New Build Heat Standard: consultation - part two analysis

Chapter One: Prohibition of Direct Emissions Heating (DEH) Systems in New Domestic Buildings

Using its power under the Buildings (Scotland) Act 2003, the Scottish Government intends to prohibit DEH systems being installed in new domestic buildings warranted from 1 April 2024. The Building (Scotland) Amendment Regulations 2022 defined a DEH system as a system by which the building is heated or is cooled, or by which hot water is made available, which uses thermal energy produced by a source of production that is located within the building and that produces greenhouse gas emissions at the point of production of that thermal energy during normal operation. Any indirect or upstream production of greenhouse gas emissions, such as those normally produced to run a heat network or electrical grid, are considered out of scope. Moreover, the 2022 building regulations also set out standards for energy efficiency in the fabrication of all new builds, which would support the implementation of the NBHS. For more information on the 2022 building regulations, please refer to the consultation paper.

1. Do you agree with the approach set out in 2.1 to regulate direct emissions heating systems in new buildings?

2. Do you envisage any unintended consequences as a result of the approach set out in 2.1 to regulate direct emissions heating systems in new buildings? Please provide reasons for your answer.

Although Q1 and Q2 focussed on the proposed approach in the consultation paper and potential unintended consequences of this, respondents gave a wide range of answers in response to Q2. One third made open comments which reiterated or gave reasons for their support for the approach and the broader decarbonisation of heating. Most commonly, however, respondents raised concerns about the approach; these were not necessarily unintended consequences but wider concerns around implementing the New Build Heating Standard (NBHS).

In addition, most of the 33 respondents who responded in an alternative format, i.e. not through the Citizen Space portal, outlined reasons for their support or opposition to the proposals. While not answering Q1 and Q2 directly, most of the themes evident in these responses aligned with Q1 and Q2 and so are included in the analysis of these questions.

Finally, 16 near identical responses from housebuilders were received as part of a response co-ordinated by Homes for Scotland. A summary of this response is provided in the box overleaf. Once again, as the key points aligned with the themes evident under Q1 and Q2 these responses have been included in the analysis below.

Housebuilder response co-ordinated by Homes for Scotland

These 16 responses were received from organisations who employ 1,490 people and are responsible for 2,943 new homes in the last year, including 1,471 affordable homes.^[5]

While supporting the Scottish Government's commitment to net zero, these responses stated that it will not be possible to deliver the new standard in the proposed timeframe without support for: infrastructure improvement, particularly grid capacity; improved supply of ZDEH systems and technology; skills development; and support and education for consumers.

These responses argued that without consideration of these issues there will be a decline in the number of new homes being built across Scotland.

Views on the proposed approach

Three fifths (62%) of those answering Q1 agreed with the proposed approach to regulate DEH systems in new buildings; three in ten (30%) disagreed and 7% were unsure.

Agreement was higher among organisations than individuals - 66% compared to 52% respectively. All Local Authorities (100%) agreed, as did 80% of manufacturers and suppliers in the energy sector and 80% of those in the wider construction sector. Views among trade bodies in the energy sector were more mixed: half (50%) agreed, while 25% disagreed and 25% were unsure. Among property developers / builders, however, 63% disagreed with the proposed approach, with 38% agreeing.

Q1. Do you agree with the approach set out in 2.1 to regulate direct emissions heating (DEH) systems in new buildings?

Base	n=	Yes	No	Don't know	Not answered
All respondents	112	51	25	6	30
All respondents (%)	112	46%	22%	5%	27%
All answering (%)	82	62%	30%	7%	-
- Individuals	21	52%	43%	5%	-
- Organisations	61	66%	26%	8%	-
- Property developer / builder	16	38%	63%	0%	-
- Energy – trade body	12	50%	25%	25%	-
- Local Authority	12	100%	0%	0%	-
- Energy – manufacturer / supplier	10	80%	20%	0%	-
- Construction	5	80%	20%	0%	-
- Other	6	67%	0%	33%	-

Wider support

Respondents were not asked to elaborate on their reasons for agreeing or disagreeing with the proposed approach at Q1. However, one third of respondents provided an open comment which expressed support for regulating DEH in new buildings, either at Q2 or in the introduction to their response. Participants in consultation workshops also expressed general support for the proposed regulations. Respondents recognised the value of the proposals in advancing decarbonisation of heating and reducing emissions through electrification, in turn helping Scotland reach its climate change targets. A few noted their agreement with using the building warrant process to regulate and deliver the NBHS.

