New build developers
Have you been thinking about the best form of heating for your development, but would like to minimise the upfront cost?
To meet the needs of your development, Kensa Utilities can fund, own, and operate the shared ground array infrastructure. This includes boreholes, pipes, manifolds, and all equipment up to the outer wall of the dwelling, leaving you to only fund the heat pump unit.
This emulates exactly the arrangements today with gas, except for a better, safer and green heating source.
By paying for just the in-home unit, you’ll be paying the same if not less than what you would for an air-source heat pump. The running costs will be lower too than for an air-source heat pump, even after paying the standing charge. This is therefore win-win for the developer and the end-customer.
A recent WWF study also cited an up to £8,000 uplift in a home’s equity value when a heat pump is installed, so the cost of the heat pump in some instances may pay for itself.
How it works
- O&M The ground array infrastructure will be maintained by Kensa Utilities
- Consumer protection: Besides inflation (CPI), Kensa Utilities cannot change the standing charge in any other way. In a time when other forms of heat networks can change prices without regulation, this offers substantial consumer protection.
- Standing charge: Typically, a few £100 per year, and charged over a minimum of 40 years (so that we can minimise the standing charge to consumers). Collected by a Kensa Utilities SPV, ideally from a management company or added onto existing estate charges but can also be collected from each dwelling.
- Standard legal documentation: If you’d like to proceed with a Kensa Utilities funding offer included in a Kensa quote you have received, we require written confirmation to obtain the funding offer, and we will prepare standard legal documentation, detailing the infrastructure Kensa Utilities will own & maintain, the minimum service levels it will provide, obligations when moving house etc.
Why go ground-source?
They’re the lowest running cost, most efficient and least hassle form of low carbon heating.
Cheapest to run: Using renewable energy from the ground, GSHP are much cheaper to run than air source heat pumps (generally over £250 per year)
Most efficient: GSHPs tend to have 300-400% efficiencies, as much of the heat is extracted from the ground, with electricity just needed to upgrade this to usable heat
Least hassle: Being inside, not exposed to the elements, GSHPs last longer than ASHPs and have less maintenance requirements
Quieter: Quieter than air source heat pumps with no fan outside your bedroom window to disturb you
For larger newbuild sites, the peak power rating is also lower than for air-source heat pumps, meaning you’ll also save on substation costs (due to lower kVa ratings). This is due to the higher efficiency of ground-source, the higher diversity factors, and the fact that GSHP don’t need a defrost cycle at just 100% efficiency.
What is a shared ground array?
The network outside the property that feeds each individual heat pump with ambient energy required to operate the heat pump. Think of it like the gas network, bringing the feedstock to your property for your boiler to use. It is composed of a series of boreholes (150-300m deep), linked together by pipes that go to a manifold (under a manhole cover), from which pipes go to your property.
Where can boreholes be placed?
In most areas! Typically on newbuild, social housing or non-domestic sites we seek to place them on the shared areas on the freehold of the site owner (parks, gardens, driveways etc), but we can also place them in the sidewalks & roads as with other utilities. This flexibility allows us to deliver ground-source heating in areas where alternatives such as air-source heat pumps are not viable (due to outside space restrictions).
What temperature does the shared ground array operate at?
Typically between 5C and 15C. This means it’s cool enough to provide cooling in the summer, and warmer than the air will be in the winter, meaning it will be much more efficient (and therefore cheaper & lower carbon) to run than an air-source heat pump.
Can it provide cooling?
Yes! A very low-cost byproduct unique to ground-source is the ability to use the 5-15C ground array to cool – either through fan coil units in various rooms (termed ‘passive cooling’), or by integrating into an MVHR system. During the 2022 summer heatwave, when it was 36C in Cardiff, passively cooled rooms were at a comfortable 21C, at an effective cost of £25 per year.
What, in summary, is the funding offer?
