Draft Heat Networks Delivery Plan

If one of the aims of this Draft Plan, and indeed the Heat in Buildings Strategy, is to tackle fuel poverty then yes, the proposals will unfairly discriminate against those groups who tend to suffer most from the effects of fuel poverty, specifically the elderly, disabled, and women (as defined by sex). The impacts on the former two groups are well known and so don’t merit repeating here however, there is an increasing body of knowledge on the impacts of fuel poverty on women compared to men. For example, women (at least in Western nations) are more sensitive to cooler temperatures than men, and women and men have different energy needs. However, women are generally more willing to change their behaviour than men. Furthermore, as women can have children and are more likely to be single parents, there is a further need to avoid discrimination by aligning measures to tackle fuel poverty with measures to tackle child poverty [1].

This discrimination ultimately arises from the Scottish Government’s continued failure to understand that policies aimed at decarbonising the built environment and tackling fuel poverty must be based on using real (as opposed to modelled) data (see our answer to Q3). Therefore, it could easily be argued that all policies based on modelled data (i.e., EPCs as they stand and under the proposed ‘reforms’) are inherently discriminatory, and therefore open to legal challenges.

In addition, significant interventions, such as may be required to connect households to heat networks as part of the effective holistic ‘whole house’ retrofits can require the short-term decanting of occupants. Here there lies another risk of discriminating against certain groups, for example, autistic adults and families with autistic children, if sufficient support measures are not in place before and during the period of decanting. This problem can also apply to elderly and disabled people. In our experience, many housing associations and energy companies are already well-versed in supporting these groups when decanting is needed, but this is not a uniform picture and has come about in spite of the lack of support and guidance from the Scottish Government. For example, we have yet to see any evidence that the needs of these people, and the costs of providing such support, have been factored into the Heat in Buildings Strategy and, indeed, no such question in relation to discrimination was included in the consultation on that Strategy.

Reference

[1] Melone, H.A., 2019. Gender-based perspectives of fuel poverty in Scotland. MSc dissertation, Glasgow School of Business and Society, Glasgow Caledonian University.

See our answer to Q1.

By far the most important consideration is using real energy data.

From attendance at a Scottish Government workshop on the Heat Networks Act, we are aware that little or no consideration of real energy data (as in measured / monitored consumption with at least yearly granularity for domestic properties, and half-hourly data for non-domestic buildings) has underpinned the Heat Networks Act, and this is also evident in the wording of this Draft Plan. We have already responded extensively to the Scottish Government’s completely inadequate proposals for ‘reforming’ Energy Performance Certificates, and therefore reiterate the criticisms made in that document [1].

A critical factor for ensuring new heat networks are successful and existing ones can expand effectively is the availability of robust and accurate data on supply and demand. Multi-technology heat networks require significant up-front investment and longer lead-in times than for standalone grid-connected renewable solutions, and this investment (in costs and time) plays to the professional instincts of engineers to design networks to meet maximum levels of aggregate peak demand, resulting in many district heating networks being greatly oversized. This makes sense if you’re an engineer worried about being held responsible for complaints from householders when a heat network doesn’t meet demand under the worst-case scenario of all householders on a network boosting their heating to the maximum settings and running showers and baths when outside temperatures drop deep into negative numbers. However, in reality, such scenarios rarely, if ever, occur, and so oversizing invariably works to drive up capital and operational costs to developers and customers, extending the time needed to recoup investments, and reducing the marginal profits from selling heat long beyond the point at which the costs should break even [2].

A further complication arises when demand is based on modelled data (i.e., BREDEM / SBEM / SAP / rdSAP / EPCs), which are prone to both over and under-predicting demand. The continued belief in the validity of EPCs (as they stand and under the proposed ‘reforms’) is, we would argue, the single biggest failing of the Scottish Government’s policies for decarbonising the built environment and tackling fuel poverty.



References

[1] Baker, K.J., Mould, R., Wise, F., & Toke, D., 2021. Response to the Scottish Government’s Draft Heat in Buildings Strategy Domestic EPC Reform Consultation. Response by the Energy Poverty Research initiative; The Built Environment Asset Management (BEAM) Centre, Glasgow Caledonian University; Common Weal; & 100% Renewable UK. Available at: https://drive.google.com/file/d/1bxtqw2qMahD2VqZlqJQsRgN4gKa9wX2E/view

[2] Millar, M-A., Elrick, B., Jones, G. et al., 2020. Roadblocks to Low Temperature District Heating. Energies 13(22): 5893. https://doi.org/10.3390/en13225893

The Scottish Government’s assumption that fuel poverty is driven by four drivers (low household income, high household energy prices, poor energy efficiency of the home, and how energy is used in the home) is a continuation of the misguided belief that the condition is driven largely by technical and economic factors, and this is then used to justify the continuation of the ‘fabric first’ approach to tackling it. We have long argued that this approach is deeply flawed, and that a switch to a ‘folk first’ approach is needed, and our work on this has been internationally recognised [1].

As regards delivering successful heat networks, encouraging members of the public to accept significant interventions to their properties and / or to change their energy behaviours to optimise the benefits of district heating will require a concerted effort to educate them; and poor education is itself a driver of fuel poverty that is ignored by ‘fabric first’ approaches.

A 2017 survey conducted by the UK’s Association for Decentralised Energy found that only 19% of respondents knew what district heating is (70% responded no, and 11% responded don’t know), and that attitudes to DHS were most negative amongst older people and those on lower incomes [2]. Resistance amongst older age groups may be related to the UK’s history of deploying, and often poorly managing, DHS in poorer communities, and so tackling such lack of knowledge and negative attitudes will require a concerted effort to ensure new heat networks are managed to a high standard, and to educate the public about what they are and their benefits. In this respect we find it very concerning that the word ‘education’ does not appear even once in this consultation document.

We also wish to comment that, if we build policies on the assumption that DHS save carbon and mitigate fuel poverty being a universal truth, when they evidently are not, we will fail to prevent harm to our vulnerable households. If there is a lack of understanding the limitations and capabilities of district heating systems within Government it will be inevitable that polices developed will fall short of what is needed, and delivered developments will fall short of expectations.

