Green Heat Finance Taskforce minutes: July 2024

Attendees and apologies

• Sara Thiam, Prosper & Taskforce Chair 
• Gareth Fenney – SG, Acting Deputy Director for HiB Delivery (meeting Chair) 
• Kirsty Hamilton OBE – Independent 
• Rufus Grantham – Independent  
• Dr Ian Cochran – Independent  
• Dr Gemma Bone Dodds – Director, Insights & Policy, Scottish National Investment Bank (SNIB) 
• Dr. Andy Kerr – Director, Climate KIC 
• Helen Melone – Senior Policy Manager Scottish Renewables 
• Lewis Shand Smith, Chair, Energy Consumers Commission; 
• Rachael Hunnisett, Green Finance Institute (GFI) (substitute for Emma) 

 

• Amy Tickell – SG, Head of Heat Networks and Investment Unit 
• Alex Chatzieleftheriou – SG, Head of Heat Network Development 

Secretariat: 

• Karl Reilly – SG, Heat in Buildings Future Finance Team Leader  
• Dr. Toby Tucker – SFT / GHFT Secretariat 
• Rajiv Naik – Heat in Buildings Future Finance Team, GHFT Secretariat  
• Daniel Nagy – Heat in Buildings Future Finance Team, GHFT Secretariat 
• Peter Irving – Heat in Buildings Future Finance Team, GHFT Secretariat   

Items and actions

Welcome and apologies  

The Chair welcomed members to the 15th meeting of the Green Heat Finance Taskforce (GHFT).  Apologies had been received from: Simon McWhirter (UKGBC); David Steen (UKGBC); and Emma Harvey-Smith (GFI). Rachael Hunnisett was welcomed as a substitute for Emma.   

Secretariat update – Scottish Government 

Secretariat provided an update of activity since March Taskforce meeting, including changes at the Scottish and UK Government levels, and around consultation responses received to the Heat in Buildings (HIB) Bill consultation:

• Gareth Fenney was now Acting Head of Heat in Buildings Delivery Division while Catherine Williams is on temporary assignment to elsewhere in SG

• new First Minister and Cabinet; Màiri McAllan as Cabinet Secretary Net Zero now on maternity leave, with Gillian Martin Acting Cabinet Secretary for Net Zero and Alasdair Allan Acting Minister for Climate Action, leading on heat
• following UK General Election there has been a change in tone from both Scottish and UK Government administrations, with a desire for greater at official and Ministerial levels. Members were asked to highlight any relevant insights they gain around UK Government heat priorities and plans as they develop
• there were around 1,650 responses to the Heat in Buildings (HIB) Bill and the Scottish Government was reflecting on next steps while a full formal analysis of responses is completed. The Programme for Government in early September was expected to outline next steps following review of the consultation responses

A brief update was provided on work the Scottish Government and the Green Finance Institute have been working on to take forward recommendations from the Taskforce’s Part 1 report around awareness raising and Property Linked Finance (PLF), noting they were in the process of finalising details on both strands of work.

Draft Part 2 report and recommendations discussion

The Taskforce discussed in detail the current iteration of the draft Part 2 report, noting actions to be undertaken by members to provide evidence and progress the work around drafting the next iteration of the report.  Secretariat would work through detailed amendments to the report and issue a next iteration as soon as possible. The Taskforce would reconvene (virtually) to discuss the next iteration of the Part 2 report in due course. 

Overall reflections

• broad endorsement of the structure which demonstrated members views and input from recent discussions
• the report needs to be bolder in calls for action and articulate greater ambition – Taskforce should be clear in calling for the action required to address the challenge, even if this goes beyond what government can deliver – if the Taskforce do not set out that ambition and provide that challenge, thenwho will?    
• there should be a stronger emphasis on place-based approaches as key to the delivery of retrofit activity at scale, with both social housing and heat networks integrated into discussion of a place-based approach – they can provide some anchor demand for place-based structures but everything happens in a place
• place based approaches are not just about delivering retrofit and should be discussed in terms of the wider co-benefits they can deliver – economic, environmental, health and regeneration. Those co-benefits need to be well articulated to win the heat transition communication battle and convince people of the need for change
• the new UK Government is talking about the net zero transition as a mechanism to renew the social contract, reinforcing the need to highlight the co-benefits of retrofit
• the context in UK is shifting and Scotland is no longer seen as clearly leading within the UK on the heat transition with metropolitan areas in England starting to develop retrofit programmes, not just individual projects, and exploring the potential to set up place-based funds for their area
• the new UK Government will also be thinking about this as they prepare for a spending review, where it is possible they will move towards establishing a UK-wide heat fund. It is important that Scottish regions start preparing to bid into and secure a fair share of any funding which becomes available UK-wide
• mentions of innovation are a notable omission at present. Innovation needs to be discussed and is upending other markets in Europe, where solar PV and battery innovation is driving power cost reductions. In the UK though, there are regulatory issues currently constraining technology and / or finance innovation. BE-ST and Changeworks should be name-checked as examples supporting innovation
• the key messages need to be drawn out very clearly and unambiguously as it is vital to land the headline points if we are to draw people into the detail which follows. The report should hit people over the head with simple, clear key messages

