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Chamber and committees

Meeting date: Thursday, December 3, 2020

Meeting of the Parliament (Hybrid) 03 December 2020

Agenda: First Minister’s Question Time, Portfolio Question Time, Covid-19 (Vaccine Delivery), Committee of the Whole Parliament, Scottish Parliament (Assistance for Political Parties) Bill: Stage 2, Meeting of the Parliament, Solicitors in the Supreme Courts of Scotland (Amendment) Bill: Final Stage, Heat Networks (Scotland) Bill: Stage 1, Heat Networks (Scotland) Bill: Financial Resolution, Parliamentary Bureau Motions, Decision Time


Contents


Heat Networks (Scotland) Bill: Stage 1

The Deputy Presiding Officer (Linda Fabiani)

The next item of business is a debate on motion S5M-23564, in the name of Paul Wheelhouse, on stage 1 of the Heat Networks (Scotland) Bill.

15:55  

The Minister for Energy, Connectivity and the Islands (Paul Wheelhouse)

I am delighted to open the debate on the bill and that we have reached this point in the process. I thank the Economy, Energy and Fair Work Committee for its careful scrutiny of the bill and I welcome its recommendation to approve the general principles of the bill. I am also grateful to the organisations and individuals who have given evidence, the convener and members of the Delegated Powers and Law Reform Committee, and the heat networks regulations working group, which was a strong source of support to us in preparing the bill.

Before I talk about the bill itself, it would be beneficial if I were to briefly set out what a heat network is, how it differs from the heating systems that we are more familiar with in Scotland and the benefits that it can bring. Put simply, a heat network is a distribution system of insulated pipes that carry hot water or steam from a central source and deliver it to homes and businesses. Heat networks are best deployed in denser, more built-up areas where there is more concentrated demand for heat, but they can also work well in rural contexts. The technology is well known across Europe, predominantly—but not exclusively—in large cities such as Copenhagen, where it supplies heat to 98 per cent of buildings.

Heat networks are generally more efficient than individual gas boilers and, in the right circumstances, can deliver fuel savings, helping to lower bills and tackle fuel poverty. The heat can come from a wide range of renewable and low-carbon sources, including large-scale heat pumps in our rivers or even waste heat recovered from industrial processes such as whisky distillation. There are also health and safety benefits, as there is no need for any combustion to take place inside the building, thereby avoiding fire and carbon monoxide poisoning risks.

As heat networks are long-lived assets, they can create long-term local jobs in maintenance and administration. When deployed in suitable areas, heat networks have many benefits, the most important of which might be their capacity to remove the emissions that are caused by heating our buildings, and to reduce bills and so help to tackle fuel poverty. The Committee on Climate Change, along with other key actors in the sector, has advised us that there is real scope for making greater use of renewable and low-carbon heat networks.

Given the opportunity that the technology presents, the overall aim of the bill is to accelerate development of heat networks in Scotland and so drive down emissions and tackle fuel poverty. The bill seeks to do that by creating a new licensing regime to ensure that operators are solvent, fit and proper, while also driving up standards across the sector. The bill introduces new processes for consenting, zoning and permitting to ensure that new networks are developed where they will have the most benefit; that they are tailored to the needs of an area; and that they can provide greater certainty to developers and investors to attract investment. We are levelling the playing field with other utilities by creating new rights for heat network developers and operators, which will help to reduce the costs and risks associated with construction. Finally, the bill puts in place arrangements to protect network users by enabling a transfer of operational rights to occur to ensure continued supply.

The bill and its provisions have been developed following extensive consultation with stakeholders and communities, including our island communities, and are based on advice and recommendations from an expert working group of stakeholders. The Economy, Energy and Fair Work Committee has made helpful recommendations throughout its report and I have responded to the committee in what I trust is an equally helpful manner.

The bill is lengthy and complex, so I will concentrate on covering four important areas that are addressed in the committee’s stage 1 report: consumer protection, fuel poverty, community engagement and the division of responsibilities between local and national Government.

I will also listen carefully to the points made by members in the debate today on all areas of the bill. If the bill progresses to stage 2, I will write to members of all parties so that I can hear the views of Parliament in further detail. As I have said from the outset, I want the process to be collaborative so that we produce a piece of legislation of which we can all be proud. I am confident that we can and will do that.

The committee has highlighted the challenges relating to consumer protection, which, as members are aware, is not currently within the competence of the Scottish Parliament. I very much welcome the committee’s scrutiny of the issue, and I reassure members that we will not enable the mass deployment of such schemes without commensurate protection for homes and businesses.

Earlier this year, the United Kingdom Government signalled its intention to legislate in order to introduce a set of consumer standards for the sector, which will apply across Great Britain. That is very welcome. I continue to work closely with my UK counterparts to ensure that the proposals are fit for Scotland.

I have written to Kwasi Kwarteng MP, who is Minister of State for Business, Energy and Clean Growth, to seek new powers for the Scottish ministers to determine which body oversees the consumer standards in Scotland. That would ensure that that body, whether it is the Office of Gas and Electricity Markets or another organisation, is one and the same as the licensing authority that is created by the bill. In that way, we will achieve coherent regulation in Scotland while harmonising standards for businesses and consumers across the borders.

Graham Simpson (Central Scotland) (Con)

Does the minister think that Ofgem would be the appropriate body?

Paul Wheelhouse

We are very supportive of Ofgem providing the role. Obviously, it is not within our gift to appoint a body that is constituted under a UK statute. We are seeking to work with UK ministers to get the powers so that the Scottish Parliament is able to appoint Ofgem to that role. We have had early discussions with Ofgem, and we believe that it is supportive of performing the role.

I had hoped to have a response by today, in time for the debate, but I do not, for which I apologise. I am waiting for Mr Kwarteng’s response, but I do not read anything into that—it is perhaps just a bandwidth issue. We will continue to keep the committee and Parliament updated as we progress. Meanwhile, I hope that members agree that the bill will improve the current situation by regulating the market for the first time and enabling conditions of licence and consent to be placed on operators and on individual sites.

I turn to the important issue of fuel poverty, which has rightly been raised in the committee’s report. Heat networks have an important role to play in helping to eradicate fuel poverty. The business and regulatory impact assessment that accompanies the bill notes that heat networks can provide average fuel savings of 17 per cent for households and, in the right circumstances, savings of up to 36 per cent.

I recognise that the bill does not make explicit reference to fuel poverty, but I assure members that contributing to the eradication of fuel poverty has been an absolute priority for the Scottish Government as we have developed the bill. To put that beyond all doubt, I propose to lodge amendments at stage 2 to parts 1, 2 and 3 of the bill to ensure that consideration of fuel poverty is embedded explicitly throughout the bill. My officials and I are liaising with the chair of the Scottish fuel poverty partnership forum and with Energy Action Scotland to inform those amendments. Should the bill pass, I will continue to work with fuel poverty stakeholders to ensure that the regulatory framework, as it is further developed and implemented, helps to tackle fuel poverty.

The committee has recommended that the bill include stronger provision for community engagement. I have reflected on that, and I recognise that the bill could be strengthened to ensure that the views and needs of local communities are accounted for. To ensure that local views are considered from the inception of a potential project, I will lodge an amendment at stage 2 that will require developers to provide real evidence of their engagement with local communities alongside their application for a heat network consent. As we develop subsequent regulations in that area, it will be important for us to draw on the expertise and insight of communities and organisations such as Citizens Advice Scotland, and I commit to working with them as we progress work in that area.

I note the committee’s recommendation for the balance of powers between the Scottish ministers and local government to be modified over time. As introduced, the bill makes the Scottish ministers responsible for approving new heat network developments through the consenting system. I want to be clear that that will not undermine the role of local authorities. Rather, the intention is to ensure proportionality by not requiring local authorities to take on that function at this time, while the heat network sector is still developing and when such systems will not have equal distribution across the country. The intention is also to make use of the Scottish Government’s existing capacity within the energy consents unit, which already performs a similar function in approving new renewable generation and electricity transmission projects. That will enable us to realise economies of scale and to proceed as quickly as possible in approving new schemes, in view of the global climate emergency.

The committee’s recommendation on that issue is very sensible and practical. I agree that local authorities should be empowered as far as possible, particularly in the case of heat networks, which are local assets by their nature. I will therefore lodge a Government amendment at stage 2 to enable responsibility for the award of heat network consents to be transferred to local authorities in future. However, the amendment will also allow local authorities to choose to leave the responsibility with the Scottish ministers, if that suits their circumstances.

Of course, the bill is only one part of our work to tackle fuel poverty and reduce emissions from Scotland’s homes and buildings. We have the most ambitious and comprehensive fuel poverty legislation and retrofit programmes in the UK, and we are committed to investing £1.6 billion during the next parliamentary session to expand and accelerate our heat and energy efficiency programmes as part of a green recovery.

We have already launched a £50 million green recovery low-carbon infrastructure transition programme call, and we will invest £25 million in heat networks as part of the Clyde mission. This year, we are also providing funding of £20 million to social landlords so that they can improve their properties by making them warmer and greener. Last month, in addition to opening a £4 million renewable heat cashback scheme for small and medium-sized enterprises, I announced a new £4.5 million cashback incentive to help people install renewable and energy efficiency measures in their homes.

