1. Heat Policy - Government’s views on Combined Heat and Power and District Heating
Chris Parkin – CHP Policy Lead, Heat Strategy & Policy
Ecotec21 Symposium 15th April 2013

2. Why heat is important Heat is our largest energy use ...
52%
34%
14%
Heat is our largest energy use ...
This was our starting point: We identified a strategic gap in the Department on heat supply which the Strategic Framework for heat attempted to plug Reasons on the slide speak for themselves as to why this was needed
....and is responsible for around a third of UK greenhouse gas emissions

3. The Heat Strategic Framework
March 2012
March 2013
The Future of Heating:
A strategic framework for low carbon heat in the UK
Last year The Future of Heating: A strategic framework for low carbon heat in the UK set out, for the first time, a framework for ensuring there is affordable, secure and low carbon heating up to 2050

4. Since Then…
We have been gathering evidence, identifying barriers and assessing policy options, including;
External modelling on cost-optimal technologies out to 2050, which better reflects heat networks, gas-based solutions and the importance of storage
Internal Heat Network and CHP modelling
Qualitative research by BRE into barriers to heat networks
Customer insight surveys on heating preferences and behaviours
Quantitative and qualitative research into homeowners’ willingness to replace their heating systems
Evaluation of the renewable heat premium payments scheme
Developing factsheets on heat-intensive industrial sub-sectors.

5. The Future of Heating: Meeting the challenge
Sets out our conclusions and specific actions to help deliver low carbon heating across the UK in the decades to come. It focuses on four different aspects of the heat challenge – industrial heat, networked heat, heat in buildings, and grids and infrastructure.
Chapter 1: Efficient low carbon heat in industry
Chapter 2: Heat networks
Chapter 3: Heat and cooling for buildings
Chapter 4: Grids and infrastructure

6. HEADING Text INDUSTRIAL HEAT
Sector-specific ‘low carbon roadmaps’ for each key industrial sector, with BIS and industry – focusing on the most heat and CO2 intensive sectors
Developing further evidence on supporting CCS for industry we committed to complete a technoeconomic study by the end of the year with BIS. We are looking for industry partners.
European Regional Development funding working with BIS to influence the £600m to support low carbon industry.
Recoverable waste industrial heat – building our evidence and investigating how to incentivise harnessing waste heat from industrial processes, alongside the 2014 RHI policy review.
HEADING Text

7. Combined Heat & Power UK CHP capacity is currently 7.9 GWe
Where are we now
UK CHP capacity is currently 7.9 GWe
Supplying 39 TWh/yr electricity, 55 TWh/yr heat
Supplying hot water and steam at up to 450°C and 60 bar
Existing capacity is primarily in industrial sectors supplying process heat needs

8. COMBINED HEAT & POWER
International comparison
Many other EU Member States have a higher proportion of CHP in their generation mix

9. COMBINED HEAT & POWER
Projected Growth
Modelling suggests economic potential for 18GWe CHP by 2020
Strong growth in renewable CHP capacity is projected
Less growth in conventional (non-renewable) CHP capacity is projected (20% increase by 2020) despite significant potential
Growth primarily small CHP supplying space and water heating to public & commercial buildings

10. COMBINED HEAT & POWER BARRIERS
Barriers to & Benefits of Additional Natural Gas CHP Capacity
BARRIERS
High hurdle rates (18-25%) compared to power generation (7.5-10%)
For small, exporting, CHP projects, accessing the electricity market wholesale price
BENEFITS
The Gas Generation Strategy indicated that significant new capacity could be required by 2030 to replace retiring plant and to balance increasing intermittency
Natural gas CHP is the most efficient natural gas generating capacity
An additional 3.4 GWe CHP could save 28.5 Mtonne CO2 ( ) provided it displaces gas, and not lower carbon, generation

11. COMBINED HEAT & POWER RENEWABLE
Next Steps on Renewable & Natural Gas CHP
RENEWABLE
CHP specific RHI tariff has been proposed to replace ROC “uplift”
CHP exempt from cap on new build biomass capacity
CHP Quality Assurance criteria being tightened to ensure support is focussed on schemes delivering significant benefits
NATURAL GAS
DECC will…
Work on a bespoke policy for new gas CHP capacity, subject to confirmation that this will not displace lower carbon generation
Explore interim opportunities for providing affordable finance from existing funding
Examine whether the specific characteristics of CHP warrant future amendments to the Capacity Market

12. HEAT NETWORKS
UK Heat Network Penetration

13. HEAT NETWORKS
Potential
Potential is estimated at 7% of domestic heating and hot water demand by 2030, rising to 14% by 2050

14. Benefits and immediate challenges
HEAT NETWORKS
Benefits and immediate challenges
BENEFITS
Networks can make the most of a range of heat sources that individual building solutions cannot harness
In urban areas there are challenges with electric heating - building density will prevent wide use of individual ground source heat pumps
IMMEDIATE CHALLENGES
Commercial considerations
Difficulty in attracting finance and reaching commercialisation
Lack of standardised commercial models
Consumer challenges
Local Authority capacity and capability
Issues around Heat Network development
Difficulty selling electricity produced by CHP

