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Heat Pump Loans 2022 – Chancellor Announces Green Finance Measures to Parliament

The government might not have offered heat pump loans before, but it has long been incentivising the uptake of renewable energy, with schemes such as the Renewable Heat Incentive (RHI). Despite this, many are saying that not enough is being done quickly enough for the UK to meet its ambitious climate targets and do its bit to pull humanity back from the brink of a climate disaster.

Heat Pump Loans 2022 - Chancellor announcement.

The climate emergency has been focusing minds in Holyrood and Whitehall for years now, and Scotland’s impressive roll-out of wind turbine technology and seen it lead the way in renewables for the UK, if not the world.

But the cost of living crisis, driven in no small part by ever rising global energy prices, and now the war in Ukraine creating a perfect storm of supply issues, rising demand and the impact of sanctions against Russia, is now forcing politicians to think outside the box. And about time, too.

Government energy loans

Before Rishi Sunak’s Spring Statement earlier today, where he announced a series of measures aimed at helping households through the current cost of living crisis, he reportedly gave a green light to cheap taxpayer-backed heat pump loans to help homeowners cover the costs of installing heat pumps.

The loans also apply to other energy efficiency materials such as insulation and solar panels, but the cheap heat pump loans got our attention, for obvious reasons.

Following on from the heat pump loan reports, Sunak’s Spring Statement to the Commons brought more good news for those looking to take advantage of green energy, with the announcement of a cut to VAT on those same energy saving materials, including heat pumps, insulation and solar panels.

He acknowledged that some items already qualify for 5% VAT relief, albeit with complicated rules around who is eligible, so the new announcement is not quite as generous as it first appears. Nevertheless, this is new money being identified for the funding of renewable, energy saving measures for the UK’s homes.

Sunak blamed the European Court of Justice for previously restricting the eligibility of energy saving relief in 2019 and credited Brexit with removing this constraint.

For the next five years, homeowners will pay zero VAT on work to install solar panels, heat pumps or insulation. He also said that the government would reverse the EU’s decision to take wind and water turbines out of scope and zero-rate them as well.

To illustrate what these changes could mean, the Chancellor provided an example of a family having solar panels installed potentially saving £1,000 in tax, not to mention savings of £300 per year on their energy bill.

Northern Ireland won’t benefit from these changes due to the Northern Ireland Protocol, but Rishi Sunak said that a Barnett contribution would be made that would be equivalent to the tax savings that the rest of the UK will benefit from.

Wider government financial assistance

In addition to the help for those installing green energy materials, the Chancellor announced an increase in the National Insurance threshold of £3,000 to £12,570 per year and a cut in fuel duty of 5 pence per litre (for one year), which will help to bring down the pressure on household budgets a little.

Critics say these measures don’t go nearly far enough. Indeed, one Member of Parliament present in the chamber for the announcement could be heard saying, “Is that it?” in response to the Chancellor’s speech.

How much can I borrow with a green energy loan?

The UK infrastructure bank, the new government-owned policy bank, which is providing £22 billion of finance for infrastructure, aims to form partnerships with the private sector and local government bodies to give birth to a new industrial revolution.

The revolution this time will be green rather than the grey of the smokestacks that powered the first industrial revolution. The new banks stated aim is to drive growth across the UK by financing green infrastructure.

Heat pump loans

There is no information yet on exactly how much money could be borrowed by homeowners for installing heat pump systems. Harriet Lamb, CEO of Ashden – the climate charity – has said that she is encouraged to see Rishi Sunak prioritising the energy efficiency of our homes and renewable heat in the guidance that he gave to the UK infrastructure bank, but she also pointed to the need for more skilled trades people and heat pump technicians to deliver the work.

Heat pump installers

This is a point of view that Greg Jackson the Chief Executive of Octopus Energy has been saying for a while. His vision is for innovation in the heat pump sector that will drive down the cost of heat pump units through collaboration with manufacturers.

He has gone further than this with the creation of a huge heat pump innovation and training centre near Slough, where he has built replica houses that will be used to practice the installation and removal of heat pumps so the process can be optimised and made as efficient as possible. Making the installation process more efficient will in turn drive down the cost to the consumer and make heat pumps available to the masses.

