Heat and Energy Efficiency Zoning:

A framework for net zero for new The Association for and existing buildings Decentralised Energy Acknowledgements Contents

The Association gratefully acknowledges the 4 Executive Summary & Introduction contribution of the following to this report: 6 Crucial to the transition – distributive fairness. 6 Key principles

ADE members & ADE Heat Networks Working Group Heat Networks Industry Council 7 What is a local planning authority?

BEIS Heat Trust 7 The Retrogap

Bristol City Council Local Partnerships 8 Zoning

Calor Gas National Grid 9 Identifying zones

Camden Council Policy Connect 14 Heat Hierarchy Citizens Advice Renewable Energy Association 16 Creating a framework Citizens Advice Scotland Renewable UK 20 Outcomes of zoning Competition and Markets Authority Scottish Futures Trust 25 Summary: what will zoning achieve? Convention of Scottish Local Authorities Scottish Government 29 Key messages / actions for governments E.ON Scottish Renewables 32 Asks of government departments Elexon South London Partnership 36 Some unanswered questions Energy Networks Association SSE Enterprise 37 Annex Energy Savings Trust Telford Homes

Energy Systems Catapult Tim Rotheray

Engie UK Power Networks

Ground Source Heat Pump Association University of Birmingham Greater London Authority Vattenfall Who and what is this paper for? Haringey Council Vital Energi

Heat Pump Federation Welsh Government This paper contains policy proposals for the UK, Scottish and Welsh Government (‘the governments’) to create a national framework for decarbonising heating and deploying energy efficiency solutions.

This framework would allow different administrations to tailor policy at a national and local level. This framework could also be implemented within a single government cycle.

In particular, this paper seeks to help inform the development of the BEIS Heat & Buildings Strategy, Scottish Government’s update to the Local Heat and Energy Efficiency Strategies (LHEES), the development of the Heat Networks (Scotland) Bill, and Welsh Government’s National Development Framework.

2 3 Executive Summary & Introduction

What is this paper trying to achieve?

Legislating for net zero by 2050 and the supporting area would bring with it a set of policies specifically Energy’s greatest myth: the silver bullet Local areas benefit from differing local work by the Committee on Climate Change designed to support particular solutions to come opportunities, limitations and priorities – some (CCC) has jumpstarted the UK’s ambition for forward, through a mix of planning policies, Most key stakeholders and relevant organisations have better access to wasted heat, some have decarbonisation, and decarbonising our heating building regulations, funding, and more. agree that, on the road to net zero, there is electricity grids that would need to undergo costly is part of the puzzle, with clear linkages to the no clear single-technology pathway for heat reinforcement, some are heat dense, some will rely 2 decarbonisation of transport and power, too. The Zoning Framework is based on the idea that decarbonisation . Instead, most agree that a on private transport and see high EV deployment, areas that can move early, should. It explores a combination of low carbon heating solutions will be some have high temperature industry, some At the moment, discussions around single- phased approach to implementation, that will needed to achieve net zero. Yet, we continue to see prioritise air quality, and so on. As such, the least- technology pathways remain common, with the allow those areas that may need to rely on high the idea of a single-technology pathway discussed cost, lowest carbon opportunity for local areas will conversation often dominated by the hydrogen temperature, low carbon, evolving or innovating in government and amongst industry, and there is differ across the UK. or electrification (typically heat pump) pathway. fuels and technologies to do so. currently no clear heat decarbonisation and energy But the picture is more diverse than just hydrogen efficiency framework that allows us to progress a It is crucial that the governments of the UK embed boilers and heat pumps, with options such as It explores how this phased framework will enable patchwork approach to heat decarbonisation. the principle that there is no silver bullet for bioLPG, biomass, storage heating, solar thermal, a learning-by-doing approach. It explores how decarbonising the UK’s heating, and that there is hybrids, heat networks, geothermal and more, signposting fuels and technologies will create clear If we know that heating is not as simple as finding a no solution which will not require some level of one-size fits all solution, why do we still see advocacy offering solutions. investment pipelines, bringing local growth, and disruption for energy users3, into UK policy. The for single-technology pathways? Why is the hydrogen certainty around investing in local skills to deliver sooner that the governments begin consistently vs. heat pumps debate still so common? Why are we We repeatedly hear this phrase ‘no silver bullet’ for the local pipeline. and clearly communicating this message, the better still looking at this locally-specific issue as though heat decarbonisation, and generally understand our chance of achieving consumer acceptance, it can be tackled solely at a national level? How can that heating is locally specific, so why, then, are we Crucially, it investigates a framework for consumer and the greater the likelihood that the appropriate we create a framework that brings together of all the still discussing single technology pathways? Heat participation – for how we bring consumers along policy solutions will be deployed. is inherently local, and the right solutions will differ with us in our journey to net zero, creating clear work happening locally and nationally, within industry from area to area. There is no clear, single pathway opportunities for involvement in decision-making, and government, on hydrogen and electrification and This should be adopted alongside messaging that for decarbonising all of the UK’s heating, and allowing them to receive a clear benefit from the other forms of low carbon heat, to create a whole- persuades users of the value of decarbonisation we must press on with decarbonisation with this energy system, plan for their future, and crucially, systems approach to net zero? action – but to create this messaging, we need understanding. Climate change will not wait for us. create distributive justice across the UK. to allow the low carbon industry to identify a consumer offer around cost, carbon and comfort This paper will explore a local approach to heat Our ask is for the implementation of an by creating a supportive policy environment. decarbonisation and energy efficiency, touching on appropriately resourced Zoning Framework which how this will in turn enable us to decarbonise our enables a local approach to heat decarbonisation energy grids and transport. The ADE advocates and energy efficiency1 improvement to identify the for the introduction of ‘zoning’ for heat and energy best technology/fuel solution for an area, including efficiency – of taking a view of local opportunities the introduction of powers around retrofit. and limitations, considering the most appropriate 2 Department for Business, Energy and Industrial Strategy, Clean Growth Strategy, 2017: https://www.gov.uk/government/publications/clean-growth-strategy Committee on Climate Change, Progress Report to Parliament, 2018: https://www.theccc.org.uk/publication/reducing-uk-emissions-2018-progress-report-to- heat decarbonisation and energy efficiency This Zoning Framework would sit above existing parliament/#outline national policies and build on them, including the ENA, Electricity Networks Association backs the Committee on Climate Change’s Net Zero Report, 2019: http://www.energynetworks.org/news/press-releases/2019/ solutions for that area in consultation with local may/energy-networks-association-backs-the-committee-on-climate-change’s-net-zero-report.html stakeholders, and ‘zoning’ a local area for active BEIS Heat & Buildings Strategy, heat networks UKERC, Written Evidence Submitted to POST Inquiry on Clean Growth, 2018: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/ regulation, Scottish Local Heat and Energy science-and-technology-committee/technologies-for-meeting-clean-growth-emissions-reduction-targets/written/92215.html deployment of a particular solution. Zoning an National Grid Gas, Future of Gas, 2019: https://futureofgas.uk/ Efficiency Strategies (LHEES) and Welsh draft Ofgem, Future Insights: The Decarbonisation of Heat, 2016: https://www.ofgem.gov.uk/system/files/docs/2016/11/ofgem_future_insights_programme_-_the_ National Development Framework. decarbonisation_of_heat.pdf The Energyst, Ofgem Heat: Decarbonising heat the biggest energy challenge, 2019: https://theenergyst.com/ofgem-chief-decarbonising-heat-key-challenge/ BEIS, A Future Framework for Heat in Buildings, Government Response, 2018: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/ attachment_data/file/762546/Future_Framework_for_Heat_in_Buildings_Govt_Response__2_.pdf 1. Energy efficiency in this context refers primarily to the thermal efficiency of buildings. This has a considerable impact on the retention of heat and the technologies 3 All heating pathways will require some level of in-home energy efficiency improvements, which will create some level of disruption during installation. Even available to decarbonise heat, including low temperature heat networks and heat pumps. Broader benefits of energy efficiency are also recognised, including the deployment of hydrogen at scale, which is perceived by many to be a simple switch of gas, would involve changes to in-home appliances such as cookers, fires and potential for shifting demand through pre-heating and helping manage network constraints. boilers, as well trenching and public highway works to make pipework reinforcements and changes

4 5 Crucial to the transition – distributive fairness. An explainer: What is a local planning authority?

Different areas of the UK benefit from different resources and infrastructure, including geothermal A local planning authority is usually the planning department of a local council, however other resources, opportunities for carbon capture and storage, more efficient building stock, less grid bodies can also be planning authorities. constraint, access to transport and so on. Access to these resources and infrastructure will help to reduce the cost of the transition for these areas of the country. However, areas that do not have access The National Planning Policy Framework in England defines a local planning authority as “the to these opportunities will see a higher cost energy transition unless principles of distributive fairness public authority whose duty it is to carry out specific planning functions for a particular area. are embedded into decision making. Distributive fairness is about sharing the cost of the transition All references to local planning authority apply to the district council, London borough council, fairly across the country. Taking a whole-systems, holistic approach will help us ensure that costs and county council, Broads Authority, National Park Authority and the Greater London Authority, to opportunities are fairly allocated across society. the extent appropriate to their responsibilities.”

