Heat in buildings strategy - achieving net zero emissions: consultation

Annex A Summary of Actions

Chapter 2 – A 2045 Pathway for Scotland’s Homes and Buildings

• We will undertake further analysis in 2021-22 to fully understand the role of secondary technologies, such as solar panels and thermal and battery storage to better understand their role in heat decarbonisation.
• We will publish a review of evidence on heat pumps in Scotland, in the first quarter of 2021. We are undertaking further research to consolidate evidence on heat pump performance in situ across Scotland where data exists. This research will be published in March 2021, and will be used to inform future policy and where relevant reflected in the design of our delivery programmes.
• Analysis undertaken for non-domestic buildings in Scotland, to be published in Spring 2021, shows that zero emissions heating technologies are applicable to a large proportion of the non-domestic building stock, however enabling works such as upgrading distribution systems (installing larger-sized pipes and new heat emitters to accommodate lower flow temperatures) and increasing site electricity capacity may often be needed.
• We will undertake further modelling and analysis during 2021-22 to better understand the role of energy efficiency in unlocking the deployment of zero emission heating systems, which will inform future delivery and regulatory programmes.
• We will keep the role of Hybrid system under active review as the evidence base develops.
• We will undertake research by 2023 to understand the potential cooling needs of Scotland’s building stock, which will inform future policy development in this area.

Chapter 3 - People

1. Building on the Climate Change Public Engagement Strategy, we will develop and begin implementing a bespoke public engagement strategy for heat in building, in 2021.

2. We will respond to the Climate Assembly’s recommendations and take action on them as we further develop this draft strategy.

3. By 2023, we will have simplified our branding to make our schemes easier to identify and navigate, helping to build trust and awareness.

4. We will identify and support disengaged and vulnerable groups, ensuring that the heat transition is accessible to all of society, and we will give due regard to equalities, and shall not unfairly discriminate based on any protected characteristics.

5. We will invest in growing our advice services so that they continue to meet the needs of the Scottish public. This includes improving our digital presence and extending the support on offer to provide more in-depth support for installing zero emissions heating systems.

6. We will expand our Green Homes Network so that people can learn from other householders, businesses and organisations who have already made the transition to warmer, greener and more efficient buildings.

7. We will work closely with consumer groups to continuously monitor and identify potential issues and take mitigating action where they arise.

8. We will work with the Energy Consumers Commission and Consumer Scotland and a range of Scottish consumer representative organisations to ensure that issues of consumer detriment are identified and addressed, focussing on consumer understanding, accessibility, costs, redress, and support for vulnerable consumers.

9. We will publish guiding principles to underpin our commitment that no one is left behind in the heat transition, ensuring our approach neither increases the fuel poverty rate nor increases the depth of existing fuel poverty and ensures that those on lower incomes or in or at risk of fuel poverty are protected from any negative impacts. This will include the effective design and targeting of our fuel poverty and heat in buildings programmes.

10. We will continue to build the evidence base on the interactions between our fuel poverty and climate commitments, and apply that knowledge to our policy design and to our programmes, mitigating any risk of unintended consequences, and tracking progress and learning by doing in order to adjust immediately where unintended consequences nevertheless arise.

11. We will continue to prioritise energy efficiency measures through our delivery programmes, as this will enable the roll-out of zero emissions heating, as well as help to tackle fuel poverty.

12. We will take action through our delivery programmes to maximise the number of homes with households in fuel poverty achieving a level of energy efficiency equivalent to EPC C by 2030 and EPC B by 2040.

13. We will take a zero emission first approach in our delivery programmes and will phase out funding for fossil fuel heating systems by 2024 where it is not detrimental to our fuel poverty objectives.

14. We will work with energy retailers to ensure households have access to the right tariffs, that tariffs tailored to zero emissions heating systems are available, and continue to press for customers with pre-payment meters to access similar tariffs to direct debit customers.

15. We will commission further analysis during 2021-22 to consider the distributional impacts of decarbonising our homes and buildings and quantify the scale of impact on those in or at risk of fuel poverty or on lower incomes and look at options available to Scottish Government to mitigate these impacts.

16. During 2021-22 we will conduct research to understand the cost effectiveness of thermal, electrical storage and rooftop solar PV to support households to reduce bills, and where this proves effective consider support for them through our existing delivery mechanisms.