Heat pumps saving the planet and the pocket

If Jackson is successful in bringing the cost of heat pump installation down, and if the expectation that, following Rishi Sunak’s announcement, high street banks will offer loans for energy efficiency projects at very low interest rates, we could see thousands of new green energy projects coming forward very soon.

Not only could these loans unlock green energy investments for households up and down the country, they might also help to ease the pressure on household finances by enabling families to take advantage of more efficient forms of heating that will save them money going forward.

Octopus Energy Heat Pump Installation

The Octopus Energy heat pump installation revolution is coming, are you ready for your heat pump?

Octopus Energy Heat Pump Installation

Octopus Energy’s Vision

Octopus Energy will shortly be launching their new low-cost heat pumps to meet growing demand for this eco-friendly, energy efficient technology. April 2022 is the target date that Octopus Energy has set itself to begin the roll-out of heat pumps to homeowners in London and the Home Counties as a prelude to nationwide expansion shortly afterwards.

Their goal is to revolutionise the heat pump market, decarbonising homes across the UK and helping people move away from less efficient, more environmentally harmful forms of heating.

Greg Jackson is the founder of Octopus Energy and speaks passionately about making heat pumps more affordable for everyone. An air source heat pump will typically set you back between £4,000 and £6,000, depending on the size and make of unit you need. On top of this, you will need to pay for installation, which will be several thousand pounds more.

Jackson’s vision is to drive down the cost of heat pumps themselves and to train a huge army of installers who will be able to install heat pumps quickly and efficiently, as well as at a low cost.

Octopus Energy Heat Pump Training and R&D Centre

Octopus energy has put its money where its mouth is and invested £10 million in a first of its kind UK training centre for heat pump engineers. It is more than just a training centre, aiming also to focus on research and development, improving the installation process and innovating to bring the cost of installation down to a fraction of what it currently is.

The centre in Slough contains two purpose-built, full-sized houses, one built to the standard of a 1970s home and the other one built to the standards required by building regulations in the 2000s.

Approximately 40% of houses in the UK are designed and built to one or other of these standards, which means they are ideal for practising installation and removal of heat pumps in order to optimise, innovate and improve the efficiency of this process so that the cost can be brought down.

Octopus energy can train 1000 green heat engineers every year at this facility, which is twice the number previously being trained in the UK. The combination of more installers being trained and the installation process becoming more streamlined will result, says Jackson, in the price of installation coming down.

All of the engineers going through octopus’s training programme will be directly employed by the company itself. A lot of the electricians that are being trained up come from the pool of staff who were previously installing smart meters.

Octopus Energy Heat Pump Installation Efficiencies

Some of the efficiencies that will be incorporated into the installation process include the careful deployment of key staff. Presently, the cost of installation is pushed up by the fact that highly skilled staff are on site for the whole installation process, which includes lugging the unit from the delivery truck, up the garden path and into the customer’s home.

Octopus plans to improve the installation process so that these highly skilled staff, such as electricians, arrive on site at the appropriate time to wire up the units once they have been put in place by other staff specifically trained to do that part of the job.

Optimising Heat Pump Manufacture

And it is not just installation that Octopus is focused on. The company is paying great attention to optimisations on the product side too. It is working with manufacturers in a strategic way to procure components and seek efficiencies in the supply chain, which will reduce the cost of materials and the heat pump units themselves.

Octopus say that buying directly from manufacturers has reduced the cost of the finished units, and they might one day manufacture units themselves, giving them full control over development and procurement of the components.

It also has a team of research scientists and engineers who are tasked with the development of innovative approaches that will overcome some of the difficulties associated with the manufacture of heat pumps in the past.

The ambition is to make heat pumps as affordable as traditional gas boilers, which should allow many more people to take advantage of this clean, green technology and help the UK to achieve its climate targets.

Electricity Tariffs for Heat Pumps

The question many people are asking is, ”Will octopus energy offer a heat pump specific energy tariff?”

At the moment there is no specific heat pump tariff available through Octopus Energy but two of their tariffs (Octopus Energy Agile and Octopus Go) make use of renewable energy, which would seem to be a good fit for use with a heat pump by the environmentally conscious consumer.

Commentators fully expect that Octopus Energy will release a heat pump tariff in the near future and I would tend to agree, given how innovative the company is and its current focus on heat pumps in general.

The company says that the cost of running a heat pump has been lowered to almost the same price as mains gas (just 4% higher) if consumers use their Agile tariff, with further efficiencies expected through innovations in the variation of the heat pump’s compressor speed.

