Heat in buildings strategy - achieving net zero emissions: consultation

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

To meet our net zero target, by 2045 all homes and buildings in Scotland must have significantly reduced their energy use, and almost all buildings must be using a zero emissions heating system. As set out in the Climate Change Plan Update^[iii], emissions for homes and non-domestic buildings combined will have to fall by 68% by 2030 as compared to 2020.

Today there are around 2.5 million occupied dwellings in Scotland and we expect the vast majority of them still to be occupied in 2045^[iv]. They account for 15% of Scotland’s total greenhouse gas emissions^[v].

The vast majority of our homes use mains gas as their primary heating fuel (approx. 2 million). Over 450,000 homes do not use gas as their primary heating fuel. Just over half of homes not using mains gas use electric heating, such as traditional storage heaters, with around 170,000 using high emission fuels such as heating oil, LPG or high carbon solid mineral fuels such as coal^[vi].

Only around 11% (approx. 278,000) of households have a renewable or very low emissions heating system, such as a heat pump, biomass boiler or electric storage heating^[viii]. This does not include those currently connected to a heat network, as these are predominately fuelled by gas. An estimated 34,000 homes are connected to heat networks^[ix].

The energy efficiency of Scotland’s homes is improving. Since 2010, the share of the most energy efficient dwellings (rated EPC C or better) has increased by 27 percentage points^[x]. In 2019, 45% of Scotland’s homes were rated EPC C or better, with social housing generally more energy efficient (56% EPC C or better) than the private sector (41%)^[xi].

There are approximately 220,000 non-domestic buildings in Scotland^[xiii], including around 23,000 buildings in public ownership^[xiv]. They account for 6% of Scotland’s total greenhouse gas emissions^[xv]. Our non-domestic properties are hugely diverse and analysis of energy efficiency levels shows that almost three in four of all non-domestic premises have a current EPC of E or worse with only 5 percent EPC B or better^[xvi].

Energy efficiency of Scotland’s non domestic properties by EPC rating (source^[xvii] Scotland’s Non Domestic Energy Efficiency Baseline, 2018)

We know that over half of our non-domestic properties are already heated using low or zero emissions sources, but also that they vary significantly in floor area and energy use and some of the largest non-domestic buildings are more likely to have gas heating systems^[xviii]. For non-domestic buildings not using gas heating, electric heating, Heating Ventilation and Air Conditioning (HVAC) systems are a common alternative, as are oil systems.

The Journey to Net Zero

Scale of the Challenge

By 2045, emissions of greenhouse gases from heating our homes and buildings will have all but disappeared, with demand for energy reduced and space and water heating provided by zero emissions alternatives.

It is essential that homes and buildings achieve a good standard of energy efficiency, and that poor energy efficiency is removed as a driver of fuel poverty. We want our homes to be as energy efficient as possible, meeting a minimum standard equivalent to EPC C at least, where technically feasible and cost-effective, by 2035.

There will be some circumstances where this is not possible. In such cases, we would expect these properties to achieve the highest standard possible, installing those measures recommended by the EPC assessment as being technically feasible and cost-effective for that building.

Energy Performance Rating – Aligning with Net Zero

To ensure that the energy performance rating included on Energy Performance Certificates (EPCs) aligns with our net zero objectives we will reform the EPC assessment process before using it as the standard by which properties will be measured. Through this reform we are proposing to revise the metrics which underpin the EPC, so that they provide information to building owners on measures needed to improve energy efficiency, an appropriate zero emissions heating supply, and the cost of heating following these improvements. We also want these reforms to remove anomalies within the current metrics (as advised by the CCC^[xix]), which at present in some circumstances can disincentivise installation of zero emissions heating systems (see Chapter 8 on Regulation for more details of our revised approach).

Improving the energy performance of buildings is essential to unlock the rollout of zero emissions heating. Energy efficiency measures alone will not reduce emissions enough to meet our emission reduction targets, but they are a critical precursor to deployment of many zero emissions systems and are vital to supporting households and businesses to reduce their energy costs today. Energy efficiency remains at the core of our heat in buildings policies and programmes, and a fabric first approach continues to be the mainstay all our fuel poverty interventions.

