Heat Network Project Journey

District heating schemes are complex systems requiring significant capital outlay. A timeline from initial conception through to operation extends over years rather than months. This section shows a typical project’s development and offers advice to support organisations through each stage.

Strategy development
  • A robust district heating strategy will provide the authority with a logical framework for identifying and prioritising opportunities to develop heat networks.
  • A piecemeal, reactive approach to opportunities is unlikely to realise the wider, strategic benefits.

Key Activities
  • Identify and consult with relevant internal and external stakeholders.
  • Identify and prioritise objectives.
  • Assemble multi-disciplinary team.
  • Carry out heat mapping to identify areas of potential interest, followed by detailed opportunity assessment.
  • Consider authority’s preferred role.
  • Develop Local Heat and Energy Efficiency Strategies (LHEES)
Skills & Support
  • Internal: representation from multiple LA departments: housing, property, sustainability, economic development, finance, legal; GIS skills required for heat mapping.
  • External: LHEES support for LA strategy development; some LAs use consultants for stakeholder engagement or heat map analysis.

Guidance, tools & templates
  • Allow at least 3-6 months for initial strategy development.
  • Consider whether the strategy will be a stand-alone document or part of a wider strategy / plan.
  • Consider need for consultation.
  • Consider approval process/timing.
Scrutiny questions
  • Consider governance arrangements.
  • Which departments should be consulted? Which external stakeholders?
  • Have the authority’s investment criteria been identified and prioritised?
  • Will proposed projects be cost effective – and over what timescale?
Feasibility study
  • The strategy identifies and prioritises areas worthy of further investigation. The next step is to carry out an options appraisal and detailed feasibility studies. This will assess specific opportunities in detail to establish their technical feasibility and financial viability.
Key activities
  • Stakeholder engagement.
  • Assess current and future heating loads / profiles, and potential heat sources.
  • Consider location for energy centre, storage and network routes.
  • Conduct technical options appraisal and assess financial viability.
  • Consider delivery models, and identify benefits/risks for each.
Skills & support
  • The feasibility study will be carried out by specialist advisers (consultant engineers), and should be overseen by the authority’s multi-disciplinary project team.
  • Support for feasibility work can be commissioned by Zero Waste Scotland(framework of technical consultants) and via Scotland's Heat Network Fund (SHNF).
Guidance, tools & templates
  • Technical advisers should carry out the detailed feasibility study in accordance with the authority’s requirements and to the standards set out in the CIBSE Code of Practice for Heat Networks.
  • The Heat Trust can advise on customer protection, membership and on dispute resolution.
  • The technical feasibility study typically takes 2-3 months from commissioning, depending on the scope of the study, the number of networks under consideration and the range of technical options considered.
Scrutiny questions
  • Is the study area well defined?
  • Is energy consumption / cost data available?
  • Is it of sufficient quality?
  • Are key off-takers identified / engaged?
  • Are criteria for carrying out the options appraisal agreed?
  • Are suitable internal resources available to manage the technical consultants?
Business case
  • The feasibility study informs the authority's decision as to whether the project is worth pursuing, i.e. can meet its social, economic and environmental objectives. If so, the next step is to develop an outline business case (OBC) for the project. The OBC must be investment grade.
Key activities
  • Carry out a detailed assessment of the project from a strategic, economic, commercial, financial and management perspective, and in accordance with HM Treasury guidance.
  • The OBC should be capable of attracting investment by the authority or from third parties (as appropriate).
Skills & support
  • Internal: project management, property / housing, energy, finance, legal, procurement
  • External: technical, financial, and legal advisers.
  • SFT can assist with business case development, delivery models, procurement and financing strategies. SHNF can co-fund/commission external advice.
Guidance, tools & templates
  • Development of an OBC, supported by Heads of Terms of Heat Supply Agreements with key customers, can take 3-6 months (longer for more complex projects).
  • Allow time to appoint advisers and obtain approvals, e.g. for any planned authority investment in the project.
Scrutiny questions
  • Does the delivery programme align with funding availability?
  • Is there market appetite for the project?
  • Are stakeholders fully engaged?
  • Has commitment been secured from off-takers / heat suppliers?
  • Is the project clearly affordable and deliverable?
  • Does it represent value-for-money to the local authority and customers?
Contracts & procurement
  • This stage involves preparation for procurement after the OBC is approved; carrying out the tender process; producing the final business case (FBC) and, following its approval, putting in place contract management arrangements prior to signing contracts with suppliers.
Key activities
  • Develop design / output spec.
  • Obtain necessary consents.
  • Develop tender documents.
  • Negotiate heat supply, purchase and financing agreements.
  • Conduct procurement exercise.
  • Following procurement, update business case to FBC.
  • Obtain approval to award contracts and to release any LA investment.