Key principles The Retrogap

Before delving into the detail around the • There is no single technology or fuel for Local planning authorities already hold a number of owner of overarching retrofit policy and exploring framework, there are several key principles that can decarbonising all building heating in the UK. key powers around new buildings, many of which this question by tenure and by zone, we can start to be seen reflected throughout this paper, and which are enshrined in the Planning & Energy Act (2008)6. unravel solutions. UK authorities should adopt in policymaking: • Different areas of the country will be able to However, the powers that local authorities hold decarbonise at different rates, and to different over existing buildings are significantly limited, To begin to address the retrofit challenge, the ADE recommends that local authorities are given powers • The UK should pursue energy policy which targets, albeit aligned with the net zero by 2050 and even at a national level, powers predominantly to mandate heating solutions in all non-domestic seeks to use the UK’s resources in the most trajectory. revolve around ‘trigger points’ in the private-rented 7 efficient way possible, at the lowest cost to sector space, but are largely non-existent. buildings under the Zoning Framework – though expects that not all local authorities would need consumers overall. • The consumer should be placed at the heart of At the moment, unless a building is going through to use this power. By mandating heating solutions the energy system. Policy on heat should be a major refurbishment it is unlikely that it will in non-domestic buildings compliant with zoning • The CCC has noted that the government must developed from the perspective of the energy come through the planning system again. As such, policies, we begin to create a low carbon pipeline ensure a just transition to net zero. Although user, specifically designed to enable them to planning policy alone is not enough to tackle the in zones, reducing costs, driving investment in not explicit within the CCC’s report, we consider make choices that meet their needs and deliver question of retrofit. This means that any policy skills, and ultimately creating a more appealing that this includes that the energy transition for the system. around retrofit must come from a national level, domestic market. should achieve distributive fairness4. and whilst sitting outside of planning policy, it must • Understanding energy consumers is key interact with the planning system in a way that For domestic buildings, a statutory date at which • Direct energy5 should be targeted to areas of to understanding how to decarbonise our ensures that retrofit is directed according to local heating solutions not compliant with the net zero industry which cannot make use of efficiency, energy system in a way that ensures consumer priorities. Building regulations may be one way that transition may no longer be deployed may be wasted heat or heat upgrade (e.g. in some acceptance and good outcomes. national governments could look to enforce this – sufficient for addressing domestic retrofit when instances, for shipping, aviation, transport, and this is something that the ADE is exploring in combined with adequate policy support. ‘Policy heavy industry, or resource-low areas of • A whole systems approach looking at the its forthcoming report on scaling retrofit for net support’ refers to policies under zoning which the country). interaction between low carbon heating and zero (expected for publication late summer 2020). are specifically designed to target deployment cooling solutions, energy efficiency, energy of particular heating systems, thereby reducing • There is no low carbon heating solution and networks and transport will result in reduced At present, there is no clear ownership of ‘retrofit’ investment costs and making access cheaper and easier for consumers. However, and this must be energy efficiency upgrade that does not involve costs for industry, consumers and government policy across and within government departments – and it is no wonder that policy in this space has reinforced, it is only when these measures are some form of disruption. by enabling identification of least-cost, cross- been slow to come about. By establishing a clear deployed together that we will see retrofit take off. vector pathways, and the creation of a more The ADE will be exploring this question further in efficient energy system. its forthcoming report on scaling retrofit.

4 Different areas of the UK benefit from different resources and infrastructure, including geothermal resources, opportunities for carbon capture and storage, more efficient building stock, less grid constraint, access to transport and so on. Access to these resources and infrastructure will help to reduce the cost of the transition 6 At present, HM Government is exploring the dismantling of this Act, which if supported, could further limit the powers of local authorities over even new buildings. for these areas of the country. However, areas that do not have access to these opportunities will see a higher cost of the energy transition unless principles of REF: MHCLG, Future Homes Standard, 2019: https://www.gov.uk/government/consultations/the-future-homes-standard-changes-to-part-l-and-part-f-of-the- distributive fairness are embedded into decision making. Distributive fairness is about levelising the cost of the transition fairly across the country. Taking a whole- building-regulations-for-new-dwellings systems, holistic approach will help us ensure that costs and opportunities are fairly allocated across society. 7 Consideration for how this could be phased, the role of public sector leaderships, exemptions, considerations around viability, and so on, must be explored. The ADE 5 For more information on the Heat Hierarchy, please see page 14 has begun to explore some of these questions below.

6 7 Zoning

Heat and efficiency are inherently local. Local government about the future of energy policy and devolved administrations, should set policy which, The process actors are best placed to understand local context, their role within it. For local planning authorities as much as possible, achieves fairness in the energy including existing resources and infrastructure, and to exercise their powers in this space, a level of system, and prevents large-scale inequity between To do this, local planning authorities would take demand. This is a principle repeatedly reflected internal upskilling and knowledge-building is the ‘winners’ and ‘losers’ of the energy transition, account of the local building stock (e.g. its energy in UK8, Scottish9 and Welsh policy10. For the UK needed, but local planning authorities do not whilst providing policy circumstances that allow the efficiency or opportunity for improvements to transition to a low carbon energy system, local yet have the certainty that this investment is market to deliver. through retrofit), local resources (e.g. presence areas will need to make best use of the low carbon worthwhile, particularly when the government is of wasted heat or energy intensive industrial resources in proximity to their boundaries, using exploring removing some of these powers. There Identifying zones operations), strategic development plans, proximity a decentralised energy approach. To ensure a is a need to bring this thinking together under one to the gas grid, network capacities, transport coherent national approach and enable appropriate framework to synthesise policy approaches and decarbonisation pathways, opportunities for co- What is zoning? Exploring precedent local decision making, the ADE recommends a understanding. location (for example, linkages between biomass framework where policy is decided at a national Zoning is the process of identifying areas of land and local forestry), and other factors of local level but directed at local level; a national framework The Zoning Framework will bring government upon which specific policies, laws, regulations context that impact decarbonisation decisions should set out how local heat decarbonisation policy on heat and energy efficiency under or powers apply. Typically, zoning - or the (e.g. demographics, vulnerability, topography, should be approached. It should also develop policy one framework across the UK, streamlining our identification of ‘areas’ - has been used as part of flooding, proximity to water, space availability, etc.). and regulatory tools to enable investment in low approach to decarbonisation. At the moment, the planning system to prevent or allow specific This would be done in consideration of the Heat carbon heating and efficiency technologies in those policy sits across multiple governments and purposes for land. For example, the identification Hierarchy (p.14) and the principles outlined above. places where they are needed. multiple departments, which has led to policy not of conservation areas within which certain types For example, low temperature heat pumps best always fitting together as best it could. Frameworks of development are prohibited13, or, in the past, serve more energy-efficient buildings, geothermal The framework should achieve several things: that pull together existing policies with new policies Simplified Planning Zones in some local planning energy needs to be in areas with suitable in one place and under a new banner can help to authorities14. The size of zones can vary, from multi- geology, and heat networks offer opportunities 1. Targeting support (policy and funding); create clearer pathways and streamlined outcomes. county level down to a few dozen roads. The National Planning Policy Framework (NPPF) to decarbonise buildings in dense urban areas. By 2. Creating a framework for consumer for England is a good example of this in practice, Zoning is not a new principle and is one that has abiding by the Heat Hierarchy, the governments will engagement and acceptance; and as its introduction sought to turn the “thicket of successfully driven policy where it is used; in be able to ensure that direct heat is focussed at the national planning policy into a clear, tightly focused London, the development of energy masterplans hardest to decarbonise areas of industry and the 3. Supporting investment by creating clear document, setting out national priorities and for decentralised networks through the London UK. For example, heavily industrialised areas may pipelines and reducing consumer costs. rules”12. Governments should take this learning on Plan (or Heat Network Priority Areas in the New need to retain direct fuel use for heat energy. board when looking at energy policy. London Plan), and in Scotland, the identification of Local planning authorities would seek to consult Local planning authorities already hold many of the heat network zones. The use of Ultra-Low Emission with local generation, electricity and gas network powers needed to conduct energy masterplanning, It is crucial that national governments play an Zones for transport is also an example of the use of 11 operators, heat network operators, the local however, success and uptake has been patchy oversight role to ensure the UK remains on track zoning to drive emissions reduction. Case studies community, neighbouring authorities, and other and powers over existing buildings are very to achieve net zero, and to create accountability of zoning and similar tools can be found in the interested stakeholders, to identify the most limited. Local planning authorities face a confusing for industry, local planning authorities and other appendices to this report. patchwork of policies and signals from actors. UK government, in consultation with the appropriate, least-cost pathway for an area. This would be done in consideration also of local The duty transport strategy. Local actors and organisations 8 BEIS, Energy Company Obligation: ECO3 2018-22 Flexible Eligibility Guidance, 2019: https://assets.publishing.service.gov.uk/government/uploads/system/ would be able to feed into the energy masterplans uploads/attachment_data/file/776540/energy-company-obligation-3-LA-flexible-eligibility-guidance_.pdf?_ga=2.59471082.635966525.1566560130- Local planning authorities should have a duty 2019228684.1541430513; and zones, much like they can feed into the local to create energy masterplans that use zoning to MHCLG, National Planning Policy Framework, 2019: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/810197/ planning process. Standardised documents could NPPF_Feb_2019_revised.pdf determine which national heat and energy efficiency MHCLG, National Local Growth Assurance Framework, 2019: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ also be produced, to reduce costs and improve file/768356/National_Local_Growth_Assurance_Framework.pdf , HECA policies and regulations apply in a particular area as processes for both the local planning authority and 9 Scottish Government, Local Heat and Energy Efficiency Strategy Pilots, 2019: https://www.gov.scot/publications/local-heat-energy-efficiency-strategies-phase-1- part of the local planning / LHEES process. pilots-social-evaluation/ the organisations feeding into the planning. 10 Welsh Government, Fuel Poverty Strategy, 2010: https://gov.wales/sites/default/files/publications/2019-06/fuel-poverty-strategy.pdf

11 BEIS, Local Authorities Supported by HNDU, 2018: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/798949/ Local_authorities_supported_by_the_Heat_Networks_Delivery_Unit_in_rounds_1-7.pdf 13 MHCLG, National Planning Policy Framework, 2019: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/810197/ NPPF_Feb_2019_revised.pdf 12 MHCLG, Dramatic simplification of planning guidance to encourage sustainable growth, 2011: https://www.gov.uk/government/news/dramatic-simplification-of- planning-guidance-to-encourage-sustainable-growth--3 14 MCHLG, Environmental Impact Assessment Guidance: https://www.gov.uk/guidance/environmental-impact-assessment#simplified-planning-zone

