Microgeneration strategy for Scotland

1 Introduction

The overarching aim of the Microgeneration Strategy is to grow the market for microgeneration, in conjunction with our targets for energy efficiency, to contribute towards a low carbon economy for Scotland.

Households, businesses, communities and the public sector across Scotland are helping to build a cleaner, greener Scotland. Homes, offices, schools and many other buildings are now being heated by biomass, heat pumps and solar thermal panels and generating their own electricity from wind turbines and solar photovoltaic ( PV) panels. New businesses are being set up to manufacture and install equipment and fuel, such as wind turbines and wood pellets. Existing businesses are taking advantage of the new opportunities offered by the growth of the sector to upskill their workforce and bring in new income.

The Scottish Government's aim is to see the market for microgeneration continue to grow, as set out in its sectoral routemap for microgeneration in the Renewables Routemap, published in June 2011. Here, the Government sets out its intention to publish a Microgeneration Strategy to support the sector move from a niche market to the mainstream.

Microgeneration covers a range of technologies which can be used to fit the specific energy needs and availability of resources at each site: biomass; biofuels; fuel cells; photovoltaics; water (including waves and tides); wind; solar power; geothermal sources; combined heat and power systems; and air. Microgeneration is legally defined as covering devices with a generation capacity of the device no greater than 50 kilowatts (kWe) for electricity generation and no greater than 45 kilowatts (45 kWth) for heat as set by the Electricity Act 2004.

1.1 A Strategy for Market Growth

The Microgeneration Strategy for Scotland focuses on how the Scottish Government, industry and other stakeholders can work together to remove barriers to uptake, raise awareness and ensure we have a skilled workforce to deploy microgeneration.

The growth of the market for microgeneration will contribute the Scottish Government's Low Carbon Economy Strategy and Government Economic Strategy. The key aims of the strategy are:

1. To contribute to Scotland's transition to a low carbon economy by delivering carbon emissions reductions.

2. As part of the overall drive for energy efficiency, to provide the opportunity for householders, businesses and communities to participate in the low carbon economy, and in particular contribute to taking more households out of fuel poverty and reducing energy costs overall.

3. To support and create jobs in Scotland, by creating new markets for businesses, particularly small and medium enterprises, and supporting business growth.

Financial incentives are an important tool to drive uptake of microgeneration technologies. We must however recognise that budgets are constrained, with limits set on the Feed in Tariff ( FIT) and Renewable Heat Incentive ( RHI) at UK level. We must also reduce costs through market growth and innovation, and build consumer confidence.

Households use more than a third of the electricity and more than half of the heat consumed in Scotland. This is the largest market for microgeneration, both for individual households and larger social housing renewable schemes to help tenants out of fuel poverty. But microgeneration can also help businesses, particularly in rural areas off the gas-grid, where increases in heating bills have a big impact on business viability. In addition, small-scale wind and hydro also give rural businesses and communities the opportunity to generate their own energy and additional income. The actions set out in the Strategy will help maximise uptake across all these sectors.

1.2 Scotland's Targets for Renewable Energy

The Scottish Government has set ambitious targets for renewable energy. The Renewables Routemap published in June 2011 set a target of the equivalent of 100% of electricity demand to be met by renewables by 2020, along with the 11% target for renewable heat.

As set out in the Renewables Routemap, microgeneration is an important part of the strategy to deliver those targets, providing the opportunity for householders, businesses and communities to participate in the low carbon economy. The Low Carbon Scotland report published in 2011 sets a milestone for at least 100,000 homes to have adopted some form of individual or community renewable heat technology for space and/or water heating by 2020 to contribute to our world leading carbon emissions reductions target. The importance of community and locally owned renewable energy is also recognised by the new target of 500 MW of community and locally owned renewable energy by 2020.

1.3 The UK Government's Microgeneration Strategy

In June 2011, the UK Government published its Microgeneration Strategy along with the Microgeneration Industry Contact Group Action Plan. The Strategy focuses on non-financial barriers to microgeneration which must be tackled to maximise the effectiveness of the financial incentives that have been put in place. The Strategy is restricted to England only, although some proposals are relevant to Scotland, particularly ensuring quality and standards and improving consumer protection through the Microgeneration Certification Scheme and REAL Assurance.

