Heat in Buildings: progress report 2024

3. Enablers

3.1. Enabler: green heat sector - workers and skills pipeline

3.1A Indicator: number of people in training to achieve relevant qualifications through apprenticeships, further education and higher education – via Modern and Graduate Apprenticeships and enrolled on Further and Higher Education courses

Data source - numbers training in Modern and Graduate Apprenticeships: Skills Development Scotland (SDS)

Data source - numbers enrolled on Further and Higher Education courses: Scottish Funding Council (SFC)

Unit: number of people

Most recent data:

Commentary:

The number of people in-training on Modern Apprenticeships analysed in this report was almost 1,700 in 2024, a figure which has grown slowly in recent years, mainly due to growth in the number of trainees on the Plumbing and Heating framework.

In addition to this, the Graduate Apprenticeship framework for Construction and the Built Environment was established in 2018-19. Enrolments have remained fairly steady for the three years for which data are published.

There were over 30,000 enrolments at Scottish Colleges in 2022-23 in courses analysed in this report, the vast majority (93%) of which were at Further Education level of study. The total number of college enrolments have grown steadily since 2019-20, mainly due to growth in enrolments on Construction and Property subjects.

In 2022-23, there were over 2,500 full person equivalent enrolments on relevant subjects at Scottish Universities. Again, the number of enrolments has grown in recent years since 2019-20, due to growth in courses relating to construction management, construction and the built environment, and energy engineering. Most enrolments in 2022-23 were at the postgraduate level (71%), compared to undergraduate (29%).

While data on apprenticeship trainees and Further and Higher Education enrolments give an indication of the scale of the skills pipeline for the sector, there are limitations because educational groupings can be quite broad. We will work with SFC and SDS to understand the alignment between existing courses and frameworks and heat skills relevant to the heat transition.

The Scottish Government will also continue to engage with the SFC, SDS and post-school learning and training providers to increase our understanding of destinations for those who complete courses that are relevant to the heat transition.

3.2. Enabler: public engagement

3.2A Indicator: public awareness and understanding of the need for the transition from fossil fuel heating to clean heat alternatives, of the changes that individuals and businesses need to make, and how to access support.

Data sources: Scottish Household Survey (SHS), Scottish Government Climate Change Public Engagement Strategy public polling^[26], Scottish Climate Survey (SCS)^[27]

Unit: percentage of households who report having an awareness of renewable power and renewable clean heating systems

Most recent data:

Commentary:

Using the question LCR1 from the SHS, it is estimated that in 2022 59% of households were aware of renewable power or renewable heating systems. This is the same as in 2018. However, awareness of air source heat pumps is estimated to have increased from 18% in 2018 to 30% in 2022. Awareness of ground source heat pumps is also estimated to have increased from 20% in 2018 to 27% in 2022.

We published the ‘Heat transition: public engagement strategic framework’^[29] in December 2023 (see indicator 4.21D for further details). This sets out how Scottish Government will work with others to deliver a programme of public awareness raising, education and participation around clean heat and energy efficiency. It also includes a high-level monitoring and evaluation framework, which will be further developed over 2024 and 2025.

The SCS will be undertaken in 2024, and results will be available the following year. The survey will assess public awareness and understanding of, and engagement with, climate change-related issues. This will include an assessment of respondents’ awareness and understanding of the heat transition, as well as their willingness/intention to install energy efficiency measures and/or a clean heating system in their home. This data will complement data on public awareness of clean heating systems collected via the SHS.

Public polling undertaken in 2022 explored public perceptions of climate change in Scotland among adults aged 18 and above and young people aged 14-17. It also provided data on public awareness of renewable heating systems. This supports data collected via the SHS. However, both the SHCS and SCS provide more robust data than that from the Climate Change Public Engagement Strategy public polling and will be the main data sources used for this indicator moving forward.

3.2B Indicator: public participation in the heat transition – number of opportunities available for people to engage in heat transition-related public engagement activities in Scotland (for example public consultations and related engagement events, and citizens’ panels)

Data source: no data source currently

Unit: to be confirmed

Most recent data: N/A

Commentary:

See above commentary under indicator 3.2A on the public engagement strategic framework.

Qualitative research is underway into public participation in the heat transition. Findings are due to be published in Autumn 2024. However, no quantitative data collection is currently planned.

3.2C Indicator: public willingness and intention to undertake energy efficiency improvement measures and install clean heating systems

Data sources: Scottish Government Climate Change Public Engagement Strategy public polling, SCS

Unit: to be confirmed

Most recent data: N/A

Commentary:

See above commentary under indicator 3.2A. The SCS will be the main data source for this indicator.

