Scottish energy strategy: Scotland's Energy Efficiency Programme (SEEP)

2. Situation Report

State of the building stock

17. Scotland's building stock is extremely varied in terms of building type, construction method and age. For example, our biggest cities are dominated by stone-built tenements, many of which include ground floor retail or commercial premises, whilst our suburbs and rural areas are less densely populated and include a range of buildings from four-in-a-block flats and old industrial and office buildings, to large detached houses, modern business parks and industrial units. In our least populated rural areas buildings are often non-uniform, can be isolated and exposed to the elements. Significant progress has been made in recent years and improvements to the energy efficiency of buildings is reflected in energy demand, which has fallen across the Scottish economy by 15.2%, ^[3] and in emissions which have fallen by 39.6% from business and industrial processes, ^[4] by 36.2% from public sector buildings, and by 26% in the residential sector.

18. The energy efficiency of Scotland's homes has increased significantly in recent years, and around two-fifths of homes now have an EPC Band C rating or above. Currently natural gas is the primary fuel used for heating, with oil and electric heating used in off-gas grid areas. An increasing proportion of heat is being generated from renewable sources, which accounted for an estimated 5.3% of heat demand in 2015. ^[5]

The current landscape

19. SEEP will transform our approach to improving energy efficiency and decarbonising the heat supply, but it is not starting from scratch. It will build on, and learn from, our current schemes, which have delivered real improvements on the ground in recent years. Since 2009 the Scottish Government has allocated over £650 million on a range of fuel poverty and energy efficiency programmes, and in 2013 launched Home Energy Efficiency Programmes for Scotland, which now include:

• area-based schemes that are designed and delivered by local authorities, targeting households that are likely to be in fuel poverty, and providing support to help improve the energy efficiency of homes, predominantly through the installation of insulation measures;
• Warmer Homes Scotland, the Scottish Government's national fuel poverty programme, helps vulnerable households, no matter where they live in Scotland, to improve the energy efficiency of their homes so that they are easier and more affordable to heat; and
• interest free loans, available to both registered social landlords, to enable them to improve the energy efficiency of their properties and assist some of our most vulnerable households, and to all private sector households to help spread the upfront costs of investing in energy efficiency improvements.

20. As well as supporting households, the Scottish Government has also invested and recycled over £45 million in loans to support energy efficiency, district heating and renewables programmes, supporting businesses, the public sector and householders since 2007, allocating and recycling loan funding now worth in excess of £65 million for a range of initiatives including:

• Low Carbon Infrastructure Transition Programme which supports the development of substantive private, public and community low-carbon projects across Scotland, enabling them to secure existing streams of public and private capital finance;
• Public Sector Energy Efficiency Procurement Framework that supports energy performance contracting, that shares the delivery risk with the private sector, delivering a range of energy efficiency and carbon reduction measures; and
• Non-domestic finance - including SME Loans and the District Heating Loan Fund, supporting business investment in energy efficiency and the development of district heating networks.

21. The Scottish Government also continues to fund Home Energy Scotland and Resource Efficient Scotland, which provide free and impartial advice to households, businesses and public sector bodies who wish to improve the energy efficiency of their buildings or decarbonise their heat supply.

22. In 2014 the Scottish Government introduced the Energy Efficiency Standard for Social Housing, which is driving energy efficiency improvements in the social rented sector and has its first milestone in 2020 by which time, in the main, no social property will have an energy efficiency rating of lower than a 'C' or 'D'. More recently, the Scottish Government introduced, under Section 63 of the Climate Change (Scotland) Act 2009, Requirements to Assess and Improve Energy Performance and Emissions in existing Non-Domestic Buildings.

What works and current issues

23. During the pre-consultation workshops stakeholders reflected on the current landscape and identified a number of schemes, initiatives and approaches that are helping to support and drive improvement, including:

• the provision of free and impartial advice;
• the Social Housing Quality Standard and the Energy Efficiency Standard for Social Housing, which have helped to raise standards in social housing;
• publically-funded loan schemes that are helping to provide finance for able-to-pay households and businesses to invest in energy efficiency measures;
• Energy Performance Certificates, which have helped raise awareness of the energy efficiency of buildings since their introduction;
• the Renewable Heat Incentive and associated Scottish support which has helped to support the uptake of renewable heat;
• area-based schemes backed by appropriate levels of funding, which help to direct investment to where it is most needed, unlock previously stalled improvements, and lever in additional investment; and
• advice, support and quality assurance, helping to protect households and businesses from high energy bills.

24. Stakeholders also identified a range of issues and challenges that need to be considered as SEEP is developed, including:

• grant application deadlines are challenging to meet and often do not align with one another; timescales for delivering district heating and energy efficiency projects can differ making it challenging to coordinate works; and short-term budgets constrain programming of longer-term works;
• lack of long-term certainty of outcome and of the support that is on offer, which creates inertia and impedes social norming;
• lack of interest among building owners in making improvements and/or an understanding of running costs and potential savings, means there is low appetite to take out loans or use their own resources to invest in energy efficiency and low carbon heat improvements;
• a tendency for grant schemes and caps to dictate the solution and/or offer a limited number of measures, which may not be the best way to achieve the outcomes desired, and can hinder innovation;
• significant mistrust about the promotion and installation of energy efficiency measures and examples of poor workmanship that are now causing problems. In some instances this now requires replacement and remediation work and has contributed to damaging the reputation of energy efficiency more generally;
• concerns around EPC-based building assessments, which do not account for building conditions, are based on modelled (rather than actual) values, and do not favour low carbon heat - as well as more general concerns about the quality of the assessment itself;
• poor building conditions which can prevent energy efficiency and heat supply works;
• low carbon heat technologies are not a direct replacement for gas boilers, they may require extra space and require works to internal heat distribution systems e.g. radiators; and
• behaviours can offset any savings by inefficient use of building and heat systems, so also need to provide advice and information to change occupant behaviours.

Consultation questions

Thinking about current Government schemes and the delivery landscape, we would welcome stakeholders' views on:

• what currently works well, including aspects of existing schemes that should be retained?
• what are the main delivery challenges faced at present and how might these be overcome?