Net Zero, Energy and Transport Committee

Meeting date: Tuesday, November 7, 2023

Official Report 695KB pdf

---

Subordinate Legislation

---

Heat Networks (Supply Targets) (Scotland) Regulations 2023 [Draft]

Agenda item 2 is consideration of a draft statutory instrument. I am pleased to welcome the Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights, Patrick Harvie. I also welcome from the Scottish Government James Hemphill, who is head of the heat networks policy unit, and—I will probably pronounce this name wrongly, but I will try hard—Suzanne Le Miere, who is head of the heat networks policy team. I hope that I got that name right. I see that I did—good. Thank you for joining us today.

The instrument was laid under the affirmative procedure, which means that it cannot come into force unless the Parliament approves it. Following this evidence session, the committee will be invited, under the next agenda item, to consider a motion for the committee to recommend that the instrument be approved.

I remind everyone that officials can speak under this agenda item, but not in the debate that follows.

I believe that the minister wants to make a brief opening statement.

Thank you very much, convener. I give my sincere apologies for the short delay—that is more than I got from the train announcement as we were held outside Waverley station. I am sorry to have taken a few minutes longer than expected to get here.

I am grateful for the chance to speak to the instrument, which supports our ambition to grow the number and scale of heat networks in Scotland. I know that it is widely recognised that heat networks should and will be an increasingly significant part of our transition from fossil fuels for heating our homes, workplaces and buildings to clean heat.

The Heat Networks (Scotland) Act 2021 requires that we set a target for 2035. As well as the fact that it is a requirement, the target is in and of itself useful. It will send a clear signal to the heat network sector that the Scottish Government and, indeed, future Scottish Governments are committed to the growth of heat networks.

The proposed target of 7 terawatt hours—TWh—is one of the three options that we proposed in our consultation. Each of those options was evidence based and developed using data from the report “First National Assessment of Potential Heat Network Zones”. However, as we set out in the Government’s response to that consultation, the data about the sector that we have is limited at the moment. We have to continue to use the powers that we have in the act to obtain more accurate and reliable information so that we can report on the progress that we are making against all the statutory targets. Recognising that, the Government’s response also committed to keeping that target and other targets under review as further evidence emerges on the potential for heat networks across Scotland—for example, as local authorities produce their local heat and energy efficiency strategies, or LHEES.

Setting that target is just one of the things that we are doing to help to grow the sector. We are taking a range of other concerted actions to meet the targets that have been set and that we are proposing now to allow the heat network sector to flourish. We are resourcing and providing technical support to local authorities to develop their LHEES, which are identifying opportunities across Scotland for heat network development. In February 2022, we launched the heat network support unit, which provides skills, capacity and other resources to local authorities to help them through the pre-capital stages of heat network development. We have also launched Scotland’s heat network fund, which makes £300 million available to large-scale district and communal heating projects across Scotland. In May this year, we also commenced legislation that requires Scottish public buildings to produce building assessment reports as soon as practical.

Collectively, those actions will help us to achieve our proposed target and increase the likelihood that consumers will want to connect into heat networks. Based on the analytics that we have done in combination with the broad support that we received in response to the consultation, I am very happy to be here to move the motion and to ask the committee to agree to set a new target for heat network deployment in Scotland of at least 7TWh by 2035.

Thank you, minister. I will start the questions.

I think that we produce about 1.18TWh of heat through heat networks. What are the targets to get us to the 2035 target of 7TWh?

As we set out in the consultation, the three proposed targets were based on not only the information from the first assessment report, which looked at where heat network zones will be, but a range of scenarios about the viability of heat networks—a high or low scenario might mean more or fewer heat networks respectively in those areas that have been found to be suitable—and assumptions about a connection rate of 50 per cent.

As we go forward, we will have to address some of the issues around demand assurance so that those developing and investing in heat networks have confidence that there will be consumers connecting to them. However, we made that connection rate assumption for the short period ahead, before the demand assurance measures are in place.

