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Will the Heat Networks Bill warm up the District Heating Sector in Scotland ?

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The Scottish Government has committed to a 35% reduction in carbon emissions from heating domestic properties by 2032 and a reduction in carbon emissions from heating non-domestic properties of 70% by 2032. In this post, Solicitor and 2050 Climate Group volunteer Alex Irwin explains some of the significant challenges in decarbonising heat, a number of notable aspects of the Heat Networks Bill in Scotland and the need for more legislation pertaining to sustainable heat.

The carbon emissions from heating domestic homes account for around 13% of the UK’s annual carbon emissions. The carbon emissions from heating homes is comparable to the contribution of all petrol and diesel cars in the UK. 

After declaring a climate emergency in 2019 the Scottish Government set out ambitious targets to reduce carbon emissions for heat. The Scottish Government has committed to a 35% reduction in carbon emissions from heating domestic properties by 2032 and a reduction in carbon emissions from heating non-domestic properties of 70% by 2032. There is also the ambitious target of eliminating carbon emissions from heat entirely by 2040. 

Achieving the Scottish Government’s net zero targets demands that we move to decarbonising all heating quickly. However, decarbonising heat poses a considerable challenge. New research from the UK Energy Research Centre has warned that zero carbon heating of homes in the UK is currently a pipe dream. Rather the UKERC has stated that at the current rate, it will take 235 years to deliver net zero heating in the UK. 

There are a number of low carbon heating systems which could help to achieve these goals, from the use of ground source heat pumps, to increasing use of electric heating, increasing energy efficiency measures and district heating. The Scottish Government appears eager to accelerate the growth of district heating across Scotland. 

In last month’s programme for Government the Scottish Government made it clear that it would seek to progress the Heat Networks Bill in this parliament. The Heat Networks Bill is the first attempt in the UK to regulate district heating and heat network operators. Much of the detail of the regulation is missing from the Bill and will follow in secondary legislation. However, the Bill does provide a framework for future legislation and an indication as to the direction of travel. 

There are a number of notable aspects of the Bill. Namely: 

1. The Bill sets out that Licences will be required

The Bill requires all heat network operators (both new and existing operators) to have a licence. The Bill provides a framework for conditions to apply to the granting of the Licence. However, it is not clear from the bill what conditions may apply to the licence. 

The Bill envisages that the district heating network will be powered by clean energy sources. It stipulates that the licensing authority can only grant a licence where it is satisfied that the applicant has the ability to operate a heat network in a manner that minimises greenhouse gases. 

2. The Bill creates a Licensing Authority

The Bill sets out that the licensing authority will be The Scottish Ministers. The Scottish Government wish to have Ofgem as the licensing authority but does not have the power to include the power to license and regulate district heating within Ofgem’s remit. 

3. The Bill confers rights on Licensors

The Bill confers rights on Licence holders, including the right to compulsorily acquire land for the construction and operation of the heat network, a right of wayleave to install heat network infrastructure up to the curtilage of buildings located within the heat network and the right to access land to carry out a survey for the purposes of determining whether the land is suitable for construction. 

These legal powers are similar to those powers already granted to electricity and gas providers. It is hoped that, by giving these powers to heat network operators, they should be able to install the heat network apparatus required with greater ease. 

4. The Bill requires Building Assessment Reports

The Bill requires building assessment reports from Scottish public authorities in respect of any non-domestic building that is owned by the public authority or which the public authority may have an interest in. The report must set out the potential for non-domestic buildings to be supported by heat networks and the life span of the existing thermal energy system. 

District heating networks market in the UK is currently small, fractured and unregulated. There are currently 17,000 district heating networks in the UK of varying sizes with only 500,000 customers. In Scotland it is hoped that the Bill will trigger growth in the sector by guaranteeing consistent standards across the market and creating a more level playing field with other heat providers. It is also hoped that regulating heat networks will give investors the confidence needed to invest. Especially as multiple funding sources will be required for operators to build the infrastructure needed to build and operate district heat networks. 

However, while the Bill is a significant first step, there is still a long way to go before district heating can be a viable alternative to current heating systems for most domestic and non-domestic buildings in Scotland. It is also worth noting that the Bill has significant gaps including licence conditions, road works rights for operators and consumer protection. Secondary legislation, which will fill much of the detail missing from the Bill, is expected. Although it is likely that it will be at least 3 or 4 year before secondary legislation is passed and the first licences are granted. 

In the immediate future, the Scottish Government is expected to  encourage growth in the district heating through the launch of a  “Heat Transition” deal, which will include a £50 million heat networks early adopter challenge fund for local authorities. The launch of the scheme was delayed in March due to Covid 19 but should be launched imminently. 

Ultimately, decarbonising heat poses a significant challenge. The pace of decarbonising buildings needs to increase substantially if the carbon emission targets set by the Scottish Government are to be met. District heat networks could form part of the solution to decarbonising heat in Scotland. However, more legislation, funding and policy will be required for the sector to experience the growth required for district heating to truly form part of the solution. 

Alex Irwin, Solicitor @dcslegaluk. Volunteer @2050climategrp. Interested in all things healthcare, rural and green. Edinburgh based.

Image from free stock image site Pexels.

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