The project aims to investigate how all-electric heat networks could affect the power grid and how the Distribution Network Operator can manage them flexibly. The project will conduct a thorough analysis to determine if it's possible to free up capacity in the network by using a smarter design that's suitable for flexible connections. UK Power Networks will partner with a Heat Network developer/operator that has an operational heat network in the area to test and validate a design optimization methodology through a one-year trial.
Benefits
The total benefit of this project is estimated based on the following points:
The electrical peak load on a primary substation can be reduced up to 40% if the heat network uses the thermal storage flexibility compared to a counterfactual. We assumed a conservative scenario where UK Power Networks could offer profiled or timed connections to the highest demanding heat network customers, representing 25% of the total number of primary substations in LPN, EPN and SPN. This method will reduce the district heat (or heat network) pump winter peak load (Strategic Forecasting System data) by 10% (25% of 40%) in all UK Power Networks areas. Therefore, this method will avoid use of capacity in the network and avoid reinforcements.
Based on the above assumptions, the project is estimated to reduce reinforcement costs by a range of £80k-£400k annually.
Therefore, the overall anticipated benefits from this project following a BAU transition is forecasted to be £0.77m by the end of RIIO-ED2 and an NPV £4.32m cumulative by end of RIIO-ED3.
Learnings
Outcomes
The Project has delivered valuable insights and learnings that contribute significantly to the understanding of the role heat networks can play in supporting electricity distribution networks through their transition to low-carbon operation. While a physical trial could not be undertaken due to industry readiness constraints, the project has achieved key technical and strategic outcomes through advanced modelling and techno-economic analysis.
Key Outcomes
A comprehensive market procurement exercise identified a heat network operator and one of its heat networks as the project partner. Two energy centres were selected as representative sites for detailed modelling and analysis.
Desktop analysis and stakeholder engagement with the heat network operator provided deep insights into the operational and design characteristics of heat networks, including decarbonisation timelines, typical load profiles, and the implications of Combined Heat and Power (CHP) systems still operating on natural gas.
The project developed and validated an optimisation methodology, which supports strategic design decisions by balancing heat network performance with electricity connection cost constraints. The model considered spatial, technical, and cost variables.
A techno-economic analysis was conducted across 15 scenario combinations. This allowed the team to assess the trade-offs between minimising fuel costs (business-as-usual) versus minimising electricity connection costs under future low-carbon configurations.
A Strategic Outline Case business case was developed following HM Treasury guidance. This articulated the benefits of flexible electrification of heat networks, though it acknowledged limitations in immediate applicability due to the 2030–2035 timeframe of decarbonisation efforts across most heat networks.
Lessons Learnt
The project has completed the Feasibility Phase (WS1), and the lessons learnt from the project can be summarised as follows.
Active engagement with the heat network operator has brought significant benefit to the project delivery. The project managed to produce a well-informed and representative model of the heat network energy centres as well as insightful analysis. This achievement has heavily relied on the data, information, and collaboration through workshops, offered by the heat network operator partner.
Techno-economic analysis carried out based on a real heat network and its energy centres has proven to be valuable, as it considered of realistic constraints faced by real heat networks, e.g. physical space available, realistic pace and approach for decarbonisation. These factors would impact the level of flexibility that could be offered by a heat network. Additionally, this revealed what kind of incentives might be required by heat networks in order to deliver flexibility services, in turn it also made it clear what level of flexibility could be provided given the incentives currently available.
Understanding the industry’s approach and timeline for decarbonisation has proven to be critical. Our heat network operator partner shared their decarbonisation strategy with the project, which not only highlighted what might be realistically possible for decarbonising energy centres through electrification but also highlighted the timeline for this transition and its dependencies with wider net zero initiatives (e.g. development around hydrogen).
The business case has been produced to the Strategic Outline Case level in accordance with the Treasury’s business case guidance. This has clearly identified the potential of heat network flexibility but more importantly, it highlighted the current gap in terms of knowledge and understanding to properly benefit from heat networks. This has provided scope and basis for further investigation.
In accordance with the understanding of and learning from the heat network modelling and analysis, the project recognises the need for evolution. This means the project has considered the modelling and engagement outcomes in a detailed review of the original plan set out for delivery. The project team has worked to re-evaluate the direction of travel in order to maximise the value of this project, particularly engaging more with key UK Power Networks business units. This reflects one of the learnings identified in the previous project progress report, i.e. this project may benefit from a flexible delivery approach to accommodate evolving knowledge and understanding leading to potential modifications.
