Heat in buildings strategy - achieving net zero emissions: consultation

Chapter 1 Introduction

This draft Strategy outlines the steps we will take to reduce greenhouse gas emissions from Scotland’s homes, workplaces and community buildings and to ensure that we remove poor energy performance as a driver of fuel poverty. The focus of this draft Strategy is on energy demand for space and water heating in homes, workplaces and community buildings. The draft Strategy does not cover heat used in industrial processes. Our support and approach to industrial decarbonisation is summarised in the recent Climate Change Plan Update.

Building on the policies and actions set out in the 2020 Climate Change Plan Update, this Strategy sets out a pathway to zero emissions buildings by 2045 and details a series of near-term actions to put us on a clear path towards this, as well as a range of further, longer-term commitments to accelerate and further scale the transformation of the nation’s building stock.

Our Vision: “By 2045 Our Homes and Buildings are Warmer, Greener and More Efficient”

This Strategy provides an update to the 2018 Energy Efficient Scotland Route Map and the 2015 Heat Policy Statement, and brings together our ambitions on energy efficiency and heat decarbonisation into a single framework. It establishes a set of principles that will underpin our policies and actions on energy efficiency and heat. It sets out strengthened action to deliver on our National Infrastructure Priority for Energy Efficiency. It considers whole-system energy issues and how these are to be managed over the course of the transition. The draft Strategy outlines the scale of the economic opportunity presented and identifies the measures necessary to realise this and to ensure a just transition, one in which the benefits of the transition are shared and no one is left behind. Securing a just transition is crucial so that we take the people of Scotland with us, and continue to protect the most vulnerable during this transition.

The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 set legally binding targets for us to achieve net zero greenhouse gas emissions by 2045, with interim targets requiring a 75% reduction by 2030, and 90% by 2040.

Our statutory fuel poverty targets are similarly ambitious requiring that in 2040 no more than 5% of households are fuel poor, no more than 1% are in extreme fuel poverty and the fuel poverty gap is no more than £250 (in 2015 prices)^[1]. It is therefore imperative that, as we take action to cut emissions from Scotland’s homes, we do so in a way that supports and enables the eradication of fuel poverty. Later this year we will build on the actions already set out in our draft Fuel Poverty Strategy with the publication of a final Fuel Poverty Strategy setting out how we will eradicate fuel poverty, including action across all four drivers – income (earnings and benefits), energy costs, poor energy efficiency, and how energy is used in the home.

For the majority of us, fossil fuels that contribute to climate change, such as mains gas and heating oil are the main source of heating. Today 45% of Scotland’s homes have a good level of energy performance, equivalent to EPC Energy Efficiency Rating C^[i]. It is estimated almost three in four of all non-domestic properties have a current EPC of E or worse with only 5% EPC B or better.^[ii] To meet our net zero targets we must reduce and ultimately remove emissions from heating our buildings and upgrade our homes and workplaces to make them more energy efficient, comfortable and affordable to heat.

Achieving our goals will require major changes in our physical infrastructure, including energy networks and generation. Over the course of the next Parliament, the Scottish Government will invest almost £1.6 billion of capital funding in heat and energy efficiency to underpin and help secure the accelerated rollout of both energy efficiency and zero emissions heat measures. A substantial proportion of this investment will be targeted at supporting those least able to pay for the transition, including those in fuel poverty.

Additional private investment will be required to secure delivery over the longer term and will require innovative approaches to securing the necessary investment, which cannot be met by public funding alone. This draft Strategy considers the funding and finance routes already available and where further work is needed – with a new Green Heat Finance Taskforce to support this. In preparing this draft Strategy and our Route Map for delivery, we have drawn on the work of the Infrastructure Commission for Scotland which recognised the importance of a system-wide approach to identifying the phasing of infrastructure investments, and incentive support mechanisms, to accelerate the pace and scale of decarbonisation.

Transforming Scotland’s building stock will create numerous opportunities for investment, regeneration as well as the realisation of wider social, environmental and health outcomes. As we accelerate our efforts to make our homes and non-domestic properties warmer, greener and more energy efficient we must lock-in and secure a wider set of outcomes that will benefit Scotland’s people and places. These ‘heat in buildings’ outcomes (see following page), aligned with our National Performance Framework, will guide our decision making and support the development of a holistic, people centred approach to the transition ahead.

This Strategy will guide our decision-making and support the scaling up and acceleration of action to retrofit our homes and non-domestic properties over the course of this decade. Delivery of the Strategy will require collaboration with a wide range of stakeholders, from SMEs and community groups to local authorities and network companies.

It focuses on the near-term actions over the first half of this decade that will set us on a path consistent with our statutory climate change and fuel poverty targets. To prepare for further accelerated action beyond 2025 and to ensure decisions are fully evidenced, we will continue to build the evidence base to reduce uncertainties on the right pathway to a net zero future for Scotland’s buildings.

