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

The role of regulation in supporting uptake of low carbon heat

The call for evidence sought views and evidence on the role that regulation could play in helping to support uptake of low carbon heat. This included evidence on the potential forms of regulation, and the extent to which regulation could operate in isolation or alongside additional policy measures. It was noted that any regulation would need to be within the Scottish Government’s competence and could not cover matters reserved to the UK Government.

Questions 49 and 50 sought evidence on the specific role that regulation could play to support uptake of low carbon heat in existing buildings, while Questions 51 to 55 sought views and evidence on the role of regulation in relation to new buildings, and Question 56 on consumer protections.

Readers should note that respondents’ focus on specific aspects of regulation to support uptake of low carbon heat appeared to reflect their experience and expertise. For example, those active in a particular energy sector were generally more likely to refer to regulation of 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.

Existing buildings

A total of 27 respondents (50%) addressed Question 49, and 26 (48%) addressed Question 50.

Support was evident across respondent groups for the role of regulation in relation to the uptake of low carbon heat in existing buildings. This included some suggesting that information and financial incentives alone have not been sufficiently effective, and that regulation was required to drive change. However, a private (solid fuel) respondent suggested that regulation should only be used when voluntary measures have been exhausted.

Respondents saw specific aspects of regulation as having an important role to play in supporting uptake of low carbon heat. This included suggestions for clear long-term direction and associated targets to incentivise decarbonisation, financial and other support to facilitate uptake, and guidance or standards to ensure high quality installations that deliver the required carbon reduction.

Respondents referred to the following examples as demonstrating successful use of regulation in other change programmes:

• Greater London Authority (GLA) regulation in London successfully driving adoption of heat pumps;
• Regulation and consumer protections in Denmark driving retrofit of heat networks; and
• Other examples including the transition away from domestic coal, transition to condenser boilers, and phase out of coal in UK power plants.

Incentives have not been enough: regulation has an important role to play in compelling consumers to adopt low carbon heating technologies.

Private sector (renewables/low carbon) respondent

In terms of the approach to developing regulation, some saw a need for ongoing engagement between national and local government, regulators and industry. Targeting of key consumer sectors was also recommended. This was primarily related to support for those in fuel poverty, and other vulnerable groups or those unable to pay. Some also suggested regulation to encourage or require ‘able to pay’ households to take up low carbon heat.

Specific suggestions for regulation of existing buildings included:

• Mandatory target dates for phasing out high carbon heat systems, including use of Building Regulations to adapt aspects of the Future Homes Standard to existing buildings. Specific target dates suggested by some respondents would require phase out of new high carbon installations by 2025, and replacement of all remaining high carbon systems by 2035.
• Regulatory support for low carbon heat networks including permitted development rights, zero business rates, reduced VAT rates, and equal access to underground infrastructure.
• Setting technical standards for new biofuels.
• Consideration of Cleaner Air for Scotland objectives in regulation to support uptake of biomass and domestic wood fuel burning.
• Targeting key points where low carbon heat can be deployed with minimal disruption, such as renovation, upgrades to energy efficiency or house sale.
• Review of the EPC methodology as discussed earlier at Question 47.

Some respondents saw a potential need for enforcement action where consumers do not wish to take up low carbon heat. The need for a careful and pragmatic approach to enforcement was suggested, to avoid any adverse impact on the reputation of the regulatory programme. An enforcement role was suggested for local government, although some also saw a potential need for additional resourcing to support this.

In relation to potential for linkage with Energy Efficient Scotland energy performance standards, there was support across respondent groups for a ‘holistic’ approach to energy efficiency and low carbon heat. This included reference to potential to use energy efficiency upgrades as an opportunity for uptake of low carbon heat with minimal disruption.

In terms of specific aspects of the Energy Efficient Scotland standards that could link with low carbon heat, respondents made the following comment:

• Potential for Environmental Impact Ratings (EIR) produced through energy efficiency assessments as a means of linking energy efficiency and carbon standards. Some respondents saw potential for setting a minimum EIR rating as a corollary of proposed EPC targets, although the EIR calculation was seen as insufficient to support this approach.
• Some respondents recommended development of an alternative heating emissions performance standard to be integrated with Energy Efficient Scotland standards as a means of regulating heating emissions.
• Linking of timescales and financial support for energy efficiency and low carbon heat to reinforce the need for a coordinated approach.
• An integrated approach to delivery of the training and support required for installers in relation to energy efficiency and low carbon heat.
• Some respondents raised concerns around the EPC methodology and suggested this required revision if it is to be used as a basis for regulation of off-gas buildings.

