Meeting of the Parliament (Hybrid)

Meeting date: Tuesday, February 23, 2021

Official Report 946KB pdf

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Heat Networks (Scotland) Bill

The next item of business is a debate on motion S5M-24192, in the name of Paul Wheelhouse, on the Heat Networks (Scotland) Bill. Before I invite Paul Wheelhouse to open the debate, I call the Cabinet Secretary for Transport, Infrastructure and Connectivity to signify Crown consent to the bill.

For the purposes of rule 9.11 of the standing orders, I advise the Parliament that Her Majesty, having been informed of the purport of the Heat Networks (Scotland) Bill, has consented to place her prerogative and interests, in so far as they are affected by the bill, at the disposal of the Parliament for the purposes of the bill.

I call the Minister for Energy, Connectivity and the Islands, Paul Wheelhouse, to speak to and move the motion.

16:23  

I am delighted to have the opportunity to address members on the Heat Networks (Scotland) Bill. I am also delighted that we have reached this stage, after many years of preparation and extensive stakeholder engagement.

Before I talk about the bill itself, I think that it is important to place in context the work that we are doing here. The bill, complex though it is, is crucial to Scotland’s response to the global climate emergency. The way in which we heat our buildings currently accounts for around 21 per cent of Scotland’s total greenhouse gas emissions; it is the third largest source of emissions across the economy. However, it is a particularly challenging area to address. As the committee recognised at stage 1, public awareness is key in the transition to renewable heating. Indeed, recent research found that many members of the public simply do not associate the incumbent fossil-fuel heating systems with climate change.

The scourge of fuel poverty notwithstanding, the natural gas that serves the great majority of our buildings is relatively low cost in comparison with the costs of renewable heating. However, we cannot tolerate the status quo any longer: we urgently need transformational change. In the draft heat in buildings strategy that the Scottish Government published earlier this month, we set out our ambition to move 1 million homes to renewable and low-carbon heating by 2030. Heat networks will have a strong role—perhaps the predominant role—to play in achieving that.

As was mentioned earlier, only an estimated 34,000 homes are currently connected to heat networks, so we know that growth in the sector will have to accelerate significantly over the next few years. That, in essence, is why we need the bill.

In simple terms, a heat network is a distribution system of insulated pipes that carry hot water or steam from a central source and deliver it to our homes and businesses. Heat networks are generally more efficient than individual gas boilers, and they can be run from a wide range of renewable and low-carbon sources. That includes large-scale heat pumps, which extract heat from our rivers, or even waste heat recovered from industrial processes. In the right circumstances, heat networks provide households with average fuel savings of 17 per cent.

Heat networks have health and safety benefits, as there is no need for any combustion, with its consequential carbon monoxide risk, to take place inside the building. As heat networks are long-lived assets, they create long-term local jobs in maintenance and administration.

The overall aim of the bill is to accelerate the development of heat networks in Scotland, which will in turn drive down emissions and tackle fuel poverty.

The bill seeks, first, to increase public confidence in heat networks by creating a new licensing regime to ensure that operators are solvent and fit and proper, as well as driving up standards across the sector. The bill introduces a new consenting system to ensure that new networks are developed where they will have the most benefit and that they are tailored to the needs of an area. The bill will put in place arrangements to protect network users by enabling a transfer of operational rights to ensure sustained supply.

Secondly, the bill supports the commercial case for new heat networks by reducing the costs of construction and levelling the playing field with other utilities through the creation of new rights for heat network developers and operators and by identifying the most optimal zones for heat networks and awarding them for development through a competitive process.

I emphasise the positive and constructive role that members of the Economy, Energy and Fair Work Committee and other members have played in the process of strengthening the bill. I believe that, because of that input, the bill is stronger and better than it would otherwise have been. That input is responsible for new provisions that were introduced at stage 2, such as having clear targets for the supply of heat via heat networks, which provides a clear signal to investors and supply chains about Scotland’s intent in the sector, regardless of the composition of future Administrations. There are also new provisions on the publication of a heat networks delivery plan, which will set out how the Scottish Government intends to meet the targets and which will be subject to the scrutiny of Parliament. I welcome those additions and have supported them, as well as the new provisions that allow responsibility for the award of heat network consents to be transferred to local authorities in the future. I am grateful to the members who lodged those amendments for their pragmatism and flexibility, particularly on the setting of targets.

I also acknowledge the constructive discussions that I have had with members on ensuring connections of buildings. I particularly acknowledge Teach the Future’s input on the connection of educational buildings to heat networks—a point that Liam McArthur raised at stage 2. I agree that that could unlock even more investment. Although we have not made specific provision in the bill to that end, our heat in buildings strategy contains a commitment to detailed consultation on the matter for a wide range of non-domestic buildings, not only those in the educational estate.

Fuel poverty has rightly been raised by several members during the bill’s journey. I reiterate that ensuring that the bill contributes to the eradication of fuel poverty has been, and continues to be, an absolute priority for the Scottish Government. For that reason, and following feedback from the committee at stage 1, I have ensured that consideration of fuel poverty is embedded throughout the regulatory framework. Should the bill pass today, as I hope it will, we will continue to engage with fuel poverty stakeholders to ensure that we reflect their priorities as we move to implement the necessary regulations. The stronger provisions that are now included on community engagement will help in that regard, and I reiterate that we envisage working with Citizens Advice Scotland in developing the regulations, should the bill pass.