Skills & support
  • Internal: procurement, legal, technical, finance etc.
  • External: technical and legal advisers.
  • SNHF can commission / co-fund design development to support the procurement / FBC development.
Guidance, tools & templates
  • Relevant guidance includes:
    • CIBSE Code of Practice for Heat Networks;
    • HNDU Detailed Project Development Guidance and HM Treasury Green Book.
    • The Heat Trust can advise on customer protection standards for domestic and micro business heat supply agreements.
  • Pre-procurement activities can take around 3-6 months.
  • Depending on the procurement route chosen, the tendering process is likely to take 6-9 months (for a Design and Build contract).
  • A competitive dialogue process or a concession agreement could take 9-12 months to procure.
Scrutiny questions
  • Does the project scope, business model or finance structure need to change following the procurement?
  • Does the FBC demonstrate that the project remains deliverable, affordable and value for money?
  • Does the delivery programme align with funder requirements?
Design & construction
  • This stage involves managing the delivery contract(s) with suppliers to schedule, quality and cost targets. Planning permission will most likely be needed, enabling works carried out, and/or energy efficiency measures installed for any buildings to be connected to the network.
Key activities
  • Following contract award, the authority’s role during the next stage will mainly be contract management.
  • The authority may also need to grant consents (planning, wayleaves) and carry out enabling works, which will need to be coordinated with the contractor(s).
Skills & support
  • The authority will need to deploy experienced contract management staff, with support from a range of internal departments (technical, finance, legal etc.).
  • The authority may also require ad-hoc support from external advisers for contractual issues arising during the construction phase.
Guidance, tools & templates
  • The CIBSE Code of Practice for Heat Networks contains guidance relevant to the construction phase.
  • For energy efficiency measures on authority-owned buildings, the Scottish Government Non-Domestic Energy Efficiency Framework is available.
  • Time scales for the design & construction phase will be project-specific.
Scrutiny questions
  • Has there been an effective handover from the project team?
  • Are effective contract management processes (project management, change control, risk management, financial control, etc.) in place?
  • Is there a clear programme with delivery milestones identified?
  • The authority will normally oversee the contractor’s commissioning of the network in accordance with an agreed Commissioning Plan. The commissioning process should ensure that the network performs to design specifications and that a smooth handover to the network operator is achieved.
Key activities
  • The commissioning process should ensure that
    • generation plant and network operate efficiently, with return temperatures minimised;
    • customer demand is met at all times, and metering / billing systems operate effectively.
    • Provision of records, manuals and training to network operator.
Skills & support
  • The authority will need to deploy experienced contract management resources, including specialist technical / client’s engineer roles.
  • The authority may require support from technical / legal advisers in relation to issues arising during the commissioning phase.
Guidance, tools & templates
  • The CIBSE Code of Practice for Heat Networks contains guidance relevant to the commissioning phase.
  • Time scales for the commissioning phase will be project specific.
Scrutiny questions
  • Has the authority reviewed the contractor’s Commissioning Plan?
  • Does the authority have available appropriate in-house resources to oversee effectively the contractor’s commissioning of the network?
  • Is external resource required?
  • Have retention fees been agreed?
Operation & maintenance
  • Following successful commissioning, responsibility for the network will switch to the network operator. This could be the authority, or a contractor / managing agent. The authority will wish to ensure that the performance and customer service standards contracted for are met throughout the operational phase.
Key activities
  • Ensuring health and safety;
  • Ongoing training; customer liaison;
  • Achieving cost effective, accurate, reliable heat metering and billing;
  • Network reliability and longevity;
  • Plant maintenance to achieve good customer service;
  • Minimising heat loss and environmental impact.
Skills & support
  • The authority will need to deploy experienced resources for contract management and customer liaison (especially householders), with support from internal resources.
  • It may require ad-hoc support from external technical / legal advisers for issues arising during operations.
Guidance, tools & templates
  • The CIBSE Code of Practice for Heat Networks contains guidance relevant to the operational phase.
  • For registered schemes, the Heat Trust provides services relating to customer standards and dispute resolution via the Energy Ombudsman.
  • Time scales for the operational phase will be project specific.
  • The authority should plan for future phases, lifecycle replacement of key plant and equipment, and the re-tendering of operation / maintenance / service level agreements and metering and billing agreements (as appropriate).
Scrutiny questions
  • Are robust contract management plans in place?
  • Do all customers (including the authority and any householders) understand how to operate the heating controls?
  • Is the network compliant with the Heat Network (Metering and Billing) Regulations, with processes & procedures documented?

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