Legislative limbo: District heating and its distant relationship with consumer-oriented legislation.

Legislative limbo : District heating and its distant relationship with consumer-oriented legislation.

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Legislative limbo : district heating and its distant relationship with consumeroriented legislation.

Luc James Askew-Vajra Elective: Energy, Society and Cities.

Tutor: Dr. Carlos Calderon BA Architecture Jan 2018

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Acknowledgements

I would like to thank Dr. Carlos Calderon for his continued support and advice over the course of this dissertation.

Many thanks also to Mark Halpin for invaluable help with graphical presentation techniques.

And finally thank you to my friends Gosia and Kotryna for their continued optimism and encouragement throughout.

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Abstract.

Legislative limbo: district heating and its distant relationship with consumeroriented legislation explores the realm

of district heating and its legislative structure. The situation in modern day Britain is presented along with a brief history of the 1973 oil crisis and how Denmark, a world leader in district heating, reacted differently to the UK and how that may have affected present day technological and legislative situations. This is then followed by brief studies of five district heating systems in the UK and the origins of the lines of enquiry that will be used to interview the figures manage these heat networks. The results of the interviews are then presented in a discursive chapter which explores pricing, consumer interaction as well as the management of district heating schemes. The conclusion then suggests who would regulate district heating in the UK and uses the results of the interviews along with the research to then propose future legislation for district heating were it regulated in the UK.

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Contents Chapter 1 - Introduction. 11 Chapter 2 - Oil, Gas And A Nation’s Energy Policy.

19

Chapter 3 - People, Places and Lines of Enquiry.

27

Chapter 3.1 - Lines Of Enquiry.

29

Chapter 3.2 - Sheffield District Heating.

35

Chapter 3.3 - Byker District Heating.

39

Chapter 3.4 - Riverside Dene District Heating.

43

Chapter 3.5 - Gateshead District Heating.

47

Chapter 3.6 - Southampton District Heating.

51

Chapter 4 - Discussion. 55 Chapter 4.1 - Pricing. 57 Chapter 4.2 - Consumer Interactions.

63

Chapter 4.3 - District Heating Schemes

& Management Of. 69 Chapter 5 - Conclusion. 75

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References 81 Bibliography 83 List Of Figures 91 Appendices 95 Appendix A - Sheffield District Heating.

97

Appendix B - Byker District Heating.

107

Appendix C - Riverside Dene District Heating.

121

Appendix D - Gateshead District Heating.

129

Appendix E - Southampton District Heating.

137

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Chapter 1 - Introduction.

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In the modern world, many things are controlled and regulated.

People’s entire lives are documented on computers along with all the details of interactions with other people and their existence.

Existence itself requires energy and distribution of this energy is also regulated and recorded. This dissertation will be exploring legislative solutions that could be implemented to provide the same benefits for users of district heating that OFGEM (Office of Gas and Electricity Markets)1 provides for other energy users and if this is the reason that heat networks are not as commonplace as in other European countries.

Currently in the UK, distribution of energy through district heating networks is unregulated, with the consumer having nowhere to turn should their supplier decide to change their terms. As district heating usage across the UK increases, with incentives from The Department for Environment and Climate Change (Decc) to rise from the current 2% (200,000 schemes) to 20% by 20302, this lack of regulation and legislation in the district heating arena will affect a wider population.

In order to investigate this topic in detail, this dissertation will be looking into district heating in the UK as a whole and how the industry has evolved. It will also delve into the British gas industry in recent times as the legislation that I am researching is closely linked to the gas distribution system which has rapidly changed to favour the modern-day consumer from the monopolised system that was in place previously in the 1980s3. Many failings in the current system stem from a lack of care taken with regards to district heating legislation which was influenced by sheer ease of access to natural gas reserves during the 1973 oil crisis. With a view to gaining a more globalised view of the topic, the dissertation will also be observing other European countries that have implemented district heating with the main focus on Denmark which has become a pioneer in 1 Ofgem. (2017) Who we are. Available at: https://www.ofgem.gov.uk/about-us/ who-we-are (Accessed: 01 October 2017) 2 The Department of Energy and Climate Change (2013) ‘The Future Heating: Meeting the challenge’ 3 Price, C.W. (1997) ‘Competition and regulation in the UK gas industry.’, Oxford Review of Economic Policy, Volume 13 (Issue 1) pp. 47-63

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this technology but also the accompanying legislation. These small studies alongside interviews with key figures of local UK district heating networks will then inform the proposing of legislation that would benefit district heating users.

Foci and Structure

This dissertation will be very much focused on current affairs and shaping the future of heat networks however, there will also be short sections of historical research that will be undertaken using articles and books. Much of the more current research will come from interviews with figures involved in district heating schemes. This will also be supported by relevant articles allowing for a comparative narrative which will provide conclusions with regards to legislation proposals.

With regards to the structure of the dissertation, Chapter 2 - Oil, Gas and A Nation’s Energy Policy, looks at how the oil crisis in the Middle East affected Denmark and the UK and the modern day outcomes of this historical event. Chapter 3 - People, Places and Lines of Enquiry, outlines the main lines of questioning and how the questions were derived from the initial research. It then provides a detailed overview of each of the five district heating schemes being studied in this dissertation as well as introducing the interviewees. Chapter 4 – Discussion, then presents the results of the structured interviews organised by question topic. The dissertation is then drawn to a close with Chapter 5 – Conclusion.

Academic Context

As this is a relatively new field in the UK, the current research papers are less common than a more established topic, however this only adds to the relevance of this dissertation. There are a few key articles that established a base for my research.

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Michael Herborn & Bent Ole Gram Mortensen’s article ‘Is District Heating Still a (Natural) Monopoly?’ 4 delves into how district heating could be redefined as an arena for a competitive market by breaking down the production and supply chain into different and smaller parts that could be independently managed. This is very relevant as one of the main issues facing the legislative structure implementation is that the consumer has no choice of supplier thus competition is simply non-existent in the current market. By dismantling the network into smaller pieces, different companies could in turn offer consumers competitive prices allowing the consumer to have freedom of choice.

With the increase in competition the companies can then be all held to a certain standard rather than a singular supplier dictating the terms simply because the consumer has no other choice than to accept. These standards would be in turn the legislation that I would be proposing.

Another discovery of interest is the Heat Trust which is a voluntary scheme in which “heat energy suppliers who contract with metered or unmetered domestic and micro business properties where the heat customer pays their supplier directly for their heat energy”5 sign up to an independent regulatory body. This independent body then sets standards that the suppliers have to comply with to remain accredited. This scheme is also supported by the government giving it another level of credibility however, it seems to be more like the government is simply neglecting to regulate the industry and has decided to endorse this scheme as a token of acknowledgment with regards to the plight of customers locked into district heating.

This immense centralisation around the capital (Fig. 1 & 2) added to the fact that it is a voluntary scheme mean that the Heat Trust cannot claim to regulate the majority of the district heating industry.

4 Michael Herborn & Bent Ole Gram Mortensen, MH & BOGM. (2015) ‘Is District Heating Still a (Natural) Monopoly?’, HOT|COOL International Magazine on District Heating and Cooling, No. 4 /2015, pg. 17-19 5 Heat Customer Protection Ltd. (2015) The Scheme. Available at: http://www. heattrust.org/index.php/the-scheme (Accessed: 01 October 2017)

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Fig. 1

Fig. 2

These two images taken from the Heat Trust website show the location of heat suppliers that are registered with the scheme. It is immediately obvious that most of the registered schemes are in the south of England, mainly London, even though many more schemes exist including the heat network in Sheffield which will be examined in more detail further on.

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However, the way it draws comparable regulatory quality with standard utilities such as gas and electricity show that the legislative aims are there and that this could be useful when it comes to suggesting legislation later in the dissertation. In addition, the guide to heat network regulations produced by Switch2 has been a useful tool in ascertaining what legislation exists already, providing up-todate summaries of the government’s releases. Currently all district heating networks must now be fitted with a meter at the entrance to properties as well as a meter in each individual residence in a multiple-occupancy building6. This enables tariffs to be precise rather than an estimation which also leads into the second piece of legislation which states that consumers must be billed using data from an actual meter reading at least once a year. Knowledge of these two legislative points provides a base to form my legislation upon, especially with regards to proposing legislation that relies on meter readings to give the consumer a fairer and more ethical energy supply tariff.

6 Switch2. (October 2016) ‘A Detailed Guide to the Heat Network (Metering and Billing) Regulations 2014’ Available at: http://content.switch2.co.uk/thank-you-heatnetwork-regulations-2014-0?submissionGuid=0cffa0ff-6be7-4609-86bb-f844f6e3b5db (Accessed: 2nd October 2017)

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Chapter 2 - Oil, Gas And A Nation’s Energy Policy.

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Before launching directly into analysing heat networks and the way they operate in the UK, it is useful to understand the historical context behind the implementation of heating schemes and their legislation in the UK but also in other countries as well. This will then allow comparisons to be drawn and possibly information gleaned from more successful countries.

In the years after the Second World War, many countries relied heavily on oil. Most of it was exported from the gulf states via ships or pipelines through Europe. Initially this situation was perfectly adequate, as the companies drilling the oil were controlled indirectly

by Britain, France and America.7 But by the 1960s and 70s, regimes in the Arab-world were becoming hostile to the West. In 1960 the Organisation of the Petroleum Exporting Countries (OPEC) was formed with the objective of coordinating petroleum prices and policies amongst the members.8 At first OPEC were relatively inactive but in the 1970s they used their organisation to influence the political landscape.

The ‘oil crisis’ that they created began in October 1973 and resulted in large price increases and even embargoes for certain countries in the West. It began with the invasion of Israel by a coalition of Egyptian and Syrian troops on the 6th of October 1973.9 They were protesting the support of Israel by America and other European countries against the Arab settlement of Palestine10. Six days later the war ended after peace talks and US intervention however the Arab states remained irritated by the West’s interference. This provoked OPEC into action, cutting oil supply by 5% and threatening to continue to do so each month until the 7 Issawi, C. (1978) ‘The 1973 Oil Crisis and After’, Journal of Post Keynesian Economics, Vol. 1 (Winter 1978-1979) pp. 3-26 8 Organization of the Petroleum Exporting Countries. (2017) About Us - Brief History. Available at: http://www.opec.org/opec_web/en/about_us/24.htm (Accessed: 13 October 2017) 9 Hellema, D. Wiebes, C. Witte,T (2004) The Netherlands and the Oil Crisis: Business as Usual. Amsterdam: Amsterdam University Press. Pp. 13-38 10 Mitchell, T. (2010) ‘The Resources of Economics’, Journal of Cultural Economy, 3:2, 189-204, DOI: 10.1080/17530350.2010.494123

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Americans stopped obstructing the Israel-Palestine conflict.11 Although this impacted the United States, other countries who relied on exported oil were also affected as this reduction in oil supply initiated large price hikes.

Amongst the countries affected was Denmark, who relied heavily on imported oil with 85% of their electricity production in 1973 reliant on oil.12. The Danish government launched an awareness campaign about how the public could save energy alongside subsidies for the installation of insulation in houses.13 In 1977 an energy tax for all households was introduced and was kept high throughout the next two decades to encourage low energy consumption. Two years later, the 1979 Heat Supply Act was enacted aiming to “promote the best national economic use of energy for heated buildings and supplying them with hot water and to reduce the country’s dependence on mineral oil”.14 Alongside this new legislation was the merging of the Danish Energy Agency, which was established in 1976, into the Energy Ministry giving it more resources and wider ranging powers.15 These improvements meant that the energy issues were brought to the fore and one of these was the advancement of district heating. The 1979 legislation meant that many local heat projects began to be planned with high levels of communication between national and local government. “The central authorities issued guidelines, supervised the planning and approved the plans, and the municipalities did the planning in collaboration with energy utilities and consultants.”16 This approach of every locality effectively running most of the new 11 Mitchell, T. (2010) ‘The Resources of Economics’, Journal of Cultural Economy, 3:2, 189-204, DOI: 10.1080/17530350.2010.494123 12 Lund, H. (2010) ‘The implementation of renewable energy systems. Lessons learned from the Danish Case’, Energy, Vol. 35 (issue 10) pp. 4003-4009 13 Rüdiger, M. (2014) ‘Special Issue: The Energy Crises of the 1970s: Anticipations and Reactions in the Industrialized World’, Historical Social Research / Historische Sozialforschung, Vol. 39, (No. 4 (150)), pp. 94-112 14 Sovacool, B. K. (2013) ‘Energy policymaking in Denmark: Implications for global energy security and sustainability’, Energy Policy, Vol. 61, pp. 829-839 15 Varone, F. & Aebischer, B. (2001) ‘Energy efficiency: the challenges of policy design’, Energy Policy, Vol. 29 (issue 8) pp. 615-629 16 DBDH. (2017) District Heating History. Available at: http://dbdh.dk/districtheating-history/ (Accessed: 15 October 2017)

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district heating scheme’s installation meant that the projects were well tailored to their location and benefited the local users in the best possible way.

Despite the initially negative situation of the 1973 oil crisis provoking Denmark’s switch to energy efficient systems and technologies, such as district heating, it is clearly proving successful for the country. So much so that the Danish government has set itself the goal of being fossil fuel free by 2050. Clearly this will involve many older buildings being updated in terms of energy efficiency. This will consist of connecting them to heating networks along with the installation of mechanical heat recovery systems and the replacement of older inefficient windows, all in total reducing heating costs.17 With 63% of Danes18 already connected to the environmentally beneficial district heating networks, this target seems realistic and achievable.

