Agenda item

To receive and consider a presentation from the Chief Officer, Climate, Energy and Green Spaces on the proposals for Heat Network Zoning contained in the Energy Act and the implications for the city.

The report of the Chief Officer, Climate, Energy and Green Spaces provided an introduction to a presentation on the proposals for Heat Network Zoning contained in the Energy Act and the implications for the city.

George Munson, Senior Project Manager, outlined the following information to Members:

·  Heat Network Zoning was Government policy, as part of the Energy Act 2023, designed to support district heating network growth in areas identified to deliver lower cost decarbonisation than heat pumps. The detailed policy was at a consultation stage, closing at the end of February 2024, and was expected to be fully implemented by 2025.

·  The policy mandated that larger buildings and new developments were connected to district heating, with Local Authorities becoming Zoning Coordinators, holding a coordination, liaison and enforcement role. Zoning Coordinators were to issue tenders for heat network delivery bodies that build networks and connect customers.

·  Potential zoning areas, where criteria for district heating to be lower cost than heat pumps had been met, had been identified for Leeds via a Heat Network Zoning Pilot. The Advanced Zoning Delivery Programme (AZP) had consolidated data for potential sites and focused on the city centre and Aire Valley zones, existing Leeds Pipes network zonal expansion, Skelton Grange energy from waste site, as well as additional areas of interest.

·  Work had been conducted to understand the extent and scope of the policy in Leeds, with an estimated 650 gigawatts per year of mandatable building heat loads, 175km length of pipe network, a zone demand of 1,439 gigawatts per year of zone demand and a capital investment of £650 million.

·  The AZP was a Government sponsored programme and Leeds had chosen to focus this on the city centre, Aire Valley and Southbank area to understand the cost of strategic oversizing of elements of the network. The Green Heat Network funding application for a network in the Southbank area was to form the base case.

·  Early stages of the AZP project had identified the Southbank network was required to be three times larger than initially planned to provide capacity for mandated buildings.

·  The key points of the consultation were noted as understanding the role and requirements to perform as a Zoning Coordinator, acting as a local regulator, establishing and procuring zone networks, running competitions to secure delivery bodies, as well as an enforcement, liaison and review role, including internal appeals. Funding was to be initially central, with support from the Central Zoning Authority.

·  The key issues identified for the Zoning Coordinator model were similarities to the planning authority, unclear levels of funding required and delivery capabilities, the proposed governance process, and the implication of appeals and liability of the Council.

·  The impacts on existing networks were to avoid the need to sell network output to delivery bodies with an incumbent rule proposed, gifting rights to existing network operations, outside of incumbent areas competition for delivery bodies was held. If the Council was to become a delivery body, it was required to establish a separate Zoning Coordinator entity.

·  For inoperable areas, outside or on the fringes of network heating zones, Officers were minded to render these zones unviable and allow Zoning Coordinators powers to designate the areas as separate zones, as part of the consultation response.

·  Issues that may impact existing networks were outlined as setting up a Zoning Coordinator as a separate body outside the Council may be undemocratic; the planning authority was recommended as an appropriate vehicle for zone coordination. Also, if a district heating contractor was already competitively procured, it was anticipated to satisfy requirements of the Utilities Act 2023.

·  The following recommended consultation responses were outlined, as part of zoning development, coordinators should reserve the right to engage with mandated buildings and heat sources and hold a stronger position to refine recommended zones from the Central Authority. A longer statuary consultation period prior to zone establishment than the proposed 21 days, a loan facility with deferred repayments for delivery bodies to account for the significant investment need ahead of revenue generation and a consistent approach to carbon standards to avoid a preference for air source heat pumps.

·  The policy was considered to be overall good, and a response was to be submitted by the end of February 2024.

During the discussions the following matters were considered:

• Likely sources of low carbon heat were outlined as initial point sources including the Skelton Grange Energy and Waste Plant, industrial waste processes, such as the glass factory, data centres, old mine works and then environmental heat such as sewers or rivers in order to create a mixed economy approach.
• In response to a query relating to financial penalty collection, it was confirmed that this was not contained in the consultation but was anticipated to be a process covered by Zoning Coordinators or delivery bodies. Clarity on this matter was to be requested.
• For areas outside the larger identified zones, smaller potential zones had been devised, however, the push for implementation by 2025 had created pressure on the industry. All potential areas were to be published by the Government and then Zoning Coordinators were to bring forward bigger, or more viable zones first, with third parties also potentially requesting zone development.
• The process for holding suppliers accountable for charges to residents in large residential buildings covered by community heating networks was queried, it was noted that gas price increases were understood as an issue at a national level. Alongside the Heating Network Zoning policy, the Government were to introduce heat network regulations, overseen by Ofgem, for householders dissatisfied with current provision.
• It was not the intention for the policy to impact current developments timeframes, but important that the policy is taken into consideration.  Developments that proposed sources of heating that could be connected to district heating once infrastructure was in place, should be favoured.
• The anticipated changes to existing networks were considered to be overall positive and a worst case scenario was outlined as stand alone networks serving the city centre and the Aire Valley, with the ability to extend and subject to approval of the plans by the Executive Board, and the best case was, the Government agreeing with the consultation response to make all zones deliverable through existing networks.
• Implications to the Council were the £650 million of required investment to deliver the infrastructure. Potential funding options were to be considered by the Executive Board in February 2024.
• A message of thanks was extended to Officers for their work on this item and the anticipated future work required.

RECCOMENDED –

a) That the report, along with Members comments, be noted.

b) That the intention for the Chief Officer, Climate, Energy and Green Spaces to respond to the consultation on behalf of the Council in consultation with the Chair of the Climate Emergency Advisory Committee, be noted.