Discussion around recommendations

• recommendations currently focus on asks of the Scottish Government, but the report should also articulate the role and asks of other parties including the UK Government, suppliers, installers, lenders and individuals
• recommendations are currently too general. They need to be more specific on the how and by when as well as the what. This will help convey a sense of urgency as well as set out what the Taskforce would like to see happen next
• it would be beneficial if more could be said about progress with recommendations from the Part 1 report and the Taskforce would like to see the Scottish Government reporting regularly on progress with delivering its recommendations
• too many recommendations currently focus on calls for more research or studies. The focus now should be on finding ways to test and prove models as we will not be able to research our way to net zero.
• In line with the report clearly emphasizing its key messages, the recommendations should provide a sense of prioritization or be structured as key recommendations with underlying actions required
• it must though still be clear how everything fits together coherently. Making a retrofit delivery framework with timelines a key recommendation would help with this

Place based considerations

• the current atomised approach is demonstrably not working, and place-based represents a credible alternative. While there are arguments for not putting all eggs in one basket, the Taskforce should also emphasise the co-benefits a place-based approach could deliver and strongly make the case that area models need tested
• various enabling actions would sit below any calling for a focus on testing place-based models. A project support unit would be one of these
• it is only through a programme approach that the scale to attract larger investors can be achieved – moving from unbankable projects to slightly less attractive projects will not move the needle in terms of clean heat installations. For that a programme showing how we will move from A to B is required
• in aggregating demand into programmes it is worth thinking about the level of derisking that will be required to attract private investment – government may end up having to guarantee the entire risk of the income stream. Also worth bearing in mind investors will always look for a higher return than they can achieve on 10-year gilts
• given the risk bearing considerations, the case for various paths to using public debt should be fully explored, including how this would sit on government balance sheets
• LHEES offers a really positive starting place in Scotland and could be a key input to a city region investment plan, noting all investment should be green investment. More information on LHEES and how we can build on them to develop programmes should be set out in the report
• however, LHEES focus on local authority areas and therefore have not explored the possible cross boundary collaborations. Place based approaches cannot be limited to local authority areas and need to start looking at city region level
• to be successful in a place-based approach it is vital to take people along with you on the journey, especially as some organisations (like some individuals) are reluctant to act. The Part 2 report should seek to provide a pathway through the blockages in developing place-based solutions
• the role of procurement frameworks – at UK or Scottish level – in facilitating place-based approaches should be discussed
• the report must be clear that we should not delay useful action now for perfect circumstances in future as this would just be kicking the can down the road
• anchor loads are important in supporting the business case for place-based models (or heat network developments) and the report should recognise the important role non-domestic properties, including public buildings, can play in providing that base demand
• a call for a stronger pipeline of investable projects is a common conclusion. To go beyond this the Taskforce report should seek to identify what drives different tiers of action and what is currently constraining those tiers. This will involve being clear on who the report is talking to and seeking to reverse engineer the required actions to reach the end goal
• creating an effective place-based programme cannot be done without proper resources. Central support needs to be available for local authorities and somewhere in the region of £10m to £20m over a two-to-four-year period is required to develop and test place-based models. The Taskforce should articulate this ambition and need
• it was noted that developing a coherent programme would require looking at individual projects first to confirm what is viable. This requires people and resource

Action points

1. Taskforce member to provide text and summary case study information around the development of a programmatic approach (with West Yorkshire as an example).

2. Taskforce member to offer text for a case study outlining how a UK-wide clean heat fund could work and what that would mean for Scottish regions.

3. Taskforce member to provide text to outline how innovation is playing a transformational role across Europe with Lewis to add information around how regulation in UK is currently constraining the required innovation.

4. Taskforce member to provide suggestions to make draft recommendations SMARTer.

5. Secretariat to consider how best to reframe the recommendations to make the key actions clearer and to broaden out asks beyond Scottish Government, for example, for the UK Government to ensure Scotland gets at least a proportionate share of any UK-wide heat funds that are launched.

6. Secretariat to put together a note summarising what the Taskforce have previously discussed around pilots to inform further discussion around what exactly pilots would seek to test.

7. Taskforce member to share Scottish Renewables Heat Networks report when it is ready.

8. Taskforce member to share information from GFI work to identify challenges and calls to action for industry around heat networks as well as the barriers associated with developing place-based models, including the interaction between both. 

9. Taskforce member to provide some text for incorporating into the report around what might be required to test a place-based approach in Scotland in a way that articulates the general level of ambition members want to see the report conveying.

10. Secretariat to produce a summary minute with actions, work to update the report in light of discussions and schedule the next Taskforce meeting.

Next meeting and AOB  

The meeting Chair and Taskforce Chair both thanked Members and closed the meeting.