In contrast, Britain is a country where the majority of homes heat their own water using a gas boiler located in the property. Essentially this means that every home must contain a complex boiler system which will need regular maintenance and leaves the home without heat should it fail. These boilers also run at 80 degrees centigrade which is much hotter than needed for water and space heating if the house is properly insulated. This high operating temperature is a remnant of when boilers used to be coal-fired and simply has not been updated, mainly because much of British housing stock is not adequately insulated. This is an ongoing problem in the UK with a parliamentary report stating that 25 million homes will still not meet insulation standards by 2050.19 17 Harrestrup, M. & Svendsen, S. (2014) ‘Heat planning for fossil-fuel-free district heating areas with extensive end-use heat savings: A case study of the Copenhagen district heating area in Denmark’ Energy Policy, Vol. 68, pp. 294-305 18 DBDH. (2017)District Heating in Denmark. Available at: http://dbdh.dk/ district-heating-history/ (Accessed: 15 October 2017) 19 BBC (2017) Uk ‘must insulate 25 million homes’ Available at: http://www.bbc. co.uk/news/business-39107973 (Accessed 24 October 2017)

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This lack of building updates also means that a large portion of British houses would also not be able to function with the lower temperatures that would accompany a district heating system.20

Historically Britain is also an energy abundant country with large reserves of coal and natural gas, hence the reason district heating and its energy saving properties did not become a pivotal energy distribution system after the 1970s oil crisis. In the seventies, Britain simply bolstered its energy supply by producing more coal and by 1980 natural gas was discovered, conveniently at the same time as oil prices collapsed.21 Initially gas was nationalized and controlled by British Gas however it was soon realised that privatisation would be better suited and in 1986 this came into force.

Evidently, much new legislation was needed alongside a regulatory body. Enter the Director General of Gas Supply, and Office, (Ofgas) which later became OFGEM, regulating the markets and making sure to avoid a monopolistic gas industry. This regulation was present in full force in 1987 when British Gas were referred due to ‘price discrimination in the contract market’ which was almost inevitable given the fact that they had previously been the sole suppliers. After this the company separated into independent transportation and supply arms also losing more than 50% of its bulk market share, though not willingly. By 2002 the technical and legislative issues had been mostly overcome and most residential customers were able to freely choose their gas supplier.22 Taking the history of the UK gas industry as a legislative structure, it clearly takes time to establish a working model for regulating energy distribution to the residential sector. However, it is also evident that in times of crisis, Denmark’s fuel shortage for example, legislative

20 Bioregional (2015) Why can’t we get district heating right in the UK? Available at: http://www.bioregional.com/district-heating-uk/ (Accessed 21 October 2017) 21 Helm, D. (2003) Energy, the State, and the Market, British Energy Policy since 1979. Revised Edition. Great Clarendon Street, Oxford OX2 6DP: Oxford University Press.

Pp. 1-5 22 Price, C.W. (1997) ‘Competition and regulation in the UK gas industry.’, Oxford Review of Economic Policy, Volume 13 (Issue 1) pp. 47-63

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structures and technology can adapt swiftly to benefit future generations rather than simply providing the cheapest solution at that moment in time.

Today in the UK, energy regulations with regards to carbon emissions do exist, with OFGEM having evidence of energy schemes aimed at suppliers since 1994. The current scheme is the Energy Company Obligation(ECO) and ran from January 2013 to the 31st of March 2017. This has now been extended under the acronym ECO2t until 2018.23 The main objectives of the scheme are to ensure that the gas and electricity suppliers promote primary measures of carbon emission reduction methods as well as improving the ability of lowincome and vulnerable households to heat their homes. This can be in the form of providing roof and wall insulation or offering boiler replacement or repair services. The most relevant aspect of this legislation is that it also stipulates the promotion of connection to a district heating system as a carbon emissions reduction method.24 This is proof that the British government is finally treating district heating as an environmentally beneficial concept and that it will become more prevalent in years to come.

This governmental support for district heating systems is also solidified by the allocation of ÂŁ320 million for schemes until the year 202125 suggesting that it is very clearly the future of energy in the UK. However, district heating is still plagued with issues with only five of the approximately twenty-five suppliers signed up to The Heat Trust. The Heat Trust in itself is also flawed stating that it

23 OFGEM. (2017) Overview of previous schemes. Available at: https://www. ofgem.gov.uk/environmental-programmes/eco/overview-previous-schemes (Accessed: 18th December 2017) 24 OFGEM. (2017) About the ECO scheme. Available at: https://www.ofgem. gov.uk/environmental-programmes/eco/about-eco-scheme (Accessed: 18th December 2017) 25 UK Government (2017) Heat Networks Investment Project (HNIP) Available at: https://www.gov.uk/government/publications/heat-networks-investment-project-hnip (Accessed: 11th January 2018)

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categorically does not cover pricing in its consumer protection.26 This presents a serious issue as it means that the consumer has absolutely no protection from aggressive pricing strategies deployed by the supplier.

There are also issues surrounding how a district heating service works for the customer and what it entails. In a recent investigation conducted by the BBC, people interviewed were not satisfied with their heat supplier and were being severely overcharged due to broken meters that had not been repaired.27 This was compounded with lack of customer care and residents who were so financially affected that they simply did not heat their homes. This and other similar articles has provoked the Competitions and Markets Authority to launch an investigation into district heating covering three areas of enquiry; customer awareness of their property being connected to district heating before and after moving in, whether heat networks are natural monopolies, and finally the pricing, service quality and reliability of heat networks.28 This investigation was launched in December 2017 and will continue over the next 12 months29 proving that the lack of legislative structure surrounding district heating is becoming a pressing issue and making this dissertation evermore relevant.

26 Tims, A. (2017) Energy customers locked into a costly scheme who have no right to switch. Available at: https://www.theguardian.com/money/2017/feb/05/ district-heating-fuel-bill-regulation (Accessed: 11th January 2018) 27 N. Dowling, A. Goldberg (2017) Green heating system accused of causing ‘fuel poverty’ Available at: www.bbc.co.uk/news/business-39736010 (Accessed: 11th January 2018) 28 Which? (2017) Are those on district heating networks getting a good deal?

Available at: https://conversation.which.co.uk/home-energy/district-heating-networkcma/ (Accessed: 12th January 2018) 29 Competition and Markets Authority (2017) CMA Examines Heat Networks.

Available at: https://www.gov.uk/government/news/cma-examines-heat-networks (Accessed: 12th January 2018)

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Chapter 3.1 - Lines Of Enquiry.

Chapter 3.2 - Sheffield District Heating.

Chapter 3.3 - Byker District Heating.

Chapter 3.4 - Riverside Dene District Heating.

Chapter 3.5 - Gateshead District Heating.

Chapter 3.6 - Southampton District Heating.

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Chapter 3 - People, Places and Lines of Enquiry.

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Chapter 3.1 - Lines Of Enquiry.

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In order to gain a wider and more in depth understanding of how the district heating situation is at this moment in time in the United Kingdom, qualitative research was undertaken which focused on five district heating networks in England. The interviewees were carefully selected in order to be certain that the person being questioned was knowledgeable about the entire system but also the political structure that supported it, which often meant that they were managers of the entire scheme in their locality. The sample included a private network, city-wide networks as well as smaller housing estate-wide networks. In order to ascertain a broad data set, the dissertation compares structures throughout differently scaled schemes to gauge how the legislation works across heat networks as a whole rather than focusing specifically on smaller building sized networks alone. These locations were chosen also because it allows for study of certain networks that are not included on the map of registered schemes provided by The Heat Trust, (see Fig. 1 and Fig. 2) leading to interesting lines of enquiry with regards to regulation of the systems but also allowing comparisons to be drawn between registered and non-registered schemes. The main reason however, for many of the schemes being situated around the north of England is that I was able to visit the schemes and gain first-hand knowledge from the interviewees.

The lines of questioning that were developed for this dissertation focus on three main areas of enquiry. The first, pricing and costs incurred, stems from The Heat Trust and its failure to straddle the topic in any way.30 This leaves users of heat networks out in the cold when it comes to mounting a challenge related to pricing with their supplier. Evidently, this is rather pertinent considering the trust is the only regulatory body that is available to consumers and this subject affects everybody. Secondly, the questions look at how the consumer interacts with the heating provider, albeit in either positive or negative exchanges. This line of questioning is motivated by a study conducted by ‘WHICH?’ that noted that many

30 Heat Customer Protection Ltd. (2015) The Scheme. Available at: http://www. heattrust.org/index.php/the-scheme (Accessed: 01 October 2017)

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customers “[…] felt let down and frustrated by poor customer service and complaints handling procedures”31 provided by their supplier. This negative attitude towards suppliers32 is also echoed in numerous articles33 suggesting that the industry is fundamentally flawed and requires oversight. The final section looks at the scheme as a whole and how it interacts with bodies such as The Heat Trust and also the reason for running the scheme as a private or public entity. This is an important subject as it ties into not only the public service aspect, but also how the pricing strategies of the scheme are approached. It was also important to uncover the interviewees’ personal opinion of the customer services that their company provides in order see if it differed from the way they had presented the district heating scheme throughout the entire interview.

Questions.

1. How is the consumer charged for their heating - actual meter

readings or estimations of energy consumption or a mix of both?

2. How is the price per unit of energy determined?

3. Is the cost of maintaining the heating network system trans-

ferred to the customer?

4. Is the customer consulted with regards to any price changes

to the heating provision?

5. Does the customer have means of contacting and complaining

to the supplier about their heat provisions?

31 Aylott, M. (2015) Turning up the heat on district heating. Available at: https:// conversation.which.co.uk/home-energy/district-heating-problems-gas-electricity/ (Accessed: 14th January 2018) 32 N. Dowling, A. Goldberg (2017) Green heating system accused of causing ‘fuel poverty’ Available at: www.bbc.co.uk/news/business-39736010 (Accessed: 11th January 2018) 33 Abbasah, AM. (2017) Appeal made to government watchdog to investigate ‘misleading’ energy efficient Orchard Village Rainham home. Available at: http://www. romfordrecorder.co.uk/news/appeal-made-to-government-watchdog-to-investigatemisleading-energy-efficient-orchard-village-rainham-homes-1-5053838 (Accessed: 15th January 2018)

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6. If the heating contract changes, does the consumer have a

system through which they can protest the changes i.e. independent complaints department?

7. Can the consumer independently verify any meter reading

taken by the heating supplier?

8. Why did you, as in the local council or community group,

decide to run the heating network as a public or semi-public entity rather than simply handing the contract over to a private company?

9. Is the heat network signed up to any voluntary regulatory

bodies such as the Heat Trust?

10. Do you think that the customer receives the same service with

regards to energy supply in comparison to gas or electricity?

With regards to studying the responses to the questions, I will use the topics outlined by the questions as a comparative base and look at the positives and negatives of the responses and how things could be changed or improved to better the district heating network. I will also look at any similarities or stark differences between the five schemes being studied and question why they are so.

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Chapter 3.2 - Sheffield District Heating.

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The plant is located just outside the city centre and consists of an incinerator that runs a CHP system which annually produces up to 60MW of thermal and 19MW of electrical energy per year.34 This makes the monthly output around 6MW but as it is not an engine, the incinerator cannot be given a capacity that it regularly produces.

Its location is as close to the city centre as possible(Fig.3), however since it is burning household waste, it would not be pleasant to house it directly in densely populated areas.

The main plant is then supported by three strategically placed standby boilers(Fig. 4) that would kick in at times of peak demand.

The scheme also has a built-in leak detection system which can accurately locate a leak to within a metre making the maintenance of the network extremely efficient. 35 The network supplies numerous buildings in and around the city centre in addition to large swathes of council owned social housing.

The scheme itself was actually a creation of a partnership between Sheffield City Council and Finnish energy firm Enko Oy. Together they created a limited company known as Sheffield Heat and Power, at the suggestion of Enko Oy, as this separated the financial risk of running a district heating network from the public money invested in the City Council.36 The company began trading on the 1st of April 198837 and by March 1991 the incinerator plant at Bernard Road was fully operational.

The interview was conducted with Peter Hoyland (PH) who has worked for Sheffield City Council for the past thirty-two years and currently holds the position of ‘Commercial Heating Manager.’ 34 Vital Energi. (2014) Sheffield City District Heating. Available at: https:// www.vitalenergi.co.uk/casestudies/sheffield-city-district-heating/#casestudy-overview (Accessed 14th December 2017) 35 Sheffield Heat and Power, Green Heat. 1991. [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, 4261M 36 Case Study 81, Community Heating in Sheffield. 1994. [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, mP6486m 37 Case Study 82, Consumer connection to Community Heating in Sheffield.

1994. [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, mP647m

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Fig. 3

Fig. 4

The location of the incinerator plant in relation to Sheffield City Centre.

The schematic layout of the scheme including the standby boilers.

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Chapter 3.3 - Byker District Heating.

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The Byker system was built in the 1970s along with the Byker estate itself and was designed by the architect Ralph Erskine. It sits within the boundaries of the housing estate itself (Fig. 5) and thus is truly a local power source. The system was originally designed to run solely off the burning of the waste produced by the residents, however this was not efficient or sustainable in any way. It now runs off a combination of three gas-fired boilers running alongside a 990 kW medium temperature hot water biomass boiler38 that is fed using woodchips. This energy then supplies approximately 3000 homes across the estate.39The system also functions as a Combined Heat and Power plant and thus produces electricity which is then sold back to the national grid.