15. Longer term challenges
HEAT NETWORKS
Longer term challenges
Issues around Heat Network development
Lack of common technical standards
Lack of statutory access to land
Difficulties joining up Networks
Future low carbon heat sources
Difficulties in planning for future requirements

16. HEAT NETWORKS DECC Next steps
Heat Networks Delivery Unit (£3m over two years)
Heat Networks Funding Stream (£6m over two years)
Supporting establishment of industry-led customer code of conduct
Examine scope for extra financial support for heat networks through the RHI (as part of RHI review 2014)
Heat metering (Energy Efficiency Directive)
Licence Lite

17. Heat and cooling for buildings[
Heat Demand:
Heat demand varies significantly over the course of the day, and, with space heating, over the course of the year, particularly pronounced during winter months, when space heating demand is greatest and total demand can reach 300 GW.
New modelling takes better account of how heat demand is much ‘peakier’ than demand for electricity especially during high usage period – and technologies and infrastructure needed to meet peak need
But, previous modelling did not fully capture the variation in heat demand within day and between seasons [the variation is clearly set out in this graph form Imperial College]
THE PEAK HEAT CHALLENGE
Previous modelling did not include some potentially important technologies.
So in our most recent modelling we have included a wider range of technologies such as hybrid heat pump systems, gas absorption heat pumps, micro-CHP and domestic hydrogen boilers.
Range of sources for heat networks also expanded to include waste heat from thermal power stations and large scale heat pumps. There is also better representation of heat storage in the modelling

18. Government’s original model for low carbon heat in buildings
Heat and cooling for buildings
Government’s original model for low carbon heat in buildings
So how would we get to near zero emissions from buildings by 2050.
Our strategy suggested a trajectory and a gradualist approach.
The proportion of heat provided directly by natural gas is the central “arrowhead” in the diagram.
It will be squeezed gradually from two sides; heat networks starting in city centres can spread outwards, and renewable heating systems targeted initially at rural, off-gas grid housing can spread in to the suburbs as they become a commercially viable alternative to gas.
We see the 2020s and 2030s as the key transitional decades.
Meanwhile, we need to drive down demand through energy efficiency measures. That applies to all building types in all locations, and is why the Green Deal is so important.

19. Government’s updated model for low carbon heat in buildings
Heat and cooling for buildings
Government’s updated model for low carbon heat in buildings
So how would we get to near zero emissions from buildings by 2050.
Our strategy suggested a trajectory and a gradualist approach.
The proportion of heat provided directly by natural gas is the central “arrowhead” in the diagram.
It will be squeezed gradually from two sides; heat networks starting in city centres can spread outwards, and renewable heating systems targeted initially at rural, off-gas grid housing can spread in to the suburbs as they become a commercially viable alternative to gas.
We see the 2020s and 2030s as the key transitional decades.
Meanwhile, we need to drive down demand through energy efficiency measures. That applies to all building types in all locations, and is why the Green Deal is so important.

20. Heat and cooling for buildings
Reducing demand through, for example, Green Deal and rolling out Smart electricity and gas meters.
Carbon emissions from heating & cooling buildings need to be nearly zero to meet, 2050 Carbon Plan
Actions on supply incentives and supply chain:
Extend the Renewable Heat Premium Payment scheme.
Improving installer competence, consumer advice and consumer protection
Through to modelling identifies a role for a range of heat pumps, district heating, creating low carbon gas grid
DECC will explore what role tighter standards on building emissions could play
The modelling for The Future of Heating identified GSHPs as being one of the key technologies on the least-cost path for meeting our carbon targets by 2050, recognising that the technology is positioned to deliver heat in a cost-effective way
A number of actions on advice, standards and consumer protection
Communication - The development of the consumer guide (announced yesterday) is the result of that work. The guide will be in an electronic form and also provide information and guidance for installers.
Quality & performance – MCS has a key role, through self-regulation, to develop and enforce industry standards. High performing heating systems are key to building consumer confidence and a sustainable industry.
Warranties – The MGICG is looking at warranties as the current situation is confused. We want clarity so consumers have adequate protection and can make informed decisions about the maintenance of their heating systems.
Preliminary data from the RHPP metering programme is still being collected and verified. Emerging findings appear to indicate that on average there has been a measurable but modest improvement in the Seasonal Performance Factor. The data is due to be published in the summer.
On Zero Carbon Homes by summer recess, DCLG will publish next steps including a proposal for Allowable Solutions. A change to Part L (energy) for building regs 2013 will be published in May.

21. Grids and Infrastructure
Following a pathway to low carbon heat will, over time, mean significant change for the UK’s energy infrastructure.
Low carbon heat will have impacts on the existing gas and electricity networks; there will be new infrastructure like heat networks and heat storage, and potentially also new infrastructure to support the use of hydrogen and to take carbon dioxide away. Decisions on all the different elements of the UK’s energy infrastructure cannot be taken in isolation. Proposed new actions therefore include:
Taking forward work to examine the strategic interaction between lower carbon electricity generation and heat production
Commissioning further research to investigate the role hydrogen might play across the UK’s energy system
Announcing the successful Phase 2 demonstration projects for its Advanced Heat Storage competition
Exploring with the industry how best to address the strategic questions facing the gas network.

22. THANK YOU FOR YOUR ATTENTION