References

[1] Baker, K.J., Mould, R and Restrick, S., 2018. Rethink fuel poverty as a complex problem. Nature Energy, 3: 610-612. https://doi.org/10.1038/s41560-018-0204-2

[2] Communication Works, 2017. Winning Hearts and Minds: Scenario-driven stakeholder analysis on how to make District Heating successful in the UK. Available at: https://communicationworks.eu/eng/wp-content/uploads/sites/2/2017/08/UK_District_Heating_Communication_Works_2017-1.pdf

Based on a wealth of evidence, for the last ten years we have consistently argued that the adoption of a Danish-style Heat Supply Act should be a fundamental cornerstone of efforts to develop district heating in Scotland, and implemented as a precursor to zoning (e.g., [1]). In light of this experience, we confidently predict that we will still be arguing for this in another ten years’ time, by which time the deployment of district heating in Scotland will have not met the targets set out in this consultation, and those civil servants and politicians responsible for the failure will have long departed to other jobs.

Reference

[1] Baker, K.J., & Mould, R., 2019. Just Warmth: Developing equitable and sustainable district heating systems in Scotland. A Common Weal policy paper, 12th May 2019. Available at: https://commonweal.scot/policies/just-warmth/

This answer relates to heat networks in Scotland in general. We have knowledge of specific heat networks through Dr Mould’s direct experiences these however, providing individual commentaries to a non-expert audience would risk drawing too much attention to specific issues that invariably require a high degree of contextualisation, and may also risk the identification of individuals in a public document.

From long and bitter experience, we have to conclude that one of the key challenges, if not the most fundamental one, is addressing the problem of the lack of technical knowledge amongst civil servants, politicians, and influential delivery companies - particularly the Energy Saving Trust. This is one of the reasons behind our proposals for a Scottish Energy Development Agency (SEDA), whose roles would include acting as a centralised source of technical expertise [1,2].

A further challenge that the SEDA is designed to tackle is the need for strategic planning and deployment of heat networks. This highlights another challenge not being addressed under current practice or this Draft Delivery Plan, which is the lack of community capacity in areas where 4th / 5th generation heat networks have the greatest potential to address fuel poverty, and the significantly higher data and resource costs of justifying, designing and deploying renewable energy heat networks (for these areas and compared to less technically-demanding renewable energy projects).

Community ownership has been found to help address a key barrier to the deployment of successful heat networks, that of a lack of knowledge and poor perceptions amongst the public [e.g., 3], and has been found to be a key factor in the success of other renewable energy projects [e.g., 4]. With this in mind, we note that the Draft Delivery Plan refers to community engagement but not to community ownership, or the consideration of ownership models more widely.

Another challenge that emerges from these is how effectively the major developers of heat networks will be able to engage with the Scottish Government, given its technically very poor record in the field, an in decarbonising heat supplies more generally. This consultation adds to the perception that there are too many issues that have not been sufficiently understood, or even thought about. This is not a good image to portray to companies who will need to make substantial investments in heat networks in Scotland, and the recent pronouncements in Holyrood by the Minister for Zero Carbon Buildings in relation to the Heat in Buildings Strategy are a particular cause for concern, as they strongly imply that he has a completely insufficient understanding of his brief.

References

[1] Baker, K.J., Morgan., G., Mould, R., & Wright, I., 2019. Powering Our Ambitions: The role of Scotland’s Publicly Owned Energy Company and the case for a Scottish Energy Development Agency. A Common Weal policy paper. Available at: https://commonweal.scot/policies/powering-our-ambitions/

[2] Baker, K.J., 2020. The case for a Scottish Energy Development Agency. Nuclear-Free Local Authorities group, Glasgow, 24th January 2020. Available at: https://drive.google.com/open?id=1OOxEQEg72815BR81Aa6NL55uKqpPJ9jS

[3] Communication Works, 2017. Winning Hearts and Minds: Scenario-driven stakeholder analysis on how to make District Heating successful in the UK. Available at: https://communicationworks.eu/eng/wp-content/uploads/sites/2/2017/08/UK_District_Heating_Communication_Works_2017-1.pdf

[4] IRENA, 2020. Community-ownership Models: Innovation Landscape Brief. Available at: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jul/IRENA_Community_ownership_2020.pdf?la=en&hash=A14542D0C95F608026457B42001483B9B82D1828

Many of Scotland’s existing heat networks, almost all of which are non-renewably fuelled, are victims of the Scottish Government’s continued failure to adopt a strategically-planned approach to their deployment (again, something the SEDA proposal is designed specifically to address). They are also commonly situated in highly urbanised areas, which limits the potential to retrofit renewable energy systems (such as large scale solar thermal arrays and water source heat pumps), and the inter-seasonal heat stores that have been critical to the success of DHS in countries such as Denmark. Many of the existing systems could, in theory and at least partially, be converted to biomass, but this raises concerns about the sustainability of biomass fuel (if imported), the economic costs and benefits (the economic potential of sustainable biomass waste falls off a cliff unless it is sourced very locally), and the emissions costs and added traffic from regular deliveries of biomass fuel.

With this in mind, we strongly recommend that the Scottish Government conducts a full review of all existing heat networks in Scotland to understand the feasibility of converting each system to renewable energy sources, biomass, and heat recovery from nearby buildings. We suspect that such a review would recommend the scrapping of some existing heat networks that cannot reasonably be converted away from fossil gas without significantly increasing the unit cost of heat to the buildings they serve. This, we understand, could also be grounds for legal challenges against those responsible. Therefore, where this is the case, the Scottish Government should admit its mistakes and own them, for example by bringing these networks into public ownership and subsidising the additional costs of either switching energy sources or replacing connections with more appropriate renewable technologies.

We welcome the review of LHEES as we have repeatedly criticised it for being unfit for purpose [e.g., 1,2]. We hope that this review will result in a root and branch reform of LHEES, rather than an attempt to modify a fundamentally flawed strategy.

