Economy, Energy and Fair Work Committee

Meeting date: Tuesday, September 1, 2020

Official Report 655KB pdf

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Heat Networks (Scotland) Bill: Stage 1

Agenda item 2 is an evidence session on the Heat Networks (Scotland) Bill. I welcome our witnesses, who are Gavin Mowat, policy adviser on rural communities at Scottish Land & Estates; Tammy Swift-Adams, director of planning at Homes for Scotland; Sarah-Jane McArthur, a member of the Law Society of Scotland’s energy law sub-committee; and Professor Roderick Paisley, chair of Scots law at the University of Aberdeen.

Each member will ask their question and I will then go to the relevant witness for a response. Members may wish to follow up on those points, and I will then move to the next member. Please keep your questions and answers succinct and allow broadcasting staff a few seconds to operate your microphones before beginning to speak to ensure that everything is broadcast.

To start with the bill and the definitions in it, given that heat and other technologies are fast moving, both in their development and in the ways in which they can operate or become part of a heat network, are the definitions in the bill sufficiently future proof to enable them to relate to current and future technologies?

Scottish Land & Estates considers the bill and its definitions to be flexible enough to allow for newly developed technologies to be added to heat networks. As you will be aware, the networks are quite agnostic, in that they can allow for the development of new technology. The bill is sufficiently flexible in that regard.

As Gavin Mowat has said, heat networks are technology agnostic, so many future generation technologies could be incorporated as they are developed. The definitions in the bill are incredibly broad. Although that is a good thing if you want to capture as many types of network as possible, there is potential for unintended consequences.

When Government comes to think about which types of networks could be exempted in future, it is worth considering, first, whether networks that are set up by an entity purely for self-supply should be caught by the licensing rules and, secondly, because of the broadness of the definition, whether generators of heat—operators of energy-from-waste plants, for example—would be captured within the licensing provisions. On the last point, as the bill stands, there is a risk that they would be.

You have touched on something that I was going to ask about. For example, are the definitions in the bill adequate to include waste heat producers? How do the definitions in the bill need to be improved, if they do? Are regulations—statutory instruments—flexible enough to deal with issues that may develop once the bill is passed?

I ask Sarah-Jane McArthur to comment, after which one of our two other witnesses might like to comment.

The definition of “network” is wide enough to capture waste heat users, in the sense that those will supply to a network. There are definitions in the bill that refer to “waste heat or cold”, but I would defer to people with engineering experience as to whether those will adequately capture the various producers of waste heat or cold in future.

Secondary legislation is probably the only way to retain the level of flexibility required to adapt quickly to future markets, given the constraints on parliamentary time to pass more primary legislation.

Professor Paisley, do you want to share any comments on those issues?

My comment relates primarily to the issue of wayleaves through land. A landowner with a pipe or cable through his land will want to know the answer to a simple question: “What, physically, is being done on my land?” With regard to wayleaves, before the bill is suitable, a bit more work is needed on the definitions, so that someone operating a heating system will be able to get a specific order requiring work to be done or enabling him to do work.

If witnesses feel that any aspects are not covered adequately or that they would like to comment further after the evidence session, the committee would welcome written comments on any of those issues.

Tammy Swift-Adams, do you want to comment on any of those matters?

Picking up on what Gavin Mowat and Sarah-Jane McArthur said about the definitions, Homes for Scotland members always look for flexibility in how different policy requirements or regulations can be met. Therefore, I welcome the comments that the bill’s definitions are technology agnostic and flexible.

On whether regulations are flexible enough to capture changes over time, that would be the preferred mechanism for our members for rolling out the policy, because they are used to using regulations for other technical aspects of building. Regulations are clear and familiar, so our members will be happy with that.

We now have questions from Richard Lyle.

Are there any practical differences between a licensing authority, as is set out in the bill, and/or a regulator, as is set out in the policy memorandum?

Again, there is a degree of flexibility in the bill on that point. To me, the regulator is the person who issues licences, determines who can get one, and then monitors the conditions of those licences, so, to my mind, it is just a difference in language rather than a difference in function per se.

Are there any comments from other witnesses? No.

No. I say to our witnesses that, unless you are specifically asked by a member, do not feel that you must respond to every question, but if you wish to come in, please indicate by raising your hand, or by commenting using the chat function.

Mr Lyle, does that conclude your questions for now?

Yes—that is fine, convener.

We will move on to questions from the deputy convener.

Do the witnesses support or welcome the proposed licensing regime? If so, should licence standard conditions be left to the licensing authority, or should those be in the bill? What are your views on each of those options?

I welcome the licensing regime that will be introduced. People across the sector are supportive of the bill. It is a step in the right direction to ensure that standards for heat networks across the country will be sufficient, and there will be a degree of consumer protection through the introduction of the licence standards.

On whether those should be in the bill or introduced by a licensing authority, the problem with introducing them in the bill is that they would lose flexibility. In the current electricity licensing regime, licence standards are updated frequently to deal with new technology or issues as they arise, and that can be done quite quickly. If it is desired, it would be fine to include general principles in the bill, but having the flexibility to respond to scenarios and to impose licence conditions and standards to deal with those as the market develops separately from the bill would be the best plan.

