Heat Networks Delivery Models

Footnotes

1 Heat In Buildings Strategy: Achieving Net Zero Emissions in Scotland's Buildings (www.gov.scot)

2 This engagement took place over the winter of 2022/2023

3 This definition is derived from that used in the BEIS DPD Guidance on Strategic & Commercial Case, which defines delivery models for heat networks as “combinations of role allocations to different parties and the contracts which govern relationships between the parties.”

4 For the purposes of defining this model, we have assumed Scottish Government would take an equity stake in projects (e.g., by subscribing for ordinary or preference shares in a project SPV). Other forms of marketable securities could also be considered, e.g. debt securities.

5 For the purpose of this report, public bodies includes bodies which are regarded as public authorities for certain purposes (such as universities, which are often constituted as charities) and are required to comply with public procurement rules.

6 For the purpose of this report, public bodies includes bodies which are regarded as public authorities for certain purposes (such as universities, which are often constituted as charities) and are required to comply with public procurement rules.

7 Note that a wider ‘energy partnership’ is also possible for the RESCo (DM10) model.

8 Heat In Buildings Strategy: Achieving Net Zero Emissions in Scotland's Buildings (www.gov.scot)

9 Statutory targets are set out in the Climate Change (Scotland) Act 2009

10 Targets are as set out in the Scottish Government’s Heat in Buildings Strategy: Achieving Net Zero Emissions in Scotland's Buildings

11 Percentage of current non-electrical heat consumption is as stated in the Consultation on a 2035 heat networks target: A consultation on a proposal to introduce a 2035 target for the supply of thermal energy by heat networks in Scotland

12 An example of evidence that informs statutory targets is the Climate Change Committee’s Research on district heating and local approaches to heat decarbonisation (Element Energy)

13 An example of evidence that informs statutory targets is the First National Assessment of Potential Heat Network Zones (www.gov.scot)

14 An example of evidence that informs statutory targets is the Local heat and energy efficiency strategies and delivery plans: guidance - gov.scot (www.gov.scot)

15 The UK legislation current being introduced is the Energy Bill [HL] - Parliamentary Bills - UK Parliament

16 The review of international heat networks carried out by BEIS is contained in the BEIS International Review of Heat Network Market Frameworks, BEIS Research Paper Number 2019/032

17 The research on sizing networks according to contracted demand is contained in the BEIS International Review of Heat Network Market Frameworks, BEIS Research Paper Number 2019/032, page 37.

18 This definition is derived from that used in the BEIS DPD Guidance on Strategic & Commercial Case, which defines delivery models for heat networks as “combinations of role allocations to different parties and the contracts which govern relationships between the parties.

19 SFT’s guidance on Delivery Structures is contained in their report SFT DH Delivery Structure Report (v1 - 16 Mar 20015)_0.pdf

20 Lending to local authorities on behalf of HM Treasury was carried out by the Public Works Loan Board (PWLB) until 2020, when PWLB was abolished and its functions transferred to the UK Debt Management Office.

21 Aspects of metering and billing are regulated under the Heat Network (Metering and Billing) Regulations 2014.

22 For the purposes of defining this model, we have assume Scottish Government would take an equity stake in projects (e.g., by subscribing for ordinary or preference shares in a project SPV). Other forms of marketable securities could also be considered, e.g. debt securities.

23 For the purpose of this report, public bodies includes bodies which are regarded as public authorities for certain purposes (such as universities, which are often constituted as charities) and are required to comply with public procurement rules.

24 An example of public sector providing cheaper finance or access funds is the UK Debt Management Office.

25 An example of public sector in-house delivery is Athletes’ Village, Glasgow.

26 An example of public sector in-house delivery is Bunhill Heat & Power Network, Islington.

27 An example of the service concession model is Birmingham District Energy Company.

28 An example of the service concession model is Cranbrook.

29 An example of the service concession model is Queen Elizabeth Olympic Park.

30 An example of third party ESCo is Leicester District Energy Company.

31 An example of a local authority led joint venture is Midlothian Energy Limited.

32 An example of a local authority led joint venture is Bristol City Leap.

33 More information on small scale community led projects including hypothetical contracting structure and funding flows can be found in BEIS Guidance on Strategic & Commercial Case, page 97.

34 See, for example, BIS report on Limited Companies for different ways in which community companies can be set up.

35 See Scottish Communities Finance page on Community Benefit Society for an example of Community CBS.

36 More information on financing community led projects see BEIS Guidance on Strategic & Commercial Case, page 96.

37 See more information on an example of a community led project at Springbok Sustainable Wood Heat Co-operative.

38 See more information on an example of a community led project at Swaffham Prior Heat Network.

39 See more information on the research into international heat networks at International Review of Heat Network Market Frameworks, Rapid Evidence Assessment, Regulatory Document Review and Qualitative Interviews, BEIS Research Paper 2019/032, February 2020, page 18.

40 See more information on commercial structures relevant to the unbundled model at BEIS Guidance on Strategic & Commercial Case, page 98.

41 See BEIS Guidance on Strategic & Commercial Case page 98.

42 See more information on the Glenrothes Heat Network example.

43 See more information on the Stirling Forthside example.

44 See more information on the Bradford Energy Network example.

45 Subject to consideration of SG devolved powers.

46 Subject to consideration of SG devolved powers.

47 The extent of control and influence would depend on the type of equity held by Scottish Government: different types of share carry different rights, e.g., in respect of voting and dividend entitlement.

48 See more information on the example of The Hub.

49 See more information on Glas Cymru.

50 Heat as a Service: Definition and Examples; authored by Roxanne Pieterse and Gaomin Liu; reviewed by Jennifer Arran; June 2019.

51 See information on the unbundled model not being recommended at this stage in the BEIS International Review of Heat Network Market Frameworks.