Turning up the heat on heat

The government recently published a paper entitled “Heat Call for Evidence” which seeks views on a set of wide ranging questions aimed at understanding how carbon dioxide emissions associated with heating can be reduced. Heat currently accounts for nearly half of the UK’s carbon dioxide emissions.

Among other things, the paper assesses the extent to which heat emissions are covered in the carbon market and seeks views on how to encourage increased use of:

• renewable energy sources for heating; and

• surplus heat from high temperature processes, such as electricity generation.

Coverage of heat emissions in the carbon market

The government notes that the EU Emissions Trading Scheme (EU ETS), the forthcoming Carbon Reduction Commitment (CRC) scheme and the proposed Supplier Obligation (SO) policy would, if implemented together, cover approximately 85% of emissions from direct heat generation. The paper seeks views on whether existing or proposed policies should be modified to include a greater share of heat emissions in the carbon market.

Renewable heat

The paper queries the extent to which low carbon electricity production could replace gas as an energy source for heating because electricity supply would need to increase “several fold” involving “significant expansion of generation and distribution capacity” and it would be relatively expensive to maintain this capacity when demand for heating declines in the summer. In light of this conclusion, the paper considers the potential to increase use of the following “renewable heat” technologies: biomass, heat from waste (including biogas/anaerobic digestions (AD)) and microgeneration.

The government’s reform of the Renewables Obligation (click here for more detail), which is intended to be implemented in 1 April 2009, provides the following additional support for renewable heat:

• combined heat and power (CHP) plant over 25MW fuelled by biomass or energy from waste will qualify for support under the banding of Renewables Obligation Certificates (ROCs) if it achieves a minimum efficiency of 35% gross calorific value; and

• the biomass content of mixed waste will be deemed to be 50% decreasing over time to 35% in line with government waste strategies. Deeming helps overcome difficulties in measuring the biomass content of mixed waste (in particular, municipal solid waste).

To encourage potential investment, the paper seeks views on whether government should introduce an additional support mechanism for renewable heat technologies: options include the use of capital grants, feed-in tariffs or a renewable heat obligation (i.e. an obligation to generate or source a certain percentage of heat supplied from a renewable source or pay a buy-out price / trade certificates).

Use of surplus heat

The government notes that the UK’s use of surplus heat is much lower than many other European countries. To encourage increased use of surplus heat and stimulate investment in supplying heat, the government asks:

• whether future phases of EU ETS, together with CRC and the current Climate Change Levy exemptions for Good Quality CHP are sufficient to support new investment (particularly in CHP plant which the government identifies as facing particular economic challenges), or whether additional measures are desirable;

• whether regulatory mechanisms are needed to stimulate industrial demand for surplus heat;

• whether regulation is needed to support developers of heat networks; and

• whether the heat supply market should be regulated, at least in the case of district heating.

The deadline for responses is 31 March 2008. The Call For Evidence will be followed by a formal consultation in the summer.