With regard to the Building Hierarchy, we note that the consultation asks for comments on the demand threshold for connecting buildings, and this typifies Scottish Government thinking on heat networks. It takes a sensible and proven concept, and then turns it on its head - it’s akin to thinking that driving a car from Point A to Point B is exactly the same as driving in reverse from Point B to Point A. Rather than identifying buildings as sources of demand (which these proposals won’t do accurately due to the reliance on abstracted / modelled data), the deployment of heat networks should begin with assessing sources of heat supply. So, when considering using heat recovery (as, again, per Denmark) you start with identifying existing sources of waste heat (using actual measured / monitored data) and then design the network to carry that waste heat to meet the demands from other local buildings, with the option (where feasible and appropriate) to supplement that supply with additional sources to maximise the benefits of the network. Under this approach, and particularly in areas where the deployment of heat networks is minimal to nil, there is no need for zoning as the network will, at least initially, grow organically within technical and geographic constraints. It does, however, require the adoption of a Heat Supply Act (see our answer to Q5).

In addition, the content of Box 2 (p.24) gives us cause for concern. It seems to be implying that the floor area of non-domestic buildings (actually, even worse, categories of floor area) will be used as the sole basis for determining heat demand. If this is the case, then this is a fundamental misunderstanding of basic building science. For domestic buildings we know there is a strong correlation between total floor area and energy demand for heating (typically r2 = 0.60-0.65, p = 0.00 for houses, and lower for flats) [3], but this means the total floor area only explains 60-65% of the variation in energy consumption, and so is nowhere near suitable as a proxy for planning heat networks, for which a high level of accuracy and certainty are needed to maximise efficiency and cost-effectiveness. However, this assumption files out of the window for non-domestic buildings, which are vastly more complex systems and open to a much wider range of influences from different variables / indicators of energy consumption [e.g., 4].

We could point the Scottish Government at many papers that have tried to develop robust sets of archetypes for grouping non-domestic buildings by energy demand according to different sets of variables (and we have provided a sample list to the Heat Networks Team, separate to this consultation response). Some of these have been known to run to hundreds of archetypes, and none are sufficiently accurate for developing district heating networks where even small differences between predicted and actual demand can lead to more significant differences in efficiency and cost-effectiveness. Therefore, we have to ask, why is the Scottish Government so resistant to using real data?

In not using real data the proposed approach merely adds layers of meaningless complexity to a process to deliver inadequate developments designed to meet fictitious demands.

As regards multi-owner / multi-tenancy buildings and historic buildings, this is an impossible question to answer to answer in general terms as any evidence on these will invariably be highly site and building-specific, so we repeat our concern that, in our view, the Heat Networks Team does not appear to be sufficiently technically competent to understand the implications of the high level of contextualisation this would need.


References

[1] Baker, K.J., & Mould, R., 2017. Response to the Scottish Government’s Consultation on Heat & Energy Efficiency Strategies, and Regulation of District Heating. Built Environment Asset Management (BEAM) Centre, Glasgow Caledonian University. Available at: https://drive.google.com/file/d/1OGfDHazC1HR3mCNu-wgwm9T8YqK5Rpoi/view

[2] Baker, K.J., Mould, R., & Wood, G., 2018. Response to the Scottish Government’s Second Consultation on Local Heat & Energy Efficiency Strategies, and Regulation of District and Communal Heating. The Energy Poverty Research initiative. Available at: https://drive.google.com/file/d/1kIryIBI3lX17BvP428IIb9BAQPjVl3jX/view

[3] Baker, K.J., & Rylatt, M., 2008. Improving the prediction of UK domestic energy demand using annual consumption data. Applied Energy, Volume 85, Issue 6, June 2008, pages 475-482.

[4] Chetboul, J., Garnier, C., & Bros-Williamson, J., 2015. Energy demand benchmarking of non-domestic buildings in Scotland. Anales de Edificación. Available at: https://www.napier.ac.uk/~/media/worktribe/output-293525/energy-demand-benchmarking-of-non-domestic-buildings-in-scotland-accepted-manuscript.pdf

By far the greatest risk to investments in DHS comes from under or over-sizing networks, as even fairly marginal errors can result in significant differences between modelled and real system efficiency and cost-effectiveness. Therefore, again, we repeat, using real, measured data is by far the most important (but not only) measure for reducing this risk.

We are also seriously concerned that the Draft Plan is taking a demand-led approach to deploying 4th and 5th generation DHS, whereas every country that has done this successfully has taken a supply-led approach. This, again, requires using real data – which for non-domestic buildings and other anchor sources should be half-hourly metered data over a ~2-year period. From attendance at the stakeholder workshop, we get the distinct impression that the Heat Networks Team is being directed to deliver the necessary evidence over a much shorter period (although there may be many cases where such data has already been collected by stakeholders). If so, this represents a fundamental failure of government, the responsibility for which ultimately lies with the Cabinet Secretary for Net Zero, Energy and Transport and the Minister for Zero Carbon Buildings.

If the Scottish Government is so insistent on not using real data and pursuing a demand-led approach, we have to ask if its real intention is to kill off district heating before the market has even developed?

One of the biggest challenges for identifying and justifying investment in the deployment of 4th and 5th generation DHS is gathering the necessary data on the costs and benefits of these systems in any given location or community, particularly amongst the deprived rural and semi-rural communities for whom these systems can offer the greatest benefits.

As detailed in our proposals for a Scottish Energy Development Agency, the current procurement and funding systems work against these projects from the start, as they require highly complex, costly, multi-technology projects being developed for such deprived areas to compete directly against very simple projects - e.g., deploying single renewable energy technologies in more affluent and / or urban areas with strong community capacities. Therefore, the Pre-Capital Support Unit could play an important role in providing funding the data collection necessary to make these projects competitive under the current system (although we still strongly advocate changing the system as per our proposals). Such data would include, but may not be limited to: energy supply data for existing and potential heat sources (heat recovery from existing / planned buildings, existing or potential local renewable energy resources, etc); data on the capacity and potential capacity of any existing or proposed infrastructure (including energy infrastructure) necessary to support such projects; data on local levels of fuel poverty and other indicators of socio-economic deprivation; expected levels of local job creation; existing and potential fuel and skills supply chains; potential to create or enhance local recreation and tourism; and the potential to preserve or enhance local biodiversity; etc.

