Low Carbon Scotland - meeting our emissions reduction targets 2013-2027: second report

5. Homes and Communities

5.1 Introduction

5.1.1 Our homes are where we spend much of our lives and choose to relax with our families and friends. We want to make them comfortable, warm and welcoming but, in a time of rising energy costs, this can be expensive. And the way we use energy in our homes and appliances also results in significant greenhouse gas emissions.

5.2 Our ambition for homes and communities

5.2.1 Our Sustainable Housing Strategy ( SHS) sets out our vision for warm, high quality, affordable, low carbon homes and a housing sector that helps to establish a low carbon economy across Scotland.The strategy aims to:

• make sure no-one in Scotland has to live in fuel poverty, as far as practicable, by 2016;
• deliver a step-change in provision of energy efficient homes to 2030 through retrofit of existing housing and improved building regulations for new build homes;
• make a full contribution to the Climate Change (Scotland) Act targets; and
• enable the refurbishment and house building sectors to contribute to and benefit from Scotland's low carbon economy and to drive Scotland's future economic prosperity.

5.2.2 The strategy recognises that, alongside programmes to support the retrofit of Scotland's existing housing stock and a role for standards, there is also a need to transform the market for sustainable housing. We need to address the fact that while energy efficient homes should be warmer and cheaper to run, this is not currently reflected in more favourable lending terms or higher property values. The Sustainable Housing Strategy is based on many of the proposals and policies outlined in this chapter and sets out the action we will take to achieve the kind of change we want to see.

5.2.3 We are also aiming for a largely decarbonised heat sector by 2050 with significant progress towards it by 2030. This could be achieved through a combination of reduced demand and energy efficiency, together with a massive increase in the use of renewable or low carbon heating. We will explain how we intend to achieve this in our Heat Generation Policy Statement, due for publication later in 2013.

5.2.4 We also set the following milestones for 2020:

• every home to have loft and cavity wall insulation, where this is cost-effective and technically feasible, plus simple measures such as draught-proofing and pipe lagging;
• every home heated with gas central heating to have a highly efficient boiler with appropriate controls; and
• at least 100,000 homes to have adopted some form of individual or community renewable heat technology for space and or water heating.

5.3 Where we are now

5.3.1 In mid-2011, there were around 2.37 million households in Scotland, occupying 85% of the housing stock we expect to be in place by 2050. Household projections suggest over half a million additional homes will be needed to meet expected demand to 2035. ^[124] A fifth of our homes are now over 90 years old and a third more than 67 years old. Detached houses, with generally higher emissions than other domestic properties (tenements have the lowest), have dominated the new build market since the early 1980s.

5.3.2 Over three-quarters of the energy we use in our homes is from gas-fired boilers for space and hot water heating. For accounting purposes, emissions from domestic electricity use are part of the 'traded sector'. Therefore, reported emissions from homes arise almost exclusively from our use of gas for heating and cooking. In 2011, the residential sector produced 6.6 MtCO ₂e of greenhouse gas emissions, which was 13% of Scotland's total that year. ^[125]

5.3.3 Indeed, in 2011, direct (non-electricity) residential emissions were 21% lower than in 2010, and 19% lower than in 1990 - even though the housing stock has increased by more than 371,000 homes since then. ^[126] Emissions in this sector are volatile as they depend heavily on weather conditions. Although there has been a general downwards trend since 2000, 2010 was one of the coldest winters on record. Household energy costs rose by 76% in real terms between 2000 and 2010 - and may be expected to rise further. Better demand management can bring down energy bills and save money.

5.3.4 In March 2013, our independent adviser, the CCC, published its second progress report on Scotland. The Committee commented that we had made steady improvements in the insulation of homes with annual loft insulation rates more than doubling from 40,000 in 2008-09 to 104,000 in 2011-12. ^[127] More recent data shows that nearly 142,000 lofts were professionally installed in the first three quarters of 2012-13. ^[128]

5.3.5 This has contributed to the good progress we are making towards our insulation and other 2020 milestones. The Scottish House Condition Survey ( SHCS) estimates that by 2011 around 86% of lofts had at least 100 millimetres insulation and 45% had 200 millimetres or more while two-thirds (66%) of cavity walls had been insulated. ^[129] The SHCS also shows that 125,000 homes reported having gas central heating installed or upgraded in 2011, which indicates that we should be on track for our milestone on efficient gas central heating.

5.3.6 On renewable heat, the Energy Saving Trust estimates 10,800 micro-heat technologies had been installed by 2012. Space and or water heating can also be provided by renewable electricity such as solar PV and the SHCS estimates that, in 2011, around 20,000 homes used some form of renewable heat. Provisional estimates from EST are that around 2,000 homes are connected to renewable district heating out of around 6,000 homes connected to community heating schemes.

