I’m taking a stand for a place-based approach to Net Zero

Opinion piece by Emma Ashcroft, Associate Director, Cities & Regions, Carbon Trust

There is no one-size fits all solution in the transition to Net Zero. The cities and regions that we live in are diverse and unique. Whether it’s for power generation, building retrofit, renewable heat technologies or transport infrastructure; taking a local and spatial approach will help to determine the most cost-effective and impactful solutions.?

Place-based solutions to the climate crisis provide multiple benefits. Local authorities, when armed with the resources and capacity that they need, are well-placed to coordinate efforts across multiple actors, to build consensus and alignment. Without this, there’s a risk that stakeholders make decisions that make sense in isolation but do not combine to form a coherent plan. The recent Net Zero Review recognises the importance of this, recommending that Government introduces a statutory duty for local authorities to take account of the UK’s Net Zero targets, based on a clear framework of roles and responsibilities.

A local and tailored approach will deliver a more cost-effective transition that maximises economic and social benefits and builds public support. This is particularly true for the huge challenge of decarbonising heat in our buildings. Heat is a local issue. An understanding of local factors such as building stock conditions, local grid constraints and proximity to waste heat sources is essential to determining the most appropriate solutions.

Heat networks are a prime example of how a place-based approach to Net Zero can be adopted in practice, supplying heat from renewable and low carbon sources to a range of different buildings in a local area. In many cases, this facilitates a lower cost transition to decarbonised heat when compared to the alternative standalone building-level solutions.

There is huge potential to scale the number and size of heat networks across our cities & towns. Today, there are over 14,000 heat networks providing heating & hot water to 480,000 people and businesses across the UK. Heat networks currently provide around 2-3% of UK heat demand, and this is projected to rise to ~20% by 2050. We’ve seen significant progress in the development and deployment of heat networks in recent years, and local authorities, alongside industry, are already playing a major role in making this happen.

BEIS has estimated that ￡16bn of capital investment is needed for heat networks to deliver their full contribution to Net Zero. To unlock this investment, the UK Government has committed to several transformative actions, including capital funding schemes through the Heat Network Investment Project and its successor the Green Heat Network Fund, project development funding through the Heat Network Delivery Unit, and the introduction of a Heat Networks Market Framework.

The Energy Security Bill, introduced to Parliament in July 2022, introduces a regulatory framework for heat networks and gives powers to enable heat network zoning in England. It’s a critical piece of legislation that will help to scale the heat networks market by de-risking investment, whilst also ensuring consumer protection, fair prices and minimum technical standards.??

As we look forward, the challenge now is how to deliver at scale.

We’ve seen lots of heat network schemes delivered in recent years using public sector-led ESCo models, where the public sector body owns the assets and contracts with the private sector to Design, Build, Operate and Maintain. However, getting to the scale we need, will require billions of pounds worth of investment from the private sector. Fortunately, there is a high level of investor appetite to fund heat networks, brought about by a strong pipeline of projects and clear long-term policy commitments.

Platforms such as the BEIS Heat Investment Vehicle (BHIVE) aim to provide a route through which the public sector can procure equity and asset finance for their heat networks. This could be to finance a new project, the expansion of an existing project or as part of the refinancing of a mature project.??

A significant majority of local authorities have declared a climate emergency and set a Net Zero target for their local areas. Local authorities are often motivated to develop heat networks as flagship projects that will deliver against these targets, whilst also providing affordable heat to customers at a time of a cost-of-living crisis. This improves energy resilience and delivers wider economic and environmental benefits. As we scale the market and leverage more private sector investment into heat networks, we must ensure that this is done in such a way as to ensure the delivery of these objectives.

Bristol City Leap is an example of an innovative public private partnership that, if proven successful, could be replicated across the UK. The twenty-year joint venture between Bristol City Council, Ameresco and Vattenfall Heat UK, will invest ￡500 million into low carbon energy infrastructure across Bristol over the next five years, contributing to the city’s Net Zero by 2030 target. This includes ambitious plans to scale low carbon heat network infrastructure across the city. The partnership has made a range of commitments to deliver social value through this activity, including the creation of local jobs, investment into communities through a Community Energy Development Fund and crowdfunding opportunities for residents.

Expanding zoning policies beyond heat networks to cover the full range of heat and energy efficiency technologies could help to meet targets, using Local Area Energy Planning and consultation with stakeholders to zone local areas for the active deployment of a particular solution. In the next few years, we need to deliver rapid scaling of local action on Net Zero across the whole energy system, and private sector investment is key to driving success.