BEIS aims to consult on a market framework for heat networks this summer, following its response to the Competition and Markets Authority’s Market Study and the Industry Heat Network Task Force report Shared Warmth. This week the Heat Networks Investment Project (HNIP) has opened for applications.
Parity Projects supports the development of heat networks where they meet the demands of residents and the environment by delivering cost-effective carbon emission reductions. This requires consideration of, and incorporation of, demand reduction measures in the very earliest stages of the development of heat supplies, and so we were interested to see BEIS’s focus on Demand Risks.
We think energy efficiency should be considered as much an opportunity as a risk in the ongoing development of the market framework. Energy efficiency is a healthy source of competition for otherwise potentially monopolistic heat providers, and the two need to, and can, work in tandem to drive carbon and financial savings. It is also a contributing factor to the reach of a network – reduce demand and that supply can go further.
And, where there are risks, those risks are not singular to the heat market network. They need addressing for all parties working on the decarbonisation of the housing stock, whether they are on the supply or demand side.
Consumption risk – the possibility that, overall, heat is not used as much as forecast, and/or that heat generation is not aligned with when it is needed.
Consumption risk plays a significant part in a key barrier to the development of heat networks as investors need confidence in the future scale, timing, and use of heat network connections.
They are not alone. The retrofit sector also needs investors to have confidence in the future scale, timing and use of their products.
These are both known barriers to urgently-needed progress against the UK’s carbon targets, and can be overcome to some degree by joining up intelligence on demand reduction and heat supply.
The UK’s route to delivering low carbon heating is a function of current homes, retrofit options, and heat options. We know where we have to get to on carbon emissions; we know 85% of current homes will still be standing in 2050; we know the impact of different energy efficiency measures; and we can identify the carbon emissions from different heating systems.
Put this knowledge together and you get Parity Projects’ data analytics service. This can build demand scenarios for geographic areas, such as a local authority or the reach of a heat network, or by ownership for our landlord clients. The scenarios are developed by incorporating the clients’ target, such as a minimum SAP, fuel bills or carbon emissions; budgets; and leveraging grants. The result is a plan for an area or housing portfolio, with measures identified for each property, that delivers those targets in the most cost-effective way, whilst also predicting heat demand.
Together with heat network developers work on the potential of the supply-side, that gives some certainty of what the future holds… provided there is certainty from Government as to what will be required in terms of carbon savings from the housing stock as a whole.
Until that long-term roadmap is set, and regulated for, investment will remain stalled, slow or unnecessarily expensive as risks continue to be priced in.