Do any of the other witnesses have a view on that?

To concur with what Sarah-Jane McArthur said, home builders would agree that it is right that customers who get their heat from heat networks get the same level of protection through regulation as they would get when using other providers. At this stage, we probably do not have a comment on the level of detail that should go into the bill, but I am sure that house builders would be supportive of the general principle.

The committee has heard evidence that the lack of standards in the area could lead to a situation akin to the wild west, which is quite a thought. Is there work to be done to develop standards that will be adopted, embraced, observed and followed? Is that important work that should continue?

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Much as we would agree that there is a need for regulation, there is a need for clarity for everyone involved as to what standards are expected. How those standards are laid out would depend on the detail. We would always ask that, through Homes for Scotland, home builders are involved in any collaborative work to develop the standards, to ensure that they can deliver the policy intentions without unintended consequences for delivery ability or customer choice.

I am not a technical expert in this area—I am a lawyer, not an engineer—but my understanding is that there are already voluntary customer protection standards through the Heat Trust, which operators across the market are signing up to. There are also standards developed with the Chartered Institution of Building Services Engineers. In contracts, we ask for networks to be built to those now well-established standards. Therefore, although I am sure that further development is possible, the industry is already moving towards a set of standards that it would be happy to sign up to.

We move on to questions from Andy Wightman.

Thank you, convener. Most of my questions are directed at Professor Paisley, although Sarah-Jane McArthur might also have some observations. First, thank you, Professor Paisley, for submitting your detailed evidence, which is incredibly useful to the committee. Obviously, you are one of the leading experts in the area. In creating a new system of regulations around putting pipes under the ground, it is important that we get the drafting correct.

Your evidence is detailed, which is useful, but, in summary, are you essentially saying that, first, we need to create these wayleaves as real rights? As I understand it, “wayleaves” is not a recognised legal term, but it is, nevertheless, in common usage. Secondly, you say that there are drafting issues, and you point out various examples of those. For example, interestingly, you say that section 60 is “English inspired nonsense.” Thirdly, you say that we need positive prescription. In summary, are those the three key messages in your evidence?

Andy, you are absolutely right. On real rights, my view is simply that, if all you have is a contract or an agreement—in other words, a personal right—with the landowner, the strength of the right available to the provider of the energy is only as strong as the individual who is the landowner at the time. If he becomes insolvent, dies or sells his property, that right will come to an end, which is absolutely inconsistent with a network that is intended to be long term or perpetual. It is important that the right is a real right, because that will allow the right to be perpetual and enforceable against third parties. As I pointed out in my evidence, the only people who are specified in this English-inspired nonsense who are bound by these rights are the owner and the occupier. That does not include anybody who goes on to the ground with a digger. It does not include anybody who has a lesser right, such as a banker who goes on to the land and just rips it up or someone who just wants to cause trouble. All that is needed is for those rights to be specified as real rights, and then they are more secure and enforceable against the world or anybody who interferes with them. It is a simple procedure. The term “wayleave” is commonly used, but it is much better to be technically correct, because it will then fit the Scottish system of landowning perfectly and it will not be an import from England, which is like oil on water to Scots law.

Thank you. To clarify, would the wayleaves that a telecoms provider might have down a country road or across a field for underground cables typically be a real right in Scots law? Would those typically be registered in the land register?

The answer to the second question is no. Anybody buying the land would not have a clue that that is in the ground. There is no public notice of that. On whether it is a real right or a personal right, a personal right is just a contract between, for example, me and you. It is not enforceable against anybody else. The statute is so obscure that, for most of the wayleaves for telecoms, it is very difficult to know what the right is. The telecommunications legislation does say that it is binding on the person who grants it and on their successors, but it tries to identify every single individual and to make it binding on them by specific drafting. All you need is a general statement that it is a real right, and then that right to put a cable in the ground is enforceable against everybody as soon it is constituted. It is much better if it is constituted on the land register so that everybody can see that the right exists.

Clearly, you have expertise in the area, and you have a view on how the legislation should be amended. However, there are many utilities, such as water, gas, electricity, telecoms and so on, that have wayleave agreements. Is the statutory basis for those equally open to criticism and subject to the sort of critique that you have provided to us on their use for heat networks? Are all utilities suffering from the problems that you outline in your written evidence?

None of those statutes is drafted to a particular style. They are all drafted individually. Almost all the statutes that you refer to suffer from those problems, at least in part, and some are worse than others. That is a goldmine for landowners who want to employ surveyors who ask for compensation once the land changes hands. There is no real regulation of that aspect. We are not going to get into a general review of the law of wayleaves here, but the law of wayleaves is an absolute shambles in Scots law. It would not be a good idea to model what you propose to do in the bill on what is already in legislation, drafted by the Westminster Parliament, which has not got the foggiest clue about how Scots law works.

Thanks. Essentially, you are saying that this is a new statute that is being proposed and that a very important part of it is the law around wayleaves, so we should get it as good as it can be, particularly in light of the history of statutes and various case law, which have shown its deficiencies. Your position is basically that we should make this as good as it can be.

Absolutely right. I agree with that, yes.

