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County Durham’s Geothermal opportunities

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Agenda

Heat Network- the basics
Work on Heat Networks in County Durham & in the North East
Policy drivers & enabling work- inc. geothermal whitepaper
The opportunity
Impact
Financing
Partnerships
Appendices

Purpose

Impress on team the scale and impact of the opportunity

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What are Heat Networks?

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Why Heat Networks?

Energy Security

Energy Affordability

Climate Neutral or Low Carbon

Figure 2: pictorial representation of the Energy Trilemma

Low Carbon
Price stability & affordability
Capturing waste
Fuel poverty action
Jobs
Energy security
Access to low carbon heat
Pace and scale
Revenue generation

Risk & capital cost
Complex
Consumer protection & regulation*
Not one size fits all

Advantages

Disadvantages

Advantages

Disadvantages

Carbon saving- because heat networks can use low carbon and waste heat sources, this can lead to a carbon reduction. Today, existing heat networks reduce carbon emissions by around 1 million tonnes of CO2 each year.

Price stability- by accessing local waste heat sources, the cost of heat will be shielded by geopolitical factors, like the war in the Ukraine, and provide consumers with long term price stability unlike gas.

Capturing waste heat- heat networks can tap into heat that would otherwise be wasted.

Fuel poverty action- new heat networks in the UK must charge consumers less than or the same as their current heating systems, this means consumers often pay less for their heat and this can have a positive impact on relieving fuel poverty.

Recent studies found that when heat networks are developed in the right place, they can provide heat for up to 40 % less than air source heat pumps.

Job creation- investment in heat networks can create highly skilled construction and long-term maintenance jobs. This is an important part of a fair and just transition as it will help provide jobs for those with transferable skills currently working in carbon intensive industries; this is of particular importance to County Durham given recent history and closure of the mines leading to mass unemployment.

Energy Security- gas heating systems rely on a steady supply on natural gas, and in 2019, 50 % of the UK’s gas supply was imported. Relying heavily on imports can mean security of supply can come into question and influenced by many geopolitical factors like the war in Ukraine. Moving away from gas as a fuel and tapping into other, local, heat sources via a heat network, can increase the security of supply.

Access to low carbon heat- heat networks can provide those not in a position to pay for a heat pump for their home of business with access to low carbon heat, helping ensure we make a fair and just transition.

Risk- although heat networks are not a new development, for example the first heat network in the UK launched in the 1950s, a lack of skills & expertise and immature supply chains can mean increased risk with such projects. However, the UK Government is assessing the findings of its Heat Network Skills Review, to understand how skills gaps can be tackled and

Regulation & consumer protection- there is currently little protection for offtakers connected to a heat network, though regulation is developing because of the Competition and Markets Authority market study’s report in 2018.

Complex- Heat networks are complex from both an engineering and legal point of view, this can mean that the development of such networks can be long and drawn out.

Heat Trust is working with regulators and partners to protect customers and provide advice to operators.

There are also developing technical standards which can be seen in Appendix 3, with more expected imminently.

High capital cost- heat networks require large investment as the infrastructure and feasibility studies can be costly. However, there are innovative ways to fund these networks, be that using central government funding such as the Heat Networks Delivery Unit and Green Heat Networks Fund, or by attracting private investment. However, investment of this size always carries a certain level of risk.

IUK-090322-AcceleratingNetZeroDelivery-UnlockingBenefitsClimateActionUKCityRegions.pdf (ukri.org)

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Heat Networks in County Durham

Seaham Garden Village

Horden Minewater

Durham City Centre

Heat Mapping study

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County Durham & Geothermal- the opportunity

Contours are depth (km) to top of granite: 37-43 Deg C/km
Target 250 Deg C hot dry rock (6km)

Generate electricity and/or distribute heat at 80-120 Deg C

Deploy US Technology:

Ultra-fast granite drilling: 6km deep plus 3km horizontal
Reduced environmental impact hydraulic fracturing (patented)

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County Durham & Geothermal- the opportunity

County Hall: ~40 Deg C/km

250 Deg C at 6km

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County Durham & Geothermal

Possible connections:

Akeley heads development
University
University Hospital Durham
HMP Frankland
Freemans Quay LC
Premier Inn
Sniperley Park housing development
New College Durham
Police HQ
St Leonard’s RC school

