We are supporting the deployment of heat networks in Scotland to help us meet climate change targets.
Heat networks are a form of infrastructure consisting of insulated pipes and heat generation which supplies heat (in the form of hot water or steam) to homes and non-domestic premises, such as businesses and the public sector.
Heat networks are often more efficient than individual fossil fuel heating systems, and can also be run fully from renewables or recovered waste or surplus heat sources. They can allow the heat source to be changed to one compatible with Scotland’s climate change targets without further disruption to the heat users. Our 'What are ‘heat networks’?' blog explains more about the technology and its benefits.
Heat networks have the capacity to reduce – or remove – the emissions associated with heating buildings and the Committee on Climate Change has recommended that heat networks should form a part of Scotland’s future heat supply.
We have consulted twice on proposals to introduce regulation to the heat network sector. This would stimulate the deployment of district and communal heating by de-risking investment and increasing consumer awareness and acceptance.
The Minister for Energy, Connectivity and the Islands established the Heat Networks Regulation Working Group in May 2019 to provide advice to the Scottish Government on how best to support the accelerated deployment of heat networks in response to the global climate emergency, ahead of the preparation of legislation.
The Working Group provided its Recommendations Report on 3 December 2019 in which it outlines a number of recommendations including introduction of legislation of the sector.
In the Programme for Government 2019 to 2020, the First Minister announced plans to introduce Heat Networks (Scotland) Bill.
The Heat Networks (Scotland) Bill was published on 3 March 2020. The Bill introduces regulation of heat network sector in Scotland through:
- creating a Heat Networks Licensing system to ensure that those developing and operating the infrastructure are suitable to do so
- creating a Heat Network Consent system to ensure that local factors and assets are considered before approving new developments
- enabling the identification of Heat Network Zones – those areas where a heat network is the appropriate heat decarbonisation solution
- enabling the award of long-term but time-limited Heat Network Zone Permits – an exclusive right to operate a heat network to a single organisation within a Heat Network Zone
- conferring new rights on Heat Networks Licence Holders to facilitate the development and maintenance of the infrastructure
- introducing Transfer Schemes to provide a ‘Supplier of Last Resort’ and a means to fairly re-tender Heat Network Zone Permits
- requiring public sector building owners to assess the potential for their estate to connect to a heat network, in order to increase the robustness of Heat Network Zones
Through these measures, we expect to:
- attract greater investment in heat networks
- increase consumer and supply chain confidence in this emerging market
- reduce fuel costs for households and businesses, thereby contributing to Scotland’s statutory targets to eradicate fuel poverty and making our businesses more competitive
We undertook impact assessments to support policy development of the Bill:
- EQIA Results
- Fairer Duty Scotland Assessment
- Island Communities Impact Assessment
- Business and Regulatory Impact Assessment
- Children’s Rights and Wellbeing Impact Assessment
Alongside the Bill, we are continuing to demonstrate its strong support for the heat networks sector by:
- offering low-rate, unsecured capital loans to overcome a range of barriers via the District Heating Loan Fund (since 2011, we have offered over £15 million to 50 different projects)
- supporting the development of investment grade business cases to help projects secure public and private capital finance via our Low Carbon Infrastructure Transition Programme (LCITP)
- working with the construction sector to ensure that new homes consented from 2024 use renewable or low carbon heat – opening up a clear market opportunity for heat network developers and other technologies
- announcing a £50 million Heat Networks Early Adopter Challenge Fund – a ring-fenced fund for local authority heat network projects - as part of our Budget,
- introducing a district heating relief, guaranteed until 2032, in order to provide certainty to investors (more detail to be provided in due course)