The heating system is currently run by the Byker Community Trust who have managed to not have any increase in the heat charges since they took over in 2012.40 They are also based within the estate adding an ease of contact for the users of the scheme.

For the purpose of the research, Richard Beedle (RB), who is the current District Heating Consultant and also an employee of the Byker Community Trust, was interviewed.

38 Clearpower (2017) Boiler Delivered to Byker district heating energy centre (Newcastle). Available at: http://www.clearpower.ie/news/boiler-delivered-bykerdistrict-heating-energy-centre-newcastle/ (Accessed: 17th December 2017) 39 Issuu. (2010) Byker district heating. Available at: https://issuu.com/ espdocuments/docs/byker_pool_case_study (Accessed: 14th December 2017) 40 Byker Community Trust. (2017) Byker District Heating Supply. Available at: https://bykercommunitytrust.org/investment-programme/district-heatingsupply/ (Accessed: 3rd December 2017)

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Fig. 5

The location of the district heating plant within the Byker Estate.

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Chapter 3.4 - Riverside Dene District Heating.

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Previously known as Cruddas Park, Riverside Dene housing estate benefited from the installation of a district heating network in 2010 thanks to a grant from the government for £1.7 million.41 The refurbishment of the blocks saw Vital Energi use the coal bunkers located on the site to store the more environmentally friendly wood pellets which power the 750kW biomass boiler via a screw-fed system. This is then supplemented by a 1.5MW gas boiler42 and in turn, they both provide heat to the residences. Like the Byker system, the heating plant is located within the estate, beneath the largest tower on the site. (Fig. 6) This then allows for the energy distribution system to be much smaller than if the energy generation centre was located in the centre of Newcastle upon Tyne, which in turn increases the efficiency of the system.

The pumps used to power the system were manufactured by a company called Armstrong and arrived preassembled on site. This in turn limited a portion of the risk associated with the installation of a district heating system and meant that the project was quickly up and running without going massively over budget for issues arising from errors on site.43 The system was installed by Vital Energi and is managed by Your Homes Newcastle (YHN), who own the buildings.

This interview was conducted with Lynn Waters (LW), who is the Regeneration Liaison Manager for Your Homes Newcastle which is the company operated in conjunction to the City council in order to provide affordable housing.

41 Liz Walker. (2010) Huge crane installs flats new heating system. Available at: http://www.chroniclelive.co.uk/news/north-east-news/huge-crane-installs-flatsnew-1414819 (Accessed: 4th December 2017) 42 Vital Energi Ltd. (2014) Newcastle City Council Riverside Dene. Available at: https://www.vitalenergi.co.uk/casestudies/riverside-dene/ (Accessed: 4th December 2017) 43 World Pumps. (2012) ‘Powering up for UK district heating project’, World Pumps, Volume 2012 (Issue 8) pp. 22-23

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Fig. 6

Showing the Energy Centre location within the Riverside Dene Housing Estate.

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Chapter 3.5 - Gateshead District Heating.

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Located across the river from Newcastle, the Gateshead district heating scheme only became operational in March 2017. It is based around a Combined Heat and Power plant which houses two 2MW gas boilers and currently supplies mainly public buildings as well as a housing estate owned by the Gateshead Town Council.44Alongside the two main boilers are two back-up gas boilers and four thermal storage tanks which have a total capacity of 250,000 litres to provide storage for hot water.45

With regards to the location of the Energy Centre, it is located not far from the town centre(Fig. 7) but also within reach of the quayside area, which currently is one of the key supply zones. It is also located on a formerly industrial site, meaning that site access and size of building were not really a problem when planning and building the Energy Centre. The location was also a key aspect when planning the project and its future expansion across the town.(Fig. 8) The council have also clearly looked to other schemes for guidance on their new venture, with the UK Government acknowledging the creation of the Gateshead Energy Company which is clearly owned by the council. The company is registered at the Civic Centre in Gateshead along with all the employees, suggesting that they have separated their assets from the public money of the Town Council,46 much in the same way as Sheffield did back in the 1980s.

For the interview, a meeting took place with Gary Watts (GW), the Energy Operations Officer for Gateshead, at the Civic Centre.

44 Gateshead Council (2017) Gateshead District Energy Scheme. Available at: http://www.gateshead.gov.uk/Building%20and%20Development/Regeneration/ GatesheadCentre/Gateshead-Town-Centre-District-Energy-Scheme/Gateshead-Towncentre-District-Energy-Scheme.aspx (Accessed: 4th December 2017) 45 The ADE. (2017) ADE Stakeholder site visit to Gateshead Energy Centre.

Available at: https://www.theade.co.uk/news/ade-news/ade-stakeholder-site-visit-togateshead-energy-centre (Accessed: 5th December 2017) 46 Companies House (2017) GATESHEAD ENERGY COMPANY LIMITED. Available at: https://beta.companieshouse.gov.uk/company/09720758 (Accessed: 5th December 2017)

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Fig. 7

Fig. 8

The Gateshead Energy Centre in relation to Gateshead and Quayside.

The planned expansion of the Gateshead District Heating System by Gateshead Council.

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Chapter 3.6 - Southampton District Heating.

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The district heating system in Southampton began construction in July 1987 but before that the idea behind the scheme came in the mid1980s when the government was researching geothermal aquifers in the area. A hole was dug near the city however it was deemed too weak by the government to power a district heating scheme. The local council did not concede to this and simply designed a smaller scheme around the aquifer.47 As time progressed and the technical issues were ironed out, another aquifer was dug near to the centre of the city on the site of the current heating plant. The plant was built upon a brownfield site, with much of the surrounding land assigned for large-scale commercial development which in-turn, could then be connected to the heat network.48 (Fig. 9) The scheme is now fully functioning and has been for a number of years, supplying Southampton with greener energy and even winning the National Energy Efficiency Award back in 2006.49 The scheme is run by private energy company, Engie and will give suitable contrast to the other publicly managed schemes I have studied. It is also the only scheme that is partially powered by geothermal energy, using a 5.7MW multifueled generator that is also supplied with gas.

For the interview, correspondence took place with Jason Taylor (JT) who is currently the Energy Manager for Southampton and is involved in the partnership that Southampton City Council currently have with Engie.

47 Energie-Cités. (2001) GEOTHERMAL ENERGY District heating scheme SOUTHAMPTON. Available at: http://www.geothermalcommunities.eu/assets/ elearning/5.13.SOUTH_EN.PDF (Accessed: 3rd December 2017) 48 Gearty, M. (2008) ‘Southampton District Energy Scheme - A story of collaboration and steady ambition’, “Innovation for Carbon Reduction” in or connected with Local Authorities, Volume 5 (Issue VWS) pp. 9-30 49 Engie. (2017) Southampton. Available at: http://business.engie.co.uk/ embedded-generation/district-energy/southampton/ (Accessed: 4th December 2017)

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Fig. 9

The geothermal pumping station and the surrounding area it supplies.

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Chapter 4.1 - Pricing.

Chapter 4.2 - Consumer Interactions.

Chapter 4.3 - District Heating Schemes & Management

Of.

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Chapter 4 - Discussion.

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Chapter 4.1 - Pricing.

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When it comes to charging the customer for the energy that they consume, the latest legislation states that all properties must have a meter50 installed. This then allows the energy companies to take accurate readings from the consumer and thus provide pricing that is more closely linked to the amount of energy consumed. This meter could be used to give an exact reading in terms of pay-as-yougo contracts or to adjust the bands when using a monthly payment to make certain that the energy company is not making a loss by charging the consumer a flat rate.

When interviewing RB however, it was revealed that the Byker district heating system does not charge using a metered system, but rather by floor area of the property. They are able to use this approach as the estate has a rather non-diverse housing stock rather than being a city-wide scheme like Southampton meaning that the charges are relatively regular. The reason they do not use a metered system though is due to technical limitations.51 As the system was designed in the 1970s by the then architects, not much thought was put into the efficiency or controllability of the system.52 This has now meant that the current owners of the heating system have had to adapt what they have to serve the tenants. This has been costly at times and from 2014 to 2016, 2.7km of underground secondary mains pipework53 were replaced across the estate. The other pitfall for the consumer not having a metered connection is that they are continuously paying for the energy, regardless of if they are occupying the residence or on two week summer holiday. This creates a pricing system that is effectively ignorant of all but one criteria, the floor area of a home, and personally I feel that this detracts from the image of district heating being a system that is tailored to each individual.

This approach to charging for the heating used without using a meter means that the Byker Estate scheme also sets up their pricing very 50 Appendix D, Question 1 51 Appendix B, Question 1 52 Appendix B, Question 2 53 Byker Community Trust. (2017) Byker District Heating Supply. Available at: https://bykercommunitytrust.org/investment-programme/district-heating-supply/ (Accessed: 3rd December 2017)

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differently. Whilst all the other schemes charge per Kilowatt Hour (kWh) for the energy, the Byker scheme takes an annual charge based on the previous year’s consumption.54 Meanwhile many of the other schemes benchmark their energy prices against other fuels, including the price of wholesale gas. This is the case in Southampton55 with the prices directly linked. Conversely, Riverside Dene uses a price directly linked to the price of the fuel source that they are burning in order to run the system.56 This could be wood pellets or it could be gas or another fuel source however, the consumer is not informed beforehand and then is simply locked into paying the charges.

Gateshead on the other-hand are looking carefully at how they organise their pricing system for the smaller domestic consumers because, as GW said, “benchmarking to the price of gas against heat and we’ll come up with what has to be, as far as we’re concerned, a cheaper option than paying for gas.”57 This approach that district heating should provide a cheaper option than paying for mains gas seems to be the correct way forward simply because the consumer is not processing any of the raw material in their home with a localised boiler unit which can become costly to maintain.

Sadly these maintenance costs seem to have been at least fractionally transferred to a concept called a ‘standing charge’. According to PH this has to be factored into the cost of the energy as the company producing the heat has already encountered all the losses58 by the time the heated water or steam reaches the consumer. These losses could be physical and due to many things such as; lack of insulation continuity between the heat plant and the pipe network, poor pipework layout with an overly long and complex route taken to supply properties or even simply poor pumping and flow-control with regards to the water being moved around the system. 59 54 Appendix B, Question 5.5 55 Appendix E, Question 2 56 Appendix C, Question 2 57 Appendix D, Question 2 58 Appendix A, Question 2 59 Blackwell, H. (2013) ‘Foiling the Great Escape’, CIBSE Journal 2013, Volume August 2013, pp. 32-34

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Or they could be financial which would include the cost of physically heating the water, maintaining the heat network and heat plant as well as providing staff for repair and maintenance.

Many of these charges are simply integrated into the rental agreement with this being the case in all of the schemes I looked at bar Southampton, which lists it as a separate charge. In most of the cases it seems to also be linked to the fact that the residences being supplied by the district heating system are social housing and are managed by the same organisation providing the heating, thus the district heating connection is seen as a part of the property. As the council rents the homes, they also tie the consumer into the heat network and essentially to disconnect from it would also involve moving residence. With regards to these standing charges, they are usually set at a fixed price however in Riverside Dene, this can also fluctuate depending on if the system needs heavy repair or not.60 With regards to fluctuation in costs for the consumer, it was important to find out if the energy provider is very open about the reasons for how and why there are changes and how they communicate the changes with the consumer. Despite the fact that the Gateshead Energy Company is only recently up and running and mainly supplying commercial consumers, they are regularly consulting their future residential customers when it comes to how the pricing system in the social housing areas should work61 and have specific members of staff that work directly with the residents and pass their concerns further up the management chain. Southampton also have a good relationship with the energy provider, with the council themselves switching to a quarterly tariff at the advice of the energy company as it would be more economical for them than a monthly payment.62 Riverside Dene also provide intellectual aid to their tenants when the cost of the scheme rises as they have a social aspect connected 60 61 62

Appendix C, Question 3 Appendix D, Question 4 Appendix E, Question 4

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to the business being that the homes are social housing provided

by Your Homes Newcastle.63 Then quite surprisingly, Byker district heating system has had no changes to its prices in the last five years64 due to the selling of excess electricity from the CHP plant back to the National Grid which effectively eliminates any increase in the price of fuel used to power the system.

Whilst the pricing of district heating can be a somewhat confusing process for the consumer, the way that charges are taken is definitely an issue with relative clarity when a metered system is involved and takes advantage of the support of the new legislation around metering. With regards to determining the price of a kWh of energy, this should be directly linked to the price that the energy companies buy in the fuel. The profit, if it is a for-profit scheme, should then be collected through charging for the services provided because making profit simply by marking up the fuel price effectively makes it almost the same as a gas supplier who will use the difference between consumer and wholesale prices to make a profit. Any changes in prices to the heat provision should also be clearly communicated to the customer in advance, especially since it is not currently like a standard utility where the consumer can quickly and easily change supplier.

63 64

Appendix C, Question 4 Appendix B, Question 4

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Chapter 4.2 - Consumer Interactions.

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Consumer interaction is very important for a successful district heating scheme and although it is not currently covered by any legislation, it is of enough importance to analyse within the research.

The main point to ascertain was whether the consumer has power in their relationship with the energy supplier and can they easily contact the company with any queries?