County Durham & Geothermal- the opportunity

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County Durham & Geothermal

County Durham & Geothermal- the opportunity, Heat and electricity (options)

Surface footprint: 1-2 ha plus pipeline & power line; subsurface: 180 ha (3km x 0.6km)
A 2-3 ha site could host an array of 16-20 wells @ 6m wellhead spacing (if above the granite)
20 wells: 48% of Durham’s 1 mtpa emissions from heat (LHS), or
20 wells: 36% of 0.33 mtpa from electricity (RHS) … (or a combination); 2020 data.

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HNDU DPD for Durham City
Hemiko doing work at risk
LoS from DCC, UHND, NCD, Premier Inn, HMP and ongoing (BW)
Hemiko- £1bn of investment
Energy Accelerator application requires a 50 % match.

Progress & Next steps

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National Enablers

Net Zero Strategy: Build Back Greener
Zoning
Local Area Energy Planning
A deep geothermal energy white paper
Future Homes & Buildings Standard
Coal Authority Business Plan
UKIB strategy

Net Zero Strategy: Build Back Greener

The UK Government’s net zero strategy highlights heat networks as being an important part of decarbonising heat and estimated that heat networks could supply up to 18 % of UK Heat demand, up from around 2 % at time of writing.

Zoning

In order to accelerate progress in heat networks, the UK Government is developing heat network zoning policy and this is set to be in place no later than 2025. Areas identified as heat network zones will areas where Heat Networks are designated to be the primary mode of delivering heat to buildings (within the context of decarbonisation of heat) and there will be obligations placed on large buildings to connect to heat networks in these zones – this includes existing commercial buildings.

Local Area Energy Planning

Local Area Energy Planning (LAEP) is the development of strategic plans which identify actions to decarbonise the energy system of a specific place, be that a Town, County or Region. Developing these plans helps the grid network operators target their investment in specified areas and can deliver significant consumer savings by making the most of resources. These plans include electricity, heat, and gas networks and will have implications for heat network development as it will provide a master plan showing where heat networks can be developed and potential for he order of development dictated by local energy infrastructure.

This has been identifies by central Government as a step to decarbonisation, and DCC are in discussions on generating a LAEP, using the Catapult’s guidance in collaboration with local and regional stakeholders.

A deep geothermal energy white paper

A report commissioned by the by the North East Local Enterprise Partnership and funded by the Department for Energy Security and Net Zero and the North East and Yorkshire Net Zero Hub has identified Durham as an area with great potential for geothermal energy.

Future Homes & Buildings Standard

In 2025, all new homes will have to comply with the UK Government’s Future Homes Standard, which aims to reduce the carbon emissions of homes by 75-80 % than homes built today. To achieve this, new homes need to be equipped with low carbon heating solutions, which mainly refers to heat pumps or connecting to a heat network.

Coal Authority Business Plan

The Coal Authority, a non-departmental Government body, has a target to “influence and enable 4 large operational mine water heat schemes across Great Britain by 2025”. This part of their business plan will drive the development of mine water heat projects.

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Local Enablers

Climate Emergency Response Plan
County Durham Plan
Housing Decarbonisation schemes
Durham’s Partnerships

Durham County Council’s Climate Emergency Response Plan(s)

Burning natural gas and other fuels to heat buildings in County Durham accounted for almost half (47%) of the total carbon footprint of the county in 2019. To decarbonise this will mean either reducing the need for heat, replacing the boiler with an alternative technology, replacing the fuel in the boiler, or removing the boiler altogether and getting the heat from a shared heat source through a heat network.

Table 1: a table taken from Durham County Council's Climate Emergency Response Plan outlining the future vision for heat in County Durham.

Table 1, taken from the Council’s Climate Emergency Response Plan, shows that heat networks are part of the solution to decarbonising heat, and this has been agreed by Durham’s Cabinet. Therefore, this will drive forward work in this area.

In the CERP, it is estimated that by 2030, Durham County Council must cut its emissions associated with heating to approximately 9,308 tonnes of CO2e per year, down from 19,519 in 2021/2. Therefore, in order to achieve this target, Durham County Council must investigate heat networks as part of the solution.