The Future

We could say the future has already arrived. We have the technical know-how to heat our homes with green, clean heat pump technology and now need to marshal resources to make it happen.

Jackson is certainly keen to do this. He says, “By scaling up the technology and supply chain in Britain, innovative companies like ours will soon be able to fit and run heat pumps without any government support, bringing us one step closer to making the UK the Silicon Valley of Energy and creating thousands of clean energy jobs throughout the country.”

I for one think that this cannot come quickly enough, especially with the price of energy rising precipitously in recent times, and the conflict in Ukraine making matters worse.

If we can roll out heat pumps to every home in the UK in the coming years, perhaps we can do our bit to combat climate change and at the same time help thousands out of fuel poverty.

Demand For Ground Source Heat Pump Grants In 2022 Grows

Ground Source Heat Pump Grants needed in 2022.

Ground source heat pump grants are back on the agenda in 2022 as the UK government comes under increasing pressure to make money available for the installation of heat pumps.

A total of 33 civil society groups have written to Boris Johnson, the UK Prime Minister, and Rishi Sunak, Chancellor of the Exchequer, calling for grants to be awarded to all households for the installation of additional insulation and heat pumps.

Energy Crisis

Signatories to the letter include Greenpeace, friends of the Earth and save the children. They all point out that the cost of living crisis, which has been coming down the tracks for many months, but has gone into overdrive with the recent war in Ukraine, will disproportionately impact vulnerable families.

Many households in the UK are already having to make the difficult choice between heating their homes and feeding their children. But spiralling energy costs are making the situation much worse, with prices set to rise at the end of the month and again in October as the energy price Increases once more.

Rising fuel bills are further compounded by increases in the cost of food and other goods right across the board, which all require energy to produce and transport to consumers.

Climate Targets and Renewable Energy

The ambitious targets to achieve net zero carbon emissions by 2050, which the Conservative party committed to under to Theresa May, are vital if the UK is to be seen to be pulling its weight in tackling climate change.

But progress has slowed and the disappearance of the renewable heat incentive at the end of March is expected to result in a drop off of new installations of renewable heating.

Added to that is the impact of the war in Ukraine, which has raised concerns about security of oil supply and sent prices skyrocketing. Boris Johnson has this week travelled to Saudi Arabia to speak with the Crown Prince about these issues and the possibility of the UK securing additional supplies from the Saudis. This is despite criticisms levelled at the Prime Minister by many people who think he should not be entering into such discussions given recent allegations of human rights abuses in Saudi Arabia.

Rather than seeking to obtain oil from countries other than Russia, many think that this is a golden opportunity to increase incentives for people considering the installation of renewable energy such as heat pumps. The government is already committed to this, they just need to follow through with the money.

Ground Source Heat Pump Grants 2022

Rishi Sunak announced a £9 billion package to help tackle the energy bills crisis and sources in the administration have indicated that this must be kept under review because further help could be required in future.

These are large sums of money being made available, but they do nothing to move us nearer to reaching the climate targets that the Tories signed up to under the previous administration.

Wouldn’t it be better to have a new push towards boosting the installation of heat pumps, with new subsidies aimed at replacing fossil fuel burning boilers with clean, green, eco-friendly heat pumps?

If we can give the heat pump industry a helping hand with grants and subsidies, the expectation is that the price of this technology will come down. With the increase in demand driven by incentive schemes, British companies can feel confident in investing in more manufacturing capacity, with some saying that the price could halve as a result.

There is also massive investment required to train up a new generation of heat pump engineers to install all these heat pumps. Octopus energy is investing £10 million to create a huge training facility for heat pump technicians, which will go some way to meeting this demand. With government help, this can be replicated across the country and the UK could be a world leader in heat pump technology.

The Case For Heat Pumps

Given the twin drivers of improving energy security and moving away from fossil fuels towards more climate friendly ways of heating our homes, surely the government can find its way to make money available for additional ground source heat pump grants in 2022?

The government has previously stated that it wants to install 600,000 heat pumps in UK homes by 2028. This is a massive target and will need support from incentive schemes and training programs to ensure that people can afford to install these systems and that we have enough heat pump engineers to carry out the work.

If we don’t, we will face runaway climate change, which will wreak havoc on our society for generations to come. Let’s see some action before it’s too late.