Chapter 4 - Place

17. We will explore the opportunity to integrate heat decarbonisation in community climate action initiatives such as Climate Action Towns and Community Climate Action Hubs.

18. We will support communities to work together to address, and champion, heat decarbonisation through the new CARES programme and work to understand further the models and solutions most appropriate for communities in Scotland.

19. We will work in collaboration with the Scottish Cities Alliance and the seven cities on the cities’ ambitions for low and zero emissions heat (in particular heat networks), supporting delivery, by 2030, of a pipeline of projects.

20. We will commission a full evaluation of the LHEES pilot programme in 2021-22.

21. We will consult on the draft LHEES methodology and guidance with a view to introducing legislation to establish LHEES on a statutory basis so that they are in place for all local authority areas by the end of 2023.

22. We will use LHEES Delivery Plans to target support for deployment and to help identify early areas for low-regrets action.

23. We will set out further guidance to ensure the involvement of local communities in decision making about the heat transition in their local area as part of the development of Local Heat & Energy Efficiency Strategies.

24. Through National Planning Framework 4 we will look for opportunities to strengthen planning policy to enable and encourage energy efficiency and low and zero emissions heating.

25. We will include low and zero emissions heat networks and micro-renewable technologies in the review programme for Permitted Development Rights.

Chapter 5 – Preparing our Energy Networks

26. We will update the Scottish Energy Strategy this year taking into account the whole system issues raised by our net zero climate targets.

27. We will carry out analysis during 2021 to understand generation and network requirements, in terms of the scale and location of the demand that heat electrification could bring.

28. We will ask the UK Government to continue to provide the support needed to develop Scotland’s renewable electricity pipeline needed to meet a decarbonised future for heat.

29. We will undertake work in 2021 - 2022 to explore the potential network investment costs of the heat transition for Scotland, to provide greater clarity on the likely range of costs, and likely impacts on consumers, including those in, or at risk of, fuel poverty and help inform further decision-making.

30. During 2021, we will conduct research into the role of energy storage in heat networks and buildings in reducing consumer costs, and minimising network impact.

31. In 2021 we will set up a Heat Electrification Partnership with Scotland’s electricity network operators to ensure that the upgrades required are delivered when and where they are needed and ensure that the LHEES framework informs this.

32. We will investigate demonstration projects through our delivery programmes strategic priorities to allow us to model real time network impact of heat pump deployment, smart-enablement, energy storage and demand management.

33. Throughout 2021, and beyond, we will continue to engage Ofgem to ensure that there is a framework to support the energy network companies – both gas and electricity – in reflecting the Scottish Government targets and ambitions as set out in this draft Strategy.

34. Throughout 2021 build on our work with SGN and National Grid Gas Transmission to provide evidence on the role gas decarbonisation can play in meeting our targets, and a timeline for resolving uncertainties.

35. Working with stakeholders, including network companies, local authority and delivery partners, we will undertake analysis in 2021 - 2022 to identify strategic areas most and least likely to have access to low carbon or green hydrogen in the future.

36. Work with the UK Government to ensure that the Green Gas Support Scheme meets the needs of Scotland, and minimises the impact of the Green Gas Support Scheme Levy on end user costs, especially in relation to fuel poverty levels.

37. We will work with the Gas Network Operators and the UK Government to explore opportunities for increasing the blend of low carbon or green hydrogen in the gas network.

38. Consult on the use of sections 44 and 63 of the Climate Change (Scotland) Act 2009 to introduce mandatory connection for large and publicly-owned buildings in next Parliament.

39. Introduce a requirement through the 2024 New Build Heat Standard for new buildings being constructed to connect to existing heat networks, when they are located within a Heat Network Zone.

40. Consult on how new powers under section 15 of the Non-Domestic Rates (Scotland) Act 2020^[lxx] could be used to de-risk investment and drive net zero behaviour, including connections to heat networks.

41. Develop a set of common technical standards for development and operation of heat networks across Great Britain which will help support the development of skills and the sector’s supply chain.

42. Create a new District Heating Relief of 90% to 2023/24 for new District Heating networks powered by renewable sources, waste heat or energy from waste.

43. Include heat networks in our ongoing programme of reviewing Permitted Development Rights (PDR) and, subject to the findings, lay Regulations.