Therefore, from those three factors, we derived proposals for targets of 6TWh and 7TWh and the other stretch target of 12.5TWh. Although a case can be made for any of those targets, it was felt pretty clearly that the target of 7TWh was stretching in terms of achieving significant growth in the sector but also achievable.

What are the targets between now and 2035? That is the question that I asked. Or do we just have to get to 7TWh by 2035?

The act set the initial targets. The new target that we are setting is for 2035. We do not have annual targets in between those.

The specific targets that the act sets are 2.6TWh by 2027 and 6TWh by 2030. One of the other things that we considered as part of the consultation was the advice from the Climate Change Committee that the UK should look to achieve around 20 per cent of heat demand through heat networks.

In effect, within three years, we have to more than double what we are doing at the moment. Is that achievable?

Those are the existing targets under the act. The 2035 target is for what happens beyond that.

That might well be what happens beyond the current targets, but I have just been told by Suzanne that the target is 2.6TWh by 2027. Therefore, is it possible to double what we are producing at the moment in less than three years?

In the previous parliamentary session, the committee debated the targets that should be set in the act. The 2030 target was the result of a committee amendment rather than a Government proposal. The view of the Climate Change Committee, as the independent adviser, is that the 2030 target is a stretch target—a bit of an outlier. We are committed to doing everything that we can to meet it. That includes the range of actions that we have set out, including the heat network support unit, the heat network fund and trying to ensure that the heat networks that come forward are investable propositions that are also attractive to non-Government investors.

I have set out the range of actions that we are already taking to meet the initial targets that were set under the act. Today, we are proposing the 2035 target, and the act requires us to set a 2035 target.

I completely understand that. I am trying to work out in my brain whether the 2035 target that you have proposed is remotely achievable.

We believe that it is.

Okay. What is it going to cost?

The overall investment will come partly from public funds and partly from institutional investors. Unlike decarbonisation through energy efficiency, heat networks generate a revenue stream, which makes them potentially attractive for institutional investors. It is not possible at this point to produce an individual costing for every network that will be built between now and 2035.

That is why local authorities are undertaking their local heat and energy efficiency strategies to identify the most likely sites. Glasgow, for example, has huge potential for heat networks. It probably has significantly more potential than some less densely built parts of the country. However, it will be for the local authority to take forward individual propositions for specific networks.

09:30  

So you are setting a target before the local councils have reported and without a clear idea of what that will cost. Is that correct?

As I have said, the 2021 act requires us to set a 2035 target. We are doing that to comply with the act, but setting the target is helpful in itself as a clear signal to the sector.

It is a little bit like the wider heat in buildings agenda that we have been discussing recently and on which we will consult shortly. The Government’s setting a clear direction of travel is the clear signal that industry needs that Scotland is serious about getting the work done. That, indeed, can focus not only minds but investment capacity to achieve the targets.

In many ways, that is what happened with renewable electricity generation. Successive Scottish Governments set a clear direction of travel and gave clear market signals that Scotland was serious about renewable electricity. If we had not done that, setting targets alone would not have been effective.

By the range of actions that I have set out, Scotland is demonstrating not only the will but the focus that is necessary to achieve the targets that we are setting today.

I will make an observation. If people see that there is an aspirational direction of travel, it might inspire them to take that direction but, at the end of the day, if they do not see a return for the capital that they have invested in the project, you could set whatever target you like and make it as aspirational as you like, but it will not mean much. What I have heard from you, minister, does not give me confidence that the 7TWh is achievable. That is my concern.

I very much welcome a target being set for 2035. I think that it was on the back of one of my amendments that the provision to set a 2035 target was put into the Heat Networks (Scotland) Act 2021—James Hemphill is nodding. At the time, it was difficult to put a figure on that and there was a lot of discussion with the minister about it. Therefore, it is good to see a figure being set and the work that is being done to construct it.

How does that work relate to the LHEES? It appears that those are on track. A lot of granular work has been done in local authorities to work out exactly where district heating schemes can be put in place. Do we have enough of a picture now through the work that has been done by the 32 local authorities to build the certainty that industry wants and enable us to peg a target to 2035, which is obviously still some way off?