Heat Pump Grants 2022 – Frantic Dash for Money from RHI Replacement Scheme

We’ve written before about the coming ban on gas boilers in 2025, which was announced by Chancellor Philip Hammond in 2019. On the back of this, heat pump grants have been made available through the Renewable Heat Incentive and other schemes.

A new announcement by Rishi Sunak has put pressure on Nicola Sturgeon’s administration to up their game in terms of green heating. Scotland has so far been leading the way in spearheading the development of renewable energy, but the recent announcement from Sunak could see the SNP on the back foot and having to play catch up.

UPDATE April 2022: The Home Energy Scotland Loan has been introduced, so you can apply for that now if you want.

The new government scheme, which only applies to England and Wales, is intended to encourage the 25 million households currently using gas boilers to switch to a low carbon heat pump or similar type of renewable energy to heat their homes.

Can I Get a Heat Pump for Free?

Sadly no, even if you do live in England or Wales. The schemes available to help with the purchase of heat pumps and other alternative heating systems a quite generous, but they don’t go so far as to give away free heat pumps.

Are Heat Pump Grants Available for Heat Pumps in England?

The scheme announced by Rishi Sunak is available from April 2022 and eligible households in England and Wales could get a £5,000 grant from the government to help with the costs of heat pump installation. However, if you live in social housing, or are buying a new build property, you won’t be eligible.

The reason the government is throwing money at this is to help achieve the ambitious climate change targets the UK signed up to in international agreements, under which all heating systems in the UK will need to be low carbon by 2035. Gas boilers are less efficient than heat pumps and contribute a significant load to the UK’s greenhouse gas emissions, so there is a lot riding on the switchover.

Boiler Upgrade Scheme (BUS)

The new scheme, known as the Boiler Upgrade Scheme (BUS) is replacing the Renewable Heat Incentive in England and Wales. It remains to be seen what the Scottish Government will bring forward after RHI is withdrawn at the end of March.

English and Welsh householders who want to take advantage of this offer will have to move quickly, because the scheme will be operated on a first-come first-served basis. They will also need to take care that they don’t go over budget, or at least plan for this eventuality, because costs above the £5,000 grant will need to be met out of their own pocket.

Notwithstanding the limitations of the grant, it is still a great deal, but is it better than anything available in Scotland?

Is There a Grant Available for Installing a Heat Pump in Scotland?

There are similar schemes available in Scotland but they are only available in specific circumstances. As mentioned above, the Boiler Upgrade Scheme is only available in England and Wales and is not available in Scotland.

Social Housing Net Zero Heat Fund

The social housing net zero heat fund targets social housing landlords throughout Scotland and aims to upgrade the most inefficient and expensive to heat homes in the social housing sector. The expectation is that these homes will be upgraded to the best possible standards, saving money for the occupants at the same time as contributing towards Scotland’s efforts to address climate change.

The social housing zero heat fund was launched in August 2021 and the latest call for this fund makes available £30 million to help deliver these upgrades. It is planned to run until 2026 and will make available a total of £200 million.

Publicly Owned Buildings

The Scottish government wants the public sector to lead from the front and show that it can transform the nation’s buildings, making them more efficient and decarbonising the entire estate. During the course of this Parliament, the government is intending to invest more than £200 million in Scotland’s public sector buildings, minimising the use of energy and putting in place heating systems which do not contribute greenhouse gases to the atmosphere.

Home Energy Loan and Cash Back

Although this is a loan, it is offered interest-free and includes up to 75% in cashback. It can be put towards the installation of any renewable heating system, which will certainly soften the financial impact. The loan can also be applied to energy efficiency measures and will be replaced in 2022/2023 with a grant scheme that will provide financial assistance to those looking to install zero carbon emission heat systems and energy efficiency measures.

Grants for Renewables are the Right Approach

Although the assistance being offered by the Scottish government is different to that being offered by the government in England and Wales, the incentives are all moving is in the same direction i.e. towards net zero and away from fossil fuels.

This can only be a good thing, and will also help to mitigate the impacts of fluctuations on the international oil and gas markets, the effects of which are hitting householders hard at the moment, with the ongoing conflict in the Ukraine causing supply shocks. Renewable energy should be cheaper in the longer term and if it can reduce our reliance on foreign fossil fuel imports then will be better off financially as well.