44. We will consult in 2021-2022 on whether the need for further regulatory measures or support measures to increase the utilisation of waste or surplus heat, for example from Energy from Waste plants, to be supplied and/or used through heat networks.

45. Publish a Heat Network Investment Prospectus during the next financial year that will demonstrate the size and location of heat network opportunities across Scotland, as well as information on the decarbonisation requirements of existing networks in Scotland.

46. Repurpose the Heat Network Partnership in 2021 with a refreshed membership and remit focussed on pipeline development and subsequent delivery.

Chapter 6 – Kick-starting Investment in the Transition

47. We propose to expand existing delivery programmes to focus on accelerating deployment over the next 5 years against the following four strategic priorities: (1) those least able to pay, (2) investing in strategic technologies in low or no regrets areas, (3) showcasing Net Zero Leadership and share learning through early adoption in key areas of focus and (4) investing in innovation and demonstration to drive forward competitive advantage.

48. We will offer interest-free loans for heat and energy efficiency technologies via Home Energy Scotland, with an additional commitment to run our cashback scheme until at least 2023 to help households overcome the upfront cost of taking early action.

49. We will undertake user research and market testing to understand the need of further products which may be needed to support and smooth the consumer journey including the option for a self-funded pre- and post-installation service.

50. We will evaluate the area-based equity loans pilot and consider any future equity scheme in light this evaluation.

51. We will continue delivery of energy efficiency investment to support fuel poor households in order to make homes warmer and easier to heat and to reduce the impact of any increased running costs from zero emissions systems, including recognising the distinct challenges faced by island, rural and remote communities, and seek to improve targeting so that we can reach more households in fuel poverty.

52. Over the next five years, our Area Based Schemes will increase their reach to support higher numbers of households in or at risk of fuel poverty. We will deliver an increased number of ‘whole house’ retrofits to fuel poor households and will adopt a ‘zero emissions first’ approach in improving heating systems.

53. We will procure a new, enhanced, Warmer Homes Scotland to begin in 2022, which will support for fuel poor households at its heart, and embed increased support for zero emissions heating, adopting a zero emissions first approach.

54. We will support SME businesses via our Energy Efficiency Business Support service (formerly Resource Efficient Scotland) and SME Loans to take action to reduce their energy use and cut emissions. We will continue our new SME loan cashback schemes until at least 2023.

55. We will expand our Green Network for Businesses, so that SMEs can learn from people, businesses and organisations who have already made the transition to warmer, greener and more efficient buildings.

56. We will continue to run our SME loan cashback schemes until at least 2023 to help reduce the cost of investing. In order to understand the support and investment SME businesses need to secure an accelerated rollout of energy efficiency and zero emission heating systems we will consult and work with the sector to develop new policies and proposals for SMEs.

57. Throughout the next 5 years, we will support communities to take the necessarily steps to transform their assets so that they are ready for a net zero Scotland through our new CARES programme.

58. We will extend our financial support for our most remote and islanded off-grid communities, ensuring that security of supply is maintained and decarbonised – acting across electricity, heat and energy efficiency – helping to transition these communities to a net zero future.

59. We will bring forward a new Scottish Green Public Sector Estate Scheme during 2021 - drawing together capital grants, loans, and other revenue funding mechanisms - as the main government-led capital funding mechanism to support leadership for heat decarbonisation right across the public sector.

60. We will work with stakeholders to design and develop the successor LCITP programme through the Call for Evidence

61. We commit to extending the Social Housing Net Zero Heat Fund until 2026 to further accelerate the decarbonisation of our social housing stock, and consider how this financial support will work in tandem with our domestic energy efficiency programmes to deliver a comprehensive approach to decarbonising our social housing stock.

62. We will support affordable housing providers who wish to install zero emissions heating systems in homes through our Affordable Housing Supply Programme, ahead of regulatory requirements in 2024.

63. We will design Scottish Government delivery programmes and advice services so that they continue to maximise the contribution from UK Government funding.

64. We will also continue to press the UK Government to provide more funding for energy efficiency and zero emission heating via GB-wide schemes, including working with UK Government to identify a more progressive way of funding these programmes.

Chapter 7 – Working Towards a Long Term Market Framework

65. In 2021-2022, we will commission independent analysis and modelling to better understand the expected costs of upgrading different property types to the proposed standards, to help guide investment decisions.