Thanks. I think that you say in your evidence that there are no real rights created in the bill. Is that correct?

As far as I can see, there are no real rights created in the bill. The nearest it comes to that is the so-called necessary wayleave, which binds the owner and the occupier. However, that just binds the owner and the occupier and nobody else. It would be much clearer if it were simply stated that those rights could be real rights. It is possible that you might want just a temporary agreement with a landowner, to locate some equipment for a limited time, for example. However, it is much easier to have a simple statement, as has been done in other Scottish Parliament legislation, such as for the trams in Edinburgh. You simply have a sentence that states: “These rights are real rights.”

That is very helpful. To be clear, real rights created by statute do not necessarily have to be registered in the land register to be real rights.

You are correct. Parliament is sovereign and can do whatever it likes. Rights do not have to be entered in the land register of Scotland to make them real rights. You can say that they are real, and, like fiat lux, they just come into existence when they are constituted by being signed. However, that leaves the problem of where you go to find out the location of the rights. If I buy a piece of ground, how can I find out whether it is affected by a pipe or a cable or a wire or a duct? With most wayleaves, you have to phone up the various statutory operators, who say that they have lost the records or that the records are incomplete. It is far better to have an idea of who owns land in Scotland—the general policy is to make it as obvious as possible to the public—but also of what derivative rights there are, such as wayleaves.

That is not difficult to do if you are setting up a new system. I agree that it would be impossible now to go back and to try to have a registration of all ancient electricity wayleaves, gas pipelines and everything else. However, we are setting up a completely new system, and if we start from scratch and require those to be registered, it will not cost very much, and it will ultimately save a lot of money by allowing anybody who is buying land or dealing in land to know exactly what they are dealing with.

Yes, I understand that it is a long-standing problem with utilities that we cannot easily find that out, and that is probably not going to be solved by the bill. It would an added advantage if it could be.

Turning to Sarah-Jane McArthur, in the Law Society of Scotland’s evidence on part 6 of the bill, you essentially say nothing. You say that you have nothing specific to add and that the powers seem similar to those for utilities. I do not know whether you have read Professor Paisley’s evidence, but he has identified what he believes are quite significant flaws in part 6. Why do you think that you do not have anything to add on the matter?

I have now read Professor Paisley’s advice, which I have no particular comment on. To explain, I am a contracts lawyer. I deal quite a lot in the delivery of such schemes, but I am not a property lawyer. Therefore, the Law Society would need to ask our property committee whether it had a view on that. I am happy to follow that up in written evidence, if you would like confirmation on that.

Yes, that would be helpful. I assumed that the Law Society’s evidence would have covered property rights, if it were commenting on part 6. That would be useful. With all respect to Professor Paisley, he has specific concerns, which I do not doubt are probably valid, but it would be useful to get some other views on that so that the committee can come to its own view on the extent to which the bill may be amended. That is all from me just now, convener.

Thank you. To follow up Mr Wightman’s questions, Professor Paisley, if I may put it in layman’s language, your point is that, if one makes these real rights and they appear on the land register, people then know where they are at, because someone buying a property sees it in the land register and they know what they are getting. Is that a fair summary?

That is a summary of about a quarter of it. Not only—

I am sorry, I was not suggesting that your detailed submission could be limited to those two sentences. Is there a mechanism or have you proposed a mechanism whereby such rights, if entered as real rights on the title sheet of a property, will also be removed if they cease to exist? As you will know, the land register includes ancient rights and so forth that get carried over into the title sheet but which are completely irrelevant in the modern day. Would it also be useful to have a mechanism whereby rights are removed when they cease to apply?

Absolutely, yes. In my evidence, I give some idea of how that could be done. The creation of these as real rights and their availability to be seen by the general public are important, as is getting rid of those real rights in due course. However, critically, right at the core of it, is the enforceability of those real rights. In practice, wayleave rights are only enforceable against the other party, and they are as weak as the other party. If I enter into a contract with a man of straw, my contract is worthless, but, if I have a real right, it is enforceable against anybody else interfering with the system that is in the ground.

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Thank you. One is a personal right, which is something that I can enforce against an individual, and the other is a real right, which can be enforced by anyone against anyone, as it were. Gavin Mowat, you have not had the opportunity to comment yet. Do you have anything to say on the issue of real rights and their appearing in the land register? Would that be useful to your members?

I do not have a specific comment on the evidence from the Professor. I am not an expert in that area, but I am happy to go back to our legal group and come back to you with written evidence on that specific matter. More generally, the knowledge of where infrastructure is as part of the lie of the land would be very useful to our members. We have frequent issues with utility providers related to locating where infrastructure is in the ground, and we have a number of problems related to that. If there is a mechanism that can better determine those factors, SLE would support that. I would be prepared to submit some written evidence to support that.

It would be useful to have written comment, if that is possible. We move to Rhoda Grant for the next questions.

We have heard evidence that there is little in the consenting process about fuel poverty. The process is about scale and about decarbonisation. However, we also heard that, if excess energy was produced, it would obviously have to be paid for and that it would be added to the bills of those energy customers. Is there enough emphasis on fuel poverty and how we could redress it?

