Heat in Buildings Strategy - achieving net zero emissions in Scotland's buildings

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 must be using a zero emissions heating system. As set out in the Climate Change Plan Update^[ix], 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^[x]. They account for 13% of Scotland’s total greenhouse gas emissions^[xi] and account for around 30% of Scotland’s total energy consumptions (44 TWh).

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 and of these, just over 260,000 use electric heating, such as storage heaters, with around 170,000 using high emission fuels including heating oil, LPG or high carbon solid mineral fuels such as coal^[xii].

Only around 11% of households (approx. 278,000) have a renewable or very low emissions heating system, such as a heat pump, biomass boiler or electric storage heating^[xiii]. 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^[xiv].

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^[xv]. 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%)^[xvi].

There are approximately 220,000 non-domestic buildings in Scotland^[xvii], including around 23,000 buildings in public ownership^[xviii] and 12% percent of Scotland’s final energy consumption (17 TWh). They account for 7% of Scotland’s total greenhouse gas emissions^[xix]. 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^[xx]. However Scottish non-domestic EPCs are derived on a different basis to domestic EPCs (and English non-domestic EPCs), and so are not comparable. These statistics serve mainly to underline that a large number of Scottish non-domestic buildings are heavy users of energy – the metric is not a reliable indicator of fabric energy efficiency.

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^[xxi]. For non-domestic buildings not using gas heating, electric heating (either direct or through Heating Ventilation and Air Conditioning (HVAC) systems) and oil are common alternatives.

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. Where technically and legally feasible and cost-effective, by 2030 a large majority of buildings should achieve a good level of energy efficiency, which for homes is at least equivalent to an EPC Band C, with all homes meeting at least this standard by 2033.

There will be some circumstances where this is not possible.^[2] 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.

Our consultation on a revised metric to be included on the EPC^[xxii] considers how best to 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^[xxiii]), 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 of 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 the vast majority of the 170,000 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, must convert to zero emissions heating. By 2030, we will also need to convert the equivalent of 50,000 of Scotland’s non-domestic properties^[3]. In energy terms, we will need to reduce fossil fuel consumption for heat in buildings by at least an estimated 28 TWh, of which at least 21 TWh will be natural gas^[4].

Respondents to the consultation expressed support for the use of these 2030 milestones, which were seen to reflect the scale of the challenge and will support progress monitoring.

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. Recent years have seen around 3,000 renewable heating systems installed in Scotland’s homes annually. As set out in the 2021 Programme for Government, to maintain progress towards our statutory emission reduction targets, zero emissions heat installations must scale up to provide a total of at least 124,000 systems installed between 2021 and 2026. The installation rate will need to peak at over 200,000 new systems per annum in the late-2020s – which is above the natural replacement rate for boilers.

While new buildings represent only a small part of the decarbonisation challenge, it is important to ensure that they do not add any new emissions (because of the rapid decarbonisation efforts needed to reach net zero).

We will require new buildings to use zero direct emissions heating, and also to feature high levels of fabric energy efficiency to reduce overall heat demand so that they do not need to be retrofitted in the future. This requirement will apply from 2024 for building warrant applications for new homes.

Low and Zero Emissions Heating Systems

In this Strategy, by “low and zero emissions heating systems” we 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.^[5]

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, once the consenting regime is in place, new heat networks will need to use heat from low or zero emissions sources, such as surplus or waste heat or heat pumps, or be powered using 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 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 also need to see increased use of biomethane and hydrogen in the mains gas network in order to reduce the emissions intensity of the gas network. Whilst the long-term future of gas remains uncertain, emissions reductions can be achieved today with gas blending. By 2030, we would like at least 20% of the volume of the gas in the GB gas grid to be alternatives to natural gas. Delivering blended gas to customers in Scotland will directly support decarbonisation of both heat and industrial demand still supplied by the gas network in Scotland in 2030. In line with our Hydrogen Policy Statement and forthcoming Hydrogen Action Plan, blending across the GB network will provide significant opportunities for Scotland’s hydrogen sector to support decarbonisation across the UK. 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.

The UK Government is launching the Green Gas Support Scheme this autumn, supporting biomethane injection into the gas grid. Similarly, as hydrogen becomes available, it will need to come from low carbon or renewable sources and be compatible with longer term plans for the gas network.