In order to meet our interim climate targets and ensure long-term delivery of our net zero objectives, by 2030 around 50% of homes , or over a million households, will need to convert to a zero or low emissions heating system. Reducing emissions from homes will mean converting the vast majority of the 167,000 off-gas homes that currently use high emissions oil, LPG, and solid fuels, as well as at least 1 million homes currently using mains gas, to zero emissions heating. By 2030, we will also need to convert an estimated 50,000 of Scotland’s non-domestic properties to zero emissions sources of heat^[2].

To meet the ambition for energy efficiency and zero emissions heat deployment set out above, we need to quickly ramp up the number of installations of low and zero emissions heating systems being installed per annum. Currently around 3,000 renewable heating systems^[xx] are installed in Scotland’s homes per year. As set out in the Programme for Government, our ambition is - as a minimum - to see the rate of low and zero emissions heat installations in new and existing homes and buildings double every year from the current baseline to at least 64,000 homes fitted in 2025, with the installation rate expected to peak at over 200,000 new systems per annum in the late-2020s.

While new buildings represent only a small part of the decarbonisation challenge, we cannot add any new emissions because of the rapid decarbonisation efforts needed to reach net zero. We will require new buildings, starting with new homes consented from 2024, to use zero direct emissions heating, and also feature high levels of fabric energy efficiency to reduce overall heat demand so that they do not need to be retrofitted in the future.

Low and Zero Emissions Heating Systems

In this draft Strategy by low and zero emissions heating systems we currently mean systems that have zero direct greenhouse gas emissions such as individual electric heat pumps and connection to heat networks, or electric systems such as storage heaters, and systems that have very low emissions such as those that use hydrogen^[3].

Buildings connected to existing heat networks, powered using natural gas, will be considered to be future proofed and net zero ready. However, these heat networks will need to decarbonise by 2040-45 and new heat networks consented from 2023 will need to use heat from low or zero emissions sources, such as surplus or waste heat, or be powered using low carbon or green hydrogen, including via the latest "fifth generation" heat networks. Bioenergy, for example in the form of biomass, bio-heating oil, bio-propane, where they come from net zero compatible and sustainable sources, are included as low emissions systems, but likely to have a more limited role. This list of low and zero emissions heating systems will be kept under review.

We will also need to see increased use of biomethane, low carbon and green hydrogen in the mains gas network in order to reduce the emissions intensity of the gas network by 2030. By 2030, we would like at least 20% of the volume of the gas in the gas grid to be green gas. To ensure compatibility with our net zero targets and wider sustainability objectives, it will be important that biomethane is sourced from sustainable and net zero sources. Similarly, hydrogen will need to come from low carbon or renewable sources and be compatible with longer term plans for the gas network.

Questions

1. To what extent do you support the pathway set out for achieving the 2045 net zero target and the interim 2030 target?

2. What are your views on any risks of unintended consequences from this pathway?

The Journey to Net Zero

New regulatory regime for heat networks must have low or zero emissions

2023

Local Heat and Energy Efficiency Strategies in place for all local authority areas

all new homes consented have zero direct emissions heating and are highly energy efficient

2024

Support for high emissions heating systems is phased out from our delivery programmes where it is not detrimental to our fuel poverty objectives

legislation and standards for zero emissions heating and energy efficiency in existing buildings to be introduced (where it is within our legal competance)

2023 - 2025

Zero emissions heating systems account for at least 50% of replacement installations each year

2025

UK Government has made decisions on the gas network to enable planning for delivery beyond 2030

2028

Private rented sector properties achieve an equivalent of EPC C

No more than 15% of households in Scotland are in fuel poverty and no more than 5% of households in Scotland are in extreme fuel poverty

Heating systems in the vast majority of domestic and non-domestic properties off the mains gas grid are zero emissions

2030

Over a million homes and around 50,000 non-domestic properties have converted to zero or low emissions heating

At least 20% of the volume of the gas in the gas grid is green gas

Households in fuel poverty have achieved a level of energy efficiency equivalent to EPC C