It shouldn’t be a surprise that the UK is offering this sort of assistance because it was the first G7 country to enshrine its net zero target by 2050 into law. Financial incentives and the boiler ban are just two approaches being used to achieve this target. Wider education and training of technicians with skills applicable to alternative heating systems will be another essential component of the UK’s response to climate change.

It remains to be seen whether Scotland will follow England’s lead and bring forward proposals to continue to support the installation of heat pumps and other renewable heating after the RHI comes to an end at the end of March 2022. I for one will be keeping my fingers crossed.

Government Funding Boost for District Heating Gets Mixed Reception

District HeatingOn the 7th April 2017, the UK Government announced the provision of £24 million for district heating schemes across England and Wales. The measure is part of the “central heating for cities” initiative and is designed to boost confidence in the sector and help to achieve ambitious targets for renewable heat generation, but concerns have been raised about the lack of protection for consumers, with some calling for better regulation of the sector instead of government subsidies.

Subsidies can help to offset some of the cost of ground source heat pumps and boost uptake of of these systems, which is beneficial for the homeowner and helps the UK work towards its renewables targets.

Although none of the money is coming to schemes in Scotland, many will be watching closely to see how much it will help to boost investor confidence in this somewhat overlooked sector. With £320 million of funding coming down the pike for heat networks between now and 2021, the scheme is hoping to facilitate the construction of as many as 200 heat networks.

Such ambitious plans will surely result in benefits for district heating schemes here in Scotland over the next four years and beyond. Not only will the proposals in England and Wales help to better establish the technologies involved and demonstrate the benefits of district heating, but Scottish businesses operating in the industry will be in a strong position to win some of the contracts to deliver these systems given their excellent track record in renewable energy.

There are a number of similar schemes at various stages of planning and development in Scotland, such as the River Tay Heat Pump and District Heating Scheme, a similar one in the River Clyde and the possibility of former mining areas across the central belt providing ground source heat for district schemes.

With all the advantages that heat networks offer, on the face of it, it seems like a smart choice for most consumers. Announcing the funding, Energy Minister Baroness Lucy Neville-Rolfe said, “Heat networks can significantly improve the efficiency with which heat is provided to our towns and cities, as well as helping to develop local infrastructure and reduce carbon. The new scheme will help us to develop viable reforms to make the most of the heat we produce and use it effectively to bring bills down for people across the country.”

According to the Committee on Climate Change, low-carbon heat networks could provide 20% of the United Kingdom’s heat generation needs by 2050, taking us towards an overall reduction of 450% in associated emissions during that same time frame.

Listen carefully though, and you will hear a few dissenting voices. Not big businesses arguing for continued heat and energy production from fossil fuels – that argument was lost a long time ago. The voices of dissent belong to that most important of groups – the customers. The people whose homes are being heated by district schemes are not all finding their bills to be cheaper.

Indeed, they are sometimes paying a handsome premium for the privilege of being supplied by a shared scheme. A customer of one such scheme, Charles Montlake has gone on record stating, “Those of us who have District Heat know that the current suppliers overcharge, far from 30% cheaper we believe it is 300% more expensive (my bill is about 1,500 a year for a 3 bedroom flat, if I had gas it would be about 500 a year).”

Mr Montlake goes on to complain of the lack of an appeals process for the prices he and others are paying for heat. He says, “There is no appeal to this over charging. We have tried OFGEM, Ombudsman, ASA, MPs etc. Some of us are taking the suppliers to court but they settle before we can be heard.” Mr Montlake is calling for regulation, not funding, and is asking for people to lobby against funding subsidies until there is proper regulation in place for the sector.

Some have also questioned the efficiency of district heat. Anecdotal evidence has suggested that some schemes have installed equipment with low efficiency ratings, which is bad both for the environment and for customers’ bank balances alike. In some cases, this could mean customers would be better off not participating in the district heating scheme at all.

It would be good for these issues to be resolved quickly. Nobody wants to pay over the odds for their heating, and it is in everyone’s interests for heat generation to be done in as environmentally friendly way as possible.

There is a balance that needs to be struck. District heating needs to be viable as a business proposition in order to be adopted widely. This means companies have to be able to turn a profit, but it also means that the price consumers pay has to be affordable. Many will say, “let the market decide”, but those waters have already been muddied by government subsidies.