We will shortly publish a consultation on our 2024 standard for new buildings, requiring them to use only zero-emission heat. That will open up a new market opportunity for the renewable heating sector, and will be an important step forward in encouraging the connection of new buildings to heat networks.

We will also shortly publish our heat in buildings strategy for Scotland, which will set out a vision for the roll-out of energy efficiency and heat decarbonisation in Scotland. The strategy will set out an ambitious set of new actions that will accelerate the decarbonisation of our building stock, including new commitments to support the deployment of heat networks. I encourage all members to consider that important document closely when it is published.

I hope that I have demonstrated to colleagues that the Heat Networks (Scotland) Bill will play a crucial role in our package of programmes as we take steps to ensure that Scotland’s buildings are warmer, greener and more efficient. The bill is an important step in supporting the deployment of heat networks at the scale that is needed to help us reach our net zero carbon targets. The bill will provide confidence for consumers, investors and the supply chain, creating a sustainable market for district heating, and I commend it to Parliament.

I move,

That the Parliament agrees to the general principles of the Heat Networks (Scotland) Bill.

16:07  

Gordon Lindhurst (Lothian) (Con)

Heat networks are hardly a new idea. The first modern district heating system was pioneered in a town in the state of New York in 1877. Birdsill Holly, a friend of Thomas Edison, observed the abundance of thermal energy in urban areas, and he realised that heat from industrial processes could be piped into homes to meet public demand. Waste not, want not. A triumph of the free market, we might say, but this is a committee report and I could not possibly comment.

The Scottish Government has presented us with a doorstop of a bill. It extends to 85 sections and 42 pages. I am pleased to say that our stage 1 report is two pages shorter. In the words of Horace,

“Whatever advice you give, be brief.”

It is, however, pleasing that the minister has heeded so much of our advice. It is fair to say we are not overly familiar with the words

“The Scottish Government accepts the Committee’s recommendation”,

but credit where credit is due: that phrase appears in almost double figures in Mr Wheelhouse’s written response to us. He and his officials are to be commended for taking such a constructive approach.

The bill is a technical bill with substantial delegated powers. In broad terms, it seeks to regulate the supply of thermal energy via heat networks. It has a single purpose, but that single purpose covers a plethora of policy areas, including energy efficiency, renewables, land rights, planning, and climate change.

I want to focus on a handful of matters that we highlighted in our scrutiny. The first and most fundamental matter, which also featured in our energy inquiry, is public engagement. The Committee on Climate Change has advised the Scottish Government to prioritise behaviour change. Our committee agrees. We also want the Scottish Government to take the lead by example to facilitate new social norms.

We want to address the disconnect between public support for carbon reduction and a lack of awareness of the role of heat, and to ensure community buy-in, consumer confidence and what we might term social licence.

Citizens Advice Scotland saw the intentions of the Bill as “admirable” but said that

“it could go further to guarantee good outcomes for consumers.”

CAS cited the experience of one community in north-west Glasgow, an area where more than 90 households had their heat turned off after falling into arrears. The provider had put up its price but had failed to appreciate the vulnerability of those customers. That is why we need a clearer commitment to local input in the growth and development of heat networks, which I think the minister recognises. That must be at the heart of the bill and central to its ethos.

We welcome the minister saying that developers should provide a community engagement report and the indication that he will lodge an amendment to stipulate that in the bill. Again, we credit him with taking a positive stance. He has agreed that provisions on fuel poverty, which a number of witnesses wanted, should be included in the bill.

The Nordic experience, notably in Denmark and Norway, is an acknowledged influence on the bill. In other circumstances, we would have liked to see the results of that experience for ourselves, but coronavirus prevented that. We were grateful, however, to the Danish energy agency for providing us with a written submission in the absence of an opportunity to make a site visit. The Danes described heat networks as a “low-regret investment” that is “agnostic to the heat source” and is adaptable to technological developments in areas such as waste heat and hydrogen.

Municipalities in Denmark oversee the consent process for heat networks and, together with consumer co-operatives, own most of the networks. The balance of power between the national and the local is certainly not like that in the bill. We feel that it would be desirable if that could be modified over time and, yet again, the minister has accepted our recommendation. He recognises that local authorities should be “empowered as far as possible” where they are willing and able. He accepts that heat networks are essentially “local assets” and he says that he will seek to amend the bill to enable the future transfer of consents to councils.

I might offer the minister even more compliments, but I am already in excess of my quota, so I will move on to a question. What is on the wallpaper today? I am told that that is what a Dane asks when they want to know what is on the agenda. On what is left of my wallpaper, I will cover a robust critique of some of the bill’s drafting.

We heard detailed evidence in relation to wayleaves, legal definitions, and the creation of real rights. Professor Roddy Paisley specialises in land law and he impressed even Andy Wightman. We will no doubt hear Andy’s comments shortly.

Professor Paisley made observations on various aspects of the bill. Here are just a few. He said that it is

“somewhat oddly drafted and lacks clarity”

and also that

“I think it will be overly sanguine to expect the builder’s shovel to conform in every or even most situations with the lawyer’s pen.”

He described the bill as

“a half-baked import … In Scotland we can do better than this”

and lastly said:

“It would not be a good idea to model what you propose to do in the bill on what is already in legislation, drafted by the Westminster Parliament”.—[Official Report, Economy, Energy and Fair Work Committee, 1 September 2020; c 7.]

That was an interesting contribution and one that we felt ought to be stress tested with another academic. We then presented both sets of views to the Scottish Government. Did the minister respond in a defensive or a derisory way? I am almost dismayed to say that he did not. He described the views as “valuable”. He believes it “crucial” to consider the transparency of wayleave rights and he says that he will seek to amend the bill to address such issues.

Heat networks are hardly a new idea, but a minister who listens—now there is an innovation. We recommend that the general principles of the bill be agreed to.

16:14  

Alexander Burnett (Aberdeenshire West) (Con)

It is welcome to finally be here deliberating legislation to advance heat networks in Scotland, although I feel that it has been a long time coming; so long, in fact, that I had to check when the subject was first raised in the Parliament, and the honour falls to Sarah Boyack for raising it back in 2003.

For my own part, and to declare an interest, I started building heat networks back in 2007. I am a firm believer that all members should bring real-life experience into the Parliament, but I guess that I might be in the minority who has literally been in the trenches of district heating. Unfortunately, I do not believe that the minister and his team have built a heat network, which is perhaps reflected in some parts of the bill, which I will come to later.

However, the principle of the bill is to encourage greater use of heat networks, which is welcome. I hope that when the bill is passed, it will encourage the development of heat networks. So far, Scotland’s performance has been woeful in hitting only half of its target of heat produced by renewables. However, we welcome the elements in the bill addressing 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 an emerging market. We also have no issue with the many technical definitions in the bill.

There are, however, a number of concerns about the bill, which fall into two clear parts. The first is existing schemes, of which there is no mention. As an aside, I find it extremely concerning that the exact quantum of schemes and consumers is not known, with figures given of 800 schemes and possibly 20,000 consumers. However, in a written answer to Tom Arthur on 29 October, the minister said that that figure was nearly 30,000. That seems a large discrepancy and a large number to be overlooked by any bill.

The minister said that existing schemes will be covered by proposed UK legislation, but there is a concern about whether they will be covered in the same way as this bill will cover them and what happens until that UK legislation is passed. Furthermore, many schemes are continuing to expand, so I would be grateful if the minister could make it clear whether any expansion of an existing scheme will require a licence and, further to that, how any existing part of the scheme not covered by the bill will then interact with the part of the scheme that will now be covered by the UK legislation. There is a vague assurance from the minister that the bill will not have a disproportionate impact on existing schemes, but clarity on those points would be most welcome.

On new schemes, I will focus on two areas that demonstrate a lack of knowledge of the sector. The first is the identity of the supplier of last resort, which the Scottish Government views as a key outcome of the bill. The suggestion is that, as part of a licensing requirement, an operator would have a third party obligated to take over and ensure continuous operation of the scheme. That is a welcome consumer protection, but we must look at how that would work in practice.

The third-party supplier of last resort, who one assumes would already be a licence holder and therefore a competitor to the existing operator, would have to take on an obligation to step in and take over a scheme in the event of insolvency or another failure of supply. Leaving aside the effects of insolvency and creditors’ claims on a network’s assets, that third party’s obligation is a financial risk that would sit on its balance sheet and would therefore require the constant due diligence of a competitor’s financial and physical performance.

Aside from commercial confidentiality, the cost of that could be prohibitive or, worse, could be passed on to consumers, with negative consequences for fuel poverty. Again, I would be grateful if the minister could give clarity on the detail of that aspect. Is he saying that the Scottish Government will always be the supplier of last resort?

The second aspect requiring further explanation is around heat zones. There are physical and practical components of a heat network that complicate that element. As a brief explanation, the generating building, fuel store and emerging pipework sizes must all be calculated and sized accordingly at the outset of a project. Although some additional capacity can be added and distributed, it is not nearly as straightforward as expanding an electrical or gas network, which much of the bill appears to be based on.