8 9 For example, an Energy Services Company Zone types Principles for standardisation and driving good can be solved through knowledge building (ESCo) could submit a plan for a heat network outcomes and appropriate resourcing. This increased to be incorporated into the Local Plan and zone The ADE has not sought to explicitly identify all responsibility for local authorities should be met To ensure such policies are consistently applied, UK identification process, as could a decentralised zone-types, but envisages that there may be a role, with appropriate resourcing to ensure that local Government should identify a set of standardisation energy asset, supported by evidence and for example, for hydrogen, geothermal, hybrid, authorities are able to sufficiently engage and 15 principles that local planning authorities must abide demand mapping. biomass, bioLPG, heat pump / electrification , and challenge applications, to ensure that they are by in the identification of zones to create a coherent heat network zones. These heating solutions would delivering the best solutions for their local area. national framework that enables local action. By offering opportunities for industry and be matched with appropriate energy efficiency The creation of a national or regional delivery body These principles should cover use of direct energy, community players to feed into the process, we solutions, to deliver a least-cost, combined heating to support local authorities in the delivery of zones cost-effectiveness, co-location, vulnerability, fuel can reduce the resource intensity of the heat and and energy efficiency approach to reaching local would also quell this concern. Finally, consideration poverty, and distributive fairness, among others. energy efficiency zoning process on local planning and national decarbonisation targets. These may need to be given for formalised oversight. authorities, ensure industry engagement and targets may differ from region to region above Standardisation of data and methodology will also approval of the process, help to ensure that the a baseline (this is being further explored in the be important for driving consistency and reducing Duty to Cooperate best options for the community are deployed, and ADE’s forthcoming report on scaling retrofit for costs and preventing ‘gaming’ of the system. In net zero). These solutions will look particularly some cases, national constraints may also need to increase consumer acceptance – this is explored MHCLG, Scottish Government and Welsh different for off-gas versus on-gas areas of the UK be imposed on local areas. further in the paper. Government must place a duty on local planning which do not fit neatly into the hydrogen versus authorities to work together in the creation of electrification pathways. The most appropriate MHCLG, BEIS, Scottish Government and Welsh Consultation would offer the opportunity to energy masterplans and in the identification of solution for an area is one which matches local Government should work with industry to identify consider how to reduce system costs, by exploring zones. Resources and energy networks do not demand and infrastructure to resourcing per the some principles about which type of heating is best opportunities to maximise or minimise plant sizes abide by political boundaries, and as such, energy Heat Hierarchy16 and established principles (above). suited to which type of use – e.g. for highly energy depending on the services that could be offered, masterplans must interlink where relevant, and efficient homes versus heavy industry operating at smart technology which could be installed in zones may span multiple authorities or span the a high temperature. Regarding the latter, this can order to enable the delivery of grid management Wales/England/Scotland borders. Local planning Statutory Duty effectively build on the UK Government’s focus on systems and smart homes & buildings, and the role authorities in England are already bound by a industrial clusters for decarbonisation. The ADE is of storage. Zoning would be a compulsory aspect of creating statutory ‘Duty to Cooperate’19 also aware that Scottish Government is undertaking and must produce a Local Plan or Local Heat and Energy Efficiency 20 work to understand building ‘archetypes’, exploring and maintain a ‘Statement of Common Ground’ Following consultation, the local planning authority Strategy. Creating LHEES is expected to become a common features in buildings and tenures, and outlining agreement with neighbouring authorities. would allocate a zone-type for this area. In doing statutory duty in Scotland in the early 2020s; the exploring options for decarbonisation based In Wales, there is a ‘Duty to Cooperate’ on some this, local planning authorities would make that zone identification of Local Plans in England and Wales on this. The development of archetypes would areas of planning policy, including homelessness, benefit from zone-specific, targeted government is already a statutory duty17, and it has largely been help to create a level of standardisation in plan and local planning authorities are encouraged policies designed to support deployment of particular successful with just 15 local planning authorities in 21 development and would support local authorities to maintain Statements of Common Ground . technology and fuel solutions. England without a Local Plan in March 2018, and to identify solutions. In Scotland, they are required to work with the prospect of central government intervention other public bodies under ‘Community Planning 18 driving action . 22 The Association is aware of the concern around Partnerships’ . This duty should include a Duty local planning authority lobbying and ‘gaming’ to Cooperate on energy masterplanning and the of the system. Oversight around local planning identification of zones, with a similar mechanism authority lobbying is minimal and lobbying within introduced across the UK. the planning approval process is very common. In general, concerns around lobbying or ‘gaming’ of the system

15 It should be noted that heat pumps or electrified solutions are umbrella, catch-all terms for a variety of technologies. The ADE anticipates that zones could also be more specific to a particular type of heat pump e.g. air source, water source, direct electric, etc.

16 For more information on the Heat Hierarchy, please see page 14

17 MHCLG, Statutory duties placed on local government: https://data.gov.uk/dataset/01171494-e40b-463f-9967-56d158412321/statutory-duties-placed-on-local- government

18 MHCLG Press Release, Government action on councils failing to plan new homes, 2018: https://www.gov.uk/government/news/government-action-on-councils- failing-to-plan-new-homes

10 11 Interaction with gas and electricity networks Going forward, the introduction of heat and The RIIO price settlement process for setting the Once a zone has been introduced, this should energy efficiency zoning should be supported by allowable revenue and incentives for the network support the ongoing network planning and The ADE has not explored in detail the interaction evidence for, and help manage implementation of, operators would run alongside the local energy forecasts of network operators through the price between the development of gas and electricity any future roll-out of hydrogen, including its use of planning process. Currently, the network operators control period and as they develop their business infrastructure as regulated by Ofgem and the legacy gas network infrastructure. The integration develop their funding baselines against a single plan for the next price control. This could be introduction of zones through national and local between hydrogen and energy efficiency will also common scenario but must make provision for through, for example, giving the network operators planning and energy policy, however organisations be a crucial consideration, as increased energy their local view of future investment need – much greater certainty of a significant uptake such as the Energy System’s Catapult in their work efficiency in buildings with a hydrogen demand will either through their baseline funding or incentive in electricity demand in specific areas that may 23 24 on Local Area Energy Planning and work on RIIO reduce the scale of the challenge for producing mechanisms. In the future, this will be supported require reinforcement to meet. Overall, this should provide useful insight. However, our initial view is green and blue hydrogen and delivering carbon better by distribution-level or local Future Energy help to improve planning efficiencies and reduce set out below and we would welcome more in- capture and storage. Scenarios that are consistent with the overall costs, which are ultimately passed to consumers. depth discussion of this crucial area. national Future Energy Scenarios published each The need for different solutions in different year by National Grid, but will provide greater detail There is also a clear emerging need for local In proposing such a model, the ADE recognises areas is already recognised by the industry as a on specific, local conditions. balancing, and policy must begin not just to remove that this is a significant departure from the current whole, with National Grid25 stating that different the barriers to this, but also to create incentives and national market framework for heating using technologies will be needed in different situations, If zoning is implemented, there will be several rewards for local balancing that can be realised by gas, the technology mix connected to networks and that this is the most effective way to manage interactions with this process. Firstly, local energy consumers and industry alike. Zoning will facilitate being driven by demand for connections, and the decarbonisation of heat. The Energy Networks plans should consider and include substantial local balancing, by allowing clear understand of requirements and incentives in place through the Association in its work with Navigant also discusses evidence from, and consultation with, network local demand and opportunity, and creating a RIIO framework. However, development of zones the role of zoning (albeit not in exactly the same operators. This will include, for example, the level framework for understanding the role of flexibility. could dovetail well with the RIIO-2 framework in so terms as discussed in this report) in decarbonising of constraint facing parts of the electricity grid far as it gives distribution networks a clearer view our gas networks26. Finally, UK Power Networks which will affect the cost and viability of extensive of the low carbon heating technologies and overall in its Distribution Future Energy Scenario also electrified heating rollouts. In more extreme cases, demand in different zones within their distribution recognises regional differences in pathways to strong collaboration would be needed as business area. It could also allow more strategic planning net zero27. The involvement of electricity and gas plans for the network operators and local energy as local planning to support zoning feeds into and network operators will be crucial in an effective plans are developed to, for example, coordinate is, in turn, supported by the networks’ business zoning approach and we look forward to working the shift of an existing section of the gas network planning. UK Power Networks’ industry-first project with these organisations and the broader industry to 100% hydrogen. This will mean that as far as ‘Heat Street: Local System Planning’ will begin to to develop these proposals further. possible, it will be better to coordinate the timelines explore some of these opportunities. for developing the local plans and the networks’ price control periods and if this is not possible, sufficient uncertainty mechanisms will need to be put in place to allow the network operators to respond within the price control to the changing circumstances.

23 Energy Systems Catapult, Local Area Energy Planning, 2018: https://es.catapult.org.uk/news/local-area-energy-planning-key-to-minimising-decarbonisation-costs/

24 Energy Systems Catapult, Open Letter Consultation on an approach to setting the next electricity distribution price control, 2019: https://es.catapult.org.uk/wp- content/uploads/2019/10/Energy-Systems-Catapult-response-to-Ofgem-Open-Letter-consultation-on-RIIO2-ED.pdf

25 National Grid, Written evidence submitted by National Grid to the POST Inquiry on Clean Growth, 2018: http://data.parliament.uk/writtenevidence/ committeeevidence.svc/evidencedocument/science-and-technology-committee/technologies-for-meeting-clean-growth-emissions-reduction-targets/ written/92027.html 3.5–3.6

26 Navigant for the Energy Networks Association, Pathways to Net-Zero: Decarbonising the Gas Networks in Great Britain, 2019: https://www.energynetworks.org/ assets/files/gas/Navigant%20Pathways%20to%20Net-Zero.pdf

27 UK Power Networks, Distribution Future Energy Scenarios, 2020, https://innovation.ukpowernetworks.co.uk/2020/02/06/distribution-future-energy-scenarios/

12 13 Heat Hierarchy

The ADE considers that there are two key building Wasted heat is second on the Heat Hierarchy Embedding the principle “The heat wasted in London blocks that underpin zoning: the principles because it is heat that exists anyway (including This Heat Hierarchy should be embedded across identified above, and the heat hierarchy. as a result of industrial processes), but would could meet 38% of the government policies and should be included in otherwise be wasted, meaning that it is very low city’s heating demand The UK Government, Scottish Government, Welsh carbon. Wasted heat should be used as a first national planning systems subject to viability Government, and local planning authorities should priority where possible; this will help us to create considerations about cost, feasibility, reliability and according to the Greater adopt the following heat hierarchy. This hierarchy a more efficient energy system. Wasted heat can longevity of the source. It should be considered London Authority” will be needed to reduce the cost of the energy be used onsite or supplied to nearby homes and that cost-effective to the system and cost-effective transition for consumers. buildings through heat networks. Often wasted to the consumer are not currently one and the heat may need to be upgraded, so the distinction same, although have distinct bearings on one between wasted heat and heat upgrade should another. Through the Zoning Framework, which 1. Energy efficiency; be thought of as a sliding scale, dependent on embeds principles of distributive justice, cost- effectiveness to the system and the consumer will 2. Wasted heat; how energy intensive it will be to make use of the wasted heat source. For example, it may be less become more aligned – as structures will need 3. Heat upgrade; energy intensive to make use of wasted heat from to be in place to make costs fair. As such, under a chemical processing plant than it is to make use zoning, cost-effectiveness must consider overall 4. Direct heat. of wasted heat from an air conditioner, due to the cost-effectiveness to the system. amount of electricity needed to upgrade the heat. Why this Heat Hierarchy? Delivering the right outcomes Thus, third on the heat hierarchy is upgraded heat. To support the energy transition, consideration must This primarily refers to lower temperature heat This Heat Hierarchy should be considered alongside be given to energy efficiency improvements. Our first that will be upgraded or concentrated to a more national resource and waste strategies, in order to priority should be to reduce our energy demand. useable temperature using a heat pump. This type ensure appropriate prioritisation of waste streams, of heat upgrade will typically be more energy and an efficient circular economy. By improving the energy efficiency of buildings intensive than use of wasted heat, as it requires and processes, we begin to reduce the size of electricity to upgrade the heat. Following this Heat Hierarchy and principle of the energy decarbonisation challenge. Without cost-effectiveness should result in the right sufficient energy efficiency improvements, the UK Finally, direct energy refers to circumstances outcomes being deployed for both new build will struggle to sufficiently decarbonise our energy where energy is directly input for the purpose and retrofit ahead of zoning, and in the context supply, as higher carbon options will continue to be of creating heat – for example electricity into a of a Zoning Framework. needed to meet peak demand. It will also be a more panel heater, natural gas or hydrogen, or biomass costly transition for consumers - higher energy or bioLPG into a boiler or CHP. The carbon and demand requires increased resources, including resource intensity associated with direct energy more back up generation, larger power lines and should be concentrated on harder to decarbonise network reinforcements. These system costs are areas of industry, transport, and geographical areas collective and rarely monetised with a single energy of the country which may not readily be able to efficiency investment, but at a city or country scale, make use of low carbon sources of indirect energy, can have major impacts. or for buildings where energy efficiency upgrades to net-zero consistent levels would be overly expensive or very detrimental in terms of cost, loss of value, or disruption.