It is developing. As I mentioned, some local authorities are further ahead than others and some have higher heat network potential than others. Earlier in the process, Glasgow was already beginning to take forward some of the work on LHEES. I think that the council had already begun to undertake that work before it was a legal requirement. The city is clearly one of the areas that have significant potential for heat networks, which is necessary given that there is a high density of homes there that will be difficult to decarbonise in other ways.

A significant number of local authorities have completed their LHEES and others are due to complete the work by the end of the year. The picture that is emerging, local authority by local authority, demonstrates that we have a handle on where heat networks are likely to be introduced, as well as—to address the convener’s concern once again—being confident that they will generate a return on investment. The developments will generate an income stream, which is one of the things that will make them attractive for investment.

Do you still see opportunities for municipal ownership of heat networks? Is that a model that could flourish?

Yes. We have been exploring a range of models of operation. That might involve direct municipal ownership; it might involve joint ventures between local authorities and other partners. The opportunity exists not only to ensure that heat decarbonisation is achievable for people—that householders and businesses feel that a service is available to them and that it will provide them with long-term certainty about the consumer protection that is being built in and about low-carbon and affordable heat—but that they trust that it is being operated to a large extent in the public interest.

As Mark Ruskell knows, Denmark has generously shared its experience and expertise on heat networks and it has been advising us for a number of years on the development and implementation of the 2021 act. Denmark has been developing heat networks for 50 years and it is still rolling them out, because there is high demand for them in the third or so of the country that does not have access to them yet. People want to be connected to them, because they know that they are an affordable way to meet their heating needs, and that is the case more than ever given the cost of living crisis.

Denmark knows that the public have a high degree of trust in the operation of such systems in the public interest. If we can emulate that in as much of Scotland as possible, we will not only achieve decarbonisation and do it affordably, but—we hope—achieve the high degree of public trust that our neighbours in Denmark have achieved.

Thank you.

Thanks, Mark. Douglas Lumsden is next. Jim, do you want in, too?

Yes, eventually.

Okay. Douglas will be first, then Jim.

I am a big fan of heat networks, but I go back to the convener’s point. Setting a target is one thing, but when will we see a plan for how we are going to achieve it? As you mentioned, minister, it might be easier in places such as Glasgow, but we also have rural areas and rural local authorities. Can you assure us that they will not be penalised for not moving forward as quickly as everyone else? It is obviously a lot harder to do this work in a rural area than it is in Glasgow.

The heat networks that exist at the moment—some are district networks that serve multiple buildings and others are communal networks that serve multiple customers in a single building—are found in a range of urban and rural settings, including in some island communities. It is clear that there will be a high level of potential in dense urban environments such as Glasgow, but that should in no way inhibit the development of networks in other parts of Scotland where they represent the most suitable approach to decarbonisation. That is why we are asking all local authorities to lead on the development of the LHEES. It would be wrong for central Government to say, “We’re going to decide what is appropriate in each local area.” Local leadership is necessary if we are to achieve this.

What are the next steps? Will there be an overall plan? When should we start seeing money in the Government’s capital plan, for example, to assist with heat networks?

As I mentioned in my opening remarks, we already have the heat network support unit and the heat network fund. The unit is providing pre-capital support and the fund is providing capital support.

On the question about when this will happen, it is already happening. Local authorities are producing their LHEES and we completed the first national assessment report some time ago. Local work is being done to develop the LHEES and they are coming in local authority by local authority. I think that they are all expected and due in by the end of the year. Is that correct, James?

Yes.

The picture is already emerging and it will continue to develop. We have other powers under the 2021 act to continue to improve data collection and we can use them to gain a richer understanding of the heat networks that are in development and in operation.

Do you expect an overall plan for all the local authorities to be presented to Parliament so that we can get assurance that the target for 2035 will be met? What will happen if that target is not met?

