Heat networks aren't always a hot idea

There is an inherent, wide spread and often misplaced assumption that heat networks, supplying heat from a centralised energy source directly to homes and businesses through a network of pipes, reduces fuel poverty and symbolise sustainable development. But it’s often not the case.

Their requirement is primarily driven through planning policy. For example, in the Greater London Authority (GLA) area it’s effectively mandatory to provide a heat network on site and facilitate a connection into a larger future district heat network. Outside of London it’s frequently a planning requirement too.

Strategically it’s easy to demonstrate that a local gas fired combined heat and power (CHP) plant may be 80% plus efficient while a modern gas turbine power station may be 55% efficient as all the waste heat is thrown away. Where this waste heat is locally available, part of an existing process and virtually free it’s clearly very sensible to utilise it. Good urban examples of distributed low cost heat can be seen in Sheffield and latterly Coventry where heat from waste to energy plants is distributed round the cities.

Inset gas fired CHP led energy centres developed as part of a new residential scheme or as part of local opportunity area represent a completely different scenario. There are a significant number of these schemes in operation and more planned, many are in London; others dropped into more recent modern developments outside the M25.

Most of these schemes are developed by the private sector and the upfront capital cost of the energy centre and heat network can be a significant financial burden

Most of these schemes are developed by the private sector and the upfront capital cost of the energy centre and heat network can be a significant financial burden. To reduce both the financial and operational aggravation most developers transfer this package as an asset to an Energy Supply Company (ESCo). The ESCo normally pays the developer a capital contribution towards the development cost and then owns the asset. This can be a significant sum perhaps 20% or more of the capital cost. The size of the contribution will be based on a variety of issues including the cost of borrowing, density of the scheme, electricity export tariff and projected future revenues from heat sales. The problem with this approach is that the only method the ESCo has to recover the capital contribution is through the sale of heat to the customer.

Below I have compared actual ESCo charges on projects where we have been asked to help clients and a traditional boiler solution.   

*Average residential cost of gas 4 p/kWh. 

Calculations based on 5,400 kWh per dwelling (approximately CfSH L4)

*Average commercial cost of gas 2.5 p/kWh

Calculations based on 300,000 kWh per annum consumption

On this basis it is evident that a natural gas fired CHP heat network procured through an ESCo would increase fuel poverty and will financially penalise its customers. If this is to be continually promoted by the planning system it needs to be directly linked to a maximum cost of heat that represents a fair value.

Finally while it’s not specifically discussed above, as the grid decarbonises gas fired CHP will not save carbon, quite the opposite and technically it’s not efficient. The energy required to pump water round the network 24/7 and the heat loss in the network will all be saved if a decentralised heat energy solution is used. 

David Bownass is sustainability director at WSP