New Build Heat Standard - scoping consultation: analysis

Key Challenges and Opportunities

Question 11

165. The consultation paper noted that the requirements proposed under this Standard would have an impact on the equipment, materials and skills needed to deliver modern homes and buildings from 2024 onwards. As such, there is a need to ensure there is a sufficiently skilled workforce and supply chain capacity available to successfully deliver the requirements of the Standard across Scotland. Question 11 asked,

Q11: '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?'

166. 68 respondents, consisting of 62 organisations and 6 individuals, made comments at this question. A number of the themes emerging at this question echoed issues raised at earlier questions.

167. A very large majority of respondents chose to comment on the need for skills and training in the workforce. The main focus of these remarks was a desire to put training and skills programmes in place so that a qualified workforce would be ready for the implementation of the Standard. Various facets of skills training were mooted, including the following:

• Upskilling or reskilling the existing workforce.
• Certification or qualification schemes to demonstrate competence.
• Apprenticeships.
• Modelling training to transition fossil fuel workers.
• College and/or university involvement.
• Establishment of a Renewable Energy Skills Centre of Excellence.

168. A large minority of respondents pinpointed specific areas in which they perceived a skills shortage, mostly in relation to technical areas concerning electric heating systems; these included engineering design, thermal bridging, hydraulic balancing, air permeability, service and maintenance, assessing and verifying work and board level / managerial skills. A particular issue, cited by a significant minority, was the requirement for large numbers of qualified heat pump installers; it was perceived these workers would mainly be trained up from the current boiler installer base and/or those with plumbing or electrical skills.

169. To facilitate skills training, a significant minority of respondents favoured investment and other forms of support, by way of government incentives, stimulus or initiatives such as a green jobs task force, the Transition Training Fund, the Future Skills Action Plan or City Region deals.

170. The other necessity required by a large minority of respondents in order to maximise opportunities for the supply chain was that of clarity regarding the Standard's regulations and framework. Clear commitments, timescales, lead-in periods and pathways to compliance were regarded as essential in order to help organisations plan for the changes. A few respondents voiced doubts about the ability to meet the 2024 timescale and suggested phasing in the new Standard to give time to adapt. Similar numbers of respondents were eager for a definition of the allowable technology mix; concerns were raised about the closing off of long term alternative solutions (e.g. BioLPG, liquid fuels), while hopes were expressed that opportunities for other non-carbon technologies would be promoted, such as solar PV and ground source heat pumps.

171. Collaboration, communication and joint working between stakeholders (manufacturers, supply chains, skills development agencies, training providers, local authorities, utilities, developers, etc.) and a generally more holistic approach was needed, according to a significant minority of respondents.

172. A large minority of respondents wished to see various parts of the supply chain scaled up in order to maximise opportunities; these areas included heat networks, ground loops, design functions and heat pumps.

173. A significant minority of respondents wanted to ensure market demand would be in place for the ramp up of supply chains. To help create this, it was suggested demand should come from existing buildings, tax incentives and/or campaigns to raise awareness.

174. Other opportunities foreseen by small numbers of respondents were in job creation (particularly if they were fair and decent jobs) and innovation opportunities involving more research and data generation to help develop the industry.

Question 12

175. Question 12 of the consultation went on to ask,

Q12: 'What do you envisage the key challenges would be for developers, and the wider building industry, in meeting this proposed Standard? How could this sector be supported to address those challenges?'

176. 73 respondents, consisting of 68 organisations and 5 individuals, made comments at this question.

177. The highest number of respondents, a large minority, suggested the main challenge for developers centred around cost issues, especially additional raw material costs incurred throughout their supply chains (in particular because of the higher costs of heat pumps as compared to conventional gas boilers), and the resulting impact on their business models. This was regarded as being particularly a problem for affordable and public housing providers, especially if the knock-on effects were higher property prices; in this respect it was noted that the 5 year Affordable Housing Supply programme was due to end. Despite the large number of references to cost issues, no quantified estimates were provided of possible cost increases. Smaller numbers of respondents focused on concerns about the running costs of net zero systems, citing lengthy pay back periods and a need for efficient operations.

