Energy Efficient Scotland consultation: Making our homes and buildings warmer, greener and more efficient

Improving Our Homes

Introduction

11. When we consulted on Scotland’s Energy Efficiency Programme ( SEEP) last year, there was a clear consensus across all respondents that a Long-Term Domestic Standard is needed to provide certainty and a clear direction of travel. As set out in the Route Map, we are proposing setting a Long-Term Standard for the domestic sector to be met by 2040.

Sector Overview

12. There are currently around 2.5 million ^[4] households in Scotland of which approximately 61% are owner occupied, 15% are privately rented, and 23% are socially rented. Social housing, where standards have been in place since 2014, is on average more energy efficient with over half rated EPC Energy Efficiency Rating Band C or better. This compares to the private rented and owner occupied sectors where under two-fifths of homes achieve a similar rating.

13. In 2016, 83% of homes were considered to be covered by the gas grid (within 63 metres of the grid). It is estimated that 79% of homes use gas as their main heating fuel, 11% use electricity, 6% oil and the remainder use other fuels.

Long-Term Domestic Standard

We propose that all homes must reach at least an EPC Energy Efficiency Rating Band C (hereafter referred to as EPC C) by 2040, where technically feasible and cost-effective.

14. In 2016, 39% of homes were at EPC C or better. ^[5] The capital investment required to meet the Energy Efficient Scotland Programme is based on improving buildings where it is technically feasible and cost‑effective. We have acknowledged that it will not be possible to bring 100% of properties to the standards set out. We estimate that the costs of meeting the Programme for domestic properties is in the region of £8bn, to bring around 75% of Scotland’s private sector to EPC C and around 50% of its social rented sector properties to EPC B. While costs to achieve the standards will vary across dwellings depending on their built form, fuel type, and current levels of heating system efficiency and insulation, we estimate that the median cost in the private sector (i.e. for owner occupied and privately rented dwellings) will be in the region of £3,500, which means that half of dwellings can be upgraded at a cost of £3,500 or less.

15. These statistics have been modelled using the National Household Model, which is also used by the UK Government and the Committee on Climate Change, drawing on data from the Scottish House Condition Survey. The model allows dwellings to be upgraded using a set of standard measures, relating to improving the efficiency of heating systems, insulating walls, roofs and floors, and installing renewables (solar, heat pumps and biomass boilers). This list is not exhaustive. For each dwelling, the model selected the package of measures which would bring the dwelling up to the target EPC at the lowest capital cost.

16. This will help to achieve our climate change commitments, by reducing our domestic energy demand and emissions. The Fuel Poverty Strategic Working Group has also recommended that Energy Efficient Scotland include a milestone towards achieving our goal of removing poor energy efficiency as a driver for fuel poverty. This is discussed further in paras 42-45.

Consultation Questions

1. What are your views on our proposal for owner occupied and private rented properties to achieve the Long-Term Domestic Standard EPC Energy Efficiency Rating Band C by 2040 at the latest?

Exceptions to the proposed Programme Long ‑ Term Domestic Standard (private rented and owner occupied homes)

17. We think there could be situations where it is appropriate for a lower standard to be acceptable, or for owners to have longer to improve their property, for example where there are issues to do with permissions or agreement of other owners. This is the approach currently taken in the Energy Standards for Social Housing ( EESSH), and consulted on for the private rented sector.

Consultation Question

2. Do you think we should allow for situations where a lower standard is acceptable?

3. Do you think we should allow for situations where a longer period for improvement is allowed? Please explain your answer, giving examples.

Technically feasible and cost-effective

18. We are proposing that properties would only need to be brought up to the standard where it is technically feasible and cost-effective. Technical feasibility is best determined at an individual property level. We consider that a new assessment, building on the EPC process, should be developed which will identify what is technically feasible.

19. As well as being technically feasible, measures should also be cost-effective. We consider this to mean that it should pay for itself over its lifetime. The new assessment proposed needs to include information on the ‘cost-effectiveness’ of measures to assist owners in understanding what combinations of appropriate measures are likely to be achievable within a given budget or payback period and how long the benefit from installed measures will continue. Please see the assessment section for more information.

Consultation Question

4. We are proposing that the definition of a cost-effective measure is that it should pay back over its lifetime. What are your views on this definition?

Air Quality and the Long-Term Domestic Standard

20. Indoor air quality is a key health issue affecting people, homes and energy efficiency. While improvements in energy efficiency can lead to improvements in health outcomes, particularly for older people, young children, and those with respiratory and other chronic health conditions, there is the potential for unintended consequences adversely affecting the air quality in a home. Proper use of energy and ventilation systems will help ensure air exchange rates meet recommended levels. Advice for households, which includes effective engagement with tenants in rented properties, is vital for successful outcomes in these regards.

