Future of low carbon heat for off gas buildings - call for evidence: analysis of responses

Introduction

Background

This report presents analysis of responses to the Energy Efficient Scotland call for evidence: the future of low carbon heat for off gas buildings.

Decarbonising the way Scotland’s buildings are heated is a fundamental part of the transition to a net-zero emissions economy, and to achieve the Scottish Government’s climate change targets. The current Climate Change Plan outlines a trajectory to supply 35% of domestic heat, and 70% of heat used by non-domestic properties, from low carbon sources by 2032.^[1] The Scottish Government has committed to updating the Climate Change Plan within 6 months of the Climate Change Bill receiving Royal Assent.

The Scottish Government has set out a hierarchical approach to heat decarbonisation. The first stage (reducing heat demand) has been the focus of a range of programmes and policies over recent years. Decarbonising heat generation is the second element in this approach, including continuing progress to decarbonise heat in off-gas buildings and work with the UK Government on heat to those using mains gas.

The call for evidence sought responses to inform the Scottish Government’s future strategic approach to decarbonise heat in off-gas buildings. The call for evidence paper sets out 57 open questions relating to the current market, low carbon heat technologies, and the framework required to support uptake of these. The call for evidence opened on 26 March 2019 and closed on 17 June 2019. The paper is available at: https://consult.gov.scot/better-homes-division/the-future-of-low-carbon-heat.

Profile of responses

In total 54 responses were received, of which 50 were from groups or organisations and 4 from individual members of the public. Of the 54 responses, 22 were received through the Scottish Government’s Citizen Space consultation hub, but most were received via email. Where consent has been given to publish the response it may be found at https://consult.gov.scot/better-homes-division/the-future-of-low-carbon-heat/.

Respondents were asked to identify whether they were responding as an individual or on behalf of a group or organisation. Organisational respondents were then allocated to one of four broad categories (and one of 11 sub-groups) by the analysis team:

• Private sector organisations: 31 respondents including six energy supply and/or distribution organisations, seven renewable/low carbon, three heat pump, four LPG, and three other fuel-related organisations. Eight ‘other’ private sector respondents include some non-energy related organisations.
• Public sector organisations: 9 respondents including six local authorities and three other national and regional public sector organisations.
• Third sector respondents: 5 respondents including three with a specific low carbon or energy efficiency focus, and two other organisations.
• Other group respondents: 5 respondents including three organisations with a specific focus on energy and heat, an academic/research organisation and a housing provider.

A breakdown of the number of responses received by respondent type is set out in Table 1 below. A full list of organisational respondents who gave consent for their name to be published can be found in Annex 1.

Table 1: Respondents by type

Organisations:	50
Private sector	31
Private sector - energy supply and/or distribution	6
Private sector - renewables/low carbon	7
Private sector - heat pump	3
Private sector - LPG	4
Private sector - other fuels	3
Private sector - other	8
Public sector	9
Public sector - local authority	6
Public sector - other	3
Third sector	5
Third sector - low carbon/energy efficiency	3
Third sector - other	2
Other organisation	5
Individuals	4
ALL RESPONDENTS	54

Responses varied in their focus across the call for evidence. Some were primarily concerned with specific low carbon technologies while others responded across a broader range of questions. Table 2 provides an overview of patterns of response by respondent type.

The extent to which responses focused on specific technologies varied by respondent type and appeared to reflect respondents’ experience and expertise. For example, those active in the relevant sector accounted for a large proportion of material submitted in relation to some low carbon technologies. This appeared to be the case for questions on biomass and bio-liquid technologies; relatively few respondents without links to the sector provided detailed responses to these questions. As such, the views expressed cannot necessarily be read as representative of the full range of opinion. Furthermore, there may be counterarguments to points raised by respondents that the call for evidence does not capture.

Table 2: Overview of responses by question.

	Private sector	Public sector	Third sector	Other	Individual	TOTAL
ALL RESPONDENTS	31	9	5	5	4	54
Current market	30	9	4	4	3	50
Low carbon technologies	27	8	5	5	2	47
Electric heating	24	8	3	4	2	41
Biomass and bio-liquid	19	5	0	3	2	29
Heat networks	19	8	3	4	2	36
Gas grid extension	19	6	3	3	2	33
Innovation	16	1	0	3	2	22
Low carbon heat and fuel poverty (Q40)	17	3	1	3	2	26
Enabling uptake of low carbon heat	29	6	4	3	2	44
The role of regulation in supporting uptake	25	5	3	4	2	39
Growing and scaling the supply chain (Q57)	21	6	2	3	2	34

Analysis and reporting

In total there were 57 open questions, of which 5 had multiple parts. This report presents a question-by-question analysis of the comments made. Respondents made submissions in a range of formats, some including material that did not directly address specific call for evidence questions. This content was analysed qualitatively under the most directly relevant part of the call for evidence. The report also takes account of feedback gathered through a stakeholder workshop event held as part of the call for evidence process.

Readers’ attention is drawn to the following points regarding the analysis and reporting process.

Analysis set out in this report focuses on evidence supplied by respondents, consistent with the purpose of the call for evidence. Where specific claims are set out in the report, references to evidence sources are provided where possible. The report notes where evidence was not provided for a claim. Statements of opinion provided by respondents without evidence may not have been included in the analysis.

A list of acronyms used in the report is provided at Annex 2.

Current market for low carbon heat

The first section of the call for evidence considers the low carbon and renewable heat market in Scotland. In addition to the distinctive characteristics of the market and how this has developed, this section specifically considers the following key factors for the future policy approach:

• Existing barriers to uptake of low carbon heat;
• Actions that can overcome these barriers to accelerate uptake; and
• Building-specific restrictions to growth in low carbon heat including poor energy efficiency, building density, conservation areas and listed buildings, and high heat demand/need for high temperature heat.