Strategic Technologies to 2030

Research^[xxiv] for the Scottish Government found that there are low and zero emissions heating options available for all domestic dwellings. 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 coming years we propose a focus on the no and low-regrets strategic technologies on the following page:

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

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. They are no and low-regrets as, across all plausible pathways to net zero, they are likely the most cost effective zero emissions options in the buildings identified. A focus on no and low-regrets interventions, deployed according to the guiding principles set out in chapter 3, will also help to tackle poverty by improving energy performance.

We welcome the broad support expressed in the consultation for the strategic technologies set out in this Strategy, prioritising deployment of energy efficiency, heat pumps and heat networks.

We have commissioned further research to consolidate the evidence on heat pump performance in Scotland, which we are publishing alongside this Strategy. The review found no evidence to suggest that heat pumps could not operate effectively in Scotland. The review also found that correct specification and sizing of heat pumps and heat emitters are critical determinants of heat pump performance.

Subject to the safety and commercial case being established we expect to see blending of hydrogen with natural gas develop across all areas of the GB gas network and may also see the conversion of parts of that network to deliver 100% hydrogen towards the end of the decade.

Blending hydrogen into the gas network can help to reduce emissions from buildings heated from the gas network. We want to see as much renewable hydrogen in the energy system as quickly as possible. Hydrogen blending can make good practical use of the existing gas grid infrastructure to support the expansion of a national market for hydrogen which can be supplied by Scotland’s developing hydrogen sector, helping to support a key sector for our wider net zero energy transition. However, blending of hydrogen will, on its own, only deliver small emissions savings and it is also important that we consider the potential for conversion and repurposing of parts of the network to 100% hydrogen. In the short term this means understanding which actions can ensure this option remains open for Scotland. This 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. For example, SGN have been exploring the potential for 100% conversion or repurposing of large parts of their network. Increased availability of hydrogen for heat will have positive 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, under any scenario, decarbonised gas is unlikely to play a large part in reducing emissions before the late 2020s. We will set out more detail on the pathways to decarbonised gas and options for hydrogen for heat in our Energy Strategy and Just Transition Plan.

We agree with the UK Committee on Climate Change’s recommendation that bioenergy resources should only be used in those applications across the economy where their carbon reduction impact is maximised or where alternative options are not available. There may be a small number of buildings for which bioenergy, for example in the form of biomass, bio-heating oil, or bio-propane (a replacement for LPG) may play a role for home heating if displacing fossil fuels in off-gas-grid areas where electric heating or heat pumps are unsuitable. Biomethane injection into the gas grid will also play a role. As set out in the Bioenergy Update^[xxv] in March 2021, we have established an internal Bioenergy Working Group, and will set up an Expert Panel to support this 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, both of which need eventually to have zero emissions to meet our emissions targets. 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 continue to 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. 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.

Initial analysis indicates 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.

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.

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’s traditional buildings

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

For traditional and heritage buildings, we recognise that bespoke approaches, including skilled design and construction, may be required. We are working 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).

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 are undertaking further modelling and analysis which will inform future delivery and regulatory programmes. This will be underpinned by reforms to Energy Performance Certificates, and the wider EPC assessment framework, taking into account our fuel poverty and climate objectives, as set out in Chapter 8.

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 passive measures, such as ventilation and shading, that could be applied to buildings during the course of improving their fabric efficiency. It will also be important to understand the need for, and role of, zero emissions heat systems that are capable of also providing cooling, such as reversible heat pumps.

We have been working with BEIS to look at cooling needs of our building stock, and this will 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

A range of secondary technologies 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) electricity 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 solar photovoltaic panels can contribute towards electrical requirements for zero emissions heating.

We are undertaking analysis to better understand the extent to which building-level storage technologies (including heat batteries, electric batteries and thermal storage cylinders) could help to support the widespread deployment of zero emissions heating in domestic properties by reducing household energy costs when installed alongside zero emissions heat systems.

Thermal storage

For many zero emission heating systems thermal storage is required to ensure efficient operation, particularly for hot water supply. Heating system thermal storage typically comes in two forms: hot water storage tanks of various sizes; and newer more compact heat batteries that may be particularly 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. This can be either thermal storage in individual buildings or larger scale installations integrated with the heat production associated with networks.

