Set up by the Scottish Government in 2014, the Special Working Group (SWG) looked at the current regulatory environment and has made recommendations as to what changes, if any, would support the development of the sector.

The group identified four key areas which are:

At the moment very little of Scotland’s heat demand is delivered by district heating; in 2011 it was less than 1 per cent. The group considered what forms of regulation would support the growth of the sector through the development of district heating systems in optimum locations and at sufficient scale and with interconnections where appropriate to deliver wider system benefits.

Recommendations:

Local actors developing district heating systems will be driven by factors unique to each project and in assessing and accommodating these will not necessarily automatically align with national strategic goals. The group considered how regulation might provide a national strategic framework for individual district heating developments, for example how to ensure that district heating networks aid the Scottish Government’s strategic policy of a smooth transition to low carbon and renewable heat sources.

Recommendations:

In other parts of Europe ‘waste’ heat from industry and energy from waste plants is extensively used by district heating systems to supply domestic heating but there is little use of such sources of heat in Scotland’s district heating sector. This is partly a function of the small size of the sector and the limited networks that are currently deployed but as district heating networks grow it will be important to encourage use of this source of heat. Experience elsewhere in Europe shows that regulatory drivers are important to ensure that industry supplies waste heat to district heating systems. Without regulation, heat sales are generally seen by those producing waste heat as a distraction outside core business, with potential costs and risks of which they have no experience and which they prefer to avoid.

Recommendations:

District heating systems are invariably operated as supply monopolies and it is therefore important to ensure customers are charged reasonable tariffs and that service standards are high. The group considered what forms of regulation could best ensure that customers receive an affordable, high quality heat supply and are treated fairly by their supplier.

Recommendations:

The SWG said that the proposals will individually enhance the district heating market in Scotland but emphasised that their value will be greater in combination.

The report said: “Taken together long-term strategic plans, national standards for socio-economic cost-benefit analysis, increased availability of anchor loads, defined technical standards, clear enabling powers for infrastructure, increased access to waste heat and effective customer protection will provide a clear and supportive context and framework for the development of district heating projects which is largely missing at present.

“If a step change in district heating is to be achieved in time to make a significant impact on ambitious low-carbon heat and climate change targets then, given the long timescales of district heating projects, it is important that a supportive and effective regulatory environment to be put in place as soon as possible. If the introduction of appropriate regulation takes too long there is a danger of failing to maximise the significant opportunity in the transition to a low-carbon economy that district heating represents.”