5.3.7 The CCC also noted that, although Scotland had missed its annual target for 2010, this could be attributed to an exceptionally cold winter which increased energy demand for heating, particularly in homes. The Committee suggested that in a normal year for temperature the target would have been achieved. It also concluded that underlying progress had generally been good. But there is still remaining potential on loft and cavity wall insulation and a large challenge on solid wall insulation.

5.4 Decarbonisation policies and proposals

5.4.1 This section outlines policies and proposals that are driving the decarbonisation of our homes. They include UK and Scottish measures that will increase energy efficiency, provide consumers with improved information on energy use, and facilitate the decarbonisation of heat. The Scottish proposals are being developed or are under consideration by Scottish Ministers.

5.4.2 Table 5.1 shows how the policies and proposals outlined in RPP1 have developed since then and identifies how proposals have changed into policies within RPP2. Table 5.2 summarises the policies and proposals for this sector, highlighting the abatement potential projected to 2020 and 2027, start dates and whether responsibility lies at Scottish or UK level.

5.4.3 Overall, estimated emissions from the homes and communities sector in 2020 are projected to be 5,106 ktCO ₂e once the impact of policies and proposals have been factored in. This is 37% lower than the current figure for 1990 baseline emissions from housing, 8,146 ktCO ₂e.

Fabric improvement and heating efficiency policies

5.4.4 In April 2013, the Scottish Government launched our national retrofit programme, the Home Energy Efficiency Programmes for Scotland ( HEEPS). ^[130] HEEPS will refurbish or refit Scotland's existing homes to make them more energy efficient. This will save people money on their fuel bills and reduce emissions while providing opportunities for businesses as we develop our low carbon economy. Building on the success of previous schemes, the core of the programme will be area-based strategies, aimed initially at fuel poor areas. National schemes are in place to provide support to vulnerable households outwith the targeted areas.

5.4.5 Local authorities will play a key strategic role in identifying fuel poor areas, and stock that requires upgrading, and develop projects to tackle this. Scottish Government funding of £79 million is available in 2013-14 to bring together a range of funding streams and lever maximum investment by the energy companies into Scotland.

5.4.6 We launched our Warm Homes Fund ^[131] in late 2012, to invest £50 million in green energy projects to further help heat homes across the country. The Fund provides grants and loans to install renewable energy measures such as biomass, hydro schemes, wind turbines and solar water heating. Councils and housing associations applying to the fund will be expected to use any income generated from their schemes to improve the energy efficiency of their existing housing. The fund will attract further finance from public and private sources.

Warm Homes Fund

Pilot schemes in Glasgow and the West Highlands will be the first to benefit from the Warm Homes Fund. West Whitlawburn Housing Cooperative in Glasgow and West Highland Housing Association in Oban will both receive assistance for biomass heating schemes, helping more than 550 households to heat their homes more cost effectively.

5.4.7 Installing energy efficiency measures has traditionally required up-front payment - with the costs being recovered over time. We need to ensure that householders have access to finance for energy efficiency measures. The Green Deal ^[132] is a GB wide policy that enables householders and other occupants of buildings to install energy efficiency improvements without up-front capital costs. Instead, they will pay for them over a period of years through a charge on their electricity bills. At the heart of the Green Deal financial mechanism is the 'Golden Rule' that estimated savings on bills should always equal, or exceed, the cost of the improvements undertaken.

5.4.8 While householders will have access to finance, energy companies also have obligations . The Energy Company Obligation ( ECO) ^[133] is a UK Government policy designed to replace both the Carbon Emission Reduction Target ( CERT) ^[134] and the Community Energy Saving Programme ( CESP). ^[135] The ECO requires energy supply companies to deliver energy efficiency measures to homes, with a twin focus on reducing heating costs for vulnerable consumer groups and saving carbon in hard to treat homes.

5.4.9 We have worked closely with the DECC on the development of ECO and have helped to secure important changes compared with the original proposals, including support for a wider range of measures and a stronger focus on delivery in rural areas. HEEPS will seek to leverage investment from energy companies under ECO to create a combined fund of around £200 million per annum to invest in energy efficiency measures. Nearly £50 million has already been allocated to local authorities to develop area-based schemes to tackle fuel poverty. Those local authorities are leveraging significant amounts of energy company funding that suggest that our £200 million target is achievable.

5.4.10 The ECO carbon savings obligations are designed to ensure that support is available for measures such as solid wall insulation and hard to treat cavities, as well as providing targeted support for people in low income and rural areas. The ECO home heating cost reduction obligation will support vulnerable, low-income households who live in the private sector and are entitled to defined benefits. We have developed Memoranda of Understanding with several energy companies for our national Affordable Warmth Scheme.

