Utility Week

UTILITY Week 5th February 2016

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6 | 5TH - 11TH FEBRUARY 2016 | UTILITY WEEK People & Opinion Take a longer view of heat networks District heat should be treated as a long-term investment so it can be compared fairly with other assets. Director's view Tim Rotheray, director, Association for Decentralised Energy O n 26 January, I appeared before the Energy and Climate Change Select Committee (ECCC) to give evidence to its inquiry on low- carbon infrastructure. The ECCC is asking some really interesting questions – ones we have not heard before. Questions about systems, integration and genu- inely seeking out about how we address energy, not just power. I gave evidence alongside Dr David Clarke, chief executive of the Energy Technologies Insti- tute, and Chris Clarke, director of asset management and HS&E at Wales and West Utilities. Wales and West Utilities is a gas distribution network, the system that brings the fuel that heats the homes of most of Britain. When the committee asked about district heating, they were told that Wales and West Utilities had calculated district heating investments would need a subsidy of 75p/ kWh. This is a huge number – 15 times the domestic retail gas price – and it made me sit up. Then I realised why it was so large. Clarke's analysis required a return on the money invested in the infrastructure within just seven years. Such an approach would treat district heating as if it were a boiler, which lasts 10 to 15 years, and not like energy infra- structure, which lasts for many decades. In other infrastructure utilities, such as power, gas and water networks, we have a dedi- cated infrastructure investment framework. Rather than expect- ing a short seven-year payback, the network operators invest on a payback of more than 30 years. Wales and West Utilities' analysis highlighted a clear case: we cannot treat long-lived infrastructure like short-term generation assets. We need to enable those who invest in infrastructure to look at heat in a similar way as other networks. By setting long, stable invest- ment horizons, the upfront investment is spread over the lifetime of the infrastructure, keeping bill-payers' costs down. If the energy regulator started requiring seven-year paybacks on gas or power network invest- ment, our bills would skyrocket. There is no one solution or infrastructure for our future. We need a diverse heating mix. The diversity creates resilience, helping security of supply, but it also enables the right solutions for different localities. District heating is best in dense areas of population where heat demand is high per square metre. Gas through combined heat and power is excellent for industry and high temperature heat, cutting energy waste and increasing competitiveness. Renewable gas is an excellent way to further decarbonise in industry and lower density areas. Heat pumps are superb in new, well-insulated homes off gas grid, while older homes off gas grid need efficient low- carbon sources such as LP gas microCHP and biomass. For those areas where dis- trict heating is the best value, low-carbon heating solution, it needs to be as investable as other forms of energy network infrastructure. As this nascent industry develops in the UK, the government's £300 million in support announced in the spending review can focus on developing the best, new, high- quality exemplar projects. At the same time, the govern- ment can also develop an appro- priate regulatory investment framework so that district heat- ing investments can be evaluated by institutional investors in the same way as other infrastructure assets such as gas, water and power networks. That way, there will be no need for a subsidy. We will simply have a level playing field for infrastructure. That strikes me as a good deal for the consumer. (News, p13) "This amazing new super sewer is providing the bold infrastructure needed to support the movements of our rapidly growing city. For years our historic Victorian systems have heaved at the seams, muddling along, battling to cope with the increasing rainfall and waste of a modern population" London mayor Boris Johnson on the opening of the Lee Tunnel (see p15)

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