Heat Networks (Scotland) Bill: Stage 3

– in the Scottish Parliament on 23rd February 2021.

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Photo of Kenneth Macintosh Kenneth Macintosh Labour

The next item of business is stage 3 proceedings on the Heat Networks (Scotland) Bill. In dealing with the amendments, members should have the bill as amended at stage 2, the marshalled list and the groupings of amendments.

As usual, the division bell will sound and proceedings will be suspended for five minutes for the first division of the afternoon, and there will be a one-minute vote on any division. Members who wish to speak in the debate on any group of amendments should press their request-to-speak button as soon as I call the group.

The Presiding Officer:

Amendment 5, in the name of Paul Wheelhouse, is in a group on its own.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

Part 1 of the bill creates a licensing system for those who are supplying thermal energy by means of a heat network. That is crucial, as it will ensure that those who are supplying the essential service of heat and, in some cases, hot water via a heat network are solvent, skilled and fit and proper persons.

The system will also provide for the imposition of licence conditions, so that networks are developed and maintained to the highest standards. As such, section 2 makes it an offence to supply thermal energy via a heat network without a licence. On reflection, I believe that it would be appropriate to insert a reasonable excuse defence for that offence, which is what amendment 5 will do. Allowing for a defence of reasonable excuse will ensure that, for example, we do not penalise people in the event that a company reorganisation inadvertently means that a licence is no longer in the name of the company that is supplying heat.

There may be other cases in which specific circumstances mean that an offence is committed unintentionally. Of course, it would be for the courts to determine what is a reasonable excuse for supplying thermal energy via a heat network without a licence. However, at this stage, I trust that members agree that, rather than create a strict liability offence, it is proportionate to allow a defence to be made when it can be shown that the person in question has a reasonable excuse.

I move amendment 5.

Amendment 5 agreed to.

The Presiding Officer:

Group 2 is on the just transition principles. Amendment 3, in the name of Claudia Beamish, is grouped with amendment 4. I call Alex Rowley to move amendment 3 and to speak to both amendments in the group.

Photo of Alex Rowley Alex Rowley Labour

Amendments 3 and 4 seek to embed the just transition principles throughout the bill. The amendments refer to just transition principles as set out in section 35C of the Climate Change (Scotland) Act 2009. The principles describe the importance of equity in taking action to reduce net Scottish emissions of greenhouse gases and require that that is done in a way that supports

“sustainable jobs ... low-carbon investment and infrastructure”, that engages

“with workers, trade unions, communities” and others, that

“creates decent ... and high-value work”, and that

“contributes to ... sustainable economic approaches which help to address inequality and poverty.”

Amendment 3 would add to sections 5(3) and 5(4). Section 5(3) provides that the licensing authority may grant a licence application only

“if it is satisfied that the applicant has the ability to perform” the licence activities.

Section 5(4) requires the licensing authority to “have regard” to certain matters in so far as that is relevant in making that assessment. Amendment 3 would add to those provisions the applicant’s ability to operate a heat network in a manner that

“takes account of the just transition principles”.

Amendment 4 would add to section 76A, on the heat networks delivery plan. The amendment would require the just transition principles to be considered by the Scottish ministers when preparing, reviewing and revising the heat networks delivery plan and when reporting to the Parliament on the plan. Embedding the just transition principles at those stages and at the heart of the network’s development would ensure that the benefits of the networks would not come at the expense of equity. In fact, the multiple benefits and opportunities for local people could be seized.

The shortcomings of capturing fair work in the renewables industry have been clear to see, so putting the just transition principles in the text of the bill is meaningful. Claudia Beamish appreciated being able to refine the amendments in discussions with the minister, Paul Wheelhouse, between stages 2 and 3.

Securing a just transition remains the key goal of Claudia Beamish and the Labour Party in Scotland. Every step on the journey to a net zero emissions economy should be tested against the principles of equity.

I move amendment 3.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

In 2019, the Climate Change (Scotland) Act 2009 was amended to enshrine in law our commitment to transitioning to net zero, in line with the just transition principles. Those principles set out the importance of taking action to reduce Scotland’s net emissions of greenhouse gases in a way that supports sustainable jobs and low-carbon investment, that develops and maintains social consensus, that creates fair and high-value work, and that contributes to sustainable economic approaches that address inequality and poverty, as Mr Rowley set out.

Our commitment to those principles is unwavering. The just transition principles are at the heart of our recovery towards being a fairer, greener and more prosperous Scotland. It is right that, in lodging amendments 3 and 4, Claudia Beamish asked the Parliament to consider how those principles might be applied to the development of the heat networks sector. In its interim report, the just transition commission highlighted a heat network in Aberdeen as a good example of what is possible when equity is considered alongside the need to reduce emissions.

I am happy to support Ms Beamish’s amendments, having discussed the topic with her prior to and since stage 2, as Mr Rowley explained. I ask members to support them, too. The principles will inform the licensing system as we plan for the long-term and large-scale delivery of heat networks across Scotland.

Amendment 3 agreed to.

The Presiding Officer:

Group 3 is on standards of service by license holders. Amendment 50, in the name of Alexander Burnett, is the only amendment in the group.

Photo of Alexander Burnett Alexander Burnett Conservative

My amendments in this group and the subsequent one relate to clarity and guidance for licence holders. The points that I made about that subject at stage 2 are on the record and I see no reason to repeat them.

