Heat in buildings strategy - achieving net zero emissions: consultation

Executive Summary

As part of ending Scotland’s contribution to climate change, the way we heat our buildings needs to change. This draft Strategy sets out actions and proposals for transforming our buildings and the systems that supply their heat, ensuring all buildings reach zero emissions by 2045.

Our strategic approach to the heat transition will ensure we meet both our climate change and fuel poverty commitments. Both commitments have interim targets hence a large share of the change we need to see by 2045 must be delivered in the 2020s. Meeting these targets simultaneously poses challenges, especially as many zero emissions heating systems are more costly to install and can be more expensive to run than high emissions equivalents. We acknowledge the inherent tensions between achievement of our fuel poverty and climate change ambitions, and are seeking your views though this consultation on ways in which these tensions can be resolved. We remain committed to a fabric first approach through all our programmes, supporting fuel poor households to make their homes more energy efficient and helping to ensure energy bills are more manageable in the short term. We will take a careful and measured approach to introducing greater levels of support for fuel poor households to install zero emissions heating systems such as heat pumps, and continue to put the needs of households themselves at the heart of all our schemes.

Transformation of our buildings and energy markets at the scale and pace required is unprecedented. As highlighted by the Climate Change Plan update, the imperative to make progress means we must learn as we go. This includes delivering heat and energy efficiency solutions in settings we know are low regrets; ensuring low income and vulnerable households are able to afford to keep their homes warm; and rapidly developing the evidence base to resolve uncertainties where they exist.

This draft Strategy presents actions and further proposals that the Scottish Government will take. It also sets out the actions that we need the UK Government to take to ensure a smooth and just transition in Scotland. We are seeking your views on these proposals through a series of consultation questions throughout the document.

The transition to zero emissions heating systems will directly affect everyone and it will require individuals and organisations to take direct action. We are therefore offering everyone the opportunity to help shape the decisions we take.

The Path to Net Zero

Energy efficiency is critical across all pathways and technologies and is critical to unlocking deployment of zero emissions heating systems. Higher levels of energy efficiency will also help to reduce requirements for energy network upgrades and running costs helping to ensure that energy bills are affordable. We are therefore aiming to reach high standards of energy performance across all buildings whatever heating systems they use. For homes this will mean achieving energy efficiency levels broadly equivalent to an EPC rating of Band C.

There is no single technology that will deliver zero emissions heating in Scotland; the most cost-effective pathway will require several different approaches. The key low and zero emissions heating solutions available today are heat pumps and heat networks, and early progress must be made - deploying them in buildings for which they are the right long-term solution. Longer term, hydrogen may have an important role to play and our Hydrogen Policy Statement and Hydrogen Assessment, published in December, set out our ambitions in hydrogen deployment in Scotland. In this Strategy we commit to keep the option of hydrogen open where it represents a potential cost-effective solution, whilst also making progress with technologies that are ready to deploy in the near term. We will take forward work to understand the potential for hydrogen for heat, including identifying those buildings and areas where hydrogen is most likely to be the best option for delivering our targets.

Achieving emissions reductions in buildings will require by 2030 over 1 million homes and an estimated 50,000 non-domestic buildings to convert to using zero or low emissions heating systems. We are committed to taking action to rapidly scale up deployment rates so that at least 64,000 homes install renewable heating systems per year by 2025, and possibly many more.

People

The transition to zero emissions heating will directly affect people’s everyday lives as buildings are upgraded and new heating systems are installed in homes, workplaces and community buildings across Scotland. To ensure we jointly deliver our fuel poverty and heat decarbonisation objectives, in the final version of this Strategy, we will publish a set of guiding principles to underpin our commitment to no one being left behind, and implement these across our programmes. 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. As we further develop each of the actions set out in this Strategy we will undertake an assessment of the impact they will have on fuel poverty and will only take forward actions where they are found to have no detrimental impact on fuel poverty, unless additional mitigating measures can also be put in place.

In order to support people as we accelerate the transformation of our building stock, we will expand our support offer on energy efficiency and zero emissions heating, including continuing to offer interest-free loans with cashback, and growing our advice services and support to access funding and finance.

We will implement a public engagement strategy and action plan for heat decarbonisation to enable people to actively participate in shaping the decisions that affect them, and will use Local Heat & Energy Efficiency Strategies to help ensure locally-tailored solutions.

Place

Local Heat & Energy Efficiency Strategies (LHEES) will provide a long-term framework for taking an area-based approach to planning and delivery of the heat transition, including through zoning linked to regulation. LHEES will also form a basis for local public engagement and will be in place for all local authority areas by the end of 2023.

