Heat delivered by heat networks will require a ten-fold increase in volume if the sector is to fulfil its potential in contributing to the UK’s net zero commitment by 2050. Development of this scale cannot be afforded purely from public funding and up to £22bn of private capital will be needed to if this target is to be achieved.
The Department for Business, Energy and Industrial Strategy (BEIS) with Triple Point Heat Networks Investment Management – their delivery partner for the £320m Heat Network Investment Project (HNIP) – has announced a new Dynamic Purchasing System (DPS) for heat networks today.
The BEIS Heat Investment Vehicle (BHIVE) will allow Public Bodies, including NHS Bodies and Local Authorities, to access funds and funding-related services for heat network projects from a portfolio of potential funders. BHIVE is open to all Public Bodies looking to finance a heat network including, financing the expansion of a new or existing network or facilitating the sale of part, or all, of an investment in a mature heat network.
The role of private capital in unlocking the potential of heat networks
To meet the UK’s legally binding commitment to net zero by 2050 in the most cost-effective manner, heat networks will need to provide 17-24% of the UK’s heat (currently just 2%). Achieving this objective requires the development of a self-sustaining market with a sufficient volume of strategic, low carbon heat networks which are economically attractive without direct Government subsidy.
Development at this scale cannot be afforded by public funds alone. The Institute for Public Policy Research has estimated that up to £22 billion of private investment capital needs to be levered in if the sector is to fulfil its potential.
At the same time, institutional investors are seeking high class infrastructure assets with good quality counterparties and predictable long-term revenues underpinned by strong environmental, social and governance (ESG) principles.
Prior to BHIVE’s launch, investors and investees had come together too infrequently and only on an ad-hoc basis.
Funding Providers can apply to join BHIVE at any time by expressing their interest in funding heat networks; demonstrating their access to funds and their capability to deliver the associated services to execute funding. Finance options available will include equity finance and asset finance.
HNIP was launched in 2019 to kick-start the market and has to date awarded £125 million to successful schemes across England and Wales.
BHIVE will further support the work that has already been achieved by HNIP in ensuring a sustainable market which is not only economically attractive to investors but supports job creation and environmental benefits.
Richard Turner, Amberside Advisors, part of Triple Point Heat Networks Investment Management said:
“BHIVE has the potential to deliver significant benefits to the heat networks market, which is essential to meeting the net zero emissions target while sustaining green jobs and delivering economic benefits. It will make for a more efficient and effective fundraising process from the perspective of Funding Providers looking for funding good quality opportunities in a high-growth sector, and Public Bodies looking for value for money.”