178. The perceived lack of availability of expertise and skills amongst the workforce was also cited by a large minority of respondents, especially in the areas of heating design, engineering and installation.

179. A significant minority of respondents also made related points about quality control issues; challenges were mentioned such as poor workmanship, a need for compliance assessors, the performance gap between design and built standards, product traceability requirements and developers being incentivised to maximise profits.

180. Concerns about product supply and the availability of products (e.g. components, materials and plant) were raised, also by a large minority of respondents.

181. Perceived conservatism and resistance to change in building industry culture were also mentioned by significant numbers of respondents as a challenge to overcome, amplified by complex engineering and technical challenges in terms of changes to housing design and build.

182. Significant numbers of respondents also had concerns about the costs, timescales and the economic viability of works needed to reinforce the electricity network infrastructure in order to support energy growth.

183. Other challenges reported by smaller numbers of respondents included the following:

• Concerns over potential or perceived restrictions over the range of technology choices permissible under the Standard (e.g. combustion technologies, hydrogen via the gas network).
• Lack of consumer demand.
• The ambitiousness of the timescale to adapt, with suggestions that implementation by 2024 would be difficult, or that changes should be phased to allow the industry time to adapt.
• Local differences (e.g. inconsistency in local planning policies, local heat network zone availability).

184. Recommendations for support of developers broadly mirrored the anticipated challenges. However, a large minority of respondents made remarks citing the importance of clarity of detail concerning the Standard such that organisations could commit to new build investment decisions. These firmed-up details should include such factors as timescales, guidance, finalised strategies (e.g. Housing to 2040, the Fuel Poverty Strategy and the Heat in Buildings Strategy), incentive policies, routes to compliance and a definition of the technology mix allowed or desired in new builds. Mentions were also made about the importance of planning and building regulations being aligned to the Standard.

185. Support for workforce education and training was considered important by similar numbers of respondents; diversity of skills, digital skills and apprenticeships were specified along with support from Skills Development Scotland and the Construction Scotland Innovation Centre. Smaller numbers of respondents desired consumer and industry education to raise awareness and engagement of stakeholders, with suggested focuses on carbon literacy and the benefits of renewable energy.

186. Investment and funding was suggested as an aid for several diverse areas, including ambient heat networks, green jobs, retrofit programmes, new council housing and tax relief on low carbon homes.

187. Smaller but still significant minorities of respondents vouched for the following forms of support:

• Aid to help develop supply chains (e.g. providing market opportunities, establishing a national supplier / installer framework).
• Technology research (e.g. to test which solutions are best for certain situations, to improve current technologies' heating abilities in cold weather and to test emissions calculations' methodologies).
• Good communication and joined up thinking between stakeholders (developers, industry, government, etc.).
• Reduction of energy demand with suggested measures including fabric, Passivhaus standards and waste water heat recovery.

Question 13

188. The consultation paper noted that with the introduction of this Standard, one potential outcome is a substantial increase in electrical heating systems serving new buildings. Question 13 of the consultation focussed on challenges for the energy networks and asked,

Q13: '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?'

189. 71 respondents, consisting of 64 organisations and 7 individuals, made comments at this question.

190. With respect to the key challenges for energy networks, a majority of respondents focused on the impact of additional electricity demand on grid capacity resulting in the need for upgrades of the broader network. Similarly, a large minority of respondents cited the issue of lack of network capacity at a local level, with upgrades needed to infrastructure such as transformers, substations, cabling and district heating networks. Respondents pointed out that a failure to undertake these infrastructure works would adversely affect the viability of zero emissions heating.

191. A large minority of respondents made points about the perceived adverse knock-on effects of having to perform major infrastructure works on the electricity network. Most comments focused around the capital costs incurred and how these were to be funded, with remarks about the possible effects on house prices and a desire for consumer bills not to be impacted. Concerns about the availability of skilled electricians, engineers and other labour, and the disruption caused by infrastructure upgrades (in terms of works and environmental impact) were also raised.