All homes meet a minimum standard equivalent to EPC band C at least, where technically feasible and cost-effective¹

2035

Poor energy efficiency has been removed as a driver of fuel poverty, with no more than 10% of households in fuel poverty and no more than 3% in extreme fuel poverty²

As a far as reasonably possible no household in Scotland is in fuel poverty

2040

Scotland's emissions have reduced by 90%

2040

Emissions from heating our homes and buildings will have all but disappeared, with demand for energy reduced and space and water heating provided by zero emissions alternatives

2040 - 2045 Existing heat networks are supplied by low and zero emissions sources

2045

Scotland's emissions are net zero

1 where for homes it will not be technically feasible or cost-effective to meet a standard equivalent to EPC band C. In such cases, we would expect these properties to achieve the highest standard possible, installing those measure recommended by the EPC assessment as being technically feasibly and cost-effective for that building.

2 and, in any event, no more than 5% of households in Scotland are in fuel poverty and no more than 1% of households in Scotland are in extreme fuel poverty, and the median poverty gap is no more than £250 adjusted for 2015 prices.

Strategic Technologies to 2030

Recent research for the Scottish Government found that there are low and zero emissions heating options available for all domestic dwellings^[xxi] and, in order to make progress now against our net zero ambitions we must begin accelerating and scaling up the deployment of already tried and tested measures such as energy efficiency, and primary heating system technologies where they are known to be no or low regrets. Therefore, over the next decade we propose the following no and low regrets strategic technologies:

No and Low Regrets Strategic Technologies

We will continue to prioritise action on energy efficiency. To deliver regulations to support the installation of cost-effective ‘energy efficiency first’ improvements in all buildings (e.g. roof, windows, wall and floor insulation); both the retrofit of existing buildings and increased energy performance of new buildings.

Deployment of individual building heat pumps in buildings off the gas network which currently use high carbon heating fuels;

Deployment of heat pumps in certain buildings currently using mains gas particularly in areas least likely to receive a mains hydrogen supply in the future and buildings for which initial assessments suggest heat pumps are likely to be cost effective in the short-term.

The development of low and zero emissions heat networks (district heating and communal heating systems) in areas deemed suitable.

These are the technological solutions where cost uncertainty is low and we already understand (a) the costs of installation and (b) running costs for consumers. A focus on no and low-regrets interventions will also help to tackle poverty by improving energy performance and bring significant wider benefits. Other technologies are likely only to become available at scale in the longer term, or will have a more limited role in decarbonising our buildings.

Subject to the safety and commercial case being established we expect to see increased blending of hydrogen with natural gas into the mains gas network and may also see 100% hydrogen becoming available in parts of the gas network towards the end of the decade. Blended into the gas network, hydrogen helps to reduce emissions if produced from low carbon or green sources. 100% hydrogen may be particularly appropriate in certain locations, where there is local supply (for example from abundant renewable electricity) or where industrial demand creates economies of scale. Increased availability of hydrogen for heat will have implications for the suitability of hybrid heat pump systems, which may be cost-effective solutions in conjunction with hydrogen, and we will keep this under review.

However, constraints in the near-term availability of hydrogen, coupled with a need to establish the standards and safe systems for its use, repurpose the gas network and replace household appliances, means that decarbonised gas is unlikely to play a large part in reducing emissions before 2030.

We agree with the UK Committee on Climate Change’s recommendation that bioenergy resources should only be used where their carbon reduction impact is maximised or where alternative options are not available. Bioenergy, for example in the form of biomass, bio-heating oil, bio-propane (a replacement for LPG) might still have a small role for home heating if displacing fossil fuels in off-gas-grid areas, or where electric heating or heat pumps are unsuitable. Biomethane injection into the gas grid will also play a role. We will publish a Bioenergy Update in the first quarter of 2021 and will establish an Expert Working Group to consider and identify the most appropriate and sustainable use of bioenergy resources within Scotland. This will inform a Bioenergy Action Plan which we will publish in 2023.

