16 June 22

Delivering decarbonised heating to our homes – Q&A with Ken Hunnisett

Ken Hunnisett, Project Director, Triple Point Heat Networks Investment Management, discusses the Green Heat Network Fund and the role heat networks can play in efforts to reach net-zero. This Q&A was originally published in Energy Management.

Can you give us a brief outline of the Green Heat Network Fund?

The clock is ticking, but decisive action on climate change has the potential to limit global warming to that vitally important 1.5 degrees while also hastening our just transition to a net-zero economy. With 37% of the UK’s emissions coming from the way we heat our buildings, a shift towards cleaner, affordable, and renewable heat is an urgent priority. 

The Green Heat Network Fund (GHNF) builds on the success of the Heat Network Investment Project (HNIP). Triple Point Investment Management was appointed by the Department for Business, Energy & Industrial Strategy (BEIS) as its delivery partner for both schemes. Through the HNIP, we have already awarded over £260 million of funding to projects in urban and rural communities across England and Wales.

The GHNF is a £288 million capital grant fund that will be awarded over the next three years. It opened in March 2022, and is focused on transforming the commercialisation and construction of new heat and cooling networks, or the retrofit and expansion of existing ones. In our delivery of the GHNF we will continue to prioritise world-class stakeholder engagement, focusing on the scheme’s market and supply chain transformation commitments.

Is there a high demand for heat networks across the UK?

The decarbonisation of our heating infrastructure is a huge challenge that must be urgently addressed.

There is no silver bullet, but low carbon heat networks are a proven first step in a least-cost decarbonisation pathway. 

While there has been lots of heat network activity in EU markets, penetration in the UK is still fairly low, but this is changing. The BEIS heat network pipeline for projects in England and Wales currently - estimated to be worth over £1.5bn - is already more than double its value in 2018. With growth predictions inferring a capital investment requirement of up to £50bn into the UK market by 2050 if the market is to fulfill its potential, as many as one-fifth of us could be getting our heat from a low carbon heat network before long.

What role can heat networks play in the UK’s efforts to reach net-zero?

To accelerate a just transition to net zero, virtually all emissions from heat in buildings and industry must be eliminated. Households remain the highest contributors to overall UK greenhouse gas emissions. The next three largest emitters - the energy, manufacturing, and transport sectors – are all investing in decarbonisation at scale.

Heat networks are already proven around the world as a reliable, cost-effective, and low carbon alternative to gas.

With the added imperative to reflect on our domestic resilience as a consequence of galloping gas prices and the global threat to predictable supply – a symptom of the devastating conflict in Ukraine - the case for district heating is compelling.

They also have a significant role to play in transforming communities and, along with other clean energy vectors, should be at the heart of efforts to ‘level-up’ and drive out place-based inequalities.

Significant infrastructure projects like district heating schemes will shape our green recovery from the pandemic and are a fantastic driver of local green job creation. Triple Point is working with actors such as The Good Economy and Pensions 4 Purpose on Place-Based Impact Investing (PBII), the institutional investment world’s pre-emptive response to government policy that should arrive in this parliamentary session.

Why do heat networks in particular provide a good investment opportunity?

The investment potential of the sector has never been greater.

The scale of the opportunity is immense and there’s a publicly available pipeline of bankable opportunities with investment-grade counterparties.

Investors who might once have been put-off investing into an unregulated market can now take comfort from the appointment of Ofgem as regulator, who arrive with a stated intent to prioritise investor interests as well as those of consumers.

We’re also excited by the prospect of heat network zoning, on which BEIS consulted last Autumn. The prospect of zones being created in which connection of certain buildings might be mandated by policy could encourage investment “ahead of need”, lessening the risks of expensive infrastructure assets becoming stranded.

We share BEIS’s ambition for the GHNF to be a driver of the kind of supply chain transformation that would be required if we can unlock investment at the scale that is being forecast. It’s my great hope that the work we have done to professionalise the sector during the HNIP - including the production of free-to-use, standardised contract templates - along with learnings from our exemplar projects will all contribute to the creation of the next truly exciting infrastructure asset class.

You have previously worked on delivering the government’s Heat Network Investment Project (HNIP). Can you tell us more about any of those projects? Have any been completed?

As at May 2022, 41 heat network projects have been awarded funding; six are operational, and four will be supplying heat in the next month or two. When fully operational, these projects will deliver carbon savings of more than 1.25 million tonnes over 15 years, connecting 86,000 residencies and 6,000 non-residential buildings.

We were particularly proud to award funding for two first-of-their-kind projects which will help power the green revolution in the Northeast of England. Gateshead Council and Durham County Council were awarded £5.9 million and £3.8 million respectively for the development of two heat networks which utilise mine water energy to heat thousands of homes.

Separately, the development of a district heating network in Swaffham Prior provides an object lesson in community stakeholder engagement. The efficacy of heat networks in places with high building density and local sources of waste heat is well understood but it is quite another thing for them to be made to work in a rural off-gas grid community of just a few hundred homes.

Early interest in the GHNF encourages us to think there’ll be no lack of demand for funding from equally exciting projects.

This interview was originally published in Energy Management.