Heat in Buildings Bill consultation: Fairer Scotland impact assessment

Stage 1 – Planning

Background

1.1 The climate emergency and the cost-of-living crisis makes the need for urgent action to reduce emissions and energy demand from buildings across Scotland more important than ever.

1.2 Our 2022 Programme for Government (A Stronger and More Resilient Scotland)^[1] reinforced this message. Measures to reduce our energy demand and end our dependence on fossil fuels will limit our exposure to the spiralling gas prices which have caused the recent surge in costs.

1.3 Scotland has legally binding targets to achieve "net zero" greenhouse gas emissions by 2045, with interim targets for a 75% reduction by 2030, and 90% by 2040. The Scottish Government's Climate Change Plan Update^[2] says that emissions from heating our homes and all other (non-domestic) buildings will need to fall 70% by 2030 compared to 2020.

1.4 Making our homes and buildings more energy efficient will help to reduce our energy demand and result in homes that are warmer and easier to heat. However, we know that better insulation and other energy efficiency measures – where those improvements are possible – will not be enough on their own. Meeting our net zero target will need all homes and buildings in Scotland – including schools, offices, hospitals and shops – to reduce their greenhouse gas emissions to zero.

1.5 It is critical that, as we take action to reduce emissions from Scotland's homes, we do so in a way that supports a just transition and the reduction of fuel poverty. Our ambitious statutory fuel poverty targets require that in 2040 no more than 5% of households are fuel poor, no more than 1% are in extreme fuel poverty and the fuel poverty gap is no more than £250 (in 2015 prices).

1.6 We can only do this by replacing heating systems which burn fossil fuels like gas boilers, oil boilers and liquid petroleum gas (LPG) boilers. These systems are known as 'direct emission heating systems'^[3] and are the way that we heat most of our homes^[4]. We refer to these as polluting heating systems in our consultation. We need to change these to clean systems, like electric heat pumps, or in some areas use district heat networks, or hydrogen which has been made using renewable electricity. We refer to these as clean heating systems in our consultation.

1.7 This consultation sets out proposals that might be included in a "Heat in Buildings" Bill. It also sets out the other elements that we propose to include as part of the Bill, including our plans for the growth of heat networks, and a strong and reliable supply chain.

1.8 We know that our proposals are likely to generate strong opinions and debate. That's why this consultation is so important. We need to hear as many views as possible on our proposals, and suggestions on how these might be amended or delivered differently, as well as for alternative approaches.

Challenge for Scotland's Buildings

2.1 Our plans for decarbonising Scotland's buildings were set out in our 2021 Heat in Buildings Strategy. This made clear the ways in which legislation requiring us all to reduce our energy demand and change our heating systems will be essential to reducing emissions from Scotland's buildings and delivering our public net zero goal by 2045.

2.2 The Heat in Buildings Strategy said that no one should be left behind in the heat transition to net zero. This means removing poor energy efficiency as part of our wider proposals and actions to help reduce fuel poverty. We believe that the proposals laid out in this consultation will make heating our homes and buildings cleaner and greener

2.3 We are introducing standards for new buildings (domestic and non-domestic) which will prohibit the use of Direct Emission Heating systems (polluting heating systems) from 2024. We now need to focus upon Scotland's existing homes and buildings.

Direct Emission Heating – Polluting Heating systems

3.1 By 'Direct Emission Heating' we mean heating systems which burn fossil fuels like gas boilers, oil boilers and liquid petroleum gas (LPG) boilers and which produce greenhouse gas emissions when we use them. In the consultation document we refer to these as 'Polluting heating systems'.

Zero Direct Emission Heating – Clean Heating systems

4.1 By 'Zero Direct Emission Heating' we mean a heating system such as individual heat pumps, or connection to a heat network, or electric system such as storage heaters which release no harmful gases into the atmosphere systems (direct greenhouse gas emissions). In the consultation document we refer to these as 'Clean Heating systems'.

4.2 As well as changes to the heating systems in individual properties, for example using air source heat pumps, we are also supporting efforts to build "heat networks" across Scotland, which could play an important part in reducing or removing emissions associated with heating buildings on that network.

Whom will it affect (particular groups/businesses/geographies etc)?