These are not insignificant requirements, and therefore applications to the Unit could also be used to filter out those projects with little (current) potential at an early stage in their development process. Furthermore, such data will be critical in ensuring sufficient confidence on the part of potential investors and the communities which will host the projects.

See our answer to Q10.

This problem fundamentally boils down to investor confidence, which ultimately requires sufficient and sufficiently robust data, and sufficient technical expertise being available within the Scottish Government and its delivery partners (on which note, we have previously criticised the District Heating Scotland partnership for lacking in this).

As one very successful example of a project that has secured significant private sector investment through going down an alternative route, and has achieved this success in spite of the Scottish Government’s usual attempts to dictate procurement procedures and force marriages with its favoured delivery bodies such as the Energy Saving Trust, we would point to the Orkney Energy Storage Park. Redacted text

See our answers to Q3, Q9, and Q10.

The list of what necessary data isn’t being collected is a lot longer than the list of data that the Draft Plan is proposing will be collected, and much of that short list of data will be unfit for purpose due to the issues we highlight in our previous answers.

We agree with the need for these persons to be required to produce building assessment reports however, as per our previous answers, we very strongly disagree with these assessment reports being based on anything other than real, half-hourly metered energy data. We repeat that not doing so will fundamentally undermine the deployment of heat networks in Scotland.

Based on the slides presented at the recent workshop, and given the low rate of construction and the fact that new non-domestic buildings should be captured by the Building Standards (subject to appropriate revisions as regards data collection), we question why the assessment of new builds has been given top priority. If appropriate data on new builds were to be captured it should essentially place (most of) them outside this prioritisation framework.

As per our answer to Q8, we have serious concerns that the Draft Plan is proposing to prioritise non-domestic buildings based solely or largely on one (grouped) attribute – floor area.

Furthermore, given this is within the legislative competency of the Scottish Government, we see no reason why all non-domestic buildings (perhaps beyond a multi-indicator threshold based on floor area, financial turnover, and other factors referred to in our answer to Q8 and the references therein) should not be required to measure their outputs of waste heat, and be taxed accordingly as an incentive to recover and recycle this waste to local heat networks.

We are strongly of the view that there would be a public outcry if people were able to see waste heat in the same way they can see waste piling up in landfills, and so we would expect such a tax, which we have long advocated, to be popular with the electorate.

Heat networks will be built by a range of promoters at different scales and to address different objectives. Although some types of heat network may require a little in the way of regulatory oversight, we believe it is important that every heat network should be licensed; even if the extent of its licence is only to register the network’s location and ownership with the regulator.

We therefore agree that licensing should be proportionate and suggest the following approach to ensure that this is achieved;
• use segmentation to allow different regulatory arrangements to apply to different types of heat networks. For example;
o Private heating networks that lie wholly within the curtilage of a commercial or industrial enterprise and that do not supply heat to any external premises
o “campus” type heat networks that primarily serve a single user, such as a university or hospital, but which include connections across land not owned by the network promoter and may provide heat connections to third party premises
o Area heat networks built to provide heat to domestic and other customers having no material ownership link to the network developer
• Develop a “menu” of licence conditions that can be applied as appropriate to individual licensees. These should include,
o A range of standard conditions defining the network owners’ general obligations in respect of registration of networks, ownership and control of the licensed entity and operational obligations, including those to third parties
o Conditions that the regulatory authority deems appropriate to individual licensees, for example giving effect to legal authorisations, such as acting in the role of a Statutory Undertaking
o Customer protection conditions, such as requiring,
 businesses engaged in more than one aspect of heat provision (e.g., heat input, network operation and supply of heat) to operate each of these as legally separate businesses
 licensees to operate each licensed activity in an efficient and economic manner
 heat network operators to make provision for third part heat providers to connect and provide heat to the network, where directed by the regulatory authority when the connection of such third-party providers is deemed to improve the environmental, economic and customer benefit performance of the overall network
 heat network operators to propose arrangements for commercial interaction with third party heat providers for approval by the regulatory authority
o Conditions that prevent economic exploitation by monopoly heat providers, such as ,
 Pricing to be generally cost-reflective
 price control arrangements
 requirement for regulatory approval of dividends

Applications for licences should obtain information on the ultimate ownership of the applicant. The application should include a sufficiently detailed description of the proposed heat network, including a map, to enable the licensing authority to determine whether a full or limited licence is relevant.
The application should allow the applicant to indicate whether they consider that only a limited scope of licence should apply.

Where and proposed licence is for works involving the provision of heat to third parties, applicants should provide evidence of their financial strength to an extent commensurate with both their ability to complete the proposed work and the potential for customer hardship in the event of their financial failure.

In the medium term, the costs of the regulatory authority should be recovered from licensees, in proportion to the scale of their operation and requirement for regulatory oversight. In the case of applications for licences, a fee reflecting the cost of processing the amount charged should reflect the cost of processing the type of application.

No part of the above is innovative in terms of good regulatory practice. Regulatory arrangements for the provision of non-state provided utility services across the UK have been developed and refined over the last thirty years for the electricity and gas industries although, for many reasons, (safety, market systems and technical interoperability and the numerous classes of market participant involved, etc) regulation of the GB electricity industry is likely to remain considerably more complex than its equivalent for heat networks is ever likely to be. However, the basic principles of utility regulation have been well rehearsed and there is no reason why the approach to regulation of heat networks in Scotland should differ radically.

In terms of constraining the ongoing cost of regulation, we believe that the multi-utility format of regulation in Northern Ireland is the correct format to adopt in Scotland, where we already have a water industry regulator, with experience in the costs and issues associated with pipe networks and located in a significantly cheaper location than central London. We also believe that it is in the interests of developing the Scottish economy that the fees paid by businesses for regulatory oversight in Scotland should contribute to the Scottish tax base, in addition to the development (of even a small number) of high-quality local job opportunities.

