Eneco has decided to stop developing a collective heating network in the Overvecht-Noord district in Utrecht. We have concluded that the affordability of the expansion of the heating network in this district cannot be sufficiently guaranteed for the residents.
Since 2021, Eneco has been investigating, together with the municipality of Utrecht, whether a heating network is an affordable, reliable and sustainable option to get the district off gas. The main reason for stopping the development of the heating network is that 75% of the area consists of ground-level single-family homes. The homes are relatively far apart, which means that a large heating network is required per home. Its construction is expensive, while the heat demand in this district is relatively low. Eneco is convinced that in this situation with low-rise homes, other heating techniques, such as a hybrid heat pump, are more affordable than a heating network.
The decision to stop developing a heating network in Overvecht-Noord is in line with Eneco's vision that in the Netherlands we should only install heating networks in those neighborhoods where they are significantly cheaper than the alternatives. Only then will it be attractive for tenants and homeowners to switch to a heating network and can sufficient support be created.
Why stop now?
A number of changes have recently occurred that have led us to this difficult decision:
In January 2024, the municipality of Utrecht designated and reduced the definitive heating area in the Overvecht-Noord district. As a result, many flats have been lost and many low-rise homes remain. Eneco is convinced that in this situation an alternative package with insulation and (hybrid) heat pumps will provide residents with a lower monthly energy bill than a heating network. We therefore expect that the participation threshold of at least 70% required for an affordable heating network would not have been met. To illustrate: in December 2023, the municipality of Pijnacker-Nootdorp and the public heating company HVC failed to reach a participation threshold of 50% in a similar situation.
In March 2024, the municipal council of the municipality of Utrecht announced in a letter to the municipal council that it did not want to explore a public-private partnership with Eneco, but that it would opt for a public municipal heating company. This choice by the municipality means that new investments by Eneco in a heating network will entail more investment uncertainty in view of the possible introduction of the Collective Heat Supply Act (WCW).
In addition to the above reasons, there has been a lot of uncertainty about the regulation of heat rates for several weeks. An emergency law is currently being discussed in the House of Representatives, the impact of which is still unknown. We are now awaiting further elaboration by the ACM. Eneco is in favor of a rapid introduction of cost-based heating rates as of January 1, 2025.
Costs and transparency
In addition, the municipality and Eneco have jointly looked at ways to reduce the costs of installing the heating network, for example by obtaining subsidies and combining various activities, such as cooperation in sewer replacement and construction of the heating network. In practice, this did not appear to provide sufficient cost reduction. The municipality has asked the consultancy firm Innoforte to independently check the cost overview for this project for accuracy. By having the figures validated by this agency, Eneco has attempted to provide maximum transparency about the cost overview and thus submit a feasible and affordable bid. The main conclusion of this second opinion was that Eneco's calculated costs are realistic and that the actual investment and operational costs are probably slightly higher than Eneco itself had calculated.
Eneco remains convinced that a collective heating network is the cheapest solution for neighborhoods in the Netherlands with many high-rise buildings and attractive local heat sources, as also shown by analyzes by the National Government and the Netherlands Environmental Assessment Agency. Eneco still sees heat via heating networks as an essential part of the sustainable energy mix of the future and hopes that new legislation can take the heat transition in the Netherlands a step further.