Local authorities will produce their LHEES and provide them to Government. I think that they are all to be provided to the committee as well. They will be made public.

Yes—they will all be made public. We have six or seven out to draft at the moment, which is good progress. We are also undertaking an independent collation of the 32 strategies so that we have something that we can present to the committee and others with an interest. I guess that that will map the opportunity areas across the country and give us an aggregate or total sum.

Based on some of the drafts that we have seen so far, I think that local authorities are—quite rightly—applying some stringent scenarios and some less stringent ones, so we will see quite a range of potential. That collation work should be completed next year and I am sure that we will be able to share it with the committee.

We also have the heat network delivery plan, which we will also have to do again. As we were required to under the act—due to, I think, Mr Ruskell’s amendment—we published the heat network delivery plan in March 2022. We are under a duty to review that and to report on progress every two years, as well as on the impact that our policies and programmes have had. We have to keep that continually updated every two years.

Following up on that point about every two years, when will the first one come back?

The review will be in March 2024. We will need to speak to clerks about where that goes to, but presumably it will go to the committee to review.

In relation to the other question that I raised about not meeting targets, will local authorities be set targets as well, or will it simply be an overall target?

It is a national target.

What happens if it is not met?

The act allows us to continue to review the target. I think that it is at least a fair possibility that we will review the target upwards rather than downwards but, if a future Government decides that heat networks have not been the success that I believe that they will be, it would be for it to come back to committee and Parliament and ask to review the target in the other direction. However, I think that there is a stronger likelihood that we will see greater progress. We should be throwing our weight behind the development of heat networks as one of the most effective ways to decarbonise Scotland.

You mentioned institutional investors. Can you give us any more details on what discussions have been held so far and how likely such investment is?

A range of discussions have taken place not only with individual potential investors—the Scottish Government has an investor panel that advises it—but through the green heat finance task force. As the committee knows, that has now been meeting for some significant time. Its first report will be due out very soon, alongside the imminent consultation on the heat in buildings proposals more generally. The expectation is that the first phase of that task force report will focus on individual approaches and that the second phase report will look at the more communal, area-based approaches, which might include greater focus on heat networks. A significant amount of work is happening in that area.

There must be a lot of regulation going on behind the scenes as well. I would imagine that, if you had a heat network, it would be about whether or not you want competition—basically, so that you do not get somebody simply increasing the prices to a huge amount. A huge amount of work must have to go on behind that, in legislation, to make sure that it works for everyone.

Yes. The legislation that was passed in the previous session of the Scottish Parliament to get the work under way was done before we knew that the United Kingdom Energy Act 2023 was coming, so we have taken account of some of the changes that took place in that. The committee will be very pleased to know that there were some areas where the Scottish and UK Governments were able to work together on useful changes to that energy legislation, in particular in dealing with some of the consumer protection issues. However, some other changes require us to perhaps reconsider some aspects of how we approach the implementation of the Scottish heat networks act. For example, in the light of the UK legislative changes, we will consider our approach to permitting and consenting and ensure that we have got the balance right. Over the course of time, there will no doubt be other legislative changes.

A critical thing that we are still awaiting from the UK Government is the rebalancing of electricity and gas prices. Whether the current UK Government makes good on that or whether we have to wait on a successor Government, we know that that is one of the critical issues that will spur not only the viability of decarbonisation of heat but its attractiveness. For example, as we decarbonise existing heat networks, some of them will shift over to using devices such as heat pumps as one of their energy sources. If those are using electricity rather than gas, that is great to decarbonise those existing networks, but the rebalancing of prices will be one of the things that are critical to making that viable and attractive to customers.

As yet, you are open as to whether it is private companies putting in heat networks or local authorities running them. That is still up in the air.

As I said, we have been exploring a number of different models for the development and operation. We think that it will be an attractive area for private investment, but we also know that there is a need for the public sector to give leadership, particularly at local level, where local authorities understand both the building stock and the energy resources that they can bring to bear. That is why they are leading on the development of LHEES. As I said, we have looked at a range of models, including direct municipal ownership and joint ventures.