It seems the only sensible way forward is for a system of proportionate regulation that will create a level playing field for businesses operating in the sector and guard against consumers being overcharged to maximise returns for investors.

Regulation will pave the way for a sustainable, subsidy-free industry that can stand on its own two feet, providing clean and affordable energy for the country well into the future.

Let’s hope that Holyrood can learn the lessons from Westminster’s experience and come up with a system of incentives and regulation that helps Scotland expand its green energy interests in a way that protects the environment, supports business and safeguards the interests of consumers.

Heat Pump Installations Make South Lanarkshire Top of the List in Scottish Renewable Energy Report

Green grass with lightbulb resting on it.A new report by the Energy Saving Trust shows heat pump installations are the most commonly used renewable technology installed by Local Authorities and Housing Associations in Scotland. The findings demonstrate that heat pump installations are an important part of the government’s strategy to build renewable energy capacity, outstripping biomass, wind and solar PV in several Local Authorities.

The report, published in December 2016, looks at the progress made towards the Scottish Government target of renewable energy owned by the local community providing an operational capacity of 500 MW by 2020. The target has already been exceeded, with 595 MW (sufficient to run approximately 300,000 homes) available as of 30 June 2016. This means the target has already been smashed by a whopping 19%.

The previous year, according to a report published in September 2015, the operating capacity was at 508 MW. At this rate of growth (almost 90 MW in 15 months) the original target would be blown out of the water by 2020, which has caused the powers that be to rethink the targets and aim a little higher.

Progress has been so impressive that Scottish Government are looking to introduce an even more ambitious target of 1 GW (1,000 MW) of community and locally owned renewable energy to be operational by 2020 and 2 GW (2,000 MW) by 2030. To put this into context, the recently closed Longannet Power Station had a generating capacity of 2,400 MW, which was the highest of any power station in Scotland.

Is doubling the target to 1 GW pushing things a bit too much? Only time will tell, but the indications at this stage are that is it very doable indeed. The evidence for this is well documented, with the development of an additional 490 MW of community or locally owned operating capacity already off the blocks and running down the track. 321 MW of this operating capacity has planning consent in place but site works have not begun, and 56 MW is already under construction as of 30 June 2016.

In its report, the Energy Saving Trust goes into detail about the factors contributing to the impressive progress towards the renewables target. South Lanarkshire is the Local Authority area with the highest number of operational heat pumps (1,360), as well as the highest operational capacity (9 MW). West Dunbartonshire and Moray are also worth a mention with 4 MW and 3 MW a piece.

It is important to bear in mind that further development of heat pump capacity is just one part of the strategy we need to implement in order to improve our green energy production. Just as important is the pursuit of other renewable technologies, such as solar PV (which has come a long way in recent years and is much more affordable these days), wind and biomass.

Reduction of heat demand through improvements to the energy efficiency of our buildings and through behavioural changes are another key plank of the strategy and must be fully exploited to gain the maximum benefit.

It is safe to say that the current Holyrood administration is fully committed to advancing the cause of green energy in Scotland. The ambitious targets and support that is available have clearly helped to deliver some serious momentum in the renewables sector and this is set to go from strength to strength in the future.

We will see the Scottish Government’s draft energy strategy when it is published this year. I’ll be giving it careful read and will let you know my thoughts once I’ve had a chance to reflect on it. The strategy is expected to set out a long term vision for Scotland’s energy until 2050.

Ahead of the publication of the strategy, the environmental trade association, Scottish Renewables, has floated the idea of having a target of half Scotland’s energy generated from renewables by 2030. Ambitious? Yes. Doable? Maybe.

According to a spokesperson for Scottish Renewables, the renewable industry is already providing sufficient power to supply about 57% of the electricity used in Scotland. The organisation thinks that a target of 50% of the total amount of energy to come from renewables by 2030 would help us keep building up the financial and environmental benefits that the renewables industry is delivering today.

With the decline of Scotland’s oil industry, heat pump renewable energy, and the rising popularity of heat pump installations in Scotland could become an important industry for providing jobs and generating wealth – as well as energy – in the Scotland of the future.

I hope so anyway.

River Tay Heat Pump

Heat pump bid in trouble as funding put in danger by slipping project deadlines.