Infrastructure projects are already subject to a variety of consent processes, whether under planning, street works, or other forms of consent. Experience shows that, once industrial and commercial operations reach the end of their economic life, redevelopment of existing sites is often complicated by lack of information on previous uses. It would therefore be appropriate, when developing a new regulatory regime, to consider whether there is a role for the new heat networks regulatory regime to address this issue as part of its wider remit. For larger projects, there can be no argument, that regulation is essential to address the kind of issues described in our answer to Question 15.

The test for any requirement for regulatory oversight must be that licensing serves a purpose in promoting a public good, both immediately and in the long term.

We therefore suggest that all heat networks are subject to the requirement for the operator to hold a licence, even in the case of a network wholly within a site boundary. Although in such a case the licence obligations should be restricted to require only registration of the network with the regulatory authority and the name and contact details of the owning entity.

See our answer to Question 16. Where regulatory oversight by licence obligation requires only registration of the network and potentially reporting change of ownership or decommissioning, there is little reason to require a wide range of detailed information to be provided as part of the process. In line with good regulatory practice, only information that is required to verify an applicant’s technical and business capability to deliver and operate the network in an efficient and professional manner, should be required.

With increasing levels of activity involving public works (for example laying heat pipes in public roads), or operations involving domestic or small business customers, it is reasonable to seek increasingly detailed information about the applicant’s ability to provide the proposed service in a sustainable manner. In such case, the applicant should provide a business plan and be able to demonstrate access to adequate financial resources, both to develop the project and for its ongoing operation.

In the case of heat networks, it will also be important to provide evidence of the sources, environmental impact and sustainability of the heat to be used. For example, geothermal heat can be provided from old mining operations indefinitely and with little environmental impact, whereas heat from incineration of waste is predicated on an ongoing supply of suitable fuel, potentially has a material environmental impact and will require major capital investment from time to time, for plant renewal.

In summary, to meet the obligations on the regulatory authority to understand the heat network industry and to ensure that only suitable applicants are given authorisations, some information should be required from every intending heat network provider. In terms of good regulatory practice, the scope and detail of required information should be commensurate with the type of activity intended by the applicant and the potential for financial, or other, harm to affect third parties and the environment.

As discussed in our answer to Q6, enabling community ownership is one effective method of engagement although, naturally, this in itself requires effective community engagement (unless a project has itself been initiated by a community).

However, and as per our answer to Q4, the first problem here is that the majority of the public do not know what district heating is, and perceptions are far from universally positive and amongst those who do. This implies that some form of education campaign may be necessary, but such a campaign should avoid the trap of implying that all households could be connected to heat networks and that heat networks will necessarily reduce energy costs and tackle fuel poverty.

Given that tackling fuel poverty is one of the aims of deploying heat networks, the evidence tells us that the needs of fuel poor householders in Scotland are best met by using trusted intermediaries – specifically, local authorities, housing associations, Citizens Advice Bureaux, the more trusted energy companies, and community-based energy advocacy organisations (and specifically not the Energy Saving Trust) [1]. Therefore, we strongly recommend that the Scottish Government consults specifically with these organisations and companies as regards effective engagement and, if they are to be used to facilitate community engagement (which we would support), ensures that they are sufficiently funded and resourced to be able to do so effectively. We also recommend that Community Energy Scotland be included in this exercise, and that the exercise is conducted by the Scottish Government itself and not (as is common) sub-contracted to the Energy Saving Trust or any other company or organisation that would subsequently be eligible to receive public funding for delivering the measures that result from the exercise.

However, we are also aware that some of these organisations will lack the technological knowledge necessary to answer all the questions likely to be raised by householders and, from our own experience of supporting public events on energy issues, this is one area where organisations such as Common Weal and EPRi would be able to support the effective deployment of heat networks. However, in order to do so, we would have confidence in the Scottish Government’s proposals for deploying heat networks, and for all the reasons expressed in our previous answers, we are far from confident that the current proposals will deliver successful heat networks – to the point of having serious concerns that they will have significant detrimental effects on public and investor confidence.

Reference

[1] Baker, K.J., Mould, R., Stewart, F., Restrick, S., Melone, H., & Atterson, B., 2019. Never try and face the journey alone: Exploring the face-to-face advocacy needs of fuel poor and vulnerable householders. Energy Research and Social Science, Vol. 59, (2019) pp. 210-219.

As noted in the Draft Plan, heat networks represent significant investments, and therefore the duration of permits should, as a minimum, be at least long enough for investors to gain acceptable returns. As a general rule we would recommend a minimum of 30 years - the Draft Plan suggests a 25-year minimum so we are not far off agreeing on this.

However, we would expect all proposals to be fully-costed over time, so there may be room for flexibility here. For example, the minimum term could be varied according to the predicted financial returns to investors where those returns are based on a fixed maximum unit energy cost to householders, which would support the alleviation of fuel poverty by incentivising developers to commit to lower maximum unit energy costs in return for longer permit periods. However, in order to ensure a high quality of service is maintained over time, it would be necessary for the relevant licensing body to be able to withdraw permits before the minimum period has been reached where the owners and operators of heat networks are found to be falling to meet minimum standards of service.

In order to deliver successful DHS developments, we need a shift away from short term financing and in order to deliver that we need to move away from short term planning therefore we support permits with the sort of long terms that we would associate with DHS, i.e., in excess of 30 years minimum.

We should consider inter-seasonal storage at large scale as a national infrastructure project that would only be possible once there is a substantial level of market penetration of DHS. In the short term, and at smaller scales, we believe that in order to achieve the potentially lowest carbon impacts it is essential that storage is an integral element of all DHS. At smaller scales thermal storage, in addition to the volume stored in the distribution networks, can address diurnal and inter-diurnal variations in demand. At the very least, inter-seasonal storage should be encouraged, if not mandated.

This is useful recognition that Scottish Government consultations, such as this one, exclude questions on some of the more pertinent aspects of what they are consulting on. Therefore, we offer the following comments on the Draft Strategy:

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“Heat networks will form an important part of Scotland’s overall heat decarbonisation programme, and to better understand how their development may contribute to our greenhouse gas targets, we will develop different scenarios around types of buildings and processes.”