14 15 Oh no, my boiler has broken down! What do I do? I can’t go without heat. I’d best get a new one. Creating a framework

The ADE proposes that the UK, Scottish and Zoning for heat and energy efficiency provides At the moment, domestic consumers make the Welsh governments empower and require local a key opportunity to unlock the dependency choice to install a new heating system in a distress planning authorities to use zoning to support the of these two areas and provides opportunity situation – their boiler has suddenly broken down, UK in its transition to a low carbon energy system, for governments to approach these two areas and they need a replacement, fast. The installation and to reach net zero. In creating new duties on under one framework – thereby dismantling a of low carbon heating systems often requires an local planning authorities, this will create a clear siloed approach. For example, if a building owner element of forward planning, be that to upgrade need for adequate funding support for local commits to switching to a particular low carbon the energy efficiency of a building, to make space planning authorities, and national government technology, they could access funding or support for a heat pump, to increase the size of radiators must provide this. to deliver energy efficiency retrofit to support that to support a lower temperature system, or to time decision. This combined approach has already with installation of a heat network connection This should be done by establishing a framework seen success in Scotland, where heat and energy for zoning; this framework should sit with BEIS at efficiency are considered together under LHEES. Currently, consumers often do not plan for their UK-wide level and interact with national planning next heating system, but this will have to change. The current situation policy frameworks and devolved energy policy The interesting thing for government is that zoning The introduction of green building passports as where relevant. This framework should also be is expected to reduce the cost of investment in recommended by the Green Finance Taskforce28, embedded into Welsh and Scottish policy, building low carbon infrastructure, technology and fuel, exploring a package of retrofit measures and on existing advancements in this space. by creating a clear pipeline and opportunity for actions to be taken to improve the building, could cost-recoupment. This will change the shape of the also be one way to support domestic consumers UK Government and, where devolved, Scottish policy landscape; consumer-side financial support Government and Welsh Government should retain Finally, industry tradespeople will tend to I understand what the best pathway is for can gradually be targeted, tailored and reduced as decarbonising my home, and I know what the ability to set policy within zones, whilst local a result of reduced costs, and policy can instead recommend technology that is familiar and well support is available for me to make that planning authorities are able to direct the location focus on creating investor certainty. Investment is understood to consumers – and many are not transition. When my current system breaks of these zones. explored more in the ‘outcomes’ section below. currently trained to install low carbon systems. down, I will be ready to install something low carbon, or I may opt to change sooner. As such, domestic consumers continue to be Different technologies will require different forms National government could also play a key recommended higher carbon solutions. of support to be deployed at scale. National oversight role in the identification and interaction government should work with industry and experts of zones. Zoning will seek to remove these barriers, by to identify what the best policy is to incentivise creating clear pathways for domestic consumers different heating and efficiency solutions for each to decarbonising their heating, encouraging Enabling domestic consumer choice zone type. This is likely to involve a combination consumers to plan, creating a local supply chain of planning policy, building regulations, subsidy, Under the proposed model, domestic consumers that understands the local net zero pathway, and taxes, levies and exemptions, as well as tailored would not be required to uptake a particular in general, giving consumers a clear signal for communication and engagement strategies. The solution, but instead, would have the barriers to their own decarbonisation. In doing so, we will ADE has provided an example of a heat network deploying the preferred zoned solution removed move consumers from the distress situation to the zone in the appendices. such that it became the ‘path of least resistance’. planned in-home transition.

This is why different policies may need to be in effect within zones. The zoned situation

28 Green Finance Task Force, Accelerating Green Finance, 2019: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/703816/green-finance-taskforce-accelerating-green-finance-report.pdf 16 17 Different policy for different zones Early movers and timescales deploying early phase zones could share learnings with authorities across the country. Indeed, many Funding and incentives for industry and consumers To effectively create zones, it will be important authorities and landowners already have learnings will need to be different for different heating that the policy framework supporting particular they can share from masterplanning. Phased zoning solutions, as they use distinct and varying business energy efficiency and heating solutions is stable, will allow for the development of local skills and models, have different consumer and business and that policy mechanisms introduced are indeed supply chains to support our net zero transition, impacts, require different technical solutions, and consistent with zoning. Through the 2020s, the and support our workforce to become a green have different cost structures. For example, the relative maturity of the different solutions is likely collar workforce. kind of incentive that will work best to encourage to mean that some zones can be established with someone to install a heat pump in a heat pump/ more confidence than others. For example, areas This phased approach will also allow local electrification zone is likely to be different to the for low carbon heat networks or for heat pumps authorities and the supply chain to boost training kind that will encourage someone to connect to a are likely to be easier to map out with confidence opportunities and develop the skills and knowledge heat network in a heat network zone – particularly currently than those that will require hydrogen or needed to meet the net zero challenge. when we look towards innovative financing models. the use of carbon capture, usage and storage. This targeted policy could include a locally specific Finally, consideration may need to be given to efficiency or emissions targets, air quality, NOx In the case of the former, early zoning that uses whether some or all zones should be time-limited or targets, tax relief, funding opportunities, and existing commercialised technologies should begin include a review stage, to allow for innovating and specific policy to support the deployment of the as soon as possible, with increased support from commercialising technologies to enter the market. targeted measure, for example through building the governments to ensure adequate support regulations and SAP. is provided to early-movers, and to ensure that learning is shared to enable policymakers to amend As part of this, all forthcoming and existing policy policy to achieve desired outcomes. needs to be evaluated through the lens of zoning “All forthcoming and existing policy needs to be to ask: are we encouraging technology to be In the case of the latter less mature solutions, evaluated through the lens of zoning to ask: are we deployed in the right places, in a smart, strategic piloting of new technologies should continue way? At present, government funding, particularly in local areas29, with a view to zone these areas encouraging technology to be deployed in the right that targeted at domestic consumers, does not later on in the cycle. If such areas are not zoned places, in a smart, strategic way?” (successfully) encourage strategic deployment. straightaway, it also becomes extremely important that any legislation regarding such infrastructure Furthermore, all forthcoming and existing policy recognises the zoning boundaries – for example, should consider heat and energy efficiency the shift of sections of Gas Distribution Networks together. This requires understanding and to hydrogen within a future RIIO framework. communicating both the optimal combination These areas could be earmarked as Innovation and sequence of heat and energy efficiency Zones. Governments may want to look to establish measures to minimise disruption to householders. the pathways for these zones in the event that For example, improving energy efficiency ahead deployment at scale of these technologies/fuels do of connecting to a low temperature heat network. not come forward. We are increasingly seeing policy decisions move towards this, with LHEES leading the way, and the Such phasing of zones will allow a learning-by- forthcoming BEIS Heat and Buildings Strategy doing approach. Local planning authorities across exploring both in tandem – we now need this at a the country would also then be able to see the local level too. benefit of zoning for themselves, and authorities

18 19 Outcomes of zoning

Investment (capital, training and skills) and Transport and often lack the resources, understanding or “Zoning is designed to reduced costs agency to make use of the opportunities they do The ADE expects that zoning for heat and energy have. Support packages are confusing, and not address the jumbled Once a zone is established, this will create the efficiency would provide opportunities for tailored to consumer situations, and it is often policy clarity needed for businesses and individuals policy signal and harmonisation with strategies for decarbonising actors that consumers do not trust who provide to invest – reducing risk and improving investor transport. Heat and energy efficiency zoning frontline advice about decarbonisation. establish clear, locally confidence around heat decarbonisation and would provide a clear framework, allowing for energy efficiency. Zoning will create a clear specific decarbonisation the identification of opportunities for transport Zoning is designed to create a framework to pipeline for low carbon heating technologies that decarbonisation. For example, hydrogen vehicles, help consumers make an informed choice that is pathways.” is enshrined in UK, Scottish and Welsh Government which the CCC have earmarked for HGVs and right for them and their locality, as the consumer policies. This will send a clear signal to the low freight, are likely to need to refuel in heavily will receive policy support for deploying the carbon heat and energy efficiency markets. industrialised areas as the goods they are technology or technologies most suited for transporting will originate from areas like this. their zone, and for suitable energy efficiency By tailoring policy to support the specific This could be factored into Hydrogen Zoning. improvements to optimise deployment of that deployment of particular technologies/fuels, we technology. Whilst consumers retain the ability begin to remove some of the policy risks around In particular, zoning will allow for consideration of to choose the combination of heating technology heat decarbonisation and energy efficiency. To co-location, and allow networks to effectively plan and energy efficiency measures that suit them date, building regulations have created some policy for future network loads. For example, if a local the most, zoning is designed to address the uncertainty in the market, as targets move, and planning authority seeks to go down an electric jumbled policy signal and establish clear, locally calculation methods change. Zoning will require heat pump route, but are also an area that will specific decarbonisation pathways. Thus, though greater visibility around building regulations, which rely on individual transport over public transport, the consumer can choose to invest in any energy in turn will ensure developers are able to better networks should be able to plan for forthcoming solutions, they will only receive policy support to account for costs of meeting regulations. demand and subsequently minimise the costs of deploy the zoned option. network reinforcement by reducing the amount of Introducing new retrofit powers in the non- work undertaken. Zoning will also create opportunities for oversight, domestic sector will also create a clear market for as local planning authorities (and/or a regional or low carbon heating and energy efficiency from the national resource) will play a role in monitoring early 2020s. These powers will deliver investment Clear choices and good outcomes for consumers zoning outcomes, and ensuring that consumers are through clear pipelines, which will in turn reduce To meet our net zero targets, we will need a getting a fair deal. Consideration should be given to costs within the markets and reduce the cost of low framework to support households and industry to how the Zoning Framework could embed existing carbon heat and energy efficiency interventions. make the right choices of how to decarbonise their and forthcoming protections and service standards heating. Thus, understanding consumer choice to ensure that consumers receive good outcomes. Organisations will also be able to target investment is a crucial element of understanding the impact in skills and training, suited to the skills and of the energy transition on domestic consumers. A consumer engagement framework is considered trainings needs of the local energy market. Skills The Energy Systems Catapult has been looking further overleaf. is ultimately an investment, and organisations to understand the role of choice in heating and need the confidence that they are investing in the consumers perspectives in net zero30, and this work right type of skills. Zoning will create clear, locally must be explored further. specific skills. This will help to reduce the costs of low carbon heating, giving domestic and non- At present, consumers receive a jumbled patchwork domestic consumers alike a more cost-competitive of policy signals from government about how offering with fossil solutions, making the transition to decarbonise their homes31. They have limited to net zero more attractive. opportunities to benefit from the energy system,

