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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.

Strategy development

Purpose

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 & consult with relevant internal & external stakeholders. Identify & 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.

Skills & Support

Internal: representation from multiple LA departments: housing, property, sustainability, economic development, finance, legal; GIS skills required for heat mapping. External: RES/HNP support for LA strategy development; some LAs use consultants for stakeholder engagement or heat map analysis.

Guidance, tools & templates

Scotland Heat Map

SE Energy Masterplanning Guide

District Heating Opportunitiy Assessment Tool

HNP District Heating Strategy Template

Home Analytics

SiCEDS

Timing

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 & prioritised? Will proposed projects be cost effective – & over what timescale?

Feasibility study

Purpose

The strategy identifies & prioritises areas worthy of further investigation. The next step is to carry out an options appraisal & detailed feasibility studies. This will assess specific opportunities in detail to establish their technical feasibility & financial viability.

Key activities

Stakeholder engagement. Assess current & future heating loads / profiles, & potential heat sources. Consider location for energy centre, storage & network routes. Conduct technical options appraisal & assess financial viability. Consider delivery models, & identify benefits/risks for each.

Skills & support

The feasibility study will be carried out by specialist advisers (consultant engineers), & should be overseen by the authority’s multi-disciplinary project team. Support for feasibility work can be commissioned by RES (framework of technical consultants) and via LCITP.

Guidance, tools & templates

Technical advisers should carry out the detailed feasibility study in accordance with the authority’s requirements & to the standards set out in the CIBSE Code of Practice for Heat Networks. The Heat Trust can advise on customer protection, membership & on dispute resolution.

Timing

The technical feasibility study typically takes 2-3 months from commissioning, depending on the scope of the study, the number of networks under consideration & 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

Purpose
The feasibility study informs the authority's decision as to whether the project is worth pursuing, i.e. can meet its social, economic & 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 & management perspective, & 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
Requires internal resources (project management, property / housing, energy, finance, legal, procurement), supported by external technical, financial, & legal advisers. SFT can assist with business case development, delivery models, procurement & financing strategies. LCITP can co-fund/commission external advice.
Guidance, tools & templates
Extensive guidance is available, including SFT Guidance (Delivery Structures for Heat Networks; Setting up ESCOs; Legal powers / procurement), HNDU’s Detailed Project Development Guidance, & HM Treasury Green Book. EST advises on the DH Loans Fund.
Timing
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 & 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 & deliverable? Does it represent value-for-money to the local authority & customers?

Contracts & procurement

Purpose

This stage involves preparation for procurement after the OBC is approved; carrying out the tender process; producing the final business case (FBC) &, 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 & financing agreements.

Conduct procurement exercise.

Following procurement, update business case to FBC. Obtain approval to award contracts & to release any LA investment.

Skills & support

As with the previous stage, both internal resources (procurement, legal, technical, finance etc.) & external resources (technical & legal advisers) will be required.

LCITP can commission / co-fund design development to support the procurement / FBC development.

Guidance, tools & templates

Relevant guidance includes the CIBSE Code of Practice for Heat Networks; HNDU Detailed Project Development Guidance & HM Treasury Green Book. The Heat Trust can advise on customer protection standards for domestic & micro business heat supply agreements.

Timing

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 & 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 & value for money? Does the delivery programme align with funder requirements?

Design & construction

Purpose
This stage involves managing the delivery contract(s) with suppliers to schedule, quality & 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) & 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.
Timing
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?

Commissioning

Purpose
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 & that a smooth handover to the network operator is achieved.
Key activities
The commissioning process should ensure that generation plant & network operate efficiently, with return temperatures minimised; that customer demand is met at all times, & metering / billing systems operate effectively. Provision of records, manuals & 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.
Timing
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

Purpose
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 & customer service standards contracted for are met throughout the operational phase.
Key activities
Key activities will include: ensuring health & safety;  ongoing training; customer liaison; achieving cost effective, accurate, reliable heat metering & billing; network reliability & longevity; plant maintenance to achieve good customer service, & minimising heat loss & environmental impact.
Skills & support
The authority will need to deploy experienced resources for contract management & 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 & dispute resolution via the Energy Ombudsman.
Timing
Time scales for the operational phase will be project specific.
The authority should plan for future phases, lifecycle replacement of key plant & equipment, & the re-tendering of operation / maintenance / service level agreements & metering & billing agreements (as appropriate).
Scrutiny questions
Are robust contract management plans in place? Do all customers (including the authority & any householders) understand how to operate the heating controls? Is the network compliant with the Heat Network (Metering & Billing) Regulations, with processes & procedures documented?