Energy Efficient Scotland programme: analysis of delivery mechanism

2 Introduction

2.1 Background

2.1.1 The Energy Efficient Scotland programme

Scottish Ministers designated energy efficiency as a national infrastructure priority in 2015, recognising the many benefits delivered by improving the energy performance of buildings. The EES programme represents the delivery of this priority.

EES is a 20 year programme with a set of actions aimed at making Scotland’s existing buildings near zero carbon wherever feasible by 2050, and in a way that is socially and economically sustainable. By the end of the programme EES aims to transform the energy efficiency and heating of Scotland’s buildings, making them more comfortable and easier to heat.

EES delivers across two key policy areas of Government: fuel poverty and climate change. It has two main objectives:

• Removing poor energy efficiency as a driver for fuel poverty. The Scottish Government is committed to removing poor energy efficiency as a driver of fuel poverty, and the programme will be the primary mechanism by which this is achieved; and
• Reducing greenhouse gas emissions through more energy efficient buildings and decarbonising heat supply. The programme also supports Scotland’s targets to reduce greenhouse gas emissions. The programme targets will see emissions reductions in the residential and services sectors of 23% and 59% respectively by 2032 (compared to 2015 levels).

To achieve these two key objectives the Scottish Government is proposing to set long term mandatory energy performance standards for all buildings in Scotland to reach by 2040, including more ambitious targets for properties with fuel poor households.

Achieving these objectives will create opportunities and realise multiple benefits across Scotland. As well as supporting the drive to eradicate fuel poverty and reduce emissions, it will help to keep bills affordable, make homes and businesses more comfortable to live and work in, and improve health and wellbeing outcomes. It is also expected to increase the productivity and competitiveness of Scottish businesses and make a positive contribution to the Scottish economy.

In January 2017, the Scottish Government asked stakeholders about the delivery of the programme, and one of the messages was the potential need for a national mechanism to oversee the delivery of Energy Efficient Scotland. This reflected the fact that the programme would run for 20 years, span multiple terms of the Scottish Parliament and will involve activities as varied as improving the energy efficiency of buildings, decarbonising the heat supply to off-gas grid properties and supporting the development of district heating networks. In addition, the programme will also involve significant investment. The Scottish Government is investing over £0.5 billion in the Programme in the four years from 2016–17, and significant additional private investment will be needed alongside this to achieve programme targets. Due to the duration and significant investment involved, and the complexity, it was felt that the programme could benefit from some form of national delivery mechanism that would develop and provide the national capacity and expertise to deliver the programme.

Following this, the Scottish Government decided to explore the case for a national delivery mechanism for EES, developing a strategic outline case (SOC) in line with HM Treasury Green Book guidance^[4] for the SOC assessment level for potential projects.

2.2 Aim and structure of this report

This report sets out the strategic outline case for a national delivery mechanism for EES. It is divided into two main parts:

• Part 1 (strategic case) focuses on the national context in which the EES programme sits, and highlights where changes could enhance the delivery of the EES. Based on this, it describes the roles and tasks required, and summarises the strategic need for some form of national delivery mechanism to carry out these functions; and
• Part 2 (preferred way forward) identifies a long list of options for the form a national delivery body could take. A shortlist of options is created by assessing the ability of different structures to perform the delivery roles required. The remaining options on the shortlist are then assessed against criteria in order to develop high level initial iterations of the economic, financial, commercial and management cases in order to identify preferred options.

Part 1 is structured as follows:

• Chapter 3 sets out the strategic context of the EES programme, with detail around the national context for energy efficiency in Scotland, summarising wider government policies and objectives and emphasising the challenges implicit in achieving these national objectives and targets;
• Chapter 4 describes the EES programme’s objectives, key targets and route map;
• Chapter 5 summarises the current energy efficiency landscape in Scotland, including an overview of the current state of the building stock, a summary of the existing levers and administering organisations currently contributing towards achieving those targets, and the key characteristics of the supply chain and quality assurance providers;
• Chapter 6 reviews the current drivers and delivery options that are in place to deliver against the targets and proposals set out in EES, and identifies where improvements and changes are needed to meet these proposals; and
• Chapter 7 identifies the roles that a delivery body would need to play to enhance the delivery of EES, and sets out the case for these roles being carried out by a national level body. Chapter 5 reviews current drivers for energy efficiency action and highlights where positive changes could improve the overall outcomes sought by EES. In short it summarises the rationale for intervention and what needs to be done to change how energy efficiency is delivered. In doing this, it inherently starts to make the case for change and action at national level.

Part 2 is structured as follows:

• Chapter 8 identifies potential body structures for the national delivery mechanism, and rules out delivery models that could not feasibly carry out the delivery functions identified;
• Chapter 9 sets out the economic case for the potential models;
• Chapter 10 sets out the preliminary financial case;
• Chapter 11 sets out the preliminary commercial case; and
• Chapter 12 sets out the preliminary management case.

2.3 Source material

Material underpinning the strategic case has been drawn from:

• Relevant strategy and consultation documents from the Scottish Government;
• Responses from Scottish Government consultations on EES (previously known as Scotland’s Energy Efficiency Programme, or SEEP);
• Consultation with a wide range of Scottish Government stakeholders; and
• Relevant research papers.