Questions 1 to 8 sought views and evidence on each of these in turn.

Readers should note that respondents’ focus on specific aspects of the current market for low carbon heat appeared to reflect their experience and expertise. For example, those active in a particular energy sector typically focused on their sector and associated technologies. As such, views expressed cannot necessarily be read as representative of the full range of opinion. References are provided for specific claims where possible, and we note where evidence was not provided. Statements of opinion provided without evidence may not have been included.

Uptake of low carbon heat without government support

A total of 38 respondents (70%) addressed Question 1.

Some private sector and a public sector respondents suggested that government support had been a crucial factor for growth in take-up of low carbon heat technologies in recent years. In this context, reference was made to the prevalence of government support in European countries with significant take-up of low carbon heat. Some suggested that ongoing support would be required to meet Scottish Government targets, particularly for hard to treat buildings where efficiency upgrades are likely to be required alongside low carbon heat. Again this was a particular concern for private sector respondents and some public sector respondents.

Respondents highlighting the importance of government support also suggested that capital costs are a significant barrier to installation of low carbon heat. One respondent included survey research evidence that 80% of consumers are unable or unwilling to pay initial capital costs.^[2] An ‘other organisation’ also cited feedback from those in receipt of a Home Energy Scotland loan that only around 1 in 10 would have installed the chosen technology without government support. Some private sector respondents indicated that the size of any potential reduction in running costs is insufficient to encourage most consumers to make the initial investment to move to low carbon heat. It was suggested that only the most environmentally committed consumers have taken up low carbon heat without government support.

There were suggestions across a range of respondent groups that take-up of low carbon technologies had remained at relatively low levels even with government support. This included comparison of low carbon installation numbers with the replacement rate of gas boilers. Some felt that RHI scheme tariffs had favoured some technologies over others; it was suggested that ground source heat pump installations had declined under RHI, in part due to higher RHI tariffs for other technologies. Respondents also cited examples of installers offering heat pumps at a lower cost to consumers where RHI is not taken up, due to the administrative burden and costs associated with RHI.

Respondents provided several examples of low carbon heat technologies being taken up without government support. This included a number of specific low carbon heat technologies and building-types, and specific policy mechanisms:

• Respondents compared data on total heat pump sales in recent years^[3] with numbers of RHI supported installations, and suggested that a significant number of heat pumps are being installed without RHI support. This included air source and ground source technologies. Some also suggested that growing consumer demand for low carbon technologies has contributed to an increasing number of installations without RHI support.
• Highly energy efficient new housing was suggested as having the greatest potential for deployment of low carbon heat without government support.
• Specific cases of low carbon heat being taken up without government financial support included:
  • Consumers in remote rural and island locations choosing non-Micro Generation Scheme (MCS) certified installers, and thus being ineligible for government support, due to difficulty accessing certified installers.
  • Combined heat and power (CHP) engines having been installed without government support due to potential revenue from the sale of electricity, although it was suggested that regulation changes may make this less likely.
  • Greater London Authority’s plan deploying heat networks to new build with financing from developers and third party loan support.
  • Energy from waste development in the Midlands.
  • Installation of air source heat pumps to local authority assets funded through external grants such as wind farm community benefit.
  • Installation of ground source heat pumps and other low carbon heat technologies being fully funded by local authority capital investment, driven by reduction in carbon emissions and revenue costs.
  • RWE’s biomass CHP connection to district heating in Glenrothes was cited as illustrating the effectiveness of the Renewables Obligation Certificates (ROC) scheme, although it was noted that the scheme also received government financial support via the Low Carbon Infrastructure Transition Programme (LCITP).
• An ‘other organisation’ respondent cited evidence that more than a quarter of consumers receiving Home Energy Scotland loans indicated that the loan had ‘freed money’ for other renewable energy or energy efficiency measures.
• Respondents referred to multiple technologies where take-up was perceived to have reduced carbon emissions, but which are not supported by RHI. These include:
  • Take-up of wood-burning stoves remaining above historical trends over recent years without government support.
  • LPG conversion providing carbon and cost savings relative to oil systems, with potential for future ‘drop in’ of bioLPG. Respondents suggested that reduction in running costs encouraged consumers to make the initial capital investment without government support.
  • Lower carbon solid fuels as alternatives to conventional house coal.
• It was also suggested that policy mechanisms had played a role in encouraging take up of low carbon heat, instead of or in addition to government financial support. This included reference to ROCs, Scottish Environment Protection Agency (SEPA) permission and air quality requirements.

Responses suggested a number of ways in which take-up of low carbon heat could be encouraged without direct financial support from government.

• Some private sector respondents expressed support for less direct financial support. These included use of tax arrangements and levies to reduce the ‘market barriers’ to take-up of low carbon heat, and government acting as guarantor for long-term bank loans for installation of low carbon heat. In relation to the latter suggestion, it was suggested that existing government backed loan schemes via banks have demonstrated the potential of this approach.
• Government policy and strategy was seen as having scope to encourage take-up of low carbon heat in the absence of government financial support. However, the role of other policy and regulation was also suggested in supporting (or requiring) take-up of low carbon heat. This included stricter emissions and air quality requirements, and more ambitious energy efficiency and emissions targets.
• The role of information and advice on low carbon heat technologies, including sharing of case studies, was seen as a means of improving consumer understanding and acceptance. Some private sector respondents described this as essential to enable mass-market deployment of low carbon heat technologies.