The main financial incentives for microgeneration are the FIT RHI and Renewable Heat Premium Payment ( RHPP), which are reserved to the UK Government with the agreement of the Scottish Government. The Scottish Government works closely with the UK Government to ensure that Scottish issues are taken in to consideration. We are also engaged with the UK Government on development of the Green Deal which includes microgeneration amongst the various measures it can support.

1.4 Microgeneration and Energy Efficiency

Microgeneration is integrally linked to energy efficiency as part of our overall policy to move towards a low carbon economy. Microgeneration technologies are most effective in terms of cost effectiveness, carbon emissions reduction and reduced energy bills only when combined with energy efficiency measures, such as insulation. Uptake of microgeneration will be strongly linked to the headline target set out in Conserve and Save to reduce Scottish final energy consumption by 12% by 2020. This approach is reflected in Scottish Government planning policy and building standards which set out a holistic framework for carbon emissions reductions from buildings, taking a 'fabric first' approach.

By helping to reduce energy bills, energy efficiency and microgeneration will also help us tackle fuel poverty. We will consult on a Sustainable Housing Strategy which will set out our vision for warm, high quality, affordable, low carbon homes and a housing sector that helps to establish a successful low carbon economy across Scotland.

1.5 Microgeneration for Renewable Heat

Small-scale renewable heat for households, businesses and communities has an important role to play in delivering our heat targets, alongside larger scale industrial heat. Consumer Focus ¹ estimate that nearly 25% of Scottish households are not connected to gas and many are in fuel poverty. More than 14% of the total value of vouchers under the RHPP has been issued to Scottish households. Businesses in Scotland have already started to take advantage of the RHI.

Scotland's potential for deployment of renewable heat is highlighted by the success of previous Scottish Government grant and loan schemes, over 80% of which were for renewable heat installations. With a higher proportion of households in Scotland off the gas grid and the Scottish Government priority to reduce fuel poverty, a key aim of the Strategy is to ensure that Scotland maximises uptake of RHI and RHPP.

1.6 Microgeneration for Renewable Electricity

Technology such as solar PV, wind and hydro can generate electricity at a small scale. Since introduction of the FIT, the predominant technology has been solar PV with almost 15,000 installations in Scotland. Combined Heat and Power ( CHP) is used to generate both electricity and heat. Gas-fired micro- CHP for domestic use, although not renewable can also deliver significant energy efficiency benefits and carbon savings

1.7 Challenges

The development of the microgeneration sector has taken place in the face of a number of challenges. The landscape is rapidly changing, particularly in light of recent changes to UK-wide financial incentives and the timetable for introduction of the RHI for households and the Green Deal. The rapid uptake of solar PV demonstrates that industry has the ability to respond quickly to demand, but this may itself bring additional challenges, for example in ensuring quality and standards are maintained.

The Strategy sets out actions to be implemented by a partnership of Scottish Government, industry and other stakeholders. Given the significant programmes of support to be implemented at a UK level and the need to assess impact of recent changes to financial support, the Strategy must be a working document which can be updated to reflect the changing landscape.

1.8 Taking the Strategy Forward

A clear conclusion from the Stakeholder Group has also been the need for improved communication and coordination between all stakeholders to maximise the impact of actions set out in the Strategy. A Task Group will therefore be set up to take forward a number of the actions set out in the Strategy, to monitor and review impact of the Strategy and make further recommendations to adapt to rapidly growing sector.

1.9 Key Actions

Action 1 Scottish Government to convene a Microgeneration Task Group, reporting to the Renewables Industry Leadership Group of the Energy Advisory Board to take forward the recommendations, monitor deployment, review progress against benchmarks and consider further actions, as required, in 6 months following the outcome of the Comprehensive Review of the Feed in Tariff ( FIT) and in the run up to implementation of the Green Deal. The Task Group will expand the Microgeneration Strategy Stakeholder Group to include representation from end users such as consumer groups, Registered Social Landlords and the construction sector.