As the UK looks to transition its economy to a carbon neutral model, sector coupling will play a crucial role in re-purposing waste energy to meet business and consumer need. Charlie Giggle explains that consultants are ideally placed to make sure this kind of joined up thinking becomes a cornerstone of the planning process.
Great British Energy (GBE) is up and running, with Jürgen Maier’s board already convening for the first meeting of the new company. Much was made of what exactly this new body would be doing and how it would be functioning, with the original proposal leaning towards an energy creation company, before becoming an investment body. Recently the prospects of energy generation have been phased back into the plans, with Ed Miliband comparing the company to Ørsted or Statkraft. The nod to Denmark and Norway here is understandable, if overly optimistic. Both companies are state owned (Statkraft 100% and Ørsted over 50%), and contribute not only to domestic utility networks but also abroad, including in the UK.
Denmark, Norway and Sweden are considered world leaders in sustainable energy infrastructure, and the government has taken another lead from Scandinavia in the stated importance of district energy (DE) networks. District energy commonly refers to generating and distributing steam, electricity, and/or chilled water from a centrally located plant – and around 90% of homes in Stockholm are connected to a DE network. This opens up major opportunities to benefit from sector coupling.
Sector coupling is an approach which involves utilising waste energy from industrial sources, wastewater or data centres. By harnessing this waste within a DE system, it can be used to provide heating for local buildings, produce more electricity for storage, usage, or even make energy to sell on.
One example of this from the Stockholm data-park initiative not only attracted considerable investment in data centres – core infrastructure needed for new technologies like artificial intelligence – but ended up capturing around 100 GWh of energy annually; enough to power 30,000 apartments. But as great as projects like this are, it’s not as if we in the UK can copy and paste these ideas for the same results.
In order to facilitate an integrated network, a district energy system must be in place. Stockholm’s DE infrastructure has been in place since the 1950’s, and the levels of collaboration involving multiple stakeholders required are admittedly high. This is not the case in the UK, and the establishment of these will likely be a high priority for GBE. But exactly how the projects will be funded and ran is still somewhat of a mystery.
One important lesson to be learned, is that there is no one-size-fits-all approach to a successful network. Generally, bodies such as the UNEP, ICLEI or Act!onHeat all agree on a kind of spectrum of public involvement, applicable in different ways in different situations.
Oslo and Bergen are represented on the far public side of the spectrum, with a fully public in-house delivery. Beyond this there are project sponsor schemes as well as joint ventures between a municipality and private companies. Paris is a good example of success in this area, avoiding the high risk of a fully publicly funded venture whilst also retaining enough state control to mandate specific tariffs for areas with different socio-economic situations. Beyond PPP models are concession contracts, wherein ownership is passed into state ownership over time, mitigating original capex related risks for the public. After this there are fully private models, which can put the system into the hands of private equity or into a co-op or non-profit, such as in Copenhagen.
At the same time, there may be conflicts or challenges which need to be regulated for in advance, if the UK is to pull off its district energy system successfully. For example, many DE expert bodies are reporting serious challenges in Northern China, pointing the finger at problems regarding how much money the various waste heat producers are being paid for their excess heat.
So, in order to succeed here, the UK will have to learn from the mistakes (and triumphs) of the past, and design and regulate with these issues (and opportunities) in mind. All of this is no walk in the park, however, and will require external expertise.
Consultancy firms are ideally placed to advise on the planning of these major projects. Co-operation between a public entity and various private stakeholders will be the key to opening up sector coupling opportunities in the future, as well as setting up as many district energy networks as we can in the upcoming years. As well as this, it’s important to use regulation to a project’s advantage, if organisations are to garner the most financial investment possible. On the surface, regulation is seen as a hinderance to investment, but that’s not necessarily the case.
True, mandated tariff levels and the like aren’t what money tends to want to hear, but it is excellent for consumer (and voter) approval. Considering planned small nuclear reactors have a 65% disapproval rating in UKDNZ polls in terms of who would like one locally, it’s important to recognise the price cap’s role in negating the impact of public opinion, taking a chess piece off the board in the planning process. One positive example of regulation making a market more attractive is in Estonia, where connection to a district heating network boosts a building’s green rating, allowing new builds within allocated district heating zones to save money on insulation and other measures, just by being connected to the network in the first place.
Great British Energy will have the scope to recommend the kinds of regulation which will be positive for investment, and will be best placed to play the mediator role between public and private sector interests. Naturally, consultants will be hugely important in that process. With some creativity and ingenuity, they could end up being the heroes of the UK’s net zero movement. They can help to design and put together the deals and projects that secure the UK’s energy security for years to come, creating thousands of jobs and even leveraging the energy sector to gain tech investment, all whilst alleviating fuel poverty.