09:45  

I will try to be very quick. If I ask daft laddie questions, I apologise—I am just catching up with what this is.

The briefing papers say that the

“Strategies will identify ... potential heating system changes that may occur in a local area following extensive analysis and consultation”.

I am going to lead to where Douglas Lumsden was a minute ago, but first I want to get clear in my head: how is this heat going to be used? How will you physically get it to the consumer?

I would encourage the member and others in the committee, if they have not yet taken the chance, to visit some of the heat networks that are already in operation, including some that are being expanded or redeveloped.

In essence, the networks are made up of highly insulated pipes that go under the ground and come from a central heat source. They might involve the deliberate generation of heat for the network, or they might use a waste heat source. At the moment, we are letting valuable warmth from some waste heat sources go to waste, and heat networks can bring that heat to the consumer.

With heat networks, individual businesses or households would not need to have their own boilers, except, potentially, as an emergency back-up. They might choose to have something in reserve, but their main heating needs—and, in some circumstances, cooling needs—would be met via the network.

If I have this right, you are saying that, in effect, heat will be pumped into a building via a pipe network. The heat that is being distributed to a property will have to be paid for—is that correct?

That is correct. That is what generates a revenue stream for the network, which is what makes it an attractive proposition for investors. The experience with heat networks in this country—and, I think, in Denmark, where they are used the most extensively of any European country—is that they tend to be affordable and attractive for that reason, compared with individual consumption of gas or other fuels.

I apologise for asking another question, convener, but that leads me to the regulatory side of energy. Minister, do you foresee yourself coming up against the UK Government when it comes to how you regulate the price of the heat that goes into properties?

The aspiration is always to work together on issues that sit between devolved and reserved powers. Sometimes we are more successful at achieving that co-operation than at other times. As I mentioned, some of the changes that were recently made to the Energy Act 2016 at Westminster were agreeable, and we made good progress on some of those issues, although not necessarily all of them. We will continue to try to work together.

Of course my preference would be that we are able to make those regulatory changes here in Scotland. We have to work with the situation that we are in as we continue to—as the member knows—make the case for Scotland at some point taking those powers to itself. However, that certainly should not prevent us from rolling out heat networks urgently, because they are one of the most obvious ways to decarbonise Scotland, and particularly urban Scotland.

There are things that we will need to negotiate going forward, but we do not stop going forward, because we hope that we will find agreement.

Yes, and the appointment of the Office of Gas and Electricity Markets as the regulator is one example of that. We need to ensure that there is consumer protection, and the appointment of Ofgem in that capacity will help to achieve that.

I have a final question, convener.

Earlier the convener talked about going from 1.6TWh now to 7TWh in 2035. Will it not require a huge workforce to be able to modify and change our existing infrastructure? Do we have that workforce, and do we have that skills base?

That question is relevant to the whole heat in buildings agenda. We know that we need to scale up and skill up. I have been working closely with Graeme Dey on the skills and education side of things. Work on the supply chain delivery plan is also including voices from industry who see the agenda as an opportunity.

I genuinely think that there is huge potential for us to see the heat in buildings agenda as an economic opportunity for Scotland. There is work to be had in decarbonising, and high-quality careers to be had from doing that work, not just between now and 2045 but beyond that, in maintaining and operating those systems.

James Hemphill wants to come in on your previous point.

On working with the UK Government, we have colleagues who join the various forums that UK Government colleagues have for designing consumer and technical standards, so we have a route into informing that work.

To add to what the minister said on the other question, some of the big energy companies in Scotland are actively involved in heat networks and are increasingly interested in them. We know that there is interest there.

There are some other questions, but I have got a quick one first.

Minister, you made the point that heat networks are used in Denmark and that they are very attractive in Glasgow. In most cases in Denmark and Glasgow, we are talking about urban conurbations or larger conurbations. Given that the biggest cost for heat pumps is surely the piping and the insulating of the piping, are they ever going to become attractive in rural areas, where houses are spread out?