I did not press my amendments at that stage. I have since worked to improve the definitions and to make the amendments compatible with the rest of the bill. I am grateful to the minister and his team for assisting me to achieve that.

I move amendment 50.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I thank Alexander Burnett for his positive engagement on the matter. As he indicated, as a general principle at stage 2, we tried to avoid putting standard conditions in the bill. The main reason for that was the need to retain flexibility and to ensure that, whoever the licensing authority is in the future, it has the ability to shape licence conditions as required.

Nevertheless, I recognise the desire for a reference to standards of service to be specified in the bill. Mr Burnett’s amendment will ensure that standards of service are clearly set out as a matter that the standards conditions may make provision for. I am happy to support amendment 50, as the clarity will help developers, and I encourage members to do so, too.

Amendment 50 agreed to.

The Presiding Officer:

Group 4 deals with guidance for the licensing authority. Amendment 1, in the name of Maurice Golden, is grouped with amendments 2 and 51.

Photo of Maurice Golden Maurice Golden Conservative

I thank the minister and his officials for working with me on amendments 1 and 2.

The bill currently provides that the

Scottish Ministers may issue guidance to the licensing authority about the exercise of its functions” under part 1. Section 14(2) provides that the guidance

“may, in particular, include guidance relating to the matters mentioned in section 5(4)”, which concerns matters for the licensing authority to have regard to in assessing an applicant’s

“ability to perform the activities that would be authorised by the licence.”

The amendments specify that the guidance may also, in particular, relate to how functions of the licensing authority should be fulfilled

“in relation to the supply of thermal energy by means of an existing heat network”.

With regard to those provisions, ministers may give the licensing authority guidance about the way in which its functions in relation to the licensing of the supply of thermal energy by existing heat networks should be carried out. Those functions include how applications for licences are to be considered and the nature of both standard conditions and of other conditions that may be imposed, excluded or modified.

The guidance will be able to define what is considered to be an existing heat network for the purpose of such guidance. The licensing authority must have regard to any guidance that is issued. Any such guidance would also be published.

I move amendment 1.

The Presiding Officer:

As Alexander Burnett has indicated that he does not want to speak to amendment 51, I call Paul Wheelhouse.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I thank Maurice Golden and Alexander Burnett for working with me since stage 2 to introduce their amendments today. I will turn first to Mr Golden’s amendments, which concern the important matter of how the implementation of the bill will affect existing heat networks, of which we estimate there are around 1,080 across Scotland. I know that those who are operating schemes today are eager to know, for example, whether they will have to obtain a licence and what might happen should such an application be refused. The Competition and Markets Authority has made it clear that regulation of the heat network sector is required, and the licensing regime in the bill will also provide the mechanism for decarbonising the sector. At this stage, I cannot provide the concrete guarantees that existing operators and developers seek about how they will be affected by the bill, but I can assure them that we will work with them as we develop secondary legislation to put in place the full regulatory framework that is provided for in the bill. That will ensure that the system is proportionate and that impacts are properly understood and mitigated as appropriate.

There are mechanisms already in the bill that allow exemptions to be made. Under section 3, there is a requirement to hold a heat networks licence. The ability to apply licence conditions or special conditions to certain licences is provided for under sections 6 and 8, and the ability to modify application fees is provided for in section 77. Those provisions provide the flexibility that is required to implement appropriate transitional arrangements or to create exceptions if that is considered appropriate.

Mr Golden’s amendments 1 and 2 would provide further reassurance to operators of existing heat networks by specifying in primary legislation that guidance that is issued to the licensing authority may include guidance on how the licensing authority is to exercise functions in relation to existing heat networks. That is a welcome and proportionate change to the bill, and I am happy to offer my support for amendments 1 and 2. I ask members to do the same.

Turning to Mr Burnett’s amendment 51, I believe that we are seeing the benefit of having a member who is experienced in the development and operation of heat networks take part in consideration of the bill. It is one of the strengths of the Parliament that we have lots of experience across the chamber. I understand that clarity is needed on how the licensing authority is to reach its decisions and on the expectations that operators can have about the dialogue with the licensing authority. Amendment 51 recognises that guidance is the most appropriate place to deal with those issues. I am happy to support that approach, and I ask members to support Mr Burnett’s amendment 51.

Amendment 1 agreed to.

Amendment 2 moved—[Maurice Golden]—and agreed to.

Amendment 51 moved—[Alexander Burnett]—and agreed to.

The Presiding Officer:

Group 5 is on minor and technical amendments. Amendment 6, in the name of Paul Wheelhouse, is grouped with amendments 7, 54, 44, 47 and 48. I call the minister to speak to and move amendment 6 and to speak to all the amendments in the group.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

Group 5 deals with minor drafting amendments, so I will keep my comments as brief as they can be, in describing them.

First, as a result of amendments at stage 2, section 17 of the bill contains sub-subparagraphs (A) and (B); we want to adjust that. Amendment 6 will therefore change paragraph (A) of section 17(2) into a subsection to itself, and amendment 7 will change paragraph (B) of section 17(2) into a new section 17(3).

Amendments 47 and 48 are consequential on amendments 6 and 7 and will change the cross-references in section 83(1) and 83(2) to the definitions in section 17.