5.4.11 In Scotland, we will work to ensure that Green Deal finance providers are able to support households across Scotland. We will also work with the UK Government to ensure that Scotland-specific issues are fully recognised in the delivery of both schemes. Working through the Sector Skills Councils, the Scottish Qualifications Authority and Certification bodies we will ensure that there are sufficient qualified assessors and certified installers available to install the energy efficiency improvements in our homes. We are also developing an electronic register of buildings to support the delivery of the Green Deal and ECO.

5.4.12 Our Green Homes Cashbackscheme ^[136] is aimed at increasing the activity around installations of energy efficiency measures and also creating confidence in the Green Deal Assessor market. This is a £20 million programme which will be delivered during 2012-13 and 2013-14. In 2013 - 14 it will provide up to £1,200 Cashback per household. Our Private Sector landlord cashback ^[137] will also contribute to the replacement of inefficient appliances and boilers. These schemes are run on our behalf by the Energy Saving Trust.

5.4.13 In addition to improving the fabric of our existing housing stock, new homes need to be built to very low carbon standards. Housing built to 2010 standards emits 70% less carbon dioxide than housing built to the standards that existed in 1990. A review of Scottish domestic energy standards for 2014 is currently nearing completion.

Promoting innovation in new-build homes

More than 330 new affordable homes will be built through the Greener Homes Innovation Scheme promoting greener methods of construction in the house building industry and enabling families to save up to £1,000 per year on running costs. Our Greener Homes Prospectus ^[138] showcases examples and case studies of the kind of work that can be done to improve energy efficiency in homes.

Smart meters

5.4.14 Whilst much can be achieved through funding incentives, support and regulation, good information is also a critical factor in driving down energy use. We support the UK Government's plan to install smart meters for gas and electricity in every home by 2020. A smart meter, together with an individual display unit provides real-time information about energy use and costs, encouraging better household energy management. The roll-out across the UK, by energy suppliers, will take place between 2014 and 2019, although suppliers estimate that five million meters will have been installed prior to the official go-live date.

Fabric improvement and heating efficiency proposals

5.4.15 Ambitious work is already underway through the policies and programmes described above. However, we recognise more will need to be done and the following proposals are currently under consideration or in development.

5.4.16 We aim to continue our Home Energy Efficiency Programmes for Scotland to cover the whole of Scotland. This could involve a continuation of effort on hard to treat properties such as tenements, combining energy efficiency measures with tackling disrepair.

5.4.17 Regulation may need to play a part in improving energy efficiency. In the SHS consultation, we sought views on if, how, and when to set minimum standards of energy efficiency for private sector housing. Feedback from the consultation has informed a stakeholder working group that is considering the issues and is developing draft regulations for consultation.

5.4.18 Responses to the SHS consultation supported a lead-in time between consulting on draft regulations and the application of any standards to allow time for householders and landlords to prepare for the changes. Scottish Ministers have previously stated that we would not look to set minimum standards before 2015. Our current thinking at this stage assumes a minimum standard for all private sector housing to be introduced in 2018 (the same timescale being considered for the private rented sector in England and Wales). However, this timetable is one of the issues to be considered by the stakeholder working group.

5.4.19 We also need to consider social housing standards. Social landlords are already required to meet the Scottish Housing Quality Standard by 2015, and this includes an energy efficiency element. We propose to introduce a new energy efficiency standard for social housing in 2013 setting initial targets to be met by 2020. This will further improve the energy efficiency of social housing, reducing energy consumption and fuel poverty and driving down emissions. ^[139]

New techniques and technologies

Scotland's Housing Expo held in Inverness in 2010 showcased master planning, passive energy techniques and new building technology in low carbon building design. The homes were designed to tight cost limits, some with predicted annual heating costs of less than £100.

5.4.20 New build domestic energy standards 2014. As part of the review of building regulation energy standards in response to the recommendations of the Sullivan Report, ^[140] we are consulting on the potential to cut new-build emissions by around 45% compared to 2007 standards. In practice this will mean there will generally be less air-infiltration, improved fabric insulation, better heating controls, heating systems of greater efficiency and, for some building types, greater use of low carbon technologies such as micro-generation and innovative measures such as wastewater heat recovery to deliver emissions reductions.

Further abatement potential in housing

5.4.21 We consider that there may be some further abatement potential (around 0.65 MtCO ₂e by 2027) through improvements to the carbon efficiency of housing beyond those estimated for the identified policies and proposals. However, we have not put forward a fully-fledged proposal at this stage as further work is required to analyse and consider a range of options. We intend to produce a detailed proposal on how we may realise this potential in RPP3.

5.4.22 Further analysis and consultation are needed before bringing forward a more detailed proposal. In the meantime we will also need to assess the impact of action to encourage market transformational change. And, as options, costs and technical solutions develop in the future years, more efficient and cost-effective approaches may emerge. Our analysis indicates that this additional carbon abatement is potentially available from the housing stock in Scotland, if it is needed to meet our emission targets. However, if more cost effective options emerge in other sectors, then it may be preferable for some or all of this abatement to be delivered from other parts of the economy.