Introduction

Growing opposition to the River Tay Heat Pump District Heating Scheme risks derailing the most promising initiative of its kind and dashing the hopes of local residents and businesses who would benefit from its success. The scheme would provide cheap, green heating to homes in one of the most deprived areas of Perth, but recent calls to put the health of the council’s balance sheet ahead of the health of our planet and our children’s future are casting doubt over its viability.

The scheme has been unanimously backed by Councillors in Perth & Kinross. Councillor John Kellas summed up the mood when he said: “We in Perth and Kinross have an opportunity with this scheme to lead the field.” A sentiment shared by all of his fellow councillors.

The Scheme

Map showing River Tay Water Source Heat Pump and District Heating Network along with the Solar Farm location

The Perth City River Tay Heat Pump is an ambitious project that aims to show that water source heat pumps are a viable proposition, even in a river such as the Tay that is ecologically sensitive and is designated as a Special Area of Conservation. If successful, it will generate renewable energy that will supply heat to premises alongside the river, including Council Offices and residential properties, via a District Heating Network.

The proposal includes the possibility for natural gas to be used by auxiliary boilers so that the heat obtained from the river can be topped up when demand is very high, such as might be the case in the depths of winter. The scheme also includes thermal stores that will keep excess heat from the heat pumps when demand is low and allow this to be made available when needed later.

The scheme will provide affordable heat to many homes in Perth and allow technological expertise to be developed locally, which will boost the economy and allow us to export skills from the Perth area.

Speaking earlier this year after he and his colleagues at Perth and Kinross Council’s strategic policy & resources committee had given their backing to the £8.2 million pound project, Council leader Ian Miller said: “This is a hugely important paper. Investing in key infrastructure is one way that our council can support our residents, local economy and business sector.” Councillor Miller went on to say: “This report provides a really good example of how this council can be ambitious and innovative in addressing economic, social and environmental challenges. This scheme will boost local enterprise, reduce fuel poverty and reduce carbon emissions.”

According to Vice-convener Alan Grant, similar projects are already operating well in other countries in Europe, including Italy and Norway. A more detailed business case will be discussed by councillors at a future date.

Scottish Government has already awarded funding of £2 million from the Local Energy Challenge Fund and PKC will be looking into other funding sources to ensure all the money is available by the end of 2016. The expectation is that the loans will be repaid using money from the distribution of heat through what will be the largest project of this type in the UK and links with the 300 panel solar park in the north of Perth.

Background – Tay Eco Valley

The scheme was developed for a number of compelling reasons, including to meet the strategic aims of the Tay Eco-Valley, which are as follows.

  • To promote the Tay Eco Valley, which it is hoped will become a major focus of expertise and a hub for environmental innovation.
  • To generate discussion about novel solutions to the sustainability problem, and to serve as a fillip for environmental innovation and business growth.
  • To provide clear opportunities for supporting businesses to grow, for example finance, construction and so on.
  • To serve as a powerful demonstration of the opportunities that such projects offer for the growth of local businesses.
  • To increase collaboration between the public, private and community sectors on eco-innovation in the Eco-Valley area.
  • To help improve local skills and training to help deliver eco-innovation.

The Tay WSHP will help to meet the strategic aims of the eco valley in a number of ways. In particular, it will reduce carbon impacts from energy consumption and production, promote the development of clean technologies and serve to demonstrate environmental technologies.

The objectives of the WSHP scheme are as follows.

  • To use the water heat pumps as a source of renewable energy from the River Tay without damaging the sensitive ecology.
  • Create a district heating network to supply affordable heat to 4 business plots, 211 social housing and 2 Council buildings (a Daycare Home and a Primary School).
  • Installation of a solar farm that will generate electricity to be distributed via a private network.
  • Boost local enterprise, mitigate fuel poverty and reduce carbon dioxide emissions from heating.
  • Put Perth City on the map, as part of the Tay Eco-Valley as a UK and European leader in eco-innovation.
  • Provide a blueprint for other similar projects that can be used elsewhere.

Costs

The overall cost of the project is estimated at £8.2M and includes the cost of an energy centre and innovation hub, which will be housed on the Perth Food & Drink Park. The building will allow for the sharing of facilities such as back-office staff, conference rooms etc and will promote resource efficiency in the food and drink sector. The costs for the building will be around £4.5M.

The heat network itself will include 2.3km of pipework and associated infrastructure. The network will connect four plots incorporating 5 small business units and the Food and Drink Park, 211 houses and North Muirton Primary School. It is expected to cost £2.3M in total.

