Fuel Poverty (Targets, Definition and Strategy) (Scotland) Bill: island communities impact assessment

Key Findings: Strategy

The final Fuel Poverty Strategy will set out our policies and actions for tackling fuel poverty. The delivery of policies to tackle fuel poverty is the change on the ground that is needed. It will require a careful balance of national level consistency and effective local flexibility to deliver an impactful strategy that will allow the targets to be met.

The draft Fuel Poverty Strategy that was published alongside the Fuel Poverty Bill was an indicative outline document but will be developed fully following commencement of the relevant sections of the Fuel Poverty Bill. Since the draft Fuel Poverty Strategy is an illustrative document, we do not intend to provide a detailed ICIA in respect of it. We will undertake an ICIA in respect of the final Fuel Poverty Strategy and this will be published alongside that strategy. It will take into account

the ongoing development of ICIA guidance and any learning from the development of this ICIA.

As part of this ICIA, we have spoken to island communities about delivery and the strategy and intend to use the feedback collated in the development of the final strategy. Annex C includes a list of programmes already being undertaken in Scotland that further explore some of these solutions, while Annex D is an update on work being undertaken by other areas of the Scottish Government which impact on tackling fuel poverty.

The proposed Fuel Poverty Strategy is to be laid before the Scottish Parliament within a year of Section 3 of the Fuel Poverty Bill coming into force. It will set out our policies and actions for tackling fuel poverty across Scotland. As previously stated, it will require a careful balance of national level consistency and effective local flexibility to deliver an impactful strategy that will allow the targets to be met.

This final strategy will be developed in partnership with those who have lived in fuel poverty, both on the islands and the mainland. This fulfils a recommendation made by the Scottish Fuel Poverty Strategic Working Group's Fuel Poverty Report in 2016 that the Scottish Government should involve people who are experiencing fuel poverty in the development of the fuel poverty strategy.^[6]

The Scottish Government will actively seek further stakeholder engagement in order to ensure that the final strategy accurately reflects the situation on the ground and how, by working together through a network of national and local partnerships, we will achieve the target of no more than 5% of Scottish households in fuel poverty and no more than 1% in extreme fuel poverty by 2040.

The final Fuel Poverty Strategy will be a national strategy, setting out a consistent framework of policies and actions to achieve the targets. Within that, however, it will need to ensure that the funding and flexibilities needed for the islands to achieve their targets alongside the mainland have been taken into consideration and acted upon.

The way that fuel poverty interventions are delivered will have significant impacts and delivery will need to be tailored to local areas across the country. Alongside the feedback we have already received through the various consultations, we have also consulted with island stakeholders throughout the development of this report and summarised below are their views for possible inclusion in the Fuel Poverty Strategy.

The Island Experience

Island stakeholders have emphasised the importance of understanding the island experience. As part of the development of the Fuel Poverty Strategy, officials will be consulting with island communities. Section 4 of the Fuel Poverty Bill requires the Scottish Government to consult with individuals who are living, or have lived in fuel poverty for the strategy. We commit to ensuring that we will engage with islanders who are living, or who have lived, with fuel poverty in order that the island experience is fully represented in the final strategy through island community consultations this summer.

Each island has its own specific considerations and constraints. For example, on Shetland, the council took the decision to focus on internal wall insulations and, because of strong winds and potential damage, avoid using external wall insulation (EWI). They also focused on under floor insulation to combat the issue of drafts. In Orkney, EWI is the number one option and in the Western Isles, it is internal wall insulation and insulation for 'a room in the roof' (attic rooms). This feedback is supported by the percentages of measures installed through HEEPS ABS vs total number of Measures for 2017/18 (table 4 below). Providing more flexibility in the delivery of national programmes would allow the islands to provide more bespoke outcomes that meet the particular needs of the island communities in tackling energy efficiency.

Table 4: Percentage of Measures Installed vs Total number of Measures

	Internal Wall insulation	External Wall Insulation	Room in Roof	Loft Insulation	Draft Proofing
Scottish Average	5%	66%	1%	5%	Less than 1%
Western Isles	37%	0%	17%	16%	0%
Orkney	11%	62%	2%	23%	0%
Shetland	11%	0%	7%	14%	7%
Highlands	0%	100%	0%	0%	0%
Argyll and Bute	35%	3%	6%	21%	0%
Scottish Borders	6%	4%	4%	6%	0%

Funding flexibility

Island community feedback highlighted their position that local delivery and flexible funding is important. In Orkney, the Council employs a managing agent which manages all funding streams and householders contact them directly on energy efficiency works. Longer term funding through Warmer Homes Scotland and HEEPS Area Based Schemes would allow greater flexibility of matching up different funding streams available and result in focused and achievable projects, which could successfully provide unique island solutions which may not be relevant on the mainland (ECO, Warmer Homes Scotland and Renewable Heat Incentive for heat pump installation for example).

