Agenda item

To receive a report on gas consumption in district heating networks from Tom Vosper, Strategic Project Manager and Simon Holmes, Head of Engineering.

The Chair introduces the item noting its focus on excessive gas consumption in district heating networks across Southwark but particularly North Peckham estates. He then welcomed Officers Tom Vosper, Strategic Project Manager for Heat Networks and Simon Holmes, Head of Engineering, accompanied by Hakeem Osinaike, Strategic Director of Housing, thanking them for the report.

The context for the report was noted with the Chair telling the Commission that that a group of leaseholders had been campaigning on the issue of higher-than-normal heating costs on the estate and that a representative of the group had spoken on the issue at Council Assembly and subsequently with a Cabinet member.

Tom then introduced the paper, outlining:

·  and expressing gratitude for the work residents on the North Peckham and Gloucester Grove Estates had done to understand the heating costs and issues involved

·  the focus of the report, namely the North Peckham heating network and others across Southwark (of which approximately 100 in total)

·  the higher average gas consumption for the council’s heat networks against individual boilers and the reasons for this (e.g. losses from the boilers and networks, and, sometimes, higher consumption within dwellings)

·  that from a technical, heating efficiency perspective, heat networks tend not to be more efficient than individual boilers – their advantages come about for different reasons such as efficiencies of maintenance, their modularity allowing alternative heat sources to be ‘plugged in’ etc

·  the issues in Peckham which relate mainly to the fact it is a higher temperature heat network, has more pipes and the boiler is further from dwellings

·  the Council’s response which, since 2021, has focused on improving heat networks based on priorities of reliability, affordability and low carbon

·  that Heat Networks Market Regulation legislation will come into force in 2025 with Ofgem regulating all networks in the country and also giving residents greater protection and the Council greater powers of scrutiny

The Chair then asked Commission members for their questions which included:

·  if the data on consumptions and efficiencies presented by residents was new to their work

·  whether, given the scale of the heating consumption in some areas, there are further lessons to draw in terms of monitoring and maintaining the Council’s heating networks

·  whether the North Peckham situation was handled wrongly in terms of speaking with residents over efficiencies and cost savings

·  whether likely network and/or boiler upgrades will mean additional costs for leaseholders and how the Council might ameliorate these if they arise

·  whether owners of new build properties connecting to North Peckham’s network would face the same costs

·  whether calculations of heat loss had been made

·  why the North Peckham boiler house renewal happened without a heating network optimisation study

·  how much network heating costed above individual boiler heating

·  why some estates with improved boilers and/or distribution systems continued to show costs above the Ofgem averages cited in the report

·  how incoming regulations were affecting heat meter dwelling installation

·  what work had been done to compare individual heating systems

·  how the North Peckham boiler house will be different

Officers responded, noting that:

·  the data were known to Officers who had been using similar metrics

·  as a further lesson learned, whether all the Council’s energy procurement could continue to happen centrally but allow for energy management to happen closer to end use i.e. in this case, within Housing, in order to have quicker and closer understanding of consumption

·  the full situation in North Peckham was slow to be understood because it is the only site where gas is pressured differently between the metring and consumption estimate for costing points meaning that a long process of calibration and metre checks are necessary to ensure costs are valid

·  leaseholders may have to contribute to the costs of future upgrades (as would tenants through rent) and there would be a need for discussions as to how costs were shared with the Council

·  subject to ongoing consultation work, cheaper heating bought from SELCHP (South East London Combined Heat and Power) may become available to more estates, potentially including North Peckham and that the Council is waiting for a financial proposal from Veolia to understand what costs might be

·  upgrades do imply costs but in the case of control mechanisms these can be lower than expected and, in addition, there are ways to make 4-pipe systems such as North Peckham’s more efficient and there are grants available to offset some of these costs

·  new builds – by law – had to have metred consumption enabling residents to change their heating behaviour directly and therefore to benefit from lower usage and

·  new build leaseholders would pay the same costs (varied by consumption differences) as existing leaseholders

·  heat loss measurement was not possible as it needed meters in each dwelling

·  an optimisation study wasn’t conducted because the replacement boiler and upgrade of the heating network made for the most cost efficient solution (compared with others such as individual boilers for each dwelling)

·  comparing heating consumption costs (network versus individual boiler heating) was complex as these costs included maintenance and electrics and could be explored in a future paper – the heating consumption in kWh was, however, available in the paper under discussion

·  with one part of a system improved (e.g. the boilers alone), costs could still be high but where dwellings had heating generation, distribution and controls improved, these were likely to benefit from much cheaper bills

·  new government regulations were likely to widen the range of properties where meters should be installed but as these were only now out for consultation, it would not be practical to act now

·  North Peckham’s new boiler house would have new boilers, pumps, controls, pipework and heat exchangers and this should make for more efficient and much more reliable heating

The commission then asked further questions on the following points of discussion

·  Resident options to opt out of district heating

·  Meter reading and service charges; Boiler and pipe changes at Portland and Barlow estate, lessons learnt.

·  Estates that have benefited from reliable and efficient heat networks

·  Regulatory risks with new regulations of Ofgem on district heating networks

Tom explained to the commission that there is a disconnection policy however the council does discourage residents to opt out, as it more cost effective if everybody stays connected. Leaseholders have to pay a disconnection fee to opt out. Meter readings are taken monthly.

The commission heard from Simon that pipe samples sent for testing to check for degradation and held up to industry standards.

Tom informed the commission that Albert Barnes and Masterman House in 2019 have new boilers, heat meters and heat network. Residents have benefitted from heat meters in keeping heating bills down.

Hakeem explained to the commission that some new regulations are unclear, however the ultimate goal is to install heat meters in every property to ensure residents only pay for heating that they use.

The commission discussed the merit in discussing how service charges and energy costs were communicated to leaseholders and how leaseholder complaints were dealt with by the council.

The commission also discussed the need for analysis of costs to leaseholders and the cost effectiveness, which impacts the Housing Revenue Account. Furthermore, the commission also discussed the benefits in learning from other London councils on heating networks and systems. The commission noted that issues with service charges and heating costs are predominantly in the historic heat networks, estates with newly installed district heating network systems fare much better.

The Chair and the commission agreed to follow up with officers on new Ofgem regulations for district heating and possibly request a report on the approach the Council takes to ensure the new regulations protect Southwark residents.