A heat network’s available capacity, and even the location of that capacity around the network, is not straightforward and subject to change with every new connection. The idea that new buildings in a designated area can simply connect is, I am sad to say, fantasy. One new building might well have a different heat load to another, requiring physical differences in both the pipe size and the hydraulic interface unit, or heat exchanger, which will mean financial differences, too. That all means varying connection charges.

Paul Wheelhouse

Will the member take an intervention?

Alexander Burnett

If I can have the time back, certainly.

Paul Wheelhouse

The member rightly identifies that we need an accurate understanding of what the heat load and the demand load would be, building by building. Does he appreciate that, as a first step, we are looking at using public sector buildings in order to produce building assessment reports to inform local heat and energy efficiency strategies and give accurate data? I hope that we will, for anchor loads—at least for public buildings—be able to give investors confidence that there is sufficient demand to justify the investment.

Alexander Burnett

I welcome that reply. I also note for the record that I welcome the minister’s offer in previous conversations to be as constructive as possible on the bill.

The minister mentioned existing loads. Those are subject to change, an issue that I will touch on now. There can be varying connection charges, which might not be known at the outset. However, building users might also change, with different heat demands, leading to obvious implications for the operator. A shed with a micro-distillery has a very different heat profile than if its use was to change to storage only. The same could apply to the public sector buildings that the minister just mentioned—their uses might change over time.

All that leads to issues over the connecting and charging obligations for the operator and the potential consumer, which do not appear to have been given any meaningful consideration.

A significant issue is how local authorities will resource their new heat zoning obligations, with funding needed for the specialist skills that are required. I know that other colleagues will speak about that. For my part, I hope that we are not going down the Government’s familiar route of devolving responsibility without the matching resource.

Other submissions raise the point that the bill is based on single entity and operator schemes, whereas multi-operator schemes are quite normal, so clarity is also required on licence-holding requirements. Similar questions were raised about the revocation or refusal of a licence, the transfer of assets process, the valuation and compensation mechanisms and, most worryingly, the lack of an appeals system.

I hope that the minister will significantly improve his knowledge of how heat network systems are built and do everything in his power to ensure that his legacy is not the death knell to consumers and developers of heating networks.

Despite the many reservations about the bill, it must become one that will increase heat networks and protect consumers. The bill must be welcomed and we will support it at decision time.

16:22  

Claudia Beamish (South Scotland) (Lab)

I thank Paul Wheelhouse for introducing the Heat Networks (Scotland) Bill. I welcome the bill as an opportunity to address concerns around the sector and as a move towards decarbonising heat. It is also an opportunity to lift thousands of families out of fuel poverty.

I will leave the committee members who are speaking today to outline the recommendations, which we support, during this important stage 1 debate.

I am pleased to open the debate for Scottish Labour. We will support the bill at stage 1, but we believe that it has so much more potential. We face a climate emergency, and heat from buildings accounts for a quarter of Scotland’s climate emissions, yet none of the statistics around renewable heat in Scotland seem to match the urgency for action. So far, the progress in this area has been far too slow. The target of 11 per cent seems quite measly given our understanding of the climate change emergency, and the fact that it has been missed is disappointing.

Heat networks can and must be part of the transition to a net zero society, but the estimates are of only between 7 and 17 per cent of Scotland’s heat demand being met from renewable networks, which is not enough. That will not drive the large-scale changes that are needed to tackle the climate crisis. We need ambitious targets for a green recovery.

It is notable that, in its recommendations, the committee invites the Government

“to reflect on whether its ambitions for the impact of the Bill are on a level with those it has already set out for tackling climate change and pursuing a green recovery.”

That needs further attention, and consideration must be given to the recommendation of WWF Scotland that targets and a clear delivery plan should be included in the bill and not just in guidance.

There is certainly consensus that heat networks are a way forward as part of a mixed renewable energy solution. However, if the sector is to be a success, a number of factors must come together. I will be listening carefully to discussion of those in the debate.

The bill presents an opportunity to drive up consumer confidence, and we know that low confidence is a significant barrier to developers and uptake. A regulated sector with robust licensing, service standards and consumer protection would improve confidence among developers and investors, who are reluctant to take risks without measures that create licence holders with statutory powers similar to those of other utility providers. In its report, the committee has asked to see

“a clearer commitment to consumer protection”,

which is a view that is supported by Ombudsman Services.

I ask that consideration be given to including in the bill provision for what should happen in a situation when a customer enters into a heat network without the ability to switch suppliers. I hope that the minister and the committee will address that issue as the bill progresses. Having more information about service, customer engagement, minimum standards and price, as well as other information such as licence conditions, in the main body of the bill would be a way of ensuring such protection.

Further, as other members have said, having a co-ordinated approach by local government and the Scottish Government will be necessary. In its report “Renewable Heat in Scotland, 2011”, the Energy Saving Trust acknowledged that clarifying the role of local authorities should be a priority. Although the bill does consider the role of local authorities, there is a lack of reference to community engagement, so that aspect must be given greater priority. Again, the committee has recognised that.

Advice and funding will also be critical to ensuring that councils have the capacity and knowledge to develop municipal, community or co-operative not-for-profit heat network companies. I welcome hearing the minister’s commitments on those areas. Consideration must also be given to achieving a just transition and to ensuring that skills and knowledge are in place to respond to the challenge and expand the sector. Those include the skills to develop technology, install it and maintain it.

Given the benefits that heat networks could bring in reducing domestic fuel costs, it is a relief that the minister has today agreed that provisions to address fuel poverty will be included in the bill.

In Drammen, Norway, district heating via a heat pump delivers the city’s collective heating needs, using fjords as a resource. Some 50 per cent of the system is owned by a commercial energy company and the remainder is owned by a municipal company. Indeed, in many European countries there have long been district heat networks, which are embedded in their cultures with no concerns about a lack of individual control, because people work together on such schemes. We must recognise that, as we develop networks here in Scotland, there must be support and clear information for our communities. It is encouraging for the development of our manufacturing base in relation to heat networks that it was a Scottish company, Star Renewable Energy—which I know the minister and other members have visited—that made the Drammen system possible.

There is much to be positive about in the bill. If the gaps are addressed, it will enable us to grasp fully the local, national and global benefits that heat networks offer.

The Deputy Presiding Officer (Christine Grahame)

I call Andy Wightman to open the debate on behalf of the Scottish Greens. You have up to five minutes, Mr Wightman.

16:28  

Andy Wightman (Lothian) (Green)

Scottish Greens welcome the bill. I thank the committee’s clerks and all those who gave evidence. As the convener did in his opening remarks, I thank the minister for his constructive engagement and positive response to the committee’s stage 1 report.

As we know, Scotland is a northern country in which it is wet and cold for much of the year. We have a persistent problem with fuel poverty, but we also need to keep warm. Some years ago, I was lucky enough to visit the Soviet Union on a number of occasions. One year, I was skiing in Siberia when I encountered interesting and quite substantial heat networks with vast pipes snaking across cities and leaks of warm air condensing in huge clouds in the streets. The homes of Soviet citizens were warm, even in the most hostile climate on earth. That is not unusual. Many—indeed, most—European countries, and certainly all the northern ones, have long embraced heat networks, and developing the policy behind the bill has involved drawing on the experience of a number of such countries. The bill is therefore a welcome one, and it represents an important step towards addressing Scotland’s energy needs.

We know how little time we have in which to address the climate crisis, and making our heating systems more efficient and climate friendly is one of the key challenges that faces us, together with transport and land use.

The committee has identified a large list of areas where improvements could be made. Again, I thank Mr Wheelhouse for his constructive response to the committee’s recommendations, and I will reflect on a few of them. First, it has been suggested that the function of tackling fuel poverty should be in the bill as an objective and criterion for the regulatory process and the awarding of consents. I welcome the Government’s agreement on that and look forward to debating the formulation of words to achieve that.

Secondly—and this is the Scottish Green Party’s principal concern—the bill centralises power with Scottish Government ministers. Much of the evidence from the Scottish Government in relation to the bill drew heavily on the Danish model of heat networks. As the convener mentioned in his opening remarks, the Danish energy agency provided useful written evidence to the committee, which I have here. It indicates that, under the key elements of heat networks, municipalities—local authorities—have

“mandated responsible authority for heat planning and approval of heat projects.”

The document goes on to say:

“The pipe network for distribution and transmission of heat is owned predominantly by municipalities”

—two thirds of it—

“while consumer-owned cooperatives own most of the”

remainder.

An important feature of the Danish heat network system is the concept of the

“‘not-for-profit’ requirement. This has been part of heat networks regulation since heat planning became a municipal responsibility. The not-for-profit requirement stipulates that heat network companies can only charge the consumers a price equal to the actual or ‘necessary costs’ of producing and transporting the heat—profit is deemed an unnecessary cost.”

Although the private sector no doubt played a useful role in New York, the Danish evidence shows that municipal enterprise can play an equally productive role in heating our homes. I am pleased that the Government has agreed to amend the bill to allow for the future transfer of regulatory functions to local authorities, but I believe that it should go further.

In the Local Government and Communities Committee yesterday, cabinet secretary Aileen Campbell said:

“We are committed to local decision making”.—[Official Report, Local Government and Communities Committee, 2 December 2020; c 2.]

