Heat in Buildings: progress report 2024

4. Activities (policy and delivery)

4.1. Activities: delivery schemes

4.1.1. Type: funding schemes – energy efficiency, clean heat and microgeneration:

Our delivery schemes have continued to provide funding through grants and loans to homes and businesses to install energy efficiency measures and clean heating systems, including targeted support for those in or at risk of fuel poverty. For most schemes, we summarise progress for the financial year 2023-24 below.

4.1.1A Indicator: number of improvement measures supported across all delivery schemes by sector during the last year:

• domestic – owner-occupier
• domestic – private rented sector
• domestic – social rented sector
• non-domestic – small medium sized business (SME)
• non-domestic – public sector

Data source: Scottish Government delivery scheme data

Unit: number of installed measures^[35]

In this year’s progress report, we report on the number of energy efficiency, clean heat^[36] and other renewables^[37] (e.g., microgeneration) measures installed per annum that are relevant to our strategy’s outcomes. This metric does not equate to the unique number of properties supported across our schemes since the same property could receive a number of measures. However, we include data on the number of properties supported by a scheme where it is available. (The exception to this is for the Social Housing Net Zero Heat Fund, where we report on the number of properties installing improvement measures.) We are currently unable to split this data out by tenure for all schemes, as intended.

We are continuing to explore ways to improve our reporting across our delivery schemes, and we may therefore update some of the delivery scheme data after this document has published as we continue the process of verification.

Most recent data: most recent data for schemes are for the financial year 2023-24, except the Area Based Schemes, where the most recent data are for 2022-23. For the Scottish Central Government Energy Efficiency Grant we report data for calendar years. We also provide historic data for all schemes where it is available.

Commentary:

Home Energy Scotland (HES) Grant and Loan Scheme

The scheme provides grants and loans to all domestic owner-occupiers in Scotland to install clean heat and energy efficiency measures. Data are presented for both the HES Grant and Loan scheme and the HES Loan and Cashback scheme, with the former having replaced the latter in December 2022. We have made necessary changes to the HES Grant and Loan scheme to ensure available funds are targeted at measures which best support direct decarbonisation of heat in homes. In 2023-24, sustained rapid growth in funding for loans for solar PV necessitated a change to limit solar funding to instances where deployed alongside renewable heat. A further change from 6 June 2024 removed solar PV and battery storage from eligibility under the scheme, even when packaged with a heat pump. Eligibility of self-builders was also removed from the scheme from 1 August 2024.

Data are only presented broken down by wider categories of measure for 2023-24, and we will continue to present these wider categories of measure in future years. In the table below, ‘other energy efficiency’ measures include secondary glazing, waste water heat recovery systems, heating controls, cylinder thermostat and hot water tank jackets. It also includes gas boilers, for which numbers have been low and will likely be zero next year since offers are not issued anymore. “Other renewables” include heat meters, wind turbines and hydro turbines.

Delivery through the HES Grant and Loan scheme has scaled up significantly from 2019-20.

Table 2: HES Grant and Loan Scheme (formerly HES Loan and Cashback) - number of measures installed - financial years between 2019 and 2024

	2019-20	2020-21	2021-22	2022-23	2023-24
Energy efficiency	997	615	796	1,013	2,030
Other renewables/clean heat	965	783	2,115	4,983	8,989

Table 2: HES Grant and Loan Scheme - breakdown of measures installed – 2023-24

	2023-24
Energy efficiency	2,030
Of which, insulation	1,721
Of which, other energy efficiency	309
Other renewables/clean heat	8,989
Of which, ZDEH /biomass	2,306
Of which, solar PV	3,368
Of which, battery storage	3,216
Of which, other renewables	99

Warmer Homes Scotland

Warmer Homes Scotland (WHS) is the Scottish Government's national fuel poverty programme designed to help those households living in or at risk of fuel poverty through the installation of measures such as insulation and clean heating systems in their homes. Households will be offered a clean heating system in the first instance, if technically appropriate, but these systems will not be installed in households where it would push people into fuel poverty or worsen the depth of fuel poverty.