Barriers to uptake of low carbon heat

A total of 49 respondents (91%) addressed Question 2.

Respondents suggested a broad range of barriers to uptake of low carbon heat in off-gas buildings. These reflected a number of common themes: technical constraints (including buildings, infrastructure and available technologies), cost, policy and legislation, and customer awareness and demand.

The most commonly suggested technical constraint related to the relatively poor energy efficiency of off-gas housing stock, including ‘hard to treat’ building types. This was suggested across respondent groups. Some noted the large proportion of off-gas buildings in rural and island locations, suggesting that average energy efficiency levels are substantially lower than urban locations. These factors were seen as presenting challenges for some low carbon technologies and/or requiring costly energy efficiency improvements alongside installation of low carbon heat. Evidence was cited that a substantial number of homes in the UK would be unsuitable for heat pump installation without energy efficiency intervention.

Other technical constraints suggested by respondents included:

• Limited electrical grid capacity in some locations to support wider use of heat pumps, although some suggested that the limited volume of installations to date meant that this has not yet been a significant active issue. Workshop participants also noted that most off-gas buildings already use electric heating, and suggested that transition to low carbon electric heating may reduce demand on the electricity grid.
• Views were mixed on the extent to which take-up of low carbon heat is constrained by the disruption associated with the initial installation. Some suggested that consumers with electric storage heating (described as requiring substantial disruption for upgrade to low carbon heat) are more likely to accept this due to potential improvement in heating performance and cost savings. Reference was also made to commercial premises, with some suggesting that disruption is typically less of a barrier if this will not affect commercial operations.
• Limited space capacity to accommodate low carbon systems, such as biomass heating.
• Several examples of problems arising from incorrect or ill-advised installation of low carbon heat technologies.
• Heat networks not being sustainable in some rural areas due to low density of heat demand.
• Mixed ownership housing blocks limiting scope for some low carbon heat options.
• Lack of internet connection or mobile coverage in some buildings for monitoring of energy usage, limiting ability to measure the benefits of low carbon systems.
• A specific issue for remote rural and island locations where consumers pay a surcharge for electricity distribution, despite some islands being net exporters of electricity.

Cost of low carbon heat technologies was also a particularly commonly suggested barrier to uptake, again raised across respondent types. Low carbon heat technologies were described as typically requiring higher capital investment than equivalent ‘traditional’ heating options, with consumers having to meet substantial upfront costs (including those in receipt of RHI financial support). This was seen as a significant barrier for consumers, even in cases where low carbon heat technologies can deliver lower running costs. Some suggested that reduced running costs can only be achieved through behavioural change from consumers, while others expressed a view that for most households, low carbon heat will require subsidy to achieve positive whole-life economics when compared with more modern ‘traditional’ systems.

Low carbon heating systems are more expensive than replacing an incumbent heating system. [Even with] lower running costs, the capital investment can be an issue.

Private sector (renewables/low carbon) respondent

Other cost-related barriers to uptake of low carbon heat are summarised below.

• Some suggested that many households in off-gas buildings would find it difficult to raise the capital required to meet installation costs of low carbon heat. It was suggested that this is compounded where poor energy efficiency and ‘hard to treat’ building types increase installation costs.
• It was suggested that any large scale decarbonisation programme would lead to higher overall costs in the short to medium term, with the potential for ‘pushback’ from consumers likely to be more motivated by direct short-term benefits than wider societal or longer-term benefits.
• Respondents suggested that a number of specific low carbon technologies are subject to particular cost pressures:
  • Heat networks where the density of demand from off-gas consumers is insufficient to justify the cost of installation.
  • High capital cost of replacing or upgrading wet space-heating systems with low carbon heat, and a perceived need for targeted funding.
  • Replacement of commercial internal heating systems, although it was suggested that the scale of such systems can provide opportunities for ‘hybrid’ systems.
• The bespoke agreements required for low carbon heat projects can incur additional legal costs.

Several respondents, including energy supply/distribution and other private sector respondents, suggested liquid fuel and modern electric storage heating (using renewable electricity generation) as means of decarbonising heat in off-gas buildings. Some suggested that these were potentially lower whole-life cost options than heat pumps or heat networks, citing evidence of lower installation costs (for example some biofuels) and reduced running costs (for example modern storage heating).

Policy uncertainty was the most commonly suggested policy and legislative barrier to deployment of low carbon heat, particularly from private and third sector respondents. This included reference to the importance of certainty for consumers and suppliers, including on the availability of financial support for low carbon heat beyond 2021. Some suggested that uncertainty around financial and regulatory support for low carbon heat had inhibited growth in the low carbon heat industry in Scotland.

The lack of certainty and clarity about the regulatory and financial support regime is inevitably inhibiting the establishment of a renewable heat industry in Scotland.

Third sector (other) respondent

Limits on public finance to incentivise take-up of low carbon heat were also referenced by some respondents. Some suggested that RHI has achieved somewhat limited success, particularly following recent reform to RHI, and saw a need for other forms of financial support for low carbon heat. Others regarded the economic case for moves to low carbon heat as highly dependent on government funding.