In most cases, however, support was caveated with the need to consider and address some of the concerns outlined below. Specifically, of the 51 respondents who agreed at Q1, 30 also identified unintended consequences at Q2, which are outlined later in this section. Only a small number of comments were given by the remaining respondents.

"The Heat Pump Association strongly supports this approach. The Scottish Government intends to reduce carbon emissions by 75% by 2030, this approach must be part of the new build standard moving forward. Heat pumps are the perfect Zero Direct Emission Heating systems solution for new build properties, alongside low-temperature heating systems. There is no reason why new homes cannot be designed to accommodate these systems, and there must be regulation to ensure properties are built in line with net zero emission targets. To further net zero aims for property-related emissions, we believe there should be an additional requirement in building standards of having a minimum proportion of the roof area covered by solar panels. The combination of heat pump and solar PV brings an added possible benefit of self-sufficiency of a household's energy requirements, which reduces fuel bills, and improves customer experience. In addition, new builds are helping to grow the reputation of heat pumps, which will be needed if they are to be adopted more widely in the retrofit sector." Heat Pump Association

"Kingspan agrees that in order to decarbonise new buildings there is a need to prohibit the use of direct emissions heating systems (DEH) in any new building applying for a building warrant from 1 April 2024 onwards. Kingspan note that whilst technologies, such as heat pumps are zero emissions at the point of use, scope 2 emissions (from purchased electricity and heat) will remain until the grid and heat networks are fully decarbonised. However, regulation of direct emissions will help to enable buildings to be future proofed and ultimately carbon neutral, as the grid and heat networks are decarbonised… Kingspan are supportive of how the Scottish Government intend to regulate to prohibit the use of direct emissions heating (DEH) systems in new buildings from 2024." – Kingspan Insulation Ltd.

"The NIA agrees with the approach set out in 2.1, as it sends a clear message and ambition to prohibit the use of direct emissions from heating systems in any new build from April 2024. The NIA support this as it provides a clear steer of the role heating can play in decarbonising new builds. Although the grid and heat networks are in transition to become decarbonised, this regulation prepares future buildings ultimately meet carbon neutral, and will be important in a decarbonised future." – National Insulation Association

"The case for pursuing Net Zero is well established and accepted by Scottish Government. In order to meet Net Zero targets, buildings will need to be equipped with ZDEH (Zero direct emission heating systems). It would be unfair to householders to construct new homes without ZDEH systems as the buildings would then require significant and costly retrofits in order to become Net Zero compatible." – BEAMA

While they did not directly express support for the proposals, in their co-ordinated response housebuilders noted their support for the Scottish Government's commitment to make Scotland net zero by 2045.

Summary of concerns and unintended consequences

At Q2, respondents were explicitly asked to identify any unintended consequences of the proposals. Both supporters and opponents of the proposals outlined a variety of concerns which they felt needed to be addressed before implementing the NBHS. The remainder of this section begins with an analysis of the results of closed question Q2, and is followed by an analysis of the open section of Q2, which asked respondents to outline any possible unintended consequences. Responses are organised into themes and presented in order of most to least commonly mentioned.

Unintended consequences

Among those answering Q2, three quarters (76%) envisaged unintended consequences from the proposed approach to regulate DEH, while one quarter (24%) did not. Organisations were more likely to anticipate unintended consequences than individuals (79% compared to 67% respectively). All property developers / builders and all those in the wider construction sector who answered the questions indicated there could be unintended consequences, as did 90% of Local Authorities. There was less concern among the energy sector – 67% among manufacturers and suppliers and 58% among energy sector trade bodies.

