Green Heat Finance Taskforce: report - part 2

9. Annex 2 - Examples of place-based models in practice

There is a wide range of local authority led or delivered clean heat initiatives in Scotland and across the UK. Some examples are summarised below:

1. Orkney – Local Renewable Integration: the Orkney Islands have become a hub for renewable energy innovation due to its strong and abundant wind and marine resources. The islands use locally generated renewable electricity for heating through heat pumps and district heating systems. The ReFLEX Orkney project aims to create an integrated, local energy system that uses renewables to meet the energy demands of the community. This place-based approach leverages the islands' geography and resources to support decarbonisation.

2. Glasgow – Urban Heat Networks: in Glasgow, the focus has been on developing district heating systems, which are networks that provide heat from a central source to multiple buildings. These systems often use waste heat from industrial processes or energy efficient, low carbon technologies like heat pumps. An example is the Glasgow City Council’s commitment to install district heating as part of the city’s Climate Emergency Action Plan.

3. Highlands and Islands – Biomass and Local Materials: in the rural Highlands and Islands, a different approach is needed due to low population density and remoteness. Communities in these areas are using local materials to build highly energy efficient homes, such as the Passivhaus, which requires very little heating. This place-based solution takes advantage of local resources such as forests for biomass and focuses on reducing heating demand through better building standards.

4. Edinburgh – Energy Efficiency and Retrofit: in Edinburgh, the focus is more on retrofitting older buildings. Given the city’s historic architecture, the challenge is adapting these buildings for modern energy systems without compromising their heritage value. Place-based solutions here include upgrading insulation, installing modern heating systems and integrating renewable energy where feasible. This reduces energy demand and carbon emissions, while preserving the city's character.

5. Aberdeen – Offshore Wind and Hydrogen: Aberdeen is known for its oil and gas industry, but it is also transitioning to renewable energy. The city has been investing in offshore wind farms and developing hydrogen energy projects, such as the Aberdeen Hydrogen Bus Project, which uses green hydrogen to power public transportation. In heating, the place-based strategy is to leverage offshore wind to produce hydrogen, which can then be used for domestic and industrial heating needs.

Each of these Scottish regions is developing a decarbonisation strategy that reflects its local strengths – whether that is wind, marine energy, biomass or the ability to retrofit older buildings. Focusing on such varied and tailored place-based solutions in this can enable significant progress towards achieving its carbon reduction targets, whilst also addressing the very particular needs of its diverse communities. Leveraging local assets and resources in support of a place’s decarbonisation journey is also happening elsewhere in the UK and internationally.

Greater Manchester Combined Authority (GMCA) have worked with GFI to explore five innovative financial solutions in the region that will offer homeowners and landlords access to attractive sources of private and blended capital to fund energy efficiency upgrades to their homes. They also explored a Net Zero Neighbourhood approach in the southern district of Wythenshawe, which now forms part of the Combine Authority’s £8 million funded Local Net Zero Accelerator programme.

Building on work of London Borough of Hounslow to develop a demonstrators focused on its social housing, London Councils^[67] has created a London Net Zero Neighbourhood cohort, which is exploring how to develop a programmatic approach for a group of demonstrators for local authorities. London Councils has now commissioned Living Places to design and cost a comprehensive place-based demonstrator programme for this cohort with clear parallels to recommendations in this report around the need for a Central Unit leading an overall programme.

West Midlands Combined Authority initiated a Net Zero Neighbourhood demonstrator programme in 2021, with an initial demonstrator being developed in the Brockmoor area of Dudley. This programme has now received a significant boost of £6 million funding from DESNZ as part of the Local Net Zero Accelerator (LNZA) which will see additional demonstrators developed in each of the other six constituent local authorities during 2025. The goal here is to create a Combined Authority scale portfolio of projects and explore the overlap with broader generation and heat investments across the region.

Bristol City Leap is an innovative partnership approach involving a twenty-year joint venture partnership between Bristol City Council, Ameresco and Vattenfall Heat UK, designed to accelerate green energy investment and decarbonise the city. Over the next five years, Bristol City Leap will deliver nearly £500 million into low carbon energy infrastructure – such as solar, wind, heat networks, heat pumps and energy efficiency measures – all of which will help Bristol become carbon neutral by 2030.

Bristol City Leap was principally designed to avoid the drag of repeated ongoing public procurement for delivery of individual projects by adopting a long-term programmatic approach. During the first five years of the partnership, at least £424 million will be invested in a range of large infrastructure projects, including the significant expansion of Bristol’s award-winning Heat Network, which provides local businesses and residents with access to reliable, affordable low carbon heat from sustainable sources. Solar panels and low carbon heating systems will be installed at local schools, the council’s social housing will be made more energy efficient, and substantial investment will go into community-owned renewable energy projects.

Building on this, Bristol City Council is also currently testing a programmatic approach in its Innovate-UK funded Mission Net Zero project, looking at a Net Zero Neighbourhood approach aligned to the heat network investment, which is already coordinated with the City Leap. The City Council is also commissioning a Regional Climate Investment Plan for Bristol and the three neighbouring local authority areas to bring the full range of investments required into a single investment portfolio.

Budapest serves as good example of a Central Eastern European city whose housing stock is in poor technical condition, yet almost completely in private ownership. Many current owners do not have sufficient funds to invest into their buildings with huge infrastructure gaps related to energy efficiency and energy poverty also prevalent in the region.

Budapest receives only a fraction of EU funds due to the high level of GDP per capita; and its municipal government has been deprived, by central government, of its main income sources, leaving it unable to intervene in the housing market without outside support. However, Budapest has committed to develop a pilot to develop retrofit finance models in collaboration with commercial banks and international financial actors. It will set up a Climate Agency at local government level to coordinate action amongst stakeholders, designed to help ensure that project development is informed by relevant specialists and financing secured.

The Netherlands also plans to test how local public climate finance could leverage funding from private and government sources. Its main tool will be District Investment Platforms set-up in the seven largest cities, and where government, companies, residents and investors will co-create joint district investment plans. This framework is aimed at speeding up investments and ensuring their effectiveness by developing coherent plans taking account of stakeholder views, project pipelines, budgets and possible financial partners at district level.

The pilot is based around multi-city collaboration, with local authorities, accepting that pilots run in isolation will not be successful. This offers potential to create larger scale, enable pilots to be tested in a wider range of circumstances and foster partnership working across layers of government and with industry and the public.