It will depend on the specific settings in each area. That is why LHEES are being taken forward at the local level.

If the committee has not had the chance to learn about the heat network in Shetland, for example, I think that that would be instructive. It has been in operation for 25 years, and the company is now looking to expand and extend it, including to potential customers who are not right in the town centre.

There are some energy losses that come from extensive heat networks, but the experience of Denmark is that you can have them over a very wide area, and they do not just have value in the inner core of a city, so we would like to ensure that as many parts of Scotland as can benefit from heat networks do so.

Of course, in less densely populated areas, other approaches to decarbonisation—including individual heat pumps and other technologies—will be, and already are, extremely successful.

I will avoid the temptation to talk about heat pumps in old houses. Douglas Lumsden, do you want to ask a question?

Yes. Minister, you mentioned gas boilers being used as an emergency back-up, potentially. Do you still feel that there is going to be a market and a demand for gas boilers going forward, even though people may be part of a heat network?

Well, the proposals that we are about to consult on on heat in buildings set out how the heat standard will work, and they recognise that fossil fuel systems for emergency back-up might continue to be necessary. It is probably more likely that those would be portable systems, rather than an installed gas boiler.

We have an opportunity to ensure that the vast majority of the heat that is consumed comes from sustainable sources and is non-polluting. We also have an opportunity to ensure that we achieve that in a way that is consistent with affordability, tackling fuel poverty and other objectives.

Would the ban on gas boilers be relaxed for emergency back-up purposes, or how would that work?

As I said, we will be consulting on the wider heat in buildings proposals very soon, so the detail will be published in that. It does not affect the setting of the target for heat networks.

I cannot remember what year the Scottish Government said that the ban on gas boilers will take effect, so is that going to be met or not?

Sorry, it is—

That is slightly off the topic, Douglas. I encourage the minister to respond to you afterwards, on that separate subject, but I want to keep the focus on the instrument that we are looking at. I think that you have pushed that topic as far as you can, for the moment.

Good morning, minister and officials. I have a brief question. Can you clarify what role energy from waste facilities will have in meeting the important targets that have been set?

Sorry, I did not catch that.

Oh, sorry. How reliant will the Government be on the existing use of energy from waste facilities and incinerators? Can you clarify what contribution they will make to the achievement of the targets?

I see no reason why we should not be using waste heat from a facility that already exists. Waste heat is a resource that, at the moment, is going to waste.

Separately, quite unconnected to the specific policy of heat network targets, the Government has an approach on incineration that aims to move away from the development of new incinerators. However, the use of any source of waste heat from an existing facility—whether it is energy from a waste plant, a data centre or an industrial site—makes a valuable contribution by putting heat into a heat network.

That is helpful, and it is good to hear about the proposal to put a moratorium on incineration.

We have the Circular Economy (Scotland) Bill, and we obviously want to see a reduction in consumption overall. If some existing facilities become less viable and feasible as businesses opportunities and start to close down or decommission early, will that have an impact on your targets?

Heat networks are particularly viable and effective when they have a range of different heat consumers—not all domestic but some commercial, some industrial, and large public buildings, for example—and a range of heat sources. Some networks will have a heavy reliance on a single heat source or small number of heat sources. Existing networks will be under a duty to bring forward a plan to decarbonise if they have a polluting heat source.

However, over time, as we see the extensive development of heat networks, we are likely to see that viability become an incentive for any operator to diversify its heat sources. That might be by using banks of heat pumps. In the Glasgow area, it might be using the River Clyde as a heat source, as Queen’s Quay does. It could also include industrial sources of heat, such as waste heat and other options. The diversification of heat producers and heat consumers is one of the things that will make the networks more viable for the long term.

Thank you.

Jim Fairlie, very quickly.

I am sorry, but questions keep getting sparked by other people asking questions.