I emphasise that the Heat Networks (Scotland) Bill as it now stands is the product of a significant team effort across Government and Parliament. I look forward to hearing members’ views in the debate. I am particularly grateful to my bill team, who have done an exceptional job throughout, as has been acknowledged by members across the chamber. Many colleagues will not know that this has been the first bill for many of the bill team, so I congratulate them on an exceptional effort. I am also very grateful to all colleagues, parliamentary staff and stakeholders for helping us to put the bill together, and I believe that the bill is stronger for their contribution. I hope that they are proud that we have reached this stage today.

I believe that the bill is a very important step in providing Scotland with the warmer, greener and more efficient buildings that we need in order to combat climate change, tackle fuel poverty and live healthier and more comfortable lives.

I move,

That the Parliament agrees that the Heat Networks (Scotland) Bill be passed.

16:30  

I take this opportunity to acknowledge the hard work that has gone into the bill from our clerks and researchers, and from the external stakeholders, who have contributed to strengthening it. I also thank the minister for his collaborative approach to the bill. Although it was, fortunately, never going to be politically contentious, I believe that it has demonstrated how the Parliament is, on occasion, able to show a more positive side of politics.

I also refer members to my entry in the register of members’ interests. As I stated in the stage 1 debate, I started developing heat networks back in 2004, so it has—I assure members—been a long wait for legislative recognition of the sector. The cynicism of experience has replaced my naivety at the time in thinking that successive Scottish Governments since then would move quickly to match their rhetoric with action.

However, the principle of the bill, which is to encourage greater use of heat networks, is welcome. I hope that the bill will encourage their development when it is passed, because Scotland’s performance has been woeful, with Scotland having hit only half the target for the amount of heat that is produced by renewables.

We also welcome the provisions in the bill that address consumer protection and the wish of both the committee and the minister to use Ofgem, which is seen as the Rolls-Royce of regulation in the emerging market.

We also have no issue with the many technical definitions. Even now, however, with the bill due to be passed, I am afraid that there are still reservations—many of which are understandable, given the physical complexity of heat networks.

There will be even more responsibility on ministers to get it right, given that most enactment of the bill’s provisions will occur through the route of secondary legislation. I agree with Ombudsman Services, which flags up that consideration needs to be given to heat network customers during drafting of regulations, and of the guidance that will be needed to enact the bill. Like Ombudsman Services, we look forward to playing our part in that process.

The main area of concern, which was raised previously, is existing schemes to which the legislation will not apply. They could account for between 20,000 and 30,000 consumers. As an aside, I note that the failure to be able to identify the number accurately is also a concern that I have raised several times. That still seems to be a large discrepancy and a large number for any bill to overlook.

The minister said previously, and we accept, that proposed UK legislation will cover existing schemes. However, there is concern about whether they will be covered in the same way as the bill will cover them, and about what will happen until such UK legislation is passed.

Furthermore, many schemes continue to modify and expand. It remains unclear when such modifications or expansions will be considered to be significant enough to fall under the new licensing regime. That could give rise to a situation in which existing parts of the scheme that the bill does not cover would have to interact with parts of the scheme that future UK legislation, which is as yet unpassed, will now cover. I do not see that being resolved in the bill.

There are a couple of other points to make. The minister has heard my concerns on the supplier of last resort, and has pointed me to various parts of the bill. We will have to accept that we do not know how the provision will work in practice until it is required—which, I suggest, is not an ideal way of operating.

I have also raised specifically the problems of designating heat zones, both for operators’ sizing of equipment and building users who are forced to join a monopoly supplier, irrespective of their heat demands.

We have also raised previously the significant issues of how local authorities will resource their new heat zoning obligations with funding, and the specialist skills that are needed. Only a couple of companies with mechanical service skills carry out that work in Scotland, yet local authorities will be expected to acquire that knowledge almost overnight. The resource that is needed to create heat zones and to decide where buildings can be realistically connected is incredibly complex, so I hope that the amendments to address that issue will work in practice.

Similarly, we previously raised questions around revocation or refusal of a licence, the transfer of assets process, the valuation and compensation mechanisms and the lack of an appeals process. The concern unfortunately remains that there is not the appropriate technical and practical knowledge in the Scottish Government. That is far from satisfactory, although we will have to accept that that detail will come through secondary legislation. We hope to see the knowledge base improving.

In conclusion, I say that we welcome the bill and will support it at decision time. Whether it will achieve

“increased use of heat networks”

as set out in the minister’s final amendment today remains in doubt. I sincerely hope that the Parliament will not, in another 15 years, be debating why there has not been growth in the heat networks sector.

16:35  

I am pleased to open for Labour in today’s debate.

I am glad that the bill will introduce a regulatory and licensing system for district and communal heating, which is something that we have repeatedly called for and supported. It surely makes sense that heat network consumers should be afforded the same service standards and protections as consumers of the gas and electricity markets.

