Support Measures For DHC

Support Measures for DHC

Country

United Kingdom

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

1

National Planning Statements (within the Climate Change Act)

Legislation

Government (Department of Energy and Climate Change)

Existing

Description of and quotations from the measure

The 2008 Climate Change Act puts a duty on the UK Government to ensure that the net UK carbon account for all six Kyoto greenhouse gases for the year 2050 is at least 80% lower than the 1990 baseline. This overarching requirement provides a framework to stimulate the uptake of sustainable energy solutions including the use of district heating.

The merits of recovering waste heat from power stations have been enshrined in new Government planning policy on the development of power plants. The details, contained within the Department for Energy and Climate Change (DECC) National Policy Statements (NPS), mark a step forward from the Government’s previous treatment of combined heat and power. In developing proposals for new thermal generating stations, developers should consider the opportunities for CHP from the very earliest point and it should be adopted as a locational criterion. Historically, in bringing forward power station proposals (except renewable energy projects) under section 36 of the Electricity Act 1989 and under section 14 on the Energy Act 1976, developers would need to show they have explored opportunities to use combined heat and power. [A full investigation in to possible local heat loads must be undertaken and to help in this regard the government has funded the development of heat mapping tools that can indicate large scale heat customers, albeit not to a very high resolution map.]

The Purpose of the measure

The national policy statements are aimed at requiring new power stations to be CHP based rather than power only stations.

Eligibility Criteria

Power station developers must demonstrate that they have considered the opportunities for CHP from the very earliest point and adopted it as a locational criterion.

Impact of Measure

National Policy Statements are a new measure, so their impact is not yet quantified. It is envisaged that their impact will be greater than the previous power station consent requirements relating to CHP, but reservation that the measure is still not strong enough.

Effectiveness of the measure

As National Policy Statements are a new measure their impact has yet to be determined. It is likely to be 2/3 years before an objective judgement can be made on their effectiveness.

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

2

Planning Policy Statements

Planning Requirement

Government (Department of Communities and Local Government) and Local Authorities

Existing

Description of and quotations from the measure

Planning Policy Statement 1 (PPS1) sets out the Government’s overarching planning policies on the delivery of sustainable development through the planning system. It tends to advise rather than instruct.

PPS1 ‘ Regional planning authorities and local authorities should promote resource and energy efficient buildings; community heating schemes, the use of combined heat and power, small scale renewable and low carbon energy schemes in developments;…’

The supplementary document ‘Planning and Climate Change – supplement to planning policy statement 1’ sets out local requirements for decentralised energy to supply new developments. This includes making use of existing decentralised energy systems as evidenced by the following quote: ‘In considering a development area or site-specific target, planning authorities should pay particular attention to opportunities for utilizing existing decentralised and renewable or low-carbon energy supply systems and to fostering the development of new opportunities to supply proposed and existing development. Such opportunities could include co-locating potential heat customers and heat suppliers.’

Heat mapping is a key tool, referred to within the PPS, for understanding where high density heat demands exist, or will exist, in relation to existing or planned sources of surplus heat. This is recognised as particular important in the early identification of opportunities.

The Purpose of the measure

PPS1 aims to create through the planning system a more sustainable environment, including implementation of low carbon technologies. It provides direction to Local Authorities in how the opportunities for decentralised energy, including district heating, can be maximised through their local plans.

Eligibility Criteria

The principles of PPS1 should be followed by all regional and local authorities, but they can choose for themselves the extent to which it can be followed. The local authority must decide how these are incorporate and implemented in their local planning documents.

Impact of Measure

PPS1 has had a big impact on the way regional and local authorities have developed their local planning policies. This includes national support for them to stipulate new DHC schemes.

In London, many communal heating systems are the direct consequences of the energy and climate change aspect of the London Plan. Research by London South Bank University has indicated that 94 CHP schemes have been committed to since 2006 through the implementation of the London Plan. Additionally, opportunities for area wide networks are being identified through heat mapping studies conducted in response to the policies set out within the draft replacement London plan. These studies have been part funded through the Decentralised Energy Masterplanning (DeMAP) programme.

Effectiveness of the measure

PPS1 has certainly led authorities in the direction of DHC. However, it is the local planning policies implemented in accordance with PPS1 that finally lead to the development of DHC.

The London Plan has proved very effective, in a few years the energy strategies for new developments have changed significantly with clear commitments to DH and CHP where applicable.

