Heat networks delivery plan - draft: consultation

Chapter 4: Guiding development

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' (see Chapter 2).

Heat networks are most suited to areas of high heat demand, which are often associated with denser urban settings and/or areas of high industrial use. Newer fifth generation heat networks may be suitable for lower density areas.

Identifying areas suitable for heat networks

The Opportunity Areas for District Heating Networks^[xiv] in the UK report uses geospatial modelling to identify areas where there may be economic potential for heat networks.

This analysis estimates that heat networks could provide around 15 TWh of heat per year in Scotland by 2050. This is likely to be the maximum potential.

To further develop our understanding of the suitability of heat networks in Scotland we are undertaking a First National Assessment of potential heat network zones. This assessment will identify potential heat network zones where it is considered that heat networks are a suitable long-term solution, initially based on linear heat demand and key anchor loads. This First National Assessment follows the LHEES Methodology. We will publish outputs from this first assessment in early 2022. This assessment will build on the Opportunity Areas mapping noted above and use improved non-domestic building data from the Scotland Heat Map to provide a more accurate assessment of heat network potential in Scotland.

We have commissioned a review, and as necessary an update, to the LHEES Methodology to ensure that in following it local authorities can fulfil the requirement to consider whether one or more areas in its area is likely to be particularly suitable for a heat network^[7].

As noted above (Chapter 3) we will supplement the LHEES Methodology and develop a more detailed assessment to determine whether an area is particularly suitable for a heat network to support local authorities in designating heat network zones.

Building Connection Hierarchy

Within zones it will be important to encourage and prioritise the connection of key anchor buildings, which can enable the efficient operation of a heat network, helping to reduce customer costs and enabling the extension of the network overtime to other nearby buildings.

Box 2: Scottish non-domestic buildings.

These vary significantly in size^[8]. Non-domestic buildings with a floor area greater than 1,400m² account for over half the stock by floor area and 9% by number of buildings; and buildings over 2,500m² account for 26% by floor area and only 3% by number. The average area of non-domestic stock is estimated to be 444m².

To guide the development of heat networks the following Building Hierarchy is proposed, which prioritises the connection of existing buildings based on their size, heat demand and ownership. The Building Hierarchy is being proposed as a tool to help steer delivery on the ground and in certain instances may be useful as part of a prioritised or tiered policy or regulatory approach, though this will not always be appropriate. New buildings within a heat network zone should connect to a heat network where available and appropriate. Views on a minimum "appropriate" heat demand for new buildings within the hierarchy would be welcome.

There may be other buildings that should be prioritised for connection. This could include for example:

• multi-owner and multi tenancy buildings
• historic buildings, where there may be few other feasible interventions.

Views on these options, and whether they should include homes within these groupings, is also being sought.

Q8: What are your views on the Building Hierarchy proposed and its use to prioritise delivery on the ground and use in developing heat networks policy and regulation? (Please also include if you have any evidence relating to the inclusion of multi-owner/multi-tenancy buildings and historic buildings.)

Draft National Planning Framework 4

The Draft Fourth National Planning Framework (NPF4)^[xv], which details our long term plan for what Scotland could be in 2045, was laid in Parliament on 10 November 2021. Alongside Parliamentary scrutiny of the draft, we are running a consultation^[xvi], which is open until 31 March 2022. The consultation seeks views on draft policy on heating and cooling.

Demand assurance

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.

As set out in the Heat in Buildings Strategy we will, subject to legal competence, introduce a regulatory framework to require the installation of zero or very near zero emissions heating systems in existing buildings off the gas grid from 2025 and on the gas grid from 2030. This is in addition to proposals to require new buildings consented from 2024 to install only zero direct emissions heat sources.

We will also 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.

In order to secure the development of heat networks and in order to meet our statutory heat network targets it will be important that these regulatory requirements drive the development of, and connection to, heat networks in designated heat network zones. As we take forward these consultations in 2022 we will consider how best to ensure that the proposed regulatory requirements are compatible with our heat network targets.

In addition, we remain committed to consulting on proposals, as far as is possible within our legal competence, to:

• introduce mandatory connections for large and publicly-owned buildings; and/or
• use new powers under section 15 of the Non-Domestic Rates (Scotland) Act 2020 which could potentially be used to de-risk investment and drive net zero behaviour, including connections to heat networks.

In developing proposals we will consider recent UK Government proposals to mandate connection to heat networks in designated areas in England and Wales to assess their applicability in Scotland and fit with our proposed wider approach to building regulation. Subject to legal competence, we will consult on proposals during 2022.

Q9: What in your view is the right approach to ensuring there is sufficient demand assurance?