New Build Heat Standard 2024: business and regulatory impact assessment

4. Options

4.1 Option 0 (Do Nothing)

35. At present, no regulations prohibit DEHs from being installed in new-builds. As a result of this and the various market failures present, we may expect the counterfactual to consist of the majority of new-builds adopting mains gas as their main heating fuel in the short-run, as observed in the data from the Scottish EPC Register (SEPCR) referenced above in Section 2.3.

36. As set out in paragraph 4, the recent changes to Scottish building standards may result in an increased deployment of ZDEH technologies in new-builds. However, considering these new standards concern only those buildings applying for a building warrant from 1 February 2023, it is difficult to predict what impact these changes may have. Regardless, these changes are to support the transition to the NBHS and will not themselves ensure that DEH system deployment in new buildings ceases.

4.2 Option 1 (Market incentives to adopt ZDEH systems)

37. One option considered in the policymaking process was the introduction of an incentive-based approach to the adoption of ZDEH. However, owing to the limitations of our devolved competence, the Scottish Government would be reliant on action taken by the UK Government or on voluntary action by suppliers.

38. For example, the Scottish Government does not have the necessary powers to intervene in the energy market to impose obligations on suppliers that would enable them to share costs, nor the powers necessary to enable them to recover costs from consumers via energy bills - as has been the case with previous incentives introduced by the UK Government, such as the Energy Company Obligation (ECO) scheme, where costs have been recovered in this way.^[38]

39. As a result, this option was not pursued further.

4.3 Option 2 (NBHS)

40. The Scottish Government's preferred option is to introduce regulations which will prohibit DEHs in new-builds and in effect require new buildings, applying for a building warrant from 1 April 2024 onwards, to use only those heating or cooling and hot water systems which produce zero direct greenhouse gas emissions at the point of use. The analysis of responses received to the full public consultation^[39] found that 62% of respondents who provided an answer to Q1^[40] were supportive of this approach. Likewise, 54% of respondents who provided an answer to Q5^[41] were supportive of the treatment of conversions under the NBHS.

41. It is proposed that this policy would be implemented using the Scottish Government's fully devolved building regulations by prohibiting the installation of direct emissions heating systems in new buildings.