192. Other challenges perceived, each by a significant minority of respondents, were as follows:

• Demand and supply management (dealing with peak demand times, etc.).
• Generation of sufficient electricity to cope with increased demand, because of the future prevalence of electric vehicles.
• Specific issues in electrical provision to rural and remote areas (including poor cost effectiveness in building infrastructure, lack of nearby heat or electrical networks, and the greater prevalence of fuel poverty amongst the rural population).

193. The most frequently cited type of support, suggested by a large minority of respondents, was the promotion of technologies to mitigate the need for network reinforcement. A variety of potential energy sources with a focus on domestic (onsite) energy production were put forward in this respect including CHP, hydrogen, electric vehicles (by smart EV charging or new V2G technology), heat pumps incorporating thermal storage units, and ambient heat sources. As the following respondents stated:

"…is currently running a trial installing around 250 heat pumps in homes … together with thermal storage units. By moving the timing of when heat is generated to low demand periods, thermal storage not only helps reduce the potential need for local electricity reinforcement but can also absorb surplus renewable generation." (Energy Sector)

"…there is a major infrastructure challenge inherent to delivering the loads necessary to support electrified heating. This in turn implies major investment and engineering work to ensure the networks are ready, over a significant timeframe. However, the use of onsite generation such as solar PV provides a way to mitigate this. Co-locating electricity supply and demand would mean that zero-carbon heating in new Scottish buildings will be able to draw on electricity produced at the point of use. This would help alleviate pressure on high-voltage networks, reducing the need for heavy engineering, and ensure that existing capacity is used to support the Scottish government's broader decarbonisation goals as effectively as possible." (Trade Body – Energy)

194. Similar numbers of respondents thought the best way to alleviate strain on electrical infrastructure was to improve home energy efficiency to reduce electrical demand. The construction of Passivhaus or fabric energy-efficient buildings (such that no or little heating is required) was recommended to help achieve this; analysis of data such as heat maps, and modelling of energy use and load requirements was also suggested.

195. Similar numbers of respondents cited the importance of coordinated working between stakeholders to upscale grid infrastructure and electricity networks; local authorities, developers, National Grid, utilities, and the Scottish Government were mentioned in this respect. Engagement of, and support for, Distribution Network Owners (e.g. through trials and good planning) was a particular focus of a few respondents. Working to a common strategy with clear targets and timescales was highlighted as being vital, with a suggestion that the government should produce a roadmap in order to facilitate this task.

196. Funding assistance was recommended by smaller numbers of respondents, as well as more general support for energy network capacity upgrades including sustainable design, supply chain development and training to increase the number of workers.

197. A significant minority of respondents discussed support and encouragement for District Heating Systems and local heat networks; a standardised or holistic approach was favoured with heat storage being posited as more cost effective than electricity storage.

198. Other potential facilitators for energy networks were put forward, each by significant numbers of respondents, as follows:

• Promotion of, and support for, battery storage (either at large scale or domestically using electric vehicles).
• Coordination or research help for other new zero carbon technologies, including EC+V charging / V2G and photoelectric cells.
• Smart energy management systems to help with flexibility (e.g. smart charging, smart heat pump control, active distribution network technologies, local smart grid systems).
• Support for lower power-consuming heat pump deployment.
• Support for specified renewable energy producers (e.g. wind, wave, hydrogen, solar PV).

Question 14

199. Question 14 of the consultation went on to ask,

Q14: "How do you see this Standard interacting with wider energy system changes, and what role do you see for flexibility and smart technologies?"

200. 68 respondents, consisting of 63 organisations and 5 individuals, made comments at this question.

201. A majority of comments about how the Standard might interact with wider energy changes centred around concerns about either how the increased demand for electricity emanating from new zero carbon infrastructure might overload or otherwise adversely impact network capacity, or the issue of balancing supply and demand at various times of day.