30 Energy Systems Catapult, Understanding Net Zero: A Consumer Perspective, 2020: https://es.catapult.org.uk/reports/net-zero-a-consumer-perspective/

31 ADE, Solving the energy policy puzzle for users, 2019: https://www.theade.co.uk/resources/publications/solving-the-energy-policy-puzzle-for-users Citizens Advice Scotland, Changing behaviour in a changing climate: consumers and Scottish climate change policy, 2018: https://www.cas.org.uk/publications/ changing-behaviour-changing-climate

20 21 Distributive fairness: managing the costs of the transition and fuel poverty look different in different areas Meeting net zero changes to their homes, install currently unfamiliar of the UK. Zoning will enable us to explore technologies, and understand that this may As the UK decarbonises its energy, it is important existing funding and support programmes for The final outcome from the transition is a clear not be a one-off change, but rather an ongoing that the transition is fair, and is perceived to be, fair. vulnerable people and people in fuel poverty in national coordinating framework to ensure that commitment to reaching net zero over time. But Different approaches to heating decarbonisation in a way that considers how best to address these the UK economy meets net zero. By creating many consumers must also know that they will have different parts of the country will create different 34 concerns in a specific local context, for example locally-specific pathways for reaching net zero , an opportunity to feed directly into local plans, costs and benefits. For example, some areas of the by considering opportunities for targeted energy the UK-wide patchwork pathway begins to emerge. to have a say in the decarbonisation pathways country will benefit more from decarbonisation efficiency upgrades that are more tailored to local for their local area, and understand that they of heating than others due to the presence of Climate change will not wait for a silver bullet. building archetypes. By making fuel poverty and will receive support and guidance to make this abundant resources of cheap, low carbon wasted Zoning creates an opportunity to get moving where vulnerability a local concern, we also give local change. Communicating that in-home disruption is heat, or a better building stock more suited to low we have clear decarbonisation pathways already, authorities a better insight into how other policy necessary to meet net zero, and ensuring consumer carbon heating. It is important that the national whilst allowing those areas that are harder to treat areas may intersect, enabling these issues to be acceptance ahead of necessary or mandatory framework for zoning respects local governance to continue to innovate. tackled in a more holistic, comprehensive way – for changes will help to make the transition easier. and decision-making whilst ensuring none are example through local skills growth or targeted left behind. This should include, in particular, Running alongside this, consumers must begin NHS support. This builds on the recent direction A framework for consumer engagement considerations of fuel poverty and vulnerability. taken through the Energy Company Obligation, to understand what energy efficiency actually Existing commitments to support the fuel poor in which local authorities play an increased role in Zoning creates a clear framework and pathway means; we must communicate the benefits of must stand regardless of whichever zone a directing funding towards measures. In the future, within which to commence a strategic consumer energy efficiency in terms that are understood by consumer falls in. fuel poverty support schemes could be locally engagement strategy. consumers, including comfort, health and its role in tailored to suit local circumstance32. facilitating low carbon heat. By doing this, we will By abiding by the principles laid out in this paper, Consumers must begin to understand what the help to make the purchasing of energy efficiency including the Heat Hierarchy, we begin to unravel Local heat decarbonisation will pose a longer-term net zero challenge means for them in practical interventions and services attractive to consumers, some of the questions around distributive fairness. question about the frameworks for cost-sharing terms, and understand the role they have to play. who will see a clear benefit in real terms, and in turn, Ultimately, moving towards a whole-systems, cross- and price regulation across the market. Further Consumer buy-in has been shown to be critical for see a personal benefit from moving to net zero. vector approach to carbon and cost will enable us exploration to understand these impacts in real terms driving the successful uptake of energy efficiency to better consider fairness whilst generally seeking 35 is needed, and it would likely represent a relatively measures , and will be critical in the route to This could be a national campaign, supported by to reduce costs across the system. It is important 36 significant change in price control regimes in order net zero. Considerable research has shown local authorities as they begin to be seen as bodies that we understand that some consumers that to create outcomes that result in distributive fairness. the impact that public involvement in decision- to turn to on energy. The governments of the UK can do more may have to do more than others to Considerable work is being undertaken by the making has on consumer buy-in and acceptance, should begin this campaign as soon as possible support a national effort to reach net zero, as some Scottish Government’s Just Transition Commission33 and Citizens Advice is already calling for more – and make it part of our green recovery from buildings will simply never reach high levels of fabric to explore issues related to this, and this question to be done to include consumers in decisions COVID-19. efficiency suitable for low carbon, low temperature 37 is also being explored by BEIS and the Committee taken by energy networks . In energy, consumers heat – the question is, how do we support those that on Climate Change. Ultimately, this question is far need to understand that they may have to make need to do more, to do more, and ensure those that more complex than merely consumer energy bills, can’t do more, aren’t left behind? as energy has touch points across the economy and 34 It is important to recognise that the UK wide target for reaching net zero does not presume that all areas of the UK independently reach net zero. Reaching net zero society, including costs (financial and non-financial) will be about balancing action across the UK, and ensuring areas that can do more (such as Scotland), do, and areas that cannot do as much (such as Wales) are not Alongside this, we must continue to consider expected to take on undue costs to reach net zero. Instead, when we talk in this paper about local areas reaching net zero, what we mean is that they reach locally around health, manufacturing (and embedded specific targets necessary for reaching net zero across the UK. As such, some local authorities will not independently be truly net zero. how energy policy affects those in fuel poverty energy prices), water, food, and more. However, 35 Citizens Advice Scotland, Warming Scotland up to Energy Efficiency: Putting Consumers First, 2017: https://www.cas.org.uk/system/files/publications/warming_ and those who are vulnerable differently. Local scotland_up_to_energy_efficiency_-_cfu_insight_report_-_2017-10-10.pdf zoning creates an opportunity to explore and monitor decarbonisation plans will enable us to unlock an 36 Citizens Advice Scotland, Engaging Hearts and Minds, 2020: https://www.cas.org.uk/system/files/publications/engaging_hearts_and_minds_jan_2020_web_ energy system costs, consider how to deliver least- final_0.pdf understanding of local contextual effects on these cost outcomes, and begin a conversation about Ofwat, Towards Water 2020 – policy issues: customer engagement and outcomes, 2015: https://www.ofwat.gov.uk/wp-content/uploads/2015/10/pap_ issues, and consider how vulnerability tec201507engagement.pdf sharing costs and benefits fairly. Carbon Trust & BEIS, Stakeholder Engagement in Heat Networks, 2018: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/717692/Stakeholder_Engagement_in_Heat_Networks_-_a_guide_for_project_managers.pdf Audit Scotland, Principles For Community Empowerment, 2019: https://www.audit-scotland.gov.uk/report/principles-for-community-empowerment Tyers et al., Harnessing behavioural insights to encourage consumer engagement in the British energy market: Results from a field trial, 2019: https://www. sciencedirect.com/science/article/abs/pii/S221480431830452X 32 Citizens Advice Scotland, Taking the Temperature: A review of energy efficiency and fuel poverty schemes in Scotland, 2016: https://www.cas.org.uk/system/files/ publications/taking_the_temperature_-_a_review_of_energy_efficiency_and_fuel_poverty_schemes_in_scotland.pdf 37 Citizens Advice, Strengthening the voice of consumers in energy networks’ business planning, 2018: https://www.citizensadvice.org.uk/about-us/policy/policy- research-topics/energy-policy-research-and-consultation-responses/energy-policy-research/strengthening-the-voice-of-consumers-in-energy-networks-business- 33 Scottish Government, Just Transition Commission: https://www.gov.scot/groups/just-transition-commission/ planning/

22 23 Summary: what will zoning achieve?

In the longer-term, locally specific campaigns Opportunity for a regional resource Zoning will… will be necessary, as we must support consumers • Identify local resources for low carbon heat to understand their roles in moving to net zero, A regional resource could be an appropriate way • Ensure the most suitable solutions are deployed including the importance of planning for moving to ensure strategic oversight of zone deployment, in the right areas, in line with the Heat Hierarchy, such as wasted heat; to low carbon heat. Locally-specific campaigns will ensuring a whole systems approach, increasing and prevent short-term carbon reduction help local communities to understand their locally- efficiencies and reducing costs. In the context measures at the expense of reaching net zero in • Allow for a phased approach to decarbonisation, of zoning, it could provide insight, advice and specific pathway, as well as provide a clear route to the mid-term; enabling testing of consumer response; decision-makers. Local authorities, supported by assistance to local planning authorities in national or regional resources, should help domestic identifying zones, including providing a centralised • Ensure that there is carbon budget for direct • Streamline policy signals to consumers, making resource for data39, knowledge, best practice, and consumers (and non-domestic consumers) to energy available for harder to decarbonise areas it clearer, easier and cheaper to take action even finance. A few organisations have explored understand the choices they have, and the targeted of industry by targeting the use of resources per towards decarbonisation; a regional resource40, with the Olympic Delivery support available to them to do this. the Heat Hierarchy; Authority model a prime example coming forward. • Target local skills growth to create local jobs; • Create policy visibility and certainty, stimulating Coronavirus and the green recovery The ADE will be exploring how the Zoning • Reduce the costs of the energy transition Framework fits with a regional resource model over investment in the low carbon energy market; Across the UK, decision-makers are considering through strategic planning, allowing for greater the coming months and will be reaching out to key how we recover from the economic and societal efficiencies across the energy system; organisations to discuss this approach. • Stimulate local, low carbon supply-chain growth challenge presented by the Coronavirus pandemic. by creating a clear pipeline; Calls for a green recovery are growing, with • Create a clear opportunity for post-Coronavirus more than 200 leading CEOs signing a letter38 to • Allow for greater interaction between heating, green economic recovery. Prime Minister Boris Johnson asking for just that, electricity, gas, transport and energy efficiency including many from across the energy industry. policy, ensuring that infrastructure is ready for the energy transition; As part of the green recovery, the governments of the UK are asked to consider how this framework • Create a clear framework for local actors and for local action could help to provide local growth the general public to engage in the energy opportunities in a way that responds directly to the transition, creating greater public acceptance locally-specific circumstances that COVID-19 has and awareness; brought. A Zoning Framework for heat and energy efficiency decarbonisation offers an opportunity to target jobs and skills growth, to help manage the pocketed factory closures and workforce layoffs presented by COVID-19, and enable us to reskill and upskill this workforce, and bringing new green collar jobs with it. L GRO CA W TH LO

