Heat Network Fund: application guidance

Overview

We are making £300 million available over the next parliamentary session to support the development and rollout of zero emission heat networks across Scotland. This fair and open fund aims to stimulate commercial interest, investment and maximise Scotland’s vast potential in the low carbon sector, whilst contributing to the positive progress on reducing Scotland’s greenhouse gas emissions.

The Heat in Buildings Strategy recognises that our delivery programmes must now move to a new phase – one capable of supporting deployment at an unprecedented scale. Our delivery programmes – and auxiliary support – will need to underpin the mass move from fossil fuel reliant systems to low and zero emissions heating in tandem with achieving a good standard of energy efficiency across all buildings.

Projects must be of a large scale and must be based in Scotland. As well as delivering emissions reductions, successful projects will also demonstrate a positive social and economic benefit for Scotland. Scotland’s Heat Network Fund wishes to consider support for projects at capital readiness that can clearly demonstrate a funding gap. For capital-ready projects, support may be offered in the form of financial assistance based on this funding gap, up to a maximum of 50% of the total eligible capital costs of a project where capital costs cover financial costs associated with the build and installation of an exemplar project.

Scotland’s Heat Network Fund will build upon our highly regarded Low Carbon Infrastructure Transition Programme to make financial support available to facilitate the delivery of low or zero emission heat network projects across Scotland.

About heat networks

Heat networks, as defined under the 2021 Act, include both district and communal heating systems. These are defined below:

• a district heat network is defined as a network by which thermal energy is distributed from one or more sources of production to more than one building
• a communal heating system is a system by which thermal energy is distributed from one or more sources of production to one building comprising more than one building unit

Heat networks, depending on their fuel source, can help reduce greenhouse gas emissions. They can also, in certain circumstances, reduce energy bills to help tackle fuel poverty. Heat networks therefore have an important role to play in achieving the ambitions set out in the Heat in Buildings Strategy, including the target to have zero emissions heating in at least one million homes, and the equivalent of 50,000 non-domestic buildings by 2030.

Heat networks are a tried and tested technology used extensively across Europe. Currently heat networks supply only 1.5% of heat in Scotland but are a key strategic technology for reducing emissions from heating our homes and buildings. Heat networks are a low regret option as they are agnostic of fuel sources and are capable of being changed over time.

As part of the Heat Networks (Scotland) Act we have new targets for the amount of heat to be supplied by heat networks. These require the combined supply of thermal energy by heat networks to reach 2.6 TWh of output by 2027 and 6 TWh of output by 2030. This is 3% and 8% respectively of Scotland’s current heat supply.

Objective of the Fund

Our ambition is for a heat network sector that:

• delivers affordable clean heat supporting the delivery of emission reductions and fuel poverty targets
• develops local supply chains and attracts new public and private investment
• contributes to the development, and operation, of an integrated resilient energy system

The objectives of Scotland’s Heat Network Fund are to:

• stimulate and accelerate the delivery of zero emission heat network opportunities across Scotland through capital co-funding
• help prepare the market for future regulations including the Heat Network (Scotland) Act 2021 and support meeting our deployment targets
• support the reduction of our heat demand and ensure poor energy efficiency is no longer a driver for fuel poverty
• create smart resilient heat networks that provide us with a reliable and affordable source of heat
• support a secure supply chain with high value, local, sustainable jobs across Scotland and help people to transition to new, secure jobs as part of a just transition
• support the delivery of heating systems that enable and efficiently use Scotland’s renewable energy sources
• support the delivery of heat networks that enable flexible and stable operation of our energy networks

Pre-capital support

Heat networks are technically complex infrastructure projects requiring a range of specialist expertise. The Heat Network Support Unit (HNSU) will support the growth of heat networks by addressing key challenges in the pre-capital stages of heat network development and building capacity across the public sector to deliver successful projects.

Working primarily with public sector organisations, the HNSU will:

• identify and support prospective heat network projects, offering advice and grant funding for pre-capital stages of works, e.g. developing feasibility studies and outline business cases 
• offer advice on and support toward procuring technical, financial and legal advisors 
• build capacity and expertise across the public (and private) sector by creating best practice and standardisation on developing and running successful heat network projects in Scotland

The HNSU is sponsored and managed by the Scottish Government, with Scottish Futures Trust and Zero Waste Scotland as core partners. 

Projects can find more information on the Heat Network Support Unit website or contact HeatNetworkSupport@gov.scot.

Who can apply

Scotland’s Heat Network Fund is open to all public and private sector applicants. Proposals will be welcomed from a consortia of organisations. In the case of a consortia proposal, a lead body must be identified that will be responsible for all aspects of the management and delivery of the project including accepting responsibility on behalf of the consortia for all offers of funding and any associated conditions of funding.

How to apply

Proposals can be submitted to the fund at any time. This fund will remain open to proposals with quarterly reports to be provided with committed spend against the allocated budget.

Projects seeking support through Scotland’s Heat Network Fund should complete the expression of interest form and provide this to HeatNetworkFund@gov.scot. The project lead will then be contacted within 10 working days by a member of the Heat Investment team to have a preliminary discussion.