What to do with your existing buildings

Switch2 Energy, Shoosmiths and BEIS have come together to provide an update on the impact of regulation, rising energy prices and decarbonisation targets on heating network operators and customers.

This second webinar, in a series of three, looks at what to do with existing buildings in relation to heating networks. It examines problems with existing heating networks and solutions to help them operate more efficiently, including:

  • How to Troubleshoot
  • Funding
  • Achieve carbon targets
  • Protect residents

As a reminder, the last webinar in the series will cover:

  • How to approach new build developments.
  • The focus will be on new heating networks, examining the ambition of low-cost, reliable and low-carbon heating networks and whether this is realistic. It will cover:
    • Design and build
    • Esco
    • New technology
    • Expenses management

Key points from the second webinar

The heating network tsunami

  • The current energy crisis and impending regulations have caused a paradigm shift in the management of heating networks
  • The price of gasoline has increased fivefold over the past 12 months. Gas is purchased at commercial tariffs for heating networks which are not subject to a price cap, although the Department for Business Energy & Industrial Strategy is looking to try to provide a form of protection similar to the price cap of detail
  • With further energy price hikes expected, the situation is set to worsen
  • There are also impending regulations – technical standards for better heating networks and regulations to protect customers on heating networks, with Ofgem as regulator
  • Under these circumstances, building owners and asset managers can no longer ignore underperforming heating networks.

Why are building owners in this position?

Gas price increases – gas cost has increased over 5x from 2p/kWh to between 7-8p/kWh

Poorly maintained heating networks – networks are not maintained at their optimum efficiency

Lack of regulation and protection for residents without consistent standards, those who operate heating networks have no rules to follow, but hopefully that can change

How are residents affected?

  • Higher energy bills
  • Reduced system reliability
  • Higher sinking fund fees

The cost of electricity for technical rooms is not taken into account in the rates, but is borne by the owner. If the heat network can be operated more efficiently, it will reduce pumping costs, which means that service charges in buildings can be reduced.

What can be done?

  • Identify and correct problems in your heating network – see below
  • Buy better – organizations that buy gas for certain heating networks often don’t have experience buying commercial gas, so don’t get the best deals for residents
  • Specialized maintenance – there is often an engine room maintenance team with a different company looking after the accommodations – it is recommended to have one company looking after both so the whole system can work in harmony
  • Improving governance and management – ​​what does good management of a building with a heating network look like? The manager must be the “guarantor” of the efficiency and sustainability of the heating network
  • Don’t forget the importance of end customer meters which can reduce demand by 50% – if you charge flat rate, demand is likely to be half as responsible for residents when it comes to heating management

Common issues and the three levels of intervention

The following examples of how operators and asset managers can improve efficiency were determined from HNES (Heat Network Efficiency Scheme) surveys conducted for customers by Switch2.

Ownership issues:

Lack of insulation (eg around terminals can contribute to overheating)

Poor control (e.g. radiators are not balanced)

Bad design

Energy flow report

Lack of balance

Sticky flaps

Broadcast issues:

Lack of insulation – for example around valves

Thermal bridge – where the pipes warm the walls by carrying heat away from the system

System workarounds

Lateral/end extensions

Piping too big

Lack of access

Challenges of the energy division:

Bad control

Fixed speed pumps

Plate heat exchangers

Mix layouts

Thermal storage connections

High temperatures

Water treatment

Focus on return temperatures

What does it look like: The objective is to reach a temperature of 70°C by leaving the technical room, passing through the HIU apartments and returning to 40[degrees] C – this means low pumping costs, low losses on the return path and high production efficiency.

This can easily be achieved with proper maintenance.

The not so good: In poorly maintained heating networks, the temperature at the outlet of the technical room is 70°C but some HIUs do not draw enough heat from the system and return the water to 65°C, which leads to increased costs pumping, increased losses and boilers operating less efficiently.