Amendment 54 takes account of an amendment that was agreed to at stage 2 that enabled local authorities to become consent authorities. At that time, a consequential amendment was made to section 77(1) that enabled provision to be made about recovery of administrative costs by local authorities. It is also necessary to modify section 77(4) to clarify that local authorities do not have to consider a heat network consent application when an applicable fee has not been paid.

Finally, an amendment was agreed to at stage 2 to insert new section 61B, which is about compensation that may be paid in the event that a network wayleave right is varied. That was done in recognition that a licence holder may in the future need to modify the right that they had secured, which could, in turn, give rise to the need to compensate the landowner or occupier. The detailed provisions about payment of compensation are to be made by regulations. Amendment 44 will modify section 81 to provide that any regulations about payment of compensation under section 61B(4) are subject to the affirmative procedure. That will provide consistency with the procedure that is to be used for other regulations about compensation throughout the bill.

I urge members to support amendment 6 and the other amendments in the group.

Amendment 6 moved—[Paul Wheelhouse] and agreed to.

Amendment 7 moved—[Paul Wheelhouse] and agreed to.

The Presiding Officer:

Group 6 is entitled “Local authority as heat network consent authority”. Amendment 8 is grouped with amendments 8A, 9, 10, 43 and 46.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

The role of local authorities in the regulatory system for heat networks, particularly in granting consent to the development and operation of networks, has been a major theme during the passage of the bill.

When we first consulted on a heat network consent system, we recognised that local authorities might be well placed to take on the function, given that they already act as planning authorities and because heat networks are local assets, by their nature.

However, as we developed our proposals, it became clear that heat networks would not be developed uniformly across Scotland, meaning that some—potentially many—local authorities would be required to invest in a function that went underutilised. Instead, we sought to maximise use of the capacity and expertise that are already available in the Scottish Government’s energy consents unit, which scrutinises renewables and electricity transmission projects. As such, the bill as introduced placed responsibility for administering heat network consents on the Scottish ministers.

However, following the constructive stage 1 debate, I agreed with the Energy, Economy and Fair Work Committee’s recommendation in its stage 1 report that the bill be amended to include provision such that responsibility for consents could move to local authorities. With the committee’s support, amendments were passed at stage 2 that enable local authorities that wish to be empowered with that responsibility to become consent authorities, while ensuring that the Scottish Government can carry out the function elsewhere in Scotland, where necessary.

Since stage 2, I have kept in touch with committee members on the issue—in particular, with Andy Wightman. We have reached consensus that part 2 of the bill could be refined further, so as to empower local authorities to take on the role of consent authority. Amendment 8 will amend section 18A to provide that, if a local authority makes a written request to the Scottish ministers to become the consent authority for its area, the Scottish ministers will then be required to make necessary regulations within six months.

Amendment 8A, which was lodged by Andy Wightman, rightly recognises that, having made a written request under amendment 8 to become the consent authority for its area, a local authority might change its mind and decide that it does not wish to become the consent authority. Mr Wightman’s amendment provides for that, recognising that where a local authority withdraws its written request, the Scottish ministers will no longer be required to make regulations under section 18A(1) in relation to that local authority. I am happy to support amendment 8A.

Amendment 9 will replace section 18A(3) with an identical obligation to consult the affected local authority and any other appropriate person before making regulations under section 18A(1). The drafting is adjusted in the light of amendment 43, which will alter the parliamentary procedure.

Amendment 10 is a technical amendment that sets out that where the regulations are subject to the affirmative procedure because they will textually amend the legislation, the references in the section to the making of regulations

“are to be read as references to laying ... draft ... regulations ... before the Scottish Parliament.”

Given that amendment 8 would empower local authorities to request to be designated as the consent authority for their area, amendment 43 will remove those designation regulations from the list of powers that are always subject to the affirmative procedure. Therefore, regulations designating a local authority as the consent authority for its area would be subject to the negative procedure, unless the designation regulations add to, omit or remove text from an act. In that case, amendment 46 provides for regulations to be subject to the affirmative procedure.

I move amendment 8.

Photo of Andy Wightman Andy Wightman Independent

Since the bill was introduced, I have sought to strengthen the powers of local government in it. It is ironic that a bill whose drafting was influenced by the Danish experience should have included such a small role for local government, given that Denmark’s municipalities—which are much smaller units of local government than ours—have exclusive jurisdiction over the consenting regime and play a significant role, together with co-operatives, in ownership of the pipe network.

The committees stage 1 report noted that, and I was pleased that the minister lodged amendments to allow for transfer of powers to local government by regulation. I lodged amendments at stage 2 that would have given a clear timescale for that. I am grateful to Graham Simpson for having spoken to them because I had to attend another committee at the time. He quite rightly did not press them on my behalf, given that the minister committed to work with me at stage 3. I thank the minister for his constructive engagement.

I welcome the amendments in the minister’s name in the group—especially amendment 8, which will give local authorities the statutory right to request, and to be granted, consenting rights. That is an elegant solution that reflects the fact that not all local authorities will want the powers at the same time.

My amendment 8A is minor but important. As the minister said, it would ensure that when a request is made under the provisions in amendment 8, a local authority will be able, should circumstances change, to withdraw that request from the date on which the request was made. It therefore covers an unlikely scenario, but provides additional flexibility.