There is a large degree of flexibility within the licensing arrangements, such that, if policy makers wanted to put in place pricing restrictions, it would be possible to do that through the licensing regime. I do not think that anyone would disagree about the need to address fuel poverty. Delivering at scale tends to reduce the costs for everyone who can join the network.

I see that no one else has a comment. Moving on, should there be a right of appeal? As well as the issues that I raised about fuel poverty, there is deemed consent. The bill is obviously designed to make it easier to get heat networks through the planning process, but are there enough checks and balances in the system?

To my understanding, the legislation has been modelled on the approach taken to electricity projects, so a lot of the language is taken from the Electricity Act 1989. Under that regime, the right of appeal, in effect, is by judicial review, and that same right would apply in relation to the decisions of Scottish ministers to award consents. Therefore, if the ministers decided to award a consent but there had not been due process, there would be the right of judicial review.

That said, I understand that there is a desire among those in the sector to have a clear appeals process, so that the basis upon which the decision has been made and the factors that were taken into account in the decision could be challenged. However, I understand that that is not in the bill, and to include it would be inconsistent with the approach taken for electricity projects, for example.

On that point about appeals, you mentioned judicial review. Am I right in saying that that can currently take place only in the Court of Session? Considering the attendant costs, what would your suggestion be for a better set-up for appeals or a review of the process, with regard to the ease of bringing the appeal, the cost and the accessibility for the parties?

Forgive me, but I do not feel terribly qualified to give you an answer on that this second, with a design of a revised appeal process, but I can follow that up separately, if you would like further thoughts on that.

Yes, it would be very helpful to have written comment on that. I will hand back to Rhoda Grant.

I am happy with those responses.

Thank you. Colin Beattie has the next question.

Thank you, convener. To expand a bit on Rhoda Grant’s questions, on planning permission, to what extent should local authorities and communities—who we hope will be the customers for many of the heating systems—have a role in determining applications? Should a size of network be specified under which local authorities and communities have a locus in the process? Most of the heat networks will probably be of a reasonably small size. Could there be better or more input locally? Perhaps Gavin Mowat could comment on that.

Given the growing expectations around involving communities when significant decisions are being made in relation to land, the consenting process should also do that in some way, not least because it is a good opportunity to have an engaged community that is informed about exactly what district heating is. There might be an element of naivety or people might not know exactly what it is and how it could benefit them.

The flip side of that is that we appreciate that adding a planning process to the licensing and permitting process will inevitably increase bureaucracy for any development, which could have an impact on the viability of a scheme, particularly a small scheme.

I take your point on that, but I would challenge one thing. We do not want bureaucracy—we want these networks to come on stream relatively quickly and without difficulty—but the communities will also be the consumers of the product and many of the systems will be very localised. Should there be more in the bill about bringing communities into the process? I am sure that we are capable of doing that without creating too much bureaucracy. If we just leave them out, are we not storing up problems?

I tend to agree with you. The point that I was going to make is that, essentially, it is perhaps more realistic to apply the approach taken with electricity generation, where small developments up to a certain size can be given consent by the local planning authority and anything larger needs consent from ministers. Precisely as you have said, it is a case of trying to get the balance right between not leaving the community out and ensuring that people know what is going on and how the development process works. Just to give you an example—

Should there be more in the bill about that?

The difficulty is that there is an opportunity for the local heat and energy efficiency strategies and the zoning districts to involve communities quite a lot on where there could be district heating. It is a shame that the local heat and energy efficiency legislation is not coming in before this bill, so that we could know what sort of community engagement there will be in that process. There could be a need for more in this bill but it is difficult to say without knowing what the local heat and energy efficiency strategies might include.

Does Tammy Swift-Adams have a view on that?

Yes, thank you—I have been waiting for a planning question as it is an area that I am comfortable in. I do not think that there is a need for anything specific on planning and community engagement in the bill because of what has already been put in place in the Planning (Scotland) Act 2019.

The 2019 act does a couple of things. First, it improves and expands on existing requirements for pre-application consultation with communities on certain types of development. I believe that the categories and scales of eligible development are set out in regulations. Therefore, if there was a need to revise those definitions to pick up anything on the heat networks, there would be scope to do so. Some of the networks might already be covered by that, depending on whether they are coming forward through their own planning permission or as part of a bigger strategic application, through master planning or the planning permission process. I am not entirely clear on what permissions would be needed. However, either way, there is scope there to bring them into the fold of community engagement.

Secondly, under the 2019 act, there is a strategy requirement on the planning minister to introduce guidance on how to involve communities more effectively in planning matters. Again, that requirement is all embracing in terms of the type of development to which it could apply.

There is a practical point about how you would deliver the schemes. Often, if a heat network is being delivered alongside a new development, the network would be given consent as part of that development. The two would come together and the timing would be consistent. One issue with the framework in the bill is that all heat networks will require consent from Scottish ministers and there is no guarantee that the timeline for that would run alongside the planning permission for the development. Therefore, in practical terms, it may make sense for a heat network to be included in planning permission for new developments, without requiring a separate consent. That may address some of your concerns.