38 Corporate Leaders Group, Letter to PM Boris Johnson, 2020: https://www.corporateleadersgroup.com/reports-evidence-and-insights/pdfs/final-290520-business- Investment groups-ceo-resilient.pdf

39 Energy Systems Catapult, 2019, Energy Data Taskforce Report: https://es.catapult.org.uk/reports/energy-data-taskforce-report/

40 Carbon Connect, Uncomfortable Home Truths: Why Britain urgently needs a low carbon heat strategy, 2019: https://www.policyconnect.org.uk/research/ uncomfortable-home-truths-future-gas-series-part-3 KPMG for Scottish Government, Energy Efficient Scotland programme: analysis of delivery mechanism, 2019: https://www.gov.scot/publications/energy-efficient- scotland-strategic-outline-case-proposed-development-national-delivery-mechanism/pages/3/ Jobs Skills

24 25 How could it work? An example: Heat Network Zone

Within Heat Network Zones, the UK, Scottish and plans they have for networks, or where they Existing Buildings (retrofit) • The Zoning Framework recommends that Welsh Government need to implement policies think deployment of networks would be viable. domestic consumers are incentivised to make a 41 • For non-domestic consumers, a retrofit policy that will address demand risk / connection risk . These plans should include information about particular low carbon heat choice, rather than should be introduced through the Zoning This is the key thing that will drive down costs anchor loads, wasted heat opportunities, targeted required. As such, this paper does not advocate Framework that requires non-domestic for consumers and encourage them to connect, domestic properties, air pollution, decarbonisation for an obligation to connect on domestic thereby accelerating deployment of heat networks strategies, new build developments, and so on. buildings (in particular anchor loads) to be buildings, though there may be a role for the use – something which all governments and the CCC Local authorities which intend to develop their own identified and compelled to connect to the of building regulations to encourage installation have identified as necessary for reaching net zero heat network could provide visibility of these plans network where reasonable, as part of the of a heat network. Policy should not require or promoted as a strategic priority. through this process. zoning process. This will address connection domestic connection to heat networks (certainly risk, offering greater revenue visibility to heat In 2020, the conversation around zoning for The heat network developers/operator would in the early 2020s, whilst our understanding networks, putting them on a more level-playing heat networks accelerated. Scottish Government then work with the local planning authority and of consumer choice is evolving). Most network field with other networked utilities. This will introduced a Heat Networks (Scotland) Bill, which local GDNs and DNOs to consider what strategic operators agree that forcing domestic make heat networks more investable, reduce incorporates zoning and many of the aspects opportunities deployment of a heat network consumers to connect will result in unhappy costs, enable decarbonisation and network referenced in this paper, and BEIS, in its 2020 offers, including opportunities for reducing grid customers. Domestic consumers should instead planning, and create a greater incentive consultation Heat Networks: Building A Market constraints and providing flexibility services. be adequately incentivised by (a) cost, (b) for consumers to connect. This will need to Framework, also mentioned zoning as one lever good consumer service, and (c) a simple way Should a heat network zone be right for a particular exclude micro-businesses, and possibly small that could encourage heat networks to come to achieve statutory decarbonisation targets, forward, but did not explore it in detail. As part area, and following consultation with consumers organisations – though a greater conversation particularly at trigger points. By creating a non- of the consideration around the future regulatory and industry, the local planning authority would about exemptions and viability is needed. domestic market and addressing connection framework for heat networks, BEIS should then work with the heat network developer/ Local planning authorities, in consultation operator, using its powers through zoning, to help risk, we are able to give consumers a better cost consider how we can embed zoning now. Scottish with the public, should work with industry to drive deployment of and connection to the heat and carbon competitive offering. However, in a Government should consider how it can strengthen identify appropriate strategic locations for the Heat Networks (Scotland) Bill. network. heat network zone, where domestic consumers heat networks, including identifying anchor within a Heat Network Zone do not connect, load buildings in Local Plans. Securing anchor Here, we explore how zoning would work for they should be required to declare why the Encouraging connection loads helps to build the crucial early phases of heat networks: building will not connect (this will help to a heat network, in turn reducing investment risk Through a combination of regulatory powers, capture concerns and allow government and planning policy and building regulations42, the and unlocking future decarbonisation and cost Role for heat network operators and developers industry to address them). reductions. This should also include identifying in local planning and zoning governments should ensure that the desired outcome – connection to a heat network in a Heat sources of wasted heat and ambient heat for To address new build, within Heat Network Zones Heat network developers would submit plans Network Zone – is achieved. Policies within Heat connection to a heat network, and using policy a Planning Policy Hierarchy should be adopted for future heat networks to the local planning Network Zones should incentivise existing buildings to require connection of wasted heat sources to similar to the London Heating Hierarchy43. In authority for inclusion in the Local Plan, justifying to connect to the heat network and should place a heat network. particular, planning policy and building regulations the opportunity for a heat network to strategically progressively stricter conditions on the use of high need to ensure connection to a heat network at decarbonise local heat. Heat network developers carbon heating, such as individual fossil-gas boilers. a later date where a heat network is not already and operators should feed into the zoning process, This may look different for domestic and non- in operation. by providing visibility to local authorities about domestic consumers.

43 GLA, New London Plan, Policy SI3 Energy Infrastructure: https://www.london.gov.uk/what-we-do/planning/london-plan/new-london-plan/draft-new-london-plan/ chapter-9-sustainable-infrastructure/policy-si3-energy

41 ADE, Shared Warmth, 2018: https://www.theade.co.uk/resources/publications/shared-warmth-a-heat-network-market-that-benefits-customers-investors-and-t

42 Planning policy and building regulations must recognise that heat networks decarbonise over time.

26 27 Key messages / actions for governments

Heat Network Planning Policy Hierarchy Crucially, concessions actually introduce The ADE’s proposal is for all zones to be This would kick off the learning-by-doing approach competition to the market. Networks have to implemented by 203545. Zones should be expanded and allow for capacity and skills growth in local 1. Connect to an existing heat network; compete to win the exclusive concession in the first between 2020 and 2035 (the deadline for which supply chains. Trials would enable us to understand place – this helps to drive down costs and drive up the CCC recommends all retrofitted heat should the impact that strategic planning could have on 2. Build a (communal) heat network sized efficiencies and performance, thereby providing be low carbon or hydrogen ready46) to incorporate networks, and give us a better understanding of appropriately for connection and future benefits for consumers. Time-constrained exclusive the whole of the UK in a phased approach. This potential avoided costs. expansion, subject to the strategic heat concessions, with re-tendering after e.g. 15- would also allow for lessons to be learnt and best network plan; 30 years further introduce competition, as the practice shared between local planning authorities, In particular, policy for tackling retrofit needs concession-holder is incentivised to deliver good government and actors over time, and for the to be trialled, to understand the impact on 3. Deploy a heat network ready solution; outcomes for consumers in hope of re-securing strategic growth of local, low carbon supply chains. consumer experience and acceptance. This will the tender. allow local planning authorities and government 4. Deploy a low carbon heating solution to streamline consumer engagement policy. The What should be done right now? equal to or above Building Regulations Exclusive concessions are a low-cost, low-regrets governments should explore quick wins that could (subject to timing considerations); option for governments to achieve strategic The POST response to the Inquiry on Clean Growth: be implemented now, and which fit within broader outcomes for heat networks. Technologies for meeting the UK’s emissions government strategic priorities. Opportunities like 5. Contribution in lieu. reduction targets noted the number of respondents promoting flexibility and storage is one such no- that had emphasised the importance of trials regrets win. Statutory Undertaker Rights at scale for low carbon heating technologies. It UK government is already exploring how zoning Heat network operators acting within zones should recommended that “the Government must commit could be applied to heat networks48, as is Scottish Planning policy and building regulations should hold statutory undertaker rights, comparable to now to large-scale trials of low-carbon heating Government49, which is also exploring the use also drive deployment of thermal storage, which other utilities. These rights help to reduce the technologies, convening relevant stakeholders to of zoning more broadly through LHEES. Welsh supports heat network development, but also risks of heat network development by providing a determine what evidence must be gathered and to Government in their National Development provides flexibility and security to the gas and statutory backstop during negotiations. Broadly, co-ordinate existing work.”47 50 electricity grids, thereby reducing costs. this helps to reduce the costs associated with Framework Draft also explored the idea of heat networks, and reduces costs passed on to The governments should look to trial the use of network priority areas, which also mirrors the zoning in key, strategic locations across different concept of zoning. All governments of the UK Exclusive Concessions consumers. Statutory undertaker rights will help to make heat networks more cost competitive. types and tenures ahead of policy changes (e.g. should widen and accelerate their thinking around Exclusivity and concessions will also play a major cities, off-gas areas, rural areas, and semi- zoning to consider how it could be applied to crucial role in encouraging development of urban areas, fuel poor households, able-to-pay create broader decarbonisation strategies – and Regulated Investment Framework heat networks. Concessions within zones help households, owner-occupied, etc.) across the UK in trial zoning for different heating technologies and energy efficiency solutions. to reduce the cost of investment by reducing In the medium to long term, there may be a role the early 2020s, to bring forward strategic projects. risks in the market. Investors have certainty for the introduction of a regulated investment about the length of contract over which the heat framework within Heat Network Zones, to help to network operator has to recoup and repay their de-risk investment in heat networks. This was an investment. By preventing other networks from ask of the Heat Networks Industry Task Force44. coming forward, exclusivity also provides a level of guarantee around the efficiency of the network. Networks can earmark connections, allowing for Heat Networks Industry Council strategic planning of network build out, and a The Heat Networks Industry Council, which 45 This coincides with the proposed introduction of the Future Homes Standard for retrofit as well as new build homes. However, a delay to the Future Homes Standard better understanding of network efficiency (which launched in June 2020, will work with the should not result in a delay to the introduction of the Zoning Framework. affects running costs). This reduces the risk that a 46 Committee on Climate Change, Net Zero – The UK’s Contribution to Stopping Global Warming, 2019: https://www.theccc.org.uk/publication/net-zero-the-uks- governments of the UK to agree a ‘sector deal’ contribution-to-stopping-global-warming/ key anchor load will not connect to the network. for heat networks. Included in their ask of 47 POST, Inquiry on Clean Growth Response: Decarbonising Heating, 2019: https://publications.parliament.uk/pa/cm201719/cmselect/cmsctech/1454/145409.htm#_ Both of these factors help to reduce costs for government is a policy ask to introduce zoning idTextAnchor106 consumers, which also helps to reduce risk in the for heat networks. 48 BEIS, Heat Networks: Building A Market Framework, 2020: https://www.gov.uk/government/consultations/heat-networks-building-a-market-framework market. 49 Scottish Government, Heat Networks (Scotland) Bill, 2020: https://www.parliament.scot/parliamentarybusiness/Bills/114590.aspx#:~:text=A%20Bill%20for%20 an%20Act,provision%20about%20conferring%20rights%20in