The best example of this is in the Byker Estate where the system is run by the Byker Community Trust who are a non-profit organisation established in 2012 in order to provide better management and more targeted funding for the estate. The properties were transferred from the city council to the trust after the outcome of a vote amongst the local residents.65 Evidently, their customer service is very involved with the heat scheme but also the customer base and the offices for the trust are situated within the Byker estate itself.

RB states the “there is nobody living more than five hundred metres from the office” which shows precisely how well integrated the trust, and therefore the energy provider, is to the consumer.66 With this level of integration then comes the ability to have a more personal connection with the users of the energy scheme which in turn means that the system can be better suited towards their specific needs.

At the opposite end of the spectrum is the Southampton scheme where residents may live in social housing run by the council however, since the heating network is privately owned, they must complain directly to the heat provider. Even if they complain to the council, they will simply be redirected towards the private company, with the council only prepared to step in when there is a major issue.67 This calls into question whether the ‘partnership’ that the scheme is built on is truly a fifty-fifty partnership or if the local government sits on the board of directors but holds relatively little power with regards to the running of the company.

Byker Community Trust. (2017) The Byker Community Trust. Available at: https://bykercommunitytrust.org/about/the-byker-story/ (Accessed: 6th December 2017) 65 66 67

Appendix B, Question 5 Appendix E, Question 5

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With regards to customer interaction within the other three schemes, they are all run through local councils, who all have a housing department in some shape or form. These housing departments provide services solely to the residents of their properties so in these cases, also the users of the heat scheme. Sheffield however, takes customer care one step further by monitoring the consumption of users and using computer programs to flag up any abnormal activity.

They then send out engineers to investigate the properties in order to verify that all the metering equipment is functioning correctly.68 This clearly visible concern for the financial health of the customers cannot be found in any privately-run schemes as the energy provider is looking to make a profit and thus does not have any reason to intervene if a customer is spending more money than normal. It also reassures the customer that they are not simply another cash income, but rather the council genuinely cares for their wellbeing.

With customer interaction there must also be an element of trust and transparency to the way energy providers communicate with the customer. With the metering systems currently installed, energy companies can now check how much energy has been consumed from a remote location meaning that the energy company and the consumer may never meet face-to-face. This makes the metering process lack transparency however, after posing the question to the interviewees, it was assured that the smart meters can also be read locally by the consumer. In the Gateshead scheme, the user is even encouraged to read their own meter to make certain that the remote readings being taken by the energy provider are correct. 69 This reassurance that smart meters are simply a tool to enable the energy provider to save money rather than taking away control of their energy supply away from the consumer is a positive step towards making district heating a trusted and widely used energy supply system.

68 69

Appendix A, Question 5 Appendix D, Question 7

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In summary, district heating schemes work best when the supplier is based locally with regards to the users as district heating in itself is a localised technology. This also gives the consumer peace of mind with regards to being connected to the scheme, as their supplier is easily contactable and should, in theory, be able to provide a very attentive service. When you have larger companies, such as Engie who run Southampton, operating at a national scale, the customer service department is less likely to be locally based or easily accessible given that the customer base will be much larger and also of national scale.

With regards to the integration of connected meters in homes that can be read remotely, they are definitely a positive step forward as it no longer requires an employee to visit your home to cross-check your meter readings. However, it is essential that these meters can still be read by the homeowner in order to have the ability to verify or contest any heat charges that they may incur.

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Chapter 4.3 - District Heating Schemes Study Visit - Portugal

& Management Of. - 69 -

With the final set of questions in the interviews, the aim was to delve into how the district heating system is run and why precisely it is managed in the way it is. It was also to find out how the scheme interacts with the wider world of district heating with regards to the Heat Trust which shows an additional level of concern with regards to how the energy company run their heat network. Lastly, it was interesting to see how the interviewee themselves perceived the services they were offering to the public and explain why they had their opinion. Evidently this question is almost certain to receive a biased answer however with the justification it becomes more informative.

Firstly, addressing how the district heating scheme is managed. This is very different to how the scheme is run, which actually takes into account the technical functioning of district heating network. There are a few different approaches across the five schemes featured in this dissertation. Southampton is run by a private firm, Engie, rather than the council and although they have a partnership, the correct phrase would be a ‘joint cooperation agreement’.70 What this means is that Southampton City Council promote and push the scheme through things such as the planning process, whilst Engie take on all the logistical and financial burdens of running a district heating network. This works well for the council as it protects public money from the supposedly risky business of a district heating scheme however, there are better ways to run a program that could be more focused around the consumer’s needs rather than simply handing over the reins to a private company.

This other method can be seen in Sheffield where the City Council still own and manage the scheme, but they contract technical and specialist labour out to different companies.71 This allows the council to search for the best prices with regards to labour, keeping the network competitive and therefore affordably priced for the consumer. This is evidently essential as many of the users will be 70 71

Appendix E, Question 8 Appendix A, Question 8

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people with low income living in social housing who would otherwise be in fuel poverty. Meanwhile in Gateshead they run a similar method, aside from the fact that the company contracting out the labour is already a separate entity to the council, Gateshead Energy Company, and when interviewing GW he admitted that they had used Sheffield as a precedent for their scheme. 72 In Newcastle, Riverside Dene is run by YHN which is in turn controlled by the council along with the district heating system. This is for the same reasons as Sheffield as without total control of a district heating network, the council cannot guarantee the energy security of their residents.73 The Byker Community Trust also manage their own scheme, “our system for our tenants”74 as RB said. This then becomes quite interesting as the Trust then contracts the specialist labour back to the council, effectively making the Byker District Heating scheme council run.

With regards to self-regulation, all the interviewees were asked whether the scheme they were part of was affiliated with The Heat Trust. With most of the schemes they simply did not know however Southampton is, via Engie, who also operate elsewhere in the UK.75 When questioned about The Heat Trust, RB was rather derogatory and stated that the regulations detailed by the organisation were in fact weaker and less favourable to the consumer and that the Byker Community Trust offered a far more attentive and caring service. For example, with “[…]the heat trust regulations, the trigger seems to be the customer telling the supplier that they haven’t got a supply and then the supplier has to respond within a timescale. But the response doesn’t necessarily mean it’s back on. They could have just been to have a look and it’s not working.”76 Whereas with the Byker District Heating Network, the team has always managed to fully repair any fault within 48 hours over the last five years.

72 73 74 75 76

Appendix D, Question 8 Appendix C, Question 8 Appendix B, Question 8 Appendix E, Question 9 Appendix B, Question 9

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This dislike of The Heat Trust by RB is totally understandable when you take into account that a community trust is there to benefit residents and clearly this government-endorsed regulatory body is not the best way to do so.

Finally, it was fascinating to uncover how the interviewees felt about the different heat networks they were involved in and the justifications of their opinions. All were astoundingly positive about their service bar JT from Southampton who seemed indifferent claiming that “[…] over the years it’s been up and down like any working relationship.”77 The other schemes, though, were very complimentary with PH saying that the Sheffield’s “[…]repair service is akin to a Goldstar British Gas service[…]”78 Many of the good aspects of the services offered related to the supplier being locally based with regards to the system.79 This also presents the opportunity for the supplier to interact with the user at a personal and face-to-face level80 which increases the transparency of the heat supplier.

Most of the schemes researched within this dissertation are managed and or run by a city or town council with only Southampton being privately owned, over which JT expressed remorse.81 This local approach to locally based energy provision is clearly the best way to provide a reliable and quality service to consumers and should be taken note of were district heating to become mainstream in the UK. With regards to The Heat Trust, it is clearly under-publicized but also not suitable for well established schemes, such as the one in Byker, and is quite possibly the government’s way of claiming that district heating is in some way, well regulated. The high opinions of their networks by the interviewees is not surprising at all although their reasoning behind the matter was very insightful into the management of district heating networks.

77 78 79 80 81

Appendix E, Question 10 Appendix B, Question 10 Appendix D, Question 10 Appendix C, Question 10 Appendix E, Question 9

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Chapter 5 - Conclusion.

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District heating in the UK is slowly becoming a more common technology with regards to providing heating and hot water to consumers. This is proven with the British government setting aside £320 million for schemes until the year 202182 indicating that the technology is not a fleeting trend. This increase in heat schemes is especially prevalent in London where the introduction of district heating could aid in the capture of waste heat which could theoretically provide 70% of the capital’s energy requirements.83 However, district heating still has a long way to go. Much of my initial research has shown district heating in its current state to be a poorly executed and managed energy strategy with widespread negative responses from national media who have interviewed users of different schemes. This may however, be a classic case of the national media creating a frenzy, as when I conducted the interviews with the prominent figures of district heating schemes, the responses they gave did not seem to align with the negative image portrayed.

There was however, an overarching sense that the government was disconnected from the schemes and it was rather ‘each to their own.’

After conducting primary and secondary research throughout the course of this dissertation, it is evident that district heating as an energy strategy in the UK is drastically in need of further regulation directly from the government. This could come from directly from the department of energy or district heating could be included by OFGEM. Or The Heat Trust could be moved from an endorsed scheme to a government run organisation. In any case, an official regulatory body is needed. Were this legislative body to be installed in the future, the research in this dissertation has allowed for the generation of six future proposed legislative items.

82 UK Government (2017) Heat Networks Investment Project (HNIP) Available at: https://www.gov.uk/government/publications/heat-networks-investment-project-hnip (Accessed: 11th January 2018) 83 Whitehead, F. (2014) Lessons from Denmark: how district heating could improve energy security. Available at: https://www.theguardian.com/big-energydebate/2014/aug/20/denmark-district-heating-uk-energy-security (Accessed: 16th January 2018)

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Proposed Future Legislation

1. The standing charge must be declared at the beginning of

the user’s contract.

2. The standing charge must be shown as a clear and separate

charge in any billing information.

3. Any property connected to a district heating system must

be advertised as such and the contractual details must be disclosed before purchase or rental of a property.

4. The heating supplier must meet quarterly with the local

council to discuss any complaints local users have.

5. The district heating scheme must be signed up to The Heat

Trust and display their membership on all correspondence with the user.

6. Any abode supplied via a district heating system must be

insulated to current standards outlined by the Government.

It is clear that the pricing of schemes is a complex topic with the current legislation stating, ‘all district heating networks must now be fitted with a meter at the entrance to properties as well as a meter in each individual residence in a multiple-occupancy building’84 is clearly aiding the pricing systems become more transparent although the issue of the ‘standing charge’ is still contentious. In some systems this charge is integrated into other payments whilst in others it is simply included in the heating bill. The advertisement of district heating also needs to be carefully approached. Many properties seem to be sold with the district heating as part of the agreement and this needs to be more clearly displayed and also ties into the standing charge.

With regards to consumer interaction with heating providers, the impression is that the locally based schemes seem to be much more 84 Switch2. (October 2016) ‘A Detailed Guide to the Heat Network (Metering and Billing) Regulations 2014’ Available at: http://content.switch2.co.uk/thank-you-heatnetwork-regulations-2014-0?submissionGuid=0cffa0ff-6be7-4609-86bb-f844f6e3b5db (Accessed: 2nd October 2017)

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attentive than schemes run by national scale companies. To improve this, companies could partner with local councils to provide a more tailored and local approach to their service.

In relation to ensuring consumers receive a minimum standard of service, The Heat Trust is currently the most viable solution although it needs to improve its regulations to cover pricing structures as an urgent matter. This provision is mainly aimed at the schemes run by national companies as the locally based schemes, as evidenced

by RB, already operate better standards than required by The Heat Trust. This measure would provide a reputable reference to a scheme’s operating standards and allow customers to easily know the minimum standards of service they are entitled to.

Finally, the decision to include a piece of legislation covering insulation stems from the fact that the widespread adoption of district heating in Britain has also been held back by the ageing housing stock of the country and the inadequate insulation levels currently installed in many homes and its inability to cope with the lower operating temperatures used by district heating systems.

Therefore, for district heating to become widespread, the legislation must also provoke changes in the built environment.

Throughout this dissertation district heating has been explored in terms of historical, technical and social context. All these wide-ranging factors make up a successful energy scheme however they are all defined by legislation. With the implementation of the proposed legislation and more district heating schemes, the UK stands to become much more energy efficient and could genuinely consider meeting the current target of emissions being 50% below levels from 1990 by the year 2020.85 District heating is the future of energy distribution and a society with reduced carbon emissions, legislation simply needs to evolve in tandem with the technology.

85 Department for Business, Energy and Industrial Strategy (2018) Updated energy and emissions projections 2017. Available at: https://www.gov.uk/government/ uploads/system/uploads/attachment_data/file/671187/Updated_energy_and_ emissions_projections_2017.pdf (Accessed: 17th January 2018)

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Bibliography List Of Figures

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References - 81 -

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Bibliography - 83 -

Books and Articles

Blackwell, H. (2013) ‘Foiling the Great Escape’, CIBSE Journal 2013, Volume August 2013, pp. 32-34

Gearty, M. (2008) ‘Southampton District Energy Scheme - A story of collaboration and steady ambition’, “Innovation for Carbon Reduction” in or

connected with Local Authorities, Volume 5 (Issue VWS) pp. 9-30

Harrestrup, M. & Svendsen, S. (2014) ‘Heat planning for fossil-fuel-free district heating areas with extensive end-use heat savings: A case study of the Copenhagen district heating area in Denmark’ Energy Policy, Vol. 68, pp.