Q2. Do you envisage any unintended consequences as a result of the approach set out in 2.1 to regulate direct emissions heating systems in new buildings?

Base	n=	Yes	No	Not answered
All respondents	112	60	19	33
All respondents (%)	112	54%	17%	29%
All answering (%)	79	76%	24%	-
- Individuals	21	67%	33%	-
- Organisations	58	79%	21%	-
- Property developer / builder	16	100%	0%	-
- Energy – trade body	12	58%	42%	-
- Local Authority	10	90%	10%	-
- Energy – manufacturer / supplier	9	67%	33%	-
- Construction	6	100%	0%	-
- Other	5	40%	60%	-

Electrical grid infrastructure and capacity

The most prevalent concern identified in responses was whether Scotland's electrical grid could cope with the additional demand from greater electrification of heat in new buildings. Respondents argued that the existing infrastructure and capacity is insufficient, and that investment is required to ensure the grid is upgraded and maintained to meet and withstand future needs.

Several respondents highlighted their belief that this could be a particular challenge in rural or island areas where connections to the grid are more difficult and capacity could be lower. Several others noted that this may not be a challenge solely for introducing the NBHS; other changes such as more electric vehicles are also placing additional demand on the electrical grid.

In their co-ordinated responses, housebuilders called for improvement in infrastructure, particularly grid capacity, and for the Scottish Government to: "assist this process by making funding available to support sites that already have planning and/or building warrant approval to enable the necessary grid reinforcement and to support early adoption of zero-carbon heating technologies". Homes for Scotland also suggested that the Scottish Government should allow a 'by exception' approach post 2024 should some sites not have the required electrical capacity.

"Additionally, we are concerned that the capacity of existing infrastructure is insufficient to fully support a reliable switch to electric and decarbonised heating. Research^[6] has highlighted the need for network-wide innovation in order to mitigate concerns regarding the security of supply as consumer reliance on the electricity network increases, especially in rural networks with overhead lines supplying sparsely located demand centres. To avoid possible unintended consequences and costs, regulations should only be implemented once capacity challenges within the wider network have been understood and addressed." - The Chartered Institute of Building (CIOB)

Supply chain and skills shortages

The second most prevalent theme was challenges with the supply, installation, and maintenance of Zero Direct Emissions Heating (ZDEH) systems. There were two distinct strands within these comments. Beliefs about issues around the supply chain, particularly for heat pumps, were highlighted slightly more frequently. Many respondents described the significant increase required in ZDEH supply and expressed concern that current manufacturing rates will not be able to meet increased demand or be sufficiently scaled up by 2024.

Concern about a potential skills shortage^[7] was the other strand within these comments. As well as a shortage of skilled manufacturers, many respondents highlighted their view that there may be a lack of trained or qualified technicians to install, service, maintain or repair ZDEH systems. It was noted that there is an even smaller pool of qualified engineers outside the central belt; this was reiterated in the Island Communities workshop. One organisation noted that many current gas safety engineers may leave the profession, rather than re-train. The co-ordinated response from housebuilders notes that the 2024 timeframe for NBHS is ambitious given the lead time required to develop training then recruit and train learners. More specifically, NIBE Energy Systems Limited highlighted a potential unintended consequence that ZDEH systems could be poorly installed due to lack of training and suggested that installation should be supported by quality checks and training to ensure they meet the Building Regulations in new buildings.

"Without significant innovation for alternative technologies in the relatively short period before the NBHS is in place there will be a heavy reliance on air source heat pumps to deliver this approach. This will put a great strain on an already struggling supply chain." – Cala Group Ltd

"Once the most appropriate ZDEH solutions have been identified supply chains will need time to scale up. Initial volumes may be insufficient to cope with demand leading to shortages, this could lead to a reduced number of new homes being delivered. There is also the possibility that the insufficient supply of the most appropriate ZDEH solutions leads to the use of solutions that are less than optimum. This could have a negative impact on consumer running costs." - Individual

Conversely, the Scottish National Investment Bank argued that introducing the NBHS demonstrates the Scottish Government's support for decarbonised heat in buildings. This gives investors the confidence to fund the businesses and projects which will allow the sector to grow and scale up their activities, thereby strengthening the supply chain.