Other policy and regulatory constraints mentioned by respondents included:

• A lack of regulatory requirement for the installation of low carbon heat.
• A lack of regulatory requirement or incentive for installers to offer low carbon options given additional administration burden, higher installation cost and low consumer awareness.
• A lack of regulatory requirement for suppliers to offer low carbon heat options or to ensure sufficient training for installers.
• A lack of mandatory consumer protections.
• Concern that policy and regulation does not provide sufficient flexibility to ensure relevance across varying building types and local infrastructure. This included reference to the specific circumstances and requirements of island communities, and a need to bring energy efficiency in these locations to the levels seen in urban areas.
• Some raised concerns regarding EPC regulations. This included suggestions that the current EPC focus on fuel cost effectively encourages uptake of higher carbon options where these are lower cost.
• Pay-back periods for available government funding being a barrier for some consumers.
• Some suggested that government policy around fuel levies was hindering take-up of low carbon heat. This included reference to higher levies on electricity relative to gas supply, and fossil fuels used at domestic properties paying a reduced rate of VAT. Respondents noted that this is reserved to the UK Government, but suggested that the Scottish Government should engage with the UK Government on this specific issue.

A lack of consumer interest and confidence in low carbon heat technologies were also suggested by a broad range of respondents as contributing to ‘inertia’ regarding change of heating types. This included reference to evidence of a lack of consumer understanding of different low carbon heat options including survey findings indicating that more than half of consumers are unclear on the performance, reliability and running costs of low carbon heat technologies. Some suggested that mis-information on the potential performance of low carbon heat technologies had contributed to a lack of consumer confidence, including installers promising consumers unrealistic cost savings.

The role of installers in advising consumers was also discussed by some. Installers of ‘traditional’ heating systems were seen as having a particularly important role given the large proportion of replacements made through ‘distress decisions’ following failure of the existing system. Some respondents perceived a lack of knowledge and training on low carbon heat for installers.

Other potential barriers to uptake suggested by respondents are summarised below.

• Evidence was cited of the value that consumers place on the responsiveness of heating systems, and some felt that the behaviour changes required by some low carbon heat technologies could be a barrier to take-up.

Public acceptance could be a major barrier to deploying future heat solutions which require large changes in behaviour.

Private sector (energy supply) respondent

• Some perceived tensions between decarbonisation and fuel poverty. This included suggestions that fuel poor households are less able to meet the cost of moving to low carbon heat, and may see an increase in ongoing heating costs (for example where moving from oil systems).
• A lack of buy-in from local authority senior management teams can hinder access to funding and support at a local level.
• A shortage in the skills and capacity required to re-design in-home heating systems to accommodate low carbon heat.

Overcoming barriers to uptake

A total of 48 respondents (89%) addressed Question 3, and 35 (65%) addressed Question 4.

Reflecting the profile of barriers discussed at Question 2, approaches to overcome these were focused around financing, regulation and policy, supply chain and consumer awareness, and technical solutions.

A broad range of respondents saw a continuing need for financial support, recognising that a move to low carbon heat will result in higher overall costs for some customers. A specific need for financial support for households in fuel poverty and areas of deprivation was suggested.

Reference to financial support included concerns that a successor to RHI is required post-2021 to avoid a significant reduction in low carbon installations, although some suggested that financial support could be reduced or withdrawn as markets mature and prices fall. Changes to the design and administration of future financial support suggested by respondents and workshop participants included:

• A larger proportion of funding as an up-front payment to overcome high capital costs. Some suggested that a lower overall value loan or grant could still be attractive to consumers if a larger proportion was paid up-front.
• Removal of Government funding from high carbon heating systems, including reference to the small proportion of low carbon systems supported by Warmer Homes Scotland.
• Permitting projects to receive both grant and RHI support.
• Reducing administration time for applications to non-domestic financial support.
• Allowing more flexibility in funding requirements, for example in remote rural or island communities, where project completion can take longer.
• Suggestions for long-term zero or low interest loans, including reference to evidence that the Home Energy Scotland renewables loan scheme has supported a large proportion of households to move to low carbon heating earlier, or to select a higher quality option than would otherwise have been possible.
• Encouraging low interest loans from finance providers as an alternative option for consumers, supported by Government communication around the need to switch to low carbon options.
• Boiler scrappage schemes to overcome disposal costs as a barrier to uptake, and incentivise planned replacement of higher carbon systems to avoid ‘distress’ purchases.
• Incentives and other financial support targeting specific technologies or sectors. This included district heating (particularly support for initial feasibility testing and business case development) and heat pumps (particularly ground collector loops).
• Incentivising research and development and supporting newer technologies to diversify the sector, for example second-generation biofuels and hydrothermal carbonization (HTC) based fuels.
• Working with the UK Government to ensure the tax system penalises high carbon fuels and encourages a switch to low carbon options.
• Lower VAT rate for low carbon technology.
• Reduced rate Council Tax and business rates for properties with low carbon heating systems.
• Varying stamp duty rates linked to EPC ratings.
• Removing import duty on low carbon technology post-Brexit.

Respondents also perceived a need for development of wider policy and regulation to support uptake of low carbon heat. This included comment across respondent groups and some workshop respondents that a stable, long-term policy framework for low carbon heat is vital to ensure growth of the supply chain in Scotland, and to increase public awareness and acceptance of the need to move to low carbon heat. Respondents and workshop participants made the following specific recommendations for policy and legislation around low carbon heat:

