Why energy communities should be at the heart of your heating (and cooling) business
Energy communities is emerging as one of the hot topics of the 2020s in the energy world. This has been accelerated by the current Covid-19 crisis, which has made the need to find local solutions to global problems even more pronounced. Many of the discussions around community energy are centred around electricity - but are we missing an opportunity by not talking about the benefits of a multi-vector approach which integrates electricity together with heat (and ultimately other vectors like mobility and hydrogen)? In this blog, we will focus on the opportunities for heat to be at the heart of energy communities.
The transition from “old heat” to “new heat” is making a community energy approach to heat more and more appropriate – and potentially more valuable. We believe that working directly with communities on local heat decarbonisation strategies will be critical to the success of heating product and service providers in the future. Energy communities with heat at their heart are not just the future – they are already here, and they are a growing opportunity not to be missed by the energy and heating industries.
How is the transition to “new heat” driving energy communities?
A potent mix of developments in the heating industry is creating fertile ground for energy communities to flourish. Here are 5 heating market trends which are driving energy communities' implementation:
- Local – rather than national – climate policy: Some of the most ambitious heat decarbonisation plans are being set by cities and municipalities – not just national governments – and communities are being asked to be part of the change. Amsterdam, Vienna and London are just a few examples of the many cities and regions across Europe who are taking concrete action drive change in how their buildings are heated.
- Digitalisation means that independent heating systems in separate buildings can now talk to each other as part of a virtual community – this means that heat provision in energy communities is not only about big district heating schemes, but can be, for example, a fleet of heat pumps or fuel cells installed in individual homes. Customers can still have a choice.
- New heat network concepts are emerging which are more local and more decentralised – enabling active community participation e.g.
- The Bunhill district heating network in London aims to capture local waste heat from the London Underground to provide heat to >1,300 buildings nearby – a great example of local communities benefitting from local energy sources.
- E.On’s Ectogrid concept is a shared local heating and cooling grid, where participants can “deposit” or “withdraw” energy from the network, enabling local waste heat streams to be captured, and where thermal storage provides flexibility and can manage top up heat requirements. There are projects in the UK, Sweden and Germany.
- Customer propositions are becoming more end-user– and community–centred, driven by nimble startups, innovators, and community-owned initiatives, who are turning traditional business models on their heads, accelerating decarbonisation and the circular economy. These models are proving competitive to the incumbent heating and energy providers. This does not only need to be a threat to the industry – the opportunities to partner with and develop solutions for such organisations is only going to grow. Examples from across Europe include the following:
- Denmark has long paved the way for community-owned, cooperative models in energy – perhaps best known with wind turbines. The so called “andelsselskab” is a not-for-profit cooperative ownership model, where the profits are returned to the members in the form of lower energy prices. One of the oldest examples of this model in heat is on the island of Ærø, where a community owned heat network Marstal fjernvarme has been established since 1962 – it is now 100% renewable. A more modern example is the Djursland cooperative Nærvarme værket, set up in 2018, which installs air/water heat pumps in individual homes, replacing oil boilers, and sells the heat to the end user (who are also the cooperative owners) on a Heat as a Service contract.
- In the Netherlands, there are also a suite of cooperative models involving heat. In the municipality of Groningen, a cooperation between community owned Grunneger Power and Paddepoel Energiek is developing a “green” district heating network for the area, as a means to reduce dependency on natural gas in the area.
- The “bioenergiedorfer” (bioenergy village) concept is well-established in Germany and Austria. Combined heat and power plants utilising local bioenergy sources (e.g. anaerobic digestion at farm sites, local forestry) meet at least half of the community heating and electricity demand, and are wholly or partially owned by the heat consumers in the community.
- The increased need for electricity system flexibility (particularly at a local distribution network level) is creating new value streams accessible to heating solutions which can provide this flexibility. Heating solutions – as part of multi-vector energy communities – can be a crucial way to store excess electricity:
- Through providing thermal storage: This can include everything from virtual communities of individual smart hot water tanks (examples include Climote, Mixergy) or heat batteries (Sunamp has been a pioneer in this) to using local heat networks for demand response (for example, Gateshead district energy scheme with demand response provider Flexitricity).
- Through connecting individual heat assets as part of a virtual power plant (VPP): In the UK, the “Smarthubs SLES” (Smart Local Energy Systems) project will include intelligent management of 250 air source heat pumps via smart controls and learning algorithms, to optimise efficiency while providing demand side flexibility. In the Netherlands, the Ameland island project is a network of 45 micro-CHP units is being used to balance intermittent wind & PV generation, in an island network. And in Japan, one of the world’s largest-scale VPPs is being developed by Osaka Gas and Chubu Electric, with 1,500 residential connected fuel cell micro-CHPs. The sum of the electrical capacity is 1MW – the magic number many believe is the minimum viable size for a VPP to make economic sense – and a possible blueprint for further projects.
So what do energy communities mean for the future of the heating market? We believe that energy communities will be a catalyst for change in the heating market – in terms of products, services and business models. Through engaging consumers, placing them front and centre of the decarbonisation drive, and giving them an attractive proposition, energy communities overcome some of the biggest barriers to decarbonisation of heat. Energy communities are democratic, voluntary and do not need to be created by big, faceless corporations or imposed by government – in fact they do not even have to have centralised assets; they can link individual assets in a smart way to optimise heat and power, providing customer choice and value. This strong customer proposition is critical to enabling the transition to new energy – and new heat - to happen.
And what are the opportunities for the heating and energy industry? There are clearly existing and growing opportunities for industry engagement and partnership with communities in low carbon heating. Whether sharing and trading heat between properties, contributing to optimisation and flexibility in electricity grids or enabling value to be captured in multi-vector systems, heating can be a highly valuable component of an energy community. And the policy framework is tilting in favour of community engagement too - two key European directives (the Renewable Energy Directive for Renewable Energy Communities, and the Electricity Market Directive for Citizen Energy Communities) are good foundations for a growing sector. In our view, the industry risks missing out on opportunities if it lets the energy communities boat sail without heat as an integral part.
For more information, get in touch, and see Delta-EE’s whitepaper for further reading on how energy communities can fund the energy transition.