Reflections on Piping Hot: The future of heat networks in Scotland

Last week Vattenfall were pleased to take part in the Scottish Renewables Low Carbon Heat Conference, attended by representatives from across the renewables energy sector. 

There was a wide-ranging programme, dominated by the groundbreaking work that the Scottish Government is doing to put in place a regulatory framework for heat networks.   The Heat Networks (Scotland) Bill is about to go through stage two of its parliamentary process, so no surprise that this was such a hot topic for discussion lead by an opening speech by Paul Wheelhouse MSP, the Minister for Energy, Connectivity and the Islands. 

Mr Wheelhouse set out the Scottish Government’s clear agenda on heat decarbonisation pointing to the direct support provided under the Low Carbon Investment Partnership Fund and promising a further policy statement on heat decarbonisation later in 2020. 

On the Heat Networks Bill, he stressed the importance of getting the regulatory framework right for the industry -  a theme which was picked up by other speakers in the session. 

For the Scottish Government, James Hemphill talked to what happens next in terms of the Parliamentary process.   James is the lead official on the Heat Networks Bill team.   The Bill is a long and complex piece of legislation – as one might imagine – so the Government is keen to make sure the right amount of parliamentary time is found to make sure it can be properly examined and still make it on to the statute books before the end of the parliament (May 2021, when the next Scottish Parliamentary elections will be held). 

Sarah Jane McArthur, from Brodies Solicitors, an experienced lawyer in the energy sector provided a lawyers perspective on the new legislation.   She stressed the importance of work being done quickly on the details of the Bill, which introduces new legal concepts requiring further explanation.  Heat networks take time to develop, she said, and clients need to know soon what the imposition of regulation will look like on future schemes so that they can properly plan.    

For Vattenfall, I (like others) warmly welcomed the new legislation saying that the industry needed a regulatory framework for several reasons and that we had been pressing for it for some time.   

Building investor confidence Across the board there are strong ambitions for heat decarbonisation, but in order to encourage investment at speed and at scale, it’s important to get the supporting policy framework in place as soon as possible. 

Consumer confidence Added to that is the consumer confidence piece.   We believe (and I made it clear in my presentation) that regulation is also badly needed to establish consumer confidence in the technology so that district heating is seen as an option people want for their homes. 

I welcomed the enhanced duties of Local Authorities to identify heat zones as a step towards the right strategic vision to allow heat networks to be developed at scale.  We recognise that Local Authorities may feel under-resourced to fulfil these new duties, but to those who do, I was keen to stress that companies like Vattenfall are ready and willing to be delivery partners.   And of course, the new licensing scheme, to be introduced under the Bill will help establish proper credentials for these prospective partners in the private sector.

Like others, I was keen to understand how the other legal concepts – concessions and permits – will be defined and how they will work together in a single scheme.   The underlying concepts are like pieces of a jigsaw, and across the board, commentators have suggested that we need more clarity on how they will all come together in a single composite picture.    

When it comes to addressing other shortcomings in the legislation the big elephant in the room is of course the introduction of an obligation to connect.   This was widely discussed in the context of the Bill proposals but it hasn’t yet made it into the draft legislation.   I re-iterated the message, doubtless familiar to Government by now, that an obligation to connect at least to public anchor load buildings will be a crucial measure in beginning to address demand assurance by providing ready-made consumers for any heat network. 

My final comments addressed the lack of consumer protection measures in the Bill.   We understand of course that this is because consumer protection remains a reserved issue and therefore not one on which the Scottish Government can legislate.   We hope that the UK government will be swift to bring forward their own proposals consistent with and to be timed to coincide with the Scottish legislation.  

At the end of the session, questions were wide-ranging but common themes emerged: the cost of decarbonisation set against the cost of gas, how quickly some of the details of the legislation will become available to allow for future-proofing of schemes under development, and the role of heat pumps in any heat decarbonisation framework.   

All panellists were keen to stress the importance of getting the primary and secondary legislation in place as soon as possible and that whilst there was clearly a cost to decarbonisation there are also societal costs in failing to decarbonise.