Earlier this week, our team attended a webinar organised by Triple Point Heat Networks Investment Management, that looked at attracting private funding into heat networks space.
During the event hosted by Ken Hunnisett from Triple Point and Neil Rutledge the director of Amberside Advisors, we heard from a range of speakers from across the industry, giving their insights into how the heat network market can secure the £80bn of investment needed by 2050 to deliver the transition to 20% of our heat being delivered by low carbon heat networks.
Starting with George Robinson from DESNZ, we heard about the Department’s plans for rolling out zoning regulations and how it will increase the sector’s investment attractiveness. The need for zoning was fully supported by other panellists, such as Ritesh Ramji of DIF Capital Partners, who expressed appreciation for the stability it will bring to the market. Equally, Adriana Rodriguez emphasised how important it will be for Asper Investment Management which she represented, with their main focus being investments in city scale projects based on independent developer model.
The enthusiasm for upcoming changes was also echoed by Antony Meanwell from of E.ON, who in his segment mentioned need for regulations as one of his top three reflections on the state of the sector. Mandating certain aspects of heat networks rollouts through zoning was featured next to recognising the sector potential, seeing it as a city-wide opportunity (energy, heat, transport, city design incl. utilities infrastructure) and a chance for developing skills, and key partnerships which in his view are essential to deliver on UK’s net zero objectives and add social value.
Peter Chalmers from UKIB added to the discussion, explaining how the Bank, which has £22bn funding capability spread across their five focus areas (one of which is energy, which includes heat) can facilitate future development of heat networks sector, using the tools they are developing such as connection charge facility, project gap funding or early phase guarantees/loans.
The excitement about the potential of heat networks market in the UK was palpable in the ‘room’ – with all speakers mentioning project pipelines worth billions of pounds and acknowledging the positive changes witnessed recently, coming in the form of central government announcements, such as the recently assented Energy Act 2023 or the visible movement in the market with more ambitious projects being given support from GHNF and more agile capital available.
However, despite all the positive comments, all the panellists also agreed on the obstacles that the sector is facing such as drawn-out procurement processes, contractual issues, difficulties managing multiple stakeholders, as well as the relatively high cost of low carbon heat and increasing cost of construction in the UK, compared to European counterparts such as Sweden or Poland, where adoption of heat networks is much higher.
In the event’s summary, Neil Rutledge highlighted that investors come in many forms and as the heat network market matures, the split between players will be shifting, with new entities coming into play. In 12 months, he said he would expect to see more institutional investors, asset finance, project finance debt and development banks playing a more active role in this space. He also emphasised a role BHIVE can play as a ready-made platform from which to source investment and which can, through pre-market engagement, offer local authorities insight into how to shape projects to maximise their attractiveness to private finance.
It was a very insightful session, providing an all-around view and giving good indication for the direction of travel for the heat networks sector. Sharing all the panellists’ sentiment, we at Amberside Advisors are equally excited about upcoming changes in this space and new projects that we are looking forward to supporting our clients with.