Green Heat Finance Taskforce minutes: 1 November 2023

Attendees and apologies

• Sara Thiam – Chief Executive, Scottish Council for Development & Industry (SCDI) 
• Patrick Harvie MSP – Minister for Zero Carbon Buildings, (Taskforce Co-Chair) 
• Emma Harvey-Smith, Programme Director, Green Finance Institute (GFI) 
• Ian Cochran – Edinburgh Uni. Business School / Institute for Climate Economics
• Kirsty Hamilton – Independent 
• Lewis Shand Smith – Chair, Energy Consumers’ Commission (ECC) 
• Eddie McAvinchey – Executive Director, The Scottish National Investment Bank (SNIB)  
• Helen Melone – Senior Policy Manager Scottish Renewables (virtually) 
• Andy Kerr – Director, Climate KIC  (virtually)  
• David Steen – Scottish Policy, UKGBC  (virtually)  
• Gordon Pollock – Project Director, Midlothian Council 
• Eoghan Maguire – Director Vattenfall and Joint Venture Manager  
• Peter Chalmers – Director, Heat Networks & Local Authority Advisory & Lending, UK Infrastructure Bank (UKIB) 
• Catherine Williams – SG, Deputy Director for Heat in Buildings Delivery 
• Gareth Fenney – SG, Head of Head of Heat in Buildings Future Delivery Unit 
• Amy Tickell – SG, Unit Head, Heat Networks and Investment Unit 
• Alex Chatzieleftheriou – SG, Head of Heat Networks Development   

Secretariat 

• Karl Reilly – SG, Heat in Buildings Future Finance Team Leader  
• Toby Tucker – SFT / GHFT Secretariat 
• Peter Irving – SG, Heat in Buildings Division Future Finance Team 
• Sarah Buchanan– SG, Private Secretary to Mr. Harvie 
• Michelle Rayneard – SG, Heat in Buildings Future Finance Team  

Items and actions

Summary and action points

Item 1. Welcome, apologies, minutes of previous meeting, including member notification of any conflicts of interest  

The Chair welcomed members to the eleventh meeting of the Green Heat Finance Taskforce (GHFT) the main focus of which was Heat Networks. Apologies had been received from: Ben Rose (SFE); Simon McWhirter (UKGBC); and Rufus Grantham (Independent).  

All members confirmed that they were content with the Minute of, and Actions from, the 20 September 2023 meeting. No conflicts of interest were raised. 

Item 2. Secretariat update – Scottish Government 

The Minister informed Members of progress with plans for the Consultation on a Heat in Buildings Bill, including current timings for Cabinet discussion of the draft consultation as well as the process from launching the consultation to introducing the Bill into Parliament. 

Secretariat advised that the Taskforce’s Part 1 report was with the publishers for formatting and confirmed that any final changes to the report would be needed by close of play on Friday 3 November. It was further noted that Secretariat had received feedback with some slight amendments to the Part 1 Report recommendations, focused around more clearly indicating who should act and by what date as well as what a deliverable might be. These tweaks were to be shared with all members following the meeting with everyone asked to provide their formal endorsement of the report.  

A publication plan was being developed and was anticipated to include a Scottish Government (SG) news release and social media activity, with Taskforce Members asked to use their own social media channels and networks to disseminate the report more broadly as well as to offer supplementary views around media enquires as required. Secretariat confirmed they would coordinate between members communications colleagues and SG communications team on detailed plans for publication  

Action 1 

Secretariat to circulate proposed amendments to the Part 1 Report recommendations to members. 

Action 2 

All Members to provide Secretariat with their formal endorsement of the Part 1 Report by close of play on Friday 3 November 2023. 

Action 3  

Members to provide Secretariat with the relevant contact details of their own Comms colleagues in preparation of publication.  

Action 4 

Secretariat to provide Taskforce members with a key points summary to ensure consistency of messaging by all when talking within their own networks about the Report. 

Item 3. Heat Networks

Presentation 1: Heat Networks, leveraging private investment through delivery models

Presentation by Alex Chatzieleftheriou, Head of Heat Networks Development covering statutory targets, the capex spend necessary to attain these targets, the opportunity heat networks provide as well as the barriers to investment. Alex summarised the different types of network finance models possible, what the role of the Government is in the development of these networks as well as heat network’s role in Local Heat and Energy Efficiency Strategies (LHEES). 

