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The Department for the Economy has published a consultation on the provision of Heat Networks and is seeking views on their proposal to introduce new legislation into Northern Ireland which will provide for the growth of low-carbon heat networks to reduce Northern Ireland’s greenhouse gas emissions (almost 60% of which are from energy), whilst also providing greater protections for both consumers of and investors in heat network.
The consultation understands that, given energy accounts for almost 60% of Northern Ireland’s greenhouse gas emissions, heat networks are crucial to address the UK’s goal of achieving net zero emissions by 2050. They are a proven, cost-effective way of providing reliable low carbon heat at a fair price to consumers, while supporting local regeneration.
There are currently around 100 heat networks in NI, providing heating and hot water to approximately 3,000 consumers. At present, the majority of heat networks are fuelled by oil or gas. However, it is expected there will be a considerable shift towards low-carbon heat networks in new developments in a bid to supply low-carbon solutions across local communities.
This consultation is an important opportunity for investors, as there is an expectation that the sector will require significant expansion in the coming years and the consultation therefore offers investors with a forum to present their views on how the market should be shaped. The phasing out of fossil fuels in new buildings coupled with the promotion of the heat network market will create long-term investment opportunities. The proposed legislative changes will also afford additional rights which would ease developers’ costs and burdens when building out new networks or extensions. These changes will provide developers with similar statutory rights and undertakings as are afforded to other utilities in NI.
The Department recognises the various obstacles which can impact on the ability for new investors and other participants to engage with the market, such as the perception of financial burden and risk for developers and investors created by complexity of market arrangements, as well as a limited understanding of potential costs and return on investment.
The Department plans to introduce efficient tools to reduce this burden on developers and investors through:
The implementation of these tools will be crucial in supporting investors as it will ultimately reduce the high cost of capital usually associated with developments like this. The Department considers that capital expenditure will decrease in light of the standardised contracts allowing risk and compliance to become uniform across projects and therefore better understood for all parties.
The Department is considering whether changes in planning policy will be required for the growth of heat networks across NI but aims to work alongside local Councils and the Department for Infrastructure to ensure policy development coincides with market growth of heat networks.
The Department has considered the introduction of planning policies together with ‘concession agreements’ as part of a zoning approach to facilitate the development of new builds as well as granting exclusivity areas that will enable the development of more designated networks. Zoning in Scotland is already governed by the Heat Networks (Scotland) Act 2021, and as with all emerging low carbon technologies, we should look to other jurisdictions for what is working so far and what could be improved. The Department further considers that concession agreements will create a vehicle to support the implementation of heat networks projects if private sector investment is required and where Councils can guarantee initial anchor load to the network. Co-operation between the private and public sectors will be vital to the success of such arrangements.
The consultation recognises that whilst Councils will be best placed to identify whether a heat network is the appropriate solution in a development, further planning policies will be required as the market expands. Local Development Plans will therefore play a key role in this and having clear planning policy will hopefully create more certainty which is a fundamental pre-requisite for significant investment in the energy sector.
It is clear that changes in legislative arrangements supporting the growth of the heat network sector will provide more protection for consumers connected to the network and for developers investing into the sector as well as much-needed benefits for the environment with accessibility to larger scale renewable resources.
The full consultation can be found at Northern Ireland Heat Networks - building a market framework, and the simplest way to respond is by email to DfEHeatpolicy@economy-ni.gov.uk by 13 February 2022. Responses received will be used to help policy proposals, and the Department will continue to discuss emerging issues with stakeholders, and work with stakeholders including the Utility Regulator in identifying the most appropriate regulatory body to undertake the regulation of heat networks in Northern Ireland.
TLT’s Real Estate and Planning & Environment teams regularly advise developers and investors on energy matters in Northern Ireland. For more information, please contact Mary-Jane Byrne or Sarah Mulholland.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2022. Specific advice should be sought for specific cases. For more information see our terms & conditions.
20 January 2022
Insights 28 NOVEMBER 2022