Infrastructure Investment Plan 2021-22 to 2025-26: programme pipeline update - March 2023

Sector: Energy

Programme name: Scotland's Heat Network Fund

Programme description: Provides capital support to accelerate the deployment of new zero emission heat networks as well as support the decarbonisation and extension of current heat networks. The Fund will stay open to applications for the foreseeable future, with quarterly updates to be provided detailing the budget committed so far.

Estimated total investment: £300 million.

How is programme being funded: Programme is capital funded by the Scottish Government.

Programme delivery timetable: 2021-22 to 2025-26.

Latest programme progress: Scotland's Heat Network Fund was launched in February 2022 to provide certainty to investors on the capital support available in Scotland to deploy heat networks. Scotland's Heat Network Fund has awarded over £6.4 million to three heat network projects as of March 2023, including an extension to Aberdeen City Council's Torry Heat Network and two shared ground loop communal heating systems serving both social and affordable homes.

The Heat in Buildings Strategy published in October 2021 committed £400 million to large scale heat decarbonisation over the next 5 years. The £300 million Scotland's Heat Network Fund makes up part of this commitment.

The launch of the Heat Network Support Unit will help build a pipeline of projects that will submit applications to the Fund. The Heat Network Support Unit is designed to address challenges in the pre-capital stage of heat network development. It identifies prospective heat network projects; supports the development of heat network projects across Scotland, through advice and grant funding; and builds capacity and expertise across the public (and private) sector in Scotland to develop and run successful heat networks.

Contribution to economic development: Capital investment from the Fund will help grow a strong heat network industry in Scotland and create high quality jobs. Applicants to the Fund must demonstrate their project's potential to have a positive and significant contribution on skills and supply chain in Scotland.

Contact for public enquiries: email: HeatNetworkFund@gov.scot

Programme name: Low Carbon Infrastructure Transition Programme (LCITP)

Programme description: Programme supports the acceleration of projects to develop investment grade business cases and the delivery of low carbon infrastructure projects.

Estimated total investment: Phase 1 (2015-2018) £76 million / Phase 2 (2018-2021) £60 million

How is programme being funded: Programme is capital funded by the Scottish Government with support for 40% activity through the European Structural Funds up until the Green Recovery: Low Carbon Energy Project Capital Fund invitation which was launched in September 2020 and fully funded by the Scottish Government.

Programme delivery timetable: 2015-16 to 2022-23

Latest programme progress: The LCITP is now closed to applications. There are still 21 projects in the pipeline from previous LCITP funding invitations that are currently being constructed. The LCITP has supported the co-development of over 30 proofs of concept and development proposals for low carbon projects. The LCITP has run a number of open funding invitations including the Social Housing Net Zero Heat Fund, Green Recovery: Low Carbon Energy Project Development Funding, Scottish Low Carbon Heat Funding Invitation, Transformational Low Carbon Demonstrator Invitation and the Innovative Local Energy Systems Invitation. Up to March 2023, LCITP has offered over £73 million of capital funding to 36 low carbon projects.

COVID-19 and Brexit impacted upon both the supply chain and delivery of projects and the delivery timetable has been extended.

Contribution to economic development: The LCITP has provided significant capital investment across various low carbon energy sectors in Scotland. Grants under the LCITP have been awarded on a competitive basis with the scoring criteria for applications requiring projects to demonstrate their potential to have a positive economic and social impact on Scotland.

Contact for public enquiries: email: LCITP@gov.scot

Programme name: Heating in Buildings (Formally Energy Efficient Scotland Domestic programmes)

Programme description: Investment in our domestic energy efficiency and zero emission heating systems supporting the elimination of poor energy efficiency as a driver of fuel poverty and reducing emissions from the housing stock.

Estimated total investment: £590 million.