• An end date for new installations of high carbon systems, suggested in the range 2021 to 2025 to provide time for suppliers and consumers to prepare while meeting climate change targets. A ‘backstop date’ was also suggested to ensure compliance with low carbon standards by 2035 for existing heating systems.
• Policy and regulation for new buildings included adaptation of the Future Homes Standard to ensure all new buildings are ‘future proofed’ for low carbon heat. Regulation to ensure developers actively consider energy efficiency and low carbon technologies at the design stage was also recommended, including potential for Energy Efficient Scotland to drive this change. Some wished to see Standard Assessment Procedure (SAP) 10 values as a planning requirement for new build design and heating systems.
• In relation to existing buildings a mix of private, third sector and other organisations wished to see planning and building regulations to encourage retrofit of low carbon heat. This included targeting of key opportunities such as major renovations, property sale and change of lease. Other suggestions included requiring installers to offer and quote for low carbon heating alternatives for any heating system replacement, permitted development rights for low carbon heat technologies such as district heating, and adaptation of the UK Government ‘Boiler Plus’ policy to Scotland.
• Ensuring sufficient flexibility in policy frameworks to adapt to changing technologies and develop bespoke approaches to decarbonising Scotland’s heat supply. Facilitating communication and collaboration between stakeholders across sectors to develop new technologies and services.
• Regulations to set maximum permitted carbon emissions from new heating systems, allowing use of fuels such as bio-LPG during a transition phase.
• Changes to the EPC framework to include a stronger focus on energy efficiency and low carbon fuels, linking these to impartial sources of information and advice.
• A regulatory framework to provide a clear model for extension of the electricity network to retrofit low carbon heat into existing buildings.
• Standardisation of contracts to simplify delivery of low carbon projects.
• Ensure local authorities have the skills and capacity to drive energy efficiency improvements and the adoption of low carbon heat, including through planning policy and zoning. Strategic planning at a regional and local level to ensure the most appropriate mix of heat technologies, including future proofing where possible.

Some respondents perceived a need to improve supply chain skills, knowledge and capacity to support uptake of low carbon heat. The Energy Efficient Scotland programme was seen as an opportunity to share information across sectors and raise awareness of low carbon heat. This included through Local Heat and Energy Efficiency Strategies (LHEES).

A nationwide programme to intensify work to upskill installers and improve knowledge of low carbon heat technologies was also recommended by a mix of private and public sector respondents. This included a perceived need for incentives to encourage installers to take up relevant training, and a particular focus on building capacity in remote rural and island locations, and in relation to historic or listed buildings. Some wished to see design and practice standards for low carbon technologies to ensure quality of installations, and maximise performance. A forthcoming Best Practice Guide to the Installation of Heat pumps^[4] was cited as an example here, and as a potential template for other technologies.

Improving consumer awareness and understanding around low carbon heat was also suggested as necessary to increase uptake. Some suggested that consumer awareness of low carbon technologies has increased in recent years, but a range of respondents felt that more work was required. This included reference to UK Government public attitudes survey evidence that half of the public were unaware of low carbon heating systems.^[5]

Specific recommendations to improve consumer awareness included:

• The Scottish Government communicating its strategy for low carbon heat in a way that makes sense to and engages the public, and ‘normalises’ the concept of low carbon heat. This should ensure the public recognise the need for urgent action, and that potentially significant changes in behaviour will be needed. The approach should include consultation on the path to low carbon heat and role of specific low carbon options. Some perceived a need to address the poor reputation of some technologies amongst consumers.
• The Energy Efficient Scotland programme was seen as an opportunity to communicate this to consumers, including through home and business energy assessments.
• Local government, agencies and installers have an important role to play in raising consumer awareness of low carbon heat, with LHEES providing a framework for this. ‘Local Heat Partnerships’ were recommended as a means of bringing together local agencies and building owners to increase consumer awareness and encourage adoption of low carbon heat.
• Sharing of consumer case studies and ‘success stories’ can encourage uptake.
• Industry-wide standards are required to ensure access to impartial advice and fair communication of performance and cost estimates. Home Energy Scotland was seen as having a role to play here. Some suggested a need to build on existing initiatives such as the Green Homes Network and specialist in-home advice services to encourage the shift to low carbon heat. Some suggested establishment of a body to provide support, advice and site assessments appropriate to different building types including historic, listed and ‘hard to treat’ properties.
• Target consumers at key ‘trigger points’ such as house moves and major refurbishment to avoid the reliance on ‘distress’ purchases. Ensure consumers have access to high quality, impartial information and advice at these points. Use of ‘retrofit coordinators’ to support this approach.

A range of potential technical solutions were suggested to overcome these barriers. These included a perceived need to ensure flexibility for specific technologies to be matched to building types and circumstances, and ensuring the full range of low carbon technologies can be deployed across Scotland. Support for specific technologies included:

• Electric heat pumps suggested as having the potential to deliver substantial carbon reduction, including a suggestion that the Committee on Climate Change estimates that around 20 million domestic and most non-domestic buildings across the UK could be suitable for heat pumps.
• Biomass could be expanded to deliver a substantially larger proportion of Scotland’s total heat demand than at present, although specific evidence was not cited in support of this.
• Low carbon heat networks.

Some respondents also perceived a need for continuing work to improve the energy efficiency of homes and reduce heat demand, alongside support for low carbon heat technologies. This included a role for smart metering and controls to manage energy demand. Some wished to see wider access to time of use tariffs to encourage use of smarter heating systems and appliances.

Some wished to see a focus on technologies that can be introduced with minimal disruption to consumers, for example through use of lower carbon fuels that can be ‘dropped in’ to existing infrastructure. Some supported delivery of decarbonised gas through grid extension in urban and semi-urban areas, and options for off-network technologies including bio-LPG, bio-oil and biomass products. These were seen as a means to deliver rapid carbon savings in properties where poor energy efficiency and consumer preference may be barriers to other technologies.

Complementary systems

Complementary heating systems combine two or more heat sources to meet the needs of a domestic or non-domestic building. These can include combinations of heat pump, solar PV and other (low or high carbon) heating technologies.

