Heat in buildings strategy: strategic environmental assessment

3. Relationship with other Plans, Programmes and Strategies (PPS)

3.1 Introduction and Policy Context

3.1.1 The draft Strategy’s high level policy context is illustrated in Figure 2 below. Further detail on the relationship between the draft Strategy and other relevant Plans, Programmes and Strategies (PPS) is also included.

Flowchart showing the high level policy interaction between existing and forthcoming Scottish Government strategies, publications and legislation with the draft Heat in Buildings Strategy, including the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 and the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 and the Climate Change Plan update.

3.2 Climate and Fuel Poverty targets

Climate Change Targets

3.2.1 The draft Strategy aims to reduce the contribution of heating buildings to Scotland’s greenhouse gas emissions, to help achieve ambitious climate change targets set out in legislation.

3.2.2 The Climate Change (Scotland) Act 2009^[17] (“The 2009 Act”) (Section 61) sets out a requirement to prepare and publish a plan for the promotion of renewable heat, including a renewable heat target, and to review the plan at least every two years. A new target is now required in order to comply with the 2009 Act’s requirement and the draft Strategy seeks to fulfil this requirement.

3.2.3 Scotland’s Climate Change Plan^[18], published early in 2018, underlined the need to transform the way we produce, generate and use energy in Scotland - and the importance of energy as one of the key sectors of our economy. Following on from this and in response to advice from the Committee on Climate Change (CCC), published in May 2019^[19], the Scottish Government acted immediately to introduce the most stringent statutory emissions reductions targets in the world.

3.2.4 The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 (“the 2019 Act”) ^[20] increases the ambition of Scotland’s targets to reduce greenhouse gas emissions, including a target for net zero greenhouse gas emissions by 2045 and interim targets for reductions of 75% and 90% by 2030 and 2040 respectively. The 2019 Act also includes a range of measures to improve transparency – for example basing progress against targets on actual emissions from all sectors of the Scottish economy. There is a continuing requirement for Scottish Ministers to lay regular “Climate Change Plans” in Parliament setting out their proposals and policies for meeting targets.

3.2.5 The provisions in the 2019 Act inform the preparation of a range of Scottish Government strategic documents, including but not limited to, an update to the Climate Change Plan. The recently published Climate Change Plan update sets out the Scottish Government’s pathway to our new and ambitious targets set by the Climate Change Act 2019, and is a key strategic document for Scotland’s green recovery. It considers the period 2019-2032 and the level of effort that is likely to be required to meet the new 2032 greenhouse gas emissions target of 78%, as set out in the 2019 Act, in addition to taking account of the future of ambition set by the introduction of a net-zero target by 2045.

Fuel Poverty Targets

3.2.6 Statutory Fuel Poverty Targets are set in the Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act (2019)^[21]. The ‘2019 Act’ sets statutory targets for reducing fuel poverty, and introduces a new definition which aligns fuel poverty more closely with relative income poverty. It requires Scottish Ministers to produce a comprehensive strategy to show how they intend to meet the new targets. Statutory 2040 fuel poverty targets require that no more than 5% of households are fuel poor, and that no more than 1% are in extreme fuel poverty by 2040.

3.2.7 Work to eradicate fuel poverty is linked to the Scottish Government’s work to improve housing standards, and this has been considered as part of the 2019 Act^[22]. A commitment to publish the final Fuel Poverty Strategy later in 2021 was contained within the 2020 Programme for Government.

3.3 Energy efficiency and Infrastructure

Scotland’s Energy Strategy and Energy Efficient Scotland

3.3.1 Improving the energy efficiency of buildings is seen as a key driver to reducing heat demand. Scottish Ministers designated energy efficiency as a national infrastructure priority in 2015^[23] and made a long-term commitment to reduce the energy demand and decarbonise the heat supply of our residential, services and industrial sectors. This commitment was then brought forwards in Scotland’s Energy Strategy^[24] and Energy Efficient Scotland^[25].

3.3.2 Scotland’s Energy Strategy^[26] (2017) includes a long-term vision that by 2050 we will have a “Flourishing, competitive, local and national energy sector, delivering secure, affordable, clean energy for Scotland’s households, communities and businesses”. One of the Strategy’s targets was for the equivalent of 50% of the energy for Scotland’s heat, transport and electricity consumption to be supplied from renewable sources by 2030. The emerging draft Heat in Buildings Strategy will contribute to this aim.

3.3.3 The Scottish Energy Strategy will be updated in 2021. This will need to respond to the twin challenges of economic recovery from Covid-19 and Net Zero. The update can provide an opportunity to focus on the short and medium-term horizon and the sector’s role in a Green Recovery.

3.3.4 The first Annual Energy Statement^[27], published in May 2019 reflects on significant progress that has been made by the energy sector towards the delivery of the Energy Strategy and considers priorities and plans required to meet targets. The Statement recognises that the low and zero emissions heat sector continues to grow and commits to the publication of a Heat Decarbonisation Policy Statement in 2020 (this current draft Strategy). Scotland’s programme for Government^[28] recognised this commitment as a means to set out steps needed to reduce the emissions associated with heating our homes and buildings.

