the Energy Bill work for independent generators; setting an RTFO trajectory to 2020; and introducing new RHI tariffs on time.

A selection of comments from survey respondents is set out below to illustrate industry perspectives.

General comments on UK policy and political landscape

An anonymous respondent from a leading UK manufacturer said:

“Too many conflicting signals have been given recently causing doubt as to whether the Coalition has a unified position on promoting a balanced mix in the future UK energy supply, including renewable technologies. There is also doubt that the Government is convinced that renewables have a long term role to play, and a widespread belief that HM Treasury has the upper hand in determining the ultimate rate of market adoption of renewables.”

An anonymous financier said:

“There is no shortage of capital for energy projects but it is an international market and many other countries are perceived as more predictable and trustworthy than the UK.”

Craig Ibbetson, Director of Regen Energy, said:

                “Simplify the regulatory framework. It is too complex.”

James Astor, Managing Director at Agrivert Biogas, said:

“Recent Government actions mean that private equity and banks see Government renewable policy as a “risk” that has to be priced.”

David Williams, Chief Executive at Eco2, stresses that this uncertainty goes back further than the past six months:

“Investor confidence has deteriorated with the many changes in legislation seen in the UK over the last two years.”

Tim Jackson, Geothermal Development Manager at Sinclair Knight Merz, said:

“The UK is falling behind other countries in Europe and Africa in terms of attractiveness for investment in new renewable generating technologies.”

Energy Bill & Electricity Market Reform

The REA is not surprised that the electricity sector recorded the highest levels of ‘very poor’ confidence. The REA is currently urging Government to solve the critical route-to-market issue for independent generators, and will debate this issue at an open meeting on 27th March [5]. Independent generators are expected to deliver between a third and one half of necessary UK investment in the power sector to 2020. There is widespread concern that, as currently conceived, Contracts for Difference are not investable for independent generators. Ministers have committed to securing a solution and are expected to report back in June/July.

Andrew MacLellan, Director of ENER-G, said:

“Lack of regulatory and incentive stability, with a three to five year outlook, is proving a major obstacle to investment in the sector. Last year it was the RO review, this year it is EMR.”

Steven Edrich, Head of Strategy at 2OC, said:

“Continuing uncertainty over EMR and how the RO will be left to work beyond 2017 are crippling industry’s ability to look ahead and making it very difficult for banks to approve funding on projects now.”

Sector-specific concerns

There is more confidence in the small scale Feed-in Tariff than the Renewables Obligation or Renewable Heat Incentive. Overall, 65% of respondents in renewable heat and electricity had poor or very poor confidence in their sector’s regulatory framework.

A great piece by Paul Spackman published on March 5^th on the Farmers Weekly website http://www.fwi.co.uk/articles/05/03/2013/137980/renewable-heat-support-faces-stricter-controls.htm

Support payments for renewable heat will be subject to tighter budgetary and environmental controls under plans announced by the government.

From this summer the Department of Energy and Climate Change will introduce a system of tariff cuts for non-domestic Renewable Heat Incentive payments, similar to that applied to Feed-in Tariffs. This means RHI rates for new claimants will be reduced by at least 5% if uptake exceeds a set level, although cuts could be up to 20%.

For most technologies the trigger for tariff cuts will be if uptake is 50% or more above DECC’s target deployment, although for others (solar thermal and ground-source heat pumps) it is 5% above. DECC will publish monthly figures on its website to help people gauge whether a tariff cut is likely, although uptake to date has been well below any such trigger.

In addition, there will be regular reviews of the scheme to ensure technologies are adequately supported and the budget is not exceeded. The first review is due earlier than planned this spring in light of “uptake to date and the new evidence on costs and performance of renewable heating technologies”.

 

DECC rejected proposals to introduce a “pre-accreditation” system that would have allowed potential RHI claimants to lock into the tariff rate available at the time of application.

“The proposals remove some of the uncertainty that surrounded future tariff levels, but it is unfortunate there are no plans to provide any certainty as to tariff levels for a project before any capital expenditure is committed,” commented Shirley Mathieson, head of renewables at Saffery Champness.

New sustainability rules

Another change is the introduction of two sustainability standards for new and existing solid biomass and biogas heating installations.

All systems will have to meet “lifecycle greenhouse gas emissions targets” and land criteria in order to receive payments.

The GHG target requires solid biomass or biogas/biomethane to give at least a 60% GHG saving compared to fossil fuels (waste-based feedstocks are exempt). The land criteria requires woodfuel to come from a sustainable source and other feedstocks such as energy crops will have to meet the same land criteria as set out in the EU’s Renewable Energy Directive. This protects land with high biodiversity or high carbon stock value, such as primary forest, peatland or wetland.

People buying-in woodfuel will be able to prove RHI sustainability compliance by using an approved supplier and keeping a record of any purchases. DECC hopes to have completed a list of approved suppliers by the end of this year.

Farms or businesses with installations under 1MWth capacity that are using wood or energy crops from their own land will be able to continue doing so under the new rules. Perennial energy crops meeting Energy Crops Scheme for England, or its equivalent, sustainability standards will automatically meet RHI land criteria.

The other option for demonstrating compliance is to submit regular reports to Ofgem showing fuel complies with sustainability criteria. http://www.fwi.co.uk/articles/05/03/2013/137980/renewable-heat-support-faces-stricter-controls.htm

You may or may not have heard of the Renewable Heat Incentive (RHI). It is a Government Scheme that pays the owners of renewable heating technologies including biomass boilers, log boilers, wood burning boilers, wood chip boilers and biomass boiler that run on a choice of fuels including grain and miscanthus for generating and using renewable heat.

Administered by the energy regulator OFGEM, the RHI is part of a programme to reduce the country’s CO2 emissions by replacing fossil fuel heating systems with renewable heating solutions, such as biomass.

The first phase of the RHI is targeted at commercial, not-for-profit, charity and public sector organisations.The RHI offers annual payments for 20 years to the owners of the equipment, index linked to inflation. Combined with the fuel cost savings over fossil fuels, which can be 50-80%, the biomass heating opportunity offers a great return on investment.

Once your biomass installation is accredited by OFGEM, the submission of quarterly heat meter readings determine the quarterly payments that will follow. If you are considering replacing your oil or electric heating system with a biomass boiler, you may be wondering how much you may save on your fuel costs or how much the Renewable Heat Incentive (RHI) may pay out every year over the 20 year scheme?

For example, a country estate with main house and offices using a 198kW system would receive upwards of £20,000 and a farm house with cottages and a holiday let using 100kW system would earn £10,000 or more per annum for the 20 year duration of the scheme.

We have developed our own RHI Calculator which is available right now as a free download. This simple tool shows the installed cost of a Treco biomass boiler system, your potential earnings from the scheme over 20 years, your fuel savings and the payback period. Click here to see four worked examples from Treco’s RHI Calculator or click here http://www.treco.co.uk/customer-satisfaction/ to see some case studies of Treco’s RHI accredited projects.

Treco have had a good response for wood burning boilers to their RHI application assistance packages and biomass still represents some 90% of accredited installations.

We now have a full time staff member handling applications and having gained a solid amount of RHI accreditations for our clients. To find out more either call us on 0845 130 9012 or email us at info@treco.co.uk.

To find out more about the RHI, including how to apply, please visit OFGEM’s website http://www.ofgem.gov.uk/e-serve/RHI/Pages/RHI.aspx