Support for complementary systems was expressed by a range of private sector and other organisation respondents as a means of overcoming barriers to uptake of low carbon heat. These were seen as having potential to improve the performance of low carbon heat systems and extend the range of circumstances in which low carbon technologies are feasible options – for example, reducing running costs to extend the range of buildings in which low carbon options are economically viable for consumers.

The greater flexibility provided by multi-part or multi-fuel systems was also seen as a benefit for the diverse range of off-gas buildings. Respondents wished to see this as part of a whole-home approach to reducing energy use and carbon emissions that is tailored to individual circumstances. Some saw a need for a ‘designer role’ to ensure a whole building approach is tailored to specific circumstances; this included reference to the Recommendations Report from the Quality Assurance Short Life Working Group.

Some respondents suggested limitations for complementary systems, and in particular solar PV, noting that the electrical generation pattern of solar PV does not fit with heat demand. An individual respondent also questioned whether current storage technologies can address this disparity sufficiently to enable solar PV to make a significant contribution to heat generation.

Some respondents commented that the combination of multiple technologies has the potential to further increase installation costs and disruption for consumers. However, some suggested these systems could reduce costs and disruption over the longer term. There was concern that combining systems can compound margins of error in performance estimates, risking reputational damage to the industry. It was also suggested that complementary systems could require a steeper learning curve for consumers.

Respondents suggested a range of specific technologies as having a role to play in complementary systems. These included:

• Use of thermal or battery storage, including electric vehicle (EV) chargers, alongside heat pumps could reduce running costs, for example by shifting heat pump operation to period of low energy prices. Energy storage can also address some issues relating to the generation patterns of solar PV.
• Some suggested that solar thermal and solar PV are under-deployed in Scotland, and have the capacity to supply low carbon heat systems in a wide range of circumstances. This was seen as vital in maximising local generation to limit grid demand.
• Aggregated solar generation and energy storage systems linked to large heat pumps may be more economical and effective solutions in some circumstances. These could also incorporate wind and hydro energy projects. Shared ‘ambient’ heat loops linked to individual heat pumps may also help to overcome barriers.
• Hybrid heat pump systems where consumers have the opportunity to fuel switch when heat pumps are unable to meet peaks in heat demand. This can reduce costs by enabling the installation of lower capacity heat pumps (ideally using a renewable energy supply), alongside lower carbon fuels such as biomass and bioLPG. Reference was also made to Gas Driven Heat Pumps as a technology used in commercial heat generation, but that could be suited to the off-gas housing stock. The FREEDOM project in Wales was noted as having tested hybrid heating systems combining heat pumps with an existing boiler, and using smart controls to manage the system based on cost of electricity, heat demand and carbon intensity.
• Fuel cell technology currently being developed could be adapted to meet heating demands.
• Use of a ‘whole system’ approach including reference to ‘grid services’ as having potential economic benefits for households willing to form part of a demand response asset helping to balance electricity supply and demand.
• ‘Heat as service’, where providers own and maintain heating equipment, could overcome installation cost barriers for consumers.

Building-specific restrictions on low carbon heat

A total of 44 respondents (81%) addressed Question 5.

A range of constraints were raised in relation to specific low carbon heat technologies, primarily related to poor energy efficiency, built form and building density, and high heat demand. However, respondents suggested that these issues do not necessarily discount any low carbon options. Rather, constraints were seen as suggesting a need for the selection and combination of low carbon heat technologies to be tailored to individual properties.

Poor energy efficiency and insulation was suggested across respondent types, and by workshop participants, as a key constraint on take-up of low carbon heat. This included evidence of the large proportion of off-gas housing stock with EPC ratings of D or below.

The importance of energy efficiency improvements for the effectiveness of many low carbon heat technologies was seen as having an impact on the economic assessment of low carbon heat options. This was suggested particularly for hard to treat properties where energy efficiency improvements were described as typically higher cost. It was suggested there may be a substantial number of properties across Scotland where the required energy efficiency improvements are not economically feasible.

Other respondents and workshop participants suggested that low carbon technologies can be installed across a diverse range of building types, including those with poorer energy efficiency. It was noted that energy efficiency improvements can reduce the capital and running costs of low carbon systems, but respondents suggested that this should be part of the selection of any heating system. Building assessment was seen as key to identifying need for improvements.

Respondents and workshop participants suggested a range of restrictions for hard to treat properties, including reference to built form and existing heating systems. Key points included:

• Examples of buildings being hard to treat on the basis of difficulty and cost of improving energy efficiency, such as solid wall construction. This was particularly where low carbon heat may not deliver better heat performance, such that capital expenditure is unlikely to be compensated by lower running costs. Some suggested that a substantial volume of housing stock in some areas have ‘hard to treat’ features such as stone built, solid walls, no loft space, solid floors and sash and case windows.
• Some suggested that all new build properties are suitable for some form of low carbon heat, and the most significant barriers relate to retrofit of existing buildings. The cost and disruption of re-designing and replacing existing heating systems, particularly conversion from dry to wet systems, was also seen as a constraint. However, some suggested that those with electric storage systems (described as having higher replacement cost and greater disruption than other heating systems) were more willing to invest due to potential for improved heat performance.
• Respondents referred to systems that are not designed for the lower flow and return temperatures of heat pumps and district heating systems. Reference was also made to a lack of space for larger heat emitters, hot water storage, fuel storage for biomass, solar PV panels.
• Stairwell and riser layout can limit heat network installation for blocks.
• Plant location can limit installation of heat networks and some heat pumps.
• Ground source heat pump installation can require significant disruption and cost.