This is a very definite statement that will require a significant step up in the deployment of resources and financing. We await the details of this.

“We are committed to ensuring that heat in buildings programmes align with our fuel poverty targets. As such, we will work with the Scottish Fuel Poverty Advisory Panel to ensure that the HNDP supports efforts to eradicate fuel poverty and does not adversely impact those in or at risk of fuel poverty.”

This statement therefore currently excludes DHS development in gas mains served areas as unit costs for DHS heat are invariably more expensive than unit costs for gas.

“Building assessment reports (BARs) will be required for public-sector nondomestic buildings, to assess their suitability for heat network connection. This will feed into the review and designation of heat network zones – which are areas particularly suitable for heat network development and operation.”

These remain unspecified and, so we suspect, may turn out to be an enhanced methodology based on SAP/BREDEM (current EPC). Since EPCs are based on rdSAP they remain a means to amplify assumptions and drive towards averages as opposed to building performance modelling (PassivHaus/EnerPhit). For the purposes of DHS actual fuel use and the patterns associated with it are most important. This is then a baseline demand before any improvements are made to a building.

Page 2

“The introduction of heat network licensing could potentially help to build trust in the market, and heat network consents will be introduced to ensure that heat networks meet local and national objectives.”

Licensing is being over seen by BEIS and Ofgem. Neither have shown their competence in dealing with gas (reducing storage leading to uncontrolled spike pricing) or electricity (multiple suppliers collapsing – a product of wholesale prices and the restrictions from regulation).

“Additionally, the 2021 Act introduces heat network permits, building on the designation of heat network zones by providing the permit authority with the power to issue permits within these zones. We are proposing permits be awarded via competition to a single, winning bidder thereby providing exclusivity for a specified number of years.”

If permits are to be offered through local authorities there is potential resource implications.

“We will publish a Local Authority Cost Strategy prior to the regulatory system becoming operational in 2024, and will work with local authorities and stakeholders to ensure the provision of relevant resources in order for local authorities to meet their duties under the 2021 Act.”

This is essential in order to inform local authorities of the implication of their choices. Currently they may be proceeding towards very onerous resource needs.

“We are currently undertaking a First Nationwide Assessment to identify potential heat network zones across Scotland, where heat networks can be considered a suitable long-term solution. Outputs from this assessment will be published in early 2022. To guide the development of heat networks within 3 zones, we are proposing a Building Hierarchy which prioritises the connection of existing buildings based on their size, heat demand and ownership.”

Based on what criteria and what data? Without knowing these details it is possible that this assessment could turn out to be a really useful way of misdirecting funding away from potential viable developments.

Page 3

“Recognising that sufficient levels of demand assurance are a gap within the overall picture of heat networks, we are proposing several measures to support confidence in future revenues for investors.”

Will demand trump efficiency? Systems will need to be designed to deliver on existing demand but financing needs to have the capacity to cope with enhanced efficiency reducing demand. Measures to support confidence need to be robust and detailed.

“Specifically, we will introduce a new Build Heat Standard requiring new buildings consented from 2024 to install only zero direct emission heat sources, and, subject to devolved competence, bring forward regulatory proposals to require the installation of zero or very near zero emissions heating systems in existing buildings.”

Will this be retrospective on existing planning consent on previous building standards?

“In addition, we will consult in 2022 on a series of phased targets and new funding to support all publicly owned buildings meeting net zero heating requirements by 2038. We remain committed to consulting on proposals, subject to legal competence, to address the issue of demand assurance. In doing so, we will consider the UK Government’s proposals to mandate connection to heat networks in England and Wales.”

This will require significant additional funding.

“Recognising that surplus or waste heat is not fully utilised in Scotland, by Winter 2022/23 we will make available to local authorities further information on the availability of surplus or waste heat, to support the identification of heat network zones and development of Local Heat and Energy Efficiency Strategies (LHEES).”

This will be useful information for planning and DHS development.

Page 4

“Over this parliamentary session, we will invest £400 million to support the development of large-scale heat infrastructure, such as heat networks, through the successor to the Low Carbon Infrastructure Transition Programme. We are seeking feedback on how financial mechanisms can help support the development of low and zero carbon heat networks.”

This is a small amount when spread across the 32 local authorities. There is likely to be more value and possibilities in considering a more intensive and focused investment in limited areas (as per our SEDA proposals).

“We are committed to establishing a National Public Energy Agency to accelerate the transformational change in how we heat and use energy in homes and buildings. To achieve this, the Agency will have a remit to raise public understanding and awareness, coordinate delivery of investment, and coordinate national, regional and local government delivery of heat decarbonisation and energy efficiency rollout.”

We await the details of this Agency with baited breath. From what we’ve heard so far it sounds like little more than another vehicle for the usual delivery bodies favoured by the Scottish Government. However, we hope that we’re wrong and that, this time, the Scottish Government will not take a proposal developed by us and either strip it completely of any practical value, or that the First Minister will not promise it and renege on that promise twice.

“We will establish the Agency first as a virtual agency and transition to a dedicated body by September 2025. We will set out the role of the Agency in delivering support for heat networks in the coming months.”

This does not give us any confidence that we may be wrong.

Page 5

“We are proposing that the requirement to undertake building assessment reports is extended to other non-public sector non-domestic building owners, in order to assist in the identification of suitable anchor buildings. We also recognise, however, that not all non-domestic buildings will be suitable to act as anchor buildings, and are seeking views on exemptions for certain buildings and a phased requirement for others.”

As per our previous comment, we need a full definition of this methodology, and it overlooks the primary importance on actual fuel/heat use.

“Recognising the varied nature of the heat networks market across Scotland, we are asking for views on how we might ensure proportionality within a licensing system. We are proposing that this could be achieved through fees, exemptions, or conditions attached to licences.”

The issuing of fees and their collection will carry an administrative burden. Where will this fall? And, if it will fall on local authorities, will there be additional funding allocated?

“The 2021 Act provides flexibility to enable the consents system to account for varied operations, allowing Ministers to determine the form and manner in which relevant applications are to be made. In this vein, we are seeking views on whether certain heat network projects should be exempt from the requirement to hold a consent, or only be required to provide limited information in the consent application.”