Kensa Utilities will fund, own & operate the shared ground array on your site, leaving the developer / social landlord / non-domestic customer responsible for only providing the heat pump & internal distribution system. This emulates the arrangements done today for gas. Kensa Utilities will charge a monthly standing charge to each property to access the shared ground array, for a minimum 40 year agreement.
Why do this?
Your end-users prefer ground-source. Of all viable heating options, it is the cheapest to run, least hassle to maintain, least noise/visual impact, and allows for lowest-cost cooling. It does however cost more upfront, due to the shared ground array located outside the property. But when you install gas, you don’t buy & own your own mini-gas network, so we emulate this arrangement. By Kensa Utilities funding & owning this in return for a standing charge, your upfront cost should be lower than air-source heat pumps (as the in-home GSHP unit should cost less than a larger, outside ASHP unit), and your end-user should pay less to run the system than if they had an air-source heat pump. Win-win.
How does the funding offer work? What’s the process?
- Kensa Contracting, the UK’s leading installer of GSHPs, will provide you with a feasibility report or quote for installing GSHPs at your site, with Kensa Utilities funding & owning the shared ground array in return for a monthly standing charge. We can flex up/down the funding amount, with the standing charge going up/down along with the funding amount. In other words, you’d pay for just the GSHP, design & internals.
- Kensa Contracting will then conduct its detailed design and revert with a final quote. The funding offer won’t change during this process, but we can again flex up/down the funding amount if you request it.
- When signing at the point of order, we together sign the Kensa Utilities contractual documents required to secure the funding offer & its terms. These include:
- Connection Agreement: Mostly pre-commissioning, ensuring Kensa Utilities delivers a shared ground array, and is compensated for your delay/abandonment pre-commissioning.
- Shared Ground Array Lease: 99-year lease on the shared ground array, ensuring Kensa Utilities can access & repair the equipment
- NB: For newbuild, this lease needs to be granted prior to the sale of the properties to end-users.
- Service Agreement: Where a management company, social landlord, non-domestic customer or other party is landlord to its end-users and supplies services to them (including heat): details outputs, response times, liabilities etc on Kensa Utilities in delivering the services
- Customer Supply Agreement: Where supplies are made directly to individual end-users who have heat pumps installed, simplified & similar terms to a service agreement
- Then, upon order, you pay for just the GSHPs, internals & design, with Kensa Utilities funding the shared ground array.
- Kensa Contracting will, as usual, install the shared ground array, and (subject to the scope agreed with Kensa Contracting):
- For newbuild: usually supply the heat pumps for your chosen M&E contractor to install, as with gas
- For social housing: usually supply & install the heat pumps & internal distribution systems on your behalf
- For non-domestic: usually provide & install the central plant heat pump
- From commissioning of the heat pumps, Kensa Utilities will start charging a standing charge. We prefer if this standing charge is collected directly from the management company or social landlord, but we can also bill end-users directly, depending on the arrangements on your site
- Kensa Utilities will ensure delivery of ambient heat needed to run each heat pump, and will conduct repairs and O&M on the shared ground array as required to ensure performance.
- This agreement with Kensa Utilities owning & maintaining the ground array lasts for a minimum of 40 years, but will roll-over after this until you choose to terminate it, ensuring continuity of supply & heat for as long as you desire.
- End-users will also pay for their heat through their electricity bill, giving them independent control of their heating use and the electricity supplier from which they source their electricity. With flexible & heat pump tariffs becoming more commonplace, this allows end-users to benefit from the lower running costs associated with these.
Can you give an example of the savings we & end-users will see?
It’s a win-win for both you and your end-users. Funding just the heat pump & internals, per property, for a retrofit site, you could expect to save up to £1000 per property on the upfront cost of the heat pump, and up to £500 per property on a newbuild site. For non-domestic sites this could be much larger. End-users can expect to save £100+ a year on running costs, even after paying the standing charge.
