Heat networks delivery plan - draft: consultation

Chapter 2: Ambition & targets

Ambition

Our ambition is for a heat networks sector that:

• delivers affordable clean heat supporting delivery of emission reduction and fuel poverty targets
• develops local supply chains and attracts new public and private investment
• contributes to the development, and operation, of an integrated and resilient energy system

Targets to 2027 and 2030

The 2021 Act sets statutory targets for the amount of heat to be supplied by heat networks, requiring the combined supply of thermal energy by heat networks to reach 2.6 TWh of output by 2027 and 6 TWh of output by 2030. This is 3% and 8% respectively of current heat demand^{[2] [3]}. As heat networks can provide heat to homes, workplaces, and industry the targets could be met with a range of outcomes in terms of the numbers of these types of buildings and processes that are connected.

The targets are broadly equivalent to 120,000 and 400,000 average gas using homes being connected to heat networks for 2027 and 2030 respectively. As multi-building heat networks are generally anchored around large non-domestic buildings, which account for a significant portion of the heat supplied, these figures should only be considered illustrative. It is likely that the number of domestic connections will be lower, with early network development focused on connections to non-domestic properties to secure anchor buildings. More detailed scenarios including non-domestic supply will be developed in due course.

Future target setting

The 2021 Act requires Scottish Ministers to set a target for 2035, in addition to the 2027 and 2030 targets.

We will consult on a proposed 2035 target in early 2023, which will be informed by the Potential Heat Network Zones: First National Assessment (see Chapter 4) and work carried out to develop Local Heat and Energy Efficiency Strategies (LHEES). We will set the 2035 target by 1 October 2023. Chapter 7 sets out how we intend to measure the targets set and to begin to improve monitoring of these.

Q3: In your view, what should be considered in setting the 2035 heat network supply target?

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.

Contribution to emission reduction targets

Emissions reductions as a result of expansion and development of heat networks will vary depending on:

• the buildings they supply, including whether they are existing or new, and whether the heat network is replacing existing fossil fuel heating systems and
• the heat source(s) of the heat network the building connects to.

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. 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^[4].

Developing scenarios around types of buildings and processes that might connect to heat network targets (as above), will provide data to allow us to better identify how targets might contribute to greenhouse gas emissions targets, and ensure that secondary legislation is developed appropriately.

Contribution to eradicating fuel poverty

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^[x] and heat networks can cut both emissions and bills.

The cost of operating a heat network, and so the costs passed onto consumers, in part relate to the wholesale cost of any energy input for the heat source. As such the operating costs can fluctuate along with gas and electricity prices, where they are used. There are examples^[5] of heat networks in Scotland and further afield which use a mix of heat sources and large scale storage to reduce customers heat costs.

The Heat in Buildings Strategy^[xi] has set out guiding principles to ensure alignment of heat in buildings programmes with fuel poverty objectives^[6]. We will use these principles in developing regulation and to guide the operation of our capital programmes.

We will work with the Scottish Fuel Poverty Advisory Panel as we bring forward regulation under the 2021 Act so that it supports efforts to eradicate fuel poverty and to ensure it does not adversely impact those in or at risk of fuel poverty. Furthermore, we will work with the Advisory Panel to identify where heat networks could help to reduce the depth and rate of fuel poverty, contributing to meeting our ambitious targets.

We will set out our approach to eradicating fuel poverty in the Fuel Poverty Strategy by the end of 2021. This will consider all four drivers of fuel poverty – low household income, high household energy prices, poor energy efficiency of the home, and how energy is used in the home.

Q4: Are there particular approaches or measures that could be taken through our proposals in this plan to reduce the depth and rate of fuel poverty? This could for example consider the approach of the heat network licensing authority or measures through our funding programmes?