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Hellema, D. Wiebes, C. Witte,T (2004) The Netherlands and the Oil Crisis: Business as Usual. Amsterdam: Amsterdam University Press. Pp. 13-38 Helm, D. (2003) Energy, the State, and the Market, British Energy Policy since 1979. Revised Edition. Great Clarendon Street, Oxford OX2 6DP: Oxford University Press. Pp. 1-5 Issawi, C. (1978) ‘The 1973 Oil Crisis and After’, Journal of Post Keynesian Economics, Vol. 1 (Winter 1978-1979) pp. 3-26

Lund, H. (2010) ‘The implementation of renewable energy systems. Lessons learned from the Danish Case’, Energy, Vol. 35 (issue 10) pp. 4003-4009 Michael Herborn & Bent Ole Gram Mortensen, MH & BOGM. (2015) ‘Is District Heating Still a (Natural) Monopoly?’, HOT|COOL International Magazine on District Heating and Cooling, No. 4 /2015, pg. 17-19 Mitchell, T. (2010) ‘The Resources of Economics’, Journal of Cultural Economy, 3:2, 189-204, DOI: 10.1080/17530350.2010.494123

Price, C.W. (1997) ‘Competition and regulation in the UK gas industry.’, Oxford Review of Economic Policy, Volume 13 (Issue 1) pp. 47-63

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Sovacool, B. K. (2013) ‘Energy policymaking in Denmark: Implications for global energy security and sustainability’, Energy Policy, Vol. 61, pp. 829839 The Department of Energy and Climate Change (2013) ‘The Future Heating: Meeting the challenge’

Archive Materials

Case Study 81, Community Heating in Sheffield. 1994. [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, mP6486m

Case Study 82, Consumer connection to Community Heating in Sheffield.

1994. [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, mP647m Sheffield Heat and Power, Green Heat. 1991. [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, 4261M

Web Sources

Abbasah, AM. (2017) Appeal made to government watchdog to investigate ‘misleading’ energy efficient Orchard Village Rainham home. Available at: http://www.romfordrecorder.co.uk/news/appeal-made-to-governmentwatchdog-to-investigate-misleading-energy-efficient-orchard-villagerainham-homes-1-5053838 (Accessed: 15th January 2018) Aylott, M. (2015) Turning up the heat on district heating. Available at: https://conversation.which.co.uk/home-energy/district-heatingproblems-gas-electricity/ (Accessed: 14th January 2018)

BBC (2017) Uk ‘must insulate 25 million homes’ Available at: http://www. bbc.co.uk/news/business-39107973 (Accessed 24 October 2017)

Bioregional (2015) Why can’t we get district heating right in the UK? Available at: http://www.bioregional.com/district-heating-uk/ (Accessed 21 October 2017)

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Byker Community Trust. (2017) Byker District Heating Supply. Available at: https://bykercommunitytrust.org/investment-programme/districtheating-supply/ (Accessed: 3rd December 2017) Byker Community Trust. (2017) The Byker Community Trust. Available at: https://bykercommunitytrust.org/about/the-byker-story/ (Accessed: 6th December 2017)

Clearpower (2017) Boiler Delivered to Byker district heating energy centre (Newcastle). Available at: http://www.clearpower.ie/news/boilerdelivered-byker-district-heating-energy-centre-newcastle/ (Accessed: 17th December 2017) Companies House (2017) GATESHEAD ENERGY COMPANY LIMITED. Available at: https://beta.companieshouse.gov.uk/company/09720758 (Accessed: 5th December 2017) Competition and Markets Authority (2017) CMA Examines Heat Networks.

Available at: https://www.gov.uk/government/news/cma-examines-heatnetworks (Accessed: 12th January 2018) DBDH. (2017) District Heating History. Available at: http://dbdh.dk/ district-heating-history/ (Accessed: 15 October 2017)

DBDH. (2017) District Heating in Denmark. Available at: http://dbdh.dk/ district-heating-history/ (Accessed: 15 October 2017)

Department for Business, Energy and Industrial Strategy (2018) Updated energy and emissions projections 2017. Available at: https://www.gov. uk/government/uploads/system/uploads/attachment_data/file/671187/ Updated_energy_and_emissions_projections_2017.pdf (Accessed: 17th January 2018)

Energie-CitĂŠs. (2001) GEOTHERMAL ENERGY District heating scheme SOUTHAMPTON. Available at: http://www.geothermalcommunities.eu/ assets/elearning/5.13.SOUTH_EN.PDF (Accessed: 3rd December 2017)

Gateshead Council (2017) Gateshead District Energy Scheme. Available at: http://www.gateshead.gov.uk/Building%20and%20Development/ Regeneration/GatesheadCentre/Gateshead-Town-Centre-District-Energy- 86 -

Scheme/Gateshead-Town-centre-District-Energy-Scheme.aspx (Accessed: 4th December 2017) Heat Customer Protection Ltd. (2015) The Scheme. Available at: http:// www.heattrust.org/index.php/the-scheme (Accessed: 01 October 2017)

Issuu. (2010) Byker district heating. Available at: https://issuu.com/ espdocuments/docs/byker_pool_case_study (Accessed: 14th December 2017) Liz Walker. (2010) Huge crane installs flats new heating system. Available at: http://www.chroniclelive.co.uk/news/north-east-news/huge-craneinstalls-flats-new-1414819 (Accessed: 4th December 2017)

N. Dowling, A. Goldberg (2017) Green heating system accused of causing ‘fuel poverty’ Available at: www.bbc.co.uk/news/business-39736010 (Accessed: 11th January 2018) OFGEM. (2017) About the ECO scheme. Available at: https://www.ofgem. gov.uk/environmental-programmes/eco/about-eco-scheme (Accessed: 18th December 2017) OFGEM. (2017) Overview of previous schemes. Available at: https:// www.ofgem.gov.uk/environmental-programmes/eco/overview-previousschemes (Accessed: 18th December 2017) Ofgem. (2017) Who we are. Available at: https://www.ofgem.gov.uk/aboutus/who-we-are (Accessed: 01 October 2017)

Organization of the Petroleum Exporting Countries. (2017) About Us - Brief History. Available at: http://www.opec.org/opec_web/en/about_us/24. htm (Accessed: 13 October 2017)

Switch2. (October 2016) ‘A Detailed Guide to the Heat Network (Metering and Billing) Regulations 2014’ Available at: http://content.switch2.co.uk/ thank-you-heat-network-regulations-2014-0?submissionGuid=0cffa0ff6be7-4609-86bb-f844f6e3b5db (Accessed: 2nd October 2017)

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The ADE. (2017) ADE Stakeholder site visit to Gateshead Energy Centre.

Available at: https://www.theade.co.uk/news/ade-news/ade-stakeholdersite-visit-to-gateshead-energy-centre (Accessed: 5th December 2017)

Tims, A. (2017) Energy customers locked into a costly scheme who have no right to switch. Available at: https://www.theguardian.com/money/2017/ feb/05/district-heating-fuel-bill-regulation (Accessed: 11th January 2018) UK Government (2017) Heat Networks Investment Project (HNIP) Available at: https://www.gov.uk/government/publications/heat-networksinvestment-project-hnip (Accessed: 11th January 2018) UK Government (2017) Heat Networks Investment Project (HNIP) Available at: https://www.gov.uk/government/publications/heat-networksinvestment-project-hnip (Accessed: 11th January 2018) Varone, F. & Aebischer, B. (2001) ‘Energy efficiency: the challenges of policy design’, Energy Policy, Vol. 29 (issue 8) pp. 615-629

Vital Energi Ltd. (2014) Newcastle City Council Riverside Dene. Avaliable at: https://www.vitalenergi.co.uk/casestudies/riverside-dene/ (Accessed: 4th December 2017)

Vital Energi. (2014) Sheffield City District Heating. Available at: https://www. vitalenergi.co.uk/casestudies/sheffield-city-district-heating/#casestudyoverview (Accessed 14th December 2017) Which? (2017) Are those on district heating networks getting a good deal?

Available at: https://conversation.which.co.uk/home-energy/districtheating-network-cma/ (Accessed: 12th January 2018)

Whitehead, F. (2014) Lessons from Denmark: how district heating could improve energy security. Available at: https://www.theguardian.com/ big-energy-debate/2014/aug/20/denmark-district-heating-uk-energysecurity (Accessed: 16th January 2018) World Pumps. (2012) ‘Powering up for UK district heating project’, World Pumps, Volume 2012 (Issue 8) pp. 22-23

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List Of Figures - 91 -

Figure 1

Heat Customer Protection Ltd. (2015) Heat Trust Membership. Available at: https://www.google.com/maps/d/viewer?mid=1uDS_eTXv7Ala7LZbIVK kxUhNuaA&ll=51.534838614438634%2C-0.04139972050779761&z=10 (Accessed: 01 October 2017)

Figure 2

Heat Customer Protection Ltd. (2015) Heat Trust Membership. Available at: https://www.google.com/maps/d/viewer?mid=1uDS_eTXv7Ala7LZbIVK kxUhNuaA&ll=51.534838614438634%2C-0.04139972050779761&z=10 (Accessed: 01 October 2017)

Figure 3

University of Edinburgh (2017) Digimap Roam. Available at: http:// digimap.edina.ac.uk/roam/os (Accessed: 17th December 2017)

Figure 4

Case Study 81, Community Heating in Sheffield. 1994. pp.3 [Booklet] Held at Sheffield City Archives, Miscellaneous Papers, mP6486m

Figure 5

University of Edinburgh (2017) Digimap Roam. Available at: http:// digimap.edina.ac.uk/roam/os (Accessed: 17th December 2017)

Figure 6

University of Edinburgh (2017) Digimap Roam. Available at: http:// digimap.edina.ac.uk/roam/os (Accessed: 17th December 2017)

Figure 7

University of Edinburgh (2017) Digimap Roam. Available at: http:// digimap.edina.ac.uk/roam/os (Accessed: 17th December 2017) - 92 -

Figure 8

Gateshead Council (2017) Gateshead Town Centre District Energy Scheme - initial network and future expansion zones. Available at: http://www. gateshead.gov.uk/DocumentLibrary/Building/regeneration/DistrictEnergy/heating-map-2.pdf (Accessed: 4th December 2017)

Figure 9

University of Edinburgh (2017) Digimap Roam. Available at: http:// digimap.edina.ac.uk/roam/os (Accessed: 17th December 2017)

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Appendix A - Sheffield District Heating.

Appendix B - Byker District Heating.

Appendix C - Riverside Dene District Heating.

Appendix D - Gateshead District Heating.

Appendix E - Southampton District Heating.

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Appendices - 95 -

- 96 -

Appendix A - Sheffield District Heating.

- 97 -

Peter Hoyland (PH)

32 years with Sheffield City Council.

Commercial heating manager for Sheffield.

1. How is the consumer charged for their heating - actual meter read-

ings or estimations of energy consumption or a mix of both?

Right ok. We just embarked on and just finished within the last few weeks, a program installing heat meters in all the properties. So, we’ve just moved from having a blanket rate if you like, that was just based consumption.

Yeah because usually there’s estimations so you’ve moved to metering?

We’ve moved to metering. So, we’ve just moved from people payed, you know, fourteen pounds or whatever, depending on the property sizes and we just moved to directly charging each individual.

Yeah

And they’re all online now

So, it’s sort of like smart meters?

Yeah, they are smart meters. We can read them remotely and we either have a pay-as-you-go setup, which is essentially you pay in advance off a card, or we setup a direct debit where we essentially take a guess like you would with any energy consumption and then we monitor it accordingly and change it depending on the usage. So its up to the tenant which of the payment methods they take.

So, the pay-as-you-go is technically you pay for exactly what you use whereas the direct debit is easier

Yeah, yep in advance. You load the credit up essentially. You put ten pounds on a card, there’s no swiping with machines, its all done via online technology, so nobody has to swipe any credit into the machines. Nobody reads the meters manually, its all done remotely, and you just burn through the credit that you’ve put onto that. The other one as I say, we bill people monthly on a, we’ve got methods. When I say, ‘we take a guess’, essentially - 98 -

it is a guess but its based on average consumption and we will review that after so many months and then hone it more carefully to be specific for that tenant.

Ah, ok so it does get more accurate over time?

It does.

2. How is the price per unit of energy determined?

Kilowatt hour.

So, a kilowatt hour. Is it in relation to any other energy? So, in accordance to national energy prices?

You mean how did we derive our price?

Yep

That was complex. Because we looked at what was out there in the market place, we looked at gas in comparison, which you’ve got to be extremely careful with.

Because it fluctuates?

With gas you buy the raw product but with heat we’ve already encountered all the losses You’ve processed it.

Exactly.

We looked at our overall gas bills, we looked at average consumption, and we came up with a rate for that. Now that was set for three years. Its going to be reviewed next year.

Ok so its reviewed every three years as well?

Yep.

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So, we came up with a kilowatt hour rate. Now significantly, what we decided to do is have a standing charge because a standing charge has a direct relation to what you charge per kilowatt hour and different organisations have had a different approach to this.

Yeah, I was going say how do you manage the standing charge?

Well what happens is with our customers, we have a four pound a week standing charge. Now what that enables you is to have a bit of leeway with the actual kilowatt hour rate. And it also means that if we get a lot of nonusers, which we get a lot of believe it or not, people switch it off and never use it In the summer, for example?

All the time. People that simply don’t use it because they’ve got electric showers and all they do is boil water up you know?

Ah yeah fair.

