New Build Heat Standard: scoping consultation

Chapter 3: Key Challenges & Opportunities

3.1 Introduction

This chapter outlines the main challenges to implementing this Standard that the Scottish Government has identified so far – alongside the potential opportunities that can be seized in this transition to a ‘zero emissions’ future.

3.2 Developing skills and supply chain capacity

The requirements proposed under this Standard will have an impact on the equipment, materials and skills needed to deliver modern homes and buildings from 2024 onwards.

Therefore, we need to ensure there is a sufficiently skilled workforce and supply chain capacity available to successfully deliver the requirements of the Standard across Scotland.

It is, however, encouraging that this has already began to take place – with a number of developers across Scotland already delivering homes with zero direct emission heating, and taking the necessary steps to reskill their workforce to do so.

The skills and qualifications required for zero direct emissions technologies differ from those required to install and maintain more ‘traditional’ plant and equipment – and this presents an excellent opportunity for the development and re-training of personnel across the industry.

Also, the skills and supply chain opportunities arising from action to decarbonising heat in buildings are also an important part of our green recovery from the COVID-19 pandemic.

The Scottish Government has laid out future plans to help ensure Scotland’s workforce is equipped with the necessary knowledge and skills to take full advantage of the changes which this Standard (and the wider-net zero agenda) will bring:

Economic Recovery Implementation Plan^[23]: Snapshot

We have:

• Focussed on improving the provision of lifelong learning and enabling people to reskill with it being one of the key themes at the heart of the Future Skills Action Plan.
• Been engaging with Skills Development Scotland, other agencies and key stakeholders to collaboratively review current interventions against emerging labour market intelligence.
• Doubled investment in workforce upskilling and retraining through the Flexible Workforce Development Fund (FWDF) and established a framework for revised delivery so it benefits more employers and individuals across Scotland.

We will now:

• Ensure that our skills response builds on the work already in development to identify and plan for the skills and jobs needed for key transitions in the future, including the Climate Emergency Skills Action Plan. This will ensure jobs created in response to COVID-19 are sustainable, support a just transition to net zero and help us to achieve our inclusive growth ambitions.

We plan to:

• Introduce a Transition Training Fund as a flexible mechanism to support individuals facing redundancy and unemployment in those sectors most exposed to a downturn. This will provide opportunities to upskill and transition into employment in sectors with continuing skills gaps/growth opportunities and to support our transition to net zero.
• Work with delivery agencies, partners and stakeholders to evaluate FWDF, ITAs and other current skills interventions to ensure alignment and effectiveness. As set out in the Future Skills Action Plan, we are committed to developing a culture of collective investment in skills and will continue to play an active role in workforce development.

3.3 Grid impacts

With the introduction of this Standard, one potential outcome is a substantial increase in electrical heating systems serving new buildings.

Heat Pumps, and other forms of electric heating such as storage heating, can have a substantial impact on the amount of electricity that a building uses, and to the contribution that building makes to local peak demand. It is important that we understand the potential grid impacts of electrifying the demand for heat, and the opportunities for dealing with them.

Separately, the Scottish Government is committed to encouraging and promoting the uptake of ultra-low emission vehicles (ULEVs), and have set out the ambition to phase out new petrol and diesel cars and vans by 2032.²⁴ An increased number of ULEVs on Scotland’s roads and the additional charging infrastructure required, including at a domestic-level through home charging points, represents a further pressure on electricity networks that will require the implementation of smart management solutions.

There is a need to consider how new buildings will also incorporate other zero direct emissions technologies and, from the perspective of the electricity network, the interaction with ULEV charging will be important. For example, in addition to this Standard, the Scottish Government will also be developing regulations that it plans to introduce next year to

facilitate the installation of ULEV charge points in car parks of new as well as existing buildings.