Some suggested that the range of low carbon heat technologies meant that there are suitable low carbon options for more building types than is generally recognised. Reference was made to the importance of building-specific assessment to identify the most appropriate options. This included evidence that systems such as ground source heat pumps can be installed to 97% of rural off-gas homes.^[6]

Building density was perceived as a potential barrier for a range of low carbon heat technologies. Respondents suggested that lower building density can significantly increase costs of district heating, and that higher building density can limit scope for ground source or air source heat pumps. The space required for ground collectors was noted in particular, although some suggested that improved technology is reducing the space requirements of heat pumps. Fuel storage and air quality were also suggested as potential constraints for biomass systems. Building placement and external layout were also seen as potentially limiting scope for district heating, for example feasibility of connecting to a heat network, and availability of a location for the central heat generating plant.

Listed status and conservation areas were suggested as a potential barrier to some low carbon technologies, and some suggested that listed status can limit options for energy efficiency improvements. However, it was suggested that the consent process allows changes to the historic environment if they are managed sensitively, and that listed status does not necessarily prevent deployment of low carbon heat.

High heat demand and high temperature heating systems were also seen as constraining uptake of low carbon heat. Respondents referred to existing wet heating systems designed for high temperature flow, and suggested that transition to low carbon heat can incur additional costs relating to larger heat emitters and the disruption of pipework replacement. However, most non-domestic systems were seen as having potential to move to low carbon while maintaining heat performance.

Overcoming building-specific constraints

A total of 41 respondents (76%) addressed Question 6.

Comments on approaches to overcome the building specific constraints reflected some of the themes raised at Question 3 in relation to wider barriers to uptake of low carbon heat. In particular, the key focus for most respondents was policy and regulation, financing, supply chain, and consumer awareness.

Recommendations for policy and regulation included:

• Flexibility in the regulatory approach and support for innovation to develop new solutions for hard to treat buildings.
• Updating planning and building regulations including powers for local authorities to act.
• Regulation to support a ‘fabric first’ approach, maximising energy efficiency improvements to reduce heat demand and expand the range of suitable low carbon heat options. To include targeting of hard to treat buildings, for example through financial support.
• More ambitious targets for energy efficiency improvements to existing buildings.
• Regulation to ensure installation of low carbon heat is tailored to local requirements and individual buildings, including complementary or hybrid systems. This should be based on a building assessment, for example through an improved EPC framework or Energy Efficiency Scotland assessment. Regulation should also recognise the potential value of action at building-level for tenement properties, taking forward recommendations of the Scottish Parliamentary Working Group on Maintenance of Tenement Scheme Property.
• Ensure the approach to decarbonisation incorporates a range of energy sources, including a role for bioenergy alongside electrification of heat.
• Ensure stability of public policy, for example through regulation to require low carbon heat systems or systems suitable for future conversion across all new build housing, and higher Minimum Energy Efficiency Standards for new build housing. Also to ensure renovation to existing buildings is designed to accommodate future retrofit for low carbon heat.
• A requirement for existing public sector buildings to meet tighter carbon limits, as a proof of concept for private dwellings and to support supply chain development.
• Regulation and support to enable consumers to improve efficiency of heating systems, including demand management through smart metering and controls.
• The potential for good practice guidance to improve approaches to older building types, including listed buildings and conservation areas. Existing guidance and case studies were suggested as a basis for developing best practice guidance. Reducing some restrictions on listed buildings and conservation areas to permit deployment of suitable low carbon heat and energy efficiency options.
• Consider establishing a national energy company to coordinate delivery of low carbon heat.

A range of respondents saw a role for financial support to overcome building specific constraints, and associated costs. This included recommendations for grant or low/zero interest loans to overcome cost barriers. Some cited evidence that a very small percentage of consumers respond to an EPC by investing in fabric improvements. Other suggestions for financial support included:

• Targeting homes failing to meet EPC-C rating, lower income households and those in fuel poverty.
• Targeting specific technologies or improvements such as incentives for difficult retrofitting of non-domestic buildings, for district heating, and for tenements where building-level improvements are required.
• Oil tank and/or boiler scrappage schemes.
• Use of Council Tax and business rate to provide financial incentives to decarbonise heat.
• Rebalancing of fuel taxation to ensure a ‘level playing field’ for electricity and gas.
• A challenge fund to incentivise innovation in relation to energy efficiency measures for ‘hard to treat’ buildings.

A range of potential technology solutions were recommended by respondents, including:

• Tailoring technologies to specific circumstances including
  • Bioenergy where energy efficiency and current heating systems cannot be upgraded economically for a heat pump system.
  • Local heat network or shared heat pump where space is limited.
  • Hybrid heat pump systems for larger buildings or non-domestic properties to meet heating requirements.
  • Upgrade of heat emitters to support heat pump installation.
• Supporting development of new technologies such as intelligent battery storage, and business models such as heat as a service.
• A role for ‘transitional’ options to lower carbon emissions for properties where current low carbon technologies are not feasible. This included low carbon liquid fuels and bioenergy.
• Extension of the gas grid alongside decarbonisation of the gas supply. This included suggestions that gas grid extension to homes within a specified distance of the grid would be more cost-effective than energy efficiency improvements and low carbon heat for the number of off-gas homes required, with future decarbonisation of the grid delivering the required carbon reduction. However, respondents did not cite specific evidence in support of this, and as noted later in this report (see Question 35), some were opposed to further gas grid extension.

Consistent with points raised at Question 3, some respondents saw a need to improve awareness and knowledge of low carbon heat across the supply chain, and for consumers. This included a role for supply chain standards and good practice in relation to building-specific constraints.

Poor energy efficiency and hard-to-treat buildings

A total of 38 respondents (70%) addressed Question 7, and 40 (74%) addressed Question 8.

