1. The Scottish Government consultation paper on Local Heat & Energy Efficiency Strategies ( LHEES) and Regulation of District Heating was a policy scoping consultation, designed to gather views to help inform further development of the proposals prior to more detailed consultations.
2. The consultation asked for views on the planning at local level of heat decarbonisation and energy efficiency programmes within Scotland's Energy Efficiency Programme ( SEEP) and ran from 24 January until 18 April 2017.
3. 87 organisations and individuals, from the following respondent sub groups, submitted a response to the consultation:
|Business & Industry||24|
|Network, Professional or Trade body||18|
|Third sector & Community||9|
Main Findings: Local Heat & Energy Efficiency Strategies to Support Delivery of Energy Efficiency and Heat Objectives of SEEP
4. Most of those who replied agreed that local authorities should have a duty to produce and implement a Local Heat & Energy Efficiency Strategy ( LHEES). Key themes included that this will be vital in taking the strategy forward, or to raise the profile of heat and energy efficiency in each area.
5. The themes of reducing energy use and heat waste, promoting decarbonisation of heat, and meeting targets on climate change, fuel poverty, energy security and affordable warmth were ones that respondents from all of the different sub groups returned to in this and in subsequent sections.
6. A key concern, and again this was seen across respondent types and in response to many of the questions, was that of the availability of funding, support or other resources to enable local authorities, and others involved, to produce or implement the LHEES.
7. In relation to separate strategies for each local authority, or joint strategies across areas, respondents felt this should be dictated by local circumstances. There were also comments, including some from those involved in the district heating industry, on the need to zone based on locally-available heat sources or areas of demand, rather than strict geographical boundaries. This need to allow flexibility for local requirements and conditions was another theme that appeared at a number of different questions and from across respondent groups.
Scope and Content
8. Most of the respondents who commented on the proposed scope and content for LHEES agreed with proposals; this included agreement that LHEES should set targets for energy efficiency and decarbonisation and include a costed, phased delivery programme that will meet local targets.
Main Findings: District Heating Regulation
9. The main sources of data available (or that could be available) to local authorities that would be useful or key to preparing and implementing such plans beyond the Scotland Heat Map and the Energy Performance Certificate ( EPC) Register, were: Business, Energy and Industrial Strategy ( BEIS) data on electricity and gas consumption; data from network operators or suppliers (perhaps making use of SMART meter data); and the Heat Map database. There were comments on the need for more robust data in order to ensure that the Heat Map is accurate and on the need for 'real time' data.
10. The broad principles for regulation outlined in the consultation were generally accepted and while there were various suggestions for priority areas, a key theme again, at this and other questions in this section, was the importance of tackling fuel poverty.
11. The main themes, from the question on key principles or approaches to inform how the regulatory approach manages risk, included fuel poverty as well as affordability. Consumer protection was another key principle identified by respondents and this included ensuring security of supply; another recurring theme across respondent groups and at many questions.
12. For industry, reducing risk was seen as key to reducing capital and operational costs; thus reducing costs for consumers.
13. The regulation of technical standards, perhaps in a way similar to that seen for other utilities, was also a theme that featured across responses.
Planning, Zoning and Concessions for District Heating
14. In relation to local authorities having the power through LHEES to zone areas for district heating, this was supported by many respondents, although fewer than half of all respondents gave a definitive answer to this question. The main theme to emerge was that zoning areas for district heating could be aligned to local and area plans for development. While this comment was seen in only a small number of responses at this question, it also features in responses to other questions.
15. There was little consensus as to how district heating zones should be identified, with respondents giving a variety of suggestions including, once again, the need to zone based on locally-available heat sources or areas of demand, rather than strict geographical boundaries.
16. In relation to concessions, there was general support for establishing exclusive concessions, with respondents, particularly local government respondents, identifying the reduction of risk to local authorities in terms of delivery and maintenance of district heating networks as an advantage of this proposal.
17. Other potential advantages mentioned by respondents were encouraging supply investment, providing certainty of supply and providing opportunities to develop networks and thus allow developers to take a long term view. The need to reduce risk for developers and to find ways to promote confidence and attract investment in district heating infrastructure were also recurring themes.
18. While many of those who addressed the question of whether local authorities should be responsible for issuing and enforcing concessions in their areas agreed, several of the small number that disagreed came from the local government group.
19. A key reason for those who did agree was the local knowledge that exists within local authorities along with the fact that they are responsible for other strategies, programmes and plans such as Local Development Plans.
20. However, as with other areas where proposals suggest responsibility should be placed with local authorities, resource implications, in terms of funds, time and expertise, were seen as a barrier.
21. Looking at the design of concessions, concession length was a key theme. This was also a theme that was seen at many questions with respondents commenting on the fact that concessions need to be long term to allow for the recovery of capital costs.
22. The size of the concession was also cited as an important consideration to ensure that any concession is economically attractive and financially viable to developers and investors.