5.4.23 At this stage, the estimated abatement has been modelled in a similar way to our other housing proposals. We used DEMScot, a model designed for us for this purpose by a partnership led by Cambridge Architectural Research Ltd. The full model, along with user manuals, is available on the Scottish Government website. ^[141]

5.4.24 The model is based on a building stock database abstracted from the Scottish House Condition Survey. Using specified building physics parameters, and taking account of Scottish weather, DEMScot models the total energy use of a home, including space and water heating, cooking, lighting and appliances.

5.4.25 DEMScot allows us to model 19 different upgrades to houses where such upgrades are technically feasible. The Scottish House Condition Survey was used to supply the starting house conditions, and then the type and number of upgrades were estimated in turn for 'business as usual', policies, and proposals (excluding technical potential). The model then provides an estimate of how many upgrades to the existing housing stock are still technically feasible.

5.4.26 These remaining technically feasible upgrades were the basis of modelling the further potential. They include measures such as solid wall insulation, loft and floor insulation and a range of other upgrades which also form part of our current policies and proposals. The difference is that there is a greater proportion of higher cost upgrades in the further potential, since our policies and proposals typically start with the most
cost-effective measures.

5.4.27 Many of the upgrades in the further potential would be in the owner-occupied and private rented sectors, where energy efficiency policies have not advanced as much as in the social sector. The optimum blend of regulation and incentives that should be used in the private sector is an area that is currently being investigated and developed in Scotland and the rest of the UK. We need to consider all the options for realising this additional potential.

5.5 Decarbonising heat policies

5.5.1 The Scottish Government's current policies and action on low carbon and renewable heat are set out in our Renewable Heat Action Plan, ^[142] in the 2020 Routemap for Renewable Energy in Scotland ^[143] and in the Scottish Government's draft Outline Heat Vision ^[144] which was published in January 2013 alongside the draft of this RPP2.

5.5.2 Specific policies on district heating have now been published in the District Heating Action Plan. ^[145] This sets out how we are taking forward recommendations from the Expert Commission on District Heating, which reported in November 2012. ^[146]

5.5.3 The RHI, ^[147] a UK Government policy, was introduced in 2011 to incentivise the use of heat produced from renewable non-fossil fuel sources, such as wood fuel or heat pumps. RHI is key to us meeting our Scottish target of 11% of heat demand from renewables by 2020, and will play a significant role in decarbonising the heat sector by 2030. We have developed a range of supporting actions to increase deployment of renewable heat technologies in Scotland.

5.5.4 The RHI is being implemented in phases. Phase one focuses on the industrial and commercial sectors. Including the grant scheme for domestic users, the RHI is worth about £90 million to Scotland over four years, with the sector expected to create up to 1,350 new jobs during this period.

5.5.5 The UK Government consulted on proposals for a RHI for the domestic sector in autumn 2012, with proposals for its introduction in summer 2013. However, the UK Government later announced that the scheme would be delayed until Spring 2014. In the interim, the UK Government has extended the support for installations of renewable heat technologies in the household sector through the Renewable Heat Premium Payment scheme ^[148] .

5.5.6 The UK Government will publish further information on the domestic RHI, including tariff rates, over summer 2013. Due to delays, no cost information has been included. However, it is likely that up-front costs for the installation of renewable heat generation will be met by property owners, with the incentive guaranteeing them a reasonable return on investment.

5.5.7 Consistent with DECC updated emissions projections, estimates of the contribution of domestic RHI to abatement have been revised downwards since RPP1 was published in 2011.

5.5.8 The District Heating Loan Fund ^[149] offers loans to support both low carbon and renewable technology solutions to a range of infrastructural issues and the costs of developing district heating networks. We have allocated at least £5 million to the scheme over this spending review period. It is open to local authorities, registered social landlords, SMEs and energy services companies in Scotland.

5.5.9 In June 2012 we announced a £5 million boost to the budget for Home Renewables Loans, ^[150] and an increase in the maximum loan available for renewable heat installation to £10,000. The loans are providing support to individual householders to install renewable technologies in their homes through the Energy Saving Trust, which has seen a sharp rise in the levels of interest since the announcement. The loans were scheduled to close in 2013 when launch of the domestic RHI was proposed. However, following the announcement of the delay in the RHI until Spring 2014, we are reviewing support for household renewables across all available measures, for example, the Green Deal.

Use of Biomass

The Scottish Government policy is to promote the use of biomass plants for heat or for combined heat and power, with new plants relatively small in scale. This is to optimise local supply, serve localised heat markets and maximise efficient use of a limited fuel source.

Wood fuel use for energy production has more than tripled in the last five years. We are currently reviewing the blend of support available for biomass to establish a more appropriate balance between the support available, policy priorities and competing needs for the resource.