We are not sure why it is sensible to establish a consent framework where we are considering exemptions before it has even been set up. The current weakness at this juncture is lack of appropriate knowledge, so consents will limit access to information.

Page 6

“We understand that thermal storage could potentially constitute an important part of our heat decarbonisation programmes, and are undertaking research into the role of energy storage in the electrification of heat, looking specifically at buildings and heat networks. We are seeking views on whether measures should be introduced as part of regulatory or support systems to encourage inter-seasonal thermal storage.”

Absolutely yes, it is paramount that we not only consider but ensure that thermal storage is an integral aspect of DHS developments. This becomes more important at scale and 5th generation DHS.

Page 9

“Heat networks, depending on their fuel source, can help reduce greenhouse gas emissions. They can also, in certain circumstances, reduce energy bills helping to tackle fuel poverty. As such heat networks have an important role to play in meeting the targets set out in the Heat in Buildings Strategy, including contributing to ensuring that at least 1 million homes, and the equivalent of 50,000 non-domestic buildings are connected to zero emission heating systems by 2030.”

The caveat here is important as it accepts that heat networks may or may not serve to alleviate fuel poverty. In theory, and with sufficient strategic planning and technical understanding, there is no reason why all heat networks deployed in Scotland in the future should not serve to alleviate fuel poverty, so this is notable acceptance that the Scottish Government has failed, and may continue to fail, to understand and apply the evidence necessary to do so.

Page 10

“Heat networks are a heat supply technology and can be powered by a range of different technologies. For example, they can use heat generated from gas or biomass fired combined heat and power (CHP) engines, electrically driven heat pumps or utilise surplus or waste heat such as from industrial processes, data centres or from Energy from Waste facilities.”

Heat networks are not a heat supply ‘technology’, no more than sewers are waste water treatment technologies. They are powered by pumps which are more limited in the energy requirements. Heat networks distribute heat and are agnostic to the technology used to generate that heat.

We assume what the author(s) of this document are referring to here is that different generations of heat networks receive and distribute heat at different temperature ranges, but the temperature of heat entering a heat network can be modulated using heat exchangers. To a non-expert this may seem like splitting hairs, but to see these basic errors in a Scottish Government does not give us confidence in the technical knowledge of the heat networks team.

“The design of heat networks enables new heat sources to be added in the future. As such, heat networks are a low or no regret technology and compatible with both electrification and hydrogen scenarios for heat supply in the future. Heat networks can also have an important role in balancing wider energy networks, helping to store energy and make use of constrained renewable electricity generation.”

This is very true, and explains the need for strategic planning at a national level, otherwise we risk similar mistakes to those made with gas storage, and the consequences they have had.

Page 13

“Box 1: What is an anchor load? Buildings with a large, reliable and long-term demand for heat, often with a stable and constant use profile, can act as anchors for a developing district heating network. Examples include hospitals, swimming pools and high-density housing. These anchor loads allow such district heat networks to operate efficiently and provide the potential to extend the network to smaller existing heat users in the area.”

There is a potential concern for corporate assets if the Scottish Government decides to place obligations on anchor load connections regardless of economic assessments. Such loads bring stability to DHS and potential viability, therefore their value to DHS is much higher than the financial revenues they may supply. From a DHS development view this makes sense to obligate anchor loads but there is a potential cost burden being pushed onto local authorities in the process as owners of many of the anchor loads.

“Research to inform the Heat Networks (Scotland) Bill found that a CHP heat network powered by natural gas with gas backup boilers could result in emission saving of up to 23%, depending on a number of factors including what it is replacing. However, as set out in the Heat in Buildings Strategy and Chapter 3 below, from the point that the heat network legislative framework is in place new heat networks, and any additional heat plant for extensions of heat networks will need to be powered using low and zero emissions sources of heat.”

Good caveats. DHS are not automatically the magic carbon saving bullets that some would have us believe.

“Therefore, we would expect them to generate significant emissions savings, beyond those from gas fired CHP networks. To provide an example of this, assuming that heat pump powered heat networks replaced 6 TWh of heat from individual gas boilers the savings are broadly estimated to be 1.1 MtC02e per year in 2030.”

This figure, we assume, is based on feeding DHS using large scale heat pumps (or technologies with equivalent outputs). If so, the caveat should be noted.

Page 14

“Heat networks can, under certain conditions, help to reduce expenditure on heating. The Competition and Markets Authority found that up to 90% of heat network customers enjoy similar, or lower, bills than those with standard gas boilers and heat networks can cut both emissions and bills.”

The first sentence here should be ‘certain conditions and assumptions’. If a fuel poor household is using zero energy to heat their home prior to installation of DHS then their benefit and fuelpoverty mitigation will be zero. We know that urban low-income homes use the least energy to heat their homes. Therefore, the benefits in mitigating fuel poverty in urban areas is significantly constrained before we consider the current availability of gas mains.

In converting the homes of vulnerable people to DHS, with new meters, new billing and the disruption of installation, there are challenges that arise in engagement and support of these households to assist them to adapt to the new regime and minimise their impacts on the DHS.

Page 16

“1. building assessment & zoning
2. licensing, consenting & permitting
3. transfer schemes”

We would strongly recommend revising these stages as follows:

1. Preliminary zoning
This can be achieved with current Heat Map data and should be understood to be indicative of potential areas of development, but not exclusive. As we have noted in responses to previous consultations, the granularity and accuracy of the Heat Map data is insufficiently fit for purpose, and this becomes particularly problematic for planning DHS. The data is sufficient for a first-pass assessment, where this would be followed up by an assessment using more detailed data, but it would likely be more cost-effective to use such detailed data in the first instance.
2. Building assessment
3. Detailed zoning
This would be achievable once more detailed data has been collated through the enhance building assessment.
4. Licensing, consenting & permitting
5. Transfer schemes
This requires timescales.

Page 18

“We are currently seeking views on extending building assessment reports to non-public sector non-domestic buildings in Part 2 of this consultation document.”

