Heat Network Detailed Project Development Resource

© Crown copyright 2016 This “Guidance on Strategic and Commercial Case for Heat Network Detailed ProjectDevelopment Resource” is the property of the Crown, and has been prepared for theDepartment for Business, Energy and Industrial Strategy (DBEIS) for use only by localauthorities in England, Wales and Northern Ireland as a guidance on Heat Network DetailedProject Development to support completion of a project Business Case. This guidance isintended to constitute generic guidance to those local authorities on strategic, governance,commercial, contractual, tax and insurance considerations that may arise in the context ofdeveloping district heating schemes. However, this guidance does not provide advice, orrecommend any approach or decisions, specific to any particular project or circumstance, andlocal authorities must obtain their own professional advice in relation to any specific project,decisions or contracts. This guidance may not under any circumstance be relied on bypersons or organisations other than local authorities, and any such other persons ororganisations who rely on it do so at their own risk. DBEIS excludes, to the fullest extentpermitted by law, any liability where this guidance is relied on by persons or organisationsother than local authorities or where local authorities rely on it without obtaining professionaladvice. This guidance is published under the Open Government Licence. You may re-use thisguidance (not including logos) free of charge in any format or medium, under the terms of theOpen Government Licence. To view this licence, visitwww.nationalarchives.gov.uk/doc/open-government-licence/or write to the Information Policy Team, The National Archives, Kew,London TW9 4DU, or email:psi@nationalarchives.gsi.gov.uk. Contents Executive Summary5 1.Introduction2.National & Regional Policies3.Heat Network Drivers4.Roles for Heat Networks5.Delivery Models6.Tax Considerations7.Insurance Considerations921242884100104 Appendix A: Glossary of Abbreviations and Defined TermsAppendix B: National and Local PoliciesAppendix C: DriversAppendix D: Suggested role selection questionsAppendix E: Notes to Contract Heads of TermsAppendix F: Additional Tax Detail114119133150153160 Executive Summary Executive Summary This document provides guidance on thecommercial and strategic elements of a heatnetwork project to support completion of aproject business case. Legislation, Policy and Strategy heat networks is provided in: to carry out sustainable development andimplement wellbeing objectives. •Guidance on Economic and FinancialCase for Heat Network Detailed ProjectDevelopment Resource; and The guidance outlines key European, UK andregional (Wales) legislation, policy andstrategywhich are relevant to heat networkinitiatives, for reference in the course ofpreparing the strategic aspect of a businesscases. •Guidance on Powers, Public Procurementand State Aid for Heat Network DetailedProject Development Resource. It is noted that legislation, policy andGovernment strategy are part of an evershifting and evolving landscape, and willchange according the political, economic orenvironmental issues of the time. The guidance is intended for local authoritiesand heat network developers to support theirinvestigations and enable progression fromfeasibility stage through to business casedelivery. The guidance has been drafted withreference to policy, legislation and regulationin England and Wales; however much of theguidance is likely also to be relevant toprojects in Scotland and Northern Ireland. Key Drivers for Heat Networks The full review of legislation, policy andstrategy has highlighted these key policyareas which support and/or shape thedelivery of heat networks: Strategic Case Guidance A heat network driver is an objective,opportunity or challenge which can beaffected, either beneficially or adversely, by aproposed heat network. Consequently,drivers may be something to be reduced oravoided, or something to be promoted andexploited. The Five Cases Model explains at Chapter 2: the Strategic Case demonstrates that thespending proposal provides businesssynergy and strategic fit and is predicatedupon a robust and evidence based casefor change... •Carbon reduction The Climate Change Act 2008 establishes alegal duty on the UK to achieve an 80%reduction in carbon emissions by 2050against a 1990 baseline. The guidance specifically supports theHMTGreen Book Five Cases Business Model(theFive Cases Model), and the derived DBEISBusiness Case Template (DBEIS BCT) thatfollows this structure, but will also beapplicable in other instances. The FiveCases Model (and similarly the DBEIS BCT)considers the viability of the project from fiveperspectives: A total of 24 drivers have been identified,across Environmental, Financial andEconomic, Technical, Social, Political, Legal,and Circumstantial domains. This strategic case requires the spendingauthority to demonstrate how thespending proposal fits in relation