The scheme mainly supports owner occupiers, but it also covers tenants in private rented homes. It has been operating since September 2015 and has helped more than 39,000 households throughout Scotland. We launched the new phase of Warmer Homes Scotland on 2 October 2023, with a greater focus on clean heating where this is both financially and technically feasible. The higher grant limits per household allow us to deliver whole-house retrofit and install more measures in individual properties.

We provide data for the number of measures installed under both the previous and current schemes in the tables below^[38]. Since 2019, we have seen a steady increase in the number of zero direct emission heating (ZDEH) installed, the majority of which have been heat pumps and new electric storage heating. In financial year 2023-24, the previous and new WHS schemes helped to install around 1,400 renewables/clean heat measures and over 9,000 energy efficiency measures in 5,000 homes.

The programme continues to install new gas boilers. This is because gas boilers can currently be cheaper to run due to high electricity costs and are able to be installed quicker.

The first months of the new scheme were focussed on servicing priority customers who had been waiting while the scheme was paused. We expect that this increased the proportion of fossil fuel heating installed to date. We are now seeing higher levels of ZDEH and we are reviewing the processes in the scheme to see where this can be increased further.

Table 3: Warmer Homes Scotland - number of measures installed under previous scheme – financial years between 2019 and 2024

	2019-20	2020-21	2021-22	2022-23	2023-24[39]
Energy efficiency	7,067	5,622	10,747	10,417	5,414
Of which, insulation	4,199	3,240	6,632	6,726	3,487
Of which, gas boiler (condensing)/LPG/Oil[40]	2,868	2,382	4,115	3,691	1,927
Other renewables/clean heat	445	332	664	1,126	609
Of which, ZDEH/biomass	423	314	572	723	375
Of which, solar PV/solar thermal/battery storage	22	18	92	403	234

Table 4: Warmer Homes Scotland - number of measures installed under current scheme – financial year 2023-24

	2023-24[41]
Energy efficiency	3,607
Of which, insulation	2,264
Of which, gas boiler (condensing)	1,343
Other renewables/clean heat	785
Of which, ZDEH/biomass	472
Of which, solar PV/battery storage	313

Area Based Schemes

Our Area Based Schemes (ABS) aim to reduce fuel poverty by enabling local authorities to design and deliver energy efficiency projects in fuel poor areas. ABS focuses primarily upon insulation measures benefitting 'hard to treat' properties, but also delivers clean heating and microgeneration measures as part of a ‘whole house’ approach. Local schemes meet most or all of the cost of improvements for owner occupiers and eight out of ten private landlords. This often enables improvements to mixed tenure buildings to go ahead, matching investment by social landlords and benefitting whole communities. Data for the financial year 2023-24 will be published separately as part of regular Area Based Schemes: annual final measures report.

In the last reported financial year (2022-23), ABS projects helped reduce energy bills for over 6,000 households living in or at risk of fuel poverty. The programme has also seen a steady increase in the number of clean heating systems being installed since 2019.

Table 5: Area Based Schemes - number of measures installed – financial years between 2019 and 2023

	2019-20	2020-21	2021-22	2022-23
Energy efficiency	7,822	5,834	6,527	4,571
Of which, insulation	7,737	5,715	4,287	4,497
Of which, gas boiler	21	30	1	0
Of which, heating controls	64	89	2,239	74
Other renewables/clean heat	98	251	734	2,460
Of which, ZDEH/biomass	98	107	151	207
Of which, solar PV	0	144	583	2,253

Private Rented Sector Landlord Loan Scheme

The Private Rented Sector (PRS) Landlord Loan Scheme provides private registered landlords interest free and low interest loan funding to enable them to invest in improving the energy efficiency of their properties and install clean heating systems. Since 2020, this scheme has supported landlords to install over 300 energy efficiency and 34 renewables/clean heat measures. Through installing these measures, landlords help reduce their tenants’ lifetime energy bills.

The ‘other energy efficiency’ category includes insulated doors, double/triple/secondary glazing and gas boilers (gas boiler offers are no longer issued as part of this scheme). ZDEH installed in 2023-24 were high heat retention electric storage heaters or air source heat pumps.

