District Heating Financial Modelling and Review
District heating is a system for distributing heat generated in a centralised location through a network of insulated pipes for residential and commercial heating requirements. The heat can come from burning fossil fuels or from renewable sources such as heat pumps and solar energy.
District heating plants provide higher efficiencies and better pollution control than standard boilers. This form of heat generation can distribution may be the cheapest method of cutting carbon emissions and has one of the lowest carbon footprints of all fossil fuel generation plants.
In the UK, there are around 2,000 district heating schemes. As they are more viable in high density population areas, in blocks of flats rather than detached houses, the are mostly found in cities.
Benefits to the community include the avoided costs of energy though the use of surplus and waste energy, and reduced investment in individual household or building heating equipment. The additional prospect of affordable heating has made district heating networks an attractive proposition to Local and County Councils, who seek to maintain the quality of their housing stock.
District heating networks require significant long-term financial commitment. Before councils and other bodies embark on such a project, they rightly need to understand the financial viability of the proposed scheme in terms of its payback, internal rate of return, and the tariffs that it has to charge to users of the scheme's output. These complex calculations are a function of electricity and embedded benefit income, heat tariffs, grants, project costs and usage estimates drawn from a variety of sources.
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