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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.


Without a robust district heating strategy in place, local authorities are at risk of adopting a piecemeal, reactive approach to individual energy supply opportunities. Such an approach will often fail to realise the full environmental and economic benefit of a single integrated system.

A strategy will likely use a heat map to identify potential heat networks. This will lead to a pre-feasibility screening process that ranks the best prospects according to technical and financial parameters as well as the priority drivers set by the commissioning organisation.

Links to:

Scotland Heat Map

District Heating Opportunitiy Assessment Tool

HNP District Heating Strategy Template



The CIBSE Heat Network Code of Practice has now been published. The code seeks to provide clear and measurable outputs which will ensure heat networks operate effectively and meet client and customer expectations. Setting minimum standards is a key step to provide greater confidence for specifiers and clients. A training, accreditation and registration program managed by CIBSE is now in place and it is recommended that practitioners are fully versed in the approaches set out. For heat network feasibility reports the code focuses on:

  • ensuring sufficient accuracy of peak heat demands and annual heat consumption;
  • identifying the most suitable low carbon heat sources and locating an energy centre;
  • determining the location of top-up and stand-by boilers;
  • defining heat network distribution routes, pipe sizes and costs;
  • conducting a consistent economic analysis and technology options appraisal;
  • develop preferred business structures and contract and procurement strategies.


Business model

An economic model for the technology solutions will provide an indication of the comparative economic performance for a number of scenarios. This model should identify costs and revenues for the options and assess economic viability of the proposed solutions using a whole-life costing approach including consideration of:

  • Capital cost of generation plant, energy centre(s), thermal storage, electricity and heat network assets, customer interface units and smart metering;
  • Operation and maintenance costs and planned asset replacement costs during the life of the project;
  • Fuel costs, and wholesale price of heat from external energy sources;
  • Energy sales income based on market competitive energy supply tariffs for each consumer type (options for electricity sales should include as relevant consideration of options for selling power wholesale,netting off and private wire);
  • Support measures such as FiT, RHI, ROCs, and CfDs that could support the business case for the project;
  • The Business as Usual case for each identified customer or groups of customers; and
  • Calculate pay-back-period, IRR and NPV over an appropriate lifetime (for example 25 or 40 year duration)and based on public and private sector hurdle rates to be agreed with the project stakeholders.

The economic model should be capable of testing a number of technology options, and should be capable of taking into account inflation and forecast energy price rises over the life of the scheme. The model should also be capable of presenting a sensitivity analysis around the key variables that influence the project economics.

The commercial assessment of the project should include a discussion of appropriate delivery models (for example ESCo’s) taking into account the results of the techno-economic analysis. Detailed business case modelling and delivery model assessment is generally carried out at the feasibility stage and beyond.

Detailed design

The detailed design should assess the capacity constraints of existing energy infrastructure and the essential network upgrades and new infrastructure that may be required. Network layout options should be taken beyond the strategic stage of the project to a high level options appraisal stage. This should take into account phased development opportunities, the need to safeguard for future capacity and the role of cluster networks. Constraints to development such as recent infrastructure works and areas unsuitable for network routing should be considered as part of this assessment.
An energy model should be developed that simulates the energy generation, distribution network operation and heat and power demands at a suitable time frequency (hourly modelling is generally appropriate) to reflect the potential peaks in demand. The energy model should include appropriate predictions of energy demand and plant replacement over an appropriate lifetime (for example 25 or 40 year duration).
The design should assess the annual energy demand including cumulative, peak and minimum loads. The design should consider the phased expansion of networks to supply expansion/growth areas or other future planned development in the locality. The technical design stage should identify potential locations for energy centres considering existing and planned generation capacity. The design should also identify the role of thermal storage, including for local balancing of electricity and heat grids. This stage should provide concept layouts, pipe lengths, diameters and sizes for the heat network options and identify network routes taking into account potential risks, physical barriers and opportunities for additional connection relating to these routes.
The conclusions of the technical design phase should include a technical assessment of risk and opportunity to identify the main anchor loads that are required or could help to establish the infrastructure proposals.
The study should further discuss the primary energy generation options and identify suitable viable intermediate technology and peak energy supply plant to provide resilience. The report should provide the rationale for selecting the preferred technologies.