202. A very few respondents cited concerns about the variability of energy production from renewable sources with a resulting need for energy redistribution. As one respondent summarised:

"Smart technologies will be essential as the current electrical power networks will have to balance demand/supply during peaks in demand and potential surplus created by Low zero carbon technologies during off peak periods. There is huge opportunity for this however, once again, support and investment is key to the Standard." (Local Authority)

203. Related comments by a significant minority of respondents cited the problem of cost issues, in terms of the necessity of upgrading distribution infrastructure, installing new electrical charging infrastructure, and heat pumps and other increased heating costs incurred by consumers.

204. A significant minority of respondents said that flexibility was needed in the Standard to allow for the advent of new technologies, such as CHP, ULEV charging points, and the possibility of hydrogen being pumped through the gas grid making the rule about banning new gas connections redundant.

205. It was perceived by slightly smaller numbers of respondents that the Standard should overtly link to other regulations or legislation, with the Energy Efficiency Directive and Performance of Building Regulation specified in this respect along with decarbonisation targets, transport legislation and planning legislation. Similar numbers of respondents saw a need to align the Standard with the SAP.

206. A large minority of respondents stated that flexibility and the use of smart technologies would be essential to deal with the increase in electrical demand and to complement wider system changes. Many examples of new technology were espoused, each purporting to play a role in either mitigating the need for network upgrades or to help balance electrical supply and demand. Some respondents suggested the following:

• Electricity storage / onsite electricity generation (e.g. vehicle to grid charging with electric cars envisaged as part of the storage system for the grid).
• Battery storage.
• Thermal storage; from heat networks (thermal inertia in a residence's heating and hot water systems being hypothesised as being large enough to act as a thermal battery on the grid) with a few mentions of thermal storage from buildings themselves.
• Varying electricity tariffs / Time of Use tariffs to help balance electrical supply and demand.

207. Respondents also cited examples of smart technologies as useful tools in helping the energy system to be flexible; energy smart appliances, smart meters, environment sensors, smart monitoring and smart domestic heat pumps were all quoted in this respect. Very small numbers of respondents suggested other energy-balancing solutions including ground source heat pumps, micro CHP and photovoltaics.

208. A few respondents thought the focus should be on building low energy-use buildings via a fabric energy efficiency or Passivhaus approach.

209. The consultation paper highlighted that 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 more complex and expensive to run. As such, the introduction of the Standard will need consumer awareness to be raised.

Question 15

210. Question 15 of the consultation went on to ask,

Q15: 'What can be done to encourage greater consumer awareness and understanding?'

211. 78 respondents, consisting of 71 organisations and 7 individuals, chose to make comments at this question.

212. The overwhelming majority of responses coalesced around the provision of education and information. The highest numbers of respondents, including a majority overall, specified more education as being the key to encouraging greater consumer awareness and understanding. Various tools were suggested as means to achieve this including:

• Educating the public (and developers) about decarbonisation, low carbon technologies and how low carbon buildings can be constructed.
• Providing clear instructions (by way of information packs, guides or manuals) as to how to efficiently operate low carbon systems (e.g. heat pumps) in the home.
• Providing an advice helpline.
• Detailing expected costs incurred and potential savings made by installing new systems, with small numbers of respondents recommending the use of real life examples or case studies to detail people's experiences and the real savings made.

213. A large minority of respondents commented more generally about the benefits of spreading of knowledge and information in terms of climate change and changes to heating systems. Similar numbers cited the importance of effective communication campaigns and publicity, via TV advertising, direct communication channels, from industry, through a variety of media and the targeting of young people – the latter being seen as the most likely grouping to respond positively to change. A few respondents suggested using COP26 as a vehicle for publicity.

214. Smaller numbers of respondents – but still a significant minority -thought that the Scottish Government should take the main role in raising consumer awareness and understanding, by pushing climate change higher up the agenda and detailing future actions and regulations. A few respondents emphasised the importance of a joined up approach between stakeholders including the government, local authorities, industry, heat suppliers and purchasers of new build properties. A small number of respondents desired a more bottom up approach including an enhanced role for community groups and more grassroots engagement (e.g. holding workshops).

