Green Heat Finance Taskforce minutes: September 2023

Attendees and apologies

• Patrick Harvie MSP – Minister for Zero Carbon Buildings, etc. (Meeting Chair) 
• Sara Thiam – Chief Executive, SCDI (Taskforce co-chair) 
• Kirsty Hamilton – Independent 
• Rufus Grantham – Independent 
• Lewis Shand Smith – Chair, Energy Consumers’ Commission (ECC)  
• Ben Rose, Director, Public Policy and Comms, Scottish Financial Enterprise (SFE)  
• Simon McWhirter – Deputy CEO, UK Green Building Council (UKGBC)  
• Ian Cochran – Edinburgh Uni. Business School/Institute for Climate Economics  
• Helen Melone – Senior Policy Manager Scottish Renewables (virtually)  
• Eddie McAvinchey – Executive Director, The Scottish National Investment Bank (SNIB) (virtually)  
• Andy Kerr – Director, Climate KIC (virtually) 
• Simon Horner – Director, Strategy and Public Affairs, Green Finance Institute (GFI) (virtually)  
• David Steen – Scottish Policy, UKGBC (virtually)  
• Joanne Wheeler – Senior Manager, Local Policy and Retrofit, UKGBC (virtually)  
• Stephen Vere – Programme Director, NZ Buildings, Scottish Futures Trust (SFT)
• Cat Magill – Partner, Living Places (from Agenda Item 3 onwards) 
• Catherine Williams – SG, Deputy Director for Heat in Buildings Delivery 
• Gareth Fenney – SG, Head of Head of Heat Networks & Investment Unit 

Secretariat: 

• Karl Reilly – SG, Heat in Buildings Future Finance Team Leader  
• Toby Tucker – SFT/GHFT Secretariat 
• Peter Irving – SG, Heat in Buildings Division Future Finance Team 
• Sarah Buchanan– SG, Private Secretary to Mr. Harvie 
• Michelle Rayneard – SG, Heat in Buildings Future Finance Team (virtually) 
• Rajiv Naik – SG, Heat in Buildings Division Future Finance Team (virtually) 
• Daniel Nagy – SG, Heat in Buildings Division Future Finance Team (virtually) 

Items and actions

Welcome, apologies, summary note and actions points from previous meeting, including member notification of any conflicts of interest 

The Chair welcomed members to the tenth meeting of the Green Heat Finance Taskforce (GHFT) the main focus of which was area-based models. Apologies had been received for this meeting from Emma Harvey-Smith, GFI. 

Ben Rose was welcomed to the Taskforce, Ben having replaced Sandy Macdonald as Director of Public Policy and Communications at SFE. The Minister expressed his thanks, and those of the Taskforce, to Sandy for his contribution to the work of the taskforce since its inception. 

All members confirmed they were content with the Summary note and Action Points from the previous meeting of 5 July 2023. No conflicts of interest were raised. 

Secretariat update – Scottish Government 

The Minister informed Members of progress with plans for the Consultation on a Heat in Buildings Bill, including current timings for Cabinet discussion of the draft consultation. He advised that Cabinet Secretary for Net Zero and Just Transition and others were engaging with stakeholders to better understand different perspectives, suggesting it would be helpful to include a meeting with some GHFT members as part of this. This would enable discussion around the balance of private versus public financing for the heat transition, as well as those actions that will be required to attract private investment. He noted that, while it would not be feasible logistically to arrange meetings with all Taskforce members, the Secretariat would liaise with individual members. 

Secretariat provided an update on engagements they had had with Glasgow City Council, which was exploring delivery plans for their Local Heat and Energy Efficiency Strategy (LHEES) as well as Alder Energy, which is a private sector organisation investing up to £200 million per year in social housing retrofit in the UK. An update was then provided on the current status of the Taskforce’s Part 1 Report and proposed a process for final sign-off, including from the co-chairs, noting:  

• publication timing is expected to align with proposed Regulations Consultation, with the Taskforce Report likely to be published shortly before. This will help manage media coverage positively by enabling the Taskforce to set out its recommendations, and SG to then demonstrate how those conclusions are being reflected in a policy context through the Consultation
• publication will involve an SG news release, although will look to make members views and experience prominent throughout the messaging
• a phased process for clearance was suggested so that once members last round of comments have been incorporated, the Minister will be asked for approval before the report goes back to Taskforce members for final endorsement and then to Sara Thiam (independent co-chair) for final sign-off
• two Taskforce reports still makes sense as it will be important to have something discussing finance published close to the Regulations Consultation and that, as the Taskforce report is providing information and setting out options, its content will not be substantially impacted by short-term changes to the economic or political environment
• the Part 2 report will now be published in early 2024

Action 1 

Secretariat to provide Taskforce members with an indicative timetable for publication of the Part 1 Report and the Heat in Buildings Bill Consultations, noting the key stages in each process. 