The scheme was launched in April 2020 to align with the planned introduction of minimum energy efficiency standards in PRS properties. Planned regulations were ultimately postponed in the context of the COVID-19 pandemic, but the support scheme has remained.

The scheme is demand-led and open to landlords who choose to apply. However, because private landlords are commercial providers operating in a private market, we recognise that many may choose to fund or finance improvements to properties privately.

Table 6: PRS Landlord Loan Scheme - number of measures installed – financial years between 2019 and 2023

	2020-21	2021-22	2022-23
Energy efficiency	51	116	78
Other renewables/clean heat	5	13	7

Table 7: PRS Landlord Loan Scheme - number of measures installed – financial year 2023-24

	2023-24
Energy efficiency	58
Of which, insulation	8
Of which, other energy efficiency	50
Other renewables/clean heat	22
Of which, ZDEH/biomass	15
Of which, solar PV	4
Of which, battery storage	3

Social Housing Net Zero Heat Fund

The Social Housing Net Zero Heat Fund (SHNZHF) offers capital grant funding to support social housing landlords across Scotland to install clean heating systems and energy efficiency measures. The SHNZHF has also offered resource support to enable the building of a pipeline of investment ready projects in future years; however, this section focuses on the number of properties installing measures under the main capital fund.

‘Other measures’ in relation to energy efficiency include mechanical ventilation heat recovery, heating controls and thermostatic radiator valves, hot water cylinder jackets and air tightness measures. Biomass is not reported below since the scheme has not supported any installations.

Data are presented from 2021 because SHNZHF launched in August 2020 and the data have been ascribed to the financial year in which each project was completed. Data for the wider energy efficiency categories of measures were only collated from 2023-24. We plan to continue to report this way in future years.

In 2023-24, the scheme supported nearly 7,400 social housing properties to install energy efficiency measures and over 2,700 properties to install renewables and/or clean heat measures. These contribute to reducing the cost of energy that social housing tenants pay in these properties, consistent with our wider efforts to tackle fuel poverty, and reducing the carbon emissions of these properties.

Table 8: SHNZHF - number of properties supported to install each improvement measures - financial years between 2021 and 2024

	2021-22	2022-23	2023-24
Energy efficiency	168	32	7,381
Of which, insulation	168	32	1,250
Of which, windows/glazing	N/A	N/A	422
Of which, doors	N/A	N/A	77
Of which, other measures	N/A	N/A	5,632
Other renewables/clean heat	771	1,299	2,759
Of which, ZDEH	159	663	1,317
Of which, solar PV	463	473	1,183
Of which, battery storage	149	163	259

SME loan and cashback scheme

This scheme supports Scottish organisations to install energy efficient and renewable technologies to cut carbon emissions and reduce energy costs, thereby increasing economic competitiveness. It provides unsecured, interest free loans of up to £100,000 to SMEs, not-for-profit-organisations and charities. A cashback grant has also been available since 2018.

From 9 May 2023, necessary changes were made to the SME Loan and Cashback scheme to target available funds at measures more closely aligned to the Heat in Buildings Strategy. As such, solar PV is no longer eligible under the scheme. Since 2019, the scheme has helped to install over 1,300 energy efficiency measures and almost 500 renewables/clean heat measures. Scottish Government funding for replacement oil/LPG heating systems ceased on 6 September 2021. Gas heating systems and their components are still currently eligible for the loan component of the scheme although installed measures have declined steadily since 2019-20.

‘Biomass’ include biomass boilers for all years and biomass room heaters from 2022-23.

Table 9: SME Loan and Cashback scheme - number of measures installed – financial years between 2019 and 2024

	2019-20	2020-21	2021-22	2022-23	2023-24
Energy efficiency	218	211	340	281	251
Of which, insulation	167	183	209	272	245
Of which, gas boiler	47	26	24	7	0
Of which, heat meters	4	2	7	2	6
Other renewables/clean heat	22	28	119	153	158
Of which, ZDEH/biomass	14	15	99	95	66
Of which, solar PV	8	13	19	46	69
Of which, battery storage	0	0	1	7	20
Of which, solar thermal	0	0	0	5	3