New buildings

Accommodating low carbon heat from the start

A total of 32 respondents (59%) addressed Question 51.

There was support across respondent groups for ‘futureproofing’ of new buildings for low carbon heat by requiring design to be suitable for future deployment of low carbon heat. This was seen as an opportunity to use the ‘low hanging fruit’ of new build development to minimise delays to the roll out of low carbon heat, and avoid costly subsequent retrofit. This included reference to evidence from the Committee on Climate Change that ultra-high fabric efficiency and heat pumps deployed as standard can save £20,000 relative to subsequent retrofit.

Respondents also suggested potential benefits in providing a stimulus to the low carbon supply chain, encouraging investment and reducing capital costs. These were seen as key developments to support deployment of low carbon heat technologies at scale.

Specific suggestions for regulation of new buildings included:

• Respondents perceived a need for clear targets to drive change, noting that Scotland’s more ambitious net zero carbon targets would require shorter interim targets. Some also saw an opportunity for the Scottish Government to take the lead in implementing standards by requiring low carbon heat in new buildings by 2021.
• Some respondents supported a requirement for low carbon heat to be installed to all new buildings. Others suggested that where this was not undertaken, design of the heat distribution system should be ‘future proofed’ for low carbon heat. This included reference to low temperature heat distribution, appropriate emitter size, sufficient space for thermal storage, and very high fabric efficiency.
• Reference was made to the need for amendment to Building Regulations, including recommendations for the Future Home Standard to be adapted to Scotland. It was suggested that Building Regulations should ensure any unintended consequences associated with design for low carbon heat are mitigated against, with an example given of potential for repositioning of larger heat emitters leading to increased condensation.
• A requirement to build skills and capacity within developers.
• Education and awareness raising to ensure consumers understand the policy direction, and the low carbon technologies.
• Some private energy supply and LPG respondents suggested that a ‘renewable ready’ standard should permit bioLPG and bio-oil heating systems alongside energy efficiency improvements, and that gas grid connections should be permitted with a pathway to future decarbonisation of the gas network.

Barriers to installation of low carbon heat in new buildings

A total of 20 respondents (37%) addressed Question 52.

The most commonly suggested barrier to installation of low carbon heat in new buildings was a lack of willingness amongst developers to install low carbon heat. This included citation of evidence from the BEIS Strategy Inquiry into Energy Efficiency, suggesting that higher installation costs deterred developers. It was also suggested that developers lack incentive to install low carbon technologies where they will not benefit from subsequent fuel cost savings.

Anecdotal evidence was cited of consumers disliking low carbon heating where they are unfamiliar with these technologies, although some also cited evidence that a heating system has relatively little impact on house purchase. It was suggested that consumer awareness raising would be required around regulation for low carbon heat in new buildings.

In terms of other potential barriers to installation, respondents provided the following comment.

• Some suggested that a lack of certainty regarding government policy has been a barrier to installation of low carbon heat.
• It was noted that building regulations still use carbon factors from SAP2013, and that these would require updating to support installation of low carbon heating to new buildings.
• Reference was made to the need for careful selection of the heat source, with some private energy supply respondents noting that unsuitable low carbon heat technologies can lead to poor heat performance and higher than anticipated running costs. A private sector respondent also suggested that limited internal space in new build properties could limit scope for low carbon heating systems.

Comparative costs

A total of 16 respondents (30%) addressed Question 53, and 15 (28%) addressed Question 54.

Respondents cited limited evidence on installation costs of low carbon heat relative to high carbon systems.

• Evidence was cited indicating that heat pump installation in a ‘future-proof’ new build is significantly lower cost due to the new build being low carbon ready (for example with suitable heat emitters). It was suggested that this reduced installation cost is equivalent to those for high carbon systems. A private renewables/low carbon respondent also referred to current projects offering low carbon heat at no additional cost relative to high carbon systems. However, a private heat pump respondent cited evidence that levelised costs are lower for heat pumps relative to high carbon.
• Some suggested that installation costs for ground source heat pumps are typically higher than other heat pump technologies, and are higher cost than some high carbon alternatives. Other estimates were cited suggesting significantly higher installation costs for heat pumps and biomass systems than oil heating.
• It was suggested that deployment of low carbon heat to new build development would drive economies of scale, increase supply chain skills and knowledge, and thus reduce installation costs.

