The Department for Business, Energy and Industrial Strategy has launched the next stage of a £320 million programme to encourage the mass rollout of heat networks.

Developers are being offered grants of £5 million and loans of up to £10 million as part of the Heat Network Investment Project. The government is hoping to unlock around £1 billion of investment using the seed funding.

The first stage of the initiative was launched in October 2016. At the time, the government stated that the full programme would aim to draw in £2 billion of public and private sector investment.

Up to £39 million was made available to public sector organisations for the pilot scheme, with £24 million being awarded to nine local authority projects the following April.

The total has since fallen to £18.5 million after it was announced last month that one of the projects – a heat network being developed by Sheffield City Council in partnership with Eon – would not go ahead due to concerns over its economic viability. The leftover funding from the pilot scheme has been returned to the main pot.

The Heat Network Investment Project has now been expanded to include all developers. The scheme will be open to applications for a period of up to three years and allocations will begin in April 2019. Funding must amount to less than half of the costs incurred for construction.

Triple Point Heat Networks Investment Management has been appointed as the lead delivery partner.

In the foreword the launch document, Triple Point project director and head of public sector, Ken Hunnisett wrote: “The impact of this funding should be felt across the UK. Heat network construction in towns and cities will support jobs in engineering, construction, energy management and design.

“At the same time, many projects will be integrated into broader urban renewal and redevelopment – contributing not just sustainable heat and power but also to an understanding of place and pride in the local environment.”

He continued: “Large scale commercial investment is critical to the development of this market and this will be a major area of focus for the delivery partner team as we seek to create the right conditions and connections between project sponsors, developers and investors from the UK and around the world who may be able to support them.”

Michael Lewis, chief executive of Eon UK, said: “We welcome the launch of this Heat Network Investment Project as a first step towards creating the right market conditions for this growing area.

“District heating is a means of providing an affordable, secure and lower carbon source of energy to homes and businesses”.

Eon already serves around 30,000 customers connected to 60 heat networks around the UK.

“The interest in such initiatives as ways to provide new energy solutions is increasing significantly and we have a very full pipeline of city energy projects,” said Lewis.

“We are ready to meet the challenges set out by the ambitions of the Clean Growth Strategy.  What we need is more ‘meat on the bones’ and crucially new policies that clearly signal to investors that there are opportunities for investing in the future UK market.

“Government and industry need to work collaboratively together to help develop opportunities over the longer term to put the industry on a sustainable platform.”

Lewis also welcomed the recent Competition and Markets Authority report that called for greater regulation of heat networks, adding: “Any regulation must protect customers in line with supply agreements as well as promote investment in what is a lower carbon and affordable source of heating our homes.”

Meanwhile, the Association for Decentralised Energy (ADE) has launched a new 13-member Heat Network Industry Council to support the development of the sector.

ADE director Tim Rotheray said: “Industry and government have the same objective; to deliver a sustainable heat network industry that delivers for customers.

“Neither industry nor government can deliver on this objective alone.

“The council exists to set out ambitious commitments of what the heat networks industry will deliver, in return for policy measures which ensure heat network infrastructure projects are an attractive investment proposition.”

The council expects to present a formal offer to government next year. The 13 members are:

  • Siemens (Chair)
  • The ADE
  • BU-UK
  • EDF Energy
  • Engie
  • Eon
  • Pinnacle Power
  • Ramboll
  • SSE
  • Switch2
  • Vattenfall
  • Veolia
  • Vital Energi

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