3.3. Enabler: access to funding and finance

3.3A Indicator: number of privately available financing products

Data source: Green Finance Institute – UK Green Mortgage Products^[30]

Unit: number of products

Most recent data:

• number of privately available financing products: 61

Commentary:

The UK green mortgage market has grown from four products in 2019 to 61 in August 2023. This demonstrates the increased interest of investors in green finance. Although the products vary, all aim to incentivise homeowners to invest in improving the energy efficiency of their properties.

The Green Finance Institute dataset is UK-wide, with 38 of the 61 products available from lenders who operate in Scotland, although some of these lenders restrict lending to mainland Scotland.

We include a summary of the Scottish Government’s work to support the scale up of private finance needed for the heat transition at indicator 4.2.1F.

3.3B Indicator: level of private financing leveraged by public funding

Data source: data from the Scottish Government’s heat networks, social housing and public sector delivery schemes

Unit: ratio

Most recent data:

• The level of private financing (and other non-Scottish Government funding) that public funding leverages (public funding: other funding) in 2023 is 1:1.

Commentary:

The estimated level of other funding leveraged by public funding (Scottish Government funding: non-Scottish Government funding) in 2023 was 1:1, as compared to 1:1.01 in 2019. This ratio has remained more or less consistent, suggesting that Scottish Government funding can play a material role in bringing in additional funding to support the heat transition.

The non-Scottish Government funding may include private finance in addition to council funds and other schemes, for example ECO4.

Scotland’s Heat Network Fund (SHNF) and Low Carbon Infrastructure Transition Programme (LCITP) figures are based on the year grants have been awarded. In 2024, no new heat network grants were awarded. LCITP closed to new applications in February 2022 after which no new grants were awarded under this scheme.

Only grant awards which have leveraged private finance have been included – those grants which used only public/other funding have not been included.

Please note these data include only SHNF/LCITP eligible costs and there may be additional costs incurred from private finance partners, including those related to future expansion of the systems. For example, many heat networks will build phase 1 and attract further private finance to progress further phases of construction.

We are aware that there are likely to be other Scottish Government-funded delivery schemes that help to leverage private investment and hope to include these for future reports. For example, the Social Housing Net Zero Heat Fund is a match-funded grant programme with registered social landlords making a contribution of between 40% and 50% of eligible project costs.

3.4. Enabler: matters reserved to the UK Government^[31]

3.4A Indicator: UK Government policy position: gas and electricity prices

Data sources: energy price cap levels^[32], annual average non-domestic energy prices^[33], and a qualitative update from officials

Unit: ratio between domestic gas and electricity prices and a qualitative update

Most recent data:

• annual average domestic energy prices: in 2023-24, domestic electricity prices were 3.97 times higher than gas.
• annual average non-domestic energy prices: in 2023, average non-domestic electricity prices were 4.25 times higher than gas.

Commentary:

The ratio of 3.97 of domestic electricity to gas prices in 2023-24 is lower than in 2019-20, when electricity prices were 4.66 times higher. In the non-domestic sector, the ratio of 4.25 is lower than in 2019, when electricity prices were 5.16 times higher.

However, this ratio still means that running costs will likely increase for homes and non-domestic properties switching to electric heating from gas, unless further mitigations are made. For example, installing a heat pump can go some way to mitigating this increase, as heat pumps can be up to three times more efficient than a gas boiler. Furthermore, when moving away from gas, homes will no longer be required to pay the gas standing charge, and when installed alongside energy efficiency measures, there is scope for energy costs to fall when a heat pump is installed. Actual running costs will of course depend on a number of factors at the property level, such as the incumbent system, the choice, design and operation of the alternative system, and the ratio of space to water heating.

They will also depend on the evolution of energy prices, which is highly uncertain due to the volatility of energy markets and UK Government decisions around rebalancing gas and electricity prices.

In the past 12 months (July 2023-July 2024), wholesale electricity prices have reduced by around 32% and are now broadly comparable to 2021 pre-energy crisis levels. Wholesale electricity prices are heavily influenced by changing gas prices due to the structure of the GB electricity market, where prices are set by the last unit of electricity needed to meet demand, which is typically provided by gas-fired power stations^[34].

We continue to urge the new UK Government to progress work to rebalance gas and electricity prices. This is vital to incentivise the installation of clean heating systems in a way that alleviates fuel poverty and the cost of living crisis.

3.4B Indicator: UK Government policy position: network planning and investment

Data source: qualitative update from officials

Unit: N/A

Most recent data: see commentary below

Commentary:

Expansion of the electricity grid will play a crucial role in delivering our energy ambitions and maximising the economic opportunities of Scotland’s abundant renewable resources. Current grid capacity is holding back our ability to develop renewable sources of electricity generation and further decarbonise our economy, including heat in buildings.

