Evaluation of the Heat Networks Investment Project

Funded by: Department for Business, Energy & Industrial Strategy

Duration:

January 2017 to August 2021

Research project leader(s) at PSI


Ben Fagan-Watson

Tom Watson

Background, summary and aims

BEIS has commissioned an evaluation of the Heat Networks Investment Project (HNIP), which aims to increase the number of heat networks built, deliver carbon savings and build capacity in heat network supply chains. The scheme will be delivered in two phases - a pilot running to summer 2017, and a main scheme launching in 2017/18 - offering some combination of grants, loans, equity investment and guarantees to local authorities, public bodies, private and third sector organisations.

Heat networks background
Heat networks commonly convey hot water from a heat source to meet distributed demand for space and/or water heating and provide an opportunity for greater energy efficiency and carbon savings. Heat networks infrastructure is fuel neutral and can deliver heat from a range of sources, such as waste heat recovery, combined heat-and-power plants, and large heat pumps. The economics of heat networks are largely determined by the initial capital cost, which is influenced by, for example, heat density and demand, street works, sites for auxiliary plant and suitable sites for heat source availability. There are approximately 2000 heat networks of various sizes operating in the UK, often in locations with a high demand density, such as urban areas and university campuses. Meeting two per cent of the country’s heating needs, their geographical coverage is limited. High capital costs mean their economic viability is typically dependent on guaranteed demand underpinned by long-term contracts.

Policy background
The UK’s emissions derive mostly from fossil fuel combustion, with heating accounting for 46 per cent of total energy use. Three quarters of this is consumed as heat in buildings, 75 per cent of which are residential. These emissions must be reduced or eliminated if we are to meet our carbon targets, as laid out in the Climate Change Act (2008). The Act requires the UK to reduce its greenhouse gas emissions by 80 per cent on 1990 levels by 2050. The Act also established the Committee on Climate Change (CCC), which in its Fifth Carbon Budget lays out a 2032 scenario in which low-carbon heat (a policy priority) meets 13 per cent of household demand and half of business demand.

In Next Step for UK Heat Policy, the CCC counted funding for heat networks amongst its ‘low-regret’ measures, noting that effective deployment of current capital funding is sufficient to meet 2020 ambitions and that it ‘should be used to develop the policies for delivering a continued expansion through the fourth and fifth carbon budget periods’. Recent examination of the system-wide implications of decarbonisation has highlighted the long lead times for network infrastructure and drawn attention to the need for clear plans at a local level for the potential use of heat pumps and district heating.

Research background
The project aims to deliver an evaluation of the HNIP pilot and main schemes and will comprise:

i) theory of change development for the main scheme,
ii) process evaluations of the pilot and main scheme (separately),
iii) impact evaluation of the whole project,
iv) economic evaluation of the whole project.

The research will be undertaken by a consortium overseen by Helen Wilkinson and Michelle Boath of Risk Solutions, including the Tavistock Institute, London Economics and Policy Studies Institute (PSI).