I move amendment 8A.

Amendment 8A agreed to.

The Presiding Officer:

I invite the minister to say whether he will press or seek to withdraw amendment 8, as amended.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I press amendment 8, as amended.

Amendment 8, as amended, agreed to.

Amendments 9 and 10 moved [Paul Wheelhouse] and agreed to.

The Presiding Officer:

We turn to group 7, which is on heat network consent: enforcement. Amendment 11, in the name of the minister, is grouped with amendments 12 to 19.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

The amendments in my name in this group are largely technical in nature, but they provide important clarity on enforcement action in relation to heat network consents.

Amendment 11 modifies section 30 so that it is clear that the enforcement authority is able to issue an enforcement notice to both persons who are constructing or operating a heat network on their own behalf, without consent, and those who are doing so on behalf of another without that other person holding a heat network consent.

Separately, the current provision in section 30(1)(b), which allows enforcement action to be taken against a consent holder, where there is a failure to comply with a condition or limitation of the consent, becomes, with minor modifications, new subsection (1A).

Amendment 12 is a technical amendment that is consequential on amendment 11. It simplifies section 30(4)(a) by providing that an enforcement notice must set out the reasons why the enforcement authority has issued it.

Amendments 13 and 14 are minor amendments that reflect the changes to section 7 that were made at stage 2. They simplify sections 30(5)(a) and (b) to refer to compliance with or failure to comply with section 17(1). As amended at stage 2, section 17(1) now includes both an obligation to hold a heat network licence and an obligation to comply with conditions on or limitations to a consent.

Amendment 15 removes section 30(8), which is no longer applicable given the changes to be made by amendment 11.

Amendment 16 provides a definition of “enforcement notice” in section 30 for the purposes of part 2 of the bill. As a result, it is no longer necessary to provide such a definition in section 36. Amendment 19 therefore removes that section.

Amendment 18 alters section 33(3) to provide persons with a further defence against the offence of non-compliance with an enforcement notice—namely that of reasonable excuse for failing to ensure the taking of steps or the cessation of activities specified in the notice.

Amendment 17 is a technical change to signify new paragraphing of the existing text of section 33(3) in consequence of amendment 18.

I move amendment 11 and urge members to support the other amendments in the group.

Amendment 11 agreed to.

Amendments 12 to 16 moved—[Paul Wheelhouse]—and agreed to.

Section 33—Offence of failing to comply with enforcement notice:

Amendments 17 and 18 moved—[Paul Wheelhouse]—and agreed to.

Section 36—Interpretation of Part 2:

Amendment 19 moved—[Paul Wheelhouse]—and agreed to.

The Presiding Officer:

We turn to group 8, which is on heat network zoning by local authorities. Amendment 20, in the name of the minister, is grouped with amendments 21 to 28.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I apologise in advance, Presiding Officer. This will be one of my longer contributions, but I will try to keep my remarks on the group as brief as I can. In the main they relate to amendments lodged by Mark Ruskell, which I have discussed with him.

I highlight that heat network zoning is probably one of the highest-priority measures for stakeholders. The bill is the first of its kind in the United Kingdom. We already know that stakeholders such as the Association for Decentralised Energy are calling on the UK Government to go in the same direction as we have set out for Scotland. That is because it will bring certainty to local heat planning and empower local authorities to ensure that heat network opportunities are visible to potential investors and local communities.

Heat network zoning by local authorities, as introduced by the bill, refers to two aspects: a duty on local authorities to review heat network zoning in their area under section 38 and a power to designate such zones under section 37. Amendment 20, in my name, is a technical amendment to clarify that a local authority may exercise its power under section 37(1) to designate an area as a heat network zone at any time without having to carry out a review under section 38 beforehand.

I feel that making that small change recognises that those local authorities that have a good picture of opportunities within their areas may move directly to the final designation of the zones without having to carry out a review under section 38 first. Amendment 20 also complements the amendments that have been introduced by Mark Ruskell, to which I will now turn.

First, I thank Mr Ruskell for his positive engagement ahead of stage 3, for which I am grateful. I understand that the underlying intention of his amendments is to maximise instances in which heat network zones are designated, which will, in turn, help to grow the sector.

Without going into too much detail, amendment 21 obliges local authorities to carry out a review under section 38(1) to consider whether one or more areas in a local authority area

“is likely to be particularly suitable for the construction and operation of a heat network”.

Amendment 23 strengthens the provisions in relation to the next steps to be taken by a local authority following the carrying out of such a review. The amendment provides that, should the review find that an area

“is likely to be particularly suitable for the construction and operation of a heat network, the local authority” may either proceed to consider whether to designate the area or areas as a heat network zone or, alternatively, request that Scottish ministers consider whether to designate the area or areas as a heat network zone.

Amendment 24 removes the option of doing nothing following a review, as currently specified in section 38(3)(b). I believe that it strengthens action to deliver heat networks. In carrying out reviews to determine whether an area is likely to be particularly suitable for the construction and operation of a heat network, amendment 22 requires local authorities to consider

“the matters mentioned in section 39(1)”, including, for example, fuel poverty.

Amendment 28 enables the Scottish ministers to issue guidance to local authorities about reviews that are carried out under section 38(1), which could include a definition of what is understood by

“particularly suitable for the construction and operation of a heat network”.

