18 July 20229 January 2024

Why domestic heat is today’s hot topic for developers

By Steven McGill, Head of Gas Networks, Energy Assets Gas Networks

Is there a future for natural gas heating? It’s a question exercising many housebuilders as they survey an energy landscape in transition.

We know the vision for transforming Britain into a low carbon economy includes a move away from natural gas heating in new homes by 2025 (2024 in Scotland), as set out in the Future Homes and Building Standard (FHBS). Even here, though, language seems to be softening, with government set to consult on whether it’s “appropriate” to prevent new build homes being connected to the gas grid.

This creates a dilemma for developers and local authority planners taking long term decisions. Should they continue to invest in gas networks while still permitted? Should planning applications be granted on gas sites, and how long should the proposed build out of these sites be?  Should they embrace the electrification of heat, using air source, ground source or solar technology? Then there’s hydrogen…and what about growing enthusiasm for district and community heating schemes (DHS)?

Weighing up investment in heat

For developers and those of us involved in the design, construction and ownership of energy networks, the pathway to effective, low carbon domestic heating is unclear, with many potential diversions.

We all want sustainable homes but finding a ready replacement for natural gas heating isn’t straightforward. While heat pumps seem to be winning out, there’s some concern over performance and household operating costs – particularly at a time of spiralling energy prices.

So given the ongoing debate around FHBS, perhaps it’s not surprising there seems a renewed enthusiasm for DHS.

This interest is evidenced by the decision to bring DHS within the regulatory remit of Ofgem from 2023, and by a 2021 government study into ‘Opportunity areas for district heating networks in the UK’. The Ofgem move can be explained in part because DHS consumers are currently more vulnerable to the vagaries of the marketplace than those served by gas and electricity suppliers (who benefit from tariff caps). 

Of course, DHS isn’t a new concept. It’s widely in use in Scandinavia, Holland and Germany. While in Britain only 2% of heat demand is met by DHS, made up by around 17,000 community and district networks.

Government aims to increase this to 17% by 2030 – perhaps cognisant that DHS can be a contributor to the sustainability of heat, particularly if connected to natural renewable energy sources, such as geothermal, biomass, wind, tidal, and solar. There’s also some thought that waste heat generated by green hydrogen manufacturing could be a contributor to DHS.

The upshot is growing interest in district and community heating. Indeed, we’re currently looking at adopting a number of such assets as part of our network operations.

What about hydrogen?

Hydrogen has long been heralded a replacement for natural gas, but there are significant technical hurdles to overcome with 100% hydrogen, particularly in domestic markets. Hydrogen’s molecular structure is very different to natural gas therefore the use of the existing UK gas distribution system isn’t fully compatible. Design requirements will also change with pipe sizing and operating pressures impacted by the lower calorific values generated by hydrogen.

The smart money is on 100% hydrogen being adopted for industrial applications and heavy transportation. For domestic heat systems, we’re more likely to take a phased approach, beginning with an 80/20 natural gas blend that will work with existing boilers. This will provide a quicker carbon reduction dividend from millions of homes on the pathway to Net Zero.

The good news for Britain is that its geographic situation makes it possible to generate an abundance of green hydrogen from wind power.

Where are we heading?

These are challenging times for developers and network operators. So much hinges on the decisions taken by government and on macroeconomics…and it’s not yet clear how these will land. What everyone involved in residential and commercial development would like is clarity – an unambiguous route map on the future of heat.

Through our membership of industry groups such as the Independent Networks Association and UK District Energy Association – and our liaison with BEIS – we continue to take the pulse of energy strategy on behalf of our customers. We’re contributors to a conversation that needs to go faster and further to bring certainty to an uncertain market.

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