"Manufacturers are ready to increase supply in response to demand and policy signals, and the supply chain has matured over the last ten years, with a design an(d) installation standards framework for installers (MCS) for installers now in place." - BEAMA

Reduction in new homes being built

Another prevalent theme raised by many respondents was that planned developments of new homes could be delayed or cancelled, and there could be a reduction in the number of new homes being built. A few reasons were given for this. Delays could result from the supply chain issues noted above, as homes could not be built without the required ZDEH systems. Several respondents linked delays to issues with the electrical grid capacity; as noted above, those providing the co-ordinated response described the potential for delays in already approved sites unless there is grid reinforcement. A few noted that these challenges could reduce the number of new homes available across all tenures, including the delivery of the Affordable Housing Supply Programme and homes in rural areas.

A specific unintended consequence of this, noted by two anonymous local authorities, is that some developers could delay applications for building warrants until late 2023 under the current regulations, so they are still able to install DEH heating systems during the duration of their building warrant, post-2024. A response from a builder noted that some of the challenges presented in this section, particularly the supply chain for heat pumps, could put small and medium size builders out of business, reducing the number, range and choice of new homes available in Scotland.

"As a result, the unintended consequences will be many and varied. Many fewer houses will be built. The housing crisis we are in will worsen. The construction industry is recognised as being a major driver in a strong economy. To significantly reduce the output of the housebuilding industry will result in a corresponding damage to the wider economy." - The Energy Poverty Research initiative; Common Weal; and the Built Environment Asset Management (BEAM) Centre, Glasgow Caledonian University (joint response)

Scone and District Community Council noted their support for the regulations even at the increased cost to builders and buyers, and the effect it may have on housing stock.

"There will be increased costs to developers, and thus house buyers, but this is not an unintended consequence. Developers should not have the right to build houses that will add to emissions, nor to build houses that are not properly insulated. As a (completely powerless) community council member any attempt to object to planning applications about the energy inefficient builds is met with officers saying 'We can't force them, there is no legislation.' We need this legislation now now." - Scone and District Community Council

Cost implications and fuel poverty

Many respondents anticipated that consumers could face higher energy bills because of the proposals, which in turn could exacerbate fuel poverty in Scotland. This is because these respondents believe that electricity costs substantially more per unit than gas, and households switching to ZDEH for heating and hot water will increase their electricity consumption. The responses from the Consumer and Equality workshop also reflected this in relation to people switching from coal to ZDEH systems. Several respondents argued that this, and the currently high cost of energy, could add to the cost-of-living crisis, and that consideration needs to be given to those who may be unable to pay extra costs. Solar Energy Scotland called for the NBHS to include provisions for onsite generation of electricity in new buildings, through solar energy systems, for example, which would reduce the amount households have to pay suppliers.

More specifically, some respondents noted that households could pay more if they do not have the most appropriate or efficient ZDEH systems installed in their homes because of supply chain issues, or if they are using their ZDEH inefficiently (see consumer education below). Conversely, Kingspan Insulation Limited noted that new Building Standards should improve energy efficiency in new builds from 2022, in turn reducing costs.

Related to costs, a small number of respondents raised each of the following:

• That the proposals could increase the cost of new build properties, making them prohibitive or unaffordable for some.
• Households may face higher purchase and installation costs of ZDEH. One local authority noted that an unintended consequence could be less efficient systems being installed as they are cheaper than the most efficient solutions.
• Infrastructure costs will be incurred e.g., costs to upgrade grid infrastructure or for local authorities to install additional substations in new developments.

Concerns over use of Zero-Direct Emission Heating

Concerns about ZDEH technology were raised by many respondents. Two themes were evident in these comments. Most commonly, several respondents who gave a co-ordinated response were concerned, suggesting that it may be a short timeframe for introducing the Standard, which could mean the ZDEH systems installed are not the best long-term solution and could be more costly for households than technology which is currently being developed. A few argued this could stifle future innovation.

