The Heat Network Partnership estimates that delivery of 50% of the 103 known heat network projects in Scotland offers an investment opportunity of around £100m to £240m.
The Scottish Government’s Heat Policy Statement sets out the ambition for a substantial expansion of heat networks in Scotland, offering a significant opportunity for investors, equipment vendors and network operators. The Statement proposes an increase in the amount of heat supplied through heat networks from around 0.3 TWh now to 1.5 TWh by 2020. A significant part of this ambition will be achieved through increasing the number of households connected, from around 9,000 currently to 40,000 by 2020.
The Scottish Government’s Heat Network Partnership (HNP) is actively engaged in supporting district projects across Scotland. The HNP has built up a database of activity which by April 2015 contained 103 proposed heat network projects in Scotland, representing around 1.02 TWh of additional heat.
Estimated total potential heat network capital costs(1)
The delivery of all 103 proposed district heating schemes in the Heat Network Partnership database offers a total investment opportunity of between £200m to £440m, including heat plants, heat distribution networks and end-user connections.
Heat distribution networks: £85m – £190m
Heat plants (excluding EfW(2)): £74m – £223m
End-user connections: £28m – £70m
The full District Heating Investment Opportunity analysis can be downloaded here:
Scottish heat network investment opportunity
Latest project development
Since 2013, the HNP partner organisations have supported over 20 early stage feasibility studies and options appraisals. A number of these projects were awarded funding in July 2015 under the second round of the Scottish Government’s Local Energy Challenge Fund. Large-scale district heating projects made up 6 out of the 23 projects awarded Phase 1 funding to accelerate detailed technical and financial proposals eligible to apply for Phase 2 capital finance by February 2016.
These heat networks will make use of innovative technologies including Water Source Heat Pumps, large-scale Air Source Heat Pumps, heat recovery and phase change material for energy storage. The Scottish Government also recently awarded £234,025 under the Geothermal Energy Challenge Fund to carry out feasibility and technical appraisals of geothermal heat supply for heat networks.
In 2015, in response to demand from larger-scale projects, the District Heating Loan Fund increase its maximum loan offer, with the largest loan to date of £1 million awarded to Aberdeen Heat & Power in February 2015. Ignis Wick have also received a total of £626,000 to support the continued expansion of the biomass heat network serving the town of Wick. Loan offers for larger projects will now be considered on a case by case basis.
The District Heating Loan Fund continues to support a large number of small-scale projects, making up 30 loans, with total value of over £5 million since 2011. The continued demand for small-scale loans for district heating demonstrates the success of a simple, replicable model of renewable district heating for rural businesses, social housing developments and community projects.
Realising the Investment Potential
The HNP regularly updates its Projects Directory, publishes news on projects supported by Scottish Government and is building up its library of case studies. The website also includes details of networking events, including the Heat Network Partnership Practitioners Group coordinated by Heat and the City. Information on tenders for public sector projects in Scotland can be accessed through Public Contracts Scotland.
A summary of district heating projects supported under the Local Energy Challenge Fund and Geothermal Energy Challenge Fund can be downloaded here.
Heat – District Heating – Scottish heat network investment opportunity – FINAL
An evaluation of the District Heating Loan Fund and Warm Homes Fund, including a full list of projects, can be downloaded here.
Notes:
(1) Around £100 million of uncertainty arises from estimated costs – heat networks are site specific and variables include current land use and infrastructure. An additional £150 million of uncertainty arises from the heat plants, with prices based on a limited number of examples in Scotland and the UK.
(2) The database includes a number of heat networks associated with proposed Energy from Waste (EfW) plants. The overall investment case for EfW plants is complex and some are already financed. The plant cost for these heat networks is therefore excluded from the total investment figure.