County Durham Plan

County Durham adopted the County’s latest Development Plan in 2020, which establishes where development will be built up to 2035.Within the plan the Council agrees to adhere to the National Planning Policy Framework to achieve sustainable development. When considering development proposals, the council will take a positive approach that reflects the presumption in favour of sustainable development. It will work pro-actively with applicants jointly to find solutions which mean that proposals can be approved wherever possible, and to secure development that improves the economic, social, and environmental conditions in County Durham.

Multiple policies will drive forward progress on heat networks and they are briefly detailed below:

Policy 5: Durham City’s Urban Extensions

Opportunities for a district heating network will be explored

Policy 16: Durham University Development, purpose build student accommodation and hoses of multiple occupation

The proposal will enhance or create well-designed spaces, and exploit sustainable energy opportunities, including the delivery of district heating, where possible.

Policy 29: Sustainable Design

All development proposals will be required to achieve well designed buildings and places having regard to supplementary planning documents and other local guidance documents where relevant, and […] minimise greenhouse gas emissions, by seeking to achieve zero carbon buildings and providing renewable and low carbon energy generation and include connections to an existing or approved district energy scheme where viable opportunities exist. Where connection to the gas network is not viable, development should utilise renewable and low carbon technologies as the main heating source.

Policy 61: Location of New Waste Facilities

Proposals for new or enhanced waste management facilities will be permitted where they will assist the efficient collection, recycling and recovery of waste materials and they […]can be satisfactorily located as part of an existing waste management facility, or where the waste management facility can be satisfactorily co-located with complimentary activities and potential users of recovered materials, recyclates and soils, energy and heat, where appropriate and feasible and where this represents a sustainable option.

It is possible that, to accelerate deployment of Heat Networks, the county Durham Plan could be amended to support development of these networks more in specified areas and/or a Local Development Order (LDO) could be implemented. LDOs are locally developed tools to accelerate progress of developments in defined and appropriate areas via permitted development; Bristol City Council introduced an LDO for this reason.

Figure 7: image showing Cllr Mark Wilkes and partners at Durham COP, November 2021, holding the Climate Agreement which states " We agree to work as a partnership of organisations across county Durham to tackle climate change"

Durham’s strong partnerships.

Durham County Council boasts strong working relationships with many strategic partners across the county and country, be this through the Climate Emergency Strategic Board or the Climate Agreement. These working relationships are vital in the progress of heat networks as many of these organisations, such as the NHS Foundation Trust and Durham University, represent anchor loads i.e., Buildings with a large, reliable and long-term demand for heat, often with a stable and constant use profile. These loads can make or break a heat network.

Housing decarbonisation schemes

Durham County Council and partner social housing providers in County Durham have a track record of success in applying to the multiple social housing decarbonisation schemes. Schemes such as the Social Housing Decarbonisation Fund (SHDF) and the Housing Upgrade Grant (HUG).

In March 2022, DCC announced they had secured £10 m in finding to help housing associations make energy efficiency improvements to their properties including insulation and LED lighting. More recently in March 2023, it was announced that DCC had £5m to help off-gas homes; Works to properties the funding could pay for include cavity wall insulation; external wall insulation; smart heating controls; low carbon heating; solar photovoltaic panels, and draught proofing.

The above schemes can ensure that if a heat network is developed, homes can connect and see the most benefit from said connection.

https://www.gov.scot/publications/draft-heat-networks-delivery-plan/pages/13/#:~:text=Annex%20C%20%E2%80%93%20Glossary%20of%20Terms%20and%20Acronyms,-Third%2C%20fourth%20and&text=Anchor%20load%20%2D%20Buildings%20with%20a,a%20developing%20district%20heating%20networks.

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Local Enablers

North-East Deep Geothermal investment programme

Durham County Council’s Climate Emergency Response Plan(s)

Burning natural gas and other fuels to heat buildings in County Durham accounted for almost half (47%) of the total carbon footprint of the county in 2019. To decarbonise this will mean either reducing the need for heat, replacing the boiler with an alternative technology, replacing the fuel in the boiler, or removing the boiler altogether and getting the heat from a shared heat source through a heat network.

