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District heat networks: A step-by-step guide to delivery in the public sector

Public-sector organisations are looking to deliver district heat networks in schemes - and are looking to contractors for expertise in delivering them.

Local authorities, universities, the health service and registered providers have a real opportunity to develop schemes with district heat networks that can secure energy supply and act as a catalyst for regeneration and economic growth.

To deliver these schemes, the public sector will often turn to contractors for their knowledge and expertise in delivering complex energy projects.

Some practical issues for contractors to consider include:

Policy

The public-sector organisations delivering successful energy schemes invariably enjoy senior leadership support.

The scheme will often be part of a long-term strategy.

Understanding the level of support at senior levels for the project will be crucial to any decision to bid for a project.

Feasibility

The feasibility stage is critical in mapping out what the project could look like.

It needs to cover a range of issues and contractors should understand what studies have been undertaken, what building types and technology could form part of the scheme, and the reliability of existing data sets.

Market testing

The public sector often uses soft market testing to seek constructive comments and gauge contractor appetite for schemes.

Use this opportunity to engage with the procuring authority.

How can you add value to their proposals?

Procurement

The procurement documents and the process used by the public sector should clearly reflect their objectives for the scheme.

Is the risk profile proposed by the procuring authority consistent with their stated objectives and the overall value of the scheme?

Areas to consider include the obligations on the parties, payment issues, liability and terminations risks, performance measurement, fuel procurement strategy, heat off-take, the requirements for maintenance and replacement of plant and infrastructure and expansion requirements and incentives.

Property and planning

There are a number of issues that could arise depending on the nature of the site(s) including:

  • Acquisition of new land on which elements of the network will be sited.
  • Any building where mechanical equipment could be located may already be in the procuring authority’s ownership. Nevertheless, check that rights exist to use the building for this purpose.
  • Is permission of any landlord or lender required to carry out alterations?
  • Are there any occupiers of any buildings involved in the scheme and is it necessary to obtain their consent?
  • Those who are connecting into the network may need to obtain consent to do so if they lease their property or it is charged to a lender and alterations are required.
  • Where pipes and other services need to be run beneath land in the ownership of a third party, the right to do so, in the form of an ‘easement’, will need to be obtained together with appropriate rights of access for maintenance and repair.
  • Who will manage the planning process – what engagement with planners is proposed?

Construction

Every construction project is unique but particular attention should be paid to the following issues:

  • Interim operational arrangements;
  • Wayleaves, site access and traffic management issues;
  • Removal of hazardous substances (including asbestos);
  • Switchover to new energy supplies;
  • Phasing of works (whether or not part of a wider regeneration project);
  • Insurance and commissioning activities.

Operation

By using information from the meters installed and remote monitoring of the equipment, the parties will assess the operation of the plant with customer demand.

They can also gauge the efficiency of the plant and identify areas for improvement or innovation.

In order to identify the appropriate growth opportunities, the parties need to maintain a dialogue with local planners and developers so they can assess the opportunities for new connections.

Any expansion of the project needs to be consistent with the initial OJEU Contract Notice.

The process for expansion should have also been developed and tested as part of the procurement phase of the project.

Patrick Sweeney is a commercial associate at TLT

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