How is programme being funded: Capital funded through the following routes:

• National fuel poverty scheme - currently Warmer Homes Scotland (WHS) which is delivered through a contract with Warmworks. A successor scheme is being procured to go live when the current contract expires. The successor will have a greater focus on decarbonisation and increased spend per intervention with an increased contract value.
• Area Based Schemes (ABS) which are delivered through grant funding to local authorities.

Programme delivery timetable: 2021-22 to 2025-26.

Latest programme progress: £55 million allocated to WHS and £64 million to ABS in 2023-24.

More than £210 million has been invested through the WHS scheme since its launch in September 2015 helping over 32,000 households throughout Scotland. The successor scheme is under procurement and the existing scheme will be replaced in October 2023. Currently, households who receive improvements through the scheme are expected to save an average of £160 per year on their energy bills.

Our ABS programme has delivered £24 million in investment in the period up to November 2022 with further projects underway and others starting early in 2023. We recognise that the challenge of delivering these may increase further during the winter but continue to support councils to maximise delivery of energy efficiency improvements.

Contribution to economic development: Contributes to the development of the supply chain and skills base across all regions of Scotland including rural and island locations in order to support rapid acceleration in zero emissions heating system conversions and energy efficiency upgrades. Improves Scotland's housing stock by improving the property's energy efficiency and emissions ratings to the standard required to meet statutory targets. Provides benefits to the wider community through vocational training and employment opportunities. Aligns with Local Heat and Energy Efficiency Strategies and Delivery Plans in order to maximise benefits to local communities from the heat transition.

Contact for public enquiries: Home Energy Scotland acts as referrals administrator for national fuel poverty scheme and can be contacted through the Home Energy Scotland website / Heat in Buildings National Delivery email: ceu@gov.scot / Area Based Schemes Delivery Team email: SGareabasedschemes@gov.scot

Programme name: Social Housing Net Zero Heat Fund

Programme description: Fund to support social housing landlords across Scotland to take forward projects to deploy zero emissions heat, improve energy efficiency and reduce fuel poverty. This fund is for the retrofit or refurbishment of existing housing stock and is not for new build social housing.

Estimated total investment: £200 million.

How is programme being funded: Programme is being capital funded solely by the Scottish Government.

Programme delivery timetable: 2021-22 to 2025-26.

Latest programme progress: The fund has awarded over £38.6 million to 43 social housing projects across Scotland in financial year 2022-23. A further 10 projects are currently in assessment. The £0.5 million Social Housing Net Zero Development Funding Invitation is supporting 7 Social Landlords to produce feasibility studies and Business Cases for projects which can then subsequently progress to be considered for capital support under the Social Housing Net Zero Heat Fund. The Heat in Buildings Strategy increased the budget to £200 million to accelerate the deployment of energy efficiency measures and zero emission heating in order to achieve our 2045 climate ambitions.

Contribution to economic development: Applications for funding under the Social Housing Net Zero Heat fund must demonstrate the expected benefits that the project will deliver including economic benefits. Projects must also have a positive economic impact for tenants and demonstrate a reduction or no increase in energy bills.

Contact for public enquiries: email: netzerosocialhousing@gov.scot

Programme name: Green Public Sector Estate Decarbonisation Scheme

Programme description: Programme to support heat decarbonisation and energy efficiency across the public sector estate.

Estimated total investment: £200 million.

How is programme being funded: Programme is being funded solely by the Scottish Government in line with recent Programme for Government commitments.

Programme delivery timetable: 2021-22 to 2025-26.

Latest programme progress: The Green Public Sector Estate Decarbonisation Scheme (GPSEDS) delivers an offer of support for public bodies across Scotland. The scheme comprises three support elements for public sector bodies: The Scottish Public Sector Energy Efficiency Loan Scheme, The Scottish Public Sector Non-Domestic Energy Efficiency (NDEE) Frameworks and Project Support Unit (PSU) and the Scottish Central Government Energy Efficiency Grant scheme.

