Heat in buildings strategy: island communities impact assessment

Annex A

Summary of evidence from data gathering exercise

The cost of remoteness – reflecting higher living costs in remote rural Scotland when measuring fuel poverty^[14]

1. The Fuel Poverty (Targets, Definitions and Strategy) (Scotland Act) 2019 adopted 90% of Minimum Income Standard (MIS), excluding housing, childcare, council tax and domestic fuel costs, as the benchmark for determining whether, a household would have insufficient remaining net income, after deducting these costs and any benefits received for a care need or disability , to maintain an acceptable standard of living. The Act also provided that the remaining net income required would be adjusted in light of additional costs for households in remote rural areas, remote towns and island areas.

2. Loughborough University was commissioned to calculate these additional costs and to estimate the amount that should be added to the equivalent UK 90% of MIS in remote rural, remote small town and island areas in Scotland for fuel poverty purposes, with a distinct uplift for island areas.

3. For fuel poverty purposes, additional minimum living costs for households in remote rural Scotland typically add 15-30% to a household budget, compared to urban areas of the UK. These comparisons are on the basis of MIS with notional costs deducted for housing, council tax and water rates, fuel and childcare since these elements are not required in the fuel poverty definition.

4. Percentage additional MIS costs in remote rural Scotland, 2021 (Table 16, page 37): note only the highlighted average uplifts will be applied in the calculation of fuel poverty for 3 broad household types, but the table also shows how these averages were derived from single and couple households without children.

5. The report provides details of additional costs by category and for each of the different household types. It also summarises the percentage uplift required for remote rural, remote small town and island areas for fuel poverty purposes.

6. Significant additional costs have been identified across a range of spending categories, including food, clothing, household goods and holidays. However, most of these are relatively small compared to the dominant extra cost identified, the cost of travel.

A Minimum Income Standard for Remote Rural Scotland: A Policy Update^[15]

7. Highland and Islands Enterprise (HIE), along with Scottish Enterprise (SE) and the Rural and Islands Housing Association Forum (RIHAF), commissioned Loughborough University's Centre for Research in Social Policy to update research into a minimum income standard for remote rural Scotland. The updated report was published in 2016 and some of the key findings were:

• In 2016 it was estimated a tenth to a third more household spending was required in remote rural Scotland to a achieve a minimum acceptable standard of living, as compared to urban areas in the UK;
• The 2016 update report showed the gap between rural and urban areas had reduced slightly, from between 10% and 40%, since the previous report in 2013.
• The cost of heating in remote rural Scotland was far higher than in other parts of the UK due to restricted fuel choice (i.e. lack of access to mains gas), low thermal efficiency, climate and in some cases tariff levels. For example comparing the least extreme case in remote rural Scotland – someone living in social housing in a mainland rural town – with the equivalent in England, there is a high premium, with a single person paying £22 rather than £12 a week for domestic fuel;
• There appeared to be limited competition between energy providers, impacting tariffs. This was partly due to the incidence of metering systems, that cannot necessarily or easily be switched to another company;
• Furthermore, remote rural communities were subject to a premium related to additional distribution costs;
• The climate of remote rural Scotland adds to heating costs, particularly in the Northern Isles where wind chill and rainfall tend to be greater;
• Low-cost and standardised methods of improving energy efficiency (such as cavity wall and loft insulation) are often not appropriate for homes in remote rural Scotland e.g. because they have not been built with cavity walls and roof spaces are often part of the living area;
• Options for improving such homes (such as external wall cladding) tend to be significantly more expensive;
• Furthermore, the diversity of construction limits the potential for economies of scale, while there is often a shortage of local suppliers to complete works.