Yeah, we’ve got a significant number that do that. What that means is that we still get a revenue of four pounds for that individual property. So, four pounds a week we’re still going to get that individual payment. Because we still incur costs to get it to the front door albeit all the infrastructure has to be kept up. So, we have a four pound a week standing charge plus what they pay per kilowatt hour.

3. We’ve basically answered the next question then. The cost of

maintaining the heat network is transferred to the customer through that standing charge.

Yeah, it’s a combination actually. Because within the rent, you know you get a standard tenancy, within the rent, they’re paying an element of that rent for maintenance anyway.

Ah ok because it’s all council homes?

Because its council homes yeah. So, all the overheads, whether it be maintenance or whatever, is all covered by the four pound standing charge or what they pay as a maintenance element of the rent. Bear in mind within the four pound standing charge we also have to pay for specialist contractors - 100 -

like energy Switch2 who are our specialist contractor. Because they collect the revenues you know, through billing system. So, all our overheads are covered either on the four pound standing charge or what with the elements they pay in the rent.

So, it’s all covered by the customer essentially?

Yeah, in a nutshell.

5. Does the customer have means of contacting and complaining to

the supplier about their heat provisions?

Yes, they do. Well the answer to that, we do it several different ways. They’ve to address any complaints about the heating or any other repairs anyway to the council’s own complaints service. Which is, you know, skewed towards our housing properties. So, they can do it through that way, that would be directed through to us, who manage the district heating, and we’d pick that up but also because we can read these automatically, we pay for a report from our energy specialist that picks up certain things. You know like, for example excessive use, which suggests there’s something wrong with the equipment.

Ah ok.

So, if somebody complains about, they’re saying ‘I’m spending too much’ for example, for a complaint. We could cross check through the report we get and then we’d investigate.

Yeah ok that’s really good.

And that’s the same with any other complaint with heating; we cross check it with the use, with the amount they’ve paid, or whatever. And that creates a picture.

So, it’s not solely just ‘I’m right, you’re wrong’ there’s an evidence chain.

Exactly. That could be evidence of what the person is saying.

Is that the smart meters that really help with that?

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Yeah, we read that from the smart meters. We dial in if you like to the smart meters and get that information. On all six thousand properties, we’re running a report on that every month. So it throws out any anomalies.

Which usually connect with your complaints. It’s not working, complaint.

We will look at that and go its not working for whatever reason, low usage.

Over usage, they spend too much money, complain. Cross check that with that report, send somebody out to have a look at it.

6. If the heating contract changes, does the consumer have a system

through which they can protest the changes i.e. independent complaints department?

Right, bearing in mind its not like an energy supplier. They have no choice, part of the tenancy agreement is when they take our property, that heating supply comes with it. So does the charges and so does the repairs and the infrastructure. They cannot turn round to us and say, ‘I want to be disconnected off this and have standalone gas’.

Yeah

So, any complaints about anything would go through our complaints procedure that I’ve just described anyway. No matter what it would be, if it was a complaint about the pricing etc. And also we get people that want transparency about how we divide the prices and what happens to the four pound standing charge etc... That’s information we send out on request. But again, it all comes through our complaints procedure.

So, if someone wanted to, say for example, take their house completely electrical and stop paying the four pound a week standing charge they can’t do that because its in the contract for them home?

Yep they can’t do it. That’s right its within he tenancy agreement for the house. It’s a district heating property and therefore it comes with that package and they sign up to that in the first place. So they waiver any rights to change that when they sign up for their new home.

Essentially if they wanted to be disconnected, they’d have to leave the house?

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Exactly. And that house would remain a district heating property. The only exception to that is, we’re in a strange position where believe it or not, we supply private properties as well.

Yeah is it the university?

No. Well what happens is, we’ve probably got an estate of let’s say, four hundred properties on one particular plant room, after those four hundred, in the last twenty years somebody will have chosen to buy that property.

Now what happens is they get the option to either stay in our district heating system, and they have to then pay exactly the same as a tenancy or whatever, abide by the rules and they sign a document saying that. Or they can disconnect in which case we disconnect that property and they go off and do their own thing. So they get the choice if its their property. If they wish to stay, which is fine, they fall into line with all the rules if you like.

7. So the next question we’ve essentially discussed it. So the consum-

er can verify their own meter readings because it’s a smart meter?

Oh yeah absolutely yeah.

8. Why did you, as in the local council or community group, decide

to run the heating network as a public or semi-public entity rather than simply handing the contract over to a private company?

Its run completely by the council

When we say it’s completely run by the council, we buy in specialist skills, which are private companies, which we haven’t got. For example, do you know the billing system?

Yep

We haven’t got the infrastructure to use pay point for example. So, what we do we buy in that, in our case from a company called Switch2 who we’ve got a contract with. So when I say we run it completely, we manage it completely.

We use private organisations for skills that we haven’t got. Now the whole idea about whether we’d put it all out to a private company, you’re talking about the philosophy of Sheffield City Council. Because all the repairs are done with a direct labour organisation, all of them, not just district heating.

You know gas, standalone gas is, window repairs, everything’s done by the - 103 -

direct labour organisation, its not put out to contractors. There are some things that are for certain reasons but the core work is done by a direct labour organisation and district heating is no different. And that’s only just happened, its just come back into being direct labour organisation. So, before it was run by a company called Kier.

Ah yeah yeah, they’re all over Sheffield.

Well they’re not anymore. Six months ago, their contract came to an end and all those people that worked on maintenance to Kier that we used to pay, came in house and became direct.

So the council essentially owns sort of a sub-firm that does direct labour?

Yeah, they employ them directly. Its not been like that for the last eighteen years, it’s just started being like that now.

9. Is the heat network signed up to any voluntary regulatory bodies

such as the Heat Trust?

I don’t know unfortunately. Not that I’m personally aware of. I’m personally not aware of it.

It’s essentially a government-backed voluntary regulatory body and there’s quite a few district heating systems signed up to it.

Well I would suspect that we are. Because we have to supply information to government organisations on a regular basis.

10. Do you think that the customer receives the same service with

regards to energy supply in comparison to gas or electricity?

It’s a matter of opinion I suppose. I think they provide a far better one for a lot of reason. Because of the way that for example, we’ve got a care element within ours which you’re not going to get with an ordinary utility supplier.

So, if we’ve got somebody that’s not using or using s very small amount of heat, we’d investigate that. Well if British Gas are supplying a property that’s doing the same, as long as the bill is payed, they couldn’t give a hoot. So, we give that service, we make sure that somebody is not in fuel poverty for example, which it might lead to. Apart from the fact that our repair service is akin to a Goldstar British Gas service which a lot of people won’t pay for.

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But its within. If they give an emergency call, no heating no hot water, we’re there within twenty-four hours. Well for you to get that on your property at home, you’ve got to be signed up to a pretty expensive service from a supplier like British Gas. Most people don’t do that. We do that, if you’re a rent payer, that’s what you get. So apart from the call centre, the service is, they might not say so, but believe me, it’s pretty good.

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- 106 -

Appendix B - Byker District Heating.

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Richard Beedle (RB)

District Heating Consultant Byker Community Trust

The estate was built was built in the 1970s and it was actually built with the district heating system as an integral part of the estate design. When it was first built the idea was that it would burn refuse as a fuel source and that it would be a very cheap form of energy and therefore very little emphasis was put on insulation levels or efficiency of the system. Because boilers burning refuse were quite inefficient, in the end the council opted to change the heat source to gas boilers and they were changed in the early nineties. When the trust was formed, the trust is a community trust, it owns and manages all the properties on the Byker estate. It was set up exclusively with a bespoke focus on Byker and one of the big challenges at the time, when the trust was formed, most of the tenants said ‘these charges are too high, can the trust do something about that?’ So we’ve put quite a lot of emphasis into trying to improve the efficiency and reliability of the system. The first thing we’ve done is to diversify the energy generation, so rather than just rely on gas as a fuel source, we now use biomass to fuel our baseload.

When we say biomass our we talking sort of like trees or plants or?

Yeah, its woodchip Woodchip ok

Yeah, Yeah. And to get the tariff that that brings with it we have to use woodchip from a certified source in the UK. So its locally sourced woodchip and we’ve also installed a combined heat and power plant. So we generate electricity from the power plant At the same time

At the same time. And we sell that electricity back to the grid. We sell it back at a higher rate than we actually buy from the electricity company That sounds ridiculous

- 108 -

It does yes.

Sounds too good to be true

It does. Anyway, that’s the way it works currently. I think the reason that happens is because we only operate during peak demand hours, from seven in the morning till seven at night.

So when they’re most desperate for electricity?

Yeah, yeah when the grid is under a lot of strain. So having sort of small independent suppliers like ourselves helps the national grid. So we’ve changed the boilers So is it all biomass now?

No, it’s a combination of biomass and gas. The biomass brings with it a green energy tariff and the chp plant – as I said we sell the electricity back to the grid so that works a treat because we sell the electricity back to the grid and then the heat, which is the waste product in the first place, we also use that to power the district heating network. So we’ve got a combination of boiler, because it’s a very old system we’ve been replacing quite a lot of the underground mains Yeah I saw that on the website

Yeah burst and leaks are, or have been a very common problem and we’re gradually replacing The whole system?

Well we’ve replaced about half of the underground system. Quite a bit of the distribution networks above ground and that pipework is still in good condition but obviously when its in the ground it gets wet and damaged and it tends to corrode more quickly than if its kept above ground in dry conditions Yeah obviously

So we’ve been upgrading the system and we’ve also upgraded the building - 109 -

management system. So that gives us early warnings to any break downs or faults on the system.

So essentially you can see where pressure is being lost straight away

Yeah, any loss of pressure, temperature, we can spot that. That’s monitored twenty-four seven and we have a twenty-four hour call out system. So if anything fails the engineers will get called out and they are then able to respond really quickly to any faults on the system Sounds really well organised

Aye, well we do our best but I think any big old engineering piece of kit like this it has its challenges, so it’s a constant effort to keep the thing operating efficiently and effectively. The next step in our quest to improve the system and upgrade it, we’re just about to start a contract to upgrade the internal controls.

In the plant room or?

No, we’ve already done the controls in the plant room, in the dwellings.

Oh ok, so we’re talking sort of metering?

Well, unfortunately we can’t install meters to the Byker system because by the virtue of installing meters you encourage peaks in demand and unfortunately the pipework sizing for Byker was designed for a constant heat level demand. So we can’t install meters for technical and economic reasons but what we are doing is providing much better controls for individual households to manage the amount of energy they use. So at the moment they just have a single thermostat, generally within the living room, to control the temperature. And it’s a very crude system, you set it and you’re probably plus or minus two or three degrees. Whereas we’re actually going to install programmers that have been bespoke designed just for the Byker system and that will help the system gear down at night so that it’s not producing the same amount heat. With the current controls people just generally find a setting that is comfortable for them and leave it on twenty-four seven. But it means that there is a substantial wastage of energy and historically that’s been part of the reason why the cost to run the system has been so high.

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Ok, so that’s a good sort of background. Shall we jump into the questions?

1. First question. Obviously we’ve just discussed that they don’t actually have meters so how do you charge the consumer for their energy consumption?

Well the charges are set to recover the net operating cost of the system.

The operating costs include, obviously, all the energy charges, the charge of running the plant and equipment including maintenance and the staff to run the boiler house. And the charges also cover the costs of responsive repairs to the mains network.

But how is that divided between; is it just divided by the number of residents?

It’s divided by floor area. So there’s bands of property. Although there are many different property types on the Byker estate. What we do is we band them based on the floor area of the building and then the charges are set per square meter. Obviously the bigger properties are paying more than a small bed flat, for example. So people in comparable property sizes can see they are paying the same heat charges.

I mean obviously, if someone were to go on holiday for a month or something they would still get charged for their heating even thought they’d not actually used it?

They would yeah.

Is that more to do with the technical limitations at the moment?

It is yes. When I say the charges recover the net operating costs, obviously everything I mentioned so far is a cost, but we do have some income. When we sell electricity to the grid we get an income from that. And when we use biomass we get renewable heat incentive. So we discount the income from the actual cost so we set the charges for the difference.

So the gains made by the green initiatives come back to the residents directly.

And I think that’s where our model, which is very community orientated, is - 111 -

very different to other district heating networks.

Yeah, if you’re in a private network that would probably go straight into the profits So that’s the way we operate it and I think since the trust was formed in 2012 we’ve been very successful in that we’ve had no heat charge increase since 2012. That’s because those tariffs that are coming in are offsetting and providing a buffer agonist in variations in fuel costs.

That’s really clever actually.

So I think we’re probably the only estate in the country that hasn’t had any increase in fuel costs since 2012.

That’s quite an interesting way in dealing with change in fuel prices. Because everywhere else that I’ve spoken to they go in line with the inflation rate of gas. Yeah it fluctuates quite a bit.

We did a quick calculation against the big six gas charges over a period and I think the cost of gas has gone up thirty percent in that time. So to be able to cap the charges is quite a big achievement No

2. So obviously you’re calculating by floor area so you don’t charge by per unit of energy

Its quite a different way of dealing with it but I suppose it makes sense in terms of a housing estate if everyone has got similar flats, you’re not on a city-wide scheme.

I think its quite a crude method of doing it. If you were designing a district heating network now you wouldn’t design with that in mind. What you would do is offer to design a system that can respond to the peaks in demand that a metered system creates and then enable the customers to pick and choose their rates. But obviously we’ve inherited a system that’s already there and it would cost millions and millions to replace it all and so what we’re doing is trying to make the bet of what we’ve got.