Hybrid systems combine two or more heating technologies, often a heat pump and a boiler, ideally both of which should have zero emissions in the long run. Hybrids may afford system-level flexibility advantages and lower building-level costs in certain circumstances. At present, however, uncertainties in the scale and distribution of these potential advantages, as well as the need for further evidence on the availability and role of decarbonised fuels for heating, mean it is too early to prioritise deployment of hybrids. We will keep this position under active review as the evidence base develops.

Other technologies such as deep geothermal are less well developed in Scotland but could have a role to play in particular communities and areas in Scotland. We will continue to explore the potential for such solutions. Solar thermal technologies tend to be most appropriate as a complement to a primary zero emissions heating technology such as a heat pump. Solar thermal is discussed below.

Analysis undertaken for non-domestic buildings in Scotland, to be published in Spring 2021, shows that low and 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.

Overall, we recognise some properties may be more constrained in terms of technology options available, limited by location and property type, proximity to the gas network, impact on the fabric of historic buildings, space constraints, and capacity of the electricity grid.

Scotland has a high proportion of traditional buildings, with around a fifth of Scotland’s homes built before 1919.^[xxii] Scotland has over 650 designated conservation areas and around 47,000 listed buildings.^[xxiii] Around 10% of the Scottish housing stock is listed or located in conservation areas^[xxiv].

We are undertaking further research to consolidate evidence on heat pump performance in situ across Scotland where data exists. This will consider how performance can be maximised in the Scottish climate, identify best practice and areas where further innovation and development may be required to address constraints. 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.

For traditional and heritage buildings, we recognise that more bespoke technological approaches, including skilled design and construction, may be required. We will work with stakeholders, including Historic Environment Scotland, to develop more solutions to transition Scotland’s historic buildings to zero emissions heating while respecting and preserving the special characteristics of our buildings and places, and where needed continue to build our evidence base and the guidance available for the heat transition in these buildings and areas, including in our approach to regulation (see Chapter 8).

To ensure that we tailor forthcoming policies and support to our diverse non-domestic building stock we are taking action to further improve the evidence base including work to develop a database of the non-domestic buildings stock in Scotland.

We know that a minimum level of energy efficiency is an important prerequisite and is needed to underpin the rollout of zero emissions heating across all technology scenarios. To better understand the role of energy efficiency levels in unlocking the deployment of zero emissions heating systems in different types of building stock, we will undertake further modelling and analysis which will inform future delivery and regulatory programmes. This will be underpinned by reforms to Energy Performance Certificates, and their underpinning methodologies, taking into account our fuel poverty and climate objective, as set out in Chapter 8. We will consult on this by Summer 2021.

As outlined above there are a range of technology solutions to reducing emissions from our homes and buildings. A number of factors will affect which buildings would be most suitable for any given technology, including the building’s characteristics and the local network infrastructure that it has or will have available (electricity, gas and heat) as well as the likelihood that an area may have access to low carbon or green hydrogen in the future. As such it will be important that this transition happens in a planned way, guided by Local Heat & Energy Efficiency Strategies, as set out in Chapter 4.

Cooling

Some buildings also require energy for cooling. At present, this is more relevant for non-domestic properties, such as hospitals, larger open plan offices, hotels and retail units. As our climate changes we are likely to experience increased temperatures, with warmer winters and hotter summers becoming more common. As a result, we are likely to see an increased demand for cooling in the future. We recognise that it will be important to understand the need for, and role of, zero emissions technologies that can also provide cooling, such as reversible heat pumps. By 2023, we will take forward research to look at cooling needs of our building stock to inform future policy development in this area.

Cooking

Many buildings use the same fuel for heating and cooking, particularly natural gas. When buildings switch away from using fossil fuel boilers, decisions on cooking appliances may also need to be made. As we accelerate deployment of strategic heating technologies, we will ensure our programmes support households and non-domestic building users to also transition to new cooking appliances, where appropriate.