We would support to a building energy model more akin to PassivHaus than a modified SAP which remains a means to compare buildings against each other but is not as effective in describing the energy demands of buildings.

“We will bring forward detailed proposals for consultation on building assessment reports and zoning, including draft regulations if appropriate, by Summer 2022, for introduction during Winter 2022/23. We will also develop Guidance for building assessment reports and consult on this in 2022.”

This work should really have been done in advance of this Draft Plan.

Page 19

“As heat networks grow, more customers will be reliant on them for their heat and, as such, an appropriate framework to ensure continuous service for users’ needs to be put in place.”

The recent failures of the electricity and gas market have been in the supplier sector. This is an emergent outcome of international energy markets, a lack of strategic national planning, and the regulation of suppliers which places severe restrictions on their capacity to weather challenging times. With respect to DHS, there is a more complex relationship of actors where the generators may not be the suppliers but either aspect may subject to failure. The provision of a continuous service therefore requires more thought and a wider range of readily deployable expertise than that which has been engaged to date by the Scottish Government.

Page 20

“Local authority cost strategy.
We will prepare a strategy setting out the costs to local authorities in relation to their duties under the 2021 Act. The final strategy will depend on the full detail of the regulatory system. As such, we will publish a final Local Authority Cost Strategy in line with our timetable set out above and before the regulatory system commences operation in early 2024. We will work with local authorities and relevant stakeholders to ensure that appropriate resource is provided in order to deliver the ambitious provisions of this 2021 Act, such as heat network zoning.”

The Act, and it’s imposition on local authorities, has the potential of creating significant financial burdens on local authorities, which may be exacerbated if they are investing in developments too.

Page 23

“Heat networks are not a suitable solution for all areas. To date the establishment of district heating has been reliant on new buildings, and suppling heat to existing ‘anchor loads’.”

A large portion of our existing DHS has been urban developments funded through ECO in low-income social housing. These are invariably retrofit.

Page 25

“We know that one of the key barriers to heat network development is demand assurance, with investors needing a long-term, secure customer base to confidently invest.”

If we continue to assume that domestic units perform in compliance with SAP/BREDEM while focusing on low income low spend areas, we will continue to develop DHS on a false narrative of potential demand. Demand assurance from domestic units can only be achieved through substantial numbers and diversity of socio-economics of the residents.

Are strongly of the view that the proposals in this Draft Plan will do little to instil confidence amongst investors and, due to the lack of technical understanding behind them, risk actively undermining investor confidence.

Page 27

“As we transition to a net-zero economy it will become increasingly important that we use resources efficiently. This includes maximising the use of surplus or waste heat, which at present goes unused. A recent ClimateXChange study identified a waste heat potential of about 1,677 GWh across some 932 sites in Scotland, including from distilleries, wastewater treatment facilities, bakeries and many other sectors.”

And yet this Draft Plan appears to be taking a demand-led approach. We would also like to know how accurate this figure is – not that we disagree with it.

“There are examples of surplus or waste heat use at Lerwick, Grangemouth, Shawfair in Midlothian and Torry in Aberdeen. However, significant amounts of heat go unused at some of these and other facilities. A key reason that heat is not recovered is that there are insufficient commercial opportunities to incentivise recovery, in particular the lack of potential heat customers and absence of an adjacent heat network. Equally, there are no legal requirements and limited incentives to recover and use surplus or waste heat.”

If the development of DHS is not economically justifiable there is nothing in this document that will alter that, and with the licences and potential charges there are mechanisms to increase the cost burden and therefore disincentivise developments.

Page 30

“To begin to develop a stronger project pipeline the Scottish Government will publish an initial Heat Network Investment Prospectus during the next financial year that will demonstrate the size and location of heat network opportunities across Scotland, as well as information on the decarbonisation requirements of existing networks in Scotland.”

This is to be welcomed but, as stated previously, what is needed is investment.

“Over this parliament we will invest at least £400 million through the successor to the Low Carbon Infrastructure Transition Programme (LCITP) to support the development of large-scale heat infrastructure, including heat networks.”

As noted earlier this is a relatively small sum and it will be most effective if targeted rather than spread widely.

Page 34

“There are limitations to the data currently available on Heat Networks. There are a number of potential options for improving the data used to report against targets – both heat networks targets and their contribution to greenhouse gas emission reduction targets - as well as wider monitoring of heat networks in Scotland. These include surveys on heat networks and nondomestic buildings and options related to existing and future regulatory systems12. The quality of these data may vary and will be available potentially at very different times.”

This appears to be complicating something that doesn’t need to be. The relevant data is the amount of energy used for the provision of heat within buildings prior to and after DHS connections are made.

Building performance is something that must be dealt with on a building-by-building basis and is specific not only to the building characteristics but also their use. Not doing so will fundamentally undermine both this Draft Plan and investor confidence. This is one of the key reasons we have serious concerns about the technical competency of the authors of this Draft Plan, and the Heat in Buildings Strategy.

Page 36

“However, in some strategic heat network zones – particularly those in city or town centre locations – there may be other non-domestic buildings that would be suitable anchor buildings and may be needed to enable the development of a heat network. We therefore propose that the requirement to undertake a building assessment report is extended to other non-public sector non-domestic 37 building owners. We estimate that this will affect the owners of up to an additional 197,000 non-domestic properties.”

As previously stated, the significant aspect of any building is the level and nature of its heat demand. In order to ascertain that the actual fuel use on the best resolutions available is what is required. For example, half hourly billing over a two-year period.

Page 37

“Not all non-domestic buildings will be suitable to act as anchor buildings, particularly those which have a relatively low heat demand, inconsistent use pattern or are unheated. As such, it may be appropriate to exempt certain buildings as well as introduce a phased requirement for others based on these characteristics. A phased approach would support the development of heat networks over time and could be developed in line with the Building Hierarchy set out in Part 1, Chapter 4. We would welcome views on whether a phased approach should be adopted and whether the proposed hierarchy or other criteria are appropriate for this.”

Rather than wasting time and public money trying to develop a classification of buildings this can be resolved much more easily by focusing on actual heat loads/energy bills.