Exploring Thermal Energy Storage in UK Heat Networks

Client

Department for Energy Security and Net Zero (DESNZ)

Challenge

The Department for Energy Security and Net Zero (DESNZ) needed to understand the current and potential role of thermal storage in heat networks. In the context of the UK’s Net Zero Strategy, which expected heat networks to supply around one-fifth of heat demand in England and Wales by 2050 (up from less than 3% in 2022), it was crucial to examine how thermal storage could enhance heat network operations, facilitate grid integration, and increase efficiency. DESNZ specifically wanted to assess technological maturity, deployment barriers, costs, and international best practices to inform future heat network strategy.

Solution

A comprehensive research study was undertaken using a mixed-methods approach, including qualitative interviews with heat network stakeholders, a focus group with electricity Distribution Network Operators (DNOs), and a Rapid Evidence Assessment (REA) of academic literature.

Forty interviews were conducted with a diverse range of stakeholders: 20 from the UK and 20 international participants, with strong representation from Scandinavian countries that had more advanced heat network sectors. The stakeholders included heat network consultants, thermal storage manufacturers, heat network developers/investors, and operators.

The focus group with DNOs aimed to understand the intersection between heat networks and the electricity system, current deployments of thermal storage, and future grid capacity concerns. It also explored how thermal storage could provide flexibility benefits to the electricity grid.

The Rapid Evidence Assessment analysed 40 detailed documents from an initial list of over 1,000 relevant academic sources, emphasising research that included cost data for thermal storage technologies.

The research assessed the current state of thermal storage deployment in UK heat networks, potential benefits, barriers to wider adoption, cost trends, and international best practices. It also examined innovative technologies and approaches that could overcome existing barriers.

Outcome

The research found that thermal storage offered substantial benefits for UK heat networks, demonstrating improvements in operational expenditure, decarbonisation potential through renewable integration, and enhanced system resilience. However, several significant barriers impeded wider adoption.

While short-duration sensible heat storage was relatively common in UK heat networks, predominantly through tank thermal energy storage, there remained significant untapped potential, particularly in long-duration and seasonal storage solutions that had seen success in countries like Denmark, Sweden, and Finland.

The most acute barriers to thermal storage adoption in the UK were identified as:

1. High land costs and space constraints, particularly in urban areas suited to heat networks, making large-scale thermal storage installations challenging to implement.
2. Fragmented ownership models that created misaligned incentives between developers and operators, often resulting in sub-optimal sizing of thermal storage systems.
3. Poor integration between heat and electricity market regulations which actively blocked grid flexibility benefits and peak demand management, preventing full economic and environmental returns.
4. Economic barriers including high capital expenditure requirements, long payback periods (typically 5-10 years), and misalignment with electricity flexibility contracts (typically 3 years).
5. Skills and knowledge gaps in thermal storage specification, design, and operation, with limited performance data available to support investment decisions.

These barriers have distinct effects on the UK market compared to more developed heat network markets such as Denmark and Sweden, where municipal ownership models, lower land costs, and more integrated regulatory frameworks facilitated greater thermal storage deployment.

The study concluded that coordinated sector development could help ensure thermal storage technologies were appropriately sized, selected, and implemented to maximise benefits for network operators and customers alike. Success would depend on enhancing integration between heat and electricity markets, aligning stakeholder agendas within heat network development to prioritise whole-life considerations, continuous engineering to achieve lower levelised cost of heat, establishing comprehensive performance monitoring systems, creating targeted training programmes, and developing supportive regulatory frameworks.

These changes would support the alignment of heat networks with an electrified, low-carbon future and could help unlock the full potential of thermal storage in the UK energy system, contributing significantly to the goal of reaching one-fifth of heat demand by 2050.