5.5.10 Heat mapping is fundamental in the development of our ambitions to decarbonise heat. Heat maps help identify and define future renewable heat opportunities in an area, particularly heat networks. Pilot heat maps have already been completed in Highland, Fife and Perth and Kinross and we are rolling out the heat mapping programme to all local authorities in Scotland with the aim of creating a pan-Scotland heat map by March 2014.

5.5.11 Heat mapping will help to identify opportunities for investment in heat infrastructure to support delivery of the Scottish Government's programmes, such as expenditure under the REIF, ^[151] the Warm Homes Fund, the District Heating Loan Scheme ^[152] and implementation of the District Heating Action Plan ^[153] as well as ensuring increased uptake of the RHI in Scotland.

Decarbonising heat proposal

5.5.12 While we are taking forward significant activity on decarbonising heat in Scotland, we recognise the need for a more strategic approach for significant decarbonisation of heat by 2030.

5.5.13 Our new ambitious proposal for decarbonising heat, expressed in a new vision, hierarchy and Heat Generation Policy Statement, will include both the domestic and non-domestic sectors. As the majority of the emissions abatement is likely to fall in the non-domestic sector, details are at paragraph 6.5.10 in the next chapter. Given the significant policy work still required in this area, the final abatement split between the Homes and Communities Sector and the Business, Industry and Public Sector may change.

5.6 Supporting and enabling measures

5.6.1 The proposals and policies in RPP1 were supported by a number of enabling measures. All of these enabling measures are still in place and we have included some new ones in this second report. These enabling measures do not necessarily abate carbon by themselves but they help to support the kind of change in behaviour and perception that are needed to transform the market and maximise the success of the other policies.

5.6.2 Access to information is vital to help people make low carbon decisions from transport through to energy efficiency in the home. We have invested in the network of HomeEnergy Scotland Advice Centres to provide free advice and support across a range of energy efficiency matters to householders, businesses, communities, and local authorities and housing associations. ^[154] This service will also provide the impartial remote advice service for Green Deal.

5.6.3 Important information is also available to existing and prospective property owners through Energy Performance Certificates ( EPCs). ^[155] They are required on completion of construction and at the point of sale or rental and provide energy efficiency information, allowing comparisons to be made. EPCs are accompanied with advice on ways in which energy efficiency of the building concerned could be improved in a cost-effective manner.

5.6.4 Information and support is also vital for community action. Communities working together can often achieve more than households and individuals acting alone. Our Climate Challenge Fund ^[156] supports local communities in developing their own solutions for reducing greenhouse gas emissions. Since 2008, over 400 communities have undertaken projects from energy efficiency and insulation projects to active travel and sustainable food production.

5.6.5 The fund empowers communities to deliver projects that are relevant to them and which leave a positive and sustainable legacy for the future. The fund supports communities to generate an income from their low carbon activity, where this can be achieved within State Aid rules, and the income is reinvested in further project activity which is consistent with a low carbon future.

5.6.6 The Junior Climate Challenge Fund operates alongside the main fund and supports projects which are designed, developed and delivered by young people (under 18s) whose future actions are crucial to the delivery of our climate change targets. The young people are engaged throughout, with funding decisions made by a youth panel.

5.6.7 The Scottish Government and COSLA produced joint guidance on local authority coverage of climate change in their local housing strategies ( LHS). Following publication of the supplementary guidance in 2011, we continue to work closely with local authorities to support their work on integrating climate change with their other housing policies through the LHS process. Consideration of climate change requirements forms part of the LHS peer review process. Since the supplementary guidance was issued, 25 local housing strategies have been peer reviewed with a further six underway. All have demonstrated a more strategic approach to climate change activities for housing.

5.6.8 Private landlords can access Energy Saving Scotland Small Business Loans to install energy efficiency measures. ^[157] The Landlords' Energy Saving Allowance ( LESA) allows landlords to claim a tax allowance of up to £1,500 on energy efficiency measures. ^[158]

5.6.9 Many people in Scotland live in historic and traditionally built houses and tenements which can be difficult to treat. While it is considered challenging to make these buildings more energy efficient thermal upgrades are possible and extensive research has taken place in this area by Historic Scotland. Following a series of refurbishment pilots, Historic Scotland has developed technical guidance ^[159] on how to improve pre-1919 dwellings and this was published in September 2012.

5.6.10 The measures developed are suitable for listed buildings of all types. Examples of properties that have been improved are reported in the Historic Scotland Refurbishment Case Study Series. Later building types often perform worse than traditional ones, and Historic Scotland is a partner on a BRE led project ^[160] to develop refurbishment options on a "four in a block" house type dating from 1930 at the Ravenscraig Innovation Park. Building on this research and guidance Historic Scotland will work with the Sector Skills Councils to develop training at trade level for the delivery of appropriate measures in older buildings.