I am also glad that the bill has been strengthened in scope through the various stages of amendments, and I hope that the bill can be used as a good starting point for the expansion of heat networks—and the benefits, in return—for everyone in Scotland.

I am pleased to see a delivery plan and targets in the bill, particularly given the successes of district heating schemes across Europe and around the world, and the opportunities that they have created. I am sure that we all hope to work towards similar successes, here in Scotland.

Heat networks can use a variety of heat sources that have varying degrees of carbon intensity. They are often more efficient than individual fossil fuel heating systems, and can also be run fully from renewables, recovered waste or surplus heat sources. We have a target to reduce Scotland’s emissions of all greenhouse gases to net zero by 2045; heat networks will surely have a role to play in achieving that.

In its briefing for the debate, WWF highlights that

“Currently a quarter of emissions come from buildings and changing the way we heat our homes will be a key part of”

the drive towards net zero. WWF goes on to say that

“Heat networks also represent an economic opportunity to support thousands of jobs in construction, which will be a key part of a just transition and green recovery”,

which I hope is the case.

One of the major takeaways should be that the bill is an opportunity to create jobs and local supply chains here in Scotland for the Scottish manufacturing sector. The Scottish Government climate change plan update states that investment in heat networks

“will provide high quality, sustainable green jobs across Scotland’s towns and cities, such as in specialist design and architecture, equipment manufacturing, civil engineering and maintenance.”

The bill is an opportunity, and I hope that the Government manages to deliver on it. As I said only a few weeks ago during the debate on a green recovery,

“if we are to focus on establishing a greener economy, we must absolutely prioritise the development of skills and jobs.”—[Official Report, 9 February 2021; c 69.]

However, the assurances that are needed from the Scottish Government are commitments to ensuring that jobs are created here in Scotland, not shipped overseas, and to providing adequate funding to realise the potential from a massive expansion of heat networks in Scotland.

The Scottish Government has said that around 50 per cent of homes and non-domestic buildings will need to convert to a low-carbon or zero-carbon heating system by 2030. Heat networks will obviously play a key role in meeting that target, and where we can, we will support the Government in its attempts to deliver on that commitment.

As WWF states,

“To reach the scale of output needed, there will need to be a quick ramping up of action, supported by increased capital funding.”

Such action can be taken now, so I would welcome a further outline from the Government on how it will deliver training and apprenticeships in order to develop the new and updated skills that will be needed to fully meet the aims of the bill once it becomes law.

The minister and the Government have worked across the parties on the bill. There is a real commitment to making it happen, so I am delighted that we are progressing towards passing the bill today.

16:39  

I am grateful for the opportunity to speak on an important piece of legislation that Scottish Liberal Democrats will be delighted to support. I am proud of the role that my party has played in helping Scotland to set stretching emissions reduction targets, and am determined that we will now walk the walk, in respect of meeting targets.

There is no doubt that to make a 75 per cent cut in emissions by 2030 is a significant challenge. It can be achieved only if we pick up the pace in areas such as heat, where—as others have said—progress to date has been glacial.

Over the next decade, we must build confidence in the technologies that are required to make the difference. That is why legislation on regulating heat networks is an essential first step. It is also why the case for developing strong customer protection is so compelling, and why further legislation in that area will be necessary, as Ombudsman Services and others have pointed out.

At stage 1, I noted the constructive engagement between the committee and the minister, and I am pleased that it has continued. One benefit of that has been willingness to extend the powers of local authorities and communities so that they can take the lead, where there is a desire to do so.

Amendments that have been passed at stage 2 and today mean that the challenge of decarbonising heat can be met from the ground up. As the member for Orkney, I am certain that the islands will be ready, willing and able to step up to that challenge. Committee members will know from their recent visit that Orkney has an impressive track record when it comes to turning concepts into practice and innovation into action.

However, as statistics that have been released today remind us, that has not sheltered islanders from the harsh reality of fuel poverty, which is higher in Orkney than it is anywhere else in Scotland. Orkney has four times the national average proportion of homes in the lowest energy efficiency category. Shameful levels of fuel poverty and extreme fuel poverty mean that the revolution in heating technology cannot come soon enough for my constituents.

That underlines why Energy Action Scotland is right to press the Government to do more in its budget, and it highlights why the bill must have regard to the importance of bearing down on fuel poverty. Making energy use more sustainable means making it more affordable for those who must currently choose between heating and eating.

I thank the minister again for the way he has sought to take on board proposals from Opposition members. At stage 2, I lodged amendments that were aimed at increasing our ambition to decarbonise the school estate. I built on the work of the inspiring Teach the Future campaign, which argues that

“If our education system is to teach students about sustainability, the buildings they learn within must be sustainable.”

Although I understand the technical reasons behind the Government’s reluctance to include such an ambition in the bill, I welcome the minister’s assurances that that aspiration will influence the work that follows the passing of the bill. I am grateful for the specific tribute to Teach the Future in his opening remarks. Young people have shown what is needed to take responsibility for our environmental obligations; the Scottish Government and Parliament must take heed.