Amendment 25 relates to the statement that a local authority must publish following the heat network zoning review. It specifies what such statements must set out. That includes setting out the reasons for the outcomes of the review,

“identifying the area by reference to a map” where it is considered to be suitable for designation as a heat network zone and providing reasons for a local authority’s decision to either proceed to consider designation itself or to refer the matter to the Scottish ministers to consider designation.

Amendment 26 makes a minor drafting change to the list of additional matters relating to reviews that may be specified by Scottish ministers in consequence of amendment 25.

At stage 2, I highlighted my concern that Mark Ruskell’s original amendments in this area would remove a degree of choice for local authorities following the first step of the review. However, I am now content with all the proposed amendments and confirm that they work within the wider context of the bill. The degree of choice is retained by maintaining the option to request Scottish ministers to undertake the designation on behalf of a local authority. Having discussed the approach with Mark Ruskell, I am happy to support his amendments, as they will ensure that heat network zones are being designated where a clear opportunity has been identified.

As I said before, heat network zones make up a key piece of the puzzle, which unlocks other elements of the bill, such as heat network zone permits, which are aimed at increasing deployment of the technology across Scotland. They also provide a useful reference point for other policy areas such as building standards, planning and non-domestic rates, which can be used to further drive connections to heat networks within heat network zones. Making sure that those heat network zones are designated at the earliest opportunity will unlock all those opportunities and give us a better picture of the potential for the technology to help us on our journey to net zero.

Mark Ruskell’s amendments have been developed constructively and collaboratively; they strengthen the bill and will have a real impact on deployment in Scotland so I am happy to support each of his amendments in the group and I encourage other members to do the same.

I move amendment 20.

The Presiding Officer:

I call Mark Ruskell to speak to amendment 21 and the other amendments in the group.

Photo of Mr Mark Ruskell Mr Mark Ruskell Green

I am happy to do so and I acknowledge the creative and constructive discussion with the minister and the bill team in between stage 2 and stage 3; the amendments that are presented are the outcome of that.

I will not go into all the details of the amendments—I think that the minister has already done that—but I will say that all stakeholders need a really clear signal that areas that have been assessed as being particularly suitable for the construction of a heat network will not be unduly held back in that designation.

Evidence that I read at stage 1 commented that we do not want a situation in which lots of positive feasibility studies are produced about heat networks but very little action is happening on the ground. Therefore, the work to designate suitable heat network zones must progress, and if local authorities are not in a position to drive that forward, under my amendments in the group, they will have the clear option to request that ministers do so instead.

Holding back on designation when areas have been assessed as suitable should not be an option and, under my amendments, it will not be. I again thank the minister for his constructive engagement on the issue, and I hope that members will vote for my amendments.

Amendment 20 agreed to.

Section 38—Duty on local authority to review heat network zoning in area:

Amendments 21 to 26 moved—[Mark Ruskell]—and agreed to.

The Presiding Officer:

Group 9 is on targets and reporting. Amendment 27, in the name of the minister, is grouped with amendments 37 to 40, 52, 41, 42, 53, 45, 55 and 49.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I again apologise, as this will be one of my lengthier contributions today.

At stage 2, the bill was amended by Mark Ruskell and Maurice Golden to include new provisions relating to heat network supply targets. Maurice Golden also inserted provision requiring the Scottish ministers to produce a heat networks delivery plan that will relate to the increased deployment and use of heat networks. In essence, those stage 2 amendments aimed to provide clear signalling to the market that is due to develop further following the establishment of a regulatory framework under the bill, and to make the Scottish ministers more accountable for the delivery of the overall aim of the bill, which is to achieve greater deployment of heat networks in Scotland.

Although I had some reservations about the evidence that was used to produce some of the targets, having discussed the matter with members, I am happy to embrace the challenge that statutory targets on heat network deployment bring. Of course, we have always had the ambition for heat networks to be deployed more significantly in Scotland, and I believe that targets will make that more certain.

To ensure that the bill is clear on that matter, it is necessary to reconcile the provisions on heat network supply targets and the heat networks delivery plan, which is why I have lodged a number of amendments that will help to achieve that.

Amendment 27 is consequential on various amendments in the group and adjusts a reference in section 39 to the heat network targets.

Amendments 37 to 39 and 42 relate to reporting requirements in the heat networks delivery plan in section 76A. Amendment 37 ties the reporting requirements in relation to heat network supply targets with the heat networks delivery plan by providing that the plan will set out how the Scottish ministers propose to meet the targets that are specified in section 76C(1). We feel that alignment of the reporting requirements, both sets of which have two-yearly reporting cycles and require reports to be laid before Parliament, will optimise the use of parliamentary time and provide a fuller picture to Parliament of the state of heat networks.

Amendment 38 provides that any report that is laid before the Scottish Parliament by the Scottish ministers following a review of the heat networks delivery plan must consider what progress has been made in meeting the targets that are specified in section 76C(1).

Amendment 42 removes subsections (2) to (4) of section 76C, which relate to the delivery plan and the reporting requirements regarding targets, as those will now be covered in section 76A.

Amendment 39 moves section 76A so that it follows section 76C, which relates to the heat network supply targets.

