Municipal heat off-take from WtE facilities: What does the future hold?

Written by: Mike Read | Published:
South East London Combined Heat and Power, better known as SELCHP, supplies heating and hot water to over 2,500 homes

Mike Read, director, head of energy & environment, GIA at Grant Thornton looks at why there has not been more take-up of heat network commercialisation

It is fair to say that the generation of heat from energy from waste (EfW) facilities at a municipal scale has not been on a scale that the government would have liked. There was a requirement that energy sourced from waste plants funded through either the private finance initiative (PFI) or Welsh Government funding routes, were required to be combined heat and power (CHP) enabled to try and boost the heat element. However, they remained at the enabled stage during the initial procurement and build stage.

While there were often good reasons for not taking the heat output aspect further at this time - lack of reliable heat off take agreements, economics of foregone electricity income, wariness of the Renewable Heat Incentive (RHI) - it doesn’t alter the fact that the focus has been on electricity rather than on heat production.

There are notable exceptions to the above including in Nottingham, Sheffield and the South East London Combined Heat and Power (SELCHP) facility in London.

Similarly, the London Borough of Sutton is developing a low carbon heat network to utilise waste heat arising from EfW and landfill gas (LFG) facilities at Beddington Lane.

When you look at the key drivers behind those local authorities that have developed networks, they all have the same core themes - tackling fuel poverty, reducing carbon emissions, and energy security, in terms of price and supply.

However, heat network commercialisation is not simple. In London, the ability to impose planning requirements on developer led solutions can accelerate schemes.

In general though, the issues that come from dealing with potentially higher credit risk customers, in a currently unregulated market where the supplier is in an effective monopolistic situation, are some of the challenges that need to be overcome.

Municipal heat networks can clearly play an important role in generating efficient heat supply as evidenced in other parts of Europe, and energy from waste will have an important role to play as the energy source.

In order to help other local authorities in England and Wales deliver these aims, while at the same time recognising the need to remove the capacity and capability challenges that have been identified as barriers to heat network deployment, the then Department of Energy and Climate Change (DECC) set up the Heat Delivery Network Unit (HNDU).

Through this, local authorities can get access to grant funding (ranging from around £10,000 to £250,000) and guidance from an assigned individual at HNDU to undertake heat mapping, energy master planning, feasibility studies and detailed project development.

While not all of these projects will be delivered, and only some of the projects will be based around EfW heat sources, it does start to provide some of the building blocks for allowing a market to grow.

This funding has subsequently been boosted with the creation of the Heat Network Investment Project (HNIP) fund which has £320m at its disposal to help get the market moving.

We have seen the power of central facilitation before with the waste PFI projects. There was a project pipeline around which contractors, funders and advisors could invest and build capacity to deliver a programme.

The importance of this cannot be underestimated. Unlike the waste PFI projects, there is no evidence that the government will provide financial support to the heat networks’ operation as the annual revenue comes from the end heat users, which isn’t necessarily the local authority.

To gain momentum and interest from the market it will be extremely important to ensure that the schemes procured are deliverable.

The role of the business case that underpins these projects will be critical. With a large number of municipally focused EfW facilities built and CHP-enabled, the potential to use them as heat sources as part of these programmes is apparent. Clearly it remains early days, but there is definitely momentum building in this market.

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