Heat in Buildings - Local Government Oversight Group minutes: April 2024

Attendees and apologies

• James Fowlie, COSLA
• Robert Nicol, COSLA
• Calum Lindsay, COSLA
• Mike Callaghan, COSLA
• Sue Kearns, Scottish Government
• Catherine Williams, Scottish Government
• Neal Rafferty, Scottish Government
• Amy Tickell, Scottish Government
• James Hemphill, Scottish Government
• Gareth Fenney, Scottish Government
• Karl Reilly, Scottish Government
• Rajiv Naik, Scottish Government
• Peter Irving, Scottish Government
• Ciara O'Connor, Scottish Government
• Drew Murphy, Scottish Government
• Ross Ramsay, Scottish Futures Trust

Items and actions

Next steps from the Heat in Buildings Bill and Social Housing Net Zero Standard consultations

SG confirmed the consultations closed on 8 March 2024. The Heat in Buildings Bill consultation received higher than average responses, 1700. Independent analysis of responses has been commissioned and will also capture events held.

The Social Housing Net Zero Standard (SHNZS) was consulted on at the same time. This would require Registered Social Landlords (RSLs) to improve fabric efficiency and install clean heat in their properties. 114 responses were received and these are being independently analysed.

The Energy Efficiency Standards for Social Housing (EESSH2) review group will then have an opportunity to shape final design of SHNZS before the Scottish Government response is published.

The social housing regulator will then engage RSLs on the charter and technical standards. Charter and standards to be in place before data collection begins. In the meantime RSLs should continue to invest in energy efficiency and clean heat where affordable and appropriate.

Findings from the Green Heat Finance Taskforce

SG presented initial findings from the Green Heat Finance Taskforce (GHFT), including context around clean heat costs and budget. SG noted intention to respond to the report in due course.

In 2021 SG estimated a cost of £33 billion for conversion to clean heat, including £27 billion for domestic, £6 billion of which is social housing. Undertaking analysis now to update those costs, although challenges remain regards data availability for non-domestic buildings and public sector.

Affordability, particularly given current economic context, was discussed. Update to cost estimates will consider how these fall over time but recognised that cannot fund solely from public budgets and that private financing is needed and that we need to see cost reductions in technologies.

COSLA advised that local government are supportive of green energy. Chief officers will discuss heat pumps in social housing at next meeting. Our housing revenue is under pressure and cuts to affordable housing budgets, all factors in funding this transition.

SG noted that the GHFT is identifying options to scale up private sector financing to support the transition. GHFT part 1 report published in November 2023, with a focus on individual property owners, and making 9 recommendations including property-linked finance and non-domestic rates reform.

Part 2 will be published later this year and will consider aggregated financial models, including heat networks, place based and social housing and will include considerations of both financing and delivery model. These aggregated models could have potential to support Local Heat and Energy Efficiency Strategies (LHEES) delivery, but cashflows and revenues need to be identified. Need for a degree of standardisation to help leverage private investment. Key conclusion is not lack of finance but a lack of projects at sufficient scale.

Action

SG offered session on GHFT part 2 report when it is published and to engage on SG response to GHFT recommendations.

Social housing decarbonisation finance

SG advised the Scottish Futures Trust are carrying out work on financing social housing retrofit. This will articulate the barriers and look for solutions to unlock finance. High level assessment of models to find out which are more viable.

Challenges: conflicting calls on limited resource, e.g. maintenance, building new properties. Linked to rent affordability. Higher inflation has an impact on these costs. Factor of tenant views and acceptability. Two key challenges: financing models require a revenue stream but limited opportunity to generate revenue, need for clarity on forward plans.

Proposed models, wide engagement with the sector. Views obtained on the different models. Two main categories: additional funding sources, additional financing sources.

Keen to build a coalition to look at this work and drive things forward.

Any other business

Action

Items for next agenda to include Energy Performance Certificate (EPC) enforcement, an update on the SHNZS, and how Area Based Schemes (ABS) fits into the wider strategic picture regarding new standards.