Sustainable Development Today Funding for Heat Networks – learning from past failures
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Written by Simon Woodward

Readers may not be aware, but some ten years before the current fanfare associated with the funding that DECC has supplied to over 100 local authorities from their Heat Networks Delivery Unit to explore of the feasibility of district energy networks in their areas, a similar fund was open for applications and sadly closed just as many projects were getting off the ground.

This fund, the Community Energy Program (CEP) ran from circa 2003 to 2007 and offered both a contribution towards feasibility studies as well as much needed capital support.

The CEP was successful and the testament to this remains today with schemes such as the one in Birmingham City Centre which used CEP funding as a catalyst. This scheme is still expanding today with the current interconnection of the scheme in the central business district in Broad Street to the Eastside of the City and Aston University via the redevelopment of New Street Station. This is all due to the CEP funding awarded to the scheme at its outset in 2007.

However, schemes such as the one in Birmingham only just managed to obtain their capital grant before the gate closed on funding and many schemes did not proceed and money's awarded were withdrawn if the project could not be rapidly delivered. All because the Treasury decided that it was taking too long to deliver actual schemes from the feasibility studies being undertaken. They simply couldn't recognise that developing a large scale heat network in the UK is a complex infrastructure project requiring the involvement of many stakeholders over a number of years. The Birmingham schemes were conceived in 2003 and the first phase was delivered in 2007.

Unless the government can demonstrate patience with this new round of feasibility funding and the commitment to support the role out of early stage heat networks with fiscal incentives then sadly it is very likely that the current intensity we are seeing with dozens of feasibility studies being undertaken across the UK, funded by the HNDU, will just fizzle and fade. The same thing those of us involved in the industry experienced nearly a decade ago when overnight the government lost interest in heat networks as a means to deliver a low carbon economy.

Whilst it is recognised that the government has committed to supporting the HNDU for another year or two, this is only for hand holding those authorities who have received feasibility funding. It will not be to actively intervene with fiscal incentives despite the fact that the majority of these feasibility studies will show that to rapidly develop schemes in the UK we need sustained fiscal incentives support from the government. This will bring new players into the UK market, create a fully functioning heat network installation sector and therefore lead to the cost of installing heat networks being driven to levels which do not require these incentives.

Until this market stimulation happens we will be left with a niche industry doing its best to deliver a small number of projects which are viable without fiscal support, but not capable of delivering the 14% target for low carbon heat networks which is the potential calculated by the ukDEA and often quoted by DECC.

Simon Woodward is chairman and technical director of the ukDEA

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