Secondary technologies

There are also secondary technologies that can work well in conjunction with a primary zero emissions heating system to increase operational effectiveness in certain scenarios. These include solar thermal, micro wind and photovoltaic (PV) generation as well as a variety of storage technologies such as electric batteries, thermal water stores or, more recently developed technology such as heat batteries. Solar thermal can supplement hot water supply during summer months whilst technologies such as micro wind or solar photovoltaic panels can contribute towards electrical requirements for zero emissions heating.

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 and potential to provide a cost-effective option for reducing end user bills.

Thermal storage

For many zero emission heating systems thermal storage is required to ensure efficient operation, particularly in terms of hot water supply. Heating system thermal storage typically comes in two forms, hot water storage tanks of various sizes or newer more compact heat batteries which occupy less space and may be suitable where space is limited. Thermal storage can allow for multiple heat inputs from a range of zero emissions technologies, help consumers access cheaper off-peak tariffs and maximise the impact of on-site generation.

The popularity of combi-boilers that provide instantaneous hot water has led to the removal of thermal storage in many homes and buildings. Retrofitting thermal storage is likely to be challenging as the space once occupied has now often been repurposed. More compact heat batteries have real potential to support retrofit thermal storage.

Thermal storage is also likely to have an important role in the operation of heat networks, helping to optimise operation and potentially reduce running costs.

Overall, be it thermal storage in individual properties or larger scale thermal storage connected to a heat network, thermal storage systems can enable the decoupling of heat production and heat use. They can support the flexible operation of smart energy networks and can help to maximise benefits, including helping to reduce the need for electricity network upgrades (see Chapter 5) with potential to reduce bills.

Strategic Technologies and the Scottish Building Stock

Summary of Further Research

• 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.

Questions

3. What are your views on our assessment of strategic technologies in low and no regrets areas to 2030?

4. What are your views on any risks of unintended consequences from this pathway?

New Heat Target

To help monitor and track our progress we are proposing to set a new Heat Target in the final version of this Strategy. We have included consultation questions below to gain input as to how that target should be framed and what it should encompass to help provide the certainty needed to individuals, businesses and communities and the wider supply chain.

A new target must support delivery of the deployment pathway for reducing emissions in buildings as set out above and in the update to the Climate Change Plan. It must also drive emissions reductions commensurate with our net zero and interim climate change targets.

We are proposing that a new target should be focused on heat in buildings, and should no longer include industrial process heat. This focus will enable a new target to better measure and track low and zero emissions heat deployment and reduced demand for heat through improved energy efficiency in buildings, and recognises that industrial decarbonisation is a largely distinct process.

A new target must also be compatible with our statutory fuel poverty targets, including the interim fuel poverty targets. We are seeking views on how a heat target could be designed that does this. We want to ensure that delivery against a new target is achieved in a way that neither exacerbates existing fuel poverty rates nor pushes more people into fuel poverty.

A target could be designed as a roll-over of the existing target, which measures renewable heat. Other options include setting a target based on the proportion of heat demand delivered by low and zero greenhouse gas emissions technologies. This would have the benefit of including electrically powered systems and low carbon and green hydrogen, which are not zero emissions today but which will be a vital part of reducing emissions from buildings to zero by 2045. A further option would be to focus the target on deployment rates for particular technologies, or on numbers of high emissions heating systems that need to be replaced.

As set out in Chapter 5, we will also set a new ambition for heat network deployment in the final version of this Strategy, taking into account the findings of the National Comprehensive Assessment (NCA) of the potential for heat networks, which will publish later in 2021. We will keep this ambition for heat networks under review and update it once the first round of heat network zoning has taken place at the end of 2023.

Our previous heat target, set out in the Renewable Heat Target and Action Plan^[xxv], was expressed in terms of total non-electrical heat demand met by renewable heat. Whichever new target is set in the final Strategy, we will continue to measure progress using this existing metric, for comparability.

We will continue to report on progress towards targets in an annual renewable and low GHG emissions heat target report.

Questions

5. What function should a new heat target serve?

6. How do you think a new heat target should account for the need to deliver against our statutory fuel poverty targets?

7. Do you agree that a new heat target should apply to heat in buildings, distinct from industrial heat?

8. What form should a new heat target take and why?

9. At what level should the target(s) be set and for what date?