In my view, the bill should presume that local government should be the competent authority as the default, unless it decides not to be. In such scenarios, local authorities may decide that they wish the Scottish Government to perform the relevant functions on their behalf, or they may decide to share services and expertise with neighbouring local authorities, as they do now.

Public engagement has also been mentioned in relation to what will be a dramatic change in infrastructure and how we heat our homes. In the absence of a formal role for communities and local authorities regarding planning and consent, a robust plan for engaging with and taking feedback from relevant individuals is important. Again, I welcome the Government’s response on that.

The committee heard significant evidence on the legal aspects and drafting of the section on wayleaves. The convener mentioned a few of those. Professor Paisley told us that section 60 needs “wholesale redrafting”, and that references to the words “owner” and “occupier” are “English inspired nonsense”. I should say that it is very good when witnesses appear before committees and tell us exactly what they think. [Laughter.]

As the convener said, the committee is very interested in and keen to see that evidence being tested properly, and we did that by inviting Scott Wortley, who was the committee’s adviser on the drafting of the Title Conditions (Scotland) Act 2003. Professor Paisley said that that was one of the Scottish Parliament’s finest legislative achievements.

Finally, we touched on the issues of building regulations and the green recovery, among other matters. However, I will leave it there. I confirm that the Scottish Green Party will support the bill at stage 1.

16:33  

Liam McArthur (Orkney Islands) (LD)

I hope that the Deputy Presiding Officer might grant Andy Wightman a closing remark, so that he can explain why he was on special manoeuvres, skiing in Siberia. [Laughter.]

Like others, I thank the Economy, Energy and Fair Work Committee for its work on the bill, as well as those who provided evidence. In the light of the comments by Andy Wightman and the convener, I, too, thank Paul Wheelhouse for his characteristically constructive engagement with the committee on the matter.

I was delighted that committee members managed to visit Orkney as part of their evidence gathering. That is always to be encouraged, and I am sure that it helped to inform the recommendations in the stage 1 report. Indeed, the islands that I represent have shown themselves to be pioneering in the generation and use of energy in ways that cut emissions and lead us towards net zero. Of course, achieving that in relation to heat, as in transport, remains one of the biggest challenges that we face. That is why the bill, which the Scottish Liberal Democrats strongly support, is crucial, and it is why the point that Claudia Beamish made about adequate resourcing of the provisions in the bill was well made.

The Orkney example also illustrates the tension in the bill between national oversight and local delivery. I accept that the consent process needs to ensure that we have the right projects in the right places and that we have a proper balance between environmental objectives and efforts to reduce fuel poverty. However, communities and local authorities must have a formal role in the planning and consenting of schemes, because, without that, public buy-in becomes difficult and, as CAS and others have pointed out, decisions could be taken that either ignore or override the interests of local residents, some of whom might be vulnerable.

Given the higher levels of fuel poverty in our island and rural areas, the bill’s provisions demand rigorous island and rural proofing. As various witnesses made clear to the committee, we need to avoid overly bureaucratic regulation, but we also need to ensure that customers across Scotland have access to the same low prices for energy.

Denmark has made a success of a decentralised process, and, as members have observed, there is no reason why Scotland cannot and should not do the same. I therefore welcome the minister’s assurances about transferring consenting power to local councils that wish to have it and about requiring meaningful engagement by developers with local communities. I was struck by Andy Wightman’s position in relation to a presumption. That approach has been taken to planning for aquaculture development, so there is a precedent.

On the theme of island proofing, I ask the minister to investigate why Shetland Heat Energy and Power’s treatment on rates appears to be at odds with the treatment of projects elsewhere in Scotland. That might not fall into his ministerial responsibility, but, even if it does not, I am sure that my colleague Beatrice Wishart, as well as Shetland Heat Energy and Power, would welcome some clarification on that.

The bill makes sensible proposals on definitions and licensing. I echo the points about the benefits of having a consistent approach across the UK, which would point to Ofgem being the obvious choice as a licensing authority. However, on the question of conditions, I think that we can be bolder in the bill, and that can be done under the guise of consumer advice, which is devolved to the Parliament. I see no reason why the bill should not include more detail on licence conditions such as information about service, price, customer engagement and minimum standards. More importantly, CAS, Energy Action Scotland and the ombudsman also see no reason why that should not be the case.

During the passage of the Climate Change (Scotland) Act 2009, Scottish Liberal Democrats worked with others to deliver important amendments prioritising action on heat networks. We believe that setting stretching targets in the bill is again the right approach and the best way of achieving those ambitions, as WWF and others have argued. I look forward to working with the committee and the minister and his officials to make the necessary improvements at stage 2.

I confirm, once again, that Scottish Liberal Democrats will be happy to vote in support of the bill at decision time this evening.

The Deputy Presiding Officer

We come to the open debate.

16:37  

John Mason (Glasgow Shettleston) (SNP)

We face a number of challenges around heat. They include the need to decarbonise heat and the fuel poverty that many of our constituents face. Heat networks, and in particular district heating systems, definitely have a big part to play in tackling those challenges. I say in passing that I hope that we continue working on hydrogen as an option, using the existing gas pipework if possible. I find it tremendously exciting to hear about the H100 pilot project in Fife, although I accept that a lot of the technology on hydrogen is still at a relatively early stage of development.

I have been a member of the Economy, Energy and Fair Work Committee and its predecessors on and off since 2011. I was hugely impressed when, some time ago, we visited the University of St Andrews district heating system, which has its heat production facility at Guardbridge, some 4.6 miles away from most of the university buildings. The network is about 10.6km in length. Frankly, I had not realised that hot water could be transferred so far with such little loss in temperature. I suspect that I am not unusual in not fully understanding the systems.

The committee found a bit of a disconnect between the undoubted public support for climate change reduction measures and the lack of awareness of the role of heat. When district heating is mentioned, some of us perhaps think of the sort of hugely inefficient Soviet-era system that Andy Wightman referred to, leaking steam and heat all over the place, with little or no control for the individual household. However, a modern district heating system is completely different.

In its response to paragraph 143 of the committee’s report, the Government refers to a report entitled “Public awareness of and attitudes to low-carbon heating technologies: an evidence review”, the findings of which include the fact that the two main factors that put people off low-carbon heating systems are the expected cost and uncertainty about performance. I guess that that will gradually be overcome as such systems become more common and more people have them or know other people who have them and are benefiting from them.

In my constituency, the Commonwealth games village was an extremely desirable housing development, with a mix of owner-occupied and social rented housing. Of course, it was built to a higher than normal specification and was subsidised, so it was very attractive to prospective residents. I suspect that most of them moved in despite the district heating system rather than because of it. We had various complaints early on, especially about the charging system. At least to start with, the heating charges were set to match traditional heating costs, because the operators did not know what the actual costs, such as the cost of long-term maintenance, would be. I do not think that we have had any complaints about the system recently.

The hope is that heat networks can be one way of reducing fuel costs and therefore fuel poverty, so I welcome the Government’s response to paragraphs 131 and 132 of the committee’s report, which recommended that that aim be made more explicit in the bill.

A related issue is how we will deal with the existing heat networks when the new licensing system comes into play. The committee raised that topic in paragraph 86, and I welcome the Government’s response, which talks about possible exemptions, which could be time limited, the exclusion or modification of licence conditions, and the adaptation of fees.

Andy Wightman was particularly concerned that local authorities and communities should be as involved as possible with district heating. I have a lot of sympathy with that point of view, so I welcome the Government’s commitment to lodge an amendment at stage 2 to enable responsibility for the award of heat network consents to be transferred to local authorities if they wish that to happen.

There is a lot more that could be said—for example, about an obligation to connect and other issues—but I will leave it at that. Like the rest of the committee, I am very happy to support the general principles of the bill.

16:41  

Edward Mountain (Highlands and Islands) (Con)

I refer members to my entry in the register of interests.

It is interesting to take part in the debate as somebody who has not been involved in the committee process on the bill but has read some of the information that has come out. During my professional career as a chartered surveyor, I have witnessed the emergence of heating networks and have seen the practical benefits that they can bring.

As we all know, individual boilers take up significant space in homes and offices. Connecting up to a heating network means that people can remove not only the boiler, but the relevant alarms and the need for annual safety inspections. Overall health and safety can be improved, because the risk of fires and carbon monoxide poisoning is reduced or eliminated.

I believe that it is time for heating networks to be expanded, especially as the early adopters of such schemes have shown real promise. For example, in the Highlands, the Wick district heating scheme has been blazing the trail when it comes to delivering renewable and affordable energy. It is that energy that powers Caithness general hospital, Pulteney distillery, Wick assembly rooms and homes that are owned by Cairn Housing Association, which proves that such schemes are reliable and provide a sustainable source of heat for homes, businesses and our health service.

Although Wick is leading the way, Scotland has been falling behind when it comes to expanding heating networks. I believe that estimates suggest that only 1 per cent of Scotland’s total heat demand is met by heating networks. Scotland has a long way to go when we compare the situation here with that in Denmark, where 63 per cent of households are powered by heating networks, or that in Finland, where such heating accounts for 50 per cent of the total heating market. I truly believe that the Scottish Government has missed a trick in not legislating sooner for heating networks, and I am pleased that its work in the area is now gathering momentum.