More generally, the other recurring theme was respondents' impression that ZDEH technology is problematic, impractical, untested, too expensive or does not currently have the scale to supply the new build market. Respondents also described negative perceptions of heat pumps (e.g., noise) and district heating networks (e.g., legal and contractual complexity.

"The [Air Source Heat Pump] technology has not been demonstrated to be the long-term solution to de-carbonisation and its forced introduction at this stage will stifle opportunity to investigate alternative carbon reducing methods of achieving net zero. Early adopters including social housing providers will be forced to adopt a new technology (ASHP), that is little used and not adequately market tested, which could well prove inefficient and likely become obsolete as new improved systems come to market." – Homes for Scotland

"Communal ground Source, Heat Networks and other options – in principle we are supportive however there are very few built pilot examples to review, compare and consider at the relevant scale of development. We're aware that this 'fear of the unknown' is prevalent across the industry and the customer base." – Springfield Properties

Need for consumer education

Though not a concern or an unintended consequence, another theme raised by many respondents was the need for consumer education on ZDEH technology and to make ZDEH systems as easy to use as possible. This theme was reflected throughout the Consumers and Equality workshop, where the role of publicity and the need for a clear communications campaign by the Scottish Government to educate consumers on ZDEH systems was suggested. Most broadly, the co-ordinated response from property developers called for a compelling and comprehensive public information campaign to increase public awareness of the benefits of net zero homes. Other respondents specifically described how many households will need to be educated in new technology so that they can run and maintain their ZDEH systems efficiently. One organisation noted the transition may be more challenging for elderly or disabled people.

Timescales

Several respondents, most of whom were part of the co-ordinated response, argued that the timescales for introducing the NBHS are too short, and it is not deliverable. This is due to the factors outlined across analysis of these initial questions, particularly grid capacity and supply chain issues. The co-ordinated response noted the perception that little progress has been made to address these issues since they were raised in a previous consultation. One organisation in the wider construction sector described how other European countries are planning to make similar changes but over a longer period, for example Denmark's target is by 2028.

Conversely, some organisations thought the Standard should be introduced more quickly. These organisations noted that introducing the standard in 2024 would mean that some homes being built in 2027/28 could still be using DEH technology. Others noted there is a missed opportunity in reducing emissions from the DEH heating systems which will be installed in new homes prior to April 2024 and will continue to emit over their lifetimes. In addition, two organisations called for the Scottish Government to establish and communicate clear timelines and milestones to provide certainty to the sector.

"However, there may be unintended consequences from this approach with the implementation date being set as 1 April 2024. If the April 2024 date is implemented, around 10,000 direct emission heating systems are estimated to be installed between October 2023 and April 2024, which could contribute a total of over 1.8 ktCO2 emissions during this heating season. Additionally, those 10,000 systems could be in place for another 15 years, consuming a cumulative 1.53 TWh of energy over their lifetimes, which could equate to 250 ktCO2 emissions. We therefore believe the ambition should be increased for this standard by bringing the timeframe for implementation forward to October 2023 (6 months earlier) to cover the heating season that precedes April 2024, reflecting the urgency of the need for change. The majority of these emissions can be displaced if the standard is implemented in October 2023, allowing for Net Zero goals to be achieved as soon as possible." - NIBE Energy Systems Limited

Calls for improved building efficiency

A recurring theme raised by several respondents was the need for the NBHS to be accompanied by other efforts to improve the energy efficiency of buildings. Some called for greater promotion of a whole building or fabric first approach to improve building standards and energy efficiency ^[8]. The importance of properly insulated homes was raised by SELECT and National Insulation Association. Kingspan Insulation Limited also noted their concern about insulation but highlighted that Building (Scotland) Regulations changes in 2022 should help ensure energy efficiency of new homes.

Three organisations including Homes for Scotland made a specific call for all regulations relating to energy use in the home to be implemented through Building Regulations as opposed to planning regulations, otherwise individual planning authorities could introduce their own requirements.