Other costs, relating to planning, project management, professional fees and contingency are likely to total £1.4M.

Part of the above costs will be met by the Local Energy Challenge Fund, which will go towards the heat pipe network.

Some figures taken from the heat and the city website:

  • 2MW Water Heat Pump to provide 4MWh heat load and cooling
  • 75Kwh solar farm (300 panels)
  • 3km pipe network
  • Total Solar Farm Costs: 95K funded from Commercial Property and Investment Programme generating income of around 10K per year over 20 years.
  • Total Energy Centre/Innovation Hub and network costs: £8.2m

The costs are being met, in part, by the successful bid placed by the Council for funding from the Local Energy Challenge Fund. The Local Energy Challenge Fund was set up in August 2014 to help promote local low carbon energy initiatives. Its chief aim is to help big, low carbon projects that can show strong local energy economy approaches linking local energy generation and use.

It is expected that the scheme will promote a busy and growing economy, helping businesses to reduce their carbon footprints, improve their green qualifications whilst bringing increased employment and real eco-innovation to the area. Jobs will be created on the Food and Drink Park and in the surrounding area through supporting businesses. Making available low-cost heat to homes and businesses in North Muirton and Muirton, the water source heat pump and district heat network will provide greater impetus to the local economy, lower fuel poverty rates and help to minimise carbon dioxide emissions from heating.

Benefits

The benefits of the scheme include reducing fuel poverty in a particularly deprived area of Scotland. This will be achieved through the expected reduction in bills brought about by the district heating network. The savings are expected to be of the order of £46,000 per year. It is expected that approximately £200/year will be saved by households currently using electricity to heat their homes and around £100/year for those using gas.

Carbon emissions will see a reduction of 450 tonnes per year of carbon dioxide.

Food and Drinks businesses will be brought to the Food & Drink Park where they can use the lower cost heat and electricity from the renewable energy systems. This will give them lower heating and electricity bills, improve their eco-friendly status and encourage resource efficiency in the Food and Drink Sector as a whole. All of this will be promoted using the innovation hub on the park.

Education benefits from involvement of local schools, such as North Muirton Primary School as part of the curriculum for excellence.

Speaking about the benefits of the scheme, Councillor Alan Grant, Vice-Convener of the Strategic Policy & Resources Committee, said: “The River Tay Heat Pump and District Heating Project allows us to tap into the immense power of the river in a way which will not harm wildlife, but will provide a source of renewable energy and access to cheaper heating to reduce fuel poverty in the north of Perth and help attract more food & drink related businesses to Perth on the basis of lower energy costs.”

He also went on to say: “The project will also be used as a model for the roll-out of similar schemes across the region, and potentially across Scotland. Together with the solar farm at Perth Food & Drink Park, this project demonstrates the exciting potential of Perth City as we continue to innovate for the future, and in doing so create higher-value, higher-skilled jobs.”

Delivery

The solar farm was scheduled to be finished in March 2016 and was the first part of the project to be built. It comprises 300 panels and has been built on a section of the Food and Drink Park that would be unfavourable for other types of development.

The combined earnings from the heat pump and electricity from the farm are expected to be around £10,000 per year for a period of 20 years. This will help to support the running costs of the park.

The Energy Centre and Innovation Hub and accompanying network should have finances in place by June 2017 and be operational by early 2018.

Future expansion plans include taking the network out towards Gowans Terrace and linking in Perth Grammar School, North Inch Campus, Caledonian Social Housing and other Council buildings. Eventually the scheme could be linked in with other schemes  in the area and would bring it to the same sort of scale as those already being run in Europe.

Once the project becomes well-known, it is expected that it will become a showpiece for the Tay Eco-Valley, which will in turn generate investment from outside the area.

Hopefully the difficulties over the project timescales slipping, and the likelihood that the important funding deadline in March 2018 will be missed, can be overcome. The council is expected to re-apply for the money in the next funding round. If that later bid is successful, we can all look forward to Perth and its surrounding area not only becoming that little bit greener, but also leading the high-tech revolution that is being driven by the need to innovate to meet our climate change targets in 2020.

The River Tay Heat Pump and District Heating project is a large scale ambitious project. However, smaller scale examples exist at the domestic level, such as described in the case study here.