Amendments 40 and 41 combine existing sections 76B and 76C, which both relate to the targets, into a single section, but with some modifications. Amendment 40 leaves out section 76B and amendment 41 inserts two regulation-making powers into section 76C that are akin to the powers in section 76B. The first power allows the Scottish ministers to specify by regulations

“an additional target relating to the ... supply of thermal energy by heat networks in Scotland”, and to

“modify any target for the time being specified” in section 76C(1). The second power allows the Scottish ministers by regulation to make provision about targets that are specified or modified under that power.

Amendment 45 provides that regulations that specify additional targets, or which modify existing targets, will be subject to the affirmative procedure.

Amendment 49 is technical and makes a change to the long title to properly reflect the fact that the bill also sets targets relating to the supply of thermal energy by heat networks and makes provision about the delivery plan relating to the increased use of heat networks.

We feel that those changes are necessary to tidy up provisions of the bill following stage 2.

In addition, the Scottish ministers taking the power to amend the targets that are set out in the bill will ensure that, once better evidence is obtained through the upcoming national comprehensive assessment and the designation of heat network zones, future Administrations will be able to update those targets by regulation, if required, with that process being subject to the full scrutiny of Parliament. We have good reasons to believe that the potential for heat networks in Scotland is substantial and that the proposed powers will be used to ensure that we are ambitious.

Other amendments in the group have been lodged by Maurice Golden and Mark Ruskell, who engaged constructively with me and my officials prior to stage 3. Without pre-empting their input to this discussion, I would like to thank them for those contributions and offer a few comments.

Maurice Golden’s amendment 52 seeks to adjust the target for the combined supply of thermal energy by heat networks in Scotland to reach 2 terawatt hours of output by 2025 so that the target is, instead, to reach 2.6 terawatt hours of output by 2027. The regulatory system that the bill will put in place provides the structure for growth of the market to ensure that heat networks are developed in appropriate places to a high standard, and that they will provide low and zero-carbon heat to end users, and high levels of service. We anticipate that that system will be operational from 2023. Therefore, having a target that must be achieved by 2025 could carry a risk that the rapid deployment of heat networks that would be needed to meet it would result in heat networks being developed to poor standards, in inappropriate places and with no controls in place to ensure that they are low or zero carbon.

Maurice Golden’s proposed target of 2.6 terawatt hours of output by 2027, which has arisen from discussions that we have had with him and Mr Ruskell, will allow more time for the regulatory system to bed in and will ensure that the supply chain is able to develop to deliver on an important challenge. I stress that it is by no means a less ambitious target. In fact, Scotland currently has approximately 34,000 homes connected to heat networks. Alongside non-domestic connections, that amounts to 1.2 terawatt hours of existing supply. To demonstrate the scale of the challenge, we estimate that, if the deployment is linear, the equivalent of 20,000 homes will need to be connected to a heat network every year from 2021 to achieve the 2027 target that is set out in amendment 52.

To put the scale of the challenge into further context, the Queens Quay heat network in Clydebank, which currently supplies a health centre and a care home with heat that is generated from the River Clyde, hopes in time to expand to connect approximately 1,000 homes and 500,000 square feet of commercial space. The heat network at Queens Quay, which is one of the most ambitious in Scotland, has taken five years to move from concept to operation.

Heat networks are large-scale infrastructure projects and, as such, they take time to plan, develop and commission, and amendment 52 will provide more time and space to identify and develop appropriately sited low or zero-carbon heat networks. It is therefore very welcome.

Mark Ruskell’s amendments 53 and 55 make other welcome additions to the bill that will further strengthen it as we seek to achieve our 2045 net zero target. Amendment 53 seeks to place a duty on the Scottish ministers to lay, by October 2023, regulations that set an additional target relating to the output from the combined supply of thermal energy by heat networks in Scotland that must be reached by 2035. Such regulations will be subject to the affirmative procedure.

As well as enabling the Scottish ministers to take account of the best evidence that is provided by initial heat network zoning, that will provide a clear pathway to the future that will give longer-term certainty to local supply chains and drive innovation to identify and deliver further opportunities in the sector. Together with a strengthened heat network zone framework, the long-term target for which amendment 53 provides will provide a strong signal to investors and the supply chain that Scotland is a good place for their business.

To sum up, I encourage members to vote for all the amendments in the group, as they provide an ambitious but balanced commitment and signal that Scotland is serious about its commitment to provide low and zero-carbon heating to our buildings.

I move amendment 27.

Photo of Maurice Golden Maurice Golden Conservative

Amendment 52 seeks to update amendment 155, which was lodged at stage 2. It will introduce a clearly defined delivery target for 2027 of 2.6 terawatt hours. Decarbonising heat will be a big step in reaching net zero in Scotland, and one of the bill’s stated aims is to develop the low-carbon heat networks that are needed to do that. Without delivery targets, however, we would have no way of assessing the pace or quality of development that takes place. The target that is cited in amendment 52 follows research from Scottish Renewables and is broadly in line with industry growth estimates. The targets represent a more than doubling of output from current levels by 2027, and they will allow us to ensure that we are on track and that heat is playing its part in reaching our 2045 net zero goal.

I welcome the other amendments in the group and look forward to Scotland achieving the ambitious targets.

Photo of Mr Mark Ruskell Mr Mark Ruskell Green

We had constructive discussions on this matter between stages 2 and 3, and the amendments in this group, taken together, will set a much better framework for target setting.