In relation to the potential risk exposure for householders in the different models – particularly in light of the lack of alternative providers – it was noted that this is dealt with in a report which is intended for publication soon, and that consumer protection was pivotal.  

Regarding any concerns that potential investors may have flagged, it was noted that demand assurance was an issue, and that mandatory connection was being looked at by both SG and the UK Government. It was also noted that demand assurance works both ways and that it was necessary to be cautious about being able to satisfy future demand, so scalability was important consideration.  

Policy officials confirmed that the next steps in developing the heat networks will revolve around stakeholder engagement. The Chair reflected that feedback was key and that SCDI members were keen to decarbonise, however, were concerned that grid connection currently operated on a first come first served basis which influenced the options available to some business customers and could be a constraint on decarbonising. 

Presentation 2: Midlothian Energy Limited (Midlothian Council and Vattenfall) - Public / private collaboration delivery and practice – “Delivering district heating and leveraging private investment through joint ventures.” 

Presentation on an existing joint venture Heat Network between Midlothian Council and Vattenfall, by Gordon Pollock, Project Director, Midlothian Council, and Eoghan Maguire, Director Vattenfall and Join Venture Manager. 

It was noted that Midlothian Energy was created to develop low carbon energy infrastructure across Midlothian, and in a way that enabled wider economic development for the benefit of the residents and businesses within the local authority area. Although it had initially been established for one project, it had been structured in such a way that allowed it to take forward other project initiatives across a wide range of energy areas. 

Members enquired about whether the project had any issues sourcing a skilled workforce and it was acknowledged that procuring a skilled workforce had been difficult.  In the future they were looking to engage with schools, colleges and look into apprenticeships for the local area. 

Members enquired as to what conditions were needed in a council to make such joint ventures work. It was noted that funding for the original business case (which had been provided by SG) and a commercial partner with the professional expertise for the build and to minimise the council’s investment risk helped. Additionally, that cross-party support had been built up for the project meaning that commitment to it was not reliant on a particular party controlling the Council. 

It was noted that a large part of this project related to new build, and that maximising the connection fee for such properties was important from the commercial perspective. However, they had sought to have a blend of new and retrofit, as connecting to existing properties would provide demand from day one, whereas new build agreements required to wait for the properties to be constructed. There was also a certain degree of existing demand from large estates, hospitals and individuals. 

Presentation 3: UK Infrastructure Bank (UKIB) – financing heat networks in the UK – available options, presentation by Peter Chalmers of the UKIB on UKIB’s core objectives and investment principles, how they invest, heat network investment, barriers to funding in the UK and UKIB solutions. 

Members enquired what relationship UKIB has with the UK Infrastructure Commission. UKIB confirmed that there was senior high-level engagement ongoing both for England and Scotland with UKIB keen to build relations across Scotland. 

The key differences between UKIB and the Scottish National Investment Bank (SNIB) were explored: SNIB can provide finance for the private sector only, while UKIB can lend to both the public and private sectors, alongside the provision of guarantees, as well as provide advisory support. It was confirmed that there is a growing relationship between UKIB and SNIB. 

It was noted that the UKIB team on heat networks would be doubling in size, and that expectations are that demand from Local Authorities will be high, when they understand the funding and advice available to them. UKIB was looking to pull all levers at once, providing funding for networks as well as expanding product ranges and skill sets to build up demand (through their advisory services). 

Taskforce members enquired at what point private investors could get involved in their projects, and UKIB confirmed that this depended upon the individual delivery models, although some Local Authorities would be looking to take a partnership approach from the beginning. 

Item 4: Next meeting and any other business 

In relation to the next Taskforce meeting, it was noted that –

• this would be held in Saint Andrew’s House on 29 November 2023 and would be chaired by the Minister
• the role of Government would be on the agenda and that this discussion would be led Ian Cochran
• members were welcome to suggest other topics to be covered with secretariat exploring several potential topics

Action 5 

Secretariat to confirm agenda for next meeting on 29 November 2023.