Contracts and Procurement

Scottish Futures Trust has developed guidance on various aspects of district heating:

  • Guidance on delivery structures for heat networks
  • Legal guidance on establishing Energy Services Companies
  • Legal guidance on the powers of Scottish public bodies to generate, procure and supply heat and electricity

 Scottish Futures Trust: Guidance on Delivery Structures for Heat Networks

This Guidance provides key information on the most common delivery structures / business models that have been adopted in the UK for heat networks. It is intended as a point of reference for public sector bodies in Scotland wishing to develop district heating projects.

The report identifies the main delivery structures currently used and, through relevant case studies, illustrates their key characteristics, advantages and disadvantages, and the type of projects for which authorities may wish to consider adopting a similar model.

The drivers, economics and approaches to district heating projects vary considerably, and the delivery structure needs to be tailored to reflect the specific circumstances at hand. The Guidance seeks to provide readers with a general understanding of the rationale for choosing a particular delivery structure, based on actual experience from real-life projects, and drawing on practical experience from both within Scotland and elsewhere in the UK. It is intended to be illustrative rather than exhaustive. Links to further information, materials, case studies and guidance are provided within the report.

SFT DH Delivery Structure Report (v1 - 16 Mar 20015)

Scottish Futures Trust: Legal Guidance on establishing Energy Services Companies

This Guidance provides information, from a public sector perspective, on "Energy Services Companies", often known as ESCOs.

Those public bodies most likely to consider establishing ESCOs are local authorities, registered social landlords (housing associations), universities and colleges of further education.  The Guidance has been prepared with these particular public bodies in mind, though it may also be of relevance to some other public bodies.

The Guidance:

  • explains what an ESCO is and addresses various basic questions which are often raised when ESCOs are discussed;
  • considers why a public sector ESCO might be established or used, and addresses a number of practical, business related and legal factors which may be relevant to a decision about whether to establish an ESCO;
  • considers the types of entity which a public body might use for an ESCO, such as limited companies, partnerships and various others, and assesses the suitability of each type for use as an ESCO against a variety of parameters; and
  • discusses governance issues that need to be addressed whenever an ESCO is formed, both from the perspective of governance internal to the ESCO and governance as between the ESCO and the "parent" public body.

The Guidance was commissioned by Scottish Futures Trust and prepared by Brodies LLP.

SFT ESCO report ( v1 - 16 March 2015)

Scottish Futures Trust: Legal Guidance on the Powers of Scottish Public Bodies to Generate, Procure and Supply Heat and Electricity

The Heat Network Partnership has commissioned legal guidance on the powers of Scottish public bodies to generate or procure heat and electricity supplies, to supply heat and electricity to third parties, and the constraints on these powers.

Constraints operate at two levels. Some are legal, such as lack of power or restrictions on the exercise of power.  Others are administrative, for example, inability to carry on a particular activity unless certain consents are obtained, or unless an administrative framework is complied with. For example, the Guidance considers the impact of the public procurement regime, and identifies a number of strategies for managing procurement risk where a public body wishes to take a heat supply from a district heating scheme owned by a third party.

The Guidance also considers relevant ancillary powers for Scottish public bodies. These include powers to borrow, to establish companies, partnerships or joint ventures, and to trade or carry on an activity with a view to making profit. The public bodies which are considered are local authorities, universities, colleges of further education, NHS boards, central government and its agencies (and the Scottish Court Service), registered social landlords and Scottish Water. There is also commentary in the Guidance on "over-sizing" of energy-generating plant or the related network in order to accommodate anticipated expansion.

The Guidance was commissioned by Scottish Futures Trust and prepared by Brodies LLP. If you have specific enquiries about this guidance please CONTACT.

