Scotland's Heat Network Fund: application guidance

What you can apply for

You can apply for enabling costs, commercialisation costs and capital costs as detailed below.

Enabling costs

Eligible enabling costs  

Projects can apply for enabling support for up to 10% of the project’s CAPEX up to a maximum of £100,000 subject to programme budget availability. The enabling grant is sourced from government resource budget and can be used to cover project management and external consultancy costs associated with the delivery of the heat network project.  

The SHNF enabling budget is particularly constrained. To receive enabling grant, applications must clearly demonstrate that enabling support is required. SHNF will take into account previous resource or development support provided to the project by other Scottish Government programmes when considering a request for enabling grant. 

Enabling grant must be provided alongside the capital grant. For projects that require pre-capital development support, please see the Heat Network Support Unit (more information on the HNSU is provided at section 4.1).  

Commercialisation costs

Projects may be considered for commercialisation support for up to 10% of the project’s CAPEX up to a maximum of £1 million, subject to programme budget availability. The use of the commercialisation grant will be agreed with the Scottish Government on a case-by-case basis.

In order to receive commercialisation costs, projects seeking capital support from the SHNF will be required to demonstrate that the project will progress to the full capital delivery phase and will be required to provide confirmation that the costs can be capitalised within the applicant’s own financial accounts.  

Capital costs

Eligible capital costs  

CAPEX, in relation to heat network projects, is the overall build cost, which is intended to be the anticipated spend to acquire, upgrade or maintain depreciable and tangible long-term physical assets over the construction period of the project. Where possible, applicants must demonstrate the project’s expected final capital costs. If final costs are still being refined, or based on reliable estimates, evidence must be provided to substantiate any judgement areas.  

Eligible capital costs include: 

• financial costs incurred for the purchase of physical assets 

• costs of project build, installation and construction 

• costs of project deployment and commissioning 

• non-reclaimable VAT for eligible capital costs 

The SHNF will provide grant funding for the costs of installing the heat generation equipment (including an energy centre but excluding grid connection costs) and heat network infrastructure up to and including heat interface units. Thermal storage within a building unit or home can also be eligible where the counterfactual is a combi-boiler.   

Typical eligible heat network capital cost items may include:  

• Energy centre  

• Zero direct emissions heat sources and associated items 

• Thermal storage  

• Heat interface units 

• Heat network spine and distribution pipework  

• Civil/ground works  

• Metering and monitoring equipment  

• Preliminaries for the delivery of eligible capital items 

The following heat network infrastructure elements are eligible up to and including secondary distribution:

• Accessing heat sources of installing heat generation 

• Low carbon generation  

• Primary Heat Network distribution 

• Secondary distribution 

Tertiary distribution costs - for example, items such as radiators that are located downstream of the heat interface unit - are ineligible.  

Ineligible capital costs 

Ineligible project costs include (but are not limited to): 

• costs incurred prior to the agreed project start date 

• costs for work undertaken after the contractual end of the project

• costs and fees for feasibility, development and design for the project

• staff costs where staff members are not contracted to work 100% on activities funded by SHNF 

• notional costs and in-kind contributions

• any VAT reclaimable by the grantee for eligible capital costs 

• any non-essential subsistence costs, meal allowances

• interest and service charges arising from hire purchase, leasing or credit arrangements 

• advertising, marketing and entertaining

• profit earned by a subsidiary or related enterprise or person(s) in providing materials, subcontracting, consultancy or trials/testing

• Directors’ dividends

• certification fees

• contingency allowances 

• costs of printing operating, service and maintenance manuals

• costs of licensing in background intellectual property when the intellectual property is being licensed from a subsidiary or related enterprise or person(s)

• training costs related to sales or distribution of the developed product, process or service

• the purchase of land and buildings

• the cost of preparing the SHNF application

• recruitment and relocation costs

• other expenses beyond those outlined in the eligible cost section above

• costs associated with purchase fees for necessary licenses or other consultancy and legal fees 

• statutory activities including Grants In Aid (GIAs), consents and planning activities 

• grid connection costs

• grid upgrade costs  

• hire or rental costs 

• retainer fees

• insurance costs

• office equipment and furniture

• PPE and safety equipment 

• Tertiary distribution capital items that are downstream of the heat interface unit (e.g. heat emitters)