I confirm again that Scottish Liberal Democrats will be happy to support the bill at decision time, and I thank all those who have played their part in a productive and genuinely collaborative process.

I remind members who are taking part in the debate that they should remain in the chamber for the opening speeches, which is particularly pertinent to those who will be closing the debate for their parties.

16:43  

As a member coming to the bill in its later stages, I thank the committee for its detailed stage 1 report, which made the intricacies of the bill much easier to pick up. I thank the minister and the bill team—this is the team’s first bill and I hope that there will be more to come—for constructively engaging. I also thank stakeholders, including WWF and Scottish Renewables, for their detailed input, which was very helpful in writing amendments

The committee was right to underline that we face an energy quadrilemma of climate, affordability, and the security and acceptability of supply. The latter three would have been big drivers for the Danes when they began their huge development of municipal heat networks in the 1970s. Today’s climate emergency hugely raises the stakes for everyone. With serious question marks over whether hydrogen will be a practical low-carbon replacement for gas, it is right that we build as many resilient low-carbon heat networks as possible today.

The bill is quite a technical one, but more of the regulatory and licensing framework has been fleshed out as it has progressed through Parliament. Having as much of that clarity as possible included in the bill will lead to more certainty, which will lead to heat networks becoming more bankable as investors can more accurately weigh up the risk and the opportunity. However, as Alexander Burnett alluded to, there will still be more detail to come. The bill has gone as far as it can, though, in including that.

I hope that there is enough of an incentive in the bill and the accompanying heat and building strategy to ensure that no low-hanging fruit is missed in the years to come. However, it is infuriating to see in my region, for example, a distillery dumping vast amounts of heat into the sky when its immediate neighbours sit in fuel poverty next to their open coal fires. We cannot miss such opportunities. Heat network zones must spell out the clear win-win opportunities, with costs to be borne if the owners of anchor buildings sit it out on the sidelines and create inertia.

The opportunities are crying out. This building itself has probably gone about as far as it can go in substantially reducing carbon emissions, but the introduction of a heat network for the Canongate would be a game-changer. The future proofing has to start now. We have major housing growth areas that need heat networks built in from day minus one, not day zero. Developers must not be allowed to choose the short-termism of the gas grid, and the Scottish Government has a responsibility to not send mixed messages about the future of fossil gas for heating. I hope that the bill heralds a new chapter in Scotland’s energy story. It builds on the experience and expertise of those who pioneered district heating in Scotland and across Europe. It is time to make another big step change for a greener and fair energy system, which is why the Greens will support the bill at decision time.

We move to the open debate.

16:47  

The aim of the bill is simple: to encourage greater use of local heat networks in Scotland and thereby move away from burning gas and fossil fuels to heat our homes and buildings; and to provide the supporting legislation, licensing and regulation to bind it all together. At the moment, over half of Scotland’s energy consumption is used to create heat and over 80 per cent of our homes burn gas to heat our gas central heating systems.

It is estimated that only about 1 per cent of Scotland’s heat demand is met by district and local heat networks, while across in Denmark, as has been mentioned by one or two members, the figure is about 50 per cent. In Copenhagen, though, an incredible 98 per cent of all buildings are connected to a heat network. Denmark started its journey a lot earlier than Scotland, for a number of reasons, but those figures illustrate both the challenge that we face and the gains to be made in our contribution towards reducing CO₂ emissions. We will be the first country in the UK to legislate on the development of heat networks, which will help us meet our target of net zero by 2040 and to tackle fuel poverty, which was a helpful addition to the bill at stage 2 that committee members requested.

The future of gas grids needs to be clarified by the UK Government, but in the meantime we can make good progress in Scotland using the powers that we have. The bill, if approved, will help us to achieve that. The proposals in the bill stem from recommendations that came from an expert group of industry, consumer groups and local government, and it lines up pretty well with advice from the Climate Change Committee too. The bill marks the beginning of a transformational change that paves the way for Scotland to create the supportive market environment that will be needed to expand the development of heat networks across the country. We must also recognise the potential for new businesses to emerge and provide jobs to support the industry. The Scottish Government is determined to unlock the potential for that sector, wherever possible.

We mentioned Denmark a lot during the committee’s work—and rightly so. We heard evidence from the Danish Energy Agency that heat networks cover about two thirds of all households in Denmark and represent about 17 per cent of its national energy consumption.

This is probably stating the obvious, but heat networks are adaptable to whatever new technology develops. The technology delivering the heat is not in the household or building, so any changes to the technology—for example, if hydrogen emerges as a solution—do not affect them at all.

The ability to create local companies and jobs is also clear, and the skills that are needed transfer quite easily from the natural gas sector. Even in my constituency we have a number of examples, such as the HALO project that is under construction in Kilmarnock. That £63 million urban village will be the first net zero carbon energy project in Scotland. It will provide jobs, economic growth, skills development, access to employment opportunities, clean energy and housing. Also, our soon-to-be-refurbished St Sophia’s primary school in Galston will be 100 per cent supplied by air source heat pump technology, which, overall, will reduce the school’s energy consumption by about 80 per cent.