The UK Government is responsible for policy relating to strategic electricity planning and network connections. These tasks are carried out by the Electricity System Operator (ESO), managing the connections process alongside Transmission Owners and Distribution Network Operators across Great Britain and regulated by Ofgem.

The new UK Government has set up a Mission Control for Clean Power by 2030 to decarbonise GB’s power systems and is reforming planning for electricity infrastructure in England. We therefore anticipate acceleration of the work started by the last UK Government under the Transmission Acceleration Action Plan and the Connections Action Plan, published in November 2023. Scottish ministers will continue to highlight the critical importance of this issue.

3.4C Indicator: UK Government policy position: the future of the gas grid

Data source: qualitative update from officials

Unit: N/A

Most recent data: see commentary below

Commentary:

Ofgem’s price control methodology which will apply from 2026-2031 does not expect large scale, systemic changes to gas network operation. Safety and resilience remain important given the networks’ vital role. However, responding to the uncertain future of gas is the largest gas issue impacting the price control methodology.

Ofgem noted that there is still uncertainty in the pace and scale of the transition away from natural gas which will be influenced by future government decisions.

The previous UK Government set an ambition to make a strategic decision in 2026 on whether to use hydrogen for domestic heating. Ofgem will continue to work with the new UK government to understand the implications of any hydrogen heating decision and to determine the most appropriate way for the price control to fund network investment, decommissioning or other changes in spending as a result of this decision.

Ofgem note that it will not fund hydrogen heating and blending upfront due to current uncertainty and to avoid duplication with the former UK Government’s Hydrogen Transport Business Model.

3.4D Indicator: the percentage of UK heat pump installations which take place within Scotland as a result of the Clean Heat Market Mechanism

Data source: no data source currently

Unit: per cent

Most recent data: see commentary below

Commentary:

While heat and energy efficiency are devolved policy areas, action is also needed in reserved areas to help ensure the transition is fair and affordable. The Scottish Government is keen to hear whether the new UK Government plans to place an obligation on energy suppliers and boiler installers to drive change in the way that the previous UK administration’s Clean Heat Market Mechanism was intended to initiate.

3.5. Enabler: heat infrastructure and planning

3.5A Indicator: number of properties covered by a designated heat network zone:

• domestic
• non-domestic

Data source: no data source currently

Unit: number of properties

Most recent data: see commentary below

Commentary:

Local authorities are required to publish Local Heat and Energy Efficiency Strategies (LHEES), many of which identify significant opportunities for district heating. For example:

• Glasgow City Council’s LHEES shows that there is the potential for between approximately 20% and 70% of the city’s heat demand to be supplied by heat networks. The upper bound applies to almost 50,000 domestic and non-domestic properties.
• Fife Council’s LHEES identifies a number of potential heat network zones including sizable zones in Rosyth Waterfront, Glenrothes (North), Dunfermline and Kirkcaldy.
• Highland Council’s LHEES identifies several existing heat networks, several projects being developed or at feasibility stage (including in Inverness and Fort William), and seven potential heat network zones in Invergordon, Inverness, Fort William and Dingwall. It also notes spaces that show a high potential to be used for small-scale heat networks, such as shared ground arrays with individual heat pumps for nearby properties.

Given that our Heat in Buildings Bill consultation proposed that new obligations could be placed on building owners within Heat Network Zones, we advised local authorities earlier in 2024 that they should take care in proceeding to designate Heat Network Zones at this time. Once final decisions have been made on the introduction and content of any Heat in Buildings Bill, we will set out how we will support local authorities in designating Heat Network Zones.

Meanwhile, our Heat Networks Support Unit (HNSU) is working with local authorities to take the potential heat network zones identified through LHEES and develop them into projects through feasibility and business case support. In November 2023, the HNSU introduced its Strategic Heat Network Support to help local authorities to develop strategic plans for district heating deployment and identify ways to attract private investment, for example by exploring and identifying a suitable and long-term heat network delivery model for their area.

Legislation came into force in May 2023 requiring Scottish public bodies to produce building assessment reports which will provide vital data about non-domestic buildings for heat network zoning. Guidance was also published for local authorities to review and decide whether to designate heat network zones (see indicator 4.2.1F Heat networks policy and delivery for additional context).

See indicator 4.2.1B for more details about how the Scottish Government has been engaging closely with local authorities on their LHEES, and indicator 2.2.3A for more information on limitations to existing heat network monitoring data.