Monica Lennon was asking about energy from waste, and there is a presumption against building new incinerator plants. I think that I am also right in saying that there is a ban on municipal waste for landfill. Is there not value in continuing to get better technology into incinerator plants if we are going to develop those energy from waste systems?

That question is probably best directed at colleagues who work on the waste side. There are many reasons why there is an environmental desire to move away from burning our waste—to put it simply—even with modern technology. As Monica Lennon’s question hinted at, it requires a continual feed of waste material going in, and it is not consistent with a circular economy approach.

The approach with regard to heat networks is that, where an existing facility has waste heat that is going into the air and is not benefiting anyone, we might as well plug that into a heat network and get some value and use out of it.

I completely agree, and we want to move to a circular economy. However, that does not mean that we will genuinely reduce the amount of waste to the point where we do not need landfill. We are still going to have waste, and probably considerable amounts of it.

You are stretching it, Mr Fairlie, but if the minister wants to answer that question, he can do so briefly.

It is not a trick question—it is just out of curiosity.

I am sure that it is a sincere question, but I think that it is one for colleagues whose remit and portfolio is around circular economy and waste management, rather than one that is about the setting of a heat network target.

My question is about accountability and consumer protection. Heat networks are being developed; I have visited ones in Clydebank and Midlothian that are owned by the council but operated through a private partnership approach, so there is accountability for the residents. By contrast, Edinburgh has dozens of heat networks; they are not run by the council, but they are also not for residential properties as a rule. As the approach is rolled out, it raises a critical issue about accountability and consumer protection—and not just in the short term. When the source of energy shifts, you will need accountability with regard to costings. How is that consumer protection issue feeding into these regulations?

I guess that it comes back to Mark Ruskell’s point about municipal ownership and how critical councils are to the planning process. After all, as far as housing is concerned, whether it be new or old, councils have, as you say, the knowledge. Is there not an accountability issue here? Should we not be focusing on those council leadership approaches? Does the public-private approach not provide that accountability rather than the private route that you have mentioned?

10:00  

I am absolutely interested in hearing the answer to that question, but the problem is that we are talking about setting a target of 7TWh by 2035. I would be delighted if the minister could respond briefly to that and shape his response as much as he can to the target that he is hoping to set.

I would like to see ambition coming from local authorities and, indeed, other bodies such as social landlords, which would see connection to a heat network as something that is in the interests of their tenants as well as their business model. If we do see that level of ambition from public bodies, including local authorities, it will contribute very substantially to meeting the 7TWh target.

As for some of the consumer protection issues that Sarah Boyack quite rightly raises, they are, as we are all aware, reserved, but the recent legislation and the appointment of Ofgem to its role will go a significant way towards addressing them. I very much wish that we were able to legislate for those matters here. As things stand, we are not, and we therefore need to work with the UK Government, which is what we have been doing.

Thank you, minister. The reason for asking the question, convener, is that the issue is about how these new heat networks are supplied and the critical role played by local authorities not only in planning and leadership, as has been mentioned, but accountability. That is why I was keen to ask the question. Moreover, if this is done properly, it will result in income generation for local communities and low bills for people. The feedback that I have had from local authorities is that they are under massive financial pressure to take this forward, which brings us back to the £300 million fund. It will be very interesting to see how that will be spent.

Thank you.

If there are no other questions, we move to agenda item 3, which is formal consideration of motion S6M-10778. I remind everyone that only the minister and members of the committee may speak in this debate, and I invite the minister to move the motion.

Motion moved,

That the Net Zero, Energy and Transport Committee recommends that the Heat Networks (Supply Targets) (Scotland) Regulations 2023 [draft] be approved.—[Patrick Harvie]

I seek comments from the committee. I have a comment, but I am happy to take others’ comments first.

If there are no comments, I have to say, minister, that I understand the need to set and achieve a target. The problem, though, is the target that you have set, which is based on a current production of 1.18TWh and goes to 2.6TWh in 2027 and 7TWh in 2035. Those figures might be aspirational, but I have no idea whether they are achievable, and you have neither convinced me that they are nor given me any indication of cost.