Traditional buildings

Traditional buildings should not be seen as inevitably "hard to treat" buildings, although they may need a distinct approach to adaptation. Historic Scotland has carried out a number of refurbishment pilots to test the effectiveness of different interventions in traditional buildings and to develop cost effective improvements in thermal performance that respect their fabric and the appearance. A refurbishment of four 'B' Listed properties belonging to Castle Rock Edinvar Housing Association were successfully upgraded with wall and glazing improvements, winning the Carbon Trust Low Carbon Building Refurbishment Award in March 2012.

5.7 Costs and benefits

5.7.1 The cost of implementing our policies and proposals for energy efficiency in existing homes is estimated at £5.1 billion over the period from 2013 to 2027. Much of these costs will be met by consumers and landlords, through either the ECO or self-financed measures (including through the Green Deal mechanism). There will also be significant targeted financial support and other action from the Scottish Government to facilitate uptake.

5.7.2 We have already made good progress in delivering the most cost-effective energy efficiency measures, such as loft and standard cavity wall insulation. As we progress towards our 2027 and 2050 targets, the focus will increasingly shift to more expensive measures that have longer pay-back periods.

5.7.3 The benefits of new build domestic energy standards include lower energy use and bills for households and support for more widespread use of energy-efficient construction practices and technologies, and the development of the low carbon economy. However, it should be noted that, in the majority of cases, fuel prices would have to increase in excess of RPI for the current additional capital cost of building to the proposed standards to be recouped during the lifetime of a new home.

5.7.4 There are significant benefits alongside these costs. Consumers would save an estimated £2.4 billion on their energy bills between 2013 and 2027 as a result of energy efficiency measures in existing homes compared to the " BAU" scenario. Savings from the measures installed would also continue beyond 2027 at an estimated £289 million a year. These estimates are based on current energy prices, and the trend is for these to increase. This means the savings may be underestimated.

5.7.5 These estimated benefits do not include the benefits associated with preventing harmful climate change as well as addressing the ill-health related to fuel poverty. A large body of research shows that improvements in housing conditions can lead to improved physical and mental health. Particularly important in the context of energy efficiency policies is that some of the greatest risks to health from housing are related to cold and damp (including moulds and fungus), which affect and exacerbate respiratory conditions.

5.7.6 We aim to make Scotland the most attractive place in Great Britain for energy companies to invest in energy efficiency. Decarbonising homes has the potential to create many jobs through upgrading existing homes, installing domestic renewable technologies and developing export markets. This will require new skills, for example, in modern methods of construction, and multi-skilling to enable retro-fit. It will also require the retention of specialist traditional skills for older and historic buildings. We will only be able to take advantage of these economic opportunities with a skilled and adaptable workforce.

5.7.7 Input-output analysis suggests that for every £100 million spent on energy-efficiency measures, approximately 1,300 full-time jobs are supported across the Scottish economy. We will continue to encourage industry to recognise the important role of training in preparing for these growth opportunities. There may be a need for new recruits, including currently under-represented groups, and returners affected by the recent economic downturn. Our National Training Programmes have at least 500 places in energy and low carbon industries. The introduction of the Green Deal will also result in training requirements for Green Deal assessors and potentially an element of up-skilling for installers.

5.7.8 We aim to ensure continuity for installers, particularly in the insulation industry. There will be new employment opportunities for installers, particularly with solid wall or hard to treat wall insulation, an industry so far relatively undeveloped in Scotland. The Green Deal will provide opportunities for SMEs as well as large businesses.

5.7.9 Driving down costs of energy efficiency measures will be particularly important in encouraging uptake . Social landlords are well placed to act as pioneers because of their ability to plan and manage major improvement programmes and offer economies of scale. This may be important in driving down costs of more expensive types of wall insulation and developing new approaches that can then be applied in the complex owner-occupier market.

5.7.10 The Scottish Government invested almost £150 million in fuel poverty and energy efficiency programmes between 2009-10 and 2011-12 to help households reduce their fuel bills. And we will be spending around £250 million over the current spending review period on energy efficiency to make homes warmer, to cut fuel poverty and to create jobs. We have increased this spending in a time of tight fiscal constraint, as part of our commitment to meeting our fuel poverty and climate change targets and because of the wider health, social and economic benefits it can bring to the people of Scotland. We estimate that this three-year investment will lead to a net gain in household income of about £700 million and a saving of 3 MtCO ₂e.

5.7.11 Over and above this investment, district heating schemes are reducing heating costs for an increasing number of households. Aberdeen Heat and Power's district heating scheme ^[161] has reduced running costs from £14 a week before the combined heat and power scheme installed to around £8.50 a week currently, and has reduced carbon emissions by about 45%. Similar benefits are being delivered to 1,500 households by Cube Housing Association's Wyndford Estate district heating scheme, installed and managed by Scottish and Southern Energy ( SSE) Heat Networks. ^[162] Additional funding of £1 million from the Scottish Government is enabling over 235 private homeowners to benefit from connections to the scheme.