Some suggested that the limitations of low carbon heat in less energy efficient buildings are overstated. Respondents suggested that heat pump technology is available that can be fitted to buildings with poor energy efficiency, if heat emitters are appropriately sized. This included reference to the MCS Heat Emitter Guide. Respondents cited examples of a range of ‘hard to treat’ buildings where heat pumps have delivered improved heating performance, including listed buildings. Reference was also made to evidence that more than 80% of homes are suitable for heat pumps without a change in energy efficiency.

However, a range of respondent types suggested issues around the sensitivity of low carbon heat technologies to energy efficiency. These included:

• Suggestions that heat pumps are highly sensitive to quality of design and installation, and building energy efficiency. Some expressed a view that correct design standards and capabilities for heat pumps are critical to ensure systems deliver the expected performance.
• Evidence was cited that heat pumps can show improved performance over gas boilers in some property types, but that this changes as external temperatures decrease. Some suggested that there is a substantial volume of older buildings where potentially expensive energy efficiency improvements would be required, and/or heat pumps will not deliver predicted cost savings.
• Suggestions that installation and running costs are the primary limitation for installation of heat pumps to buildings with poor energy efficiency, including some citing evidence on these costs relative to other heating systems. However, it was also suggested that this issue is not limited to heat pump systems. This included suggestions that running costs are higher than predicted, risks of exacerbating fuel poverty, and a perceived need for modelling of the capital investment required to enable heat pumps to work efficiently.

Some perceived issues around the technical feasibility of specific low carbon heat options in buildings with poorer energy efficiency. These included suggestions that installation of Ground Source Heat Pumps (GSHPs) can create additional disruption and cost even for those with sufficient external space. Circulation space for air source heat pumps and additional space requirements for larger heat emitters were also suggested as potential barriers for smaller properties. It was suggested that some new build homes lack the internal space for thermal stores required by heat pump systems.

Some respondents suggested that heat pumps can meet the heat requirements of most properties, but that for a potentially substantial proportion of off-gas buildings heat pumps are unable to meet peaks in demand during heavy winters.^[7] A number of respondents cited evidence indicating that heat pump performance deteriorates significantly where external temperatures fall, for example to below -10C.^[8] This included a suggestion that hybrid systems are required to meet these demands.

A private sector (renewables/low carbon) respondent perceived a lack of evidence around the performance that can be expected from low carbon heat systems, particularly in buildings with poor energy efficiency. It was suggested that further work is required to build on the existing evidence base.

Low carbon technologies for hard to treat properties

Respondents saw a potential role for a broad range of low carbon technologies in hard to treat properties. This included some who regarded accurate assessment of building requirements and independent consumer advice as key elements in identifying the most appropriate technology. Respondents provided comment on specific technologies, including reference to examples, but relatively little evidence was cited.

Key points raised in relation to use of heat pumps in hard to treat buildings were:

• Suggestions that heat pumps can be adapted to a wide range of building types, including those with poorer energy efficiency, through appropriate specification of heat pump and heat emitters, and use of thermal storage.
• An ‘other organisation’ respondent suggested that higher temperature heat pumps remain more efficient than traditional heating systems.
• A private sector (heat pump) respondent suggested that ground source heat pumps can give better performance than other heat pumps when run at the higher flow temperatures often required in buildings with poor energy efficiency. Examples of effective retrofit were cited including multi-storey flats using shared ground loops, although an ‘other organisation’ respondent suggested that ground source heat pumps are better suited to rural locations.
• An ‘other organisation’ respondent suggested that air source heat pumps are particularly suitable in urban areas.
• Some suggested that hybrid heat pump systems with a ‘traditional’ heat source to meet peak demand can act as transitional systems until heat pump technologies are developed that can meet the needs of poor energy efficiency buildings. However, some saw a need to ensure that hybrid systems do not prolong use of high carbon fuels.

In relation to storage and other electric heating, respondents suggested that carefully designed electric storage heating, supported by low carbon generation including solar PV, could be the lowest carbon approach for some buildings. Some suggested that this could include use of high heat retention storage heaters, and others suggested that solar PV and thermal storage can reduce household costs to offset heating costs. Respondents noted that the Heat Trust is consulting on a tool that compares different electric heating options.

Comment around biomass and other bioenergy options is summarised below.

• Respondents discussed a range of biomass and bioliquid options. This included evidence on the proportion of off-gas buildings that may not be suited to electric heat. Some suggested that a diversified approach incorporating bioenergy can reduce the burden on electricity generation. It was also suggested that these options can support the high grade heat required by less energy efficient buildings (both domestic and non-domestic), in some cases without significant capital expenditure (for example bioLPG). Specific options suggested by respondents included:
  • Biomass systems as a direct replacement to existing systems in terms of thermal performance, and are a well-established technology.
  • Varying mixes of liquid fuel, with references to ongoing trials of blends that can deliver carbon savings.
  • Bio-oil offers similar performance to other bioenergy, but with lower running costs than bioLPG and lower installation costs than biomass.
• Some respondents saw a need for Scottish Government support to ongoing innovation in development of bioenergy.

High temperature heat networks were suggested as a solution for buildings with limited opportunities for energy efficiency improvements, including historic and listed properties. It was suggested that low temperature networks can provide greater carbon and cost savings, but that higher temperature systems could provide a route to decarbonising low efficiency buildings. This included potential to change fuel mix including waste heat fed systems.

Reference to other solutions in hard to treat buildings included increasingly decarbonised gas supply and gas grid extension, hydrogen as part of a local heat network, and energy management to control heat systems and minimise waste.