Scottish Green Public Sector Estate Decarbonisation Scheme

The Scottish Green Public Sector Estate Decarbonisation scheme is the main government-led capital funding mechanism to support decarbonisation of buildings owned by the public sector. The scheme comprises four support elements for public sector bodies:

1. The Scottish Public Sector Non-Domestic Energy Efficiency (NDEE) Frameworks and Project Support Unit (PSU)
2. The Scottish Central Government Energy Efficiency Grant scheme
3. The Scottish Public Sector Energy Efficiency Loan Scheme

4. Scotland’s Public Sector Heat Decarbonisation Fund

The NDEE Frameworks and PSU, which support public and third sector organisations retrofit their buildings, are in the process of re-procurement. Once the procurement exercise is complete, links to framework documentation and buyers guides will be made available on guidance for public sector organisations on how to access and use the framework agreement.

We present data below on the number of energy efficiency, clean heat and renewables measures installed in public sector buildings as part of these schemes.

The Scottish Central Government Energy Efficiency Grant scheme offers capital grant funding support for heat decarbonisation and energy efficiency projects across the public sector and is targeted at public bodies with no borrowing powers. In 2023, we supported the installation of 26 measures across 23 organisations to install renewables/clean heat measures and energy efficiency measures. Between 2021 to 2023, the scheme has supported around 350 energy efficiency measures and nearly 170 renewables/clean heat measures in public sector buildings.

Table 10: Scottish Central Government Energy Efficiency Grant Scheme - number of measures installed in public sector buildings – calendar years between 2021 and 2023

	2021	2022	2023
Energy efficiency/conservation measures	65	234	46
Other renewables/clean heat	44	91	34
Of which, ZDEH/biomass	11	32	12
Of which, solar PV/solar thermal/wind turbine	33	59	22

The Scottish Public Sector Energy Efficiency Loan Scheme offers zero interest loans to public sector bodies for energy efficiency works and projects that support the transition to zero carbon estates. The scheme is open to local authorities, Arms Length External Organisations (ALEOs) and universities.

Scotland’s Public Sector Heat Decarbonisation Fund launched in October 2023 and is delivered by Salix on behalf of the Scottish Government. It provided grant funding for the financial year 2023-24 to public sector organisations, including local authorities, universities and ALEOs, to install heat decarbonisation and energy efficiency measures. The scheme has so far helped to install 55 energy efficiency measures and nearly 20 other renewables/clean heat measures in these organisations’ buildings.

No biomass heating systems were installed in 2023-24.

Table 11: Scotland's Public Sector Heat Decarbonisation Fund - number of measures installed in public sector buildings - financial year 2023-24

	2023-24
Energy efficiency/conservation measures	55
Other renewables/clean heat	18
Of which, ZDEH	11
Of which, solar PV/solar thermal/wind turbine	7

4.1.2. Type: heat network support

4.1.2A Indicator: new pre-capital support projects in previous year

Data source: data collected directly by Scottish Government and delivery partners via the Heat Network Support Unit (HNSU)

Unit: number of projects

Most recent data:

• number of new pre-capital support projects in previous year (2023): 14

Year	2022	2023	2024
Number of projects	11	14	14

4.1.2B Indicator: new capital support projects in previous year

Data source: data collected directly by Scottish Government and delivery partners via SHNF

Unit: number of projects

Most recent data:

• number of new capital support projects in previous year (2023): 3

Year	2019	2020	2021	2022	2023
Number of projects	1	3	2	4	3

Commentary (for indicators 4.1.2A and 4.1.2B):

Since 2022, the HNSU has formally supported 39 pre-capital projects in 16 local authority areas through advice, guidance and funding, with the Scottish Government committing approximately £2.2 million of financial support (see Figure 2). Our Heat Network Projects report^[42] is published quarterly and provides more detail on all supported projects.

The HNSU was established in Autumn 2022 to address key challenges in the pre-capital stages of heat network development and to build capacity across the public sector to deliver successful projects. It is sponsored and managed by the Scottish Government, with partners Scottish Futures Trust and Zero Waste Scotland providing a range of support services.

