LHEES: guidance on strategy level socio-economic assessments

Non-technical summary

Introduction

Energy Efficient Scotland is the cornerstone programme for delivering Scotland’s low carbon heat and energy efficiency priorities. Given the need for strategic planning of Energy Efficient Scotland across the 20 years of the programme, the Scottish Government has consulted in detail on the introduction of a new statutory duty on local authorities to develop Local Heat and Energy Efficiency Strategies (LHEES). The Scottish Government has proposed that local authorities would be required to undertake a socio-economic assessment to help develop their LHEES. This assessment should demonstrate that priorities have been designated appropriately, according to national and local objectives, including fuel poverty.

Meanwhile, the Scottish Government has also proposed a district heating consents and licence regime, such that in their application for a district heating consent, developers would be required to undertake a project level socio-economic assessment.

The aim of conducting any socio-economic assessment is to identify and evaluate the direct and indirect impacts associated with a given strategic intervention or project. Socio-economic analysis sits alongside the technical and financial analysis of any strategy or project.

In the context of energy and heat, socio-economic assessments can be utilised to provide an indication as to the effect that an intervention will have on indicators such as decarbonisation and fuel poverty across an area.

The Scottish Government has proposed that guidance for socio-economic assessments for both LHEES and district heating consents would be made available in the form of detailed methodologies, laying out the overarching process and standard assumptions.

This document provides the methodology and guidance on how to appraise the socio-economic impacts of LHEES, through the implementation of Multi-Criteria Analysis (MCA).

A similar but separate document details the methodology and guidance for assessing the socio-economic impacts of district heating projects, through the application of Cost Benefit Analysis (CBA).

What is a Multi-Criteria Analysis?

MCA is a socio-economic decision-making tool which establishes preferences based on an explicit set of pre-defined objectives. All impacts are assessed, whether they can be monetised or not, through the development of a user-defined scoring system. This translates into a final value which can be used to rank and identify the most attractive intervention(s).

MCA allows a more formal approach to be taken to ensure that all impacts are recognised and taken into account by decision-makers. MCA can therefore assist with the identification of a single preferred option, or can be applied in order to create a short-list of potential options that can, in turn, be appraised using additional techniques.

This approach is most useful when evaluating an intervention against multiple objectives simultaneously, not all of which can be monetised.

Who should use this document?

The methodology developed and presented within this document is directed at local authority practitioners and project managers across Scotland, who, under Energy Efficient Scotland, may be required to appraise the projects proposed for inclusion in their LHEES through the development of socio-economic assessments.

When should this guidance be implemented?

The processes outlined within this MCA methodology should be used to support strategic socio-economic assessments of proposed interventions, some of which may be delivered in the shorter term and others which may be delivered in the longer term. Practitioners should follow the guidance outlined here to ensure an appropriate baseline scenario has been created, and to certify that the calculation methods used are robust in nature, such that appropriate MCA outputs can be developed and explained.

The added benefit associated with applying MCA includes that larger scale interventions that serve to meet multiple objectives can be appraised appropriately using MCA methodologies. For that reason, MCA has been identified as the most appropriate methodology for strategy-level socio-economic assessments, as may be required for LHEES.