50 Welsh Government, National Development Framework Draft, 2019: https://gov.wales/draft-national-development-framework

44 ADE, Shared Warmth, 2018: https://www.theade.co.uk/resources/publications/shared-warmth-a-heat-network-market-that-benefits-customers-investors-and-t

28 29 What should be done in 2022-25? The clear need for adequate funding and support Local authorities must be funded in a way “The skills gap in low carbon that reflects the new duties that would be Following accelerated pilots in strategic towns The local authorities that fed into this strategy all placed on them under this framework – and an heating is a key area that and cities, local planning authorities should look reiterated the same theme – the need for adequate impact assessment should look at the expected 51 BEIS must look to address to proportionally zone early zones, to ensure funding. As they noted, local authorities already opportunities for local authorities to recoup costs each authority is able to learn by doing, ready for have many of the powers needed to direct energy of zoning. in the early 2020s” a rollout at scale from 2025. This should be done policy at a local level, the problem is finding the in recognition of the fact that some areas might resources to use and enforce the use of these powers. More broadly, adequate funding will be crucial for best be suited to forthcoming technologies and all departments in reaching net zero. Funding for Often, local authorities do not have the resourcing, fuels such as hydrogen and biofuels. The sooner local authorities should be a central element of the time, skills or funding to understand how best to that local stakeholders are made aware of policy in Net Zero Spending Review that Treasury committed use powers that they already have in this space. their area, the greater the likelihood of consumer to in 2019. This may be considered as part of the Thus, whilst supportive of the approach, local acceptance, and the lower the costs of the energy regional, ODA approach, explored above. transition. Zoning will help to create a pipeline, authorities noted that sufficient funding would be and the earlier the visibility on this, the sooner that crucial to the success of this policy framework. rigorous investment in local low carbon supply However, it was also noted that funding alone chains and upskilling will begin. is not enough. Funding can be used to procure Local planning authorities should be under a external resource, but the recommendations statutory duty in Scotland to begin identifying following this procurement can then be difficult zones. In England & Wales, identification of or time-consuming to enact. This is particularly zones and energy master planning should be due to a skills gap. Local authorities also noted £ required as a new part of all Local Plans. Local that the lack of clarity about their emerging role planning authorities should be under a statutory in their energy system, and the changing policy duty to identify zones in consultation with their landscape, has meant that investing in skills is more constituents. We except that this duty would be tricky for local authorities, which must consider fulfilled over a matter of years, but should be in its tax-payer funded resources through the lens place by 2025 at the latest. All zones should then of tax-payer outcomes. By providing a clear duty be in place by 2035, when we will have a clearer and responsibility for local authorities, government view of currently commercialising and innovating will create a clear signal that investing in skills is technologies. prudent long-term. The skills gap in low carbon heating is a key area that BEIS must look to address Whilst there is a clear need for urgent action, in the early 2020s; BEIS should consider how the as a country there is a need to establish a clear skills gap impacts local authorities. long-term view. This long-term view should be developed in 2022-25.

51 Proportionality should be encouraged to prevent the picking off of low hanging fruit and ensure that skills, knowledge and resources are developed across the energy sector. 30 31 Asks of government departments

In detail, this would require the following from government departments, the devolved administrations and Ofgem.

BEIS MHCLG

Within the short-term (next 3 years) • Begin a rigorous consumer awareness campaign Within the medium term (to 2025) • Embed the Zoning Framework into the National to alert all users to the upcoming energy Planning Policy Framework (NPPF); • Adopt the Heat Hierarchy; transition, and explain how to share their views, • Create a framework for heat and get involved, and find out more information, energy efficiency zoning to drive • Adopt the Heat Hierarchy; • Conduct pilot studies to test heat and energy linked with our post-COVID-19 recovery; decarbonisation of new and existing efficiency zoning in key strategic areas; buildings – to be embedded into the • Make changes to relevant legislation and policy to • Consider all forthcoming policy, in particular National Planning Policy Framework support the introduction of zoning, including to: • Seriously consider the role for zoning as part of funding policy, through the lens of zoning, to (NPPF) and Building Regulations the forthcoming Heat & Buildings Strategy; o Amend the NPPF to make energy ensure that technology and fuel choices taken by MHCLG; masterplanning a requirement of Local from now are considered in a way that creates • Provide resource to and require local planning Plans – the NPPF Strategic Policies should system benefits, and does not add system costs, • Create a duty on local authorities to authorities to collect and analyse data and include a requirement to zone for heat begin zoning for heat and energy information52 to share with BEIS with an aim to and energy efficiency. This will ensure that o Ensure that the proposed Clean Heat Grant efficiency; zoning tackles new build, improving the targeting of zoning policies; supports the strategic deployment of heat pumps, biomass, heat networks and other • Work with industry to identify which o Include in the NPPF a statutory duty for • Create a dedicated team and senior leadership low carbon heating technologies, zones are needed, and which policies planning authorities to consult gas and position within BEIS responsible for overseeing should be in place within these zones to electricity network operators, members retrofit policy, and specifically create o Ensure that the proposed Green Heat support the deployment of the targeted of the public, energy services companies policy designed to address the retrogap by Networks Fund supports the strategic technology, and then adopt relevant and other interested bodies in the energy introducing new powers over existing non- deployment of heat networks; policy, regulation and legislation in masterplanning process, domestic buildings and creating a market for 53 • Create a regulatory and policy framework late 2022 ; low carbon heat; o Amend the NPPF to explicitly require the for heat networks that interacts sufficiently • Clarify the future role for Ofgem in adoption of the Heat Hierarchy, embed • Assess the skills gap within the low carbon with zoning policy to de-risk demand on heat decarbonisation; this into planning considerations and allow heating industry, looking at how to upskill and networks from 2022 or before, by zoning policy to change planning policy, reskill the high carbon heating industry, with the • Work closely with other departments o Extending government support from 2022 o Prevent the dismantling of the Planning explicit aim to create clear signals to employers and devolved administrations to ensure to support the heat networks market to & Energy Act 2008, and amend the Act and training bodies that the value of investment that timescales and policies align. adapt to the regulatory context (post-RHI to give local authorities powers around in training lies in low carbon heating; and post-HNIP), zoning and retrofit to support the • Provide certainty about the post-RHI landscape, introduction of this framework, and to o Delivering policies that are specifically embed the Heat Hierarchy, setting out which zones will receive financial designed to de-risk demand, support for the mix of low carbon heating o Amend the Planning and Compulsory technologies and energy efficiency identified in o Regulating for parity with other utility Purchase Act 2004 to include a statutory each zone, including being clear about which (if providers, including creating a regulated duty for local planning authorities to any) will not; investment framework, introducing undertake energy masterplanning, and make statutory undertaker rights, and reforming relevant changes around which information business rates; local authorities can collect and hold;

52 There is a gap here that should be explored: to better understand exactly which data is needed to enable an optimised, whole-systems approach to energy. As a first steer, the ADE anticipate that this will include information about energy performance certificates, building occupancy, heat loss, etc. This work should build on the 53 The Association acknowledges that not all technology solutions are yet clear, however we cannot wait for this clarity. For some areas, a low cost, low carbon solution work of the Energy Systems Catapult’s Data Taskforce: https://es.catapult.org.uk/reports/energy-data-taskforce-report/ is already clear, and these areas should be empowered and incentivised to act early. This includes possible green-gas areas.

32 33 Treasury Scottish Government Welsh Government

• Work with BEIS to ensure that timescales align; • Consider the implications of zoning in the • Adopt the Heat Hierarchy; • Adopt the Heat Hierarchy; review of the net zero costs and Spending • Make identification of Local Heat and Energy • Introduce requirements for non-domestic Reviews, and as part of our economic recovery • Integrate the Zoning Framework into Welsh Efficiency Strategies (LHEES) a statutory duty building owners to improve the energy from coronavirus; policy, including through the Welsh Planning efficiency of buildings when conducting work, on local planning authorities within 5 years; Policy;

extending to domestic properties in 2025; • Consider all funding through the lens of zoning, • Trial zoning for less conventional sources of heat, • Begin trialling the principle of zoning within to ensure that technology and fuel choices building on piloting for zoning for heat networks; • Ensure that building regulations / the Future taken from now are considered in a way that existing Welsh Government competencies, Homes Standard and the National Calculation creates system benefits, and does not add • Strengthen LHEES to require the zoning of heat building on work already being taken at a local 55 Methodology do not close off options for system costs, and energy efficiency by local planning authorities, planning authority level (e.g. in Bridgend ); area wide solutions, and reconsider the role expanded to include more than just heat network for national targets in favour of area-based o Ensure that the proposed Clean Heat Grant zoning (adopt the Zoning Framework); • Include the Zoning Framework as part of the targets (to be explored further in the ADE’s supports the strategic deployment of heat National Development Framework, or make • Provide resource to and require local planning forthcoming report on scaling retrofit for net pumps, biomass, heat networks and other provision for it in policy; authorities to collect and analyse data and zero, expected later summer 2020); low carbon heating technologies, information to share with Scottish Government with • Begin a rigorous consumer awareness campaign o Ensure that the proposed Green Heat • Embed a Duty to Cooperate on energy an aim to improve the targeting of zoning policies; to alert all users to the upcoming energy Networks Fund supports the strategic masterplanning and zoning into relevant policy. transition, and explain how to share their views, • Assess the skills gap within the low carbon deployment of heat networks; get involved, and find out more information, heating industry, looking at how to upskill and linked with our post-COVID-19 recovery; • Support new capital investment programmes reskill the high carbon heating industry, with the by BEIS and MHCLG where they are found to explicit aim to create clear signals to employers • Work with UK Government, Scottish Government be needed to support deployment of a Zoning and training bodies that the value of investment and industry to identify the appropriate policy Framework, including for pilot schemes; in training lies in low carbon heating; solutions for encouraging the deployment of specific technologies. • Allocate resourcing to local planning authorities • Begin a rigorous consumer awareness campaign to alert all users to the upcoming energy for undertaking energy masterplanning and Ofgem zoning; transition, and explain how to share their views, get involved, and find out more information, • Create a license requirement on Electricity • Review and recalibrate existing funding pots linked with our post-COVID-19 recovery; and Gas Network Operators to engage and resourcing to target deployment at with planning authorities and local • Alongside the Heat Networks (Scotland) Bill, strategically significant, zoned technologies. authorities in the identification of zones as make a commitment that Scottish Government part of energy masterplanning; will use regulatory powers, planning policy and building standards in the context of zoning to • Work with BEIS to understand Ofgem’s ensure appropriate heat network connections evolving role in decarbonisation are made, and to de-risk demand; regulation; • Work with BEIS, MHCLG and industry to identify • Require DNOs to produce distribution- “Many departments are appropriate policy solutions and implement zoning within Scottish competencies; level Future Energy Scenarios (FES); already taking brilliant steps • Include the Zoning Framework as part of the • Open up data sources to allow for towards zoning, including Local Energy Policy Statement54; strategic planning, embed a norm or exploring some of these presumption of openness and provide the • Align existing funding pots to ensure right data. recommendations here. We funding is delivering robust examples of heat must build on this work and decarbonisation and energy efficiency. support it to continue.” 54 Scottish Government, Consultation: Local Energy Policy Statement, 2019: https://www.gov.scot/publications/scottish-governments-local-energy-policy-statement- consultation/