21. The Energy Efficiency Standard for Social Housing ( EESSH) consultation, which is live in parallel with this consultation, proposes that the Scottish Government and social landlords work together at the earliest opportunity to collect and analyse data on air quality, with a no detriment air quality requirement to be included in EESSH from 2025.

Consultation Question

5. What are your views on the issue of air quality in relation to the Long-Term Domestic Standard?

Using EPCs for the Long-Term Domestic Standard

22. Energy Performance Certificates ( EPC) are an established mechanism to benchmark a property’s energy efficiency. They are required at the point of sale and rental. The Energy Efficiency Rating on the EPC is already used in social housing to set minimum standards through the Energy Efficiency Standard for Social Housing ( EESSH), which currently complies with minimum energy efficiency standards using this metric (Reduced Standard Assessment Procedure [ RdSAP] Rating). ^[6] The EPC Energy Efficiency Rating will also be used when regulating for minimum energy efficiency standards in the private rented sector.

Energy Performance Certificates ( EPCs)

The EPC reports upon the calculated Efficiency of the dwelling using the ‘Reduced Data’ version of the UK Government Standard Assessment Procedure for Energy Rating of Dwellings ( RdSAP).

Two ratings are reported on the EPC:

1) The Energy Efficiency Rating, which takes into account both energy efficiency and fuel costs. The higher this rating, the lower fuel bills are likely to be.

2) The Environmental Impact (CO ₂) Rating, which reports the dwelling’s effect on the environment through its emissions. The higher the rating, the more environmentally friendly the property is deemed to be.

Both ratings are divided into seven bands ranging from A to G, with band A being the best, with a calculated rating of 92 or higher. The EPC reports both the current ratings for the building and potential ratings for the building if identified improvement measures are undertaken.

23. Stakeholders responding to the 2017 SEEP Consultation told us that, whilst EPCs are not always fully understood, they are already used widely and recognisable, and recommended that we build on them. As such, we will continue to use EPCs and the Energy Efficiency Rating to set performance standards for domestic buildings.

24. Feedback received during the 2017 SEEP Consultation highlighted a number of concerns around the underlying methodology of EPCs and we have already commissioned some initial research to explore these issues and identify how EPCs can be improved to support Energy Efficient Scotland.

25. The Energy Efficiency Rating is linked to the energy efficiency of the property, the type of heating system in place, and the cost of fuel. As such, it can change over time as the background methodology is refined and updated to take account of the latest knowledge and by revision in fuel price data used in the calculation.

26. The existing Energy Efficiency Standard for Social Housing ( EESSH) takes account of this through conversion tables, base lined against the version of SAP used to set the standard, and recognising that social landlords need to be able to plan works across their stock over the longer term as part of their asset management processes. In comparison, our consultation in 2017 on minimum standards in the private rented sector proposed that compliance with the standard would be based on the rating on the current valid EPC for the property, to ensure that the standard was based on the most current assessment of the property. We are now seeking views on how best to take account of potential future changes to EPC ratings driven by changing methodology and fuel price data.

Consultation Question

6. The EPC Rating of a property can be affected by changes to the underlying methodology and to fuel price data. How do you suggest that the Programme takes account of this in setting the Long-Term Domestic Standard?

Support for the Long-Term Domestic Standard

27. We know that there are different starting points for energy efficiency across the social and privately rented and owner occupied sectors. In the past, Government schemes and standards have focussed on improving the energy efficiency of households in fuel poverty. In the social rented sector landlords have already been working towards ensuring that the majority of their properties are equivalent of EPC C or D by 2020. Grant schemes and low-cost loans have been made available to help improve the energy efficiency of owner occupied and privately rented properties. However much more remains to be done to improve these sectors. Due to these differences in starting points we consider that the EPC C standard should be introduced in a phased way. The following table and diagram below summarise the proposed domestic programme for Energy Efficient Scotland by sector and essential delivery criteria.

Domestic

	Transition	General	Advice	Delivery	Delivery	Finance	Service
Offer	In the Transition Phase we will expand current local delivery programmes into able-to-pay households and businesses, drawing on national advice and financial support. The two year programme will incrementally offer local authorities greater opportunities to plan and deliver integrated energy efficiency projects.	The Programme offer will consist of a universal end-to-end offer made by either a local authority or the Scottish Government.	The foundation of the Programme offer is that all households will be able to access good quality, independent advice and information on improving the energy efficiency of their property and reducing their fuel bills.	Tackling fuel poverty – Area based schemes and Warmer Homes Scotland. National delivery - continue to be offered to provide those households who are either not covered by an area based scheme at any given time, or who wish to improve their property earlier than any proposed backstop date.	Local delivery - Local authorities expand their current approach to delivery by developing a Local Heat and Energy Efficiency Strategy ( LHEES) setting out a costed delivery plan for its area.	A mixture of grant and loan funding across different tenure and sectors to tackle fuel poverty and enable achievement of standards.	The Programme customers should be offered a consistent, quality level of service at each stage of the process. Independent advice will be the bedrock, advising property owners on the standards they will be expected to achieve, deadlines, trigger points, programmes and funding.

