INTERVIEW: Vattenfall Heat UK calls for policy stability for district heat networks

Consistent policy and a focus on building supply chains are vital if the UK is to hit ambitious district heat targets, Vattenfall Heat UK Managing Director Jenny Curtis said Oct. 10.

District heating is common in continental Europe, meeting 50% of heat demand in Vattenfall's home market of Sweden, but has never thrived in the UK, where market share is just 2%.

While district heat providers are looking to bring their experience to UK cities and take advantage of an estimated GBP60 billion-80 billion investment opportunity to 2050, UK Prime Minister Rishi Sunak's latest climate policy statements have raised understandable doubts.

"The decision to delay the phase out of gas boilers doesn't do anybody any favors, although the media coverage has at least raised the issue," Curtis told S&P Global Commodity Insights.

Some 85% of UK homes are heated by gas via 26 million boilers producing 92 million mt of CO2 a year -- 14% of UK emissions.

On Sept. 20, the government rowed back on proposals to ban installation of gas boilers in new homes from 2025, Sunak pledging that householders would only be obliged to switch away from gas boilers from 2035, and only then if a gas boiler had to be replaced.

"We really need consistency of policy and direction from the government because UK policy remains that 18% of heat demand by 2050 needs to be met by district heating. In some cities that means most of the population will be on a district heat network," Curtis said.

A debate focused on ripping out gas boilers and replacing them with GBP15,000 heat pumps was simplistic, Curtis said.

"This is also about economies of scale, working with communities to retrofit buildings at the right time while giving developers enough certainty around demand so we can invest ahead of need," Curtis added.

Network zones

On the plus side, government plans for a zoning framework under the Energy Security Bill are moving through consultation.

This will help local authorities identify and designate zones for heat networks, with the government committed to designating zones in England no later than 2025.

"Zoning will be hugely beneficial, we just need to get the mechanics right so projects proceed in a fair and transparent way without being tied up in lengthy public procurement," Curtis said.

The extension of statutory undertaker rights to heat networks under the new regulations will be another significant benefit.

"Enhanced powers in line with other utilities will help us manage pipeline installation more efficiently," she said.

In the meantime, Vattenfall Heat UK is already "extremely busy" with projects in Edinburgh, Bristol and London, to the extent that resource is becoming constrained.

"We have a very underdeveloped supply chain relative to the scale of investment required," Curtis said.

Vattenfall was looking to attract UK and foreign contractors to build UK networks, "but we also need more training of specialist renewable energy engineers and more commercial, financial and legal resources focused on these infrastructure projects," she said.

The squeeze is mirrored across clean tech markets, with EPC costs up 20% in the last few months alone in the solar sector, developers have told S&P Global.

Taking the heat

A variety of heat sources are used by modern heat networks, ranging from energy from waste plants and recycling plants to data centers, solar thermal, geothermal and large-scale heat pump assets.

In Bristol, Vattenfall has a large water source heat pump, a biomass boiler and some gas CHP. To meet its 2030 decarbonization strategy, and as the Bristol network is built out, Vattenfall is looking at further heat pumps, and potentially connecting to waste recycling facilities in Avonmouth, and to data centers.

In London, Vattenfall has just secured waste heat from Cory's Riverside energy from waste plant at Belvedere, in the borough of Bexley.

"We're out knocking on doors in east London to secure demand for the Riverside heat network," designed to serve 25,000 homes and businesses in Bexley and Greenwich over the next 10 years.

Also in London, Vattenfall has an agreement with Brent Cross Town developer Related Argent to provide low carbon heating in Barnet from an all-electric air source heat pump solution. The heat network will supply 6,700 homes and 280,000 sq m of office, retail and commercial space.

Providers of waste heat tend to think they are sitting on a goldmine, Curtis noted, ignoring the costs involved in extracting it, and the fact that finding offtake helps meet decarbonization goals.

"Data centers sometimes have to pay for cooling, so giving the heat is cost-benefit for them. We're looking to move toward a model where people should be paying us as a heat offtaker, but for now the industry is nascent. For now, we'll only pay for heat at a price that makes sense for our customers," Curtis said.

In turn, Vattenfall's UK district heat customers pay a connection fee per unit to cover capital costs, plus a part fixed, part variable tariff for heat.

"The heat market is not currently regulated but we see that coming and welcome it. For now we're pricing against an equivalent low carbon solution, and we guarantee we won't be more expensive than if you had an individual heat pump," Curtis said.

2030 city target

The developer aims to be in five to eight cities by 2030, with Glasgow set to be added to active projects in Edinburgh, London and Bristol.

"The market in Amsterdam is a good case study for the UK, showing how to set up zones, engage with building owners, and combine carrot-and-stick incentives to encourage connections. Then in Berlin we've got pipes that have been in the ground for 100 years, proving this is resilient infrastructure," she said.

Berlin is also the site of Vattenfall's 200-MW heat storage tank, holding 56 million liters of water, seen as an important balancing element on the system when twinned with digital controls and heat pumps.

"The heat store can act as a large battery, with a lot of heat decarbonization relying on electrification. Anything we can do to ease power demand on the grid is valuable," Curtis said.