Area based models   

The Chair welcomed Cat Magill of Living Places to the meeting, with Cat co-presenting with Rufus Grantham in the second of three presentations under this item. This item provided the opportunity to hear from Taskforce members about different area-based models they had been involved with, followed by focused group discussion around the points raised. 

Presentation 1: Digital Retrofit Toolkit – UKGBC 

Joanne Wheeler of UKGBC presented, with focus on the Digital Retrofit Toolkit and the work UKGBC has done on clustered, Local Authority-led place-based models. This presentation outlined the role for different parts of the public sector to deliver finance for ZDEH at scale. It also helped articulate the particular gaps and barriers that would require private sector financing to create / build a market that would be more attractive to private finance. 

The group noted how UKGBC was trying to break the deadlock on retrofit through both a top down and bottom-up approach. To this end, and to help inform retrofit policy, UKGBC had developed a ‘calculator’ to help policy makers understand the costs of different policy and technical interventions. 

UKGBC was also working to support local authorities and community groups to facilitate delivery on the ground. In partnership with the MCS Foundation, UKGBC run a Local Authority Retrofit Forum with more than 85 officers. It had also developed a Retrofit Toolkit, which would shortly be available on its website, in the form of a ‘mini-site’. The Toolkit would provide guidance for Local Authorities to help them build and write the business case for retrofit ‘one stop shops’. The guidance is targeted mostly at the ‘able to pay’ market (to build the supply chain and harness latent demand). UKGBC was working closely with two localities to go through the process of writing the business case with them over the next few months in order to further refine the Toolkit and disseminate lessons learnt. 

Presentation 2: Neighbourhood Model – Living Places 

Rufus and Cat provided an overview of the core concepts of the Net Zero Neighbourhood model, a place-based delivery and funding approach. Their presentation then focused on the practical steps of how it could be taken forward by means of a Local Authority demonstrator programme as testing and evolving it on the ground would be important to proving the concept. This was being explored in Scotland through bilateral discussions with a number of Local Authorities, as well as collectively with the Hub North group via SFT, while the UK Department for Energy Security and Net Zero were also interested in the model’s potential. 

Points raised in the presentation and subsequent discussion included –  

• the model had the potential to address challenges including lack of demand as people think retrofitting costs too much – no upfront payment required; is too hard to arrange – collectively procuring solutions at a neighbourhood level; and the benefits are too low – economies of scale lower the costs while neighbourhoods also value the wider community benefits they shape
• funding is provided through three routes - the public sector, longer term institutional investment and outcome buying by organisations who have common strategic interests.  
• the model forecasts significant energy bill savings with some of those accruing to households and some being used as a revenue stream for investors to recover their investment, with some also able to be packaged into a reinvestment fund for the community
• a phased approach to testing the model is required, with the initial phase being development of a business case with local authorities including some demonstrator homes. Public funding is important for the initial phase to help prove the model and evolve it by doing 
• the model builds in an assumption for inflation in the service charge customers will pay which helps to future proof the model which still stacks up even with falling energy prices and high inflation
• the model is targeted at all housing segments, rather than focusing on particular groups. This is because all types of housing will need to be converted to achieve climate targets. Building a narrative around bringing investment to local areas with individuals having agency to shape community benefits will be important to securing buy-in

Presentation 3: City Demonstrators – GFI 

Simon Horner made a presentation on area-based work of GFI and City Demonstrators, highlighting:

• place based offer an opportunity for local authorities to drive action with or without central government support
• GFI has worked with banks and lenders to develop financial products which can help support retrofitting at an area-based level. This includes in developing the range of green mortgage offerings as well as partnering with two banks to explore the potential to offer property linked finance
• GFI is working with a number of local authorities in England to help them develop and / or run programmes of activity. GFI would like to develop this into a national advice hub to help all local authorities develop their heat transition business plans and attract the required private investment

Eddie McAvinchey flagged a forthcoming workshop being hosted by SNIB and Edinburgh Climate Change Institute: “Net Zero Places: Creating an investible pipeline”. The event would be held at the Edinburgh Climate Change Institute on 24 October 2023.  

Action 2

Secretariat to circulate workshop details. 

It was agreed that Agenda Item 4 on the role of Government (SG, UKG and wider public sector) would be rolled forward to 1 November meeting. 

Next meeting and any other business 

Members noted that subsequent Taskforce meetings would be held in Saint Andrew’s House on 1 and 29 November. The main focus of the 1 November meeting would be the role of Government (carried forward) and a substantive discussion on financing heat networks. 

The Chair indicated that Secretariat anticipated that a shorter, virtual meeting would be required in December as the Taskforce progressed work towards the completion of its Part 2 report.   

Action 3 

Secretariat to make arrangements for and canvass members about additional meeting in mid-December 2023.