So I am stuck. I would like to agree a target, but I do not see the current target as having been correctly justified. Can you have one more go at setting my mind at rest, please, minister?

As we have discussed in the evidence session that we have just held, the Scottish Government has consulted widely on a number of options for this target. Not only is it a legal requirement that we set a 2035 target, it sends, I believe, a very positive signal to the industry that we are serious about the development of heat networks.

We could have set a very stretching and much more aspirational target. I think that the target that we have set is more achievable; it still shows an aspiration to grow heat networks significantly in Scotland, but it is achievable. The target is consistent with the advice that we have had from the UK Climate Change Committee and consistent with the position that was widely supported in the consultation.

I will also mention that the business and regulatory impact assessment that has been provided suggests that the cost of meeting the target that was set in the Scottish statutory instrument could be up to £6.2 billion and that it is likely that that cost will be shared between the public support that has been made available and private investment.

The cost is estimated to be £6.2 billion, of which, at the moment, you have put up £300 million. Is that right?

Yes, £300 million of public funding.

Therefore, the rest will come from the private sector.

It will come from a range of sources.

Okay. I remain sceptical. Do members have any further questions?

The Government’s approach perhaps justified not putting a target for 2035 in the original legislation, because it is clear that a lot of work has been needed, particularly at a local level and with councils, to really understand, in a granular way, how the target can be met and, indeed, what it should be. I am pleased that the groundwork has been done, and I think that we now have a target that will drive that private investment, which is going to be critical in meeting the gap and ensuring that we have real projects on the ground that are well regulated and protect consumers. Within that, we hope that there will also be opportunities for municipal ownership and public benefit.

It is good to see the stretching target brought forward, but it is good to see that it is going to be based on the reality of what is possible and what is going to be investable and bankable.

I am actually more concerned now that I have heard the figure of £6.2 billion. Mark Ruskell said that a lot of the groundwork has been done, but I do not think that it has been done. I have not seen anything that shows that we have any idea how we would reach that target. As much as I would like to reach that target, I have no idea how we would get there.

I know where only £300 million of the £6.2 billion is going to come from. I do not know where the other £5.9 billion is going to come from, so I am concerned that we are setting a target without knowing how on earth we are going to get there.

Minister, as there are no other comments, I invite you to sum up and respond to the debate.

Once again, I would say that we have consulted widely on a range of evidence-based targets. The target that we are setting was widely supported in the consultation. It sets out strong growth in the heat network sector, which we believe not only sends a signal about what we intend to achieve and builds confidence among investors but represents an achievable target that will help to decarbonise Scotland. I genuinely hope that, as we develop policy and the wider heat in buildings approach, members across the chamber will recognise not only the opportunity but the necessity of decarbonising Scotland’s heat.

The question is, that motion S6M-10778, in the name of Patrick Harvie, be agreed to. Are we agreed?

Members: No.

There will be a division.

For

Dunbar, Jackie (Aberdeen Donside) (SNP)
Fairlie, Jim (Perthshire South and Kinross-shire) (SNP)
Lennon, Monica (Central Scotland) (Lab)
Macpherson, Ben (Edinburgh Northern and Leith) (SNP)
Ruskell, Mark (Mid Scotland and Fife) (Green)

Abstentions

Lumsden, Douglas (North East Scotland) (Con)
Mountain, Edward (Highlands and Islands) (Con)

The result of the division is: For 5, Against 0, Abstentions 2.

Motion agreed to,

That the Net Zero, Energy and Transport Committee recommends that the Heat Networks (Supply Targets) (Scotland) Regulations 2023 [draft] be approved.

The committee will report on the outcome of this instrument in due course. I invite the committee to delegate authority to me as convener to finalise the report for publication. Are we happy as a committee to do that? No one said no, so I will take that as a yes.

Members indicated agreement.

Thank you, committee, and thank you, minister and your officials, for attending.

I will briefly suspend the meeting before the next agenda item.

10:09 Meeting suspended.  

10:14 On resuming—