Low carbon district heating networks could succeed without subsidies from 2021.
It would be possible by creating a regulatory framework that puts heat networks on par with other energy infrastructures, according to the Association for Decentralised Energy (ADE).
Building on the government’s pledge to provide £320 million for district heating networks in the next five years, the ADE’s report sets out how the industry can move towards becoming subsidy free and attract lower cost investment.
It could be done by reducing heat network capital risk, lowering network costs by creating a fairer tax regime and providing local authorities with the support they need to move forward with new network investments.
Some of the policy proposals the report recommends include providing a guarantee to investors to reduce risks of future heat connection capacity by leveling the playing field with other energy networks.
It believes that would lower the cost of projects and therefore reduce the cost of heat for customers, adding the policy would create a low cost framework for district heating infrastructure investment.
The ADE also suggests treating district heating networks “equally to electricity and gas in business rates”. It states heat network customers are subject to business rates far higher than gas and power infrastructure, increasing heating bills by as much as 20% – or up to £300 a home.
ADE Director Tim Rotheray said: “An investment framework for heat networks has the potential to reduce investor risk, drive down the cost of heat supply and attract major international and UK investors. Delivering on our heat network ambitions will help us to meet our carbon commitments as cost-effectively as possible, return control over energy to local authorities and their communities and generate jobs and value to local areas across the UK.”