For an example 15,000kWh/yr retrofit house, you may pay £11,400 for an ASHP, but just £10,500 for a GSHP, saving just under £1000. End-users expect to save £242 per year on running costs, assuming:
- Efficiency: 250% for ASHP, 300% for GSHP
- Electricity at current 34p/kWh price cap
- Lifetime: 15 years for ASHP, 20 years for GSHP
- Maintenance: annual for ASHP, once every 3 years for GSHP
Who owns what?
The arrangements here mirror ownership as with other utilities (gas, water, electricity etc)
Kensa Utilities will own the shared ground array (including boreholes, pipes, manifolds), which extends to the outer wall of each dwelling connected up to the shared ground array.
The customer/end-user will own and be responsible for the heat pump and the internal distribution system from the dwelling up until the outer wall of the dwelling.
Kensa can provide a service & replacement package for the internal heat pumps (similar to Boilercare).
How will end users be charged?
Kensa Utilities will bill monthly. The entity billed depends on the arrangements agreed with you. In newbuild sites with a management company, with social landlords or with non-domestic customers, we prefer to bill this entity directly to ease collection, however we can bill end-users directly, just as how other utilities bill households directly.
Is there a minimum size development?
Kensa Utilities’ minimum funding offer is £100k per site, which is typically 10-20 properties for domestic.
What happens after the minimum 40 year agreement?
The agreement is for minimum 40 years so that we can lower the standing charge as much as possible to you, whilst being on a term that funders can accept. After the 40 years, the contracts in place will roll over so that there is continuity of supply, but you have the option to serve 3 months’ notice to cancel the contract at this point. Given that the infrastructure should last 100+ years (given it is inert pipework with a water & glycol mix flowing through), this system could serve properties for a lot longer than the 40 year agreement.
What happens after the 99 year lease?
Here Kensa Utilities, as with other heat network schemes, will (as required) replace and renew the equipment required, and enter/extend the lease and enter/extend the contract so that there is rollover of ongoing heat provision. If the customer chooses not to enter/extend the lease & contract, then the equipment will be made safe & isolated.
What happens if Kensa Utilities or its subsidiaries go into administration?
In this highly unlikely event, the lease and service agreement responsibilities could be easily transferred onto another capable operator. Given the existing breadth in the industry, and the fact that it is rapidly growing, there should be many such players capable of taking this role.
Can this work with the Green Heat Networks Fund?
Yes absolutely, subject to your site aligning to BEIS’ conditions. In essence, we should be able to lower the standing charge offered to your site by around 35-40%, subject to the key conditions being met:
- Minimum site demand of 2GWh/yr to be connected within 5 years of first connection. For newbuild this is typically 400-500 homes; less for retrofit
- Your site timelines will allow for the shared ground array to be installed by March 2025, with all heat pumps to be purchased by then also
- You are comfortable with Kensa Utilities including a ‘Boilercare-style’ package to service, maintain and replace the heat pumps. We find this is required to meet the GHNF application criteria. This should be highly favourable to you & your customers.
Come talk to us, and we can illustrate the funding conditions for our usual offer, and give an indication of what this would be with the GHNF included too. It’ll take us a few weeks to complete the GHNF application form (and around 8 weeks for a full GHNF application on your behalf).
How, in summary, does the standing charge work?
The standing charge is paid monthly by each end-user, which covers all of the ambient heat used and all O&M, billing, overheads etc to operate & maintain the ground array. The standing charge is adjusted annually with inflation (up to a cap), with no other ways for Kensa Utilities to alter the standing charge. End-users pay this, alongside their electricity bill (used to power the heat pump).
Does the standing charge vary by property?
Yes, just like with council tax banding (where council tax varies by property value), the initial standing charge set in year 1 is based on the design heat load of the property. For example, while the average standing charge for a site may be £25 per month for an average 7,000 kWh/yr consumption house, a 3,500 kWh/yr flat would pay £12.5 per month (50% less than the average), and a 7,700kWh/yr house £27.5 per month (10% more than average). This is done as the initial cost of the array is sized to the total heat load required to deliver, so this ensures fairness such that everyone pays their share.