Domestic Programme Summary

Social Housing

28. The Energy Efficiency Standard for Social Housing ( EESSH) was introduced in 2014 and aims to encourage landlords to improve the energy efficiency of social housing in Scotland. The EESSH sets a minimum EPC Energy Efficiency Rating for landlords to achieve by 2020 (equivalent to EPC C or D dependent on building type and fuel type), and three quarters of the social housing stock already meets the standard. The Scottish Housing Regulator is responsible for monitoring social landlords’ compliance with the EESSH, and use this information as part of its annual risk assessment of social landlords.

29. Following a review of the EESSH, and consideration of activity post-2020, a new milestone has been proposed to maximise the number of social rented homes attaining EPC B by 2032, with an opportunity for review in 2025. We are consulting separately on these proposals, which can be found at: /ISBN/9781788518185.

Private Rented Sector ( PRS)

30. We consulted on proposals for minimum energy efficiency standards in private rented housing in summer 2017 and published an analysis of responses in November 2017. ^[7] As set out in the Route Map, we will bring forward regulations requiring PRS properties to have at least an EPC E at a change of tenancy from 1 April 2020 and in all properties by 31 March 2022; and to have an EPC D at a change of tenancy from 1 April 2022 and in all properties by 31 March 2025. There will be financial penalties for those who fail to achieve compliance. In some situations, there will be exceptions, for example where a lower level or longer timescales will be acceptable.

31. In order to provide certainty for landlords to plan improvements and make use of the support on offer, we propose that PRS properties reach the Long-Term Domestic Standard of EPC C by 2030. This will bring the private rented sector closer to the standards in the social rented sector so that people who rent in Scotland, whether privately or socially, can enjoy housing which is warmer and affordable to heat. This could be achieved in the same way as the minimum standard, applying at point of rental from April 2025 and in all PRS properties by 2030, with financial penalties for non-compliance.

Consultation Question

7. What are your views on the proposal that all PRS properties meet EPC Energy Efficiency Rating Band C by 2030?

Owner Occupied

32. Private homes occupied by their owners account for 61% of housing. As such, improving the energy efficiency of these homes will be critical in achieving the overall aims of the Programme. The Scottish Government has provided support to improve the energy efficiency of owner occupied properties for a number of years, including through our Home Energy Efficiency Programmes for Scotland. This has helped drive a steady improvement in the number of homes achieving EPC C, and there are now around 34% of homes at this standard.

33. However, much more remains to be done to improve the energy efficiency of owner occupied homes. Based on current figures, there are around 1 million owner occupied properties in EPC energy efficiency bands D-G which would need to be improved to meet EPC C by 2040.

34. That is why we are proposing that over an initial 10 year period we focus on encouraging and enabling home owners to improve their homes, and that we will consider whether mandatory action is needed from 2030 to require owner occupiers to improve their homes to EPC C by 2040 (where technically feasible and cost-effective). This will be linked to the ongoing review of the Energy Efficient Scotland Programme to monitor the effect of the voluntary phase.

Encouraging Action

35. In the first years of the Energy Efficient Scotland Programme, we think that action in the owner occupied sector should continue to be based on enabling and encouraging action, through the Programme offer, which builds on our existing support schemes such as the Home Energy Efficiency Programmes for Scotland ( HEEPS), and through information on energy efficiency being provided at key trigger points. This could also be an opportunity to provide advice on the benefits of energy efficiency, the support which is available, and the long‑term ambition of the Programme.

Requiring action

36. Movement towards an EPC C will initially be progressed through encouraging and enabling owners to improve their properties. We will monitor progress through wider work to evaluate the roll out of Energy Efficient Scotland, but if this does not show satisfactory progress towards meeting our ambition, we think that mandatory action to ensure compliance with the Long-Term Domestic Standard will need to be considered. For example, this could be through requiring improvements to reach EPC C when there is a change in ownership, or ultimately requiring the standard in all properties. If we do mandate that owner occupiers improve their properties, this is likely to be accompanied by financial penalties for non-compliance. The detail of how standards would be required and enforced will be subject to further consultation ahead of their introduction.