I think that we all acknowledge that targets are important—we have seen that in relation to renewable electricity—but they can be prone to either overshooting or undershooting if they do not have a solid technical basis behind them. The terawatt hours targets that were inserted by Maurice Golden’s amendment at stage 2 were welcome, but the 2025 target perhaps did not fully align with the tools that the bill will make available to deliver on that timescale.

The minister mentioned what could have been an unintended consequence of that, namely that heat networks would get built quickly but they would be connected to gas. If that happened, we would have another dash for gas, which would not be great in terms of carbon. Although the 2027 target in the amendment is two years later, it matches the trajectory of the 2025 and 2030 targets and it sets a clear and achievable medium-term goal for the industry. It is the right approach.

I turn to my amendments in the group. At the other end of the scale, there is a danger that we will not set targets far enough into the future to deliver the long-term certainty that is needed for investment. It is therefore important that we set in the bill a clear expectation that there will be a robust 2035 target for heat networks.

Thinking of the work that we are doing in the Environment, Climate Change and Land Reform Committee on the climate change plan update, I note that, in the current climate change plan, there is a flatlining of ambition in a number of the sectors as we head towards 2030. Where bottom-up targets can be set within sectors such as the one that we are discussing, it will put more solid blocks of ambition into the full climate change plan when it comes up for a full review in 2023. Where we have certainty, let us build it into the climate change plan so that we can be ambitious and build from there.

In my amendment 53, the date for setting the target for 2035 is October 2023, so the target setting will come at a good time when we are looking at the climate change plan in its entirety. That will mean that the 2035 target is set on the back of a comprehensive national assessment that draws together all the detailed work on heat zones that will come from the councils. It will deliver certainty in a robust and, I hope, ambitious way.

The Presiding Officer:

Minister, do you wish to add any comments?

Section 45—Guidance:

Amendment 28 moved—[Mark Ruskell]—and agreed to.

The Presiding Officer:

Group 10 is entitled “Heat network permits: requirement for permit and enforcement”. Amendment 29, in the name of the minister, is grouped with amendments 30 to 34.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

My amendments in group 10 largely address technical matters that were identified by a review of the bill following stage 2.

Unless an exemption applies, section 47(1) prohibits the operation of a heat network in a heat network zone that is designated by a notice if there is no heat network zone permit for the zone. Amendment 29 will modify section 47(1) to ensure that those who operate a heat network on behalf of a heat network permit holder may do so without having to hold a permit themselves.

Amendment 30 will place the exemptions from the prohibition into section 47. They are essentially those in the criminal offence provision in section 51.

The exemptions from the need to hold a heat network zone permit to operate a heat network within a designated zone apply in terms of new subsections (1A) and (1B) if the person is entitled to operate the heat network immediately before the zone is designated by a notice under section 47(1). That means that when, at the time of designating a zone, a person already holds consent to operate the heat network or is exempt from the need to hold a consent, they are to be exempt from the requirement to hold a heat network zone permit in order to operate the heat network.

Amendment 31 is a consequential amendment that provides that a heat network zone permit is defined as one that is

“issued by the permit authority.”

Amendment 32 replaces the existing subsections (1) to (3) of section 51, as the exemptions that they contained will be moved to section 47 by amendment 30. New subsections (1) and (1A) of section 51 provide that a person who operates a heat network without holding a heat network zone permit, in contravention of a notice that prohibits that operation, commits an offence if they do so on their own behalf or if they engage another to do so on their behalf.

Amendment 32 allows for the defence of reasonable excuse against those offences, which is similar to the provision in relation to licences in amendment 5.

Amendment 33 is consequential to amendment 32 and ensures that the penalty for the offence of operating a heat network in a designated zone without a permit applies whether a person is operating the heat network on their own behalf or another person is acting for them.

Amendment 34 is also consequential to amendment 32. It removes the definition of a term that is no longer required in the light of drafting changes.

I urge members to support each of the technical amendments in the group.

I move amendment 29.

Amendment 29 agreed to.

Amendments 30 and 31 moved—[Paul Wheelhouse]—and agreed to.

Section 51—Enforcement of requirement for heat network zone permit:

Amendments 32 to 34 moved—[Paul Wheelhouse]—and agreed to.

The Presiding Officer:

Group 11 is entitled “Compulsory purchase: Crown land”. Amendment 35, in the name of the minister, is grouped with amendment 36.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I am delighted to have the opportunity—oops! Sorry. I have skipped ahead of myself, which is never a good start. I was going so fast.

My amendments in this group provide for how compulsory purchase powers that are conferred on heat network licence holders under section 57 may be exercised in relation to Her Majesty’s private estates.

Section 80 already makes provision in relation to the powers of entry on to Crown land as a result of the powers under sections 34(2), 64(5) and 65(7). On reflection, I believe that it is appropriate that similar provision is made regarding how compulsory purchase powers are to apply to the Queen’s private estates. Amendment 35 therefore prohibits the Scottish ministers from confirming a compulsory purchase order that is prompted under section 37 unless the “appropriate authority” consents. The appropriate authority is defined for those purposes in section 80. Subject to the consent of the appropriate authority, the amendment continues to permit the use of a compulsory purchase order to assemble land for the construction and operation of a heat network.