The diagram below illustrates how heat pumps and ULEV charging can change domestic electricity demands:

Demand

Domestic property (gas grid)
Contribution to peak electrical demand: 1 – 3 kW
Typical annual electricity demand: 3,000 kWh

Domestic charge point for single electric vehicle
Installed capacity: 7 kW
Typical annual electricity demand: 2,000 – 4,000 kWh

Heat pump
Installed capacity: 3 – 10 kW
Typical annual electricity demand: 3,000 kWh – 6,000 kWh

Indicative values showing how the addition of heat pumps and electric vehicle charge points can substantially increase both the annual electricity demand of a household and the contribution that house makes to local peak demand. Adding heat pumps and EV charge points will require greater capacity on the electricity networks.

The electricity network impacts will affect housing developers, Distribution Network Operators (DNOs) and domestic customers themselves. Housing developers will need to provide larger connections to new buildings which could push up electricity connection costs.

While this may be unavoidable, the Scottish Government’s approach aims to mitigate some of the anticipated pressure on Scotland’s electricity grid infrastructure by further improvements to reduce heat demand in new buildings as part of the current and future review of energy standards within building regulations.

There is also the potential for connection costs to be managed by providing greater flexibility through smart-home management systems and energy storage (for example thermal storage or batteries).

We are keen to understand the evidence base and opportunities as well as the risks and limitations of relying on flexibility to reduce a building’s peak demand and manage electricity networks capacity, and any potential benefits of storage from a consumer perspective.

3.4 Potential cost implications

The Scottish Government recognises that the requirements of this Standard may have implications for the costs to construct new buildings and, also, on the energy bills of building owners and tenants.

It is important to address the likelihood that the capital and running costs of zero direct emissions heating may be higher than for the high greenhouse gas emitting systems they replace – which only further illustrates the importance of the need to reduce the demand for heat as far as possible.

This is most likely to be true if energy efficiency is also not considered as a priority – hence, why parallel work (i.e. the Scottish Government’s 2021 Building Regulations Energy Review) will investigate further opportunities to reduce heat demand (as recommended by the CCC), and the potential this offers to reduce overall development and running costs.

Scottish Government Support: Affordable Housing Supply Programme

Through the Scottish Government’s Affordable Housing Supply Programme (AHSP), we will be exploring these costs further by gathering evidence on:

a) The additional costs of installing zero direct emissions heating systems including any associated energy network connection costs within new build homes across Scotland.

b) The running costs for heating and hot water using these systems against ‘business as usual’ counterfactual assuming conventional high emissions heating systems would have been used.

c) The impacts of these actions on the end user/ consumer. We envisage the evaluation will be in two phases:

1. Pre-construction - which may use, for example, modelled data.

2. Post-construction - with tenant occupancy.

Through the AHSP, we will be able to test and evaluate zero direct emissions heating solutions so that lessons could, ultimately, be shared across industry and beyond.

The transition to a zero emissions future is one which must be just: ensuring that no one is left behind and no individual (particularly society’s most vulnerable) is unfairly impacted by the changes that this Standard will introduce.

Therefore, as part of the wider-consultation process (including the Technical Consultation, planned for 2021), the Scottish Government commits to undertaking a suite of impact assessments, including an Equality Impact Assessment (EQIA) and a Fairer Scotland Duty Assessment.

The purpose of undertaking these impact assessments is to ensure that, through the introduction of this Standard, there are no unintended consequences that have negative impacts on individuals or groups across Scotland. If any regressive impacts are identified, we will work with stakeholders to take steps to mitigate these.

3.5 Consumer awareness and education is key

Consumers have become accustomed to traditional heating systems, and many have had the comfort of knowing that there is a secure supply available at a comparatively low cost. Traditionally, direct electric heating is often perceived to be complex and expensive to run.

The introduction of this proposed Standard requires consumer awareness raising about the heat technologies it implies, and potentially some reassurance about ongoing maintenance, ease of use and comfort levels.

There is a general low level of awareness of zero emissions heat technologies amongst the public - highlighting the importance of raising consumer awareness around the transition to zero direct emissions heating technologies.