For a multi-occupancy non-domestic site, we can also vary the standing charge by property along the same principle, based on each customer’s initial predicted demand.
Why do you not meter heat?
Metering adds additional upfront cost, failure points and maintenance costs to the system, all of which would increase the standing charge required. By not metering, we are able to offer the lowest overall connection cost to the system. A fixed standing charge also offers predictability to consumers on their bills.
Can end-users switch electricity suppliers used to power their heat pump?
Yes! Apart from their standing charge, end-users will pay for their heat through their electricity bill, giving them independent control of their heating use and the electricity supplier from which they source their electricity. With flexible & heat pump tariffs becoming more commonplace, this allows end-users to benefit from the lower running costs associated with these.
How frequent is the standing charge billed?
Monthly, as with other utilities
Do you lower the standing charge if properties install additional insulation?
No, as the system was designed to their initial conditions & heat requirements, the standing charge won’t change. Consumers will benefit from lower electricity bills to run their heat pumps if they install insulation, so we certainly recommend it where cost-effective to the end-user.
When does your standing charge billing begin?
For social housing & non-domestic properties, this charging begins upon commissioning of the heat pumps.
For newbuild developments, as each phase is commissioned, the standing charge begins 12 months after for that phase, to allow for some time from commissioning to house sale. In the event where all properties are not yet occupied at this 12 month period, the developer would be expected to cover the standing charge until the house is sold.
Who bills me or my end-users?
A company set up by Kensa Utilities Limited specifically to handle billing & collection.
What are the response times when there’s issues with the array?
As part of our standard maintenance offer included, where we are responsible for just the shared ground array (up to the outer wall of the dwelling), our responses are as follows:
- Emergency (within 24 hours): temporary heating provided, and hot water through the immersion element of the hot water cylinder. We will pay service failure payments in line with the Heat Trust for any periods after this, ensuring we comply with best practises for consumer protection
- Borehole failure: In the exceedingly rare event that a borehole fails, heat may still be provided to the properties given there’s multiple boreholes on most arrays. But in this event we will respond within 90 days, or sooner.
What happens when I move house?
For individual domestic consumers, when moving house, the options are:
- Transfer the service agreement onto the next tenant: so they are able to access this lowest-cost, lowest-carbon form of heating that is installed in their property. This means they’ll also be responsible for paying the standing charge.
- Disconnection: terminate the contract and pay a disconnection fee, withdrawing access to the equipment. Here we will isolate the property off the shared ground array, and make-safe any equipment feeding the property.
Given that the property will already have the lowest-cost, lowest-carbon and least hassle form of heating installed, we would encourage a transfer of the service agreement, and we provide this transferring service & make it very easy for customers. When disconnecting, a new heating system would need to be installed (just as if you were to disconnect your boiler from the gas network today).
For domestic management companies, non-domestic customers or social landlord customers, if transferring ownership of the site served by our system, the lease & service agreements in place allow for:
- Transfer of the service agreement onto the next site owner: so they are able to access this lowest-cost, lowest-carbon form of heating. They then take responsibility for ensuring the standing charge is paid
- Disconnection: terminate the contract and pay a site-wide disconnection fee.
Can I terminate my contract early?
This is of course possible. A disconnection fee will apply, reflecting the costs involved in isolating & making safe the disconnection, and also reflecting that this is a long-term financing arrangement that is being terminated early.
What happens after I disconnect?
KUL will isolate the shared ground array pipe feeding your property at the manifold, and make that piece of pipe safe and leave it in-situ. You are then free to install your own alternative form of heating system.
What happens if I don’t pay my standing charge? Will you disconnect my heat?
