Councils need to play a pivotal role in effective energy system planning and operation at the sub national level. Councils, as planning authorities, shape place through the Local Plan making process and through location specific Masterplans.
Summary
Councils want to work as partners with central government on climate action. Councils are well-placed to do this as place-shapers, convenors of communities and partners, delivery agents, commissioners, and owners of assets. Net zero can only be achieved with decarbonisation happening in every place across the country and this requires local leadership.
Councils need to play a pivotal role in effective energy system planning and operation at the sub national level. Councils, as planning authorities, shape place through the Local Plan making process and through location specific Masterplans. Through these processes, growth areas are identified, and areas of land are designated for uses. These plan making processes shape future land use and with that comes future energy demand.
Increasingly councils are looking to play their role in supporting decision-making around the local energy system. For instance, many councils are now looking to develop Local Area Energy Plans but are also considering other ways to best shape place given the likely largescale shift to the electrification of buildings and transport. Councils, as community leaders, can be a positive and influential partner when taking this agenda forward.
The role of Heat Network Zone Coordinator ideally sits with councils however the resources and support to effectively deliver the roles need to be provided to them. The roles and responsibilities of the zone coordinators are expansive. Identifying and designating zones, tendering large infrastructure contracts, and monitoring and enforcing zone requirements. Councils are best placed to deliver locally, but they need to be fully resourced and properly supported to do so.
Some of the larger councils and combined authorities will have some staff resources capable of delivering the roles of the Zone Coordinator. For others it will require creating entirely new teams. Adequately resourcing councils to undertake the role of Zone Coordinator, and therefore attracting a skilled workforce, is going to be the key factor determining whether heat networks deliver governments ambition to provide up to 20% of the UK’s low carbon space heating. Advice, guidance and allowing time and space for peer-to-peer learning will be important, and providing tools to help standardise some of the reporting requirements would increase resource efficiency.
Community engagement is going to be key to the success of this ambition. There will likely be a considerable amount of local disruption and to keep the public onside, community engagement is going to be integral. Councils are best placed to undertake this role, but the resources required to do this need to be factored in to the final decision on resourcing.
Answers to consultation questions
Proposed roles and responsibilities of the Heat Network Zoning Authority
The roles and responsibilities of the Central Authority set out in the consultation document look to be comprehensive, however when the zone coordinator is the local authority, in practice the responsibilities should be executed using more of a partnership approach. Central and local government need to work more closely together in partnership rather than contractually.
Scrutinising, Intervening to direct, and Monitoring the performance, can all be avoided or at least minimised through a supportive, partnership approach to delivery.
There are some very good examples of local and national government working together through the Heat Network Delivery Unit for which the LGA received very positive feedback on from our members. Replicating the working relationships developed through the work programmes of that unit has the potential to accelerate the implementation of Heat Network Zoning and its deployment.
It makes sense to house the Central Authority in DESNZ to start with given the knowledge and experience of heat networks in the department, however this programme of work will succeed or fail on the adequacy of funding made available to it.
Treasury must be convinced that heat networks are a low cost, no regrets net zero heating solution and agree that the invest-to-save model it presents is worthy of the investment.
The roles and responsibilities of the zone coordinators are expansive. Identifying and designating zones, tendering large infrastructure contracts to monitoring and enforcing zone requirements. Councils are best placed to deliver locally, but they need to be fully resourced to do so.
Some of the larger councils and combined authorities will have staff resources capable of delivering the roles of the Zone Coordinator. For others it will require recruitment process. Adequately resourcing councils to undertake the role of Zone Coordinator, and therefore attracting a skilled workforce, is going to be the key factor determining whether heat networks deliver governments ambition to provide up to 20% of the UK’s low carbon space heating.
Advice, guidance and allowing time and space for peer-to-peer learning will be important and providing tools to help standardise some of the reporting requirements would increase resource efficiency.
Community engagement is going to be key to the success of this ambition. There will likely be a considerable amount of local disruption and to keep the public onside, community engagement is going to be integral. Councils are best placed to undertake this role, but the resources required to do this need to be factored into the final decision on resourcing.
The Impact Assessment (IA) that accompanies the consultation sets out an assumption that each zone, coordinated by a council, will require on average, 5 FTE. Given the expansive and varied roles and responsibilities the Zone Coordinators need to undertake, we consider this figure to be on the low side. We also consider, if the average is correct at 5 FTE, that the annual sum of £200,000 per zone per annum is also on the low side when you factor in on-costs and regional variations in cost of living.
The IA also suggests that the roll-out of heat network zones nationally will result in a significant increase in the number of new jobs, up to 9000 direct in-year jobs by 2050. This will require investment in recruitment, training and skills development, driving up competition across councils to attract and retain staff, likely resulting in elevated salaries.