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So its essentially problems created in the past.

I think it all goes back to that visionary idea that the architects had when they built the estate. You put a district heating system, its got a free fuel source, we don’t need to worry so much about this. And so we’ve been retrospectively trying to rectify the energy efficiency and controllability.

3. Cost of maintaining the heat network system that’s transferred to the customer – we’ve already sort of talked about that though

The heat charges include the operating costs and any repairs to the mains.

If it’s the maintenance of the systems within the dwellings then that’s covered by the rent. So when you pay your rent, within that is a proportion that covers replacement or temporary renewal, this that and the other. So basically the heat charge is everything to cover the supply coming into that dwelling and then the rent charge is anything that needs to be done within the dwelling.

4. Is the customer consulted with regards to any price changes to the heating provision? Obviously you haven’t actually had any changes in the price of the heat provision.

What happens is the heat charge is collected along with the rents and other services charges. At the start of every financial year we notify the tenants of what the rents but also the heat and service charge will be.

Ah ok so the heat charge is in advance of payment and not just on the payment date.

Yeah yeah.

Ok that’s quite a novel change, so no changes in the past five years.

So we’re now onto sort of consumer input.

5. Obviously you’re a community trust, so can the customer easily get in contact about the supplying of heat provision?

Yeah, our offices are based in the middle of the Byker estate.

Yep, I think I’ve walked by

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Yeah there’s nobody living more than five hundred metres from the office.

Its very well used and if anybody has a problem they’ve got a wide means of getting in touch; via the website, via email, via phone, via personal visit or through any of the housing staff.

Ok so you’re very easily contactable.

Yeah.

Because you’re so local to the entire It is yep.

5.5. Do you know, just on the off chance, how many people the heating system roughly encompasses?

1978 dwellings

So that’s a lot of people

So that’s around four and a half or five thousand

That’s a lot of people to serve. That’s actually a really efficient system then.

Definitely one of the best I’ve looked at so far.

Well I think, as I said because we’re a community trust, we’re set up specifically to help that community.

You’re not trying to extort money out of anyone

No, no there’s no party within the setup trying to make a profit out of this.

So is it completely non-profit the system then?

Yeah. Like I said we just have the charges to break even. What tends to happen is we set the charges based on the energy consumption from the previous year. Now we do get fluctuations, some years the charges are higher Obviously if the winter is colder

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Yeah. But, again by having a set charge spread over the whole year it’s a lot easier for people on low incomes to budget for that. In the summer the charges would be low but in winter they would be high but your income remains the same.

Yeah that definitely makes sense.

6. Obviously you haven’t had any changes recently, but if the heating contract did change, would the consumer any way of protesting that or are they just locked into the system?

At the moment, they’re locked into that system. It’s effectively the only way of getting heat into the property. In the past, one or two people did disconnect from the system. Former occupants disconnected and then installed their own gas system.

Oh ok so they have to install a gas system for the hot water and the heating, everything?

Yes. The problem now is that the estate is listed so you can’t alter the external appearance I was going to say, how did they get gas in?

Well most of the properties have got a gas supply but probably the only thing they use is a gas cooker. And to be honest, where possible, we’ve been taking it out.

Yeah because obviously it’s a fire hazard.

It’s a fire hazard, it’s a maintenance nightmare, has to be serviced every year and all its being used for is cooking. Its really doesn’t justify having the supply in there. So we take them out. So really, this is the means of heating within Byker.

And everyone seems to quite like it

There aren’t any real viable alternatives to that

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No

7. So obviously you haven’t got any meters, so there’s no way a customer can independently verify any energy charges for the year?

But there’s the trust that because it’s a community trust, a fair energy charge is not simply going to be raised for profit margins or anything like that.

Yeah. And obviously as a public housing association we have our year end accounts available for people to look at if they wish So the accounts of the community trust can be publicly viewed as well.

Yeah, yeah.

Ok that’s really good.

Ok so onto the general questions, we’ve probably covered them.

8. With regards to the district heating system, why did the community trust decide to take that on top of the housing and not just sell it off to a private operator?

Well I think the impression I get from talking to others in the world of district heating is a lot of the disquiet about district heating is where private operators operate it focused on profit rather than service. I think that’s led to district heating being discredited rather than being seen as an asset.

Its obviously quite a good thing for a community and for energy systems worldwide its quite a good efficient system.

Yes, yeah. So its better for the consumer. The other thing that’s a big factor for the community trust, it obviously takes quite a bit of expertise to maintain and manage a district heating network. Which a lot of housing organisations would really struggle with. Now fortunately the byker trust has got a good working relationship with the city council, and the city council run quite a lot of big heat and energy plants across the city and we use the city council, on the mains side anyway, to operate the system for us. So we’ve got both the social motive to keep it inhouse; our system for our tenants and then we’ve got the technical skills readily available to us through the council to - 116 -

actually be able operate the system.

Yep that’s really good. So it’s sort of been kept local because there is that expertise locally and the social motive to keep it local as well. And keep all the profits and the tariffs local.

Yeah, yeah. I suspect that you’ve picked up from elsewhere if the companies that have got access to, they’re trying to make a profit from running these things and simple maths is if we’re just setting the charge based on recovering the costs, they add in a profit margin then the costs are going to go up.

10. Sort of the last question is: with regards to energy supply in comparison to gas or electricity, do you think the consumer receives the same service or better?

I think it’s the same if not better. Any faults or problems, some of them are picked up centrally through the maintenance of the plant and the BMS system but also it’s the fact that because this is linked into the repair system, there’s a twenty-four seven helpline. So if somebody has a fault, they can get a response within a few hours.

And it can get fixed within twenty-four hours Yeah.

9. We are watching closely the development of the sort of heat trust idea and the voluntary regulation system that some of the suppliers have signed up to but we opted not to join that because our internal policies are far more generous to the customer.

Oh so you’re actually one step further than The Heat Trust?

Yeah, so in our case if somebody has a system failure we will refund their heat charge for every twenty-four, if they’re off for more than forty-eight hours, we’ll refund the heat charge for the period they’re off. Now in the time I’ve been here since 2012, we’ve never had to refund anybody because we’ve always managed to get the system back on within that timeframe.

Whereas when we were looking at the heat trust regulations, the trigger seems to be the customer telling the supplier that they haven’t got a supply and then the supplier has to respond within a timescale. But the response - 117 -

doesn’t necessarily mean it’s back on. They could have just been to have a look and its not working. So we saw that regulations at that level is a retrograde step to our existing policy and I think its far fairer.

Would you say the heat trust is probably aimed more at sort of private companies operating a system.

I think so. I went to a seminar run by the district energy association about two years ago where they were talking about this. And there was one other local authority district heating operator there and they were quite scathing about how weak the regulations were.

So from a local run thing the heat trust is a weaker option. Definitely not as community based.

No. it probably is what people need if you got a big commercial operator with a wide range of different customers on the system but certainly for our system we’ve got a more bespoke policy of responding to system failures and it’s much more responsive than the timescale set out in the heat trust.

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Appendix C - Riverside Dene District Heating.

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Lynn Waters (LW)

Regeneration Liaison Manager Your Homes Newcastle (YHN)

1. How is the consumer charged for their heating - actual meter readings or estimations of energy consumption or a mix of both?

An actual meter reading which are read remotely by a contractor – Switch2 – and in the event that there is an issue then we will receive an estimated reading. Once we start receiving estimated readings we then flag that and go out and treat that as a fault.

Are these smart meters then if they are read remotely?

Yes

Does the consumer have access to these smart meters?

Yes in the majority they do but we have some bungalows where the meter is in the loftspace.

Not as in physical access, as in access to the meter readings online?

We send out quarterly statements. So the customer gets quarterly statements and an annual statement.

2. How is the price per unit of energy determined?

The charge is determined by the cost of the required fuel source.

So its nothing to do with per kilowatt hour or anything like that?

Well you are charged per kilowatt hour but the tariff is determined by the fuel source so that’s how we measure their heating usage, well energy usage.

So in terms of district heating you don’t get to decide the fuel source, you just get told that effectively its one fuel source and it costs X amount of money?

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Yes. So for instance its 3.612pence per kilowatt hour from the properties Yep that’s helpful

3. So obviously district heating has to maintained, so does this cost of maintenance get transferred to the customer, do they pay a set charge?

Yes. There’ll be a number in the basic rent for repairs and maintenance and we call it an ‘infrastructure charge’ Yep and that just covers the cost of maintenance?

Yeah

Does that ever go up or down with regards to heavy work?

It peaks and troughs. There’ll be times where we have a few systems go down. Say in the summer months when the people haven’t got their heating on and then the winter months they switch it on and there’s an issue with the valve. Where the valves don’t open, you know? Or there’s things where the valve is open and they’re receiving heat all the time.

So that obviously needs immediate sorting Yeah

4. Is the customer consulted with regards to any price changes to the heating provision? Or do they just receive the bill with a higher charge?

All we do is inform them to any changes to the tariff

They’ve got no way of sort of challenging the price change?

Well they could challenge it with us but we’d have to respond in relation to YHN homes. But changes to the tariff price increase, normally they get advice on their statement if there’s any change in their tariff.

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5. Does the customer have means of contacting and complaining to the supplier about their heat provisions?

Yes. YHN have a corporate complaints procedure that they can go through.

So they can go through that Yes

They’re not sort of like left without anyone to complain to?

No, not at all, not at all.

Is that system only devoted to the local area then?

Yes. As we have 2200 properties on the district heating system

6. If the heating contract changes, does the consumer complain through the YHN system?

Yes. Well basically, the change in the contract would have no effect on the customer as they are simply subject to any tariff changes.

Is that because its written into the rental agreement?

Yep

So they’re sort of locked in?

Yes. So on their rent they pay the usage on their rent account and then we basically. An element of that is rent that covers repairs and maintenance and the infrastructure charge. And their rent covers the background heat loss and things like that.

And if a customer was wanting to change from district heating to sort of a gas provider would they be able to do that or is that?

No. We’re not linked. Would be like cutting off a leg of the district. Would be critical.

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So essentially they’re locked in to the heating system they have Yep.

So they have no choice but to pay for it.

7. You give them the statement quarterly for their meter reading, is there anyway for them to log onto an online system and read the readings themselves?

They don’t need to log onto an online system, they can just read it. In the bungalows we’ve put a new system which is a g6 so they can read it and its calibrated to the meter.

So its like a second screen?

Yep.

8. The district heating system is it local council run or is it privately owned or is it sort of a bit of both?

No its local council, YHN is a non-profit entity.

Why did Newcastle council decide to run it like that?

Because of the social responsibility. We can ensure the tenants have continuous hot water and heat, if we went for a private provider, they wouldn’t have the same as we would. They would switch people’s heating off if they weren’t paying. We go out and do have contact with these tenants if they’re high users and a liaison team will go out and meet with the tenant and advise them on how to use it efficiently . So we’re non-profit and that wouldn’t be the case if it were a private contractor.

It would be much more expensive effectively Yep

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9. Is the heat network signed up to any voluntary regulatory bodies such as the Heat Trust?

No. But we adhere to all regulatory guidelines. We’re not signed up to anything.

Obviously the legislation that is in place for the district heating at the moment is sort of quite a lot less compared to gas and electricity so the heat trust is another regulatory body on top that adds a bit more legislation. And its also supported by the government so I was just wondering if Newcastle was signed up to that?

Well we do adhere to the guidelines

10. Do you think that the customer receives the same service with regards to energy supply in comparison to gas or electricity

I have to say it’s better because we’re providing enhanced customer service.

Obviously we provide quarterly statements as well as home visits. Like I mentioned earlier, the resident liaison office provides advice on end usage and bill payments, it you know pretty enhanced. If we see anybody who’s been a previous low user and then they’re high or someone who’s really low we’ll flag that. One of the liaison officers goes out to discuss it with the tenant. We don’t want anyone not using their heating cos they’re worried about the price. We don’t want anyone to have their heating on twenty-four hours a day thinking its on a fixed charge.

Yep. So that’s really good service. Definitely much better than the gas companies do Are all the houses provided by the district heating, are they all social housing?

Yes

So obviously the social housing aspect feeds into that enhanced customer service.

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Appendix D - Gateshead District Heating.

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Gary Watts (GW)

Energy Operations Officer for Gateshead

1. How is the consumer charged for their heating - actual meter readings or estimations of energy consumption or a mix of both?

The consumer will be charged on a price per kilowatt and for the heating will be metered. Heat meters will be in place on all sites whether residential or commercial which is actually legislative, you know.

Yep that’s come through with the legislation. Was that 2013 or 14?

Something like that?

About that. I was going to Leeds with a workshop with what was then DECC at the time it just went cold because it was just a massive amount of work thinking of the current towerblocks that the council have Yeah to put meters in every single flat

What a headache that would be but it hasn’t turned out to be that bad.

Well these meters, are they smart meters can the consumers sort of check?

They will be smart meters. What we have in Gateshead at the moment is we’ve built the energy centre that you’re probably aware of. The energy centre is a private fire network, its fired by two, two megawatt CHP gas fired engine. The by-product of that is heat. So the heat will heat the water up which we will then use to distribute into the heat network. The heat that we deliver to all of the sites will be measured via heat meters, it will be read remotely, so they will be smart meters. And it will be charged hence per kilowatt hour for heat back to the customer.