No, while we do retain that ability, we are highly unlikely to shut heating off. Rather, we’ll stop servicing & maintaining the part of the shared ground array feeding your system. If you do not pay promptly we may:
- Ask you to pay by another method;
- Charge you interest on overdue amounts from the due date at a rate of 4% above the base lending rate of HSBC Bank plc (as amended from time to time) whether before or after judgment;
- Ask you for a security deposit
We may charge you our reasonable costs to recover any money you owe us. These costs may include but are not limited to:
- Returned cheques or unpaid Direct Debits;
- Visiting a Property to collect money you owe; or
- Obtaining a warrant;
- Disconnecting or reconnecting your System from our Infrastructure.
What are the key terms included in each legal document?
Kensa Utilities: Standard Contracts
The set of legal documents are designed to ensure you receive all of the services required to ensure a performant, affordable and reliable shared ground array feeding your properties, whilst ensuring our assets are protected and we’re able to recover our investment over the length of the agreement.
The bulk of the agreements are standard terms & conditions seen across district heating, with the upfront few schedules highlighting the key terms & site specific conditions. The summary of what’s in the documents below:
Connection Agreement: Ensuring Kensa Utilities delivers a shared ground array on schedule, and is compensated for developer delay/abandonment pre-commissioning. Parties: KUL and customer
- Obligation on Kensa Utilities to ensure installation of the shared ground array to required standards, and in line with the site program
- Obligation for client to start paying the standing charge from the agreed date if the client delays the program (outside of Kensa Utilities’ control). This agreed date is within 12 months from the deployment of the first array.
- Appropriate compensation to Kensa Utilities if client abandons the site during build (refund at Kensa Utilities funding amount)
- Appropriate compensation to customer if Kensa Utilities isn’t able to complete build (temporary heating provision)
- Requirement to enter into the lease and customer supply agreement(s) upon connection
- Protection if either Kensa Utilities or the client goes into administration during installation
Ground Array Lease: 99-year lease on the shared ground array, ensuring Kensa Utilities can access & repair the equipment. Parties: KUL and initial freeholder (customer)
- Rights for Kensa Utilities’ retained ownership of the shared ground array upon the freeholders’ land
- Right for Kensa Utilities & identifiable sub-contractors to access the shared ground array for inspection and maintenance through easements
- Kensa Utilities funder rights to step into the lease
- Length of the document reflects many ‘Lease’ terms required by the Land Registry
Customer Supply Agreement: Where a management company, social landlord, non-domestic customer or other party is landlord to its end-users and supplies services to them (including ambient heat) – details outputs, response times, liabilities etc on Kensa Utilities in delivering the services. Parties: KUL and management company/social landlord/non-domestic customer
- Outputs: Heat delivery requirements at the appropriate temperature and required to run the heat pumps effectively, and done in a safe manner
- Response time: To rectify issues when they occur with Kensa Utilities’ equipment, typically along two priority levels:  emergency (within 24 hour response times);  other (24-48 hour response times)
- Liability for damage Kensa Utilities causes: as a result of our actions to you/your end-users site
- Liability for damage to Kensa Utilities equipment: by the customer or those acting on behalf of the customer
- Compensation for termination: either voluntarily (disconnection) or due to breaches of contract
Residential Supply Agreement: Where supplies are made directly to individual end-users who have heat pumps installed, simplified & similar terms to a service agreement. Parties: KUL and tenants
- Simplified terms from the service agreement, alongside granting of access for commissioning and repairing the equipment where on their land
- Additional services for vulnerable customers
How does the funding offer work with phased developments?
We will follow the shared ground array deployment & phasing plan agreed with yourself and the contractor installing the ground array (Kensa Contracting). Typically we fund the ground array as it goes in for each phase, with the standing charge payments beginning for each phase from either  the commissioning date, or  12 months from the construction start date, whichever is earlier.
As a council, could I seek to own & operate the array?
Yes, with your ability to loan at PWLB rates (or other low-cost loans), we can support you in  co-investing in the ground array, with us handling O&M and servicing, or  setting up full ownership of the ground array. Both will act as a means to drive revenue through standing charges into your housing & revenue accounts.