Heat Networks Delivery Unit ERDF Workshop George Dobson, Project Lead, HNDU March 2016

Why heat networks? ETI has modelled that 43% of the building heat market can be economically connected. It is estimated that 34% of customers would move to heat networks in the event of phasing out domestic gas by 2045. Lowest costs for low carbon heat come at scale, and need networks to deliver the heat Models show a range of deployment projections from 14 to 43% by 2050. An 8% compound growth rate is required even to meet the lower end of these trajectories. ERDF Workshops

Heat Networks Development to Delivery ‘Future of Heating Meeting the Challenge’, was published in March 2013 and established the Heat Networks Delivery Unit (HNDU). It’s remit is to “encourage and enable Local Authorities in England and Wales to undertake the development stages of heat networks”. ERDF Workshops

The Heat Networks Delivery Unit HNDU is playing a key role in helping participant LAs to progress their work on heat networks HNDU is driving standardisation across development stages The value added to heat network development As part of the guidance provided to LAs we ensure: The full scale of the potential customer base is considered A full range of heat sources are considered The economics and phasing of any schemes are optimised Risk is recognised, managed and allocated appropriately Appropriate commercial structures and funding sources are explored Quality assurance of reports provides the confidence to progress ERDF Workshops

HNDU Coverage HNDU is a team of specialists providing flexible guidance to Local Authorities £m funding has been allocated across 4 funding rounds HNDU is supporting 190 projects across 118 Local Authorities plus Coal Authority LAs stakeholders made up of urban and rural as well as different tiers A clear demonstration of the latent ambitions of Local Authorities across England and Wales to support the deployment of heat networks ERDF Workshops

Role of ERDF and LEPs Potential for ERDF in relation to Heat Networks: Examples: Worcestershire Herefordshire Birmingham Leeds Gateshead Role of ERDF and LEPs Potential for ERDF in relation to Heat Networks: Match funding for heat network project delivery Commercialisation support and funding Delivering innovation LEP Role in relation to Heat Networks Development: Strategic support – bringing different authorities together Support for private sector and stakeholder engagement Facilitating role in relation to ERDF funding proposals Presentation title - edit in Header and Footer

The HNDU Portfolio What do the projects look like A diverse range of potential schemes ranging from £3-4m up to projects in excess of £40m. A combination of new build and retrofit connections A mixture of public and private sector connections, with initial anchor loads primarily public Technology agnostic so a variety of heat supplies Common IRR varies between 0-15% with majority at 5-9%. ERDF Workshops

Heat Networks – a major new Government project In case you missed it, the Government has said….. “The government will provide over £300m of funding on heat networks over the next five years ….. leveraging around £2bn of private and local capital investment. ….” “… This investment support is expected to lead to the construction of some 200 large heat networks in towns, cities and communities across England and Wales heating commercial offices, public sector buildings like hospitals and schools, as well as flats and houses, by 2025.” Spending Review Announcement by George Osbourne - November 2015 ERDF Workshops David Wagstaff presentation Energy from Waste Conference - Feb 2016

£300m Heat Networks Investment Project Capital support for heat networks over 2016-2021 - enabling investment decisions to be taken, not just feasibility support Grants, loans and other types of financing Based on set of criteria around credibility, carbon savings and… …ability to maximise local and private investment Doesn’t stack up economically Economic but not commercially investable Stacks up as commercial proposition now David Wagstaff presentation Energy from Waste Conference - Feb 2016

Next Steps £300m Heat Networks Investment Project – Seeking views from key investors, developers and other stakeholders, leading to a broader stakeholder engagement activity in the spring Aim to open the first funding round in the autumn Initial capital payments in 2016/17 financial year Building a pipeline of investment-ready projects, developers and investors for coming years Prior to structured stakeholder engagement activity, informal views are welcome: Email : heatnetworks@decc.gsi.gov.uk ERDF Workshops David Wagstaff presentation Energy from Waste Conference - Feb 2016

For further information please contact: Heat Networks Delivery Unit E: hndu@decc.gsi.gov.uk