Designation of a Zone Coordinator
The suggested approach for designating Zone Coordinators seems mostly agreeable. More detail on the coordination oversight role to be undertaken by the Central Authority would be useful as there may be more efficient, cost-effective approaches using peer to peer learning that the LGA could facilitate.
The ambition that local government could bring through projects that are not part of the national pipeline and that resources will be made available through a route like the Heat Networks Delivery Unit (HNDU) is especially welcomed. Feedback from our members identified the highest levels of satisfaction between local and central government partnership being work with HNDU.
Regarding the proposed Zone Coordinator Fitness to Operate Assessment Criteria, each of the criteria look appropriate however the description of the Finance criteria says, ‘Review that it has appropriate plans for resourcing the role.’ As set out above, if councils are undertaking the role of Zone Coordinator, the resources to undertake the role will need to be made available from Government and therefore the assessment criteria description is circular.
Zone Coordinator structure
The LGA agrees with the Zone Coordinator governance arrangements and strongly supports the requirement for Local, democratic accountability and the quarterly reporting to councillors. Where the Zone Coordinator is the council, the activities of the zone coordination team would likely sit in a council portfolio anyway, but in the instance where another body is undertaking that role, a legal requirement for Local Democratic accountability is welcomed.
Where a heat network zone crosses local authority boundaries and where one authority is undertaking the role of zone coordinator on behalf of two or more authorities the quarterly reporting to local councillors should be to the councillors representing the wards the heat networks are providing heat for, and the portfolio holders with a direct interest (Climate, Housing, Place, etc).
The LGA agrees with the principle that the heat network developers and operators should in the longer term meet the cost of the Zone Coordinators. This transition must be managed centrally however to ensure that councils fully receive the cost of the activity.
Councils are facing severe financial pressures and are not able to take on this new role if it isn’t being fully funded. We agree that developers and operators should not provide funding for compliance and enforcement functions to avoid conflicts of interest, but that cost should not be covered by the council, but rather Ofgem, as the energy regulator.
Buildings in scope of the requirement to connect.
Ensuring all appropriate buildings within a designated heat zone area are heat network ready is fundamental for the achievement of the policy objective whether they connect immediately or in due course. When designating zones for heat networks it is important that consideration is taken as to the land use requirements of the site to ensure heat networks are appropriate. Heat network zones should not be allocated solely on their proximity to low carbon and waste heat sources.
Existing buildings on communal heating systems, in scope of the requirement to connect should be required to connect at the earliest opportunity. Most domestic heating will be moving from fossil-based heating systems such as natural gas boilers etc through strong market forces, such as banning the sale of new gas boilers from 2035, and similar strong market signals are required to transition communal heating systems to more sustainable district heating systems.
For multi-unit residential buildings that have undergone significant refurbishment, decisions on whether they should connect to a heat network, or use a different low carbon heat source, should be taken on a case-by-case basis. Residential heating needs to be reliable, adequate, and affordable, and making arbitrary decisions risks households having ineffective heating systems potentially exacerbating fuel poverty, risking health, and tarnishing the reputation of heat networks.
Activation of the requirement for existing buildings
The proposed mechanism for activating the requirement to connect seems sensible, however where possible flexibility should be enabled through dialogue. Connecting existing buildings, aligning tenants, freeholders, leaseholders is not to be underestimated and therefore an inflexible rigid system is not likely to achieve the desired effect.
The use of buffer periods is a sensible approach to take but it needs to be well managed to ensure the intent is legitimate. Third party mediators could be a viable option, enabling an interest free perspective to ensure that each party is working towards the same goal in a fair and timely manner.
Activation of the requirement for existing buildings
The Zone Coordinator should be responsible for heat source investigation and heat source report preparation. Heat networks are a heat delivery mechanism and the heat they deliver may or may not be zero carbon. Many councils have set carbon emission reduction target for their own activities but often for the local authority boundary. Identifying and facilitating low carbon heat sources is in the councils interest.
Heat network developers should include heat source plans in their Zone Development Plans and where they deviate from the Zone Coordinators heat source report, that deviation should be justified in carbon terms as well as cost terms. Where the Heat Zone Developers proposed heat source does not equal or improve on the zone coordinators heat source in carbon reduction terms, it should be discarded.
Owners of heat sources should have the right to appeal a decision requiring them to connect to a heat source, but clear guidance setting out what constitutes a successful appeal should be developed from the outset.
Categories of heat sources
The requirement to connect should prioritise high temperature heat sources, and low temperature heat sources should be required to give access. There are likely to be fewer high temperature heat sources than low temperature heat sources so investigating high temperature heat sources should not be at the expense of investigating low temperature heat sources.
The general approach to determining whether a heat source should be required to connect sounds sensible.