Table 1: a table taken from Durham County Council's Climate Emergency Response Plan outlining the future vision for heat in County Durham.

Table 1, taken from the Council’s Climate Emergency Response Plan, shows that heat networks are part of the solution to decarbonising heat, and this has been agreed by Durham’s Cabinet. Therefore, this will drive forward work in this area.

In the CERP, it is estimated that by 2030, Durham County Council must cut its emissions associated with heating to approximately 9,308 tonnes of CO2e per year, down from 19,519 in 2021/2. Therefore, in order to achieve this target, Durham County Council must investigate heat networks as part of the solution.

County Durham Plan

County Durham adopted the County’s latest Development Plan in 2020, which establishes where development will be built up to 2035.Within the plan the Council agrees to adhere to the National Planning Policy Framework to achieve sustainable development. When considering development proposals, the council will take a positive approach that reflects the presumption in favour of sustainable development. It will work pro-actively with applicants jointly to find solutions which mean that proposals can be approved wherever possible, and to secure development that improves the economic, social, and environmental conditions in County Durham.

Multiple policies will drive forward progress on heat networks and they are briefly detailed below:

Policy 5: Durham City’s Urban Extensions

Opportunities for a district heating network will be explored

Policy 16: Durham University Development, purpose build student accommodation and hoses of multiple occupation

The proposal will enhance or create well-designed spaces, and exploit sustainable energy opportunities, including the delivery of district heating, where possible.

Policy 29: Sustainable Design

All development proposals will be required to achieve well designed buildings and places having regard to supplementary planning documents and other local guidance documents where relevant, and […] minimise greenhouse gas emissions, by seeking to achieve zero carbon buildings and providing renewable and low carbon energy generation and include connections to an existing or approved district energy scheme where viable opportunities exist. Where connection to the gas network is not viable, development should utilise renewable and low carbon technologies as the main heating source.

Policy 61: Location of New Waste Facilities

Proposals for new or enhanced waste management facilities will be permitted where they will assist the efficient collection, recycling and recovery of waste materials and they […]can be satisfactorily located as part of an existing waste management facility, or where the waste management facility can be satisfactorily co-located with complimentary activities and potential users of recovered materials, recyclates and soils, energy and heat, where appropriate and feasible and where this represents a sustainable option.

It is possible that, to accelerate deployment of Heat Networks, the county Durham Plan could be amended to support development of these networks more in specified areas and/or a Local Development Order (LDO) could be implemented. LDOs are locally developed tools to accelerate progress of developments in defined and appropriate areas via permitted development; Bristol City Council introduced an LDO for this reason.

Figure 7: image showing Cllr Mark Wilkes and partners at Durham COP, November 2021, holding the Climate Agreement which states " We agree to work as a partnership of organisations across county Durham to tackle climate change"

Durham’s strong partnerships.

Durham County Council boasts strong working relationships with many strategic partners across the county and country, be this through the Climate Emergency Strategic Board or the Climate Agreement. These working relationships are vital in the progress of heat networks as many of these organisations, such as the NHS Foundation Trust and Durham University, represent anchor loads i.e., Buildings with a large, reliable and long-term demand for heat, often with a stable and constant use profile. These loads can make or break a heat network.

Housing decarbonisation schemes

Durham County Council and partner social housing providers in County Durham have a track record of success in applying to the multiple social housing decarbonisation schemes. Schemes such as the Social Housing Decarbonisation Fund (SHDF) and the Housing Upgrade Grant (HUG).

In March 2022, DCC announced they had secured £10 m in finding to help housing associations make energy efficiency improvements to their properties including insulation and LED lighting. More recently in March 2023, it was announced that DCC had £5m to help off-gas homes; Works to properties the funding could pay for include cavity wall insulation; external wall insulation; smart heating controls; low carbon heating; solar photovoltaic panels, and draught proofing.

The above schemes can ensure that if a heat network is developed, homes can connect and see the most benefit from said connection.

https://www.gov.scot/publications/draft-heat-networks-delivery-plan/pages/13/#:~:text=Annex%20C%20%E2%80%93%20Glossary%20of%20Terms%20and%20Acronyms,-Third%2C%20fourth%20and&text=Anchor%20load%20%2D%20Buildings%20with%20a,a%20developing%20district%20heating%20networks.

