Member Article

Capital Costs and Delivering Value on Heat Networks

There has been a concern expressed recently about certain district energy or district heating schemes by Fuel Poverty Action, who campaign “against the injustice of cold homes” and “take action for warm, well insulated homes and clean and affordable energy”.

Fuel Poverty Action is specifically concerned about long-term supply contracts entered into by social landlords when developing heat networks or district energy systems. These long-term contracts extend from 10 to over 30 years and can be the only method available to develop heat network or district energy systems. This is because of the high capital costs associated with their development and lack of available funding.

However, the effect of this can be that consumers are tied to one supplier for one or more of their utilities. The problems arise if the level of service consumers receive, or the cost of the provision of energy, becomes unacceptable.

There is no option to choose a different supplier that may offer a better level of service or lower cost. This leads to dissatisfaction from the end-consumers, directed towards the suppliers and the party tying them into the long contract.

Inevitably an element of the problem is down to the lack of funding available for the development of heat networks. The main source funding currently available is through the DECC Heat Network Delivery Unit and only covers feasibility studies. In order to achieve the true potential of district energy schemes there needs to be a review of the funding made available for capital costs associated with their development.

There is also a need for network operators, such as social housing providers and local authorities, to select hardware that does not tie them into any manufacturer or supplier, wherever possible. They also need to ensure that any administration and maintenance contracts are of an optimum length to allow the best overall value suppliers to be selected and any failures rectified or the supplier changed.

This ability to choose the best overall value service providers, as well as retaining the ability to switch if consumers are dissatisfied with the cost or level of service, is a powerful tool to ensure consumer engagement, especially if they can form part of the selection process.

The information from Fuel Poverty Action has been published by a number of different sources and more details can be found here – http://www.24dash.com/news/housing/2015-05-05-Social-landlords-preventing-tenants-from-securing-best-energy-deals-Fuel-Poverty-Action#.VUkYlK3n940.mailto

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