Anthony Coates-Smith, Managing Director, Insite Energy
If you haven’t yet come across motivational tariffs when talking about utility billing, that soon may change. Already proven successful in Europe, this innovative approach to improving the performance of heat networks reached the UK earlier this year, and plans are in place for a wider roll-out.
In a nutshell, motivational tariffs provide financial incentives to residents to encourage energy saving behaviours. They empower customers to take control of their energy use, helping to align the interests of heat suppliers and residents to lower bills and carbon emissions.
Room for improvement
When heat networks perform optimally, they can be cheaper and use less carbon than homes heated by individual gas boilers. Yet many in the UK operate at only 35-45% efficiency.
A key performance indicator is the difference between system flow and return temperatures, known as Delta T (ΔT). A high ΔT means end users will be getting the same amount of heat at a lower cost, as there will be less heat loss, a more efficient energy centre and reduced emissions. A good supply temperature should be around 60°C with a return temperature of 30°C, but it’s more usual to see supply temperatures of 80°C with a 75°C return temperature, causing a low ΔT and low network efficiency. Inefficient heat networks ultimately need larger pumps and pipework to meet the unnecessarily high flow and energy demand and in turn, because equipment has to work harder, have a much shorter replacement cycle, driving up capital costs and power consumption.
If you want to improve your ΔT, everyone connected to the network has a part to play. ‘Weak links’ in the system will result in higher costs for everyone. But it can be hard to get people to understand and engage with the opaque technicalities of network optimisation, particularly when the size of their energy bill depends as much on what their neighbours do as on their own behaviour. This is something quite alien to the UK.
This is where motivational tariffs come in. They solve this dilemma by translating collective benefits into tangible cost savings for individual households. And they really do work. In Denmark, where around 64% of all homes are on heat networks, motivational tariffs have succeeded in reducing return temperatures by an impressive 10oC over 10 years. In one notable case, an operator in Viborg realised over €679,000 of efficiency gains across its portfolio by motivating residents to upgrade their heating systems.
At Insite Energy, we’ve seen first-hand the impact of motivational tariffs in our own pilot programme conducted last February at a 300-unit residential site in London. The trial focused on servicing access and showed highly promising results. Previously, when the managing agents tried to arrange service visits, 59.3% of households didn’t reply. When those residents who engaged and scheduled an appointment were offered a more favourable tariff rate, this number dropped to 8.3%, most of which were sublet properties.
Following this test case, Insite Energy is now looking at rolling out motivational tariffs at a measured pace across its client base. As the first heat network metering & billing provider in the UK to implement this approach, we’re cognisant of the need to get it right. It will require something of a culture change in a sector that itself remains unfamiliar to most people. That means information and education will be needed.
Phase One of the rollout will see us gathering data about average return temperatures as well as introducing this concept to users, using a simple traffic-light system, via our digital web-app, KURVE (another UK first).
In Phase Two, we’ll introduce hypothetical monetary values to actual and desired return temperatures, with target return temperatures tailored to individual sites. New-build sites will have lower targets for efficiency, as one would expect them to be working well already. For older sites with ageing equipment, targets will reflect realistically achievable gains.
A review of data from 1,091 Insite-operated meters from Jan-Jul 2023 showed that over 81% of households would save money straight away under a motivational tariff scheme as their system is already performing efficiently, based on a good average return temperature (using volume weighted average return temperatures (VWARTs) being less than 45°C. The 6.8% of accounts in the inefficient ‘red’ zone (an average return temperature over 55°C), who would be on a more punitive rate, would be able to take prompt action to improve their tariff.
As with any new initiative, there will likely be some challenges to overcome. Cooperation and communication between heat suppliers and residents will be crucial. We will proactively provide clear information about how the tariffs would work and offer support and guidance to householders who need help to lower their return temperatures.
Heat networks have the potential to be the preferred low-carbon choice for communal buildings, but only if they’re optimised to work efficiently. Motivational tariffs could be a powerful tool to improve their performance.