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Barriers

Initial Capital requirement

Complexity and skills gap

Uncertainty of connection

Initial capital cost & funding

Heat networks require significant investment and the initial start up and capital costs to complete the feasibility, commercialisation, and construction of such a development can be high. However, there are several funding pots available to cover at least 50 % of said costs and these are detailed in chapter 8. However, these schemes are incredibly competitive and the likelihood of funding is uncertain.

Although the capital costs can be high, heat networks can, when using the appropriate heat source for that location and when projected demand is steady and significant, the costs can be lower than if the connectors were to install individual heat pumps. Therefore, we should compare the cost of installing heat pumps to the heat network.

Complexity & skills gap

Heat Networks can be technically, legally, and commercially complex and due to their complexity, we need highly skilled individuals. However, we currently face a skills shortage, nationally, which limits heat network development. The UK Government investigated this through their Heat Network Skills Review, and have proposed 4 broad goals for the UK Government and partners, which include facilitating development of necessary skills within the sector, develop more specialised heat network skills among potential entrants and encourage transfer of skills into the sector. Heat network mentorship programm is now live, DCC hve applied to this.

Uncertainty of connections

Managing a heat network in development can be incredibly complex, especially when a developer cannot be certain that a potential offtaker will connect and provide the network with a much-needed anchor load. This can make attracting potential investors difficult.

Zoning regulation should go some way to tackle this as it will mandate connection of non-domestic properties where a heat network is available in a heat network zone. Careful stakeholder management and early engagement here is key to ensure that all potential offtakers are actively engaged in the process.

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Who is responsible?

The Northumberland model.

Northumberland County Council’s cabinet has approved a procurement exercise to bring in a delivery partner to develop district heat networks across 8 towns in Northumberland. This will deliver low carbon heating at pace and scale.

This model is described above as the Strategic partnership option.

Each of the 8 towns were the focus of techno-economic feasibility previously.

.

Private Sector Scheme
Public sector or community led scheme
Strategic partnership
SPV
Concession contract (SGV)

Both public and private organisations across England, and beyond, are becoming investors in heat networks as they can offer a good return on investment and significant social and carbon benefits. There are many delivery structures, and some are detailed below with other more complex structures in Appendix 4 and some outlined below. Depending on the investor, and legal and commercial ownership structures the organisation responsible for the operation and maintenance of a network would vary.

Public Sector or community led

The Council or a community organisation would itself establish a wholly owned Special Purpose Vehicle (SPV) such as an Energy Supply Company or ESCo . The funding for the SPV would be provided by the Council or community group. Therefore, it would be entirely the local authority’s or community group’s responsibility to develop connection, supply, bulk heat supply, Design build and operation and maintenance agreements.

Private Sector Scheme

The Project would be wholly delivered by the private sector and the private sector would be responsible for arranging all funding for the Project.

Strategic Partnership

The Council and contractor would enter into a Strategic Partnering Agreement. The Strategic Partnering Agreement would detail the overarching relationship between the parties regarding delivery of the heat network, and the agreements would outline who is responsible for what.

SPV (Council as minority shareholder)

The Council would establish an SPV in which it is a minority shareholder. A private sector contractor would be the majority stakeholder in the SPV and the parties would enter into a Subscription and Shareholders Agreement in order regulate their relationship in respect of the SPV.

The Northumberland model.

Northumberland County Council’s cabinet has approved a procurement exercise to bring in a delivery partner to develop district heat networks across 8 towns in Northumberland. This will deliver low carbon heating at pace and scale.

As Northumberland is relatively less densely populated that other areas of the UK, this could mean they struggle to attract investment, especially where the business cases are marginal. However, by packaging up the 8 towns into one procurement exercise, the more and less attractive schemes will be delivered simultaneously and improve economies of scale making it a more attractive investment. As the Council will not be the lead, this mean that the risk is taken on by the delivery partner alone. Publicly owned buildings and housing will be prioritised as anchor loads enabling the council to achieve their net zero commitments.

This model is described above as the Strategic partnership option.

Each of the 8 towns were the focus of techno-economic feasibility previously.

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Thank you!

Discussion- any questions?

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