In relation to cost of installation at new build or retrofit, respondents cited a range of estimates. This included reference to a modelling exercise to compare total cost of installation and emissions (based on a monetised cost of emissions), analysis undertaken by the Committee on Climate Change, and approximate estimates provided by respondents.

• Estimates cited by respondents were consistent in indicating that installation of low carbon heat at new build delivers cost savings relative to subsequent retrofit. Specific savings estimates included approximately 15% to 40% for ASHP (the upper estimate including emissions costs), 20% for GSHP, and 50% for biomass heat to commercial buildings.
• Some suggested that reliance on retrofit could also limit the feasibility of low carbon technologies, for example where space for installation of a ground source heat collector may not be accessible following construction. It was also noted that the Committee on Climate Change suggested retrofit costs were so high for some technologies as to be economically unviable.

Future proofing new buildings

A total of 24 respondents (44%) addressed Question 55.

Respondents supported the need for a clear policy and regulatory framework to futureproof new buildings. This included perceived benefits in supply chain development maximising consistency of standards with England and Wales. However, some questioned a focus on futureproofing for low carbon retrofit, and instead supported requirement to install low carbon heat at the point of new build.

Respondents recommended various aspects of a ‘future proof’ standard for new buildings, including the following specific areas:

• Wet heating systems wherever possible, suitable for lower flow temperatures.
• Sufficient thermal emitter size.
• Space for thermal storage and larger appliances (for example heat pumps).
• Ultra-high fabric efficiency, including reference to EPC C64 as a minimum standard.
• Smart controls.
• Facility to integrate battery storage.
• Scope for creation of space for biomass storage.
• Design suitable for retrofit of solar PV or heat networks.
• Mandatory hydraulic balancing.
• Avoiding energy plant placement on the roof of larger or commercial buildings, for example external energy centre.
• Electric vehicle charging points.

Consumer issues

A total of 18 respondents (33%) addressed Question 56.

Some suggested that the market is currently operating well for consumers. This included reference to strong satisfaction with low carbon heat as evidence that the market is operating well for consumers. Ease of energy switching was also seen as a potential protection for consumers.

However, respondents were most likely to suggest changes to further strengthen consumer protections.

Some wished to see the Scottish Government engage with other agencies including BEIS, Ofgem and industry to ensure consumer protection in heating. Reference was made here to the Heat Trust’s collaborative approach to heat network consumer protection. Some also suggested that working with the UK Government to establish a UK consumer protection framework could allow the Scottish Government to adopt consumer protection measures within a licensing scheme.

Guidance and licensing were also supported as a means of providing consumer protections, and it was suggested that this could incorporate both energy efficiency and low carbon heat. It was recommended that guidance draws on the work of groups such as the Quality Assurance Short Life Working Group and the Heat Trust to ensure standards are consistent across the UK, and meet or exceed those across electricity and gas sectors. Standards around billing were seen as a priority here.

Respondents saw a role for accreditation or quality marks such as MCS and the forthcoming Each Home Counts Quality Mark. Some suggested mandatory compliance. However, others suggested that the associated cost and administration should not be set at a level that could deter engagement by installers.

Other suggested approaches to consumer protection included:

• Robust heat agreements for consumers, including reference to Fair Heat Contracts providing clear information on consumer protections.
• Regulation or guidance to ensure incentives for heat networks are linked to improved consumer outcomes, such as alleviating fuel poverty. A third sector respondent suggested that mandatory licencing may be required for heat networks to ensure consumers have the same rights across the disparate organisations operating heat networks. It was suggested that a compulsory statutory licence enshrining consumer protections is within the Scottish Government’s devolved competency.
• A potential role for procurement to reinforce consumer protection including framework agreements to ensure installations are overseen by a third party, and linking award of contracts and funding to use of approved installers and consultants.
• It was suggested that high quality design of heating projects can help to protect consumers, and respondents suggested a range of devolved powers in this area. Reference was made here to embedding technical standards into the policy and regulatory framework.