Strategy/ Drivers

Strategy/ Drivers
It is vitally important to ascertain from the outset of a scheme what the principal drivers of any Energy scheme are.
District Heating Schemes need to offer the end user a low cost, secure and reliable service whilst also delivering value to the main developer and/or investor. This needs to be achieved whilst delivering the target environmental benefits as well as the planning conditions that are imposed on the site.
Using its experience and industry knowhow, Ener-Vate can work with the client to ensure that all aspects of the scheme requirements are evaluated in a balanced way and that the scheme begins with the correct motives and understanding of how each driver impacts on the others.

A very important aspect of initial project development and strategy is awareness of the risks and how each should be modelled and balanced. Each scheme is unique and therefore a thorough assessment of risk and potential reward should be undertaken at a very early stage to establish the strategy. This should include the short, medium and longer term ambitions of the investor.

Market Knowledge

Ener-Vate has vast experience within the UK District Heating market with each director having worked within the industry for over 10 years. Our wide-ranging portfolio of clients has led us to work with and alongside most of the major market suppliers which has enabled us to build a thorough database of information that we can use to help clients in their evaluation of market players.
We consistently update the costs we hold based on the most recent information received and use these within our modelling assumptions.
Having this deep and wide market knowledge, enables us to help the client to develop schemes from the outset in a way that will attract the best investment from the ESCo providers as well as Design & Build/Operation and Maintenance providers. We understand the strengths and weaknesses of the market and this knowledge helps to ensure that tender exercises can be focused and deliver the required results.


Ener-Vate has vast experience within the UK District Heating market with each director having worked within the industry for over 10 years. Our wide-ranging portfolio of clients has led us to work with and alongside most of the major market suppliers which has enabled us to build a thorough database of information that we can use to help clients in their evaluation of market players.
With the knowledge of the market in place Ener-Vate can provide our clients with a full experienced and knowledgeable end-to-end procurement service of market engagement. With the full input of the client and based on the strategy required by the investor we can write the initial tender pack that are used to engage with the market, evaluate and interview the tenderers and then produce full scoring and evaluation matrix that aid final appointment by producing an auditable trail of procurement whilst gaining the most value.


Once the initial evaluation of the scheme investors, the scheme’s drivers and the scheme’s intended outcomes are developed and known at the initial stage then it is vital to prepare the structure of the scheme in the most appropriate way to deliver the required outputs.
Ener-Vate understands the most common type of structure options that are prevalent in the market today as well as evaluate alternate structures bespoke to the client depending on the aspirations, future aspirations and possible exit strategies that the client has.
It is imperative that the structure balances all of the potential risks and rewards of each of the parties involved whilst maintaining the continuity of responsibility of delivering the heat to end users in a secure, low cost manner.
Knowing the structures most common in the market helps us to ensure that it is engaged in a way that we know will produce the best possible response and investment.

Project Commercial Modelling

A huge part of any scheme or project, the commercial modelling is the foundation on which investment and decisions are made.
We recognise that Commercial Modelling of a project has to be a process that adapts to the changing conditions of the world of property and energy development.
The way in which the commercial modelling is carried out takes into account all aspects of the scheme. It is imperative to understand how each of the commercial inputs, the client information, the project information and timelines and masterplan assumptions can impact on the outputs and viability of a scheme. Ener-Vate is very experienced in this aspect of project development and we know which are the most important items to balance correctly to achieve the best result for developers and customers alike.
The commercial models produced are presented to clients in an easy to view format which highlights the main areas of risk. We create an easily adaptable model in which different input and masterplan scenarios can be viewed to assess the impact to the modelling outputs without the need to fundamentally change the background model.

Technical Design

It is an obvious requirement that all District Heating Schemes require a technical design to be carried out in order to ensure that the drivers and target outputs can be met.
However, sometimes the technical aspect of the development of a scheme can dominate all other factors which can lead to an imbalance or even worse mean that a scheme looks not to be viable or deliverable. Clients can spend un-necessary early cash producing a high level of technical design not required at early project development stages
Ener-Vate has a good depth of understanding of the building blocks of the technical solution based on years of producing early modelling outputs and option solutions for clients that can be applied to schemes at the early stage. Once the direction and basic structure of the scheme is known we then engage with and help the client to develop a more detailed technical solution alongside the client design team or external, recognised industry design contractors.