I have a personal view that it would seem to make sense that Scottish ministers would not need to give consent to particularly small schemes, which might be better left to local decision making, in the same way as happens with the planning system or, indeed, with consent under the Electricity Act 1989. Small schemes receive planning permission and larger schemes require consent from ministers.

One of the issues is how you specify the size of a scheme. When is it a small scheme that will fall within the remit of the local authority and local community engagement, and when will it fall within the remit of Scottish ministers? Do you exclude Scottish ministers from a certain size of project? You could get into quite a debate on that, and I am not sure how you would resolve that. Do you have any thoughts?

It all comes down to definitions, I suppose. It is for policy makers to determine what they want to achieve and then for the legislators to try to define that as accurately as possible. I understand your point about the potential for local people to be more involved in the smaller schemes.

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Local authorities have duties on matters such as zoning, awarding permits and so forth. How does that fit in with the proposal?

That is one of the areas in the bill that probably requires some clarification. This is very new—we have not regulated heat networks before—and the bill introduces four new concepts: there is a licence, a consent, a zone and a permit. It would be helpful to have a flow chart or a guide as to how it is intended that those four different concepts will flow together. For example, what happens if you get your licence at a different time to your consent? Do you need to have a licence in order to apply for a consent? Thought needs to be given to how those concepts interact.

On the duties around zones and permits, those make a lot of sense when you think about delivering heat networks at scale. It makes sense to strategically lay out a zone that is suitable for heat networks and then to give someone a permit to run that zone. However, once a zone is created, there is no requirement to issue a permit. Therefore, you might have decided that a zone is suitable for heat networks, but if there is then no requirement to say whether you are going to issue a permit or a timeline for that, that could create more risk of heat networks not being built in that area, while it is zoned but not permitted.

The other issue about the duty to consider zones is that it would be helpful if local authorities were given a bit more guidance on what they have to consider in order to set the zone. What factors do they have to take into account, and what areas are we expecting them to cover? Also, we should bear in mind that local authorities will need to be resourced and supported to enable them to complete that task.

Thank you. Andy Wightman wants to come back in on one or two points.

Thank you for that last point, Sarah-Jane McArthur; it is an important one, because it is unclear how some of these things link together. For example, under section 18, “Exemptions from requirement for heat network consent”, regulations can be introduced to exempt certain applications. That could be based on size and so on, but there is no such exemption for deemed planning permission or for granting or modifying heat network consent in section 35.

Under section 11, “Revocation of heat networks licence”, there are no regulation-making powers, and there is no right of appeal. Ministers can revoke licences just as is set out in the bill. There are no regulations to modify or set out the circumstances in which revocation can take place, and there are no appeal rights. However, section 24, “Revocation of heat network consent”, is a very brief section, which just states:

“The Scottish Ministers may revoke a heat network consent in such circumstances and in such manner as may be specified by them by regulations.”

In other words, in revoking consents, we are giving ministers huge freedom, by regulation, to determine the circumstances of revocation, but there is no flexibility whatsoever on the revocation of licences, and there is certainly no right of appeal. Does anyone have a view on whether those two sections should be consistent?

Again, I would draw a parallel with the position in relation to electricity licences. The Electricity Act 1989 is quite light on the detail of when Ofgem can revoke the licence, because the circumstances in which the licence can be revoked are set out within the licence conditions. The circumstances in which revocation might happen change over time, because, as new conditions are entered into the licence, breaches of some of those conditions may trigger revocation, while breaches of other licence conditions may not. Therefore, the process is outwith the legislation. I acknowledge that it is not clear whether that is the intention here. However, that would be a way to manage that issue.

That is helpful, because section 11(1)(b) states:

“has failed to comply with a condition of the licence.”

In essence, you are suggesting that, following the model of the Electricity Act 1989, it would be better to leave the circumstances of revocation to the licence or, as section 11(1)(a) states, to the circumstances where the person holding the licence

“no longer has the ability to perform the activities authorised by the licence”.

Therefore, you would not have any regulation-making powers or appeals but essentially leave that matter to contract law.

You would leave it to the terms of the licence, because, over time, the licence conditions will change, and the conditions that may trigger revocation would therefore need to change as well.

Thank you. We now come to questions from Maurice Golden.

Thank you, convener. I am interested in the transfer of the schedule of assets when an operator ceases or is required to cease operating those assets. What are witnesses’ thoughts on the strengths and weaknesses of the transfer scheme set out in the bill?

We made a point in our written submission about how you might capture existing assets. One of the purposes of the asset transfer scheme is to enable a replacement operator to be brought in to continue supply to customers who are already connected to a network. However, the way in which those assets are known to ministers is through the consenting process. Therefore, if infrastructure was not consented because it already existed, there would not be a list of key assets to transfer. If there are networks that are not being operated properly at the moment, the ability to use that transfer scheme to resolve that and to pass the network on to a new operator might be defeated. As it stands, the transfer scheme would not work as intended.

We know that the transfer scheme is trying to get towards an operator-of-last-resort-type function, but that is not what it actually does, because we would have to try to transfer assets to a new operator. It is not as easy as transferring contracts. I would defer to Professor Paisley—if he has also looked at that section of the bill—with regard to the property rights, how we would be able to transfer assets that belong to third parties and how that might affect the on-going ownership of their property, if the network assets are being transferred without their control.