Broad Evidence Review

8. The Scottish Government commissioned an additional Broad Evidence review on implications of the strategy on inequality on domestic consumers. During the evidence review process some information relevant to this ICIA was found and a summary of these findings are as follows (these may not appear in the final report owing to the broader nature of the final research publication):

• Heating Costs
  • Rural and island households spend statistically significantly more on heating than their urban equivalents (Baker et al., 2016).
  • In a study in the Western Isles, the cost of heating was found to be significantly higher than on the UK mainland, indicating that participants paid a premium for their remoteness (Sherriff et al 2019).
  • Baker et al. (2016) report higher than average costs for households in Orkney using solid fuels as their main space heating type, and lower than average costs for those using air and air to water source heat pumps.
• Fuel Poverty
  • Between 2018 and 2019, rates of fuel poverty increased in remote rural areas (from 33% to 43%), increasing the gap when comparing overall urban (24%) to overall rural areas (29%) (Scottish House Conditions Survey 2019).
  • In the period 2017-2019 (see table below), the fuel poverty rate varied from 13% in East Renfrewshire to 40% in Na h-Eileanan Siar compared to the average in Scotland of 24%. Seven local authorities had significantly higher fuel poverty rates than the national average, these were: Na h-Eileanan Siar (40%), Highland (33%), Argyll and Bute (32%), Moray (32%), Dundee City (31%), Shetland Islands (31%) and Orkney Islands (31%). Five local authorities had significantly lower fuel poverty rates than the national average, these were: East Renfrewshire (13%), West Lothian (18%), Midlothian (19%), North Lanarkshire (20%) and City of Edinburgh (21%) (Scottish House Conditions Survey 2019).
  • In the same period (see table below), the extreme fuel poverty rate varied from 7% in East Renfrewshire to 24% in Na h-Eileanan Siar compared to the average in Scotland of 12% . Seven local authorities had significantly higher extreme fuel poverty rates than the national average, these were: Na h-Eileanan Siar (24%), Orkney Islands (22%), Shetland Islands (22%), Highland (22%), Argyll and Bute (19%), Moray (19%) and Perth and Kinross (18%). All of these local authorities also had a greater prevalence than average of lower energy efficient properties. Four local authorities had significantly lower extreme fuel poverty rates than the national average, these were: East Renfrewshire (7%), Midlothian (7%), North Lanarkshire (7%) and East Dunbartonshire (8%). Midlothian and North Lanarkshire have a higher prevalence of higher energy efficient homes compared to the national average. East Renfrewshire and East Dunbartonshire have a similar prevalence of higher energy efficient homes compared to the national average (Scottish House Conditions Survey 2019).
  • In the period 2017-2019, both the median fuel poverty gap and the median gap adjusted for 2015 prices were generally higher in island and rural local authorities:

- Households who are not income poor but do experience fuel poverty have a higher likelihood of living in rural areas, living in low energy efficiency properties and use electricity for their heating compared to fuel poor and income poor households and Scotland overall. (Scottish House Conditions Survey 2019).

- In fuel poverty study of Skye households, Baker et al. (2016) found anecdotal evidence of households self-limiting their energy use. In Orkney the found that 44% of households reported spending more than 10% of their income on their total energy costs, and 12% spending more than 20%.

