Q&A – AECOM: Integrating energy systems

News of the Department for Energy Security and Net Zero (DESNZ) and Westminster City Council's South Westminster Area Network (SWAN) broke in November 2024.

The £1 billion (€1.2bn $1.28bn) heat network will supply buildings in Westminster with low-carbon heat using latent heat sources such as the River Thames, London Underground and sewer networks.

It is to be developed by SWAN Partnership, a joint venture between Hemiko, a developer of heat and power energy networks, and Vital Energi, a renewable energy technology provider.

The SWAN Partnership will fund, build, and operate the heat network, while AECOM will act as a planning and technical partner.

Once operational, it will supply decarbonised heat to approximately 1,000 buildings – including well-known London landmarks like the Houses of Parliament and the National Gallery – making it the UK's largest heat network.

Discussing this project and the growth of UK-based district heat networks, inspiratia spoke with Channa Karunaratne (pictured right), Regional Director at AECOM, the infrastructure consulting firm. 

Approaching an 18-year tenure at AECOM, Karunaratne has overseen such projects as SWAN, the Thames Tideway Tunnel, a 25km deep-level sewer along the tidal section of the River Thames, and Old Oak Park Royal Energy Network, a data centre heat reuse network.

Is there an opportunity to partner with data centres in the development of district heat networks?

All indications show that we are heading toward an AI-driven future, and with that comes the requirement for a lot of infrastructure, including masses of hyperscale data centres, to keep up with that demand.

Data centres are extremely power-hungry, quite large, and can be detrimental to certain areas.

So, modern data centre thinking, driven by both developers and data centre operators, is that they need to be able to give something back to those communities that enables those other developments to happen and enables growth.

As a result, a lot of the data centres that we are working with are looking at waste heat to heat networks, because it benefits them as well.

Data centres need a lot of cooling. If they put all their excess heat into a heat network, it is a lot more efficient, which means they spend less on their power, and the power is a big proportion of the cost of running a data centre.

At the same time, because they are doing that, they are not drawing as much power from the national grid, which means there is more space for other infrastructure that we might want to build. It is a better, more cohesive, infrastructure approach where everyone can benefit.

Data centres are a crucial component of our society that, rather than working in isolation, needs to fit within this piece that we are calling the energy transition.

What are some of the challenges around retrofitting new energy technologies into existing and sometimes historic infrastructure?

That is the thing, we do not have a blank canvas on which to draw. We are working with buildings that have been around for hundreds of years, and in some cases, even longer. Engineering is about making these things fit together now and be ready for the future.

We cannot ignore that when working with historical infrastructure, there is additional cost and risk. From an engineering perspective, retrofitting new technology is always possible, but it comes with a tension between cost and programme. So, when we have the opportunity to make changes, we need to plan for the future.

Let us say we are building a heat network, and we are digging up the road. We always want to determine whether we can also put in EV charging, run a private wire, or new data infrastructure. 

We can do all of those things as an infrastructure integrator, but we need the market, the developers, local authorities and central government to also be pulling in that same direction.

You were recently quoted as saying, 'We should put back better' when it comes to building and development. What does this mean in practice?

Our whole ethos is that short-sightedness does not help anybody. In fact, modern thinking in engineering circles is to do whole-life assessments of infrastructure projects.

These are now calculated on a 40-year basis, both in terms of carbon, cost and rate of return, so that the investment community looks at it as a long-term investment, rather than a 10-year piece of infrastructure which is going to need to be ripped up.

We are living in a society where resources are getting more scarce and increasingly expensive. So, in the long run, for society to benefit, we have to be smarter about what we install and how we install it. Short-termism, in my opinion, is a waste of both investors' and the taxpayers' money.

Look at the Thames Tideway Tunnel. That is a piece of infrastructure that we have put in that is going to protect overflow in London for the next 50 to 100 years.

