The District Heating 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 & 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
  • 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
  • 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.
  • 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
  • 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
  • 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
  • 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.
  • 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
  • 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.
  • 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 & 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.
  • 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 & 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.
  • 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?

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