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

Options

Option 1 – Business as Usual (no regulation)

7.1 The continuation of existing Scottish Government programmes including Warmer Homes Scotland, Area Based Schemes, the Low Carbon Infrastructure Transition Programme, CARES, and the Home Energy Scotland loan and cash back mechanism at recent funding levels, alongside UK Government support mechanisms such as the Green Gas Support Scheme. While deployment of clean heating systems is increasing, evidence suggests that this currently extends to around only 10% of Scottish homes.^[21] Meeting our targets means that this figure needs to grow as quickly as possible.

Option 2 – A combination of regulatory, economic and behavioural change initiatives as part of a cohesive strategy (as promoted by the Heat in Buildings Strategy)

7.2 We know that our statutory climate change and net zero targets will not be met unless we decarbonise the systems used to heat our homes, businesses and other buildings. Over two million Scottish homes use polluting heating systems, as do almost half of our non-domestic buildings. They will all need to transition to clean heat by 2045 if Scotland is to reach net zero.

7.3 We also know that relying on a business as usual approach of incentivising and funding particular sectors is not achieving the rate of change needed. Option 2 relies on a cohesive package of actions, one of which includes the introduction of regulations to drive change. This package includes the use of non-regulatory measures to boost public engagement and enhance support for households, the public sector and businesses through consumer advice and advocacy and a range of financial and funding mechanisms. It also targets supply chain and skills development to support the transition and maximise economic opportunities.

7.4 The consultation proposes the following approaches to clean heat and energy efficiency:

• properties would be required to install clean heating systems when they are purchased, with a grace period from the date of purchase. We ask in the consultation document a question on the length of this grace period, between 2 and 5 years.

• PRS dwellings would be required to install energy efficiency measures to meet EPC C equivalent by 2028.

• Owner occupied dwellings would be required to install energy efficiency measures to meet EPC C equivalent by 2033.

7.5 This regulatory approach, based on powers to be introduced under the proposed Heat in Buildings Bill, will provide certainty to the market and supply chain, and a strong signal to home and building owners across Scotland.

7.6 It will sit within the following broader package:

• Use of Local Heat and Energy Efficiency Strategies, to provide an area-based long-term framework for planning, delivery, coordination (e.g. with network investment) and potentially triggering regulation.
• Scottish Government support of £1.8 billion available during the current parliamentary session, evolving and expanding existing delivery mechanism to reflect focus on Heat in Buildings and our four key priorities: (1) supporting those least able to pay, (2) investing in strategic technologies in low- and no-regrets areas, (3) showcasing Net Zero leadership and (4) innovation and demonstration.
• A public engagement strategy and action plan to enable people to participate in shaping the decisions that affect them, and support to enable communities across Scotland to play a role in the developing heat transition. This is planned for publication by the end of 2023.
• Progressing the outline business case to establish a National Public Energy Agency. As a first step we launched the Agency in virtual form – known as Heat and Energy Efficiency Scotland (HEES) - this operates in house within Scottish Government and comprises the Heat in Buildings Delivery Division within the Directorate of Energy and Climate Change
• Working towards a long-term market framework, including development of new finance mechanisms and work to align financial incentives around clean heating choices.
• Working with the supply chain to ensure skills and supply chains are adequate to deliver the transformation needed, maximising the economic benefits to Scotland by building local supply chains, maximising local job creation, and ensuring a just transition.
• Working with network companies, Ofgem and UK Government to ensure that the wider energy system is able to supply the energy needed for heating buildings in Scotland through the transition.
• Working more broadly with the UK Government to ensure coherence across reserved and devolved areas, including regulations, investment and market mechanisms, customer protection, product standards, taxes, levies, data access and GB wide schemes.