37. We think that we should consider starting to require owners to improve their properties to EPC C from 2030. This would allow 10 years of the Energy Efficient Scotland Programme to encourage action, and 10 years to ensure the remaining properties are brought up to standard.

Consultation Questions

Owner Occupiers: Encouraging Action

8. What are your views on our proposal for an initial period of encouraging action?

9. What information would be useful for householders to be able to access on how to achieve EPC Energy Efficiency Rating Band C before 2030?

Owner Occupiers: Mandatory Action

10. What are your views on our proposal to follow this initial period with mandating action?

11. What are your views on our proposal that 2030 is the right point to start mandating action to achieve EPC Energy Efficiency Rating Band C?

12. What are your views on our proposal for owner occupied properties to be subject to penalties for non-compliance?

Homes outside of the existing mandatory EPC process

38. We are proposing linking the Long-Term Domestic Standard to the EPC because these are already required at the point of sale or rental in the majority of Scottish houses. However, Park Homes are not covered by the European Performance of Buildings Directive nor by housing legislation. Fuel poverty can be an issue for people not living in traditional domestic accommodation, for example mobile homes ^[8] or gypsy/traveller accommodation. It may therefore be appropriate to ensure that action is taken within the Energy Efficient Scotland Programme to improve the energy efficiency of such accommodation.

39. Our Warmer Homes Scotland programme is available to all eligible households in Scotland, including the gypsy traveller community. It can provide assistance for those living in Park Homes which are also eligible for assistance through our Area Based Schemes but must be part of the permanent housing stock and have an EPC Energy Efficiency Rating of E, F or G.

40. Similarly, agricultural homes such as agricultural tenancies and crofts, are also not currently required to meet other housing standards. Scottish Ministers are considering this issue, and it may be appropriate for the Energy Efficient Scotland Programme to consider the possible application of energy efficiency standards to these properties over time.

41. Finally, accommodation such as Houses in Multiple Occupation ( HMOs) and holiday lets may not be required to have an EPC under existing legislation. Further work is planned to identify and then determine which types of domestic accommodation should be included within the Energy Efficient Scotland Programme.

Consultation Question

13. What are your views on requiring all types of accommodation to meet the Long‑Term Domestic Standard over time? Please explain your answer, giving examples of accommodation you think should/should not be required to meet the Long-Term Domestic Standard if relevant.

Higher targets for Fuel Poor Homes

42. Households that are living in fuel poverty spend a larger proportion of their income on fuel bills. We know that improving the Energy Efficiency Rating of Scotland’s homes is one of the most sustainable ways to lift households out of fuel poverty by providing fuel bill savings year-after-year as well as helping to protect against future fluctuations in fuel prices. That is why we have allocated £1 billion to our fuel poverty and energy efficiency programmes since 2009, helping over 1 million households vulnerable to fuel poverty.

43. We recently consulted on establishing a non-statutory sub-target and interim milestone in our fuel poverty strategy to remove poor energy efficiency as a driver of fuel poverty by ensuring all homes reach a minimum energy performance rating by 2040.

44. As set out earlier in this consultation we are proposing setting a minimum energy efficiency standard of EPC C, to be met by all domestic properties, where technically feasible and cost-effective, by 2040. However, due to the depth of fuel poverty experienced by some households, we know that reaching EPC C will not be enough to lift them out of fuel poverty. We are proposing a new milestone to maximise the number of social rented homes attaining EPC B by 2032, and whilst some of our most vulnerable citizens live in social housing, we also want to ensure that all fuel poor households are protected. That is why we also propose adopting a higher ambition or stretch target for fuel poor households, regardless of tenure, that would see them improved so that they reach EPC C by 2030 and EPC B by 2040.

45. We know that in many cases it will not be feasible to achieve EPC B without significant technical intervention, for example the installation of solar panels and heat pumps in addition to significantly improving the building fabric, or without significant investment. That is why, at this stage, we do not believe it is appropriate to propose making such ambitious targets mandatory across the entire domestic building stock. However, we propose that these ambitious targets act as a guide for our national and area-based fuel poverty programmes which will operate throughout the lifetime of Energy Efficient Scotland, building on the existing schemes in operation. In practice this will mean maximising the level of improvement possible, whilst remaining affordable for the public purse.

Consultation Question

14. Please provide your views on our proposal that all homes with fuel poor households are to reach EPC Energy Efficiency Rating Band C by 2030, where technically feasible and cost effective?

15. Please provide your views on our proposal that all homes with fuel poor households are to reach EPC Energy Efficiency Rating Band B by 2040, where technically feasible, cost-effective and possible within limits affordable to the public purse?