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

3

CHPQA

Certification providing entitlement to benefits

Government (Department of Energy and Climate Change)

Existing

Description of and quotations from the measure

Through the Combined Heat and Power Quality Assurance (CHPQA) programme there are a number of fiscal incentives that apply to Good Quality CHP. These are:

- Enhanced Capital Allowance (ECA): a tax relief for companies that purchase CHP which is certified as Good Quality CHP through CHPQA.

- Exemption from the Climate Change Levy (CCL): Good quality CHP also benefits from exemption from the CCL which is a tax on some supplies of energy that are described as taxable commodities. These are electricity, gas, liquid petroleum, gas, coal, coke and similar products. The CCL exemption extends to both the fuel input to the CHP and the output electricity from the CHP.

- There is an exception from business rates for qualifying plant and machinery.

For CHP that does not meet the threshold criteria for Good Quality CHP, it is still possible to secure part of the fiscal incentive benefits through analysis of the Qualifying Power Output.

The Purpose of the measure

The fiscal incentives for Good Quality CHP accessed through CHPQA set out to encourage the installation of CHP for which there is an existing target of 10GW by end of 2010.

Eligibility Criteria

In order to trigger entitlement to the fiscal incentives such as ECA entitlement and CCL exemption, CHP must meet the threshold criteria for Good Quality through CHPQA. To assess CHP quality, an index value = X*electrical efficiency + Y*heat efficiency is used where X and Y vary according to the type of CHP technology. These factors are set to ensure compliance with the EU Cogeneration Directive.

Impact of Measure

The fiscal incentives arising from using Good Quality CHP assist with the financial case for CHP. The effect of Climate Change Levy exemption has been to improve the payback of CHP serving heat networks on building estates, e.g. hospital estates, by 20%.

The overall impact of measures emerging from HESS lies in the future but it has had a motivational effect that included a consultation with local authorities many of whom are seriously considering this option.

Effectiveness of the measure

The fiscal incentives that Good Quality CHP benefits from are effective for helping the case for CHP. However, pipes (except for insulation) are not included so the DHC infrastructure is not assisted. Further, most housing associations and residential owners are not subject to the CCL.

#

Name and reference of measure

Type of measure

Responsible organ

Existing or planned?

4

HESS/HEM/RHI

Strategy including fiscal incentives

Government (Department of energy and Climate Change)

Planned

Description of and quotations from the measure

The UK Government launched its ‘Heat and Energy Saving Strategy’ (HESS) consultation in February 2009. Many measures were included to tackle carbon dioxide reduction targets and fuel poverty, and improve security of fuel supply and these have been taken forward through the Household Energy Management (HEM) strategy. Measures include CHP and district heating, where market failure is acknowledged.

To mitigate barriers a Renewable Heat Incentive (RHI) is planned and a Heat Markets Forum is to be established. The role of local authorities in facilitating district heating is pointed out, including developing heat maps. Local authorities will be able to charge new developments the Community Infrastructure Charge (CIL). The CIL can be used to support DH infrastructure.

The RHI is not set to emerge until 2011, but the consultation document cites ‘inclusion of renewable CHP’ and ‘proposal for an uplift to support district heating infrastructure’. The RHI tariffs are designed to compensate for overcosts (compared with conventional) and non-financial ‘hassle factor’ barriers are also to be compensated financially.

The Purpose of the measure

HESS/HEM sees government acknowledging the role of efficient production of heat in a major way for the first time, and it also acknowledges the role district heating could play, although does not commit with firm resolve to establishing this infrastructure.

The RHI is a policy mechanism to drive the substantial uptake of renewable heat.

Eligibility Criteria

HESS/HEM is a strategy which embraces a discussion of a number of measures for which eligibility rules will apply.

RHI is at consultation stage only but benefits for renewable driven DHC are likely. The eligibility is likely to cite the DHC must be supplied with heat from new renewable generation plant. The treatment of fossil fuel CHP under RHI has yet to be finalised but industry concerns remain that gas fired CHP will have to pay towards the implementation of the levy, whereas power only stations will not be required to contribute (as they don’t produce heat) .

Impact of Measure

The overall impact of measures emerging from HESS/HEM lies in the future but it has had a motivational effect that included a consultation with local authorities many of whom are seriously considering this option.

The impact of RHI has the potential to be significant for heat networks heated by renewables but is currently uncertain.

Effectiveness of the measure

Measures emerging from HESS/HEM will need to be looked at individually and lie in the future. This includes the RHI.