5.1 Socio-economic disadvantage encompasses low income, low wealth, material deprivation and geographical area deprivations with communities and interest and of place as cross cutting issues. Socio-economic background is a mechanism by which disadvantage can persist across generations.

5.2 The Heat in Buildings Bill Proposals will impact homeowners, business owners, landlords, building owners, tenants and residents across Scotland in communities and geographies of all types. It will also impact all socio-economic groups and demographics across Scotland. However, we expect the proposals, should they be implemented, to affect different groups in different ways. Evidence suggests that the following groups may be more impacted than others:

• Those with low incomes and/or low wealth
• Those in comparatively disadvantaged or deprived areas
• Those with disadvantaged socio-economic background

What main outcomes do you expect the policy/strategy/plan to deliver?

6.1 Our plans for decarbonising Scotland's buildings were set out in our 2021 Heat in Buildings Strategy. This made clear the ways in which regulations requiring us all to reduce our energy demand and change our heating systems will be essential to reducing emissions from Scotland's buildings and delivering our public Net Zero goal by 2045.

6.2 The Strategy also made clear that no one should be left behind in the heat transition. This means ensuring that poor energy efficiency is removed as a driver of fuel poverty and that our proposals and actions as a whole help reduce fuel poverty. We believe that the changes and improvements delivered by the proposed way forward laid out in this consultation will make our homes and buildings cleaner, greener, and easier to heat.

6.3 We are introducing standards for new buildings (domestic and non-domestic) which will prohibit the use of polluting heating systems from 2024; we now need to focus upon Scotland's existing homes and buildings. At the moment, 21% of our emissions come from our domestic and non-domestic buildings, with around 5,000 clean systems installed per year in Scottish homes. However, to reach our net zero target, this number must increase.

6.4 As well as changes to the heating systems in individual properties, we are also progressing work to deploy "heat networks" across Scotland, which could play an important part in reducing or removing emissions associated with heating buildings on that network. We believe that they will play an important part in the heat transition across Scotland.

6.5 The Bute House Agreement^[5] included a commitment to "phasing out the need to install new or replacement fossil fuel boilers, in off gas [areas] from 2025 and in on gas areas from 2030, subject to technological developments and decisions by the UK Government in reserved areas". It said that the Scottish Government would consult on the introduction of primary legislation – a Bill – which would provide the means to deliver this.

6.6 The Consultation sets out proposals on the ways in which regulations made using the powers in a "Heat in Buildings" Bill might look and operate. It also sets out the other elements that we propose to include as part of the Bill, including our plans for the growth of heat networks, and a strong and reliable supply chain.

Proposed Measures for the Heat in Buildings Bill

Proposal 1 - Setting a Heat in Buildings Standard for all buildings

7.1 We are proposing to include powers into the Heat in Buildings Bill to establish a 'Heat in Buildings (HiB) Standard'. This will affect all buildings in Scotland and will comprise three separate, but linked, parts:

• a prohibition on the use of polluting heating systems after the end of 2045 for all buildings;
• In owner occupied homes – require such homes to meet a minimum energy efficiency standard by the end of 2033; and
• In private rented homes – require landlords to meet a minimum energy efficiency standard by the end of 2028.

Proposal 2 – Scope of the Heat in Buildings Standard (extra time to take action)

8.1 The HiB Standard set out in Proposal 1 will mean that all homes meet the energy efficiency and Clean Heating requirements by 2045. However, we know that, in some cases, extra time might be needed to help people undertake the necessary works, or to take into account individual circumstances.

8.2 This is why we are proposing to introduce the HiB Standard affecting only main heating systems in a property. We are also proposing to give extra time in the period to 2045 to those already using bioenergy to meet the clean heat requirement of the Standard. Where there is no clean heating solution available to some homes and businesses, we are also proposing to give extra time until cleaner alternative fuel options become available.

Proposal 3 – Phasing of the Heat in Buildings Standard (Property purchase)

9.1 To help us contribute to our interim targets to reduce emissions by 2030 we are proposing to require those purchasing a property to comply with the prohibition on polluting heating within a specified amount of time following completion of the sale (likely two years).