Legal Agreement Development

One of the largest tasks that needs to be undertaken on the development of a District Heating Scheme. It is essential that the various contracts between the parties of the agreed structure deliver heat to the end customer is a secure and low-cost way that can be forecast long into the future.
Ener-Vate sits with the client and his legal team to negotiate the contract suite with the suppliers. This includes
The main project agreement between the client and the nominated ESCo along with all the schedules such as
 the customer supply agreements
 guaranteed supply conditions
 price methodologies and comparators
 plot agreements
 Housing Authority Agreements
 D&B Contracts
 O&M Contracts
 Loan/funding agreements
 Government benefit applications/agreements
 3rd Party Thermal Party Agreements
Our excellent knowledge of the legal agreements structures and inter-relationships helps the client to ensure that all of the risk transfers are carried out in the best way possible to deliver a successful scheme.

ESCo Performance Monitoring

Once a scheme is designed, built and operational it is important that it delivers the requirements on customer cost and satisfaction and all environmental targets.
There will be reporting requirements within the ESCo project agreement with the client requiring it to report its operational performance at regular intervals.
Using its experience, Ener-Vate can provide a supporting asset management service to the client providing a knowledgeable insight to the ESCo performance. We will aid the client in identifying any early signs of non-performance and/or trends and suggest early mitigation of them. We also help to liaise with customers of the ESCo, providing an independent view to any operational issues that arise.
Another aspect of the post operational phase is to evaluate the benefits of 3rd party connections or sources of heat that can add additional value to the scheme.



  • It is vitally important that any commercial model begins with defined drivers that are required to be achieved. Many models try to be ‘all things to all men’ and therefore fail to deliver the core requirements. We isolate out with clients their main criteria and base the modelling on those and then importantly ensure that these are not lost as the scheme develops. We advise that the drivers and the decision on what they are remains under the control of relatively few people to ensure focus. The considerations that can form part of the initial discussion on why a District Heating Scheme can be;
  • Planning Requirement :

    The scheme is to be a base solution to meet the renewable and/or carbon reduction requirements of the site. This means that all consideration must revolve around the planning conditions that means that alternate solutions will not be considered.

  • Wider Strategic Local and National Guidance and Policy :

    The scheme will play into the wider policy of council/planning/Government direction which may include conditions on technology and cost to customers

  • Loan and Grant Availability :

    The scheme and or the main developer has access or wishes to have access to low cost emergency funds through loans or grants to certain technologies. This requires the scheme
    to be designed to meet those criteria both technically and commercially in order to attract the funds

  • Lower Energy Bills :

    The scheme is to offer lower end cost to residents and customers of the scheme. Sometimes this can be part of the conditions of the loan/grant funding above as a
    solution to ‘fuel poverty’. Certain funds require the end user to see specific reductions to energy bills and therefore commercial modelling needs to take this into

  • Security of fuel supply and therefore security of Heat Supply :

    To meet the requirements of the scheme the modelling needs to review the fuel type, cost and security of delivery. This sometimes plays an important role in
    determining the final technical solution

  • Market Leading and Brand :

    If the main driver is to deliver heat to residents in a low cost, secure way for the longer term then the modelling can be structured to be viable to the developer which otherwise would not be viable to outside suppliers. This enables full control of heat delivery to developers who retain a value on the asset and longer term control of the site customers for additional branding benefit.

  • Most projects will be a combination of all of the above as well as other specific drivers unique to them. Having a clear hierarchy of importance means that the model develops in the most suitable way.



  • Once the drivers are decided upon and made the focus of the modelling then attention turns to what heat and cooling demand that is available to the scheme.
  • The model should differentiate the types of properties to be supplied and be flexible to changes. District Heating Schemes can easily supply all types of propertyincluding:
    • Residential
    • Commercial
    • Industrial
    • New Build/Retrofit
    • City Centre Public Buildings
  • The modelling should be carried out as much as possible on actual recorded data provided by the customers in the case of existing properties or for new build it should be based on sound forecasts by the builder/developer.
  • An important aspect of the heat demand is the security of it in terms of the commitment of the customers. If a new build development then this should be through a Concession Agreement that guarantees the heat demand to the model and in the case of retro-fit then detailed Heads of Terms should be sought and complete.
  • Ultimately the success of the model to provide its required outputs depends on the accuracy and security of the heat demand and so effort must be expended in this area to ensure accuracy and security.