23. Location is another theme that occurred across respondent groups and at several questions; specifically that consideration needs to be given to whether an area is suitable. Rural areas with low population densities were often cited as not suitable, but any instances where there is a great distance from anchor loads were also not seen as suitable, as were areas where there is an existing gas infrastructure and where gas might still be a cheaper alternative to district heating.
24. Also in relation to anchor loads, respondents noted the importance of ensuring concessions include key anchor users, giving examples like local authority or public sector owned buildings, large industrial centres, social housing or areas where there is already demand.
25. The question of implications of zoning and concessions for district heating networks raised more questions from respondents than it did answers and, again, there were concerns over consumer protection and the need for regulation, monitoring and review.
26. Most of those who addressed the question of whether the broad rights and responsibilities of concession holders set out in this document are appropriate felt that they are. However, respondents asked for more detail in relation to a number of points such as size, ownership, management and billing, among others.
27. The need for consistency across Scotland and for a central body to check on concession design and progress and to provide regulation and guidance was raised by respondents.
28. Respondents did want to see some flexibility to allow LHEES to be responsive to changing conditions while ensuring security and stability in long term district heating development models. For example, the LHEES will need to allow for emerging and low carbon technologies to be incorporated when they become cost effective.
29. The long term nature of LHEES was again emphasised and, in relation to long term ownership of heat network assets, post-concession, respondents wanted to see this transfer or revert to the local authority or a local authority holding company such as an energy service company ( ESCo).
Connecting Users to District Heating Networks
30. Many respondents said that anchor loads would be essential in making any new district heating scheme viable, although there would be a requirement for a long term commitment to using heat from the system. However, respondents also cited challenges in connecting anchor loads to heat networks.
31. Views were mixed on the proposed power to compel existing buildings to connect to district heating. Even among those who broadly supported the proposed power, several respondents qualified their answer and noted specific issues that would have to be considered. Some of these also felt that use of the power to compel should only be used as a last resort, with a preference for persuasion rather than compulsion; a recurring theme in this section.
32. Those supporting the proposed power felt that this would help facilitate greater uptake of district heating and create certainty for developers and investors.
33. When asked if the broad principles and criteria are appropriate, there was some support, although relatively few respondents addressed this question.
34. There was fairly broad support for socio-economic assessment at project level to include an assessment of the impacts on consumers of the requirements to connect with the customer; again reducing fuel poverty was seen as a priority.
35. There was also fairly broad support for local authorities to exercise powers to compel connection of existing buildings; respondents felt this would help to speed up growth in the district heating market. However, several cautioned that this power should be used only if economic advantage and a positive commercial basis can be proved, with no detriment to consumers.
36. Views were mixed on the question of whether mitigating risk by establishing exclusive concessions will lower financing costs and heat prices, although more agreed than disagreed. The main reason for agreement was, once again, that it removes a major risk and provides certainty to the developer; respondents felt that this should in theory lead to lower heat prices for consumers. A key concern, seen at previous questions and repeated here by respondents within the district heating development sector was that lower costs will only come about after heat revenues are de-risked to the level of current utility investors.
37. Respondents made a number of suggestions as to how regulations could best be designed. The key suggestion, albeit from a small number of respondents, was on the need for transparency of costs, which would offer protection for customers; and reductions in financing costs which could again feed through to lower heat prices.
38. In relation to the time length of concessions in order to attract investment, suggestions varied from 10 years to 50 years, although the majority noted the length of concessions needed to be at least 20 years, with some involved in district heating development suggesting 25 years but adding that any length should be appropriate to the area.
39. A majority of those, who addressed the question of whether compelling existing buildings to connect to district heating would mitigate heat demand risk, lower financing costs and help create an attractive investment proposition for district heating developers and financial institutions, agreed that it would. Some respondents added qualifications to their agreement, with suggestions again including that compulsion should be used as a last resort.
40. When asked for evidence of how much costs would be lowered or how regulations can be designed to best ensure this happens, few respondents commented; a small number said that individual areas have unique risk profiles and many variables that can impact on cost per unit of heat.
41. The main theme from responses to the question on the relationship between LHEES and local development plans, and how planning policy and development management should support the anticipated role of LHEES for new buildings, was, once again, that Local Development Plans and LHEES should be aligned.
Connecting Surplus Industrial Heat
42. Respondents were asked what challenges and opportunities they saw for existing industrial plant to connect and sell waste heat to nearby district heat networks, both now and in the future. Several concerns emerged from responses and these were also given as examples of barriers to selling heat. Concerns included some of the key themes that have already been mentioned previously, particularly reliability of supply and capital costs, and that the risk (both legal and political) posed by this proposal could make investment less attractive. An additional concern raised here was over the quality or nature of waste heat and whether it could be suitable or viable for supply, as waste heat can often be at a lower temperature and may need to be boosted.
43. The availability of data, from existing industrial plant with the potential to supply surplus heat, was seen as important, with several respondents saying there should be a requirement to provide this data to public authorities, although others suggested a voluntary approach could be tried in the first instance. Reasons given for agreeing with a mandatory approach included the need for an accurate Heat Map.
