A Rising Opportunity?

Mike-Read-Grant-Thornton-webMunicipal heat off-take from waste to energy facilities – is this a rising opportunity for the industry? asks Mike Read, head of waste at Grant Thornton UK LLP, who sees momentum building in this market. 


Veolia’s SELCHP facility – a notable exception

It is fair to say that the generation of heat from Energy from Waste (EfW) facilities at a municipal scale has not been on a scale that government would have liked. There was a requirement that energy from waste plants funded through either the PFI or Welsh Government funding routes were required to be CHP-enabled to try and boost the heat element. However, at the procurement stage of these projects they remained at the enabled stage.

Whilst there were often good reasons for not taking the heat output aspect further at that time – lack of reliable heat offtake agreements, economics of foregone electricity income, wariness of renewable heat incentives (RHI) – it doesn’t alter the fact that the focus has been on electricity rather than on heat production.

There are notable exceptions to the above including in Nottingham, Sheffield and from the SELCHP facility in London. Similarly, the London Borough of Sutton is developing a low carbon heat network to utilise waste heat arising from EfW and landfill gas facilities at Beddington Lane.

When you look at what the relevant local authorities are saying they are achieving from having a heat network, the same core themes of tackling fuel poverty, reducing carbon emissions, and energy security, in terms of price and supply apply to each.

It is in order to help other local authorities in England and Wales to deliver these same aims, whilst at the same time recognising the need to remove the capacity and capability challenges that have been identified as barriers to heat network deployment, DECC set up the Heat Delivery Network Unit (HNDU).

Through this local authorities get access to grant funding (ranging from around £10,000 to £250,000) and guidance from an assigned person at HNDU to undertake heat mapping, energy master planning, feasibility studies and detailed project development. Our understanding is that since inception in September 2013 to June 2015, the Unit had awarded grant funding of £9.7m to 180 projects across 115 local authorities. The Unit is scheduled to run until March 2016 and a further funding allocation round may take place.

Whilst not all of these projects will be delivered, and only some of the projects will be based around EfW heat sources, it does start to provide some of the building blocks for allowing a market to grow. We have seen this before with the waste PFI projects where there was a project pipeline around which contractors, funders and advisors could invest and build capacity to deliver a programme.

The importance of this cannot be underestimated. Unlike the waste PFI projects, there is no evidence the Government will provide financial support to the cost of construction and / or operation of the heat networks. Critics of the HNDU funding suggest that this funding gap may be a barrier to these projects ever making it past Business Cases. However, we are hearing strong interest in owning district heating assets from various investing bodies.

With a large number of municipally focussed EfW facilities built and which are CHP-enabled, the potential to use these as heat sources as part of these programmes is apparent. Clearly it remains early days but there is definitely momentum building in this market.


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