The transfer scheme in the bill would operate in a similar way to a transfer between a defunct local authority and a new local authority, or almost like a bankruptcy or insolvency scheme. It will work, but the regulations will require to be relatively generously phrased, because the assets will include not only rights in things that are corporeal, but incorporeal rights, such as rights to enforce contracts, rights to sue people and the like. However, that is perfectly manageable; even if it were to be the case that some of those rights would be in the land register, which is ultimately for Parliament to decide, the scheme can work.

Those involved in conveyancing will know and be familiar with that type of general transfer of assets that is used as a link in title. I like the scheme; it is a good idea and it will be capable of being a sweeper. I would like to see an express statement that the initial transfer scheme can get it wrong. It should be possible to make a supplementary scheme to sweep up things that are subsequently discovered. Beyond that, I am happy with the scheme.

Professor Paisley, do you have any thoughts on how assets that are already in existence might be dealt with under the legislation?

May I ask you a question before I answer that? When you say, “assets that are already in existence”, do you mean pieces of land or equipment, or something like that?

Yes. Existing—[Inaudible.]—scheme.

The critical thing here is identification. As long as we know that the material exists and can be identified, it can be identified in general terms—I do not think that you need a schedule of every nut and bolt. In a sense, it could be as general a transfer as, for example, a will. A will is a transfer, and you have a residue clause in a will, along the lines of, “I hereby convey all my property that I have not otherwise particularly disposed of.” A transfer scheme can work like that.

Given that the bill, in essence, creates localised monopolies, what are the likely impacts on consumers? How best would we regulate that to ensure correct pricing and a minimum level of service?

I had perhaps better let someone else have a go at that question. Sarah-Jane McArthur knows a lot more about that than I do.

It will be possible to introduce a lot of consumer protection provisions in the licences themselves, although we all acknowledge—as did the Government when it promoted the bill—that the Scottish Government does not currently have the legislative competence to enact consumer protection provisions to the level that it would want in the bill. I am not going to suggest how best to resolve that devolved competence issue, but I understand that discussions are on-going as to whether ministers should be able to get competency in relation to heat networks to enable ministers to enact those provisions. However, it will be possible to achieve a level of protection through the licence conditions.

Do any of the other witnesses have comments on either of those questions?

Home builders would like that question to be resolved as well, because anything that reduces choice for the occupier of a new home, including choice about where, as a customer, they take their heat from, has a potential knock-on impact on demand for, or interest in, new homes. Those issues are combined; we need to maintain the market for new homes and the interest in them, and we need to ensure that the occupiers of new homes have similar rights and options to those of consumers in the second-hand market.

How can that be resolved? Clearly, the operator requires that demand to allow it to function. How can that be squared with consumer choice?

I will take that question back to the technical forum, because it is an area that moves on every time innovation or policy changes. I think it would be best for me to submit something in writing to you on that.

Thank you. I have no further questions, convener.

Thank you. We now move to questions from Gordon MacDonald. Richard Lyle might also have further questions on the same area.

Thank you, convener. I will follow on from Maurice Golden’s questions. To deliver heat networks, we need to ensure that there is enough demand within a proposed heat network zone to attract investors. Last week, the committee heard evidence calling for the bill to be strengthened by the introduction of an obligation to connect new buildings, public sector buildings and non-domestic buildings within heat network zones. Should there be a duty to connect all new buildings? What would be the advantages and disadvantages of adopting that approach? Tammy Swift-Adams might want to go first, given her planning background.

10:30  

The consideration that jumps out at me is whether any disbenefits or burdens that might result from making that a firm requirement on either the builder or the occupier of the home—whether the development must be a compatible development, or there is a requirement to be a customer, in effect—come with a good enough reward in policy outcomes. Given that new-build homes have fairly low heat demand, because of energy efficiencies that have been achieved through building standards, it might be that there is not enough gain from requiring occupiers of new-build homes to be customers of a heat network. Again, I can confirm that in writing and possibly add some detail. I understand where the question comes from, but new-build homes are unlikely to be the bulk of the users of the heat.

Does anyone else want to comment?

I would like to make a comparison with the existing duty to connect to services that lies on water authorities and electricity authorities, for example. Invariably, the statutory provisions are hedged about with a limitation that it is required that the obligation to connect be complied with only if it can be done at reasonable cost. In the majority of my experiences of dealing with operators, that is a complete get-out, because—to link back to what I said earlier about wayleaves—they simply say, “Because we require to obtain rights in land to put the system through to you, we’re not going to comply with any obligation to connect unless you, Mr Consumer and Ms Consumer, go and get those rights for us.” If you are going to put an obligation on the heat-transfer provider to connect to particular houses, you will need to draft the legislation quite tightly so that there is not the same get-out as already exists more widely for electricity and water suppliers.

Section 39 of the bill identifies key criteria to be considered in identifying anchor buildings. Are those criteria adequate or are changes to the bill required?