44. More respondents agreed with an enabling approach than felt it should be a requirement, although small numbers commented. Some suggested the need for incentives such as a reduction in CO 2 tax, off-setting the cost of connecting or business rates reductions.
45. Respondents were fairly evenly split over whether they felt the Scottish Government, SEPA or local authorities should carry out the role of voluntary mediation; again only small numbers commented. The need for the body to have skilled people with a technical background and expertise in the field was seen as important.
46. Around half of respondents commented on compulsory mediation; most of those that did so agreed that in some circumstances (if requested) compulsory mediation is needed; some said that there may be cases where this is needed to ensure the supply.
47. Again, around half of respondents commented on whether, if compulsory mediation was not successful, a more directive approach should be used. Most of these respondents said that it should, again security of supply was a main reason, and as has also been seen at previous questions, there were comments that compulsion should be used as a last resort.
48. SEPA or the Scottish Government were the main suggestions for the body who should carry out the role of compulsory mediation or direction.
49. Most of those who addressed the question on requiring new industrial plant to be 'district heating-ready' agreed with this requirement, saying that costs will be reduced if this is incorporated at the design or early stage of development.
50. However, half of those who agreed qualified their response with many saying that that this should be a requirement only when the plant is in an area where the supply can be used.
51. Local development plans, planning regulations and consent were seen as the most appropriate ways of ensuring that new industrial buildings connect to district heating networks. Again, the need to ensure that decisions are appropriate for the local area and for the business were stressed.
Technical Standards, Consumer Protection and Licensing
52. Almost all respondents, who provided a definitive response, agreed that, as district heating becomes more widespread, it will need to become a licensed activity. Once again, consumer protection and consistent standards were seen as important issues that would be protected by a licensing system. Respondents suggested the Heat Trust and Chartered Institution of Building Services Engineers ( CIBSE) as measures that could be included. There was also a view, however, that adherence to strict standards might negate the need for formal licensing.
53. Although relatively few respondents commented on the issue, the view expressed by most of those that did comment was that a licensing system is the best way to confer enabling powers on operators.
54. A wide range of principles, objectives and considerations to guide the development of a Scottish district heating licence were noted in responses, each mentioned by small numbers of respondents.
55. Some respondents felt a licensing system might prove onerous, overly bureaucratic or costly and so act as a barrier to operators, particularly for public sector or small organisations that may wish to take out a licence.
56. The need to ensure access to new entrants, communities or smaller schemes was seen as important.
57. On the question of who should issue District Heating Licences and ensure that technical standards are being met, most of the small number who commented suggested a new Energy Agency; smaller numbers said the Scottish Government or SEPA.
58. While a small number of respondents felt that the benefits of the concession area would outweigh the costs of the licensing arrangements, a similar number said it was not possible to tell at this stage.
Enabling Activity and Additional Areas for Consideration to Support our Regulatory Approach
59. Around half of all respondents provided views on the best approach to ensuring that potential customers understand the differences as potential customers of a heat network. The main themes included the need for customer engagement, consultation and education.
60. Respondents were asked for evidence regarding analytical skills, resources and techniques that could support development of LHEES, particularly where these are not currently used by local government. The main theme from the relatively small number that replied was that central government input will be required to create Scotland wide, standardised information, data and resources from a central body and make this available to local authorities. Several, particularly from the local government group, again highlighted a lack of either the necessary specialism and / or resources in local authorities to support development of LHEES.
61. When asked to provide any evidence regarding the anticipated cost of preparing LHEES, few commented and, for those that did so, the main theme was that costs are expected to be extensive.
62. Again, few commented on evidence regarding the additional skills and resources needed to meet the requirements of the potential local authority role of district heating regulation; respondents again mentioned a lack of many skills as well as a lack of resources in local authorities.
63. Respondents were asked what support and resources local authorities will need to produce LHEES and implement the potential local authority role of district heating regulation, and which organisations might be best placed to provide these. The main recurring themes focussed once again on the need for financial resource for additional in house staff and / or procurement of consultancy services. The need for technical resource and strategic guidance was also a theme again here.
64. Looking at how support could change over the different phases of development, introduction and implementation of any regulation, respondents simply expected the support required to reduce as expertise builds at a local level.
65. In respect of the wider regulation of the heat market to ensure decarbonisation, many of the comments made at this question focussed not only on decarbonisation but also the importance of heat regulation ensuring sustainability. There was reference to social, economic and environmental sustainability and comment on the importance of prioritising low carbon sources over those from fossil fuels and avoiding reliance on fossil fuels. In addition, there was comment that regulation should focus on principles around sustainability and decarbonisation linked to strategy.
66. Respondents provided a range of suggestions on when decisions should be taken on the future of the gas network with a number saying 'as soon as possible' and others giving suggestions covering the next 5 to 10 years.