Energy Efficient Scotland: partial business and regulatory impact assessment

5. Competition Assessment

We have applied the following competition filter questions to the various proposals:

• 1) The measure won’t directly or indirectly limit the number or range of suppliers
• 2) The measure won’t limit the ability of suppliers to compete
• 3) The measure won’t limit suppliers’ incentives to compete vigorously
• 4) The measure won’t limit the choices and information available to consumers

5.1 Long-term domestic standard

Dwelling owners will be responsible for ensuring appropriate energy efficiency measures are undertaken to reach the required standard. Accordingly, dwelling owners will be able to approach both large and small installation businesses to undertake any proposed energy efficiency measures. As such, we do not believe this will limit the ability of suppliers to compete, as they will be operating in an open and transparent market when tendering for these works. Similarly, dwelling owners will not be restricted by choices or information available to them. As we continue to engage with stakeholders and further develop our policies and proposals, any future detailed assessment and impact evaluation will reconsider the competition questions.

5.2 EESSH2

To meet the requirements of EESSH2, social landlords will be responsible for ensuring the energy efficiency measures are carried out to a high standard by reputable contractors. The related works will go out to tender and a wide range of construction businesses will have the opportunity to bid for work. There is the potential for both large and small to medium sized enterprises to secure contracts for the installation of measures which will be necessary to meet EESSH2. The amount of work and the nature of the work is unlikely to impact on competitiveness of Scottish companies within the UK or elsewhere in Europe.

There is the potential for significant job creation to undertake the retrofitting works, which may assist in developing skills and market in some of the newer technologies such as external and internal wall insulation and renewables. Individual businesses and business representative bodies are invited to respond to this partial Business and Regulatory Impact Assessment; comments received will inform the final assessment.

Accordingly, when applying the competition filter questions set out above, we can confirm that we expect the proposals for EESSH2 to pass all four of these tests.

5.3 LHEES and District Heating

The LHEES and District Heating proposals will not impact on competition as the processes we propose in terms of local authorities gathering information/data through socio-economic assessment, zoning and identifying of potential opportunities for district and communal heating will encourage competition among suppliers, particularly in terms of providing a level of visibility that currently does not exist.

In light of the above, the Competitions and Markets Authority ( CMA), in response to our first consultation ^[23] made a number of recommendations which have been an ongoing consideration in the continued development of our proposals.

The CMA has also informed the Scottish Government within their response to our second consultation ^[24] that in December 2017 they launched a market study into domestic heat networks to review how well the market works with a focus on consumer experience. The specific focus of the CMA study is on the provision of heat networks to domestic consumers. This includes domestic residents of large commercial housing developments and blocks of flats. The scope of the study is UK-wide.

The CMA have informed the Scottish Government that they are examining three key themes, drawing both on the concerns that have been expressed by other institutions, and those that have been addressed directly to the CMA. These themes are:

a) Transparency of information, both prior to moving into a property and during residency;

b) Concerns regarding the monopoly supply of heat, the inability of customers to switch and the potential misalignment of the incentives of the builders, operators and customers of heat networks; and

c) Outcomes for heat network customers, including prices, service quality and reliability.

The CMA are currently engaging with stakeholders across the UK and examining a range of evidence, including survey evidence, data on prices and costs, the operation of the supply chain, contracts and outcomes for customers. The CMA’s stakeholder engagement, as well as research and analysis, is ongoing, and while they have stated they are not currently in a position to provide any detailed analysis of the Scottish Government’s proposals as regards regulation of district heating, the Scottish Government will continue to engage closely with CMA as we develop our proposals and take into account any recommendations they may make as a result of their market study.