Utility Week

UTILITY WEEK | 24Th - 30Th JUnE 2016 | 11 Policy & Regulation H eat is an issue. It represents almost half of UK energy use and a third of UK carbon emissions. The UK won't meet its carbon-reduction targets set out in the Cli- mate Change Act – or fulfil its commitments in the Paris Agreement – without a long-term plan to move to low-carbon heating. The Centre for Energy Policy and Tech- nology at Imperial College London says for- mulating a plan for decarbonisation of the heat system should be a top priority for the UK government. Preparation will make the transformation of this significant sector as cost-effective as possible, and keep disrup- tion in both streets and homes to a mini- mum. It will also allow the mass rollout of low-carbon technologies to start in the 2020s. The government appears to be attuned to this need. In November it announced that the budget for the Renewable Heat Incentive (RHI) is to increase to £1.15 billion in 2020/21 – from £430 million in 2015/16 – and, in the Budget, heat networks received £320 mil- lion of support for the next five years. How this money would best be spent is now being discussed. The report also concludes that there is "no silver bullet" – no single, low-carbon solution to replace natural gas. The key prob- lems are meeting the huge seasonal varia- tions in demand and the required ramp rate, both currently addressed by the UK's signifi- cant capacity to store natural gas. The electrification of heat, once consid- ered "the silver bullet" for decarbonisation, has largely been abandoned because the peak heating load could be five to six times what it is today, requiring huge increases in generating capacity. The report concludes that to deal with variations in geography, housing types and occupancy, three solutions will have to be deployed: electrification, repurposing the gas grids for hydrogen, and heat networks. But none of these solutions is the perfect fit. The report weighed up the attractiveness of each approach, bearing in mind the cost and disruption implementation will cause. None of the solutions is without drawbacks. One important area of concern is manag- ing the disruption to homes and businesses – either through streetworks or the replace- ment of appliances – during the transi- tion. The report warns that if the transition is not well managed "it could become a major social and political issue, even where the technical and economic justification is favourable and the end outcome itself is uncontroversial". The choice of solution and the rate at which it is deployed may well be determined by customer acceptance rather than cost. The report recommends that decisions should be made locally rather than seek- ing a single approach at national level, but government should at the earliest oppor- tunity establish a system of governance for heat. The relevant parties are likely to be the National Infrastructure Commission and Ofgem because the current govern- ance arrangements are "not fit for purpose". Energy efficiency also has a vital role to play in reducing the scale of the challenge. Repurposing gas grids Most of the gas infrastructure is already in situ, and disruption through replacing domestic appliances with hydrogen-ready ones can be minimised by early legislation. Hydrogen has similar storage requirements to natural gas, so it should be able to meet the demand peaks and ramp rates, albeit at three times the pressure of natural gas. But hydrogen is expensive to produce, through the electrolysis of water or through steam methane reformation of natural gas, and depends on carbon capture and storage, which the government no longer supports. Electrification Once there is sufficient low-carbon electricity generation, it could meet the extra needs of the heat sector. Highly efficient heat pumps are suitable for less densely populated envi- ronments where traffic disruption is less of a problem, but the cost and disruption required to install the equipment could put many customers off the technology. Any pen- etration of heat pumps is likely to require upgrades for local networks to avoid short- term fluctuations in service quality. The government has also proposed a raŸ of changes to the RHI, including a new budget cap and changes to promote the deployment of technologies "likely to be strategically important in the long term", such as heat pumps. Heat networks District heat networks can supply heat effi- ciently and at low cost to areas of mixed use with strong "anchor clients" such as offices and leisure centres; but they are also suitable for community energy schemes. Heat sources are available but only on a limited scale, and the schemes are as yet unregulated. This leaves customers largely unprotected, and is stifling investment. Among the RHI reforms is a proposal to scrap support for solar ther- mal, a potential source for heat networks. A multipronged plan for heat There is no single way to decarbonise heat cheaply, but there are options if the UK starts the planning process now. Lucinda Dann assesses three of the most practical approaches. Analysis Urban and suburban properties Repurposed gas grids (hydrogen) Electrification (heat pump) District heating Cost/impact of decarbonised heat supply Cost/impact of network activities Cost/impact of activities in customer premises Need for new regulation Cost anD impaCt of eaCh appRoaCh

• Cover