• Weather climate and impact on heating regimes
  • Although research on energy use often focusses on winter as the heating season, one study that focused on households with electric heating in high-rise flats in Edinburgh exposed to severe weather conditions due to proximity to the North Sea, found that keeping warm in a cold home was a problem not just in winter but also in summer (De Haro & Koslowski, 2013). This finding may be relevant for heating requirements in island communities as they are exposed to the Atlantic Ocean and North Sea. Coping with the weather and the impact it has on rural living was mentioned in a fuel poverty study in Golspie by Baker et al. (2016).
• Energy Performance of Housing Stock
  • Island and rural local authorities generally had the highest proportion of the least energy efficient dwellings (those rated EPC F or G) on average over 2017-19 (SAP 2012, RdSAP v9.92). A total of eleven local authorities had rates above the national average (4%), with the highest being Na h-Eileanan Siar (18%), Orkney Islands (17%), Dumfries & Galloway (15%), Shetland Islands (14%). These local authorities also had the lowest proportions of properties in the highest efficiency bands. Island and rural local authorities tended to have lower than average proportions of B or C rated dwellings with Shetland Islands (8%), Na h-Eileanan Siar (9%) and Orkney Islands (15%) having the lowest.
  • In contrast for urban local authorities, Glasgow City (1%), Aberdeen City (1%), Renfrewshire (2%), South Ayrshire (2%) and Fife (3%) had the lowest average shares of F or G rated dwellings and were statistically different from the national average. Correspondingly, Glasgow City and Renfrewshire also had higher than average proportions of B or C rated dwellings. West Lothian had the highest proportion of B or C rated dwellings (61%) compared to 45% in Scotland overall (Scottish House Conditions Survey 2019).
  • - Primary heating fuel is a key determinant of the energy efficiency of the dwelling. Properties heated by mains gas have an average rating of 67.5 and 50% are in band C or better. Dwellings heated by other fuels (including electric and oil) have considerably lower ratings. The average energy efficiency rating for oil heated properties is 49.2 (making the average dwelling in this group E rated) and only 8% are in band C or better.
  • Proximity to the gas grid has a similar effect on the energy efficiency rating (average SAP rating 66.3 for dwellings near the gas grid, higher than the 58.1 for other dwellings). Rural and Island properties are less likely to be on the gas grid.
  • As dwelling characteristics associated with lower energy efficiency are disproportionately represented in rural areas, the average energy efficiency profile of rural properties is lower than that for urban: mean SAP 2012 rating is 66.7 for dwellings in urban areas, higher than the 56.2 for dwellings in rural areas.
  • 17% of rural households live in EER Band FG (Scottish House Condition Survey 2019) compared to 2% of urban households.
• Community Participation
  • A higher proportion of people who live in remote rural areas either feel 'very strongly' that they belong to their immediate neighbourhood than either people in accessible rural areas or the rest of Scotland (Scottish Household Survey 2019).
  • In rural Scotland, a higher proportion of people give up their time to help as an organiser or a volunteer than in the rest of Scotland. Around 32% compared to 25% – Scottish Household Survey 2019
  • Rates of formal volunteering increase with degree of rurality and there are higher number of registered charities per head in rural areas (cited in Markantoni & Woolvin, 2015).
• Skills and supply chain
  • As of 28 October 2021 the Scottish Government is aware of four companies based in the Highlands and Islands who are currently approved to carry out insulation work to the BSI retrofit standards.
  • These companies are certified to install insulation as per the British Standards Institution (BSI) Publically Available Specification (PAS) 2030. There are a larger number of companies accredited to BSI standards to install insulation that operate in the Highlands and Islands. For our example, our national fuel poverty scheme, Warmer Homes Scotland has 12 approved sub-contractors covering the Highlands and Islands.

Small Islands Energy System Overview^[16]

9. Highlands and Islands Enterprise commissioned research to look at the status of energy systems across 49 of the region's islands. It provides an overview of island energy generation and demand; issues relating to the islanders such as proximity to services, population, security of supply and fuel poverty; insights into the electrical infrastructure; and opportunities to address some of the challenges facing island energy systems.

10. Notable findings include:

• A large proportion of the island properties meet their heat demand via direct electric, electric storage heating or oil which pushes energy costs up.
• The additional electricity demand required for meeting heat loads, at a higher cost in the North of Scotland, than the rest of the UK, increase the likelihood of islanders experience fuel poverty.
• The building stock was found to be generally EPC D or lower, both of which suggests that energy efficiency projects would be beneficial to all island communities.
• Low and zero emission heating projects could help tackle fuel poverty, if they can be achieved at a lower unit cost of heat than the existing higher carbon options (e.g. oil).
• Energy system solutions should be tailored in a way that fits not only with the energy needs of the island but the ability for the community to facilitate, deliver and engage with it.
• A standardised methodology could allow each island/community to establish their own energy system requirements, challenges to be tackled and the steps required to write a development plan.
• Decarbonising heat: High levels of energy demand and fuel poverty across the study islands can be viewed as an opportunity to promote efficiency upgrades as a low-cost improvement method. In addition, the energy demand could be supplied more efficiently, at a lower cost and carbon intensity if new, low carbon heating options (such as heat pumps) are promoted.