I would probably add to that that there is a presumption that the supplier will actively take steps to exercise its powers to connect. In other words, suppliers cannot shovel the responsibility to acquire the rights on to the person who wishes to receive the heat. There must be a presumption that the provider will exercise its rights and will basically try to make the system work and expand it, rather than put that responsibility on to the person who wishes to receive the heat.

Does anybody else have a view on that?

On the first question—about the compulsion to connect new builds to a heat network—Tammy Swift-Adams touched a bit on technology development in house building. It is worth bearing it in mind that the energy efficiency of new-build homes is improving all the time, and is moving towards carbon neutrality. With developments such as passive houses, making those connect to a heat network would defeat their purpose by spending money for no effect. There will be instances when new-build houses will not need to be connected to heat networks because they are passive houses, or because some technology that is yet to be developed means that they already meet a very acceptable low-carbon energy-efficient standard.

Finally, given that part 5 requires that building assessment reports be carried out only on publicly owned buildings, is there a risk that community-owned assets will be missed? Does anybody want to volunteer?

May I come back on the suite of questions that you just asked? The main policy intent of the bill is decarbonisation of heat in Scotland. The biggest prize in that sense, as Tammy Swift-Adams and Gavin Mowat have alluded to, is not suburban new builds but city centres, old buildings and dense urban areas. The creation of heat network zones and suggesting that that is where we will make great strides forward in decarbonisation, without there being some kind of compulsion that the core anchor loads that have been identified connect to the network, would defeat the policy aim of the bill.

I am not necessarily a supporter of requiring domestic consumers to sign up for anything like that. Also, identifying key anchor loads in an area then not having them connect effectively will mean that the zone that has been set will not be as effective as it could be. On building assessment reports, when, having done a report, it can be seen that a building is particularly suitable for connection to a heat network, not to require then that it be connected, or—at least—not to require an explanation for why it cannot or should not be connected, is a failing in the bill.

How would you change it? Would you just put that duty in the bill?

Yes. I would ensure that the building assessment reports be required for more than just public sector buildings, for a start, and I would ensure that, if the building assessment report says that a building is suitable for connection to heat network, there would be a next step of having to explain any decision not to connect. If, for example, a building has had a new heating system installed in the past year, it might not make economic sense to rip that out and connect to a heat network, but it might make sense to do so in five or 10 years, which could be built into the report.

Richard Lyle has questions on that.

Thank you, convener. I have two questions, one of which is for Sarah-Jane McArthur, who has given us quite a lot of good information, and one is for Tammy Swift-Adams.

Sarah-Jane, are you suggesting that we use the bill to retrofit old buildings, rather than to create new networks, as was done with water, gas and electricity many decades ago?

Networks that have been rolled out recently in Glenrothes and Stirling are supplying buildings that already existed. The network is new, but the buildings are not. I appreciate that the Scottish Government has a fabric-first approach, which is correct from a decarbonisation perspective. It might make sense to put energy efficiency measures in those buildings, which would improve the efficiency of the heat network, as well. “Retrofitting” is perhaps the wrong word, but using heat networks to serve existing buildings in dense urban areas seems to make more sense from a decarbonisation perspective than does rolling out heat networks only to new energy-efficient suburban buildings.

In that way, we would get an instant hit, instead of waiting a long time for the benefit. Is that what you are saying?

Yes. New build does not account for very much of our built environment.

Thanks.

This question is for Tammy Swift-Adams. How, from a planning perspective, could the designating and permitting process be improved to ensure a more strategic and joined-up approach to local implementation of national policy?

Perhaps more than the permitting process, it is the development and planning process that needs to be dovetailed with that policy area. Sarah-Jane McArthur mentioned earlier that local authorities and planning authorities will need guidance on how to support that. That is particularly true with regard to how to develop a 10-year local development plan that supports the roll out of heat network maps, which has spatial strategies and suites of site allocations that are compatible with emerging heat network zones, but which does not go down the road that planning sometimes goes down of having too-rigorous or too-blunt tools, in terms of planning policies.

Over the past few years, we have seen planning authorities and the Scottish Environment Protection Agency trying to use the planning system to start to roll out district heating policy. They did that by putting policy requirements on individual residential developments that asked, at that last stage—the permitting stage—that viability assessments be done on whether a particular development in itself could fund and incorporate heat networks. Of course, all that that resulted in was a series of viability studies that said that they could not support that, for the reason that I mentioned earlier—heat demands were too low, even with quite large strategic housing developments.

As Sarah-Jane McArthur suggested earlier, we must, for any area, identify a spatial strategy that is right, in terms of where it is possible and viable to achieve new development, but which also considers where the best gain is to be had from a heat network. Again, it is harder to do, but the gain will always come from aligning a heat network with where there is highest demand for heat.

The programme for government for 2019-20 states that emissions from buildings account for about 20 per cent of Scotland’s greenhouse gas emissions, which is obviously why there are policies and bills such as this. However, the amount of those emissions that comes from residential properties, whether from existing or new-build properties, will be relatively small compared to industry, education and buildings that are open all the time. Within that relatively small amount, emissions from new-build homes—those that are being built now and those that have been built in recent years—will be very small. I will see whether I can get a figure for that, although I am not sure that I can.

