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 ZWS (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
- Internal: project management, property / housing, energy, finance, legal, procurement
- 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
- SFT Guidance
- 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
- Internal: procurement, legal, technical, finance etc.
- External: technical & legal advisers.
- LCITP 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 & 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;
- 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
- 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?