66. Establish a new Green Heat Finance Taskforce in early 2021 to provide advice and recommendations to Scottish Government on potential new financing models and routes to market.

67. Set out options for future financing and delivery in 2023, with a view to implementing these new mechanisms from 2025 where applicable and allowed within our legislative competence.

68. Work with the UK Government to design new market mechanisms that can secure and accelerate delivery.

69. We will undertake scoping work during 2021 to understand how the Heat as a Service model might support our decarbonisation goals, including commissioning market and consumer research.

70. We will consider how our local tax and charging powers, such as council tax and non-domestic rates, could be used to incentivise or encourage the retrofit of buildings, alongside our planned approach to regulation. We will commission further analysis to identify potential options, to be implemented from the middle of the decade where appropriate, subject to consultation and public engagement.

71. We will work with the UK Government as it progresses its call for evidence on affordability and fairness to ensure that any reforms do not disadvantage Scottish consumers and that they fit with and enable delivery of our more ambitious climate targets.

72. We will publish research on the impact of rebalancing consumer levies on electricity and gas bills.

Chapter 8 – Developing a Regulatory Framework for Zero Emissions Buildings

73. We will introduce regulation in a way that is proportionate and which considers the health and wellbeing of Scotland’s people.

74. We will ensure sufficient periods of transition to allow people and the market to adjust and prepare for new standards coming into force.

75. We will tailor our delivery support to set out a clear path of support and advice for all those effected.

76. We will consider what legislation is needed to meet these regulatory ambitions, including bringing forward new primary legislation in this area if required, pending further policy development and securing agreement with the UK Government on any necessary devolution.

77. Develop and bring into force the 2024 New Build Zero Emissions from Heat Standard, requiring new buildings to have zero direct emissions heating systems.

78. Review energy standards within current building regulations to deliver further improvement in energy efficiency and emissions reductions in new buildings, in 2021 and 2024.

79. Publish the Net Zero Carbon Public Buildings standard in early 2021 and work to introduce regulation and mandatory standards across the non-domestic sector more widely from 2023-25 onwards.

80. We will consult on a reformed EPC assessment process to better align with wider net zero objectives whilst meeting our fuel poverty obligations by summer 2021.

81. We will bring forward proposals for regulating, to the extent that devolved powers allow, to require the installation of zero or very near zero emissions heat in existing buildings from 2025, with a backstop of 2045.

82. We will bring forward regulations requiring private rented sector properties to achieve an equivalent to EPC C by 2028.

83. We will consult on detailed proposals to introduce regulations from 2023-2025, to require owner occupied private homes to meet a minimum level of energy efficiency (equivalent to EPC C) by 2035.

84. We will seek the agreement of the social housing sector stakeholders to bring forward the review of EESSH2 to 2023 with a view to strengthening and realigning the standard with net zero requirements so that social housing leads the transition to zero emission buildings.

85. We will consult on introducing regulation to require mixed tenure and mixed-use buildings such as tenements to reach a good level of energy efficiency (equivalent to EPC C where technically feasible and cost effective), and to install a zero emissions heating supply by 2040-45, including provisions on ensuring cooperation between building owners to carry out works and recover costs.

86. We will work with Historic Environment Scotland to consider what specific regulatory provisions or exemptions may be needed within regulations for buildings designated as listed or in conservation areas. (this also applies to non-domestic buildings as below)

87. Develop and introduce strengthened regulation for non-domestic buildings, which builds on existing requirements under Section 63 of the Climate Change (Scotland) Act, to ensure they reduce demand for heat and install a zero emissions heating supply; and launch a consultation on these proposals.

88. We will develop guidance for minor refurbishments and heating system replacements in the public sector.

89. We will consult on area or zone-based triggers to complement those at the individual property level.

Chapter 9 - The Economic Opportunity

90. In 2021, on final publication of this strategy, we will respond to the recommendations from the heat pump sector deal expert advisory group.

91. We will work with our partners Scottish Futures Trust and the Construction Leadership Group to engage with the sector on the opportunity presented by the heat transition.

92. Through our existing Sustainable Energy Supply Chain programme and our economic development agencies - Highlands and Islands Enterprise, South of Scotland Enterprise, Scottish Enterprise and Scottish Development International – we will continue to raise awareness amongst the supply chain, and continue to provide valuable tailored business support, that will attract new entrants and inward investment.