Passing the bill at stage 3 will set off Scotland in yet another positive direction towards meeting our net zero aspirations. It is important that we do that carefully, with all due consideration being given to drafting all the regulations and licensing arrangements, opening up opportunities for local businesses—and, I hope, co-operatives—to emerge and exploit the potential of heat networks, and, probably most important of all, taking the public along with us on that journey to net zero.

I am happy to support the bill at stage 3. I look forward to it being agreed to at decision time.

16:51  

These measures to tackle Scotland’s move to zero carbon by the middle of the century will no doubt be welcomed by all parties.

When the bill came before Parliament at stage 1, I noted that modern district heating systems were pioneered in New York in 1877, where Birdshill Holly, having noticed the abundance of thermal energy in towns and cities, realised that it could be repurposed and piped into homes to meet public demand. That is a case study of initiative and the free market making lives comfortable with minimal additional impact on our environment. The question of why it has taken so long over the past almost century and a half for the idea to catch on here might arise, but it is reassuring to know that a similar idea has finally caught on and seems to be at the centre of the bill. It must be implemented by action.

There is the undesirable possibility that regulated and licensed energy and heating networks could lead to rising prices and a disproportionate impact on the least well-off.? That is what we do not need.

An excellent Great Britain-wide framework demonstrating the benefits of our great union is what we do need. A single British regulator—the Office of Gas and Electricity Markets—might be able to ensure that matters proceed in an organised fashion to the benefit of us all. Effective solutions are needed.

The bill’s narrow purpose conceals a vast number of policy areas, which include efficiency, climate targets and land rights.?I am pleased to see amendments that will, for example, require developer engagement with local communities before seeking consent for new developments. Local consultation is a good thing in instances where Government action can cause significant disruption. Indeed, communities should be at the heart of the bill’s operation.

At stage 2, Citizens Advice Scotland described the aims of the bill as “admirable” but cited troubling cases of those who have had their heat turned off after accruing arrears.

The Scottish Conservatives called for the expansion of district heating in our manifesto five years ago and for the networks in 2017. The Scottish National Party in government has often missed its own loudly hailed targets. I accept that this is an energy quadrilemma for us all. Let us hope that the commitments that are set out in the bill do not disappear in the mists of future time.

My party and I support the bill.

16:54  

The debate on the bill has been really constructive. We are now living in a climate emergency and we need to take steps across all sectors to reduce our carbon emissions, so the bill’s provisions will be critical. New heat networks will require strategic thinking and a lot of detailed work to enable us to build in the opportunities that new technologies will deliver in the years to come. It is vital that our infrastructure is future proofed, is affordable for those who use and rely on it, and works for all.

Heat networks are a key aspect of our net zero infrastructure. As Alex Rowley said, they bring us in Scotland a big opportunity to invest in local jobs, with apprenticeships and roles in designing, building and installing projects, all of which could be spread right across the country. It is also vital that such networks help us to tackle fuel poverty, and enable the green recovery that we urgently need to deliver good-quality, long-term employment and training opportunities for our communities.

Heat networks are also vital infrastructure elements in the context of our national climate targets. However, alongside that, maximising local decision making will be critical. There is a need for leadership at both Scottish Government and local government levels. The Scottish Government needs to use its leadership to support information exchange and to work with local authorities to ensure that they have the funding to lead on the planning and implementation that will make such goals a reality. Crucially, though, and as the Local Government and Communities Committee discussed last week, such leadership must be used to help to de-risk projects. That was the key message that came across from the committee’s witnesses.

My amendment to the Non-Domestic Rates (Scotland) Bill enabled infrastructure that will contribute to our net zero goals to be exempt from non-domestic rates, or at least have them significantly reduced. My colleagues in the previous Labour leadership of Glasgow City Council led the way for heat networks to be deployed, only for them to be hit with the prospect of huge NDR bills that made the project totally unworkable. However, the work in Glasgow is an excellent example of anchor institutions—the council and the University of Strathclyde—working together to drive innovation in the city. We need to see such an approach being replicated right across Scotland. I am therefore delighted that the statutory instrument on non-domestic rates and heat networks will be considered at tomorrow’s meeting of the Local Government and Communities Committee. That will be really good progress.

Quite a few of the members who have spoken in the debate mentioned Denmark. I went there as a minister 20 years ago, when it was miles ahead of us. We are still miles behind, but we can learn from its example. It was focusing on heat networks that actively encouraged municipal and local ownership and planning, in close co-operation with local industries and businesses. We need the same leadership and support to enable us to maximise the development of local investment so that the benefits of community-owned networks can be recycled into our communities. Community wealth building needs to be built in from the start.

Given the growing demands on local government budgets and resources, it is critical that we get the right support to our local authorities. Given the pressures that they are under, in-house knowledge and experience need to be developed across the country. Leadership from the next Scottish Government will be absolutely critical. Ministers must take the political lead to support authorities through finance, policy and technology, or exchange of experience. However, local authorities must also begin to take on their leadership roles and seek to plan head successfully. Both aspects of government must work together, and in conjunction with the UK Government, so that everyone is aligned to deliver. That will be a key issue if we are to be successful—and the climate emergency demands that we be successful. We can do so by supporting our communities and seeing manufacturing happening in Scotland. We need people to work together, but we also need there to be the right incentives and support.