The Government promised to create a licensing body for heating networks back in 2013, but such a body has not yet been delivered. If the Government had done so, the industry could have accelerated its expansion, which would have helped to reduce carbon emissions and household bills even more. There has been a seven-year delay. In that time, how much heat has been generated by distilleries in Speyside and squandered by being pumped back into the rivers, thereby increasing river temperatures by two or three degrees?

Paul Wheelhouse

I am grateful to the member for giving way; I will not take much of his time. I very much agree with him about the need for pace. I do not disagree with that at all. I merely highlight that we, the UK Government and indeed colleagues in Northern Ireland have needed to emerge with a framework for consumer protection that works for all parts of the UK. I do not say that to criticise, but I hope that the member appreciates that that is an important part of what we are discussing today.

Edward Mountain

I thank the minister for that, and I agree. Whoever is slowing it down and wherever the slowness is, I will criticise those people, because it is a great scheme, as we have heard this afternoon.

The Economy, Energy and Fair Work Committee’s report identifies that there is no formal role for communities or local authorities in planning and consent for heat networks. I am pleased to hear that the minister has taken steps to change that, because local democracy is an essential part of the planning process and it should never be undermined. Local communities should be involved at all levels.

If we are to reduce emissions and meet Scotland’s climate change targets, we require a mixture of renewable energy solutions, and heating networks have a key role to play. I am delighted that my party and, it appears, all the other parties support the general principles of the bill, which is, I believe, long overdue.

16:46  

Richard Lyle (Uddingston and Bellshill) (SNP)

As ever, I begin by welcoming the opportunity to contribute to this important debate.

Scotland and, by extension, this Scottish Government have a proud record of taking world-leading action to address climate change and tackle fuel poverty, and the Heat Networks (Scotland) Bill paves the way for even greater action on those priorities. In passing the bill, Scotland will be the first country in the United Kingdom to legislate on the development of heat networks in order to help to meet climate change targets and tackle fuel poverty.

The bill will introduce regulation and a licensing system for district and communal heating in order to accelerate the use of heat networks across Scotland. As many members will know, district or communal networks deliver heat from a central source through insulated pipes to local homes and other buildings, and they have the potential to reduce or remove emissions from the heating of buildings and homes across Scotland.

Heat networks are generally more efficient than individual gas boilers. They can be run wholly from renewable sources and they reduce the need for customers to procure and maintain their own boilers. Those are incredibly important elements of the bill. I will shortly outline why the fact that heat networks can be run wholly from renewable sources is particularly important given our global obligations to our climate.

As a member of the Economy, Energy and Fair Work Committee, I am particularly pleased that the committee has recommended that the Parliament agrees to the general principles of the bill, because it can make a difference.

We are facing a global climate emergency and we must reduce the emissions that are associated with heating our homes and businesses if we are to achieve our aim of net-zero emissions by 2040. One of the main challenges is to reduce and ultimately stop the impact from heating our homes and buildings, which is currently where more than half of the energy that we consume as a society goes.

In order to fully deliver on those ambitions, however, we need clarity from the UK Government on the future of the gas grid. In the meantime, Scotland will make full use of our devolved powers, and that will include the development of heat networks where they are appropriate. Heat networks will play a key role in supplying Scotland’s heat in future, and the bill will create the circumstances that are needed to unlock the full potential of the sector and support its growth.

It is welcome that the proposals in the bill were developed based on recommendations from an expert group of industry, consumer group and local government representatives, and that they are in line with the statutory advice that was received from the Committee on Climate Change.

The benefits of heat networks are not only environmental. However, heat networks are often more efficient than individual fossil fuel heating systems, as I mentioned, and they can be run fully from renewables, recovered waste or surplus heat sources. They can allow the heat source to be changed to one that is compatible with Scotland’s world-leading climate change targets without further disruption to the heat users, and they have the capacity to reduce or remove the emissions associated with heating buildings. The Committee on Climate Change has recommended that heat networks should form a part of Scotland’s future heat supply.

Heat networks can save space and remove combustion risk in buildings, and they have been shown to save householders and businesses up to 36 per cent of fuel costs, with consequent benefits for tackling fuel poverty and reducing costs faced by businesses and public bodies.

The Competition and Markets Authority found that costs for 90 per cent of heat network customers were similar to or less than the costs for those who used gas or electricity, and the evidence gathered for the impact assessments suggests that heat networks can result in fuel savings of up to 36 per cent.

The SNP Scottish Government has done much to support the sector in recent years. Between 800 and 1,000 heat networks are estimated to be up and running in Scotland. The bill marks the beginning of a transformational change as we seek to create a supportive market environment for the necessary expansion of our heat networks—an environment that supports the achievement of Scotland’s target to deliver 11 per cent of non-electrical heat demand from renewable sources by 2020, and the Scottish Government’s target that 50 per cent of all energy consumption should come from renewables by 2030.

Ultimately, these actions will contribute to our shared goal of dealing with our global climate emergency and creating the world we all want to see, which is sustainable and fit for our future.

The Deputy Presiding Officer

I have a little time in hand, so I am giving quizzical looks if members go over their four minutes. I am not upset.

16:51  

Daniel Johnson (Edinburgh Southern) (Lab)

Thank you for that reassurance, Presiding Officer. I speak on behalf of all members when I say that we do not like upsetting you at all.

Members: Hear, hear.

Daniel Johnson

I echo Edward Mountain’s comment. As a non-committee member, one can feel a little like an interloper, especially on a subject such as this. I would say, however, that any debate that can take one from the poet Horace to skiing in Siberia is worthy of every member’s consideration.

This area is of interest to me. One of the great privileges of this job is that we get introduced to areas with which we had perhaps not been familiar but which become very important and interesting to us. I am certainly very thankful to David Somervell and Transition Edinburgh who, early on in this parliamentary session, invited me to a briefing that outlined the early progress that the University of Edinburgh had made in developing heat networks.

As members may or may not know, the University of Edinburgh has three combined heat and power pumps across its campus, the first of which was installed in 2000. In basic terms, they have been able to improve the university’s energy efficiency by more than a third, partly through the more efficient use of heat from power generation but also through the reduction of power loss by having power generated immediately next to where it is consumed. That has generated savings in excess of £1.5 million a year for the university.

That is not the only such scheme in or close to my constituency. Slateford Green, which is a housing association development of 60 flats in my constituency that was developed in 2000, had a heat network built as part of it. Tynecastle school, which is just outside my constituency, is heated using waste energy from the Caledonian brewery, which is much in line with the distillery schemes that Edward Mountain alluded to.

Despite the progress that we have had in Scotland and the benefits that have been outlined, heat networks provide only 1 per cent of Scotland’s heating. It is imperative that we do better and that we improve our ability to heat our homes in an energy-efficient way. Quite simply, as Andy Wightman pointed out, Scotland is cold. The fact that CO2 emissions from heating our homes are a quarter of our total emissions, as Claudia Beamish set out, is something that we have to tackle.

The improvements that we gain from efficiencies decline, so we need investment and infrastructure if we are going to remove gas boilers from our homes. In our cities in particular, heat networks can be an incredibly valuable part of that. The bill is therefore welcome. It provides a framework for the construction and running of heat networks, and it is a necessary starting point.

As has already been said, there is concern that the bill is permissive rather than enabling. I was encouraged by the minister setting out the range of other measures that the Scottish Government is seeking to take forward so that the bill is not simply a single shot but is part of a suite of initiatives. However, we need to go further.

If the University of Edinburgh example points to anything, it is that efficiency and carbon neutrality can go hand in hand in addressing fuel poverty. It is clear that, if savings of a third can be passed down to all consumers and communities, that will be advantageous as we seek to tackle fuel poverty.

The committee convener’s contribution was remarkable for a great number of reasons. Not least, I was struck by his conversion to municipal socialism. The example of Denmark and the way in which such schemes work in Scandinavian countries is important. We do not want large corporate investment that does not pass on benefits to our communities. The schemes work best when they are owned and controlled by local communities.

Andy Wightman

I am very glad that Daniel Johnson mentioned that. Does he agree that what we are seeing in countries such as Denmark is an example of municipal enterprise, not socialism?

Daniel Johnson

By the means of our collective endeavour, we achieve more than we do alone. I do not care much if we want to call that municipal socialism or co-operative enterprise; it sounds like a good thing.

I am encouraged by the sentiments from all parties across the chamber that we should build on the bill, build a means of building heat networks so that all communities benefit, tackle climate change and tackle fuel poverty.

16:56  

Willie Coffey (Kilmarnock and Irvine Valley) (SNP)

I think that Daniel Johnson has just condemned Gordon Lindhurst to banishment by describing him as a municipal socialist—but there we go.

I welcome the chance to say a few words in this stage 1 debate on the Heat Networks (Scotland) Bill. Before I say anything about the bill, it is worth saying something about the public perception—or the lack of perception—of what this is really all about. If members talk to constituents about heat networks and why the Parliament is legislating on them, they are unlikely to get a great deal of acknowledgment or even much awareness of what networks are and why we are legislating. Therein lies a problem for all of us as we take the bill forward. The help of all MSPs is needed to start to bring these matters to the attention of our electorate.