Amendment 36 defines what is meant by “Her Majesty’s private estates” and “appropriate authority”.

Given the technological nature of heat networks, which are dependent on a density of heat demand being adjacent to a source of thermal energy, it is not anticipated that the exercise of compulsory purchase powers in relation to the Queen’s private estates will be a common occurrence. Nevertheless, given that licence holders will often be private enterprises rather than public authorities, to which compulsory purchase powers are typically provided, it is appropriate that there is further provision for their application in relation to Her Majesty’s private land. I urge members to support both amendments in the group.

I move amendment 35.

Photo of Andy Wightman Andy Wightman Independent

I oppose amendments 35 and 36. Prior to 1862, the monarch was prohibited from owning land in their personal capacity. The Crown Private Estates Act 1862, which legitimised and allowed the private ownership of land in Scotland by the monarch, was passed only following the death of Prince Albert.

I have no objection to the Queen owning property in a private capacity. However, she cannot, on the one hand, claim rights to private estates as a private citizen and, on the other hand, continue to be exempt from the rules that govern the affairs of all other private citizens who own land—most particularly, in this respect, the risk that, in the public interest, some of one’s land might be subject to a compulsory purchase order.

It is long past time that the 1862 act was repealed. Until the day arrives when it is, we should not be seeking to make any exemptions for Her Majesty.

Photo of Paul Wheelhouse Paul Wheelhouse Scottish National Party

I will keep my response brief. I understand members’ concerns about the amendments, but we have taken care to make it clear that the approach that is being taken is particular to the bill and is not an acceptance of a general principle, as it relates to the specific nature of heat networks and the business models that they often adopt.

I hear what Mr Wightman says, but it is not considered that a precedent is being set, and our understanding is that equivalent provisions have been included in other acts of the Scottish Parliament. For example, subsections (4) and (5) of section 100 of the Police and Fire Reform (Scotland) Act 2012 exempted Her Majesty’s private estate and, indeed, other Crown land from compulsory purchase.

As I previously said, powers of compulsory purchase are more usually conferred on public bodies or bodies with a community purpose, as the compulsory acquisition of land must be in the public interest. Heat network development is likely to be taken forward by the construction of both large-scale and small-scale heat networks. Therefore, licence holders cannot necessarily be directly compared with public utilities, which provide other services such as gas, electricity and water. In practice, it is probable that many licence holders will be companies that have been created as special purpose vehicles to operate particular heat networks.

In those circumstances, we think that the amendments are required to ensure the smooth passage of the bill.

The Presiding Officer:

The question is, that amendment 35 be agreed to. Are we agreed?

There will be a division. As it is the first division of the afternoon, I suspend proceedings for five minutes to call members to the chamber and allow members online to register.

16:06 Meeting suspended.

16:15 On resuming—

I remind members that we are at group 11, on compulsory purchase of Crown land. The question is, that amendment 35 be agreed to. Members may cast their vote now. This will be a one-minute division.

The vote is now closed. Please let me know if you have had any difficulty in voting.

The Cabinet Secretary for Environment, Climate Change and Land Reform:

On a point of order, Presiding Officer. I could not access the vote Parliament site at all. I would have voted yes.

The Presiding Officer:

Roseanna Cunningham would have voted yes. I will make sure that your vote is added to the register.

Division number 1 Heat Networks (Scotland) Bill: Stage 3

Aye: 108 MSPs

No: 6 MSPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Presiding Officer:

The result of the division is: For 108, Against 6, Abstentions 0.

Amendment 35 agreed to.

Amendment 36 moved—[Paul Wheelhouse]—and agreed to.

Section 76A—Heat networks delivery plan:

Amendments 37 and 38 moved—[Paul Wheelhouse]—and agreed to.

Amendment 4 moved—[Alex Rowley]—and agreed to.

Amendment 39 moved—[Paul Wheelhouse]—and agreed to.

Section 76B—Heat network supply targets:

Amendment 40 moved—[Paul Wheelhouse]—and agreed to.

Section 76C—Heat network supply targets:

Amendment 52 moved—[Maurice Golden]—and agreed to.

Amendments 41 and 42 moved—[Paul Wheelhouse]—and agreed to.

Amendment 53 moved—[Mark Ruskell]—and agreed to.

Section 77—Fees for applications etc:

Amendment 54 moved—[Paul Wheelhouse]—and agreed to.

Section 81—Regulations:

Amendments 43, 44 and 45 moved—[Paul Wheelhouse]—and agreed to.

Amendment 55 moved—[Mark Ruskell]—and agreed to.

Amendment 46 moved—[Paul Wheelhouse]—and agreed to.

Section 83—General interpretation:

Amendments 47 and 48 moved—[Paul Wheelhouse]—and agreed to.

Long Title:

Amendment 49 moved—[Paul Wheelhouse]—and agreed to.

The Presiding Officer:

That concludes consideration of amendments.

At this point in the proceedings, as members may be aware, I am required under the standing orders to decide whether, in my view, any provision of the bill relates to a protected subject matter—that is, whether the bill modifies the electoral system or franchise for Scottish parliamentary elections. It is my view that no provision of the Heat Networks (Scotland) Bill relates to a protected subject matter. Therefore, the bill does not require a supermajority in order to be passed at stage 3.