The HNSU support includes expert advice, project steering and funding for the pre-capital stages of heat network development, such as detailed feasibility studies, business case building and commercialisation. Support is available for new district heating schemes or extensions to existing district heating schemes.

Launched in 2022, SHNF makes capital grant funding available to public and private sector organisations to support the roll out of zero emission heat networks across Scotland. To date, SHNF has awarded approximately £10.1 million to four heat network projects in Scotland.

The Low Carbon Infrastructure Transition Programme (LCITP) launched in 2015 and closed to new applications in 2022. Since 2019, LCITP has awarded grant funding to nine heat network projects totalling approximately £33.1 million. Figures are provided based on the year in which the heat network project was awarded grant funding through LCITP or SHNF. As the LCITP launched in 2015, there are an additional four heat network projects which were awarded grant funding prior to 2019.

4.1.3. Type: Scottish Government investment

4.1.3A Indicator: Scottish Government funding for the previous year (actual spend) on all schemes that support installation of energy efficiency measures and clean heating systems across domestic and non-domestic properties and the development of heat networks. This will be broken down by scheme and identify both capital and revenue funding.

Data source: Scottish Government delivery schemes

Unit: £m

Most recent data:

• Scottish Government funding for financial year 2023-24 (actual spend): net £195m in Capital investment as well as net £18m of Financial Transactions

Table 9: Scottish Government delivery scheme funding - financial year 2023-24 (in £m’s)

Year	2023-24
SHNF and LCITP legacy funding capital	£ 16.0
SHNZHF capital	£ 29.5
Area Based Schemes	£ 58.3
Warmer Homes Scotland	£ 59.7
HES Grant and Loan[43]	£ 62.3
SME Grant and Loan	£ 5.4
Public Sector Decarbonisation	£ 27.7
Departure from ERDF schemes[44]	£ 9.0
Income from Closed Schemes	£ (54.3)
Delivery Scheme Resource Spend	£ 20.5
Other Resource spend	£ 7.9
Total (Resource)[45]	£ 28.4
Total (Capital)[46]	£ 195.2
Total (Financial Transactions)	£ 18.0
Total Investment	£ 241.6

Commentary:

These figures represent the actual expenditure incurred by Scottish Government in the previous financial year as published. For this indicator, the baseline data will be financial year 2023-2024. Data for previous financial years are not shown because they are not directly comparable. Spend on HNSU resource is not shown due to data collection restrictions.

We invested over £210 million in capital and loan funding through 2023-24 and close to £20 million of resource for funding advice services. The balance of the resource funding was allocated to Heat in Buildings policy and regulation.

Through this investment, nearly 10,000 households at risk of fuel poor were supported to make their homes warmer through the Warmer Homes Scotland programme and Area-Based Schemes.

Over 6,500 homeowners applied for funding through the HES Grant and Loans scheme to undertake energy efficiency works and/or install ZDEH, resulting in 6,100 funding offers.

Over 6,000 domestic ZDEH installations funded this year through our schemes and around 330 homes were connected to heat networks using clean heat sources in 2023-24.

4.1.4. Type: advice services

4.1.4A Indicator: number of unique households supported by Home Energy Scotland (HES) advice service

Data source: Scottish Government scheme data

Unit: number of unique households

Most recent data:

Year	2019-20	2020-21	2021-22	2022-23	2023-24
Number supported	92,681	90,468	114,392	138,347	128,791

4.1.4B Indicator: number of SMEs supported by Business Energy Scotland (BES) advice service and number of energy assessment reports completed by BES

Data source: Scottish Government advice service

Unit: number of SMEs/number of energy assessment reports

Most recent data:

Year	2020-21	2021-22	2022-23[47]	2023-24
Number SMEs supported	782	883	460 (approx.)	932 (approx.)
Number energy assessments completed	988	1,144	773	1,384

4.1.4C Indicator: advice and referral services investment

Data source: Scottish Government scheme data

Unit: £m

Most recent data:

Year	2019-20	2020-21	2021-22	2022-23	2023-24
Investment (HES) (£m)	8.329	8.134	9.379	12.316	13.548

Year	2022-23	2023-24
Investment (BES/EEBS) (£m)	2.150	3

Commentary (for indicators 4.1.4A, 4.1.4B, 4.1.4C):

In 2023-24, the HES network delivered 489,000 advice interactions, supported over 128,000 unique households and recorded over 894,000 users of their website. From the launch of the new scheme in October 2023, just under 12,000 households were referred through to our Warmer Homes Scotland fuel poverty support programme which provides funding to eligible households to help make their homes warmer and easier to heat.