We are talking about a system of supplying heat that involves hot water or steam being piped to networks that connect to our houses. It does away with central heating boilers that burn gas to heat our homes, which most of us have. That is it in a nutshell. We have to start a discussion with the public at large about how we and they can go about all of that.

The aims and reasons behind the idea are clear enough. As many members have reminded us, we face a climate emergency and we need to reduce the emissions that are associated with our domestic homes if we are to make good progress towards our target of net zero emissions over the next 20 years.

During the committee’s evidence sessions, we heard that half of Scotland’s entire energy consumption was to create heat, with over 80 per cent of all our houses dependent on gas. We have also heard that about 50 per cent of Denmark’s entire heat demand is met by district and local heat networks. In Scotland, the figure is only about 1 per cent—I think that that is similar to England’s figure. We know that, for a variety of reasons, Denmark started off on its journey much earlier than we were able to. The challenge is formidable, but the prize can be even greater.

The bill is mainly technical, but it has a number of key provisions that are essential to allow us to begin the process. It starts us off on the necessary journey of regulating the heat network sector by creating a licensing system that heat network operators will be bound by. That provides for consumers the essential protection that those operators are fit and proper companies to deliver those services.

The bill also creates a consent system to make sure that local factors and local assets are taken into account before the approval of any new developments, although there was some discussion in the committee about the extent to which the public themselves may be able to give such consent. The bill will also allow us to identify potential heat network zones in which it would be appropriate to establish a heat network. Among a few other provisions, it will also require public sector building owners to assess the potential of their estate to connect to a heat network so that they can begin to make progress in that regard.

One of the issues that came up was who the regulator for the sector should be. The discussion centred around Ofgem, which is a statutory body that was established under UK legislation. It is fair to say that everyone, including the Scottish Government, I believe, was happy for Ofgem to provide those regulatory duties for us, provided that it applies whatever the Scottish ministers determine as appropriate criteria for the sector here in Scotland.

There was also a discussion about licensing, including the regime to be put in place, and who the licensing authority should be. There was a good bit of discussion about whether Ofgem could, or should, occupy both the regulatory and licensing roles, and whether there would be a conflict if it did so. It would be worth while hearing the minister’s further thoughts on those key duties and how we best set up and support those functions.

I will end where I started. In engaging with the public on such important work, local people will want to be involved and not feel that things are being done to them. We need to provide the means by which local people can participate in the whole transition to heat networks and feel that their interests are at its heart. They will want to know more about how existing systems in their homes could be decommissioned, and whether any support will be available to help with that transition. People will also want to know that what we end up with is not only better for the environment but much more efficient and cost effective for their homes and families.

I am happy to support the bill at stage 1.

17:02  

Dean Lockhart (Mid Scotland and Fife) (Con)

It is perhaps fitting that we are having this debate while many parts of Scotland are seeing the first snow of winter.

I was a member of the Economy, Energy and Fair Work Committee when it started gathering evidence on the Heat Networks (Scotland) Bill, but I left the committee before the report was published, although I confirm that there was no connection between those two events. I thank the clerks for all their hard work, not only on the bill but across a wide range of topics over the four years that I was a member of the committee.

As Gordon Lindhurst said, it is a technical bill and my colleague Alexander Burnett demonstrated that, when it comes to the technical details of the bill, he knows his onions. As he said, the bill covers a wide range of policy areas, including fuel poverty, climate change and delegated powers to local authorities. It is those areas that I will briefly touch on today.

The minister gave his commitment that fuel poverty was an “absolute priority” in the development of the bill. However, the evidence of Citizens Advice Scotland was compelling about the limitations of the bill when it comes to addressing fuel poverty. CAS said that the bill

“cannot guarantee lower fuel costs for heat network consumers as it does not have competency over pricing.”

It also said that

“the Bill cannot oblige heat networks to publish their tariffs so that consumers can compare what they are paying in the same way gas and electricity consumers can”

at the moment. It said that

“while heat networks are ... able to provide lower cost heating, ... consumers will not be guaranteed that”

that lower cost will be passed on for their benefit.

To be fair, not all those powers are in the minister’s gift. In his response to the stage 1 report, and in his opening remarks today, he undertook to consider what changes could be made at stage 2 to make the bill more explicit with regard to how heat networks will contribute to reducing fuel poverty. That is all very welcome.

As other members have said, addressing the fuel poverty issue will be an important part of developing the bill and ensuring that it has effective outcomes. Therefore, I encourage the minister to carefully consider the evidence that was given by Citizens Advice Scotland on that matter.

Outside of the bill, I know that the minister is working on other policy measures to address fuel poverty. However, it is now more than three years since we heard an announcement about the publicly owned energy company, which was announced as the primary answer in addressing fuel poverty in Scotland. Again, I know that the minister has been working hard to turn that announcement into a feasible working plan; perhaps in his closing remarks he will provide an update on when in the near future we might see the publicly owned energy company. For the record, and to continue the collegiate nature of the debate, I do not hold the minister himself wholly responsible for the delays in that policy, because I suspect that its announcement was cobbled together by a special adviser in order to grab headlines for the announcement of the programme for government. Perhaps the minister will confirm whether that was the case.

The second area of concern that I want to highlight is the support that local authorities will require in order to implement the legislation. Paragraph 181 of the report rightly states that

“The importance of the role of local authorities ... should not be underestimated”

in delivering targets.

The minister told the committee that he wants to “strike the right balance” between local authorities having the necessary powers and the Government giving them the necessary resources. A significant number of respondents gave feedback in the consultation to suggest that local authorities lacked the necessary resources and the necessary expertise to deliver the proposed targets that were set out for heat networks. In their written evidence to the committee, Glasgow City Council and Highland Council warned that

“Care must be taken not to overload local authorities”

in delivering targets. I will conclude on that point. Local authorities have done a tremendous job in responding to the Covid crisis and I think that we would all encourage the minister to make sure that they have all the necessary additional support, resources and expertise that are required to implement the proposals.

I am happy to support the bill’s general principles at stage 1.

The Deputy Presiding Officer

I call Colin Beattie, to be followed by Bob Doris. [Interruption.] I think that you are on mute, Mr Beattie. While we are waiting for things to be sorted at that end, I call Bob Doris.

17:07  

Bob Doris (Glasgow Maryhill and Springburn) (SNP)

It is just as well that I was paying attention, Presiding Officer.

I am pleased to speak in the debate and to highlight the very real opportunities to boost consumer protection that the licensing of heat networks, which is the central aspect of the bill, may bring.

The minister knows that I have a direct constituency interest in the matter. In November 2019, he visited Maryhill to hear about the issues facing residents of the Wyndford estate in my constituency, which are referenced in paragraph 133 of the committee’s report.

Households in Wyndford receive their heating and hot water through a heat network. Such households have less protection than energy customers; that is clear. My office was contacted by many households who were about to be disconnected or were seeking to get their supply reconnected. In what should have been a flagship scheme, residents had been cut off by SSE due to arrears—which were often disputed, it has to be said—for heating and hot-water charges. There were issues around SSE’s punitive £274 reconnection fee and the high level of the up-front payment—routinely of around 50 per cent of the debt owed—that it required before a household could be reconnected.

In the run-up to Christmas 2018, my office, along with Glasgow North West Citizens Advice Bureau, secured some reconnections by persuading SSE to show flexibility, and I warmly welcomed the actions that SSE took at that time. At the height of the situation, 121 households were disconnected, but the figure dropped to 46.

I very much hope that the licensing regime in the bill, along with the wider UK consumer protection framework that we have heard much about, can drive up the consumer experience, so that the situation in the Wyndford estate is not repeated in future. I want to be clearer about how that can happen and what needs to go in the bill to drive that expectation.

One of the key issues that customers in Wyndford faced was the daily accrual of debt through standing charges, even if they did not use heating or hot water. Low-usage households were particularly impacted. SSE was persuaded to introduce a low-usage, low-income tariff without daily standing charges—it was not ideal, but it was better than what had been in place. The definition of what constituted a vulnerable household was too narrow, and SSE extended the criteria to include households with children under five. I pay tribute to the Wyndford tenants union, which persuaded SSE to increase the threshold for residents seeking to qualify for the low-usage tariff, and which drove further changes to the criteria for access to that tariff.

I am keen to ensure that there is suitable regulation and levers of influence in the bill and the licensing regime so that, for example, reconnection fees are not a barrier to reconnecting constituents to heating and hot water, and that companies’ repayment plans are not unreasonable.

More important, there should not be disconnections in the first place, of course, and there should be a fair and consistent approach to protecting vulnerable groups. Standing charges accrue daily for users of heat networks, and we should remind ourselves that they also pay standing charges for electricity. We must not penalise users more generally and certainly not low-usage, low-income households.

In paragraph 135 of its stage 1 report, the committee wanted clarity about what the bill can do to drive that kind of change—and it is that kind of change that I would be hugely supportive of in the bill. I want to be very clear about how the bill will improve the lot of people on the Wyndford estate in my constituency and across Scotland in relation to existing heat networks, as well as how it will drive more heat networks, which we all want to see.

