Energy efficiency in social housing: guidance for landlords - revised 2020

9 Funding the EESSH

9.1 Data on investment to date indicates that most of the funding for meeting the EESSH has come from landlords own resources. The Review Group highlighted a number of practical difficulties faced by landlords in obtaining funding for energy efficiency works, including:

• The resource implications attached to applying for, and complying with, the Energy Company Obligation (ECO) are not always justified in terms of returns. By comparison, the capital acceleration programme is more effective.
• In some remote areas there is a shortage of local contractors which limits competition.
• There is a need for longer term planning on funding programmes, including HEEPS. Assurance of longer term funding would aid financial planning for both social landlords and contractors, and crucially would also encourage investment in building skills in local areas.

9.2 The Review Group also highlighted examples of successful good practice including:

• Using a local contractor who takes on responsibility for ECO application thus reducing the burden on the social landlord, and similarly for the Renewable Heat Incentive (RHI). However, landlords may have to include the cost of this work in the tender.
• By using Home Energy Efficiency Programme for Scotland (HEEPS) loans including Area Based Schemes (ABS) funding, landlords could capitalise on ECO to deliver mixed tenure programmes.
• In order to take advantage of ECO it is essential to be able to identify housing stock which matches the eligibility criteria.
• By working together, social landlords can capitalise on available funding. There is evidence of frameworks already in place where housing associations are using a collaborative approach. Good working relationships between RSLs and local authorities are also evident.

9.3 A variety of funding sources are available, including some that are useful in mixed tenure projects. One of the concerns is that funding sources are changing. Current funding sources (correct at January 2020) include:

• Climate Challenge Fund (CCF) Delivered by Keep Scotland Beautiful on behalf of the Scottish Government. CCF provides support to communities to take local action on the impacts of climate change.
• Energy Company Obligation (ECO) UK Government scheme obligating larger energy suppliers to fund installation of energy efficiency and heating measures, which reduce fuel bills for households vulnerable to experiencing fuel poverty. Funding for measures delivered to eligible households is accessed through energy companies and their delivery partners.
• Help to Heat Subsidises mains gas connections for households that meet certain criteria relating to fuel poverty risk. This can include connections carried out by independent gas transporters.
• Renewable Heat Incentive (RHI) A scheme managed by Ofgem that provides annual payments over 7 years (domestic route) or 20 years (non-domestic route) to support the cost of installing some heat producing renewables (due to close to new applications at the end of March 2021).
• Smart Export Guarantee An obligation on licensed electricity suppliers to offer a tariff and make payments to small-scale low-carbon generators, including households, for electricity exported to the National Grid from 1 January 2020.
• Home Energy Efficiency Programmes for Scotland: Area Based Schemes (HEEPS:ABS) Delivered by the Scottish Government via local authorities. Provides funding to private sector households for installation of energy efficiency measures. Can be accessed by social landlords to help owners/private landlords in mixed tenure schemes.
• Community and Renewable Energy Scheme Delivered by Local Energy Scotland. Provides grants and loans of up to £150k to not-for-profit community based organisations (including LAs and RSLs) to assist with the development and delivery of renewable projects.
• District Heating Loan Fund Delivered by the Energy Saving Trust. Provides low interest unsecured loans up to £1 million (and above) with repayment terms of up to 15 years, to support capital costs of delivering heat networks.
• Renewable Energy Investment Fund Delivered by Scottish Enterprise – Scottish Investment Bank. Key areas for support are marine, district heating and community energy.
• Scottish Partnership for Regeneration in Urban Centres (SPRUCE) The Scottish Government established SPRUCE using European Regional Development Funds in conjunction with the JESSICA (Joint European Support for Sustainable Investment in City Areas) programme. The fund manager is Amber Infrastructure. Social housing providers are invited to develop renewable energy projects and energy efficiency schemes as part of the retrofit of their existing housing stock.

9.4 Further information on available funding, including criteria and timescales, will be made available through the online forum (see paras 1.7 and 13.2).