DH Legal Powers report - v2 (Nov 14).pdf

DH legal guidance - Appendix 1 (local authorities)

DH legal guidance - Appendix 2 (universities).pdf

DH legal guidance - Appendix 3 (colleges)

DH legal guidance - Appendix 4 (NHS Boards)

DH legal guidance - Appendix 5 (Central government)

DH legal guidance - Appendix 6 (RSLs)

DH legal guidance - Appendix 7 (Scottish Water)

DH legal guidance - Appendix 8 (Procurement)


Construction & Commissioning

Retrofit heat network construction works typically take place in busy areas and often involve working in close proximity to the public, with a level of disruption to traffic and pedestrians inevitable in many cases. Managing construction activity safely and giving due consideration to other stakeholders when planning construction work are therefore two key areas where efforts should be focused. Permitting requirements apply when working on public roads (New Roads and Street Works Act (1991) Section 50). The opportunity to coordinate activity with other services installation work should be considered at the appropriate stage of planning.

Heat networks are long-term infrastructure projects. With much of the installed equipment being buried pipework that is difficult and expensive to access, diligent installation and commissioning is of critical importance to the whole-life economics of the project. The focus during construction and commissioning should be on quality and on getting it right first time.

The CIBSE Code of Practice for Heat Networks (CP1) offers high-level guidance on the construction and installation of heat networks, including a set of objectives for the main activities during these phases. For construction, the document focuses on:

  • The safe installation of heat networks e.g. through appropriate traffic and pedestrian management and control of working areas.
  • Quality control during installation e.g. reference to the appropriate European Standards for jointing and installation of insulated steel pipework.
  • Quality control during Heat Interface Unit (HIU) and building connection installation e.g. the correct installation of flow meters.
  • Ensuring the appropriate environmental management systems are in place e.g. for the storage and recycling of construction waste.

CP1 also offers guidance on the key aspects of commissioning heat networks. The focus is placed on achieving low return temperatures, ensuring the system meets customer demand requirements, customer engagement regarding correct system operation, central plant commissioning and handover to the operator.

Common Issues – a few of the more common problems that occur during heat network construction and commissioning include: poor quality pipework welding and installation leading to downtime and expensive repair work; open bypasses leading to higher network return temperatures; missing insulation, particularly on terminal runs from laterals into flats resulting in higher network losses, overheating of corridors and loss of revenue; poor HIU commissioning leading to control problems and higher return temperatures.

Operation & Maintenance

The quality of the work carried out during the design and construction phases will impact heavily on the operability of a district heating network. Even with a smooth history however, there is always scope for refinement during the operational phase of a project to reflect working reality rather than network design parameters. Fine tuning to achieve greater operational efficiency should be a constant pursuit for the network operator.

Again, the CIBSE Code of Practice for Heat Networks (CP1) is an excellent resource offering high-level guidance in key areas. For the live stage of the project, the CP1 objectives cover the following areas:

  • Operational health and safety e.g. the operator should be ISO 18001 accredited.
  • Achieving effective heat metering, pre-payment and billing systems.
  • Network reliability and longevity e.g. guidance on water treatment regimen.
  • Maintenance of central plant, including monitoring and reporting.
  • Maintenance of building connections, including the importance of maintaining building heating systems to efficient network operation.
  • Environmental management systems e.g. the operator should be ISO 14001 accredited.

Common Issues – follow the link below for an article discussing common operational problems with heat networks and the work being done to remedy these – http://www.cibsejournal.com/technical/on-a-mission-using-data-to-optimise-heat-networks/


The CIBSE Heat Network Code of Practice recommends that an annual report is produced to confirm that the heat network is performing as expected. As part of this the operator should have a meter checking and servicing plan in place and there should be records to confirm this is active.

As water quality is crucial to ensuring the life and performance of a heat network an operator should have a robust water treatment programme and again records should be available to confirm this is active.

Operators should also carry out individual building connections servicing with records kept for reference.

Periodic inspection reports should be available and referenced to allow network performance to be continually improved.

Broadly, operational standards should be in line with those recommended by CIBSE Guide M: Maintenance engineering and management available here.