You can use counters to find out which properties are not being maintained properly and significantly reduce costs by implementing better maintenance measures. On current gas costs, savings of £74,000 to £93,000 can be made with just a few basic interventions such as insulation or paying a little more for maintenance.

Running a heat network properly – what you need

  • Good governance and accounting of the heating network
  • Operation and maintenance best practices
  • Plan improvements based on ROI
  • Consider funding available to make improvements
  • Install end customer meters

Overview of the Heat Network Efficiency Scheme (HNES)

  • Need to increase the number of heat networks providing heat supply across the country from 2% to 18% to achieve net zero targets by 2050
  • BEIS is looking at ways to do this, including grants from HNES, the Heat Network Investment Project and the Green Heat Network Fund (GHNF)
  • Where is the diagram? The HNES demonstrator ran from October 2021 to March 2022 and there is continuous monitoring and reporting of what will feed into the main program
  • The HNES demonstrator consists of deploying funds to improve the performance of existing district and municipal networks. Primary goals are (1) efficiency (fuel/carbon saving) and (2) improving customer outcomes, with secondary goals around (3) performance data and (4) support HN policy areas – such as those of the HN transformation agenda
  • HNES Demonstrator – involved two types of grants:
    • Income grants – for optimization studies identifying problems and recommending solutions
    • Capital grants – for delivery/installation measures to provide the required changes
  • Pathways for existing networks: HNES (delivering network performance improvements) and GNHF (for decarbonisation of the heat supply source) – these are complementary devices
  • Data from the HNES demonstrator so far shows:
    • applications from local authorities and housing associations were more focused on income grants than capital grants, while in the private sector the majority of applications were for capital grants
    • geographical distribution – vast majority of applicants in London, with clusters in the North West around Manchester/Stockport. Just a few in other regions. None in Wales and Scotland and Northern Ireland were included in the demonstrator
    • wide range of project issues at the application stage without a single issue emerging
    • good range of activities funded on primary, secondary and tertiary networks and energy centre/engine room – slight bias in favor of the latter which could be due to timing of applications
  • Changes to the aims and objectives of the main HNES diagram following the demonstrator: given the current energy and cost of living crisis, the main objective is now to improve consumer confidence and performance data have been deleted
  • HNES core budget: £30m for capital grants and £2m for income grants (with multiple rounds of funding). Timetable: Over two fiscal years 2023/24 and 2024/25.
  • The program will be launched in the spring of 2023 and will end in March 2025
  • To sign up for regular BEIS program updates, email [email protected]

Alignment of priorities and contract structure

Building Owner (Client) Priorities:

  • Improve the efficiency and reliability of existing infrastructure
  • Responsibility and risk of outsourcing operation and maintenance and customer interface
  • Have an experienced, competent and robust operator

Operator Priorities:

  • Operation of an efficient and reliable energy system
  • Assume and manage the risks it is best placed to manage
  • Have a happy customer and happy customers

End User (Customer) Priorities:

  • Efficient and reliable energy supply
  • Visibility and security of energy costs

Contract structure:

  • Concession agreement – long-term outsourcing agreement between customer and operator
  • Supply contracts – governing the supply of heat (and electricity, if applicable) by the operator to the customer
  • Other agreements – Leases (between clients and clients) and management company agreements

Main issues for existing buildings

Discount and defects

  • Investigations and transfer process
  • Liability for faults in the existing system

Energy system improvements

  • Responsibility for work
  • Construction costs and recovery from tenants (including LTA considerations)

Debt management and risk – historical and future debts

Control of energy costs and prices

  • Factors driving the increase in ongoing royalties and unit prices
  • Possibility to limit or restrict increases – gas comparator and Heat Trust

Sinking fund management and adequacy

  • Liability shifts to operator, but what if funds are insufficient?
  • Protection of sinking funds between plans
  • Risk of change of law – especially with a net zero

Marjorie N. McClure