The Grant funding aspect of the GPSEDS relaunched in May 2022 to support multi-year projects and to continue to boost heat decarbonisation and improve energy efficiency across Scotland's public sector. Since re-launching in 2022, the scheme has committed £30 million of investment across 32 Capital projects to be delivered over the course of three financial years. Since re-launching the fund has also supported 17 pre-capital projects totalling around £750k of resource funding. The fund remains open to applicants and will support projects up to the end of this parliamentary term.

The Scottish Government is working closely with Salix Finance to review the offering to wider public sector to ensure this is fit for purpose in 2023-24.

The Heat in Buildings Strategy increased the budget to £200 million to accelerate decarbonisation and increased energy efficiency of existing public sector building in order to achieve our 2045 climate ambitions.

Contribution to economic development: The GPSEDS continues to provide significant capital investment across the public sector. Investing capital and resource funding in energy efficiency and heat decarbonisation projects in public sector organisations provides them with support to meet ambitious net-zero targets while freeing up their own resources to invest in services that benefit the people of Scotland.

Contact for public enquiries: email: GPSEDS@gov.scot

Programme name: Heat in Buildings Grants and Loans (formerly Heat in Buildings Capital Investment)

Programme description: Investment to support heat decarbonisation and energy efficiency in homes and buildings, community energy, decarbonising islands and energy.

Estimated total investment: £344.5 million.

How is programme being funded: Capital – grants and loans delivered via a number of delivery partners.

Programme delivery timetable: 2021-22 to 2025-26.

Latest programme progress: Funding issued as planned via CARES (Community and

Renewable Energy Scheme), SME (Small and medium-sized enterprises) Loan & Cashback scheme, Home Energy Grant and Loan scheme and District Heating Loan Fund.

CARES 'Let's Do Net Zero Community Buildings' fund opened in May 2022 and provides a rolling programme of support to communities, charities, and faith organisations to decarbonise their buildings and reduce energy bills. This support takes a whole building retrofit approach, covering energy efficiency measures, zero emissions heat installations, and additional small-scale generation where there is a clear benefit to the community organisation in terms of energy bill reduction.

CARES, via the 'Let's Do Net Zero: Off Electricity Grid Communities Fund,' is also providing a package of support to some of Scotland's more remote and rural off grid communities to help them upgrade their energy systems and decarbonise their energy supplies, with the aim of making them more resilient and sustainable in the future.

CARES Community Heat Development Programme works with community organisations and groups of householders to help develop their ideas for locally generated, low and zero carbon heat project ideas. By providing funding for and access to advisors, community organisations receive advice and support to assess the feasibility of potential community heat projects and advice on next steps, including any potential routes for further funding.

The Home Energy Scotland (HES) Grant and Loan Scheme was launched in December 2022 as an update to the cashback offered through the HES Loan scheme and offers applicants a grant, interest free loan or combination of both to support the installation of energy efficiency measures and zero emissions heating. This scheme intends to offer applicants a straightforward, flexible and accessible way to access targeted priority measures. A rural uplift has been introduced to the scheme in recognition of the higher costs faced by rural households associated with the installation of measures.

Contribution to economic development: The SME Loan and cashback scheme aims to support businesses based in Scotland by installing measures which will increase their energy efficiency and reduce their carbon output and energy costs while improving financial savings and business competitiveness. This is primarily accessible via the Business Energy Scotland (BES) advice and support service.

CARES provides advice and support, including funding support (grants and loans) to community groups and other eligible organisations seeking to explore their renewable energy options. The aim is to support the growth of community and local energy in Scotland and to ensure that communities across Scotland are engaging in and benefiting from the energy transition to net zero. Local and community energy projects have the potential to help local communities reduce carbon emissions, create local jobs, upskill local people, reduce energy costs and overall allow greater investment in local economies.

Contact for public enquiries: Advice and support is delivered on behalf of the Scottish Government at the Business Energy Scotland website / Loan and cashback support can be found at the Home Energy Scotland website / CARES is delivered on behalf of Scottish Government and further information can be found at the Local Energy Scotland website.