215. The use of financial incentives was suggested by a large minority of respondents, in part because of the perceived high costs of new build heat systems, with some comments maintaining that these were currently poorly thought through. A variety of incentives were suggested, including:

• Council tax reductions on energy-efficient A-rated homes.
• Incentives to replace gas boilers.
• A Green Homes Grant.
• Energy-efficiency being a requirement for mortgage lenders.
• Increasing tariffs for peak time energy use.

216. More training or upskilling of developers and tradespeople was suggested by a significant minority of respondents, so that they can demonstrate the correct operation of new energy systems to consumers.

217. Other forms of encouragement, mainly in terms of accessing advice, were suggested by very small numbers of respondents.

218. Many of the points raised in consultation responses were also reiterated by individuals who attended the workshop events.

Question 16

219. Question 16 of the consultation went on to ask,

Q16: '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?'

220. 68 respondents chose to comment at this question, consisting of 62 organisations and 6 individuals

221. Opinions were split fairly evenly on the approach to be taken with regard to new non-domestic buildings. The numbers of respondents who thought the standards and principles applied should be broadly similar to those for domestic buildings, was roughly equal to the numbers who perceived they may need altering. A few respondents thought there should be a more phased process for reduction of emissions or introductions of standards as compared to residential properties, without specifying particular sectors.

222. A very few respondents saw a need for financial incentives to facilitate new non-domestic buildings in meeting the standards: revisions to stamp duty, council tax or business rates were suggested as well as the introduction of low interest loans or penalties for non-compliance.

223. The main challenge perceived in relation to new non-domestic buildings (by a large minority of respondents) was their differing uses. It was pointed out that the heating, hot water and energy demands of buildings varied a great deal depending on whether the buildings concerned were used for office space, warehousing, leisure, education, etc. Sector specific guidance was therefore suggested as being necessary. In a related point, smaller numbers of respondents pointed out that it would be difficult to apply a single standard to the buildings due to a multitude of different designs. As illustrated below:

"There is a need to understand the complexity of non-domestic building designs, from a large open spaced warehouse, to the requirements of a multi-discipline hospital as well as hotels, schools, prisons and many more types of building. Each type of building requires a different approach to designing the space heating and DHW (Domestic Hot Water) supply. The use of heat pumps for space heating and point of use appliances for DHW is an acceptable solution for smaller buildings, however, when large amounts of domestic hot water are required for hotels, sports halls etc., then the need for large volumes of hot water at a higher temperature will cause issue of supply. In these cases, there is a need for an appliance which can provide large volumes of hot water and this is more suited for a boiler. There is the option of electric boilers, however, the increased electrical load to the building needs to be considered as to whether upgrades to the electric supply are needed, with the extra costs involved." (Trade Body – Energy)

224. A significant minority of respondents foresaw challenges caused by the larger scale of non-domestic buildings. In particular, respondents focused on large heating and hot water demands making heat pumps unsuitable for use in sizeable buildings (albeit there was some disagreement here with small numbers of respondents vouching for the ability of commercially-sized heat pumps being able to meet the requirements of almost any size of building). Concerns about the capacity of electrical networks and the potential to overload existing infrastructure due to the demands of large buildings were voiced by a very few respondents.

225. Other challenges were foreseen by small numbers of respondents as follows:

• Problems arising from occupants of non-domestic buildings, often being tenants, having no vested interest in the operational performance of the buildings in terms of carbon emissions; changing tenants resulting in regular changes in use; or complex building ownership chains.
• Cost implications (e.g. given the bespoke construction of new non-domestic builds).
• Split responsibility (in some cases) for the installation and / or operation of heating systems.

226. The most frequently discussed opportunity afforded by non-domestic buildings, as mentioned by a significant minority of respondents, was the potential to act as good baseloads, generation modes or heat sinks for District Heating Systems or other heat networks or sources of heat (e.g. heat recovery). An important role in local heat and energy flexibility was thus envisaged. Small numbers of respondents proposed using non-domestic buildings as important anchor loads or as providing economies of scale (e.g. via their large roof areas) for other net zero infrastructure such as solar panels and community solar schemes.

