Heat Network Fund: application guidance

Eligibility

Eligibility criteria

The Heat Networks (Scotland) Act 2021 states that a heat network can be defined as either a district heat network which is “a network by which thermal energy is distributed from one or more sources of production to more than one building” or a communal heating system which 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”. The following types of project will be eligible for funding under Scotland’s Heat Network Fund:

• new low or zero emission heat network projects
• new low or zero emission communal heating systems
• expansion of existing heat networks, with requirements to install additional zero emission generation
• decarbonisation of existing fossil fuelled heat networks

Proposals are welcome from zero emission heat network projects. They must have a:

• project location
• proof of technology concept
• end user for output identified

Scotland’s Heat Network Fund is an outcomes and results driven infrastructure investment programme. Projects must meet the following mandatory criteria:

1. Ability to demonstrate a contribution to our zero emissions heat targets, including delivering heat with low greenhouse gas emissions (MtCO2e) and reducing energy consumption
2. Ability to provide confirmation of other sources of funding/finance that make a contribution towards the final delivery costs of the project.
3. Ability to demonstrate additionality and requirement for grant support, including clear evidence of the funding gap to become an investable project.
4. Ability to demonstrate their organisation’s commitment to the Fair Work criteria.
5. Ability to demonstrate the project will provide heat at an affordable cost to consumers and support the eradication of fuel poverty.
6. The potential to have a positive and significant impact on the skills and supply chain in Scotland.
7. The project can demonstrate it will be commissioned by March 2026.

Further information will be provided in due course on the criteria projects will be scored against when seeking capital grant funding.

This financial support cannot cover:

• projects or technologies at research and development stage or any research and development related activities
• established generation technologies in Scotland such as large scale onshore wind, large scale biomass, or conventional gas fired CHP supported technologies
• developing technologies at technology readiness level 1-6

Funding availability

Grant funding will be made available to projects for the funding gap up to a maximum of 50% of the eligible capital expenditure of the project.

Where there is a clear counterfactual heating option, for example for new-builds or retrofits where the current system has come to the end of its lifetime, the funding gap will be based on the difference in cost between the heat network project and the counterfactual.

As part of their application, projects will be required to demonstrate the additionality of support through the fund, including the level of intervention required to deliver an investable project. As part of this, the funding gap can also be defined as the grant required to make the project investable for other organisations that are providing funding.