Of those supported, HES advisors referred or signposted 15,904 households on to providers of crisis funding for vulnerable consumers and those who needed immediate assistance, and 2,599 householders received direct one to one Energycarer support. Energycarers provide specialist support to households with issues relating to physical or mental health, disability, family circumstances, low income and expensive heating, who are often less able to make full use of the freephone services and website.

HES continued its focus on low and zero emission heating and estimate that 3,539 heat pumps will be installed following advice.

BES provided in depth support to over 900 unique SMEs in Scotland in 2023-24 related to low carbon heat and energy efficiency and recorded over 43,000 unique visits to its website. BES also completed nearly 1,400 energy assessment reports for SMEs to help identify energy saving opportunities. In 2023-24, 452 SME Loan and Cashback applications were made as a result of the support and bespoke energy assessment reports provided by BES. We do not have reliable data for 2019-2020.

Data for investment in BES advice service starts from 2022 since we do not have reliable data for the previous Energy Efficiency Business Support Service (EEBS) scheme.

4.2. Activities: other policy and delivery work

4.2.1 Indicator: qualitative update on developments over the last year

Data source: Scottish Government officials

Unit: N/A

Most recent update/commentary:

This document is both a report against the Monitoring and Evaluation Framework, and our annual report on progress against the Heat in Buildings Strategy. This section therefore provides a qualitative update on progress against key policy and regulatory areas. The key areas identified in the Framework are:

A. Introducing a regulatory framework to scale up the deployment of clean heating systems and energy efficiency measures:

• Regulating for clean heat and energy efficiency improvements in existing buildings
• Reviewing our social housing standards to align with our net zero targets
• Reforming EPCs to support the transition to net zero

B. Working with UK Government and local government:

• Engaging closely with local authorities on their LHEES
• Working with the UK Government on key heat in buildings policies

C. Providing support for skills and the supply chain to enable the growth needed in the green heat sector to meet our climate targets

D. Developing our approach to increasing public awareness and engagement with the heat transition

E. Exploring solutions to deliver the significant increase in private finance needed for the heat transition, alongside the Scottish Government’s delivery and advice schemes

F. Developing a regulatory regime for heat networks to meet the statutory requirements of the Heat Networks (Scotland) Act 2021.

4.2.1A Regulatory framework:

New Build Heat Standard (NBHS):

The NBHS is one of the most important steps we have taken in the past year towards decarbonising our buildings and reaching net zero in buildings.

The NBHS as it currently stands means that no new buildings constructed under a building warrant applied for from 1 April 2024 will be built with polluting heating systems, like gas and oil boilers. New domestic and non-domestic buildings will be built with clean alternatives, such as heat pumps and heat networks.

This represents a significant, positive step towards achieving the Scottish Government’s wider ambitions for net zero buildings.

Ministers confirmed to Parliament in May that there would be a review of the NBHS with the intention to adapt it to address issues of inflexibility raised by communities – particularly regarding the installation of wood burning stoves in new homes in rural areas.

The Minister for Climate Action has now written (19 September) to local authorities to temporarily relax the Standard in relation to the use of bioenergy and peat heating, pending the conclusion of that formal review.

This does not have any implications for the outcome of the review which is currently concluding – any regulatory amendments will be introduced by the end of the year.

Regulating for clean heat and energy efficiency improvements in existing buildings:

We have consulted during the past year on proposals for a Heat in Buildings Bill. This would prohibit the use of polluting heating systems, like gas boilers, in all privately owned and privately rented homes and non-domestic properties after 2045, and to require some building owners to do so earlier than 2045. The consultation received over 1,600 responses; an independent analysis has been commissioned and will be published in due course, along with details on next steps.

Socially rented homes will remain subject to a separate and equivalent performance standard (see below).

