Heat network licensing: partial business and regulatory impact assessment

Executive summary

Issue and why it needs to be addressed

The heat network sector in Scotland needs to expand if we are to reduce our reliance on fossil fuels, improve our energy security and ensure we meet our climate targets. At present some heat networks report experiencing challenges when installing or maintaining essential apparatus, for example when accessing land or road works are required. Without government intervention these challenges can delay or disrupt heat network development, slowing expansion of the sector and potentially discouraging investment. For example, at present if a proposed heat network’s pipes would pass under a road or railway line the developer needs to negotiate land access on a case-by-case basis. Costs and timescales can depend on the landowner, and there is a risk access will not be granted which could require re-routed pipework or even make the project undeliverable. Land access and other rights are also very important for maintenance and repair of operational networks, especially in emergency situations. Our proposals seek to remove these potential challenges and increase confidence in the sector.

Intended outcomes

Introduce an opt in installation and maintenance licensing regime to allow heat network entities to access the statutory rights and powers which they need to carry out essential work, related to their heat network. The licence application would be subject to suitability checks prior to any licence being awarded.

Options

This Partial BRIA identifies three options:

• Option 1: An opt in installation and maintenance licensing regime (this is the proposal being consulted on).
• Option 2: A mandatory heat network licensing regime.
• Option 3: Do nothing.

Sectors affected

The proposal for an opt in licensing regime is expected to affect a limited number of large organisations involved in heat network installation and/or maintenance, who decide to apply for a licence. This may include private businesses, local authorities and public sector bodies such as hospitals or universities. The proposed regime is non-mandatory and no organisations will be required to obtain a licence. Any organisation involved in heat network installation or maintenance will be able to reach their own decision whether to apply for a licence or not.

Engagement completed, ongoing and planned

Initial proposals for the scope of rights and powers were consulted on as part of the Heat Networks (Scotland) Act 2021. Engagement with stakeholders across the private and public sectors has continued since then, primarily focused on how best to implement the 2021 Act proposals in light of new UK legislation. Engagement has also taken place with UK Government and Ofgem to ensure alignment of regulation.

Anticipated impacts (intended and unintended, positive and negative) and mitigating actions

There will be a cost for organisations which choose to apply for an installation and maintenance licence. Costs relate to staff time to complete the application and payment of proportionate fees to offset the costs of the licence regulator. These application costs are expected to be minimal and justified by the benefits granted to licence holders. Licence holders will have access to statutory undertaker rights and powers which will help overcome existing obstacles to heat network installation and maintenance. This in turn may increase investor confidence in heat network projects in Scotland.

As explained further in the ‘Options considered so far/still open’ section below, our proposals are expected to remove double regulation and streamline requirements on the sector when compared to alternative regulatory options available under existing legislation. A more streamlined regime should also reduce costs for the regulator and applicants.

Enforcement/ compliance

Not covered by this Partial BRIA.

Recommendations/ implementation plans

Option 1 is recommended because it achieves our policy aims and is consistent with the Scottish Government’s Better Regulation Principles.

Evaluation and monitoring of implementation/ review of BRIA

Not covered by this Partial BRIA.