17:11  

Colin Beattie (Midlothian North and Musselburgh) (SNP)

Tackling our need to decarbonise heating systems must be a major priority for us all. To date, we have been fairly successful in decarbonising our electricity needs through wind farms and other renewable sources, but a comprehensive solution to decarbonising our heating has been more elusive.

We are facing a global climate emergency and we need to think of innovative ways to reduce the emissions that are associated with heating our homes. Heat networks will have a key role to play in supplying Scotland’s homes with heat in the future, and that is why we need to focus on unlocking the potential of the sector and supporting its growth. Heat networks have a huge potential to reduce our carbon emissions and provide a more efficient and environmentally friendly way of heating our homes. I was happy to take part in the Economy, Energy and Fair Work Committee’s evidence taking in this key area.

The subject is very close to my heart, as I have long advocated making better use of our natural resources to provide the energy that is needed to run our heating systems. I give my constituency of Midlothian North and Musselburgh a quick plug. We have an abundance of flooded mine shafts, which creates the opportunity to develop geothermal energy from the water that they contain and to provide my constituency with jobs and relatively cheap heating sources.

I would like to highlight one or two points that arose from the evidence that the committee gathered. First, given the landscape around the opportunity to develop local heat networks, we need to consider carefully the likelihood that a variety of different designs and technologies will arise, depending on the heat source and the mode of extraction. It is vital that all those designs and technologies are capable of talking to one another and integrating at a national level. Although we are talking about “local” heat networks, it is important that they do not operate in isolation.

The committee had concerns about the regulatory framework and we need to consider whether there needs to be a Scottish regulator or whether Ofgem could be modified to take up the task—that issue is still to be resolved.

Companies investing in local heat networks would enjoy a virtual monopoly that might last as long as 20 or even 40 years as they recovered their costs. I emphasise the importance to consumers of a monitoring or price-matching system to ensure value for money and prevent excessive price hikes.

Fuel poverty is a real concern and is likely to feature more prominently, given our current economic situation. Evidence from the BRIA shows that heat networks can lead to fuel savings of up to 36 per cent. There are already many Scottish Government investments in the area, such as the heat networks early adopter challenge fund, and we need to ensure that such funds are utilised to support the transition to achieving net zero emissions by 2040.

I was pleased to hear the minister’s commitment that local councils and communities would be completely involved in the development of heat networks. Given the likely impact on local employment, the environment and energy supplies, there needs to be solid local buy-in for projects to be a success—and I am not talking about the contrived local consultations that have been the norm in some places; we need consultations that actively promote participation.

I foresee difficulties in implementing local heat networks where multiple landowners and stakeholders with conflicting interests are involved. The possibility of compulsion exists, but I am ambivalent about whether that is the best route to take in the interests of the wider community. There is an attraction in resolving issues in that way, but it can also create hostility and problems among local residents, so a form of statutory negotiation—with compulsion as the back-up position—might be the best solution. We might need to consider the all-too-common situation of there being no clear ownership of a necessary piece of land—compulsory wayleaves or purchase are obvious solutions.

Overall, the committee carried out a thorough and comprehensive investigation into local heat networks, which is particularly commendable given the disruptions that have been caused by Covid-19 and its fallout. The Scottish Government has been keen to review all the points that have been raised with it, which will result in effective and workable legislation, enabling Scotland to take the lead in developing the abundance of opportunity that is available.

I am happy to support the bill at stage 1.

17:16  

Lewis Macdonald (North East Scotland) (Lab)

As members have said, the Heat Networks (Scotland) Bill is a welcome and long-awaited development. Today’s debate has shown that there is broad support for its general principles. There is also consensus that the bill will need to be amended substantially if it is to achieve the desired results, and I am glad that the minister has acknowledged that so clearly today.

Local councils already play a number of roles in relation to district heating, whether as investors in networks, customers, landlords of customers or partners with commercial or not-for-profit network operators. The bill gives councils new responsibilities, and it is important to get those right from the start. I am glad that there now appears to be broad agreement that councils should be consenting authorities if they wish to be so. They are also critical to delivering the engagement of the communities that they represent.

The bill rightly promotes carbon reduction and increased energy efficiency, which are key public policy objectives, but currently makes no mention of fuel poverty. Therefore, it is welcome that the Government is intent on embedding the tackling of fuel poverty in parts of the bill. The bill should go beyond merely mentioning fuel poverty and should actively and positively encourage heat networks to be designed expressly to address it.

Evidence to the committee at stage 1 proposed that tackling fuel poverty should be a statutory consideration for local councils in deciding whether and where to designate heat network zones, and I hope that that is one of the areas that the minister is looking at with regard to addressing fuel poverty in the bill.

If we are to achieve a just transition to a low-carbon economy, carbon reduction and increased energy efficiency must go hand-in-hand with fuel poverty reduction. The opportunity that the bill offers to put all those objectives on an equal footing should not be missed.

The bill requires the availability of waste heat and renewable sources of energy to be taken into account, but they are not the only possible options.

If we succeed in putting new heat networks in place, they will undoubtedly help Scotland to meet the challenge of climate change but, first, we need to get the networks built. Once they are there, in the ground and in people’s homes, the source of energy and the technology employed can be changed at source without disruption to the end user, unlike more conventional technologies, such as gas central heating.

In the north-east of Scotland and elsewhere, a huge amount of investment is already being made in hydrogen, in the hope that it can replace hydrocarbons in the existing gas grid. Hydrogen might be a key fuel for future heating networks, too, although it is not there yet.

The bill must not get in the way of that, or of any other switch in fuels in future, by overspecifying what types of sources should be taken into account in designating and developing heat network zones in the short term.

The economics of network development also require a degree of certainty before the pipework is put in place and the investment is made. If a network is built up to the perimeter of a potential anchor-load building, there is currently no obligation on the operator of that building to connect, even if it is in a designated heat network zone. That lack of obligation potentially creates a high level of risk for the network operator. As Michael King of Aberdeen Heat & Power told the committee, there should at least be an obligation on owners of anchor-load buildings to explain their reasons if they choose not to connect. Such a statutory obligation would certainly concentrate the mind.

Finally, the bill can and should address the issue of community engagement. Currently, network customers rely on the efficiency and prudence of their network operator. If networks are built as purely commercial undertakings—as envisaged by the bill—there is an obvious risk that the interests of the operators and those of the customers could diverge over time.

As Ombudsman Services suggested, and as Claudia Beamish and Liam McArthur mentioned, better accountability of operators to customers is an alternative approach that could be achieved through requiring the provision of consumer advice, as opposed to consumer protection, and could make such provision a licence condition for new network operators.

I have followed the fortunes of Aberdeen Heat & Power since it was set up as a not-for-profit company in 2002, with a mission to reduce fuel poverty and cut carbon emissions. It supplies over 3,000 tenants in 50 high-rise blocks, and many public buildings besides, making AHP the largest operator of its kind, not just in Scotland, but anywhere in the UK. Clarity about the impact of the bill on existing networks is therefore important. The bill will allow other parts of Scotland to follow that lead, and so it is to be welcomed. The bill can be improved, and Labour looks forward to that being done as it proceeds through Parliament.

17:21  

Graham Simpson (Central Scotland) (Con)

I am glad that I turned up today, because the debate has been very interesting. On the face of it, that might not have been expected, but there have been some very interesting speeches and I thank everyone who has taken part. We started with Gordon Lindhurst gushing like mad about the minister—we will have to have words with Mr Lindhurst about that. We discovered that Mr Lindhurst has a new role as a municipal socialist. I suggest that, for his next holiday, Mr Lindhurst could go with Andy Wightman to Russia—I am sure that the two comrades would make a very happy couple.

Daniel Johnson

Is the member proposing to send his colleague to the gulag? It sounds rather like it.

Graham Simpson

It has often been suggested. [Laughter.]

Gordon Lindhurst

The assumption is that we are not in a gulag already.

Graham Simpson

Let us get serious now. I was struck by Alexander Burnett’s speech. It is good to hear from someone who has hands-on experience of heat networks and I hope that the minister listens to him. The minister should consider Mr Burnett a critical friend—he was genuinely trying to be positive.

The bill was introduced on 2 March and provides for a regulatory and licensing system for district and communal heating, to accelerate its use in Scotland. That would be a good thing. We can easily see how there might be issues for consumers if there were no regulatory back-up. The bill is an inherently good idea, but, as Citizens Advice Scotland has said, it is limited in what it can do. There are currently very limited consumer protections in place for heat network consumers. Consumer protection powers are reserved to the UK Government. The Scottish Government therefore cannot legislate for those, although it can introduce a licensing system.

I have thought about the issue a lot in regard to buyers of newly built homes. They, too, have few protections if things go wrong. People need to be protected, so it is encouraging that the UK Government is considering a framework for consumer protection in that area. It needs to get on with it. Once someone has signed up to a heat network, they could be tied to a provider for a long time; essentially they are off grid and unable to switch supplier if the price gets too high or they are not happy with the service. Claudia Beamish mentioned that issue.