227. Significant minorities of respondents saw value in using new non-domestic buildings as case studies in order to demonstrate new designs, help upskill designers and installers and generally encourage new heat system take up. To this end they could play an important role in progressing net zero technologies such as hydrogen (replacing gas supply), air source heat pumps, bioLPG, LPG, hybrid systems and battery storage.

228. A significant minority of respondents viewed Passivhaus standards as being commercially possible to integrate into a wide range of non-domestic buildings.

229. A workshop was held among individuals within the non-domestic sector and similar themes to those seen above emerged in relation to non-domestic buildings. Other issues raised by workshop attendees included reference to:

• Covid19 ventilation requirements and the need to take these into account.
• A potential lack of skills within this sector; also a lack of capacity.
• A lack of clarity over incentives, for example, for the development of different technologies. One respondent also requested an RHI replacement.
• A need to hold contractors to design targets.
• The need to get buy-in across the industry and consumers, along with increased understanding and awareness.

Question 17

230. The final question in the consultation focused on the challenges or opportunities for households on low incomes and asked,

Q17: "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?"

231. 65 respondents chose to comment on this question, consisting of 62 organisations and 3 individuals.

232. Challenges and opportunities were voiced in equal measure regarding the impact of the Standard on low income households. Two worries in particular were pinpointed, both by significant minorities of respondents: firstly, concerns about increased energy costs and bills with the resulting negative impact on affordability of energy. It was pointed out in this respect that electricity's running costs are currently more expensive than those of gas or ground source heat pumps – the latter perceived by one trade body respondent as being 3 or 4 times cheaper to run than direct electric heating, albeit with installation costs which are expected to be paid by the consumer and with limited application depending on ground space availability. Secondly, related points were made about the negative effects of fuel poverty, in terms of encouraging inappropriate heating sources as these are cheaper, and the lack of access to new build properties by the fuel poor.

233. Other challenges postulated by small numbers of respondents were the possibility of higher rents and other property costs (e.g. as a result of landlords trying to cover their capital outlay on clean energy, or as a result of a hypothesised raise in council tax on new builds).

234. However, a majority of respondents foresaw that lower energy use in housing would be a major benefit for low income households. Greater efficiency was visualised as resulting in a reduction of costs, no future retrofitting being necessary and a reduction in fuel poverty as long as standards are implemented effectively. Additional points were made by small numbers of respondents about access to cheaper renewable energy reducing energy bills, and the perceived low running costs of ground source heat pumps. Passivhaus standards were also advocated as a means of reducing energy spend.

235. Other advantages cited for low income households by small numbers of respondents were an improvement in health standards (due to better air quality and thermal comfort) and the possibility of local community ownership via local heat networks or systems.

236. A variety of suggestions were made as to how the Scottish Government could take account of the challenges and opportunities facing low income households. The greatest numbers of respondents – a significant minority – saw the need for protection of the most vulnerable (e.g. social tenants) by means of policy drivers and /or financial support or subsidies. Low cost tariffs for those on benefits were specified by a very few respondents. Respondents also commented on a perceived need to reduce the current imbalance in fuel pricing (in terms of electricity versus gas) as a means to help ensure that no new heating system costs more than current systems. Several respondents suggested a change in environmental and social levies is required in order to achieve this, given perceptions that they do not reflect relative fuel emissions (i.e. promoting gas over electricity).

237. Similar numbers were in favour of supporting customers with technology use and educating consumers; keeping technology controls simple, handover packs, efficiency advice and remote monitoring for corrective advice were the various tools suggested to this end. A few respondents saw a need for helping people know what support is available, with suggestions that there should be a role for Home Energy Scotland in this respect.

238. Slightly smaller numbers reiterated that it would help if developers were allowed flexibility to meet the Standard using various technologies including: hydrogen, PV battery, solar, BioLPG, liquid fuels, DHS, battery storage and Mechanical Ventilation Heat Recovery (MVHR). Similar numbers of respondents desired a fabric energy efficiency approach to be prioritised.

239. A few respondents desired a more joined up approach between policies, in particular between the fuel poverty strategy, the Standard, and environmental, energy and building regulations.

240. Tackling the capital costs of new installations was deemed a priority by a very few respondents.