Table 5.1: Highlights of progress since publication of RPP1

Homes and Communities	Summary
Policies
Smart meters installed in every home by 2020 to encourage better household energy management.	This initiative is led by the UK Government due to policies regarding the UK electricity market being reserved to Westminster. Latest estimates from DECC are that suppliers have installed approximately 1.25 million smart meters across Great Britain during the Foundation stage of the programme. Separate Scottish figures are not currently available. DECC announced in May 2013 that the planned mass roll-out of smart-meters had been delayed until autumn 2015 in order to allow time to finalise the technical specifications for the meters. In light of this, the main Scottish energy suppliers have delayed intensive installation activity. However, Scottish Power has installed 30,000 smart meters in a pilot programme, of which more than 50% were in Scotland. The Scottish Government bases its figures on the latest DECC projections and it is not believed that the delay to the main roll-out of the programme will significantly impact overall emissions abatement.
Domestic energy efficiency policies to install cavity wall, loft insulation and other energy efficiency measures.	Since 2008, loft and cavity wall insulation has been installed in over 540,000 homes in Scotland through the CERT scheme assisted by the Scottish Government funded home insulation programmes. This has supported progress towards our 2020 milestone on insulation, while our Boiler Scrappage Scheme has contributed towards our milestone on efficient gas central heating. The UK Government obligations on energy companies to deliver energy efficiency measures for domestic consumers outlined in RPP1 changed from the beginning of 2013. The new Energy Company Obligation ( ECO) replaces the Carbon Emission Reduction Target ( CERT) and the Community Energy Saving Programme ( CESP). The ECO requires energy supply companies to provide homes with energy efficiency measures. It has a twin focus on reducing heating costs for vulnerable consumer groups and saving carbon in hard to treat homes, particularly through solid wall insulation. This is complemented by the Green Deal which is a new GB-wide policy that enables householders and other occupants of buildings to install energy efficiency improvements without up-front capital costs. Instead, they will pay for them over a period of years through a charge on their electricity bills. Since RPP1, we have also introduced a new Warm Homes Fund to provide grants and loans for community renewable energy schemes. Alongside these policies, the Scottish Government Green Homes Cashback scheme, will operate until March 2014 to incentivise the installation of a wide range of energy efficiency measures. The proposal in RPP1 to develop new fuel poverty and insulation programmes was implemented when the Scottish Government introduced a new national retrofit programme, the Home Energy Efficiency Programmes for Scotland ( HEEPS) in April 2013. This ambitious programme supersedes the Energy Assistance Package, Universal Home Insulation and Boiler Scrappage Schemes. The new programmes, supported by £79 million in 2013-14, include both area-based and national schemes, giving priority to people and areas at most risk of fuel poverty. The area-based programmes will support a range of measures with a focus on hard-to-treat homes.
New build domestic energy standards for 2007 and 2010 - progressive improvement in building standards to reduce emissions from housing.	Standards introduced in 2010 set emissions targets for new homes which are 30% lower than those within the previous 2007 standards. These standards apply to building warrant applications made from October 2010. An increasing proportion of new homes being completed are now to these standards.
Renewable Heat Incentive ( RHI): payments to home owners who install and obtain heat from renewable sources.	The RHI is a UK Government scheme and Phase 1 for non-domestic renewable heat installations was launched in November 2011. Phase 2 of the RHI will include payments to householders for renewable heat generated by domestic installations. The UK Government consulted on the domestic RHI in autumn 2012. Prior to implementation of the domestic RHI, the UK Government has run two phases of the Renewable Heat Premium Payment ( RHPP), which provides a limited up-front payment towards the capital costs of an installation. In 2011-12, under Phase 1 of the RHPP, 662 households in Scotland were paid vouchers worth around 13.5% of the total value of vouchers paid, and a similar proportion during Phase 2 in 2012-13. As implementation of the domestic RHI has now been delayed until spring 2014, the UK Government has announced an extension to the RHPP and in May 2013, made a further announcement of an increase in the value of the vouchers.
Proposals
Fuel poverty and insulation programmes.	The fuel poverty and insulation programmes outlined as proposals in RPP1 are being delivered as policies in RPP2 through ECO, Green Deal and the Home Energy Efficiency Programmes for Scotland. We have designed HEEPS to draw in the maximum additional funding from the ECO into Scotland and the Green Homes Cashback scheme will support uptake of measures through the Green Deal scheme. While HEEPS is now an active policy, our modelling has presented HEEPS as a proposal from 2018, reflecting the fact that decisions on the scale and nature of future phases of HEEPS will be a matter for future administrations.
Regulation of energy efficiency in existing housing and reducing emissions from social housing.	RPP1 included the setting of energy efficiency standards for both social and private housing as an enabling and supporting measure. Since then, there has been extensive investigation and development, work with stakeholders and a consultation process, leading to these measures being upgraded into proposals for RPP2.
New build domestic energy standards for 2013.	The 2013 review of energy standards in building regulations proposed in RPP1 is nearing completion. Consultation on proposed standards for 2014, which propose a further 21% reduction in emissions over 2010 standards (45% reduction on 2007 standards) took place between January and April 2013. In support of this review, work is also underway to improve compliance and as-built performance, both within building regulations and in the wider industry process of procurement, design and construction.