55 Energy Systems Catapult, Smart Energy Plan – Bridgend County Borough Council, 2019: https://es.catapult.org.uk/reports/smart-energy-plan-bridgend-county-borough-council/

34 35 Some unanswered questions Annex 1. How long would zones last? How do we we need to ensure that decision-making comes manage consumer lock-in? And what happens together, and some amount of standardisation will Precedent and examples to learn Much as the ADE is proposing for the UK, the plans if a new technology comes to the market? be key – but how much? from are expected to generate a phased approach, creating early action that can be scaled up and For some zones, it may make sense to have a time 5. How do we embed consumer protections into rolled out over time. The Netherlands will support limit or expiry date on zoning. Zoning could also regulations in the context of zoning? Scotland early-moving districts to begin this process, “which be seen as a transitionary policy, to support the will allow us to learn and experiment systematically Net zero will give rise to an enormity of questions In Scotland, the Scottish Government has already majority (but not all) homes and buildings to reach and move forward with cost-effective upscaling around consumer protection. Already we see calls been piloting Local Heat and Energy Efficiency net zero, reducing costs across the UK. As we pilot and implementation”, before full-scale rollout of for clarity about the role of Ofgem in regulating Strategies (LHEES), which allow local councils in zoning, we must look to explore how long zones energy efficiency and heating policies commence. should last for, and whether different zones would for carbon. The deployment of more low carbon Scotland to tailor heat and energy efficiency policy have different lifetimes. As time goes on, national solutions will naturally give rise to questions about to their local context. Part of this has included the or local policy changes, economic situations (like the role for regulation and an increased scope for designation of heat network zones. Energy Innovation Zones we are seeing with COVID-19) and other factors Ofgem, as the growth of the heat networks market Scottish Government has since consulted on The West Midland’s Policy Commission has may also change local context, requiring a need to has already demonstrated. making identification of LHEES compulsory and is identified that Energy Innovation Zones (EIZs) revisit zoning. This may equally be the case if new looking to ensure that all local councils have piloted could be used to deliver good outcomes for technologies come to the market that offer better Summary of steps to date and next LHEES in the next cycle. consumers and industry. “EIZs are the missing link opportunities for consumers. This would need to be steps in the UK innovation eco-system for energy. We done in a strategic way that did not affect long- It is proposed that identification of LHEES is based have small-scale technology demonstrators and we term investment cases or consumer plans. How to get involved on socioeconomic assessments and heat mapping, have competitive national market structures, but to identify the best solution for an area. To support we lack a supportive space in which to prove and 2. Who pays and how? The ADE drafted this paper in consultation with this, Scotland has created a Scotland Heat Map56. deploy new integrated approaches at scale.” its members and many external stakeholders, The ‘who pays’ question remains a key, unanswered including DNOs, GDNs, local authorities, citizens The West Midlands Policy Commission question in our net zero journey, and one which representatives, academia, industry bodies, the London recommended the introduction of EIZ, identifying BEIS and Scottish Government have rightfully wider energy sector, settlement bodies and code the main benefits of EIZ’s as: faster progress; explored. However, the answer remains unclear. In London, the Greater London Authority (GLA) has administrators, and government officials. lower emissions and potentially lower bills; lower The Zoning Framework creates an opportunity to made deployment of heat networks a priority. As system costs; local supply chains, jobs, skills and streamline this discussion, and to consider how to The ADE is sharing this paper now, in the hope such, the GLA has introduced the London Heating markets; system integration; improved productivity reinforce principles of distributive fairness. it will kick off a thorough dialogue about what a Hierarchy, which prioritises connection to a heat 57 and faster growth; and standards for innovative patchwork approach to decarbonisation looks network under planning policy . The New London 58 technologies to help establish market. 3. What happens to the homes and buildings that like in practice, and provide a framework for Plan will also include Heat Network Priority Areas , do not fit the zone type? which will identify specific areas of London best discussion and action. We welcome continued The EIZ’s did not go as far as the proposals input from across the economy on our paper, and suited to heat networks. Some homes and buildings in a particular area will identified by the ADE, as the aim of the EIZ was would encourage those organisations with an not, and may never be, suited to particular types The Netherlands to create a proposal that could be taken up by understanding of what zoning would mean for their of heating and energy efficiency solutions. The authorities within the current funding and policy sector to draft policy recommendations. framework must consider what support is provided In the Netherlands, the National Climate Agreement framework to encourage energy innovation and is moving towards a local district-level process for deliver system integration. However, the success of to these buildings to ensure that they do not get left Many organisations are already exploring zoning identifying energy solutions. The Strategy says that the EIZ helps to demonstrate how zoning at a local behind. This question should ultimately form part and local area energy planning, including UKPN, “a meticulous process will have to be completed level can help to deliver good outcomes across the of the ‘who pays and how’ question, as charging Energy Systems Catapult, local authorities to determine the best solution for each district, for energy market. and price controls could consider how to provide like Bristol City Council, and more, and the when houses are no longer heated with traditional cross-vector support for these homes and buildings. Association will work with these organisations, and central-heating boilers.”59 Municipalities are It should be acknowledged that this provides a organisations that have already leant support to Conservation Areas expected to “decide on the future of the district in framework for the majority of homes and buildings, this paper, to advocate for the implementation of consultation with residents and building owners”, Conservation Areas can be designated by local but not all, and consideration must be given to the zoning. tailored support needed for these properties. much as the Association is proposing as part of the planning authorities to identify areas of special The ADE’s research body, ACE Research, will also Local Plan process. architectural or historic interest which need 4. Should elements of the framework be be exploring domestic and non-domestic consumer amendable at a local level? attitudes to heat and energy efficiency, and will be publishing these findings in the coming months. 56 Scottish Government, Heat Map: http://heatmap.scotland.gov.uk/ The Zoning Framework reinforces the role of local 57 GLA, London Plan: https://www.london.gov.uk/what-we-do/planning/london-plan/current-london-plan/london-plan-chapter-five-londons-response/pol-22 authority and local actor leadership, and with it, Finally, the ADE will be publishing a linked report 58 GLA, Draft New London Plan: https://www.london.gov.uk/what-we-do/planning/london-plan/new-london-plan/draft-new-london-plan/chapter-9-sustainable- gives rise to questions about how far the powers of infrastructure/policy-si3-energy on scaling retrofit for net zero. local decision-makers should go. In general, 59 Klimaatakkoord, National Climate Agreement for the Netherlands, 2019: https://www.klimaatakkoord.nl/documenten/publicaties/2019/06/28/national-climate- agreement-the-netherlands

36 37 management to ensure that the character of the Enterprise Zones area is protected. Historic England also holds the right to designate conservation areas in London, Enterprise Zones are part of the UK Government’s and the Secretary of State for Digital, Culture, Industrial Strategy to support businesses and 62 Media and Sport anywhere in England. enable local growth .

Conservation Area status is set out under the Businesses located within Enterprise Zones can NPPF and the 1990 Planning (Listed Buildings and access various benefits, including up to a 100% Conservation Areas) Act. business rate discount worth up to £275,000 over a 5-year period and simplified local planning authority Conservation Areas differ in size and number planning through Local Development Orders. across local planning authorities. Like in zoning, in designating a Conservation Area, a local Local Enterprise Partnerships planning authority can make it subject to specific planning policies. Local Enterprise Partnerships63 (LEPs) are voluntary partnerships between local planning authorities More information can be found on Historic and businesses in England. The LEPs cover England England’s website60. but are not constrained by local planning authority boundaries. There are 38 LEPs across England.

Accelerator Cities Pathfinder “They play a central role in determining local The Accelerator Cities Pathfinder project, part of economic priorities and undertaking activities to the Climate-KIC Pathfinder programme, works with drive economic growth and job creation, improve ambitious city authorities and stakeholders in the infrastructure and raise workforce skills within the UK to create proposals for long-term, city-led home local area.” retrofit programmes. They aim to move “beyond stop-start policy and short-term pilots, and instead provide a stable way of achieving the scale of home retrofit needed if we are to meet the UK’s target to be net zero by 2050”61.

Simplified Planning Zones

Simplified Planning Zones (SPZs) were areas in which local planning authorities encouraged development by removing the need to apply for planning permission for certain development types. SPZs were removed from the NPPF and replaced with a combination of Development Orders and LEPs.

60 Historic England, What is a Conservation Area?: https://historicengland.org.uk/advice/planning/conservation-areas/

61 UKGBC, Accelerator Cities Pathfinder, 2019: https://www.ukgbc.org/ukgbc-work/accelerator-cities-pathfinder/

62 MHCLG, Enterprise Zones: https://enterprisezones.communities.gov.uk/about-enterprise-zones/

63 LEP Network: https://www.lepnetwork.net/

38 39 For further information, or to get involved with our work on zoning, please contact:

Charlotte Owen Policy Manager Association for Decentralised Energy

[email protected]

© 2020 The Association for Decentralised Energy 6th Floor, 10 Dean Farrar Street, London SW1H 0DX The Association for Registered in England #917116 Decentralised Energy

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