2. How is the price per unit of energy determined?

We haven’t done that yet. We don’t actually have the customers getting the heat service yet so we are looking at the best way forward and benchmarking to the price of gas against the heat and we’ll come up with what has to be, as far as we’re concerned, a cheaper option than paying for gas - 130 -

Yeah I suppose that makes sense.

3. Obviously its not up and running yet but, Is the cost of maintaining the heating network system transferred to the customer?

We’ll have to see because on the heating network there aren’t many customers Is it mainly commercial?

It is all commercial. The heat network for Gateshead energy centre is all commercial apart from one block of flats.

We’re running a heights project at the moment so we’re going to be putting heat sources into one tower block opposite the civic centre here and six tower blocks towards the south of Gateshead.

4. Obviously you haven’t got any customers yet so you can’t consult them.

We are consulting, we’re very proactive, we’re obviously sitting around the table thinking about what we need to do talk about how we do it and then we sort of get the ball rolling. So we’re not suddenly going to say ‘right lads, heat networks on, go and get some customers’. The block of flats opposite, which has I believe 159 properties, is all going to come over to Gateshead wet system, Gateshead energy company’s wet system. So that’s going to be charged and they’re all our own going to have heat meters etc. etc. I mean the consultations have been done, not so much about how we bill, what we bill, what the prices are. We’ve done the consultations with the residents and said do you think it’s a good idea and the majority of the said it was.

They’re happy to come onto a system that the council runs in a block of social housing flats. As long as it works.

5. Obviously you’ve had consultations with them, have they got any way of contacting you?

Yeah. Within Gateshead council, like in any council I suppose, we’ve got a housing department or its Almo, a separate housing company. So we have resident liaison officers, tenant liaison officers, estate managers and we’ve worked, in the energy team, we’ve worked with the tenant liaison officers.

They have residents sessions beforehand to make them aware of the - 131 -

scheme, do the consultation, ask if they want the scheme and if it’ll work?

7. The smart meters – will the consumer be able to log on and check their own, so they can verify?

Yes. The smart meter will be in their property

So the smart meters can be verified by the customer?

Absolutely yes. We will, at intervals, ask for verifications for our own purposes. We need to make sure that we’re not just billing blindly and we do spot checks.

8. Did you decide to keep it running through the council or did you sort of want to privatise it?

Initially we were going to do it all within the council. My side of the team is operations, so we have people that think of schemes, people that deliver the schemes and then my team run the scheme. My team was going to be doing all of that until we looked into an option that Sheffield council actually use and we’ve decided to go with that for the residentials. We’re going to have 744 residencies on the network all together. The one that we will still be doing will be the 7 or 8 council owned within the sort of Gateshead area.

Obviously it has to localised because of the heat network. So they’ll be done manually by my team.

And then it’ll be partially owned by…

The heat network, its actually all owned by Gateshead council but it has been contracted out to run to Gateshead energy company which is a subsidiary of Gateshead council.

So its effectively a company within the council?

Yes

Its obviously separately registered and has its own bank accounts, bank registration, company registration.

But its heavily integrated with Gateshead council - 132 -

Well it is wholly owned by Gateshead council

9. Is the heat network signed up to any voluntary regulatory bodies such as the Heat Trust?

We’re going to. More so for the residential. We’re learning as we go along.

We’ve got the recommendations for the heat network and there’s the heat metering regulations which we have to follow. For, I suppose, security and conformity for our tenants, we are looking towards the Heat Trust in the near future.

Because it adds another layer of transparency?

It does yeah. Look at us, we’re doing things properly. We don’t want you to think that there’s anything that we could be doing that we’re not doing.

10. Do you think that the customer will receive the same service with regards to energy supply in comparison to gas or electricity

Its hard to say. I think the issues lie with suppliers rather than gas and electricity as a utility. We’re pretty certain that we’ll be a better supplier.

I suppose its like anything, you learn from the pitfalls of others. We’re the local council, we’re not sitting in a call centre at the other end of the country.

Someone can actually come in and ring the bell and get to see the face of someone they know.

So that local aspect is really played upon?

Yep.

We’re pretty much done with questions so do you want to talk about the other scheme, heat source pumps?

We thought about 78 years ago that an energy centre might be a good idea, councils had faced massive cutbacks, there’s no money coming in, or not as much, we can’t provide the services we used to. Everything’s been cut back.

If we had built an energy centre and it was an income stream, we going to utilise the income. What a council will do is it will get money in and not spend necessarily money in that area

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So essentially its another income apart from council tax?

Yeah. So we built this energy centre, would it work, what would we do with it? Lets build and put in 2 CHP engines, we’ll provide lower priced electricity. Oh hang on a minute, we’ll be producing loads of excess heat here why don’t we make it heat-led? You know the discussions have been ongoing even when the energy centre was being built. Is it going to be heat led? Is it going to be private wire led? We’ve cleaned all that out, we know where we’re going with it now. The heat network is currently being flushed. We’re actually building another branch along Gateshead library, Gateshead civic centre and an old council finance department which is still a council office. You don’t necessarily have to be a council department to be a customer. We’re currently supplying electricity to Gateshead college, the Sage Gateshead, the Baltic, obviously all within the relative proximity that we can get a heat network to we and know it can still work. So we produce the heat, heats the hot water which is kept in two huge pink cylinders. Then the pumps push the hot water out at each site there’s a plate heat exchanger just to top it up because obviously you will lose some temperature and we make sure that that’s hot enough to provide heating in each of the centres that we’re servicing. That’s a very brief description of how the heat networks going to work.

Where the pipes go for the heat, there’s a subsidiary pipe that carries all the cables for the private wire network. So we’ve made provision within the energy centre that we take from the grid, so if anything happens we can still supply of the grid. So we should never get breakdowns. We’ve gone into a marriage with northern power grid support service integrated utility services. They’re on contract with us to provide and emergency service should any of our cabling break down. So its all backed up. We’ve got everything in place that we feel we should have. We’re quite happy with it, private wire has been going for about a year now.

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Appendix E - Southampton District Heating.

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Jason Taylor (JT)

Energy manager For Southampton Yeah the district energy scheme in owned and operated by Engie, so its not council but we’ve got a joint cooperation agreement with the energy provider So it’s a co-op run?

No its private sector run

1. How is the consumer charged for their heating - actual meter readings or estimations of energy consumption or a mix of both?

All mains supplies are charged through a meter

And that meter is read regularly throughout the year?

Yeah they’re on a sort of automatic meter reading system So are they all smart meters then?

Yeah, well they’re all automatic meters. AMR. Not smart meters Can the consumer read the meter as well?

Yes

2. How is the price per unit of energy determined?

Its broken down into two. So there’s a fixed price element and then there’s the energy price element How is that worked out?

The fixed price element is based on your maximum heat demand, so lets say for a commercial property it might be a megawatt so you’re charged sort of - 138 -

almost an available capacity for that and you’re charged for having assets down at the heat station. And then obviously the energy charge is a cost directly related to the cost of energy that we feed into the scheme.

Is that directly related to the cost of other energy, gas or electricity?

It will be wholesale gas and probably some electricity yeah.

3. Is the cost of maintaining the heating network system transferred to the customer?

Yeah. As part of the fixed charged arrangement. So within that fixed charge all of the costs to run the scheme to supply the amount of energy required by the customer is within that fixed charge.

So essentially the customer pays for the running of the scheme as well as the energy?

Yeah

So that’s pretty standard.

4. Is the customer consulted with regards to any price changes to the heating provision?

I can’t speak for everyone but based on our bills we are charged a different rate every month. And its based on certain indices, gas indices things like that.

So it changes in regard to the market and the gas prices going up and down?

Yeah

And that’s every month?

Yeah most months we see a change in the units rate yeah Ok so that’s quite a fluctuation

Yeah, there is the, we’re moving towards a quarterly price arrangement - 139 -

That would make more sense because your prices wouldn’t fluctuate as much

5. Does the customer have means of contacting and complaining to the supplier about their heat provisions?

Because we don’t run or operate the scheme, we don’t deal with complaints directly. If we get a complaint about the scheme we pass it onto Engie who’s scheme it is. But they have got a process to deal with complaints.

So the complaints system is sort of run by the private company?

Yeah. If the complaints escalate we do sometimes get involved.

Yes

6. So we’ve already talked about it really if there’s a change in the costs, I’m guessing that works the same as complaints. That goes through the private company as well?

So essentially all complaints go through the private company.

Yeah

Do they complain through you and then it gets passed on or do they complain directly to?

Well its their responsibility to complain directly to the energy supplier, so Engie. If they haven’t complained, I someone contacts me and says they’ve got a problem here there or wherever we make sure that they’re in contact with Engie. The contract doesn’t sit between the council and the customer, its between the customer and Engie.

And with regards to social housing does the council have any more involvement in their heating system?

Yeah we’ve got one housing estate that’s connected to the district heating scheme and we are the customer on that supply So essentially the residents, they pay through you and you pay in a large sum - 140 -

That’s right yeah

7. Can the consumer independently verify any meter reading taken by the heating supplier?

No so basically we’ve got three buildings in the current complex I’m sitting in and each one’s got several meters within them and we can go down and validate the meter readings on the bills.

So the meters are free to read, they’re not sort of hidden away?

No

8. The district energy scheme, I know obviously that it’s privately owned but was there any point was it decided that it would be privately owned instead of being run by the council? Was there a reason for that?

I think that basically it was technical reason because it was actually set up in 1986, so basically at that time it was quite an innovative sort of thing that the council had set up with a private company and the council at that point didn’t want to take on any liability or risk. So all of the risk and liability who then developed, designed and built the scheme. We help that scheme by ensuring all of our buildings were connected too it. So we developed the business case for them, and they delivered it if that makes sense.

Ah ok. Because I’ve been looking at other district heating systems such as Sheffield, and they, obviously the council doesn’t have the technical ability, but they run it sort of through the council and they subcontract the actual system. So I was just wondering why Southampton wasn’t in a similar sort of set-up?

I think if we were going to do it now, we would definitely own the scheme. But times were very different back then and it was quite a new thing. Because it was part of the recommissioning of the geothermal well so technical it was quite a challenging project. And I think at that time, even though there was an appetite to develop district heating in the city, it was quite a big risk.

There was quite a bit of money.

Because the government sort of passed it off as not reliable enough to run a district heating scheme but then Southampton took it on though didn’t - 141 -

they?

Yeah, so basically they dug that well, because there used to be a power station where the well was dug, the department for energy dug the well in 1977 or 78 I think, did some tests on it, decided that the temperatures were not sufficient to prefeed the power station so they just left it. And then obviously the council at that time knew that you could do something with it, so they decided to develop a district heating scheme.

So basically the main reason its been privatised is because of risk to public money?

Yeah, but I think, lets say we were starting from scratch, it would be a council led scheme I think.

Definitely

Do you think, in the way its run, do the council have any control over the company at all? Can they suggest for protection of consumers. Obviously you’ve got an entire housing estate, do you have any sort of contact in the upper regions of the management of the company at all?

Yeah we have a quarterly meeting with the senior director of the energy business for the national business, and that’s with our director. And we also have quarterly technical board as well Ok. So its not totally a customer-consumer relationship. Its almost a partnership

Yeah. But its not in the modern sense of the word. Basically we’ve got what’s called a joint cooperation agreement and that states the responsibilities of each party. We help them promote and develop the scheme, and they basically ensure that they run an efficient and sensible scheme to then consumers.

Ok so its sort of you’re on promotional, they’re on the technical?

Yeah. We promote them by including connections in the planning process.

Ah ok so you, not forcibly, but suggest that connections should be included.

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And that essentially also helps the environmental policy of the city as well.

That’s it. It sort of meets our planning objectives in terms of commercial developments in the city And do they sort of pay any sort of royalty to be the sole provider of this energy system?

We’ve got what’s called a profit share but the scheme doesn’t actually make a profit, officially. But the council gets a sum of money every year to help administer bits and bobs around the scheme but it’s a tiny sum really in the grand scheme of things. Its like a goodwill gesture really.

Theoretically its non-profit but there is a small amount of profit that gets passed onto the council Well it’s a private profit making company but for tax purposes they don’t make a profit but we get a almost like a bit of their income Just to promote them in general

Well its mainly for administering that joint cooperation agreement

9. Is the heat network signed up to any voluntary regulatory bodies such as the Heat Trust?

The Southampton scheme hasn’t officially signed up I don’t think or the existing customers aren’t under that scheme. But I do believe that Engie as a company are signed up to that heat trust. So they run schemes elsewhere as well in London.

The Southampton isn’t signed up?

I don’t know. The thing is the existing customers have got contracts already in place so any new customers might be signed up under that

I suppose if the entire company is signed up to the heat trust then theoretically Southampton is as well.

They are a market leader in that sort of area - 143 -

10. Do you think that the customer receives the same service with regards to energy supply in comparison to gas or electricity

In terms of outages, we have far fewer outages on the district mains than what we have done in the past with electricity So it’s a more reliable supply energy wise Yeah

But consumer satisfactory wise do you think it’s the same or any different?

I can only speak for us, but I think its probably about the same. Yeah but over the years its been up and down like any working relationship Because it’s a large private supplier, there’s not a personalised service like a council-led district heating system in other cities.

Yeah. So I think if its like any contract, if its managed effectively you normally have a good relationship with them.

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