It’s a pleasure to be here with you today. Since I joined the department a year ago ADE have always been really helpful to me in understanding how this whole sector works and are a trusted and valued partner to the department and myself as we have worked our way through some of the issues in heat networks. For nearly 60 years, ADE has been championing decentralised energy systems and district heat. And that partnersh...
It’s a pleasure to be here with you today. Since I joined the department a year ago ADE have always been really helpful to me in understanding how this whole sector works and are a trusted and valued partner to the department and myself as we have worked our way through some of the issues in heat networks. For nearly 60 years, ADE has been championing decentralised energy systems and district heat. And that partnership that I spoke about there is so valuable at this point in time, when these types of solutions are more needed. In July when the Prime Minister asked me to carry on in the department he asked me to carry on a new role as Minister for Local Energy and Jobs. The idea behind this brief is simple. Energy has always been a critical sector for this country – employing tens of thousands of people, driving and contributing to the country’s economy. And with this country now firmly in the midst of an energy transition, my focus is on making sure that every single part of the country benefits from this transition and feels the benefit. Because when they see the benefits coming to their towns like lower bills, modern infrastructure, less pollution. That’s when people see their role in this huge project of transition that we’re undertaking; it’s not something that’s happening to communities but building something for them. Prospects for the future that they can feel. The transition offers renewal for the whole country - if we get it right. That is precisely what this Government has set out to do. We are, and you’ll have heard the Prime Minister talking about this a lot over the last few months, we are setting out to reindustrialise this country. We are setting out to make energy more affordable. And we are developing this process wherever possible so that local people can make the best decisions for their own communities. That is exactly why we are committed to the growth of the heat network industry. When deployed in the right locations, heat networks offer a low cost, low carbon approach to heating, while reducing our reliance on imported fossil fuels by harnessing local, recoverable heat. Developing these infrastructure projects in local areas also supports our ambitions to reindustrialise the UK. Bringing good skilled jobs to communities across the whole country. When I joined the department last year one of my first visits was to Cardiff to see the construction of their main district heat network. And it left a real impression on me because I spoke to the engineers that worked there, and I saw the trainees that were preparing to enter the workforce doing highly technical work in clean energy. I saw for myself how the industry was providing solutions for heating; but it was also helping to provide people with livelihoods. And it’s really boosting the local economy and all the sub-contractors. So, I’ve been a real advocate for heat networks ever since that first visit, I want to see these benefits right across the country. And we’ve set out some really ambitious targets for this sector to achieve exactly that. Over the next ten years, we want heat networks to meet 7% of heat demand in England – doubling the current level that we currently have. By 2050, we want them providing a fifth of all heat across England. It’s ambitious, but I think it is achievable. As long as we continue to see a joint effort from both government and the private sector. I know that this industry has already made phenomenal progress in the last year alone; we have seen several new Government-supported heat network projects beginning to supply low carbon heat to consumers this year… Including Seaham Garden Village in County Durham, and Lancaster University… With West King Street in Hammersmith and others following shortly. Across four Green Heat Network Fund announcements in the past 12 months, we have confirmed funding allocations from government of more than £200 million to twenty low carbon heat network projects. From heat delivered via barges along the River Thames, paving the way for a potential major heat project in Central London. To town-centre schemes in Sunderland, Stockport, Oldham and Milton Keynes. And they all use a diverse range of heat sources - data centres, sewers, rivers and energy from waste plants, as well as large scale heat pumps that will often positively impact local grid capacity constraints. This year, we’ve also expanded the Green Heat Network Fund to enable projects in Wales to have the opportunity to apply for funding. A number of areas we are supporting through our Advanced Zoning Programme have successfully completed developer procurements and are now moving forward to develop zonal scale heat and network opportunities. Demand for our Heat Network Efficiency Scheme continues to be high, and we have continued to deliver improvements to operational heat networks by allocating almost £35m of capital funding, across 65 projects, that will positively impact over 10,000 residents who depend on heat networks. These are really significant achievements. We do however recognise that changes in policy direction over recent years have created real uncertainty for the industry and made it harder to plan with confidence. But the message that I really want to get across this morning is that we are here to change that, and provide you with the confidence you need to continue to grow. And there are three main ways this government is supporting you in that journey. First, we’re providing funding through the Warm Homes Plan. Heat networks are a central pillar of this plan – which is the government’s programme to upgrade millions of homes right across the country. And we continue to work with the National Wealth Fund to explore greater support for this sector. Because we are listening to industry when they tell us that the cost of low carbon heat remains a key barrier to growth. Reducing these costs is the way to ensure that everyone gets to benefit from the transition. That is why we are working to create the right economic and policy environment to bring down the costs of developing low carbon heat. Electrification has to be the economically rational choice for a wider range of businesses and organisations. And we also need to unlock the long-term private investment that will allow this sector to grow at scale. That means creating a market where investors have the confidence to commit capital for the long term and bringing down the cost of financing major heat infrastructure. That is why we are assessing a range of potential options, including a Regulated Asset Base model. Because our ambition is not simply to build more