Similarly, with heat networks, when they go into the ground, they are 50-to-60-year assets, and if well maintained, they can stretch to 100 years.

Why is it that most district heating networks and projects of that ilk are financed through public funding, and where does private funding sit within these networks?

The thinking around this has changed a lot in the last two or three years. One of the key trends I have been seeing from investors recently is that they prefer to be followers.

For them, the investment has to be derisked as much as possible because if you are leading the way, your risk profile is much greater, and therefore, you stand to lose more money.

If we look at the heat network sector, five years ago or so, the majority of the projects were public sector funded, using public works loans or central government funding.

That has completely changed now, with the majority of heat networks being privately funded.

Roughly one in four heat networks still has a public sector investment associated with it, but it is not the whole piece. They will often be in partnership with the private sector.

There are a few reasons for this. One is that these [district heat networks] are going to be a regulated utility, and that fits better with these large energy service companies.

Also, the cost of these projects, because they are getting bigger and bigger, far exceeds what the public sector is comfortable paying.

So, it is the right move in terms of getting this infrastructure built quicker.

The public sector and central government have led the way. They have opened up and made the market conditions favourable for investing in things like heat networks.

They will continue to have a vital role in regulating, permitting and, in some instances, taking a leading role in developing heat networks.

Is hybrid the middle-ground on the road towards energy transition?

Absolutely. That is where our infrastructure is going. It will be a much more connected, interdependent way of working. It is more efficient, it is easier to manage, and it is greener.

So, yes, a lot of investors and developers are coming to us and saying we want to integrate a data centre with a new fibre connection, with a new heat network with a hospital, a university, and we want to then put in EV and photovoltaics, and maybe we can put some wind farms.

Bringing together all of our respective experts in all of the various industry sectors means we can give our clients that holistic offering as an all-around systems integrator.

What needs to happen for the National Grid to keep up with all this renewable energy? 

If the heat networks, the electric vehicle charging, and the photovoltaics are the arteries of our nation, the grid infrastructure is the spine.

It is the thing that joins it all together. Without that as something fit for the future, we as a nation will not be able to develop the way we want to.

AECOM is working quite closely with the national grid, and we have experts in place looking at how the grid can go from where it is now to where it needs to be in the future.

If we are going to be investing in it over the next 10 years, we need to make sure that that is fit for the next 100 years.

The fact that we are having to turn wind turbines off because we do not have the grid infrastructure to get energy from point A to point B, and the fact that we have to pick up that bill, is something that needs to be addressed.

As a country, we are looking at how we modernise the grid. It is going to cost a lot of money, but it is an investment to ensure we are replacing it with better, and it will absolutely pay back.

From an engineering standpoint, do we have the right regulatory framework in place to support the development of these energy projects?

I am all for easing regulations and easing planning policies to make things go smoother, but checks and balances need to be maintained. We cannot have a system that is so easily manipulated that people build things in a disparate and unconnected way.

I welcome things like heat network regulation and policy, but things that are slowing us down are things like planning policy.

Offshore wind, for example, if you wanted to do a project today, by the time you get planning and you get a spade in the ground, it is 10 years. That is too long in the space of what we now know is an ever-emerging climate crisis.

But with things like planning reform and the review of electricity market arrangements (REMA) consultation that the government is undertaking, I am confident the necessary changes will be made to how we build these things and how much they will cost the bill payer.

What is the roadmap for you and your team over the next 12 months?

From a strategic standpoint, I want to see how things like heat networks can feed into our national infrastructure, into what the National Energy System Operator (NESO) is looking at, for example. They are examining the future of grid infrastructure at a national level.

On the heat network side, it is going to be an incredibly exciting time for us because policy and regulation will land, and all of the advanced zoning projects in the pipeline will start their journey. They will start getting designed and built.

Many projects are hoping to put spades in the ground by as soon as 2026.  That is going to be the next 12 months of my life – preparing for the construction stage of some pretty important schemes.