Scottish Government Business Rates decision is good for low-carbon heat

On Wednesday, the Scottish Government announced that it would implement a new 50 per cent relief for stand-alone district heating schemes as part of a larger Business Rates relief package.

Responding to the announcement, ADE Director Dr Tim Rotheray said:

“This is a welcome decision by the Scottish Government and will make an enormous difference to this key sector. Scotland has long recognised the key role that heat networks will play in reducing fuel poverty, decarbonising heat and improving competitiveness.

“More importantly, the move was absolutely necessary. In Scotland and across the UK, heat networks are treated differently from all other energy networks, leading to heat network operators and customers being unfairly burdened with higher costs. One heat network in Scotland pays the equivalent of £200 per household, or 38% of an average household heating bill.

“We look forward to further conversations with both the Scottish and UK Governments about how to ensure all energy networks face the same business rates costs, whether they provide electricity, gas or heat.”

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District Heating is a cost-effective, low-carbon technology that the Scottish Government considers a strategic priority for eliminating fuel poverty and meeting decarbonisation goals.

In Scotland and throughout the UK, District Heating is frequently assessed differently than gas and electricity network infrastructure.

Whereas gas and electricity networks are assessed according to the value of the energy transacted, District Heating assets are valued according to land and construction costs.

The method of business rates valuation for District Heating is placing the sector at a competitive disadvantage. For example, one scheme in Scotland has reported a business rates liability that equates to £200 per residence, or 38% of an average household’s bill of £530.

As long as an unlevel playing field exists for energy infrastructure, business rates for district heating will continue to increase because the rating methodology is linked to construction and land costs, which are rising.

To correct the competitive distortion, the ADE is asking for district heating to be exempted from business rates liabilities across the UK.

In the absence of an exemption for District Heating from business rates, the ADE is calling for a level playing field with gas and electricity networks, so that all energy infrastructures are evaluated according to the same methodology (i.e. the receipts and expenditures method), and/or receive a comparable result.

Source: Association for Decentralised Energy