Table 5.2: Summary of Homes and Communities policies and proposals

Homes & Communities	EU, UK or Scottish	Maximum abatement potential (KtCO 2 e) in 2020	Maximum Abatement potential (KtCO 2 e) in 2027	Earliest start date
Policies
Smart Meters The UK Government is committed to installing "smart" meters for gas and electricity in every home by 2020. This type of meter, when accompanied by an individual display unit, can display real-time information about energy use and costs, encouraging better household energy management.	UK	88	95	Preliminary installations have been undertaken by some suppliers during the Foundation Stage pending full roll-out
Domestic Building Energy Standards (2010) - New Build Properties Homes built to current building regulations have emissions in the region of 70% lower than those built to standards applicable in 1990, following improvement in 2002, 2007 and 2010. Improvements introduced in 2010 resulted in new homes with emissions 30% lower than those built to 2007 standards.	Scottish	76	142	2010
Renewable Heat Incentive (Domestic) Payments to those who install and obtain heat from renewable sources. Householders have had access to the Renewable Heat Premium Payment grant scheme since 2011, but it is planned to introduce the domestic RHI alongside the non-domestic sector in Spring 2014.	UK	78	80	2014
Energy Company Obligation and Green Deal The ECO requires energy supply companies to provide energy efficiency measures to homes, with a twin focus on reducing heating costs for vulnerable consumer groups and saving carbon in hard to treat homes. The Green Deal works alongside the ECO and enables households throughout Great Britain to install energy efficiency improvements without up-front capital costs.	UK	104	132	2013
Home Energy Efficiency Programmes Scotland Area-based and national schemes to refurbish Scotland's older homes and make them more energy efficient, tackle fuel poverty and reduce emissions, while providing opportunities for businesses in the low carbon economy. These Scottish Government schemes aim to draw in maximum extra funding from the ECO.	Scottish	207	207	2013
Warm Homes Fund This fund provides grants and loans to install renewable energy measures such as biomass, hydro schemes, wind turbines and solar water heating. Councils and housing associations applying to the fund will be expected to use any income generated from their schemes to improve the energy efficiency of their existing housing.	Scottish	23	22	2013
District Heating Loan Fund The District Heating Loan Fund provides low interest loans for both low carbon and renewable technology to help organisations implement district heating projects that will benefit local communities.	Scottish	36	36	2011
Proposals	EU, UK or Scottish?	Maximum abatement potential (KtCO 2 e) in 2020	Maximum Abatement potential (KtCO 2 e) in 2027	Earliest start date
Domestic Buildings Energy Standards (2014) New Build Properties A consultation launched in January 2013 proposes a further 21% reduction in current emissions in new homes from 2014. This equates to a 45% reduction in emission compared to the 2007 building standards.	Scottish	22	55	2014
Regulation of Private and Social Housing As well as introducing a new Energy Efficiency Standard for Social Housing, we are working with stakeholders to develop draft minimum standards for the energy efficiency of private housing for consultation.	Scottish	63	152	2014
Continuation of Home Energy Efficiency Programmes Scotland We propose to continue the programmes beyond the current spending review period, to cover the whole of Scotland. This will continue to improve the energy efficiency of Scotland's homes, particularly those that are harder to treat.	Scottish	33	167	2018
Low Carbon Heat (Domestic) The Scottish Government has published a "Draft Outline Heat Vision" and "Draft Heat Deployment Options Guidance". They bring together policy on heat across government to show how they contribute to our Economic Strategy objective to make the transition to a low carbon economy. We will develop a new Heat Generation Policy Statement in 2013. This will set out future supply scenarios, building upon the success of the Electricity Generation Policy Statement.	Scottish	99	609	2013
Additional technical potential through improvements to carbon efficiency of the housing stock Our modelling suggests there is an additional technical abatement potential of approximately 0.65 Mt CO 2e in 2027 through improvements to the carbon efficiency of the housing stock. There are inherent uncertainties in predicting technologies and costs more than a decade into the future and further analysis is needed. We intend to include a proposal on how we may realise this potential in the next RPP.	Scottish	210	650	2018