Analysis of potential for Scotland to be leader in 5th Generation Heating and Cooling Networks

Scottish Enterprise commissioned Ramboll to undertake research into existing applications and understanding of 5th generation district heating (5GDHC) in Scotland and across the rest of Europe, and identify opportunities for Scotland to become a leader in the developing market.

The research included an extensive literature and information review as well as 19 expert interviews which were conducted across 15 companies and organisations.

Fifth Generation District Heating and Cooling (5GDHC) Networks use ambient temperature water for heat transmission combined with local heat pumps to supply heating and cooling at the required temperature for each building. There is currently no clear ‘winner’ between 5GDHC and fourth generation district heating (4GDH). In contradiction to naming conventions using ‘generations’, 5GDHC should be considered no better or worse than other low-carbon heat networks, but rather should be considered as one of the many options, that will be more appropriate for certain contexts than others. The European market is dominated by a small number of pilot projects and leadership is determined by visibility and complexity of pilots. The Netherlands, Switzerland, and Italy were all highlighted as frontrunners. It is too early to assess market export potential, but a number of drivers that affect demand can be identified, including local policies, awareness of the technology, and CAPEX – particularly cost of heat pumps. Opportunities for Scotland include developing pilots, understanding approaches to integrating 5GDHC into energy planning, and improving the requirements and incentives for connection to DHC in general. Challenges include the business model for delivery, lack of understanding of current and future cooling demand, and lack of awareness of the technology, amongst others. Although Scotland currently lags behind the Netherlands and Switzerland in perceived market leadership, Scotland has the potential to challenge current leaders by focusing on complex pilot projects, prioritising research and development and influencing relevant policy.

Recommendations include: demonstration of further advanced pilot projects; increase awareness throughout the value chain; map and match sources and demand; and development of the business model.