Initial Technical Solution


  • Ener-Vate believe that the technical solution should be at the mid point in the hierarchy once the drivers and heat demand is defined and clear. Often, as District Heating is deemed a technical delivery solution then schemes are almost started with the technical design before the drivers are defined. This results in over -engineered or under-performing schemes leading to higher than necessary capital costs or customer costs.
  • The technical solution should be built on the information of the two sections below it in our hierarchy. It should meet all of the criteria of the drivers and based on the demand that is known and secure.
  • We often see schemes ‘over master-planned’ whereby schemes are designed based on projected heat availability and demand into future phases. Our policy is to meet the targets and drivers of the initial scheme first and only then look at the future potential of expansion which should be done on an equally measured consideration of drivers and heat demand.
  • To ensure that capital cost of installation is minimised, Ener-Vate works with leading industry experts to use thermo-dynamic modelling. This is an essential aspect to ensure efficiencies of design and cost.
  • It is also essential that the technical solution is fit for purpose over the longer term of the heat supply period. District Heating is a long term facility which requires customers to be served in a professional and secure way. The capital cost and technical solution should also show clearly the expected cost of Operation and Maintenance and timescale of plant replacement

Dynamic Modelling & Structure


  • Once all of the previous aspects have been carried out then the modelling can begin in earnest to deliver the drivers.
  • Ener-Vate has full knowledge of the general industry costs for plant items and network. This is based on inter-action with the industry on regular basis whereby we update our estimates.
  • We also look at items that need consideration such as Business Rates (if applicable) and the context and methodology that should be used to assess this difficult aspect, we look at incentives available to the scheme such as Renewable Heat Incentives, Grants from Government such as HNIP and LCITP.
  • Ongoing operational cost play a huge part in the outcome of the model and so accurately forecasting these is done by receiving direct quotations from suppliers or based on previous modelling experience. We also look at the replacement cost for main plant items and the duration of replacement and the methodology of accrual.
  • As most District Heating Schemes involve a longer term build programme which is subject to change then Ener-Vate builds a model that is easily adaptable to changes. This enable the client to see the effect of those changes and therefore inform any decision making to mitigate negative impacts or exploit opportunities
  • The modelling should be able to show easily several scenarios of increase or decrease in capex/opex/repex/build rate/heat demand/fuel cost etc etc
  • Once a model is complete and adaptable it is then easier to carry out SWOT analysis.

Market Engagement


  • Having carried out the tasks in the order that we describe and agreed the model with the client we can then meet with market providers in a focused and informed manner. If not done in this way, the market can be asked to deliver a solution to a project which is not focused which then returns several different and completely uninformed responses. This wastes the time of the client and the market and can lead to schemes being deemed non-viable.
  • We provide the market with a focused tender with clarity on scope and project structure. This ensures that the market can provide an efficient response on which they know the drivers of the client and understand the risk and reward to themselves.
  • We also ask the market to bring innovation and ideas that may be new in the market for comparison to the base model.

Bottom Up Approach

Input Level

Market Engagement

  • Focused Market Engagement tender
  • Clarity on scope and structure
  • Clarity on risk and rewards
  • Can seek innovation

Dynamic Modelling & Structure

  • Initial costs on industry metrics and knowledge / expertise
  • Capex, Opex, Repex, Business Rates, EUETS, etc
  • Model flexibility to determine structures / optimal solution
  • Model agility to perform sensitivities and stress tests
  • SWOT analysis
  • Mitigation circumstances

Initial Technical Solution

  • To meet Drivers
  • Select Heat sources and Fractions (thermodynamic models)
  • Determine plant size and phasing
  • Determine Network size, scale and phasing.


  • Type of properties – residential / commercial / industrial
  • New Build or Retrofit
  • Actual Data or Assumed
  • Property owners / Developer engagement
  • Security of Demand / Commitment


  • Planning
  • Carbon Reduction
  • First Mover
  • Retain Value – be in control and offer more
  • Branding
  • Lower Energy Bills
  • Sustainability & Security of Supply

Bottom Up Approach

Input Level