Energy Efficient Scotland programme: analysis of delivery mechanism

Part 1

The Strategic Case

3 Strategic Context

3.1 Key points

The EES Programme has been created by the Scottish Government with the aim to reduce Scotland’s existing buildings to near zero carbon through decarbonisation and reducing energy demand.

It is proposed that Local Authorities will take on a new responsibility to produce and deliver Local Heat and Energy Efficiency Strategies over the next 15 to 20 years. Several challenges will be faced in order to deliver the national programme. This chapter explores how these uncertainties can be managed.

3.2 National context

The Climate Change (Scotland) Act 2009^[5] set out the Scottish Government’s target to cut carbon emissions by 80%, relative to a 1990 baseline, by 2050. As of February 2018, the Government was on track to meet its interim target of a 42% reduction by 2020^[6].

Scotland’s Climate Change Plan, published in February 2018, confirmed the Government’s ambition to progress to a 66% reduction in emissions by 20326. Energy efficiency and decarbonisation of energy supply are key to this. The accompanying Scottish Energy Strategy document^[7] outlines targets to increase the productivity of energy use across the Scottish economy by 30%, and supply 50% of Scotland’s energy for heat, transport and electricity consumption from renewables by 2030. Reflecting this, the Scottish Government’s Infrastructure Investment Plan (2015)^[8] identifies energy efficiency as a national infrastructure priority.

Over 50% of Scotland’s energy consumption is used for heating and/or cooling households, businesses and public service buildings^[9]. Therefore, increasing the energy efficiency of Scotland’s building stock will be central to the delivery of the Government’s ambition.

In June 2018, the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill was published1. The proposed target is that no more than 5% of households will be in fuel poverty by 2040. Improving energy efficiency is seen as the primary driver to achieve this.

Furthermore, the Scottish Government has stressed the importance of capitalising on associated opportunities to grow and diversify the economy, improve health and wellbeing, and protect and enhance the natural environment. These, it notes, can be achieved through:

• Encouraging trade and inward investment;
• Supporting research and innovation;
• Workforce ‘up-skilling’;
• Delivering affordable energy and clean growth;
• Development of regional partnerships;
• Supply chain development;
• Supporting SMEs and new businesses;
• Upgrading infrastructure;
• Community regeneration; and
• Inclusive growth nationwide.

Therefore, the Scottish Government argues that improvements in the energy efficiency of buildings can not only make a significant contribution to the national energy and climate change targets, but will also help towards the Government’s wider aim of “creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth”^[10].

3.3 Energy Efficient Scotland

The Scottish Government has created the EES programme with the aim of making Scotland’s existing buildings “near zero carbon wherever feasible by 2050”. This will be achieved, Government proposes, through focusing on reducing energy demand and decarbonising heat supply and it will involve an estimated investment in excess of £10bn over a 20-year period^[9]. Plans for decarbonising electricity and transport infrastructure will be tackled, in parallel, through other policies and programmes^[6].

In the shorter term, EES will focus on reducing energy demand through improving the energy efficiency of residential, commercial, public and industrial sector buildings and implementing ‘low-regrets’ low-carbon technologies, such as district heating systems. In the longer term, the programme will also respond to and integrate the UK Government’s decision on the future of the natural gas grid, a decision expected in the mid-2020s.

It is expected that the programme may potentially include the creation of a new responsibility for Local Authorities to produce and deliver Local Heat and Energy Efficiency Strategies (LHEES).

These 15 to 20 year plans would outline the most appropriate approach for each authority to identify, cost and prioritise local energy efficiency and heat decarbonisation opportunities, contributing towards overall EES programme targets. The focus for LHEES will be on energy demand reduction, low carbon heat in off-gas grid areas and community district heating systems.

An initial transition period, which began in May 2018, is supporting Local Authorities to develop their LHEES and the projects underpinning them and to test proposals through funded pilot schemes. The LHEES and roles for Local Authorities may evolve over time, and Local Authorities could be closely involved in tasks including the provision of advice, monitoring, enforcement, and district heating regulation.

3.4 A National Delivery Mechanism?

The question of whether a national delivery mechanism is now required in Scotland to coordinate consistent, sustained delivery of EES, was raised in consultation responses related to SEEP (now EES)^[11]. Given the scale and technical complexity of the EES programme, the range and sheer number of stakeholders involved and its far-reaching and ambitious targets, several responses questioned the need for a national delivery mechanism to support and drive delivery of objectives and targets across multiple parliamentary cycles and maximise societal-wide benefits, including fuel poverty, health, regeneration, economic and environmental benefits.

3.5 Nature of the challenge

Delivering national programmes of energy efficiency across residential and commercial buildings will have challenges, including scale, complexity, uncertainty, and will require the best possible understanding of how to engage citizens and organisations in cooperative behavioural change.

This strategic case presents the outcomes and targets of EES and summarises the massive scale of what needs to be undertaken across Scotland’s domestic and non-domestic building stock, but the complexity and challenges of achieving this must not be underestimated. It is important to learn the lessons from national successes and failures, such as the failure of a national residential energy efficiency scheme with the UK Government’s Green Deal. The consequent Select Committee report^[12] notes a range of reasons for this, including:

• Lack of engagement with potential customers before implementation of the scheme to identify its attractiveness;
• Lack of marketing of the scheme generally and specifically in terms of the comfort benefits for customers, not just financial benefits;
• The scheme’s administration was too complex;
• Interest rates on loans to homeowners were too high to make them attractive;
• There was no mechanism for measuring progress against the scheme’s objectives, including its impact on fuel poverty; and
• There was no enforcement of quality assurance standards or compliance. Poor work and miss-selling damaged the reputation of the scheme and made customers wary.

The case of delivering EES’ outcomes and targets have considered the potential challenges and uncertainties and how they can be managed best in considering the potential roles for a national delivery mechanism.