Reviewing our social housing standards to align with our net zero targets:

The Scottish Government has been working closely with the social housing sector in Scotland over the past year to co-develop proposals for a new Social Housing Net Zero Standard (SHNZS). The SHNZS is more aligned with net zero targets and designed to provide much needed clarity for the social housing sector.

A consultation on proposals for the SHNZS (which will replace the post-2020 Energy Efficiency Standard for Social Housing, or EESSH2) closed on 8 March 2024. The responses are currently under independent analysis, with results to be published in due course. The proposals are consistent with plans for the wider housing stock as set out in the consultation on a Heat in Buildings Bill, with the SHNZS proposed to require social landlords to improve fabric efficiency and install clean heating where it is technically feasible and cost-effective to do so. The social housing sector has been leading the way on energy efficiency in recent years and is well placed to build on this further while building in longer term ambition to transition to clean heating.

Reforming Energy Performance Certificates (EPCs) to support the transition to net zero:

We need to enhance EPCs so they continue to be a valuable source of information for home buyers, owners, and tenants. The Scottish Government consulted on proposals in 2023 to reform EPCs, in line with the CCC’s advice^[48]. These reforms would address long-standing criticisms from the CCC and others that EPC ratings are not aligned with net zero. We will shortly publish our response to this consultation and set out next steps.

Our proposed reforms will mean EPCs have clearer information about how well-insulated a home is by providing new information on the fabric energy efficiency of the home (a rating based on the annual heat (kWh) demand of the building). They will also highlight clearly whether key insulation measures (such as cavity wall and loft insulation) have been installed.

The reformed EPCs will provide new information about the home’s current heating system, with recommendations on clean and efficient replacements, plus the modelled cost of heating the home before and after recommended changes system are made. These reforms would ensure current and prospective building owners and tenants have as much information as possible to inform choices they make about improving the fabric efficiency and installing clean heating systems in their building. We are reviewing the operation and governance of the EPC assessor market, to ensure that consumers (home and business owners/ tenants alike) have full confidence in their EPC rating. We are also developing the infrastructure required to adopt the UK Government’s Home Energy Model which is about to replace the Standard Assessment Procedure (SAP) methodology.

4.2.1B Working with UK Government and local government:

Working with the UK Government on key heat in buildings policies:

We are committed to working collaboratively on areas of common ground with the new UK Government. However, action by the UKG in reserved areas remains critical to help ensure that the transition is fair and affordable. The key areas are:

• Action to rebalance gas and electricity prices to incentivise the installation of clean heating systems in a way that alleviates fuel poverty and the cost of living crisis.
• A decision on the future of the gas grid, which will have significant implications for any decisions we may make in the future regarding regulating building owners.
• Decisions on the use of reserved powers to accelerate the supply and installation of clean heating systems.

Engaging closely with local authorities on their LHEES:

Local Heat and Energy Efficiency Strategies (LHEES) are at the heart of a place based, locally-led and tailored approach to heat and energy efficiency planning and delivery. LHEES set out the long-term plan for decarbonising heat in buildings and improving their energy efficiency across an entire local authority area. Accompanying the Strategies are Delivery Plans, which provide a strong basis for action for local communities, government, investors, developers and wider stakeholders, pinpointing areas for targeted intervention and early, low-regrets measures.

The Scottish Parliament passed legislation in April 2022 requiring all local authorities to publish a Local Heat and Energy Efficiency Strategy and Delivery Plan by the end of 2023 and update them on a five-year basis. The Scottish Government published guidance regarding what is required to fulfil this duty in October 2022. At the time of publication, 27 of the 32 local authorities have published LHEES, including 24 final LHEES and three in draft.

The published LHEES provide an evidence base for what interventions are needed to decarbonise Scotland’s buildings and tackle poor energy efficiency as a driver of fuel poverty, as well as importantly, where these buildings are located.

We continue to engage closely with local authorities and are providing support through capacity building training.

4.2.1C Workers and skills:

Providing support for skills and the supply chain to enable the growth needed in the green heat sector to meet our climate targets:

We have funded the Green Heat Installer Engagement Programme^[49], delivered by Energy Saving Trust, to provide assistance and support for installers in their green heat transition to becoming accredited in the installation of heat pumps and insulation.