This draft Strategy is aligned with wider policy development within the Scottish Government in Housing, Energy, and Climate Change. The actions it sets out will be reflected in our Housing to 2040 Strategy, which will also present further details on how our housing can support achievement of our net zero ambitions, whilst also delivering against wider objectives. Transforming our homes and buildings will also have an impact on our wider energy systems and this will be happening at the same time as action in other sectors to reduce emissions. We will update the Scottish Energy Strategy this year, taking into account the whole system issues raised by this draft Heat in Buildings Strategy and our wider net zero climate targets.

Outcomes

National Performanance Framework

Economy

We have a globally competittive, entrepreneurial, inclusive and sustainable economy

Environment

We value, enjoy, protect and enhance our environment

Poverty

We tackle poverty by sharing opportunities, wealth amd power more equally

Health

We are healthy and active

Fair work and business

We have thriving and innovative businesses, with quality jobs and fair work for everyone

Communities

We live in communities that are inclusive, empowered, resilient and safe

Heat in Buildings Strategy

The cost of heating our homes and businesses is affordable and those occupying them have a high comfort level.

We have reduced our demand for heat and poor energy efficiency is no longer a driver of fule poverty.

The systems we use are smart and resilient and provide us with a relaible source of heat.

We have a secure supply chain with high value, local, sustainable jobs across Scotland and people have been helped to transition to new, secure jobs as part of a just transition.

Our indoor and outdoor spaces are filled with cleaner air.

Our heating systems enable and efficiently use Scotland's renewable energy sources.

Electricity and non-electricity fuels are produced from sustainable sources in a way which consistent with net zero emissions and biodiversity targets.

Our heating systems enable the flexible and stable operation of our energy networks.

This Strategy is a draft for consultation. You will find consultation questions at key points throughout this document requesting feedback on different elements of the draft Strategy, and summarised in Annex B. We invite you to respond to these questions by 30th April 2021. Information on how to respond to this consultation is provided in Annex F. We will use the consultation responses we receive to further develop the Strategy before a final version is published later in 2021.

The Strategy is structured as follows and poses questions focused on:

• A 2045 Pathway for Scotland’s Homes and Buildings – the trajectory we must take to meet our net zero ambitions, including consultation on a new low and zero greenhouse gas emissions heat target
• People – taking the people of Scotland with us, and ensuring that we address fuel poverty and that the most vulnerable in society are protected as heating systems are replaced
• Place – ensuring our actions are tailored to Scotland’s communities, resources, built environment and designated places
• Preparing our Energy Networks – ensuring our energy networks are robust and fit for the future
• Kick-starting Investment in the Transition – how we will invest to stimulate the transition
• Working Towards a Long-Term Market Framework – taking action to ensure that the heat transition can be enabled by a stable, long term market framework
• Developing a Regulatory Framework for Zero Emissions Buildings – to underpin our delivery and provide certainty
• The Economic Opportunity – growing our supply chain to meet the rising demand, and ensuring that Scotland maximises the economic benefits of the transition
• Working with the UK Government – agreeing the steps the UK Government must take to ensure and enable delivery
• Monitoring, Evaluation and Future Decision Making – monitoring our progress

We recognise that the costs and opportunities of this will fall differently on different groups of people. Therefore, a Business and Regulatory Impact Assessment (BRIA) is being undertaken to support the development of this Strategy. This will support the identification of action which minimises and balances cost and burdens across consumers, businesses and the third sector. A draft BRIA will be published during the consultation phase of this draft Strategy and finalised alongside the final version of the Strategy.

As we deliver the policies set out in the draft Strategy, we will give due regard to equalities, and shall not unfairly discriminate based on any protected characteristics, or particular challenges faced as a result of geography or connectivity (such as on islands), and we will encourage improved access to decarbonisation. An Equality Impact Assessment, Islands Impact Assessment, and Fairer Scotland Impact Assessment are being undertaken in conjunction with this draft Strategy and the requirement for a Child Rights and Wellbeing Impact Assessment will also be determined through our stakeholder engagement on this draft Strategy.

These assessments form a critical part of our ability to predict and therefore mitigate negative impacts on different groups in society. Combined with our commitment to enhance our evidence-base on the interactions between fuel poverty and heat decarbonisation, these impact assessments will provide a strong foundation on which to build our policies, future regulation and programmes. Completed Impact Assessments will be published alongside the final version of this Strategy.

A Strategic Environmental Assessment has also been undertaken to identify where the policies and proposals set out in this draft Strategy may have significant – positive or negative - environmental effects. The Environmental Report will be published during the consultation phase of the draft Strategy and seeks views on the possible significant environmental effects, as well as on the actions identified to mitigate any adverse effects or to enhance and maximise positive impacts. Consultation questions have been included within the Environmental Report to help shape respondents' views on the Strategic Environmental Assessment.

We are undertaking an Islands Impact Assessment as part of the finalisation of this Strategy. We know that our island communities face unique challenges, including energy and supply chain constraints and costs. In addition, a number of our island communities are not connected to mainland energy grids and face unique challenges in their efforts to reduce emissions. We will also publish an Islands Energy Strategy in 2021 with a focus on resilience and sustainability of island energy systems for the future, and on supporting islands’ transition to net zero emissions. As we develop and deliver this Strategy, we will ensure that we appropriately consider the challenges facing our island communities and how they can be reflected in the delivery programmes we take forward to support the heat transition.