What does the bill do? As we have heard, it is a pretty hefty bill. There are seven parts to it, and I will go through them quickly, because no one has yet done so. Part 1 provides key definitions, sets out a requirement for a heat networks licence and makes it an offence to supply thermal energy through a heat network without a relevant licence; part 2 establishes the heat network consent process for specific projects; part 3 places a duty on councils to consider undertaking the designation of heat network zones; part 4 builds on the designation of heat network zones by allowing ministers to award a heat network zone permit; part 5 places a duty on public sector building owners to assess the viability of connecting their building to a heat network; part 6 provides heat network licence holders with various special rights and powers; and part 7 requires that ministers identify the key assets of each heat network consent application that they receive. Heat networks have the potential to play a significant role in the green recovery and the just transition.

As I said at the start of my speech, there were a number of really good contributions from members. I slightly joked about Mr Wightman’s visit to the Soviet Union, but he saw at first hand the heat networks there, and he rightly spoke about fuel poverty. Liam McArthur mentioned the pioneering work that is being done in Orkney and the islands. John Mason mentioned his constituency experience in relation to the Commonwealth village.

Edward Mountain talked about the benefits of not having a boiler; that was also mentioned by Richard Lyle. Daniel Johnson, who is always interesting to listen to, talked about the heat networks at the University of Edinburgh and elsewhere in the city. Bob Doris—thankfully, minus his moustache—talked about the problems that his constituents had when they got disconnected from a heat network, which is clearly a potential issue.

The committee raised a number of questions with the minister, to which the minister responded positively. There will be a lot of work at stage 2, and I will be on the committee that will deal with that. There is work to be done, but we welcome the general principles of the bill. I look forward to dealing with the bill, in conjunction with other members and the minister, at stage 2.

17:27  

Paul Wheelhouse

I thank all members for their contributions to today’s debate. I particularly thank Gordon Lindhurst for probably ending my career by giving me so much praise in the early part of his speech.

I will use my closing remarks to respond to a number of the points that were made today, as well as to set out our intended approach to the remaining stages of the bill, and beyond, should the Parliament agree to its general principles, which I am grateful to say looks likely.

First, I will briefly recap on the need for the bill. I appreciate that there are challenges in delivering the bill. We are addressing a number of issues collectively and constructively with members across the chamber. We should not forget that the Parliament is taking on quite a task. This is a complex area. We all agree—including Mr Burnett, who is delivering heat networks—that the bill is badly needed. We are the first country in the UK to take such a bill through the parliamentary process. That is not to say that other Administrations across the UK are not looking at the issue—they are—but we are, in some ways, trialling the legislation, and I hope that some of the measures that we take will benefit others thereafter.

As we have heard, the bill represents a chance to unlock and enhance the latent potential of the heat networks sector in Scotland. I repeat Richard Lyle’s point that we have had fantastic input from the expert working group and stakeholders in shaping the bill. The input has not purely come from me, as someone who does not benefit from a heat network and has not built one; we have benefited from those who benefit from heat networks and those who have built them. We have taken on board the lived experience of people in the sector.

It is absolutely necessary that we pass the bill. As we have heard, only about 1.5 per cent of properties in Scotland are connected to a heat network, although there are some tremendous examples of such networks around Scotland, as we heard from Daniel Johnson, John Mason and Lewis Macdonald. My colleague Kevin Stewart is very familiar with Aberdeen Heat & Power and has previously filled me in on its work.

I was struck particularly by the networks around the University of Edinburgh that Daniel Johnson mentioned. We are not just talking about domestic projects; that project is benefiting a major institution in Scotland’s capital and it is great to hear about the savings that have been made for the university that mean money going into education for the public’s benefit.

All the Administrations across the UK would agree that we have to do better, and the bill is essential in providing the framework to do that. We know that renewable and low carbon heat networks are one of the technologies that we will need to install in order to remove the emissions that are caused by heating in our buildings. Willie Coffey rightly cited the figure that more than half of the energy that we consume is required to provide heat. We know that we will need to focus particularly on those systems during the remainder of the decade if we are to contribute to the interim targets set in the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019.

Denmark’s experience was cited by a number of members, including Andy Wightman and Willie Coffey. The trigger for its massive expansion of heat networks was the energy crisis during the early part of the 1970s. We are not facing an energy crisis, but we are facing a climate crisis and I hope that the need to act quickly will help us to power forward and develop networks at pace. I need to be honest with the Parliament and say that it will be challenging to achieve the level of coverage that Denmark has, and there are a number of geographic and demographic reasons for that, but I think that we can outperform the 17 per cent upper end of the range that is being cited, although it will require concerted action from all parties.

I am pleased to note the broad agreement that we have heard in today’s debate about the role of heat networks and the role that this bill, in particular, can play. As I say, the bill could be an example of an area over which our Parliament can come together as a collective in support of a shared objective, and do a good job in doing so.

In that spirit, I welcome the Economy, Energy and Fair Work Committee’s helpful stage 1 report. We have genuinely endeavoured to take on its recommendations, including through making commitments to amend the bill. I am pleased that that has been welcomed by members in the chamber today.

I trust that the changes that I outlined at the beginning of the debate in our response to the report will also be welcomed by stakeholders. As I said in my opening statement, I want the bill to be one that we can all be proud of, and I genuinely mean that. I am therefore happy to take any opportunity to co-operate with members and listen to any constructive suggestions that they might have to strengthen the bill, to benefit from the experience of those who have developed and delivered heat networks, and to hear from members who are concerned about fuel poverty, local engagement, community awareness and other matters that have been raised today.

I have listened closely to the issues that have been raised today and I will try to respond to a few of them in the time that I have available to me. One of the main issues that was raised in the chamber today was about community involvement in decision making. Colin Beattie, John Mason, Liam McArthur, Andy Wightman, Edward Mountain, Claudia Beamish, Dean Lockhart, and Lewis Macdonald all mentioned that—I apologise if I have missed anyone off that list. It is one of the most important issues that was raised today and, under the bill as introduced, local authorities will be able to designate heat network zones within their local areas, a measure which one witness described in their written evidence as the biggest enabling feature within the bill.

I also note the committee’s desire for the balance of powers between the Scottish ministers and local government to be modified over time, and we intend to do that. I should state that our starting point for developing the bill was largely influenced by the situation in Norway, which is a more centralised model, but we are listening to the aspirations of the Parliament and we are reflecting that in our approach. The points raised in the debate re-emphasise the importance of that issue, and, as I set out in my opening statement, we intend to amend the bill at stage 2 in response.

Alongside that, we have committed to lodging an amendment that will require developers to submit evidence of real engagement alongside the heat network consent application, and provide powers for the Scottish ministers to issue guidance on effective community engagement. I hope that members can see my commitment to further strengthening local involvement in decision making within the regulatory system.

Many members have mentioned fuel poverty today, and I recognise that it is a very important issue. I reassure members that, although the bill as introduced does not specifically mention fuel poverty, it is our intention that the heat network developments should be deployed to eradicate fuel poverty in Scotland where possible. In that respect, the not-for-profit model was discussed by Andy Wightman, and Daniel Johnson and Dean Lockhart asked about a public energy company. We continue to work on that and some of the issues that have been talked about in today’s debate are very much the issues that we are now trying to take on board. We are looking at changing the utilities market, rather than preparing a company to deliver today’s utility market, and we are looking at heat as a service. There could be a role for a public energy company also to provide heat networks. I give the commitment that we are still working on the issue and taking it seriously. I will happily engage further with members on that matter as time goes on.

We will also be happy to provide details of the work that we are doing with the Scottish fuel poverty advisory panel in developing the relevant amendments on tackling fuel poverty that we wish to include in the bill. Prior to stage 2, we will engage with members who have a strong interest in that.

Presiding Officer, how much time do I have left?

The Deputy Presiding Officer

How much are you asking for?

Paul Wheelhouse

As much as I can get.

The Deputy Presiding Officer

I will give you a minute.

Paul Wheelhouse

In that case I will not be able to respond to some of the points that have been raised.

I will come back on the real rights issue, which was raised by Gordon Lindhurst. We are taking steps to amend the bill to address that. We must ensure that our approach is not disproportionate and that it does not act as a cost deterrent to projects. We are working with Registers of Scotland to ensure that licence holders would be required to make information about wayleave rights publicly available. We commit to a consultation on how that requirement will be implemented so that we hear the views of all the parties that are interested in that complex area.

I hope that these and my earlier comments will give the Parliament confidence that we are listening to stakeholders and members as we consider the provisions of the bill. We will plan secondary legislation. We do not intend to pre-empt the parliamentary process, but we have begun initial work to inform the development of regulations so that we can put the new regulatory system in place as quickly as possible and so that we can support the deployment of investment in the sector, should the bill be passed. Our response to the stage 1 report gives more detail about that work.

I hope that my remarks are helpful to members. I will try to communicate more with members about the issues that have been raised today. I repeat my commitment to meet interested members ahead of stage 2 to allow further opportunities to discuss the provisions of the bill and, in considering their support for the general principles of the bill, I ask members to bear that commitment in mind.

The bill seeks to address two crucial issues: climate change and fuel poverty. I thank members for their generous remarks today and for their supportive contributions to the debate. I hope that all members feel that they can get behind the bill and that they will vote in favour of the motion. I invite members to support me in agreeing to the principles of the Heat Networks (Scotland) Bill so that we can move to detailed consideration at stage 2.

The Deputy Presiding Officer

That concludes the stage 1 debate on the Heat Networks (Scotland) Bill.