We need to ensure that whoever is here in 20 years’ time will not be talking about missed opportunities and the need to catch up. We now have good examples in the UK and Denmark—and also in Scotland—from which we should learn. Let us get going, and let us ensure that the bill makes a real difference and that we get the low-carbon investment that our country urgently needs.

I call Alex Rowley to close the debate on behalf of Scottish Labour.

16:59  

This has been a really good debate. I again pay tribute to the minister, Paul Wheelhouse, for the way in which he has engaged with other parties across the Parliament. That is the right way to make legislation, as was evidenced by all the amendments to the bill being dealt with in record time. I am grateful to the minister and also to the bill team, whom he rightly thanked for all the work that they have put into this important bill.

I was interested in Mr Wheelhouse’s point about the need to get buy-in, including from communities. I have experienced that. My first experience of a district heating system was many years ago, when I first visited Lerwick and was made aware of the district heating system there. What struck me then was that people there had really bought in to the district heating system. They told people about it and they were quite proud of the fact that they had that system, so I get the point that people would feel a bit concerned about that need for buy-in.

Interestingly, Gordon Lindhurst mentioned cost and looking at how we do cost. There is a district heating system in Dunfermline that is run from the Wellwood tip. It heats not only the Carnegie leisure centre and the multistorey flats, but Tesco and a social enterprise that is next to it. Yesterday, I was contacted by the social enterprise, which told me that Fife Council has three different tariffs for the different providers. Tesco is on a much cheaper tariff than the social enterprise. I will be following up on that, but it was only yesterday that I became aware of the issue. Cost is important; these things have to be affordable. That is important.

Mr Rowley, there is time in hand so you do not need to worry about that; you can take longer if you need it.

Thank you.

The Government’s progress on community ownership of renewable energy is behind—I think that 70 per cent of the target was achieved by 2020—so there is a lot of work to be done on that. Community ownership of district heating systems is an important way forward and we need to look at how we can support it.

I take on board Alexander Burnett’s point about the need to have expertise in and knowledge of this type of system. I remember that, when I was leader of Fife Council, we put in £X million to erect wind turbines across Fife. The intention was to then get the payback from them and inject that into the community. It did not quite come off and I believe that one of the reasons for that was that we did not have that level of expertise within the local authority and we had not accessed or been able to buy in that level of expertise. If we want to reach the point that Denmark is at, it will take time, but we have to start somewhere and it is important to build up that expertise if we can.

A point about fuel poverty has always struck me. A number of years ago, I was campaigning in Paisley and knocking on doors there. I got talking to a lady who had just moved into a new housing association house. The key point that she made to me was that the house that she lived in previously, which was also owned by a social landlord, was damp and it cost a fortune that they could not afford to heat the house. Most importantly, during the winter months in particular, her daughter suffered from chest complaints and asthma and was never away from the hospital. The lady told me that, after she moved into her new house, not once had the daughter had to attend hospital.

Fuel poverty comes in many forms and the level of fuel poverty that we have is absolutely appalling, but when people live in fuel poverty, it impacts on the health and education and every other part of families’ lives. That is why we have to tackle fuel poverty and why I am quite excited by the progress that has been made.

I hope that I will be back in the next parliamentary session, but I certainly look forward to the Parliament, in the next session, doing the work and taking the bill forward so that, once and for all, we can tackle fuel poverty and invest in training, skills and jobs. That is what we need to see coming through under this new green agenda—jobs. I can understand why the trade unions are sceptical—I have raised the issue with the minister before. We have to deliver and we have to deliver jobs. The potential for Scotland is endless; we can do so much. I am pleased that there is unity in the Parliament to drive this agenda forward. That is a good start.

I call Graham Simpson to close for the Conservatives.

17:04  

I apologise for briefly leaving the chamber during the debate, Presiding Officer.

It has been a very good debate. Alex Rowley summed up why the bill is so important. He spoke eloquently about fuel poverty, and he mentioned a three-tier tariff scheme in Dunfermline, both of which are issues that the bill tackles. On fuel poverty, if we have more district heating schemes, we can potentially drive down the cost of heating. I say “potentially”, because that is not a given and will not be automatic.

That will be one of the two tests of the bill. The first is whether it will lead to greater take-up and use of district heating, and we do not know the answer to that. The second is whether consumers will be better protected as a result, and the jury is out on that, too. That is an important issue. As a number of members have raised during the process, if someone is tied into a district heating scheme, what happens if they do not like it and want to switch supplier? Those of us who are not in a district heating scheme can pretty much do that any time. There are difficulties with that issue.

What happens if a company supplying a district heating scheme goes bust or just decides that it does not want to do it any more? That brings me on to the question that Alexander Burnett raised about the supplier of last resort. Mr Burnett said that what is in the bill in that regard is not ideal. I agree—there are still questions to be asked about that.