heat networks. It is to create an investable, enduring sector, rooted in the places it serves and capable of delivering at the scale the country needs. Putting power in the hands of places, turning local opportunity into investment growth and delivery to ensure the benefits of the clean energy transition are felt in communities right across the country. Second, we’re making sure the regulation of heat networks gets the best outcomes for industry, and consumers. We believe in the enormous potential of this sector. But we also recognise that poor service from a minority of operators has really damaged public confidence in heat networks over the years. But I am really confident that we can turn this around. And I know when I speak to industry partners they want to turn it round as well. We want the public to be able to recognise how this is a transformative technology that can benefit them. That is why, at the start of this year, we introduced regulation to root out poor practice, to give consumers protections comparable to those in gas and electricity, and to demonstrate that heat networks can deliver affordable, low-carbon, and locally generated energy. As the new regulator, Ofgem now has powers to act if a heat network operator puts up prices unfairly or delivers a poor level of service. This is a really big step forward for the half a million consumers on a heat network that will now be entitled to protections for the first time. With that said, we know this is a complex sector and the roll out of regulation for the first time will not be without its challenges. We are committed to listening and learning each step of the way. Heat networks have to complete the registration process as soon as possible – and I know this is a priority for many of you. And we are working closely with Ofgem to make sure this process is as simple and smooth as it can be for all, and we are grateful for your commitment and patience as we get this off the ground. As you know, the introduction of regulations also means that consumers who have a service outage can seek redress through the Energy Ombudsman scheme. And we are already seeing the difference this can make. In one recent case, the EO (Energy Ombudsman) stepped in after a supplier applied an unfairly inflated tariff to recover historic losses. The supplier was required to correct the bills, apologise and provide a goodwill credit to those consumers. And I think that’s really important because as I think of areas of my own constituency, where heat networks apply, it is that lack of regulation in the past and that lack of redress that has really created a bad feeling. Which I know people in this room understand that is not something that is good for the heat networks sector and is something we need to work on and regulation really provides that. But we know that redress can only go so far. That is why we need meaningful action to improve the technical efficiency and reliability of heat networks. Many old, but even some newer networks, have high heat losses, or are designed, constructed, operated and maintained badly. That is why we consulted on mandating minimum technical standards earlier this year. It is right that we take the time needed to ensure we reflect on the feedback form the sector to the consultation. I want to ensure that the final scheme that we come up with is proportionate, affordable and deliverable and we’ll be saying more on this in the coming months. But, standards for new and existing networks need to improve. To be crystal clear, if a heat network has failed, we don’t want to see people go backwards. Gas boilers, should not, and will not be the answer. The answer to me for a poorly performing heat network is a better performing heat network. I can’t see a situation where we turn back the clock on clean heat. Thirdly and finally, we’re putting more power into the hands of local areas. You’ll have heard the Prime Minister talk a lot about devolution and the work that we’re doing in the department to do that. Devolution will enable us to put more power in the hands of local areas, giving Mayors, local government and communities greater autonomy to shape how billions of pounds are invested. Because decisions about homes and energy should reflect the places they serve. Devolution gives local leaders the opportunity to bring together investment in warmer homes with their plans for energy, housing, skills, infrastructure and economic growth. That matters, because giving places greater power to make those connections and decide what works for their communities is the best way to deliver improvements across the country. And it’s already happening in many places across the country. You may have seen that the Secretary of State announced that Government will devolve the Warm Homes Plan in the coming years. And you may be aware of the great work that Great British Energy is already doing under the Local Power Plan. And heat networks show just how powerful this approach can be. We want to see a new generation of local and municipal investment in energy infrastructure, with communities seeing the benefits. And heat networks have an important role to play in that ambition. We are already putting devolution into action through Zoning. Giving towns and cities in England the powers to identify where heat networks are the right solution and drive forward projects that harness opportunities in their areas. It will give building owners certainty about the best clean heating options for their place. And it will give developers the confidence in heat demand that they need to invest. We have made huge progress already; delivering the final Advanced Zoning Programme procurements, and we are now communicating funding awards for the next wave of projects. Our commitment is that at least 10 of the biggest English towns and cities will get government support to establish their heat network zones soon after Heat Network Zoning Regulations go live, with more to follow in the future. I know that we’re now going to get into the challenges soon in our panel discussion. And that’s something that government and industry will need to collaborate on if we’re to reach our shared aim that I think everyone in this room wants to achieve. A system where energy bills are affordable and stay that way. Where regions are empowered to make the right decisions for their own areas. Where our heat demand is met through existing sources, with fewer emissions and less reliance on a market out of our control. Local energy in my view is the solution to our current crisis. So, as I say when I meet groups like yourselves all across the country, I want to work hand in hand with all of you to achieve what I know we want to achieve together. But also, your role in that is to challenge me and to challenge the department when you think maybe we aren’t moving quick enough or where we’re not getting things right. I am confident that by achieving that we will achieve a significant amount in the months and years ahead. Thank you.
Speech Brief