The importance of linking health and energy efficient funding for those in fuel poverty was highlighted by many island stakeholders. This echoes the findings of the "Delivering affordable warmth in rural Scotland: action plan" produced by the Scottish Rural Fuel Poverty Task Force. This report highlighted that there was strong evidence to suggest that fuel poverty, vulnerability and health care issues were closely linked and that adopting a co-ordinated approach across these areas would lead to a reduction in NHS burdens and expenditure costs.^[7] Island community stakeholders agree that fuel poverty has a negative impact on health and utilising funding from both areas would support people to stay in their homes longer and reduce negative health outcomes (please see the homecare pilot in Moray and Aberdeenshire in Annex C).

Scheme flexibility

Island stakeholders were unified in their call for an island approach in order to allow island solutions, which may well not be relevant to the mainland.

Face to face communication is encouraged and preferred on the islands where there may be issues with internet coverage, the population is also older and may not have access to the internet and local business' are used to disseminate information through posters and leaflet drops.

Some stakeholders felt that equity release schemes may work better on the islands due to the greater proportion of outright homeowners in comparison to the mainland, although there is no definitive evidence to support this at this time. While there has been 38 requests for application packs (and applicants then going through the HES customer journey) for the HEEPS Equity Loan Pilot Scheme in the Western Isles, we have only received 1 loan application to date. Some of the applicants will have been referred to alternative schemes i.e. Warmer Homes Scotland, some will have decided not to progress and others are likely to be in the process of deciding whether to complete the application or not.

Integration of services at an island level may provide benefits not possible on the mainland due to economies of scale. It was suggested that a pilot project on health, education, social care, repair and energy could be developed for an island community to further explore the links between these areas and potentially inform operational delivery. Annex C includes such a programme in the Western Isles; The Moving Together Programme.

Fabric First

Island stakeholders mentioned the direct link between the general condition of some of the housing stock and energy efficiency, pointing out that there is little point attempting to improve the latter if the house isn't maintained to a certain level of repair (wind and water tight). Orkney stakeholders suggested a small improvement repair pilot project on a remote island using grant funding and possibly a loan from the council tied to HEEPS ABS and Warm homes funding could be a way of assessing how this issue could be tackled with hard to treat homes on the islands.

There is a loan scheme available to householders: a maximum loan value for HEEPS ABS energy efficiency measures is £5,000 or up to £10,000 if repair work is needed as well. However, at least one energy efficiency measure has to be installed if claiming repairs. These loans are available to householders who need to make a contribution towards their grant funded measure.

Equity loans are available with a 55%/45% split between energy efficiency and repairs. The maximum loan available is £40,000 or up to 50% equity share, whichever is less. In addition, the applicant should have 30% free equity after any existing mortgage and equity loan.^[8]

Availability of qualified installers

Island community feedback indicates a high level of variation between the islands when it comes to finding reliable companies to undertake energy efficiency improvement work. Local delivery is possible in some areas, however high costs of local providers, due to general demand for such skills, mean that in some cases it is cheaper to contract with companies on the mainland, even with the additional transport and accommodation costs. This was the case in Orkney, in particular for EWI, as well as Cumbrae, however the isle of Arran use internal contractors. It was reported that smaller island contractors can be put off by the need for specific qualifications, such as PAS 2030, while additional logistics of accommodation, transporting materials to the islands, and the seasonal impact of both inclement weather and the tourist season can all have a negative impact on the desirability of using mainland contractors. These difficulties are reflected in the findings of the Scottish Rural Fuel Poverty Task Force's report for rural and remote areas in Chapter 7: House improvement, tenure and supply chain issues.^[9]

Flexibility of electricity Tariffs

Island stakeholders were concerned around the possibility of forced low consumption of electricity due to the high costs on the islands. The islands have a higher percentage of restricted meters which preclude easy switching (e.g. economy 7, economy 10, economy 18, and economy 24). The percentage of households using these tariffs over the three-year period from 2015-2017 ranged from 23% in Na h-Eileanan Siar and Highland, to 47% in Orkney and 55% in Shetland; this compared to 10% across Scotland as a whole. There is only one electricity supplier that now offers these electricity tariffs on the islands and switching entails removal and replacement of the existing meters, the cost of which makes it prohibitive for vulnerable customers. These higher costs on the islands echo the findings of the "delivering affordable warmth in rural Scotland: action plan" produced by the Scottish Rural Fuel Poverty Task Force. Evidence reviewed in this report demonstrates that:

"…the energy market is not serving rural Scotland well or fairly. It shows that off-gas rural households in particular incur significantly higher-than-average heating costs as a result of the range of contributory factors stacked up against them. These start with the greater exposure to harsh weather conditions and lower levels of energy efficiency and are compounded by higher levels of energy consumption."^[10]

Mitigation Actions

Action 8: We will conduct an ICIA on the final Fuel Poverty Strategy, building on the work done to prepare this assessment, to be published at the same time as the strategy.