I, too, must praise the minister for his approach. I do not want to embarrass him too much, but I have to say that he has given something of a masterclass in cross-party co-operation. The process has been driven by the minister. He has managed to get people virtually round the table and to agree on pretty much everything. He was doing so well until the final group of amendments, when Mr Wightman decided that the minister could not have it all his own way. Anyway, I say to the minister, “Well done—really well done.” As we have heard, there is cross-party consensus on the issue, which is important.

The minister started by telling us what a heat network is. I assume that people know this, but it is a network that delivers heat—obviously—most commonly through hot water or steam from a central source. There are a number of ways of doing that.

At all stages of the bill, we have heard various examples from across the country of heat networks that already exist, but we want the provision to expand. Members have mentioned the Danish experience. As we have heard, heat networks cover about 50 per cent of Danish heat consumption and two thirds of households, representing 17 per cent of national energy consumption. Therefore, as Sarah Boyack said, we have a long way to go. I did not realise that Sarah Boyack was a minister as long as 20 years ago—she certainly does not look it, does she, Presiding Officer? I am praising everyone today. However, if we have not made progress in 20 years, that is not a good record.

There are a number of issues still to be tackled, such as the issue that Citizens Advice Scotland raised about what happens when people’s heat is turned off by the network. However, we are fully behind the bill, as are all the parties.

I call the much-praised Mr Wheelhouse to close the debate on behalf of the Government. Minister, you can have 10 minutes if you wish.

17:09  

Thank you very much, Presiding Officer. I thank all members for their contributions to today’s debate and getting the bill to this point. I will try to cover as many of the points that have been raised as I can and to provide clarity to the members who raised them.

Alexander Burnett was right to raise the issue of the importance to heat network customers of the role of Ofgem, which I will come on to when I talk more formally about our engagement with UK ministers. He also mentioned the existing schemes and the importance of them being covered by the bill.

I recognise that, as Mr Burnett mentioned, the bill creates a large number of delegated powers. That reflects the fact that the bill is regulating a market from scratch; I know that Mr Burnett appreciates that. The Delegated Powers and Law Reform Committee scrutinised the bill on 11 August, and it has had the opportunity to scrutinise the amendments that we put forward at stages 2 and 3. I believe that it is comfortable with the use of delegated powers in the bill, and it raised only one question with us, which I hope has been addressed.

We will certainly try to give Parliament as much early sight of subordinate legislation as possible, as it comes forward. We have not had draft orders ready to present to committee during the passage of the bill, but I can confirm that we will be ready to consult on regulations later this year and to get moving on that. We will, of course, continue to use the experience and knowledge of our heat networks regulation working group, and others, as regulations are developed. I hope that members find that helpful.

Sarah Boyack raised the issue of non-domestic rates. I am grateful to her for the engagement that she has had on that in relation to other legislation. We have introduced a district heating relief, which provides a discount of up to 50 per cent on rates bills for premises that are used for district heating. That relief is unique to Scotland—it is not offered anywhere else in the UK. To provide certainty, this year we will introduce regulations that will extend that relief out to 2032.

In addition, we have committed to laying regulations that will provide 90 per cent relief for renewable heat networks, as well as those running on waste heat or energy from waste, which a number of members mentioned. That will begin on 1 April. That will incentivise clean heat networks prior to the implementation of the bill. The business growth accelerator, which applies to a number of types of business, already provides 100 per cent relief for new-build premises for up to 12 months after they are first occupied. That goes for heat networks, too. It also guarantees no rates increase on building improvements for 12 months. Therefore, a district heating scheme that was built after 1 April 2018 can already claim 100 per cent relief for the first year, and 50 per cent relief thereafter. We are obviously looking to implement the other change that I mentioned—90 per cent relief—through regulations. I hope that that is helpful in addressing the points that Sarah Boyack raised.

Alex Rowley made many fair comments, including on the importance of heat networks for the economy. I was particularly struck by his point about how important good-quality, warm homes are for people in relation to their health and their education. We know how debilitating a cold home can be for people’s health and wellbeing, and Mr Rowley was right to make that point.

Alex Rowley also made an important point about the supply chain opportunities, which is an issue that Claudia Beamish—who cannot be here today—has previously raised. I agree. It is clear that there are economic opportunities, and it is right to mention that. For example, in 2020 the heat networks industry council found that, on a UK-wide basis, the heat networks sector could grow to support between 20,000 and 35,000 new direct jobs in the sector by 2050, as well as additional, indirect and induced jobs in the economy, and investment of up to £50 billion into the market by the same year. Scotland would like to get a large share of that, and because we are moving quickly on legislation, we are giving ourselves the best possible chance to have early sight of the pipeline and an early opportunity to capitalise on the job opportunities that come from that, whether in manufacturing equipment or the installation and maintenance of heat networks.

Alex Rowley also raised the issue of skills, which is already on the radar of Skills Development Scotland. SDS, along with the green jobs academy and the Energy Skills Alliance, is looking at the potential for heat network development to stimulate job opportunities for young people, in particular, and, in the context of a just transition, to provide new opportunities for those who move out of industries such as oil and gas. I hope that that is welcome.

In addition, Alex Rowley rightly highlighted the role of the trade unions. From the Government’s perspective, I give an undertaking that we want to work closely with trade unions to make sure that we seize the opportunities as they arise.

