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District Heating Loan Fund

District Heating Loan Fund

The Scottish Government’s district heating loan fund is designed to help address the financial and technical barriers to district heating projects.

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Please note that this page contains information and links most relevant for people living in Scotland.

As the cost of home heating continues to increase, it has never been more important to ensure our communities develop affordable, locally produced heat which will cut fuel bills and carbon emissions.

The Scottish Government’s district heating loan fund is designed to help address the financial and technical barriers to district heating projects as commercial borrowing can be extremely expensive and difficult to obtain.

Loans of more than £1 million are available as low interest unsecured loans with repayment terms of either 10 or 15 years. Loans for larger projects above £500,000 will be considered on a case by case basis. Loans of over £1 million could involve co-investment with a potential range of funding partners. A typical interest rate of 3.5% applies for low risk projects (dependent upon credit status). The scheme is open to local authorities, registered social landlords, small and medium sized enterprises and energy services companies (ESCOs) with fewer than 250 employees.

Since 2011, £20 million has been lent to 53 different projects across Scotland. These projects have generated benefits such as providing affordable warmth to householders, creating local employment, reducing costs for businesses and reducing greenhouse gas emissions.

Looking for funding?

If you have district heating projects that you would like to be considered for this year’s funding round then please download the expression of interest form. Once you submit your expression of interest we will then be able to contact you to discuss your project in more detail.

District heating case studies

District Heating Loan Fund supporting Glen Mhor ESCO in Inverness

District heating loan fund helps ng homes replace ageing electric storage heaters with community heating systems.

District heating loan fund helping to provide low cost heating in Wick

District heating loan fund supports sustainable local regeneration in Foyers

District heating loans evaluation

Heat network skills in Scotland report

The Heat Networks (Scotland) Bill was introduced to the Scottish Parliament by the Scottish Government on 2 March 2020 and forms part of the Scottish Government’s response to the global climate emergency.

The bill aims to stimulate the deployment of heat networks in Scotland by providing regulation, which will increase investor, consumer and supply chain certainty, as well as build trust in the sector.

Consequently, heating networks in Scotland are expected to create new demands on the supply chains needed to design, install, commission and maintain these networks.

Following a stakeholder workshop in November 2019,* which highlighted that there was a range of skills gaps (for example, design, installation and project management) that were creating challenges for the sector, Energy Saving Trust and the Scottish Government commissioned research to help identify the skills gaps and training needs of the heat network supply chain in Scotland.

*Including product suppliers, energy companies, local authorities, consultants and public sector organisations

You can read a full copy of the report.

Find out more about this research and what the key recommendations are.

Database of renewable heat installations

The Scottish Government has set a target for 11% of non-electrical heat demand in Scotland to come from renewable sources by 2020.

In order to help measure progress towards this target, Energy Saving Trust maintains a database of renewable heat installations on behalf of the Scottish Government. The database records installations known to be operating and those currently in various stages of development, and contains data on the capacity and yearly heat output of those installations.

Read the latest report.

The District Heating Loan Fund is funded by the Scottish Government.

Last updated: 11 May 2023