We will ensure the planning system enables and encourages the deployment of low and zero emissions heating, including the networks they require. We will make it a requirement for Local Development Plans to take into account LHEES and identify new and existing heat networks and associated ancillary infrastructure.

A Long-Term Investment Framework

Over the course of the next Parliament, the Scottish Government will invest almost £1.6 billion of capital funding in heat and energy efficiency. We want to see the right level of investment in our energy infrastructure over the coming decade, to enable delivery of the heat transition and ensure communities can access affordable zero emissions heat. We will build the evidence base on how and where investment is needed, and work to understand the options for how this will be funded and financed, with the aim of attracting private investment in appropriate circumstances and enabling domestic and non-domestic property owners to invest in the heating systems and energy efficiency of their homes and business premises.

Private investment must also drive progress alongside public funding. We will establish a new Green Heat Finance Task Force and will work in partnership with the private sector to leverage the scale of investment needed and to develop innovative approaches to financing heat decarbonisation and energy efficiency.

Our delivery programmes will provide the initial stimulus for the mass move from fossil fuel reliant systems to low and zero emissions heating for over two million homes and 100,000 non-domestic properties by 2045, and will support significant energy efficiency improvement across all buildings.

A Regulatory Framework for Zero Emissions Buildings

We are working with industry, energy network companies and the regulators to put the right enablers in place for the heat transition in Scotland. This includes a new Heat Electrification Partnership with the electricity network operators and work with the gas networks on greening Scotland’s gas grid. We will also build the evidence base on where hydrogen is most likely to play a role for heating.

The 2018 Energy Efficient Scotland Route Map set out our intention to use regulation to support the transformation of our buildings. Requirements on building owners to upgrade energy efficiency and install zero emissions heating systems will be an essential underpinning for driving deployment.

By 2025, we will therefore develop a new regulatory framework for zero emissions heating and energy efficiency. The framework will build on our existing commitments to extend regulation for minimum energy efficiency standards to include requirements, where possible within our legal competence, to install and use zero emissions heating systems. This will ensure that all buildings are energy efficient by 2035 and use zero emissions heating and cooling systems by 2045. Multi-tenure or mixed-use buildings will be given until 2040-45 to improve both their energy efficiency and install a zero emissions heat supply, given the complexity involved in coordinating works and recovering costs between multiple owners, likely necessitating a ‘whole building intervention’ simultaneously covering energy efficiency and heat supply improvements. Some buildings or areas may be required to comply with standards earlier.

This approach will complement the requirements we will put in place for new buildings to have zero emissions heating systems from 2024. For non-domestic buildings we will consult on a phased approach to requiring energy efficiency levels and zero emissions heat supply across new and existing buildings. Mixed-use and multi-tenure buildings like tenements have their own challenges and we will develop a separate regulatory approach to ensure they are energy efficient and use zero emissions heat.

Heat networks will play an important role in the heat transition. The Heat Networks (Scotland) Bill will build confidence among consumers and attract investment for development. A new regulatory regime for heat networks will be operational by the end of 2023. In order to support the delivery of Scotland’s climate change targets, new heat networks will need to be powered using renewables or other low or zero emissions sources of heat. From 2023 we will only consent renewable and low or zero emissions heat networks.

Economic Opportunity

Seizing the significant economic opportunity from the heat transition in Scotland and beyond will involve a significant ramp up of the capability and capacity of supply chains in Scotland. The scale of transformation means there will be opportunities for existing market participants across the energy efficiency and heating sectors, as well as new entrants to these markets. We will use our investment in, and regulation of, heat networks to stimulate the development of new heat networks and the extension of existing networks. We will see increased rates of installation of energy efficiency measures, potentially supporting 1,200 jobs for every £100 million invested. Our targeted support for innovation will support companies with a high growth potential, boosting the economy and creating jobs. Overall, we estimate that as many as 24,000 jobs could be supported each year in Scotland by the roll out of low and zero emissions heat.

We will work with industry to review our existing supply chain support and address any gaps identified. We will act on the recommendations of the Heat Pump Sector Deal advisory group and we will develop a new supply chain programme. We will promote PAS 2035/30 and MCS standards to ensure that installations are good quality and fit for purpose, and propose to integrate our Scottish installer skills matrix with these installer standards. We will work with skills delivery partners to ensure that there are sufficient training opportunities and to ensure that there are career pathways for those who wish to enter the sector.

Working with the UK Government

A broad suite of energy market reforms is needed, including changes to the ways in which policy levies are applied to energy supply and new safeguards to share the cost of the transition fairly across consumers. These measures span reserved and devolved areas, and we will work with the UK Government to secure the outcomes that are necessary for Scotland’s heat transition. We will also work with the UK Government to ensure we have all the powers we need to take action and to secure UK action that supports the pace of change needed and protects consumers in Scotland.