The programme includes the Low Carbon Skills Grant, which has been available to heating and plumbing apprentices. This allows them to include heat pump training modules as part of their qualification at no additional cost to their employer. During 2023-24 the fund supported 318 apprentices to be trained in heat pump installation.

The programme includes the MCS Certification Fund which provides a grant to become MCS certified on heat pumps. The grant will pay 75%, up to a maximum of £1,000, of the certification fees. In 2023-24 it supported 24 businesses to become MCS certified. The programme has also developed a Heat Pump Installer toolkit which gives advice on how to become MCS certified and an Insulation Installer toolkit which gives advice to installers about achieving PAS 2030 certification and becoming a TrustMark registered business.

The mobile heat pump training centre^[50] was launched last year to deliver certified heat pump training in rural and island areas of Scotland. Activities have included a visit to Shetland in May where eight participants successfully completed their BPEC accredited heat pump course^[51].

We are also funding a Clean Heat Strategic Workforce Development Fund^[52] to support SMEs, delivered by Scottish Enterprise. This offers workplace innovation support to companies that are either already active or interested in diversifying into the clean heat market in areas such as the design, development, manufacture, operation or installation of clean heat related solutions. Support includes training related to heat pump installations.

4.2.1D Public awareness:

Developing our approach to increasing public awareness and engagement with the heat transition:

In December 2023 we published the Heat transition: public engagement strategic framework. This outlines our approach to increase awareness and understanding of heat decarbonisation and the support available to help make the transition. We are currently developing several workstreams, including developing a high-level monitoring and evaluation framework.

The Scottish Climate Survey, to be carried out in 2024, will assess public awareness and understanding of the heat transition, as well as respondents’ willingness and intention to install a clean heating system in their home.

4.2.1E Finance:

Exploring solutions to deliver the significant increase in private finance needed for the heat transition, alongside the Scottish Government’s delivery and advice schemes:

Our Green Heat Finance Taskforce has been working on new ways to finance this work, and to stimulate investment in skills, innovation and the supply chain. It published the Part 1 report in November 2023 and will publish a Part 2 report later this year, following which the Scottish Government will formally respond.

The Taskforce’s Part 1 report concluded that the market in green home retrofit products in the UK is currently immature but has significant potential for growth.

4.2.1F Heat networks policy and delivery:

Developing a regulatory regime for heat networks to meet the statutory requirements of the Heat Networks (Scotland) Act 2021:

In last year’s annual report, we described regulations that introduced a requirement for public sector non-domestic buildings to assess their heating requirements and suitability to connect to heat networks. Around 300 building assessment reports have been produced to date.

We continue to engage with key stakeholders in the development of the heat networks regulatory system and are concentrating on licensing and consents.

Heat Network Licences will ensure that market participants are solvent, competent and fit and proper. It will also put them on a more equal footing with other utilities, for example by providing them with powers to undertake roadworks.

Heat Network Consents will provide a robust route for scrutinising individual projects, considering local context and ensuring networks are built and operated in a way which reduces emissions and contributes to a reduction in fuel poverty.

We continue to engage with UK Government to try and ensure interoperability between our regulatory regime and the regulations to protect heat consumers it is developing after the passage of the UK Energy Act 2023. We are also working closely with UK Government to deliver a Heat Network Technical Assurance Scheme^[53] to ensure heat networks are built and operated in an efficient manner.

The Heat Networks (Scotland) Act sets statutory targets for the amount of heat (and cooling) to be supplied by heat networks, which signal to the developing heat networks sector that this – and future – governments of Scotland are committed to its growth and providing greater certainty for investors.

We provide regular updates^[54] on our progress towards meeting the targets and show how these have been aided by the Heat Networks (Scotland) Act and other supporting policies.

We remain committed to further consulting on proposals, as far as possible within our devolved competence, to reduce demand risks for heat networks. This includes proposals specific to heat networks in the Heat in Buildings Bill consultation as well as a focus on large publicly owned non-domestic buildings.