3.3.5 It is envisaged that this Strategy will build on the ambitious Energy Efficient Scotland route map to transform energy efficiency and support the scaling up and acceleration of existing work with the aim of reducing emissions from heating our homes and buildings to levels compatible with net zero by 2045.

3.4 Decarbonising Heating

3.4.1 In 2009, the Scottish Government adopted a target for useful renewable heat generated in Scotland to reach the equivalent of 11% of fuels (other than electricity) consumed for heat by 2020.^[29] This target combined heat demand for space and water heating, cooking and industrial processes. In 2015, the Scottish Government published a Heat Policy Statement which set out the future policy direction for: addressing heat demand and its reduction; heat networks and storage; and, heat generation with a focus on using renewable and low carbon heat. The Statement set out an ambition to deliver district or communal heating to 40,000 homes or more by 2020. The most recent data available indicates that in 2018 approximately 29,600 homes were connected to district or communal heating in Scotland.^[30] The statement also reaffirmed the Scottish Government’s commitment to the 11% renewable heat target.

3.4.2 In 2019, the Scottish Government set out a vision to 2030 for Scotland’s electricity and gas networks^[31], supporting an inclusive transition to a decarbonised energy system; a whole system approach across heat, transport and electricity; and smarter local energy models. It recognised that new transmission infrastructure will be required, including links to meet the needs of the islands, within Scotland, and with the rest of the UK.

3.4.3 In October 2020, an Update on Renewable Heat Target and Action^[32], was published. This reported on progress towards the 11% renewable heat, stating that in 2019, useful renewable heat produced in Scotland was equivalent to 6.5% of fuels (other than electricity) consumed for heat, up from 6.2% in 2018. The statement also reported on wider progress toward heat decarbonisation, and recognised the commitment to publish a statement setting out actions to decarbonise heat supply to buildings (the Heat Decarbonisation Policy Statement – now this draft Strategy). The draft Strategy proposes to set a new heat target focused on heat in buildings, no longer including industrial heat. It seeks views on the scope and function of such a target. It also commits to continuing to publish statistics using the existing target metric for comparability.

3.4.4 Existing funding mechanisms are available to support improved energy efficiency and heat decarbonisation of homes and buildings. Scottish Government mechanisms include funding through Warmer Homes Scotland and the Low Carbon Infrastructure Transition Programme^[33]. At GB-level, schemes include the GB-wide Renewable Heat Incentive (RHI)^[34]. This UK Government scheme covers heat technologies such as ground and air source heat pumps and biomass boilers. The non-domestic RHI is due to close in March 2021, and the domestic RHI is due to close in March 2022. The RHI is expected to be replaced by the UK Government’s Green Gas Support Scheme (due to launch Autumn 2021) and Clean Heat Grant (due to launch April 2022).

3.4.5 The 2020 – 2021 Programme for Government sets out a green recovery commitment of £1.6 billion which will directly support jobs and tackle fuel poverty. This is targeted at transforming heat and energy efficiency of buildings and rapidly accelerating the decarbonisation of homes and buildings.

3.5 Infrastructure, Planning and Land Use

3.5.1 The development of the draft Strategy and its subsequent delivery will also influence and be influenced by a range of existing and emerging plans, programmes and strategies relating to infrastructure, planning and land use.

3.5.2 The Infrastructure Investment Plan for Scotland 2021-2022 to 2025-2026 was published on 4 February 2021. It sets out a long term vision of infrastructure in Scotland, which supports an inclusive, net zero carbon economy and includes details on over £26 billion of major projects and large programmes. One area of focus for the plan is decarbonising heat and boosting the energy efficiency of buildings.

3.5.3 The third National Planning Framework (NPF)^[35] and Scottish Planning Policy (SPP)^[36] (published 2014) is clear that planning must facilitate the transition to a low carbon economy and help to deliver Scotland’s Climate change targets. Work on NPF4 is now underway to incorporate SPP including proposals for radical change to our national planning policies and a spatial strategy to support a transition to net zero and economic recovery. Potential policy changes set out in the recently published NPF4 Position Statement^[37] include:

• Introducing new policies that address a wider range of energy generation technologies for example for electrical and thermal storage, and hydrogen.
• Setting out a more practical and outcome-focused approach to accelerating a transition to low and zero emissions heating in buildings, including by linking with wider policies for green and blue infrastructure and vacant and derelict land and properties and ensuring that Local Heat and Energy Efficiency Strategies inform local development planning to ensure a single coherent approach to heat planning across Scotland.
• Encourage new buildings to connect to existing heat networks, where located in a Heat Network Zone, wherever feasible; and, encouraging applications for energy from waste facilities to provide a connection to a heat network, taking into account the practical considerations involved.

3.5.4 A draft NPF4 will likely be laid in Parliament in autumn 2021 and publicly consulted on, with a view to being adopted by Scottish Ministers in 2022.