With planning, the task is not to take what, I guess, some would see as the easy option of saying that we will use new development as a trigger for asking for heat networks to be rolled out and funded, but to look at how the planning system could better achieve the policy outcome.

From a planning point of view—I am going to put you on the spot—we need waste heat plants, but most people oppose those, so how would you implement a waste heat policy, from a planning perspective? Do you have a view on that, or is that not possible at the moment?

I do not have a view on that specifically, but it is one of many examples of changes that can happen in the built environment that communities will not automatically welcome. That is why the planning reforms are focusing so much on pre-application consultation and community engagement. That is not about asking communities questions in a tick-box way; it is about bringing in more opportunities, whether you are a developer, local politician or a planning officer, to help communities to see how all the policies on net zero carbon, district heating, housing delivery and so on relate to what happens through the planning system.

I cannot comment specifically on the type of development that you are asking about, but it is typical of a range of challenges for communities in planning.

10:45  

From a planning point of view, can the bill work?

My understanding, from colleagues and home builders who have looked at the bill, is that there are questions to which we want answers before we can say whether it could work. I will try to look at that again and address it in writing after the committee meeting. The evidence session has been useful for me; I will look at previous sessions then come back to you with a fuller view.

Ladies—thank you both. Thank you, convener.

Our final questions are from Alison Harris.

Part 5 of the bill places a duty on public-sector building owners to assess the viability of connecting their building to a heat network. Why does that duty not apply to all non-domestic buildings? Should it be extended? I am happy for anyone to answer.

As I said earlier, in order to make the building assessment reports really work as part of wider heat network zoning, it makes sense to expand the number of people who have to do that—certainly, to include big non-domestic buildings. However, that is ultimately a decision for Parliament and policy makers.

Does anyone else have any comment on that?

From the Scottish Land & Estates perspective, local authorities seem to be in the best position to develop the initial spine of the network, because they have, throughout their regions, large non-domestic assets that can provide anchor loads. Significantly, many of those tend to be—[Inaudible.]—domestic properties that are, essentially, near the demand.

It makes sense to start there, at least, but it is important to remember that it is not about ensuring that local authority buildings are assessed just for the sake of it; it is important that they are assessed in terms of the fact that they have demand next to them. The same should be true for private community assets and local authority assets. There is no point in assessing a building that is in the middle of nowhere and which is unlikely to be part of any network in the near future. We need to assess buildings that are near demand.

Thank you. Is it likely that the process will rely on existing data from energy performance certificates? If so, what are the strengths and weaknesses of that approach?

We think that relying on EPC data to predict demand for heat is not entirely sound. SLE has consistently called for review of the EPC methodology, which we consider to be flawed, particularly in respect of existing housing stock. We have a number of examples on which we can write to the committee in more detail. Essentially, our members’ experience shows that costly upgrades to properties often result in insignificant, if any, increases in EPC ratings.

That is largely due to a reliance on using model data—[Inaudible.] There is concern that if you start basing assessments on data such as that which is gathered in EPCs, systems might be oversized or undersized, which would result in people being either overcharged or not being supplied with adequate energy.

SLE suggests placing more emphasis on the environmental impact rating, which is a measure of a home’s impact on the environment in terms of carbon dioxide emissions. The higher the rating, the less impact it has on the environment. That rating is based on the performance of the building and its fixed services, such as heating and lighting, and it is potentially—[Inaudible.]—to this. I am happy to provide more information.

Thank you.

Thank you. We have a final brief supplementary question from Andy Wightman.

Thank you, convener. I will follow up on Professor Paisley’s evidence.

We discussed creating real rights and the land register, as did the convener. I want to be absolutely clear. Creating a real right in the bill would resolve many of the problems—not all of them—that you identify, but can you confirm that it is not necessary also to make those real rights registrable in the land register? Desirable as that might be, it is a separate question. The very creation of those real rights by statute would achieve much of what you want. Is that correct?

It is possible to create a real right without going anywhere near the land register. Such rights do not need to be registered in the land register. A statement in a statute that a right is real suffices.

That is helpful. Therefore, all the consequences would flow from such a real right in law.

That is correct.

Thanks very much.

I will follow that up. The difficulty with that can be that people do not know that the real rights exist. The purpose of the land register, in public policy terms, is to have a public record of all rights that are real rights affecting land, is it not?

That is absolutely correct. It is possible to create a real right by a statutory declaration that, if an agreement is entered into, a real right will flow from that agreement. However, the agreement could be stored under somebody’s bed and no one would be able to see it. It is important for anybody who is not a party to that original agreement to be able to get a copy of that to see what its terms are, particularly about depth, width and the type of material that is going down a pipe.

If you are buying land, it is important to be able to get such information, not from a private person who might charge you for it, but from a state register that is open to everyone without the need to demonstrate an interest. That is the difference between us and England. In England, a person must show that they have a legitimate interest in order to be able to look at the register. In Scotland, everybody—this is very important—has the freedom to look at the land register to find out what the responsibilities and rights are in relation to a piece of land.

I thank you very much, Professor, and I thank our other witnesses.

We will have a brief suspension before agenda item 3.

10:54 Meeting suspended.  

10:58 On resuming—