Today, we have updated the SOMS contracts for use across the district heating sector, free of charge. In this iteration, we have introduced a brand-new recovered heat contract template. It marks the first time a recovered heat off-take and access agreement has been created for the UK market and published for use free of charge.
The Green Heat Network Fund (GHNF) is here to provide the foundations to catalyse a thriving, self-sustaining district heating industry across England and Wales (applications are open for Welsh projects from Round 12). As part of this, we want to make it as simple as possible for our funded projects to engage with the supply chain, procure contracts, and drive down costs.
The GHNF has developed a set of draft contracts free for use by anyone in the sector developing a district heating scheme. The documents reduce transaction costs for project developers and help to raise standards across the industry.
These contracts, which can be found here, cover everything from infrastructure delivery to energy offtake. The draft templates also cover connection and adoption to heat networks, use of heat pipes, energy centre and plant room lease, and operation and maintenance contracts.
The SOMS have proven to be immensely popular, with over 170 downloads in the past year, showcasing how the templates are helping to build high standards across the district heating space.
What’s new
Firstly, we’ve undertaken another update of the existing set of SOMS contracts to ensure they reflect current best practice, introducing “contract particulars” sheets to many of them to put the focus on key commercial details, as well as undertaking some regulatory updating and some shortening.
Secondly, we’ve created a new recovered heat off-take and access contract template.
Recovering the heat that’s available from industrial and other processes is a key challenge for the district heating sector. In the UK, while there are a few examples of heat networks that harness this “recovered” heat, the potential is vast.
Potential heat sources exist wherever there’s a process that generates heat. We see tapping into these heat sources as a great way to help decarbonise both heat supply and the wider economy. We’ve already funded several projects that will take heat from data centres, energy-from-waste plants, and other industrial sources, and we see that trend accelerating in the coming years.
However, district heating projects are having to start from scratch in how they structure their heat recovery deal and how they convert this deal into a contract. The GHNF team set about making this process more seamless, developing a new recovered heat off-take and access agreement contract template. The contract will help to streamline interactions between recovered heat sources and the heat supply companies, making it easier to prompt, structure, and ultimately reach final supply agreements.
Our recovered heat contract provides flexibility for different commercial approaches but focuses on both an off-take model and an access model. It’s the first of its kind for the UK market, and the way that we’ve written it makes it suitable for use with almost any recovered heat source and technology. We’re publishing this alongside our other free of charge SOMS contracts. This removes a major hurdle to recovered heat projects reaching close and should help to reduce project costs too.
All template contracts were created by our clean energy law firm delivery partner, Lux Nova Partners, part of the Triple Point Heat Networks Investment Management consortium which delivers the GHNF.
How to use the contracts
All of the SOMS contracts can be found here.
The contracts provide a useful and advanced foundation for contract creation and negotiation. The templates also include useful drafting notes and guidance to help organisations to understand how these contracts may be tailored, alongside important information to include during contract negotiations. Since the recovered heat off-take and access agreement is trying to create a way of doing business, it includes more extensive guidance notes.
While each contract will require tailoring to specific project requirements, they exist as a helpful tool to raise standards across the district heating sector, while reducing the costs associated with developing and funding district heating schemes.