3.5.5 It is also noted that Scottish Government is currently carrying out a multi-phase review of Permitted Development Rights in Scotland. This review includes a commitment to consider the case for new or extended PDR for micro-renewables and heat networks. Detailed proposals for new micro-renewable or heat network PDR are anticipated to be considered during phase 4 of the review programme^[38].

3.5.6 The Second Land Use Strategy^[39] as well as the emerging Third Land Use Strategy^[40] are also relevant. The Third Land Use Strategy is expected to create an overall understanding of the role of existing policies, including sustainable agriculture and how these can help support the Scottish Government’s sustainable land use vison and objectives.

3.6 Other recent and emerging PPS and regulations of relevance

3.6.1 In addition to emerging national PPS detailed above, the development of the draft Strategy and its subsequent delivery will also influence and be influenced by a range of emerging PPS that focus on support for heat decarbonisation and energy efficiency and the potential future role of heat technologies (such as hydrogen and bioenergy) at the national level as well as lower tier future plans and a supporting regulatory framework. These are discussed below.

3.6.2 The Housing to 2040 Strategy will present further details on how our housing can support achievement of our net zero ambitions, whilst also delivering against wider objectives.

3.6.3 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. As set out above, The Scottish Energy Strategy will be updated this year, taking into account the whole system issues raised by this draft Heat in Buildings Strategy and our wider net zero climate targets.

3.6.4 The recently published Hydrogen Policy Statement^[41] provides the framework for the development of a Hydrogen Action Plan in 2021 which will provide further details on the planned approach and necessary actions to implement the policy positions outlined within it.

3.6.5 A Bioenergy Update in the first quarter of 2021 is also expected 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 to be published in 2023.

Local Heat and Energy Efficiency Strategies (LHEES) will be in place for all local authority areas in Scotland by the end of 2023. LHEES Strategies and Delivery Plans will provide an important platform to consider both local community and wider national infrastructure issues and their associated potential environmental effects. LHEES Strategies will set out the long term vision for decarbonising heat in buildings and improving their energy efficiency across an entire local authority area. For each local area, LHEES Strategies will draw on a consistent data driven methodology to:

• set out how each segment of the building stock needs to change to meet national objectives, including achieving zero greenhouse gas emissions in the building sector, and the removal of poor energy efficiency as a driver of fuel poverty;
• identify indicative heat decarbonisation zones, setting out the principal means for decarbonising buildings within each zone; and
• support the prioritisation of delivery.

Developing a Regulatory Framework for Zero Emissions Buildings

3.6.6 The 2018 Energy Efficient Scotland Route Map set out the 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.

3.6.7 By 2025, a new regulatory framework for zero emission heating and energy efficiency for Scotland will be developed. 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 emission heating systems. Compliance will be required by no later than 2045, with some buildings or areas being 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^[42]. For non-domestic buildings, the Scottish Government will consult on a phased approach to requiring energy efficiency levels and low carbon heat supply across new and existing buildings.

3.6.8 Heat networks will play an important role in the heat transition and once passed, the Heat Networks Scotland Bill^[43] will provide a new regulatory regime to be operational by the end of 2023 to support consenting of only renewable and low carbon heat networks. The Heat Networks (Scotland) Bill proposes a duty on local authorities to consider the designation of heat network zones. Should local authorities choose to do this, we envisage that LHEES will be the primary means by which these zones will be documented.

The Guiding Principles

3.6.9 The UK Withdrawal from the European Union (Scotland) Continuity Bill (2020) (The Continuity Bill) ^[44] recently completed its Parliamentary stages on 22 December 2020 and was granted royal assent in January 2021. The provisions of the Act will be brought into force later this year^[45]. The UK Withdrawal from the European Union (Scotland) Continuity Act (2021) provides Scottish Ministers with a discretionary power to continue to keep devolved law in line with EU law following the end of the implementation period. and ensures Scots law can remain closely aligned with EU standards.

3.6.10 The Act includes provisions for the continuity of environmental governance in domestic arrangements, and for the continuation of the effect of the EU environmental principles as the guiding principles on the environment in Scots law. During the passage of the Continuity Act, the principle of integration requirement was added as a fifth principle to complete the guiding principles on the environment.

3.6.11 Section 11 of the Continuity Act will place a duty on public authorities to have due regard to the guiding principles on the environment when preparing a plan, programme or strategy requiring a SEA under the 2005 Act. Whilst not yet in force, nonetheless the guiding principles are set out below and have been taken into account in the preparation of this Environmental Report:

• The principle that protecting the environment should be integrated into the making of policies;
• The precautionary principle as it relates to the environment;
• The preventative principle;
• The principle that damage should be reflected at source; and
• The polluter pays principle

3.6.12 Through its vision for all buildings to reach zero emissions by 2045, the draft Heat in Buildings Strategy has environmental protection principles at its heart. The SEA considers the potential for any likely significant environmental effects arising, both positive and negative, and where appropriate seeks to identify opportunities for avoiding or mitigating negative effects and enhancing positive effects. Further information on the assessment findings can be found in section 6 of this report.