"With regards to implementation of the proposals, BEFS welcomes the general principles, but considers that there is still some work to be done towards a broader culture shift within the construction industries, as well as Scotland's homeowners, businesses, suppliers, and manufacturers. All need to understand that a fabric first - incorporating a maintenance first - approach will pay dividends and help to support the transition to net zero." - Built Environment Forum Scotland

"Restricting the use of the most polluting forms of heating and implementing more efficient alternatives is, in our view, only part of the solution. It is critical to link the standards and their application alongside requirements for reductions in demand. It is essential that the new standard is implemented in conjunction with improvements in the performance requirements of buildings and their energy efficiency." - The Royal Incorporation of Architects in Scotland (RIAS)

Related to this, some respondents called on the NBHS to recognise that the right ZDEH solution could vary for different buildings. For example, some suggested air source heat pumps may work well with individual homes, but not with flats. Another respondent, NIBE Energy Systems Limited, however, noted that blocks of flats could benefit from large-scale ground source heating systems or individual exhaust air heating systems, such as their own product.

"The SEA advocates a technology agnostic approach and believes that overly prescriptive policy can inhibit innovation and lead to unintended consequences. A host of low-carbon heating technologies, ancillary products, and energy efficiency measures that meet the heterogenous space and water heating demands of a building, and lead to the right outcomes, should be supported by government schemes." - Sustainable Energy Association

Fiscal package

The co-ordinated response from developers called for the Scottish Government to provide a fiscal support package to encourage and support consumers in the transition to net zero homes. They suggested this should include: an enhanced grant regime for delivering new affordable homes; the introduction of net zero carbon grant support for new home buyers; and discounted LBTT (Land and Building Transaction Tax) rates to incentivise consumer behaviour to encourage purchase of low carbon homes. One individual also suggested that there could be public subsidies for adopting ZDEH systems but noted this could be an unpopular use of public funds.

Less commonly mentioned themes

Several respondents highlighted that rural areas face additional barriers to moving to ZDEH, including less grid capacity, more off-grid buildings and uncertainty over electricity supply. A small number suggested that this could mean that it will not be possible to build new homes in some areas until better technology is available. Solutions were suggested by a few respondents, including the adoption of a regional response to the standard to allow fuel or biomass burning devices for back-up in rural areas, to introduce a phased approach for rural or off-grid areas, or to permit exceptions if grid capacity is unavailable beyond a certain level.

The exclusion of biomass and bioenergy systems from new builds after 2024 was also raised by some respondents including detailed responses from Oil Firing Technical Association (OFTEC) and United Kingdom and Ireland Fuel Distributors Association (UKIFDA) and AMP Clean Energy. Views on the use of bioenergy systems are presented in the analysis of Q3. As well as raising the exclusion of biomass, Scottish Renewables argued that solar should be included as an option in all building specifications.

Across Q1 and Q2 and the alternative format responses, several other concerns or consequences were raised by very small numbers. These included:

• Calls for a further review of the EPC (Energy Performance Certificate) to ensure it and the NBHS are aligned. A few respondents, including the co-ordinated responses, also noted that there have been delays to the new iSAP (Standard Assessment Procedure) software which is impacting preparation for the new Building (Scotland) Regulations changes in 2022 and that this may also impact the delivery of the NBHS in 2024.
• One respondent noted that as no gas network will be built to new homes, this could prevent homes switching to green gases^[9] such as hydrogen in the future. Another called for the regulations to be drafted in a way which would accommodate hydrogen in the future if trials are successful, and two called for hydrogen to be considered as an alternative. One respondent noted that hydrogen boilers could eventually be considered ZDEH, but that they create Nitrous Oxide emissions, so they called for the NBHS to focus on systems which do not produce Nitrous Oxide.
• A need for upstream reduction in emissions from electricity generation.
• Designs of houses will need to change to accommodate ZDEH solutions.
• Noise pollution from multiple heat pumps could be an unintended consequence.
• Job losses in businesses supplying wood burning stoves.
• The potential for direct greenhouse gas emissions from leakage of refrigerants from a larger number of air source heat pumps if they are not regulated or serviced.