Swan Energy has previously discussed the grants which are available for heat networks throughout England and Wales. Read: Heat networks funding availability across England and Wales. However, the Scottish Government has implemented its own individual funding schemes which we share in this update.
The Scottish Government states similar reasons to the UK Government regarding the need for legislation and funding schemes; such as how these schemes will contribute to achieving emission reductions throughout the heat sector, which in turn will help achieve our net zero goals.
The Scottish Government also draws attention to the significance that such schemes could have in terms of encouraging new public and private investment and contributing towards the country’s fuel poverty targets – as well as aiding the development of an integrated resilient energy system.
Scotland’s Heat Network Fund (SHNF)
As of now, the main funding scheme implemented throughout Scotland is Scotland’s Heat Network Fund (SHNF). The purpose of the scheme is to allow the country to overcome the main financial and technical barriers which district heating projects often experience.
The SHNF offers a total £300 million in capital grants to applicants from both the public and private sectors who are developing new zero emission heat networks or wishing to decarbonise and expand their existing heat networks.
However, all applicants must be able to evidence where there is a funding gap within their project as the grant will be based on this gap, as well as having capital readiness. In total the scheme will offer funding no greater than 50% of the total eligible capital costs.
The scheme also offers support for the following:
- Commercialisation support: A maximum 10% of the total capital cost – with a cap of £1 million based on the budget availability.
- Project management and consultancy: A maximum of 10% of the capital cost – with a cap of £100,000.
However, the scheme has its limitations as an applicant cannot apply for solely commercialisation or enabling support. The scheme will offer support for commercialisation and construction support or solely construction support.
For applicants to be approved for funding, they must meet the eligibility criteria and all applications will be assessed on a case-by-case basis. The following project examples are eligible:
- New low or zero direct emissions district heat network projects
- New zero direct emissions communal heating systems
- The expansion of existing heat networks, with requirements to install additional zero direct emission heating systems.
- Existing networks switching to zero emissions heat source.
The deadlines for applications to apply for funding will be once all the funding allocated for the scheme has been distributed. The only deadline that applies to the scheme’s applicants is that all projects must be commissioned by the 31st of March 2026. More details on the SHNF can be found here.
District Heating Loan Fund (DHLF)
In addition to the SHNF, applicants can also apply for funding granted via the District Heating Loan Fund (DHLF), which is managed the Energy Saving Trust.
The main purpose of the scheme is the same as that of the SHNF, and it focuses on district heat projects. However, unlike the SHNF where applicants are granted their funding, the DHLF loans the money to its applications with repayment options of either 10 or 15 years.
The DHLF can offer funding greater than £1 million to its applicants with a standard interest rate of 3.5% for projects deemed ‘low risk’. However, as with the SHNF, applicants must also be able to evidence their need for the loan as a requirement and utilise renewable technologies to expand their heat networks.
The project has had widespread success since its implementation in 2011, as the fund has loaned approximately £20 million to its applicants, which has supported the development of 53 projects.
However, as with most loans, applicants will be assessed based upon their credit status, which determines whether the project is deemed as ‘low’ or ‘high’ risk.
Some examples of those eligible for the DHLF are below, and for more details, on the DHLF click here.
- Scottish companies and subsidiary companies with 3 years of trading experience
- Local authorities.
- Registered social landlords.
- ESCOs with less than 250 employees in total.
The Heat Network Support Unit (HNSU)
Alternatively, to the SHNF and DHLF, there is the possibility than an organisation can be granted pre-development support for their projects via the Heat Network Support Unit (HNSU).
The HSNU is sponsored by the Scottish Government, alongside other partners.
The organisation can offer grants towards pre-development stages such as:
- Feasibility studies
- The allocation of technical, financial, and legal advisors for a project
To find out more information regarding if you could be eligible for pre-development support you can contact the HNSU via the SHNF application form.
This news article concludes Swan Energy’s summary on what Government funding is available throughout England, Scotland, and Wales for heat networks. However, there are also numerous non-governmental programmes which also support the development of existing and new heat networks throughout the UK if you are not eligible for the schemes we have outlined throughout this instalment of articles.
If you have any questions on the information provided within this blog, then please contact bethany.bailey@swanenergy.co.uk