9.2 This 'trigger' will apply only after we have developed and consulted on further regulations which will help implement the proposals. This proposal places no new obligation on the seller.

Proposal 4 – Phasing of the Heat in Buildings Standard at other points in time

10.1 In the future it may make sense, or be possible, to require people to end their use of polluting heating, for example, when their current boiler comes towards the end of its life.

10.2 We are proposing to include in the Bill powers to allow Scottish Ministers to require property owners to end their use of such polluting heating in other circumstances – but these powers would be the subject of further consultation as well as needing the future consent of the Scottish Parliament. .

Proposal 5 – Connecting to and developing Heat Networks

11.1 We know that heat networks are one of the clean heating systems that will enable people to comply with the HiB Standard. We want to see growth in this sector and we know that there is significant interest from local authorities and private investors in owning and operating these networks.

11.2 To attract more investment in this sector we are proposing that we provide local authorities and Scottish Ministers with powers to require buildings within a Heat Network Zone to end their use of polluting heating systems (by a certain date and with a minimum notice period).

11.3 Where a building is within a Heat Network Zone we are also proposing that building would not be affected by the property purchase trigger. This is to help preserve the business case for the network. Buildings within these zones will be required to meet the Standard when a heat network becomes available, either by connecting to that network or by installing another clean heating solution.

11.4 For new buildings within a Heat Network Zone, we are considering the creation of powers to allow local authorities and Scottish Ministers to require developers to connect to that network.

11.5 In the development of Heat Networks, the use of 'excess', 'surplus' and 'waste' heat are currently underused resources. If this can be fed into a heat network it may increase the number of viable heat networks across Scotland. That is why we are also proposing that occupiers of non-domestic properties are required to provide information about unused heat on their premises, and potentially require buildings with unused heat to provide this to a local heat network (where cost effective).

Proposal 6 - Dealing with individual circumstances

12.1 We know that property owners are all different, with different means and facing different circumstances. This means that their ability to change their home in order to meet the HiB Standard will vary greatly. We plan to take proper account of these individual circumstances through the use of exemptions and agreement of extra to give individual homeowners or landlords some extra time to meet the HiB Standard depending on their individual circumstances.

12.2 This is why we are proposing to establish formal powers to exempt those who can't, or perhaps should not have to meet the HiB Standards. We are also considering the use of modifications to the Standard to account for individual building circumstances or unique characteristics.

12.3 We also need to make sure there is a proper route for people to appeal where they feel the requirements are incorrect or unfair.

Proposal 7 – Public sector buildings

13.1 There are around 23,000 non-domestic buildings owned by public bodies. We believe that the public sector should show leadership by moving to use clean heating systems by the end of 2038 and have set out proposals to achieve this.

Proposal 8 – Amendments to existing legislation

14.1 Finally, our Heat in Buildings Strategy set out a provisional target for renewable heat of at least 22% by 2030. However, this target doesn't capture the ways in which Scotland is performing on heat decarbonisation and emissions as a whole. We think the proposed Bill gives us an opportunity to change this.

14.2 The final proposal in the consultation therefore proposes the inclusion of powers to require a new or amended target which could be more understandable and provide a better illustration of our progress, as well as a better signal and greater confidence to clean heating and building retrofit installers and business.

Timeframe for completing the Fairer Scotland assessment

15.1 The Fairer Scotland assessment will be published in November 2023.

Who else in the organisation will be involved in the assessment and what roles will they be playing? We'd expect involvement from policy and analytical teams as a minimum. It is rarely appropriate for one person to conduct the assessment alone.

16.1 Heat in Buildings Unit - The Unit is leading on the development of the bill and is therefore also leading the work on the Impact Assessments, including the Fairer Scotland Duty.

16.2 Heat Strategy Unit – This team developed the Heat in Buildings Strategy and relevant impact assessment which feed in to this assessment

16.3 Wider policy areas – Other policy areas have provided input relevant to their own concerns regarding the decarbonisation of heat in buildings in Scotland, including colleagues working in the housing, fuel poverty, energy networks, and consumers teams.

16.4 Analysts – We have sought input from analysts working in and OCEA and CAD who work with the wider policy areas involved in the assessment.