Heat pumps provide an example of where it is important to ensure that the user of the system is aware of the most effective way of running it. The maximum output of heat pump- based systems can be significantly lower than equivalent boiler systems, meaning that heat pumps will take longer to heat up a cold building. Users need to be aware that keeping a property warm, even when they are out all day, is the most effective way to use a heat pump.

We are keen to better understand the impact that consumer behaviour can have on the effectiveness and efficiency of zero direct emissions heating systems, and the implications for awareness and education.

Developers are already obliged to provide written information to the new building owner regarding the operation and maintenance of the building services and energy supply system^[25]. This also includes a Quick Start Guide, which should assist the home owner in identifying ‘all installed building services, the location of controls and identifying how systems should be used for optimum efficiency’.

The right introduction to the zero emissions heating system, which is simple to operate for efficient use, will be instrumental in building consumer understanding – while also ensuring they are able to take full advantage of the system to minimise their ongoing costs.

3.6 Wider-environmental impacts

It is envisaged that the transition to zero direct emissions heating and cooling in new buildings would have a positive environmental impact (for example, through improved air quality with the reduction in greenhouse gas emissions).

In terms of a Strategic Environmental Assessment (SEA), the Scottish Government will, as part of the development of this Standard, establish its statutory requirements under the Environmental Assessment (Scotland) Act 2005 – and ensure these are undertaken where required.

However, at this stage in the preparation of the Standard, it is our view that it would be beneficial to complete this work as part of the Technical Consultation in 2021 – scoping out views of stakeholders. Once the Scottish Government has had an opportunity to reflect on these initial views, and formulate a more comprehensive view on the depth of the proposals required, we could then better understand and explain our SEA needs.

3.7 Timings

Within Scotland’s 2019-20 Programme for Government, the Scottish Government’s aspirations for this new Standard to take effect from 2024 are made clear.

A regulatory Standard is essential to create a ‘level playing field’ across the construction industry - ensuring a common starting point for the transition to a zero emissions future.

The approach taken by the Scottish Government is to legislate in advance of 2024 to give industry clarity on what is expected for new developments moving forward, and also to allow industry sufficient time to prepare in advance of this Standard coming into force.

Scotland is already seen as a leader in its efforts to decarbonise – and, by embracing the requirements set out within this Standard prior to 2024, there may be prospects for Scottish businesses and supply chains to eventually take advantage of potential export opportunities: thereby, growing the Scottish economy as well as further contributing to the effort to decarbonise globally.

However, the Scottish Government does recognise that many developers operate across the UK as a whole, and consistency with the rest the UK (as far as reasonably possible) is a priority for many developers.

As set out previously, for new non-domestic buildings, similar requirements will be ‘phased- in’ from 2024 - whereas all new domestic dwellings consented from 2024 will be required to comply with this Standard. There are further challenges associated with non-domestic buildings (for example, due to the diverse building stock), and it is the Scottish Government’s intention to address these within this Standard’s Technical Consultation in 2021.

3.8 Questions

11. How can opportunities be maximised for the supply chain involved in the delivery of new homes (ranging from product suppliers to on-site operatives), including skills?

12. What do you envisage the key challenges would be for developers, and wider-building industry, in meeting this proposed Standard? How could this sector be supported to address those challenges?

13. What are the key challenges for the energy networks regarding the deployment of zero emissions heating in new developments? How could this sector be supported to address those challenges?

14. How do you see this Standard interacting with wider-energy system changes, and what role do you see for flexibility and smart technologies?

15. What can be done to encourage greater consumer awareness and understanding?

16. What approach should be taken when considering new non- domestic buildings, and what are the specific challenges and opportunities relating to new non-domestic buildings?

17. By introducing this Standard, what challenges or opportunities might result for households on low incomes (for example, around affordability or access), and how can the Scottish Government best take account of these?