Programme name: Clyde Mission Heat Decarbonisation Fund

Programme description: Investment in zero emission heat projects along the River Clyde.

Estimated total investment: £25 million.

How is programme being funded: Programme is capital funded by the Scottish Government.

Programme delivery timetable: 2023-24 to 2025-26.

Latest programme progress: The 2022-23 Programme for Government made a commitment to launch £25 million of capital funding over the current parliamentary term to support the delivery of low/zero emissions heat projects including heat networks and communal heating systems located within the Clyde Mission area, which contribute to the aims of Clyde Mission. Ministers have agreed that the funding will be awarded to Glasgow City Council on behalf of the Clyde Mission partner Councils (including Argyll & Bute).

Contribution to economic development: Projects will be expected to demonstrate a contribution to inclusive economic growth through developing skills, creating employment, and supporting secure supply chains across Scotland. Projects should contribute to a reduction in fuel poverty and utilise vacant and derelict land.

Contact for public enquiries: email: clydemission@gov.scot

Programme name: Scottish Industrial Energy Transformation Fund (SIETF)

Programme description: SIETF is the Scottish administered version of IETF (Industrial Energy Transformation Fund) and supports manufacturers to fund the deployment of investment-ready energy efficiency technologies and/or decarbonisation at their industrial sites. The fund also supports feasibility and engineering studies into energy efficiency or deeper decarbonisation.

Estimated total investment: The 2022 Programme for Government committed us to continue SIETF which leverages over £100 million of total investment to directly reduce emissions from industrial processes.

How is programme being funded: £34 million of Scottish Government capital committed in 2020 (as part of low-carbon funding).

Programme delivery timetable: 2021-22 to 2025-26.

Latest programme progress: Our SIETF programme continues to receive significant applications from a wide range of industrial manufacturing sectors across the country. By enhancing energy efficiency it cuts energy costs, in particular for Scotland's diverse food and drink sector. Phases 1 and 2 up to 2022 provided 20 projects with grants totalling £12 million and Phase 3 has received 31 applications that will be processed in 2023/24. The programme will be reviewed prior to further invitations to apply.

Contribution to economic development: Investment to support energy efficiency or decarbonisation of energy-intensive industries (EII) can sustain high-value jobs that are often in the supply chains which are vital for regional communities, the Scottish manufacturing sector and economy as a whole. There are significant barriers however to attracting the necessary investment – particularly long payback periods – whilst sites must remain internationally competitive. Via match-funding, SIETF grants are incentivising investment across various sectors including food and drink, pharmaceuticals, glassmaking, and a data centre. This demonstrates the steps which government and industry are taking together to deliver against Scotland's climate change ambitions by co-investing to decarbonise the industrial sites that local jobs and communities depend upon.

Contact for public enquiries: email: SIETF@gov.scot

Programme name: Energy Transition Fund

Programme description: This package of investment will support our energy sector and help us make significant progress on energy transition, as we move toward a net zero society by 2045.

Estimated total investment: £75 million.

How is programme being funded: The Energy Transition Fund (ETF) was launched in June 2020, and was increased from £62 million to £75 million in September 2021. The ETF will support our energy sector and the North East over the next 5 years, to make progress on energy transition as we move toward a net zero society by 2045.

Programme delivery timetable: 2020-21 to 2024-25.

Latest programme progress: The Energy Transition Fund is actively funding the following:

• £26.3 million for an Energy Transition Zone - ETZ was officially opened in February 2022 and will transform north east Scotland into a globally integrated energy cluster focussed on accelerating net zero through energy transition activities.
  • £11.4 million funded from 2020-23, and £6.4 million to be delivered in 2023-24.
  • Latest workstreams revolve around greenfield site developments- working in conjunction with Aberdeen City Council to expedite granting of planning permission.
• £16.6 million to Net Zero Technology Centre - at the heart of the Net Zero Technology Transition Programme (NZTTP) are seven interconnected projects focussing on reducing emissions and transforming the industry to an integrated, digitally enabled energy system, with the North Sea as the nexus.
  • £8,2 million funded from 2020-23, and £6.2 million to be delivered in 2023-24
  • Delivered a world first running of a Gas Turbine on e-methanol – showcasing a readily deliverable solution to decarbonise North Sea operations.
• £6.5 million for a Global Underwater Hub - the vision for the Global Underwater Hub (GUH) is to transform the globally competitive underwater sector in the UK to accelerate the transition to net zero, drive innovation and growth and make a step change in the development and internationalisation of technology and services.
  • £3.6 million funded from 2020-23 and £770k to be delivered in 2023-24.
  • Delivered the first two phases of the Digital Ecosystem project – covering development of the website and customer engagement platform.
  • Ran Subsea Expo from 21-23 February 2023 - huge engagement with the sector and strong support from stakeholders.
• £15.2 million to the Aberdeen Hydrogen Hub - the Aberdeen Hydrogen Hub will play a leading role in supporting the Scottish Government's Net Zero Emissions target and presents the opportunity to deliver Scotland's first commercially investable, 'green hydrogen' production facility focussed initially on the decarbonisation of transport.
  • £5.85 million funded from 2020-23, and £5.65 million to be delivered in 2023-24.
  • 10 Hydrogen buses added to the original 15 on fleet, and equipment procured to convert Aberdeen City Council vehicles to Hydrogen.

All four projects have completed their funding application and are at delivery stage, with grant offer letters signed. The two projects that are jointly funded by UK Government (The Energy Transition Zone Ltd and Global Underwater Hub) are still awaiting UK Government funding being finalised and issued. Funding Delivery for the Energy Transition Zone has moved from the Department for Business, Energy and Industrial Strategy (BEIS) to the Department for Levelling Up, Housing and Communities. The Global Underwater Hub funding from BEIS has been partially delivered, with the capital funding being awarded. The resource funding is still outstanding. The ETF team continue to engage proactively with UK Government colleagues to facilitate issuing of UK Government Funding.

Contribution to economic development: Investment of £75 million over 5 years into the North East to support transition to renewable energy and support a thriving energy economy. ETZ is part of the wider harbour redevelopment works supported by the Aberdeen City Deal

Contact for public enquiries: email: Neil.purdom@gov.scot

Programme name: Emerging Energy Technologies Fund (EETF) – including hydrogen and CCS

Programme description: Support carbon capture and storage (CCS), negative emissions technologies (NETs) and hydrogen development.

Estimated total investment: £180 million.

How is programme being funded: Scottish Government has committed £180 million capital grant as part of Climate Change Plan over 5 years - £100 million on Hydrogen and £80 million on CCS and NETs.

Programme delivery timetable: 2021-22 to 2025-26

Latest programme progress: In June 2022, we launched the first tranche of the EETF hydrogen investment programme via the £10 million Hydrogen Innovation Scheme with a focus on innovation in renewable hydrogen production, storage and distribution technology. The second tranche of the EETF hydrogen investment programme, the £90 million Green Hydrogen Scheme, is due to follow.

While the legislative and regulatory levers required to deliver the CCUS Cluster Sequencing process are reserved to the UK Government, we remain wholly committed to supporting the development and deployment of CCUS and stand firmly behind our commitment to make available £80 million of financial support.

Due to the unfortunate delays from the UK Government in awarding the Scottish Cluster, it has not yet been possible to deploy this support and we continue to urge the UK Government to provide a timetabled solution for when the Scottish Cluster will be awarded.

Contribution to economic development: The Emerging Energy Technologies Fund (EETF) will, over the next four years, invest £180 million in the development of hydrogen and CCUS industries in Scotland and support the development of negative emissions technologies - creating attractive diversification opportunities and new, sustainable green jobs for those currently working in the oil and gas industry.

Contact for public enquiries: CCS email: nicholas.young@gov.scot / EETF email: EETF@gov.scot