Consumer protection is paramount when introducing heat zones and a requirement to connect. Market competition and consumer choice is going to be considerably less than the status quo and therefore all necessary measures to protect the consumer must be taken.
Transparency on pricing should be a minimum requirement and standardised templates setting out how prices should be presented should be the starting position. Allowing zone coordinators to set pricing conditions that developers need to follow is key to ensuring fairness and transparency is guaranteed for the consumer.
Carbon emissions requirements of heat networks in zones
Option 1, the lowest of the three proposed emissions limits, should be set as the initial limit in 2030. There is a risk that the more relaxed limits of Option 2 and 3 send the wrong message and set a precedent that district heating doesn’t need to be low carbon. Setting emissions limits from 2030 should give adequate time for heat networks to adapt as many large-scale heat networks have been looking for these opportunities to decarbonise for a long time.
Zone identification and refinement
The zone refinement stage should allow the zone coordinator to make more general refinements. Councils as local plan makers, master planners and housing allocators should be allowed the opportunity to apply local growth knowledge during the refinement stage. Knowledge about expected or predicted growth may be a consideration for future network expansion that needs to be considered from the outset.
The size of a potential heat network zone should be left to a combination of Zone Coordinator knowledge and market forces. Arbitrary minimum and maximum sizes only has the potential to limit opportunity. The heat demand for an area coupled with the number of heat sources available and the CO2e emissions limits should be sufficient to ensure the size of a network is optimal. This includes the aggregation of smaller networks.
Reviewing the zoning methodology every five years sounds sensible. The review should include in depth engagement with the zone coordinators and the heat zone developers to ensure it considers what has worked well and less well over those five years. The review should include consumer engagement to ensure the offer is working for the heat user, not just the coordinator and the developer. It also needs to consider technological advancements and look forward to considering what changes are likely to happen in the next five years. Any changes to the zoning methodology should not apply retrospectively unless all parties agree.
Zone designation
21 days seems short for consultation if sufficient steps are to be taken to flag to interested parties. Community engagement is going to be key to the success of this ambition. There will likely be a considerable amount of local disruption and to keep the public onside, community engagement is going to be integral. Meaningful community engagement takes time and needs to be considered carefully. Failing to convince the community that the result warrants the level of disruption they may experience can lead to community opposition that could cause significant delay to a project.
The consultation should be posted on the Zoning digital service and the local authority or Zone Coordinator website. Communication channels such as X should be used to direct potentially interested parties to the consultation page. The Tier 1 and tier 2 consultees and the proposal look about right but would suggest the inclusion of the local fire service.
Zone delivery
A competed process should be used to confer special and potentially exclusive rights to zone developers.
We consider a hybrid option of options 2 and 3 would be optimal. The zone coordinator and the zone developer should work together on the local refinement with techno-economic cash flow modelling and building owner and heat source engagement. Exactly who leads can be agreed on a case-by-case basis, but we expect councils will have a keen interest in engaging with the heat source owner.
The LGA agree with the principles for evaluating commercial delivery models and that larger heat network zones could be divided into multiple smaller “Heat Network Zone Delivery Areas
We agree with the option of establishing a framework for conferring zone rights for national pipeline projects as set out and with the option of establishing a separate framework for conferring zone rights for smaller scale projects.
We agree with the proposed approach to incumbent networks and investment, to be used following zone designation, as set out and with the proposed approaches to zoning rights awarded prior to zone designation.
The proposed shortlisted models are supported but local authority delivered should be included outright, not only when a joint venture approach has failed. Most councils would prefer a joint venture approach as it brings with it private sector knowledge and investment and shares risk, however some councils could be able to deliver alone, offering greater value for money for both the consumers and the council.
Zone operation
Maximising the automation of data collection should be a priority approach. How that collection and automation should be undertaken should be a contractual decision between the zone coordinator and developer at the point of contract award.
The intended outcomes in table 7 look acceptable and Zone Coordinators should be able to decide if they want a heat network developer to hold a licence. Councils, as Zone Coordinators should be granted maximum flexibility to ensure Zone Developers comply with the requirements and deliver cost effective heat networks.
Zone Review
The LGA agree with the process for zone review that the Zone Coordinator and/or the Central Authority should have the power to revoke a zone
We agree with the process for revoking zones but consider a change to the heat source (where its carbon intensity increases) should also be a trigger. For central and local government to meet its carbon targets, certainty that the carbon intensity of the heat being provided through these networks is needed. If that changes, local and central government could fall short with no recourse.
Enforcement, penalties and appeals
One option on penalties could be to set them as a percentage of annual turnover. This approach will deliver equity and means those organisations with a turnover of less than £2m are included.
The LGA agree with the proposed internal review and appeals process