Heat in Buildings Bill consultation: business and regulatory impact assessment (partial)

Scottish firms impact test

10.1 The objectives of the proposed Heat in Buildings Bill will have two broad categories of impact on firms in Scotland:

• Impacts on firms in the energy industries and clean heat supply chains:
  • Switching buildings from polluting heating systems to clean heat will reduce demand for the manufacture, installation and maintenance of polluting heating systems, and in the extraction, refinery and supply of these fuels. Demand for clean heating technologies will increase. On balance, it is likely that the net effect on employment will be positive with more jobs created in manufacturing and services than are displaced.
  • The impact on individual firms involved in heating technology supply chains will depend on the extent to which they switch technology focus.
  • The development of a market for clean heating systems in Scotland on a faster timescale than the rest of the UK has potential to build competitive advantage for firms active in Scotland to then deliver products and services in the rest of the UK.
  • There is potential for an increase in demand for energy efficiency upgrades to building fabric, leading to increased activity in the sector.
• Impacts on firms as owners / occupants / users of buildings:
  • The transition to clean heat will likely on average create a net lifecycle cost at building level relative to continuing the use of incumbent polluting technologies. The size of this cost (and hence firms' competitiveness with others not facing equivalent costs) will be dependent on developments across energy markets, reserved energy policy, financing options and subsidies.
  • Based on EPC records, around half of non-domestic buildings already use clean heat, meaning many businesses will not be directly affected by the regulation. For the businesses which are affected, the heterogeneity of the sector means the impacts are likely to be wide ranging. Scottish Government will look to mitigate the impacts of the regulation for businesses through stakeholder engagement and support.
  • In 2023/23 there were 4,223 commercial sales of buildings and 848 long term commercial leases.^[40]
  • The impact on individual firms may depend on whether they are in a heat network zone.
  • The impact on firms will also be determined by the content of subsequent secondary legislation, such as any variations to requirements. These regulations will be subject to full consultation with businesses and a further BRIA.

10.2 For this BRIA, these impacts have been judged qualitatively. This reflects that further work is to be carried out to develop secondary regulations which will rely on the primary, high level, powers to be included in this bill.

10.3 Further work will be carried out to better assess the impact on Scottish firms, including targeted stakeholder engagement.