I thank Alex Rowley and Mark Ruskell for their kind words about the bill team, which has done a sterling piece of work. Other colleagues mentioned that, too.

Mark Ruskell made important points about a transition in technology and the need, in the context of the energy quadrilemma, to look at the use of hydrogen. We are already actively thinking about that, and I give an undertaking that we will do whatever we can to maximise the opportunities and to look for the low-hanging fruit and the win-wins that he described.

Willie Coffey rightly raised Denmark, which gives me an opportunity to thank the Danish Government for the solid support that it has provided in giving the Scottish Government the benefit of its experience. Colleagues in Norway have also done that. We can learn something from the way that Denmark implemented heat networks and then switched the heat engines to lower-carbon alternatives as it went along. We will have to short-circuit that process and move straight to low-carbon and zero-carbon heating systems, but we can also learn from the way that that has proved to be less painful for consumers. I also thank Willie Coffey for raising some good examples in his constituency, such as the one in Galston.

In the remainder of the time available to me, I will cover the next steps. It seems to me that we have arrived at a point where the bill has broad support and consensus among members and we can now look forward to the work that lies ahead of us, as Alex Rowley said. The process of turning the legal framework in the bill into a fully functioning regulatory system will require a series of implementing regulations that will shape precisely how each element will work in practice—licensing, consenting, permitting, zoning and so forth. I thank Mark Ruskell for recognising that we have gone as far as we can without going to the Delegated Powers and Law Reform Committee to take that work forward.

The bill contains a large number of delegated powers and we must be realistic in our expectations on timing, but I anticipate that the new system will be in place by 2023. We are already working towards implementation. The introduction to the bill of a delivery plan through an amendment at stage 2 was a welcome development. The plan will drive the work forward and we aim to have it in place by April 2022. As I said earlier, I expect the first of a number of detailed consultations on the regulations to take place later this year.

I believe that we will continue to move forward in the collaborative way that has been demonstrated today. We intend to relaunch our stakeholder working group to maintain close co-operation with the heat networks and housing sectors. I take this opportunity to thank all those who are involved with the working group for the fantastic input that we have had, which has helped to inform the detail of what is a technical bill.

The UK Government has announced that it intends to introduce consumer standards to the heat networks market, which goes a long way towards addressing some of the issues that colleagues have raised today. I will briefly update Parliament on our collaboration on that front.

Lord Callanan, Parliamentary Under Secretary of State at the Department for Business, Energy and Industrial Strategy, wrote to me last week in reply to my earlier correspondence and reaffirmed the UK Government’s commitment to working with Scottish ministers and Scottish Government officials in the development of the UK Government’s primary legislation to introduce consumer standards, which will apply across Great Britain.

I welcome that commitment, although not necessarily for the same reasons that Gordon Lindhurst did so. We want to ensure that we have the power to appoint the consumer standards body for Scotland. It is still our intention to appoint Ofgem, which a number of members have praised today. The consumer standards body and the licensing body that is created by the bill can be one and the same, which will reduce costs and confusion for consumers and the industry alike.

We should not forget that Ofgem already has a 300-strong team in Glasgow that provides an excellent service in relation to the electricity and gas markets. There will be opportunities in due course to look at different energy sources and, for example, dual-fuel billing between heat networks and electricity.

The nature of heat networks means that local authorities will be vital if we are to make such systems work in practice. We will invite local government representatives to work in partnership with us to help to ensure that we end up with processes and regulations that are manageable and affordable for everyone. We have worked with Parliament to augment the role of local authorities in the regulatory system.

I am enormously grateful for the enthusiastic and constructive role that members in the chamber and particularly the Economy, Energy and Fair Work Committee have played in getting the bill to this point in such a strong shape. I believe that it has shown the Parliament in its best light. I hope that the rest of the work that needs to be done will benefit from the same spirit of co-operation and consensus. As many of the regulations that will flow from the bill will be subject to the affirmative procedure, Parliament will have direct oversight of them. I look forward to full implementation of the act in due course—like Alex Rowley, I hope that I will be here after the election to see that.

The targets that are now embedded in the bill are undoubtedly challenging. They will require the equivalent of approximately 650,000 domestic premises to be connected to heat networks by 2030. The fact that just over 32,000 homes are connected today shows the scale of the task that is ahead of us.

The bill will be fundamental to that, but it will not act alone. The 2020-21 programme for government committed us to invest £1.6 billion over the next five years to get things rolling. A recent estimate indicated that the total cost of transforming our homes and buildings is likely to be in excess of £33 billion.

I thank members once again for their contributions to the debate today and throughout the passage of the bill over the past 11 months, and I thank my exceptional bill team for all that they have done. I hope that all members feel that they can get behind and be proud of the bill and that they will vote in favour of it. I urge them to support the Heat Networks (Scotland) Bill and I am proud to have moved the motion.

Given that we have reached the end of scheduled business, I am minded to accept a motion without notice, under rule 11.2.4 of the standing orders, that decision time be brought forward to now.

Motion moved,

That, under Rule 11.2.4, Decision Time be brought forward to 4.32 pm.—[Graeme Dey]

Motion agreed to.