93. We are undertaking work to better understand supply chain linkages for the heat transition across the Scottish economy. This work will identify gaps in the supply chain and the extent to which these could constrain future deployment. We are taking a whole-system view and will consider interactions with other economic sectors.

94. We will work with partners to build on our existing Sustainable Energy Supply Chain programme.

95. Early in 2021 we will initiate a new supply chain action plan specifically focussed on the development of energy efficiency and zero emissions heat in the buildings supply chain in Scotland.

96. We will work with Scottish Development International to understand more about the potential for exporting our Scottish capabilities overseas.

97. In early 2021, we will set out a call for evidence on a new framework of support for innovation across Scotland’s energy sector. We will respond to the call for evidence by publishing a new market support framework for innovation by the end of 2021.

98.We will work with industry bodies, such as SNIPEF and the BESA to consider opportunities for retraining and dual qualifying the existing heating sector workforce.

99.We will consult on proposals for Scottish skills requirements for energy efficiency, low and zero emissions heating systems, microgeneration and heat networks in 2021.

100.We will continue to work together with Skills Development Scotland (SDS), the Scottish Qualifications Authority (SQA) and the Energy Skills Partnership (ESP) to ensure that there are sufficient training opportunities and to ensure that there are career pathways for those who wish to enter the sector. We will also work with our partners to develop new qualifications for energy efficiency and low and zero emissions heating as may be appropriate.

101.Provide increased support to Scottish colleges for training and retraining for jobs in the energy efficiency and low and zero emissions heating sectors, including capital investment for colleges to buy equipment.

102.With partners, we will develop at least two accredited training courses, to de delivered by universities and colleges in Scotland. We expect these courses to be on offer from 2021.

103.Throughout 2021, we will continue to build evidence in support of the wider skill requirements necessary for installing zero and emissions heating systems in the buildings sector, including the timings of when skills are required, how best to support the transition opportunity from other industries, support training of young people and the provision of local jobs across Scotland, as well as the development of apprenticeships in this area.

104.We will continue to use our government led programmes, such as Warmer Homes Scotland, to support apprenticeships, and will look to expand our support for apprenticeships through our existing funding programmes.

Chapter 10 - Working with the UK Government

We call on the UK Government to:

• amend the Gas Act 1986 to stop the extension of the gas grid to new properties;
• work with us to identify and develop options for new market mechanisms to drive investment, innovation and deployment of low and zero emissions heating;
• work with us to ensure a fair distribution of the costs of the transition; and to put in place the right financial incentives for households and businesses;
• accelerate decisions on the role of hydrogen and the future of the gas network, and to ensure timely updates to relevant regulations.
• amend Ofgem’s statutory obligations to include a duty to enable delivery of statutory greenhouse gas emission targets across all administrations in the UK;
• ensure that forthcoming UK heat networks legislation creates powers for the Scottish Government to appoint a regulator of its choosing, to enforce both UK-wide heat network consumer protection and the Scottish regulatory framework being introduced by the Heat Networks (Scotland) Bill;
• work with us on product standards for gas boilers, for example requiring them to be hydrogen-ready;
• rebalance environmental and social obligation costs on energy bills to help unlock deployment and ensure a fair settlement for consumers;
• amend the VAT regime so that all energy efficiency and renewable heat retrofit installations receive a reduced or zero VAT rate;
• work with the devolved administrations under the proposed review of the new UK Emissions Trading Scheme, to consider how it could drive investment to reduce heat emissions;
• explore the role for different bioenergy fuels in buildings and, as appropriate, develop sustainability and other appropriate criteria;
• review levy funding for the Energy Company Obligation and the Warm Homes Discount and work with Scottish Ministers to bring these together into a single Combined Levy to establish a single, flexible Scottish Fuel Poverty scheme; and
• extend the scope of the Clean Heat Grant, increase the total level of funding available, and increase the flat grant level to recognise likely cost differences across different communities.

Chapter 11 - Monitoring, Evaluation and Future Decision Making

105.Publish a monitoring and evaluation framework to accompany the publication of the final strategy.

106.We will build in evaluation to our delivery programmes, to ensure lessons are learned and inform future approaches and rollout.

107.We will continue to work with COSLA to strengthen and integrate governance arrangements on heat and energy efficiency to ensure effective delivery over the long term.