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.

Heat in Buildings Research Programme

1. We are undertaking analysis to better understand the extent to which building-level storage technologies (including heat batteries, electric batteries and thermal storage cylinders) could help to support the widespread deployment of zero emissions heating in domestic properties by reducing household energy costs when installed alongside zero emissions heat systems.

2. We will publish a review of evidence on heat pumps in Scotland alongside this Strategy. The review found no evidence to suggest that heat pumps could not operate effectively in Scotland, but also found that correct specification and sizing of heat pumps and heat emitters are critical determinants of heat pump performance.

3. We will further improve the non-domestic buildings evidence base, including work to develop a database of this part of the building stock in Scotland.

4. We are undertaking further modelling and analysis 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.

5. We are keeping the role of hybrid systems under active review as the evidence base develops.

6. We have been working with BEIS to understand the cooling needs of our building stock, and this will inform future policy development in this area.

Our emissions reduction target: 68% greenhouse gas emissions reduction for buildings by 2030 against 2020 levels

Consultation responses to the draft of this Strategy offered a range of views on the function a new heat target should serve. These included ensuring progress in delivering emissions reductions, and articulating the heat transition in meaningful terms. Comments also drew out a tension between the role of targets for specific measures in providing certainty to industry, set against the risk that such targets could constrain flexibility.

The buildings emissions envelope set out in the Climate Change Plan update^[xxix] is the target for emissions reduction we must deliver: 68% reduction in emissions by 2030 against a 2020 baseline. This target reflects directly the contribution buildings must make to meet our economy wide climate change targets.

As set out above, realising the 2030 emissions envelope will require both energy efficiency upgrades and deployment of zero emissions heating across a large number of buildings. Our monitoring and evaluation process will report progress against these outcomes, affording more concrete insight into our progress through the heat transition.

The Heat Networks (Scotland) Act has set new statutory targets for heat supplied by heat networks. As set out in Chapter 5, these require the combined supply of thermal energy by heat networks to reach 2.6 TWh of output by 2027 and 6 TWh of output by 2030.

Responses to the consultation also expressed support for technology-specific milestones to give certainty to specific industries beyond the targets above. We recognise the value in technology specific milestones, but to be effective in mobilising investment along supply chains these milestones need to be robust to uncertainties and to take into account a whole systems view. We will therefore continue exploring how best to set technology-specific milestones that account for the needs of industry and whole systems issues, and will consider them alongside the Energy Strategy and Just Transition Plan.

New Renewable Heat Target

To comply with statutory requirements, we are setting a new provisional renewable heat target for the proportion of non-electrical heat demand in buildings supplied by renewable sources either directly or via a heat network. These sources include ambient heat supplied by heat pumps, the renewable heat supplied by heat networks, and bioenergy. The new target is for at least 22% of non-electrical heat in buildings to be directly supplied by these sources by 2030, up from the current estimated level of 4%. As set out in the draft Strategy, the scope of this target differs from the previous target by not including industrial heat, a proposal that was generally supported by consultation respondents.

This target is provisional. We know that more than 22% of heat in buildings must be decarbonised in order to deliver our 2030 emissions reduction target. However, the amount of this heat that must be supplied by renewable sources depends on the whole systems pathway and other forms of low carbon heat provision. For this reason the provisional renewable heat target has been set as a minimum level, and will be reviewed as part of the Energy Strategy and Just Transition Plan in 2022.

Summary of heat targets

• Principal emissions reduction target: 68% reduction in emissions from buildings by 2030 against a 2020 baseline as set out in the Climate Change Plan Update.
• Heat networks target: the combined supply of thermal energy by heat networks to reach 2.6 TWh of output by 2027 and 6 TWh of output by 2030.
• New Renewable heat target (provisional): at least 22% of heat in buildings to be directly supplied from renewable sources by 2030.

Respondents to the consultation generally agreed with the draft Strategy’s intention to simultaneously deliver our climate change and fuel poverty commitments, and agreed that any new heat target should be compatible with this position. Chapter 3 sets out the principles we will adopt in our delivery programmes and policy to support those in fuel poverty through the transition.