Zero Emission Taskforce recommendation report: Scottish Government response

Chapter 4 Providing social landlords with certainty

Recommendation 4:

Social landlords and the Scottish Government must work together to plan ahead with certainty, including working with new partners to access and maximise funding opportunities.

Our response:

The Scottish Government agrees with this assertion, we are committed to working with social landlords to plan ahead with certainty, including working with new funding and financing partners to maximise opportunities. This includes reviewing our current funding programmes and leveraging private investment through the work of the Green Heat Finance Taskforce.

Action 11.

In the live development and review of a range of interconnected policies, the Scottish Government should aim to provide clarity on the connections and tensions between different strategies and targets relating to net zero, primarily the Heat in Buildings Strategy, Fuel Poverty Strategy, rent affordability and EESSH2.

Scottish Government response

The Scottish Government is committed to achieving a just transition to net zero, as such it is imperative that there is coherence across a number of areas notably the Heat in Buildings Strategy, Fuel Poverty Strategy and rent affordability. Routes to achieving all outcomes in a balanced and sustainable way must be found.

The Heat in Buildings Strategy includes a set of principles to ensure progress on heat decarbonisation is aligned with the need to eliminate fuel poverty as far as is reasonably possible and in line with statutory targets. These principles will guide us in our delivery programmes, such that we only take forward actions where they are found to have no detrimental impact on fuel poverty rates, unless additional mitigating measures can also be put in place. Our fuel poverty strategy sets out the actions we will take to address the other drivers of fuel poverty, which complement the actions we are taking to retrofit homes across Scotland.

We commit to continuing to work with the social housing sector and across the Scottish Government, initially through the review of EESSH2, to ensure there is coherence across objectives in order to deliver on our statutory targets to eradicate fuel poverty and achieve net zero.

Action 12.

The proposed review of EESSH2 should be brought forward to commence immediately with a final decision on the revised approach and implementation no later than 2023. This should include a period of reflection and further research while also allowing the outcomes of the recently published consultation on EPC assessments to be considered.

Scottish Government response

The Scottish Government will bring forward and accelerate the review of EESSH2. This will commence in summer 2022 for completion in 2023. The review will need to take into account the outcome of the EPC assessment review as well as the development of the wider regulatory framework for heat in buildings, including requirements for owner occupied and private rented sectors. We are committed to undertaking this review jointly with the social housing sector.

Action 13.

In order that time is not wasted planning for the requirements as they currently stand, if it is now likely the goalposts will shift, the Scottish Government and Scottish Housing Regulator should issue interim guidance on what measures should be prioritised during the review period.

Scottish Government response

We recognise that the EESSH2 review, which will align standards in the social housing sector with net zero will require a change in approach to respond to the significantly increased national ambitions on Zero Carbon buildings. For example, a revised standard will also need to incorporate zero emissions heating systems as well as fabric improvement measures. In recognition of this the Scottish Government has put on hold temporarily both the 2025 and 2032 EESSH milestones, pending the outcome of the EESSH2 Review.

In the meantime we call on social housing providers to continue to invest in retrofitting their stock including:

• Continuing to improve standards across the board so that an increasing number of properties achieves the 2020 EESSH Milestone equivalent to EPC Band C or D in the short term, with a view to ultimately achieving EPC Band C where possible;
• Deploying zero emissions heating systems where technically feasible and where they would not have an adverse impact on tenant energy bills or fuel poverty, giving particularly prioritisation to heat networks where they are the optimal solution.

We will continue to support the sector’s investment in energy efficiency and zero emissions retrofit through the Social Housing Net Zero Heat Fund, which is allocating £30 million in 2022-23 for heat and energy efficiency projects. Social landlords wishing to develop heat networks are also eligible for capital funding via Scotland’s Heat Networks Fund.

Action 14.

A new Housing Net Zero Technical Steering Group, with representatives from the social housing sector, should be established to provide guidance and clarity on technical solutions and to continually review progress and refresh existing strategies as new energy and zero emissions heating systems are evaluated and developed.

Scottish Government response

The Scottish Government will work with the social housing sector to establish a new technical steering group. In the first instance this group should support and feed into the EESSH2 review. Longer term this group could have a role in disseminating and sharing best practice across the sector.

Action 15.

The Scottish Government should engage with the UK Government to determine the availability, timing and risk of alternative energy sources (e.g. low carbon or green hydrogen) and the future role of the gas network to enable the social housing sector to prepare short, medium and long-term investment plans.

Scottish Government response

The Scottish Government agrees with this action, and it is part of our ongoing strategic engagement with the UK Government on our Heat in Buildings Strategy. We will seek clarity from the UK Government at the earliest possible juncture and continue to impress the importance of clarity on this issue.

Indications so far suggest there will not be clarity on hydrogen until at least 2026 which is when the UK Government plans to make its final decision on the use of hydrogen for heat.

In order to make progress on our climate changes targets in the meantime, we would encourage social landlords to plan for the decarbonisation of their housing stock now in the context that there is no guarantee that hydrogen will be both available and cheaper than electrification routes.

Action 16.

The Scottish Government’s proposed analysis in the draft Heat in Buildings Strategy on the strategic areas most and least likely to have access to low carbon or green hydrogen in the future should be progressed as a matter of priority. This should also incorporate cost appraisals in order to consider the overall affordability of, and appetite for, hydrogen and whether this is a viable option for social landlords and their tenants.

Scottish Government response

The analysis to identify areas with high potential for hydrogen for heat in Scotland has recently completed and will be used to guide our approach going forward. A summary of the outputs will be published in the coming months.

The Scottish Government is unable to undertake a cost appraisal of likely running costs as they are dependent on future energy prices, market structures and business models – decisions on these are reserved to the UK Government. For the average home, blue hydrogen (and probably also green) might be less affordable than other forms of zero emissions heating such as heat networks or electric heat pumps due to the relative efficiencies of systems.

Action 17.

A central repository of funding opportunities, in one strategic package, for social landlords should be created, bringing together opportunities from government and other strategic bodies, and social landlords, local authorities and national governments should continue to work together to ensure funding opportunities are maximised to match the scale of the challenge.

Scottish Government response

The Scottish Government agrees with this in principle and that funding opportunities are easy to identify, navigate and access.

The National Public Energy Agency will have a role in streamlining the process, and how it will do that will be considered as part of the development work to establish the new Agency. We are committed to ensuring the Agency is designed to be people-centred, with a clear focus on embedding the principles of a Just Transition in all that it does. In that respect, we want to ensure a collaborative and transparent approach across the heat decarbonisation landscape in the development of the new dedicated Agency. Given its role as a key stakeholder, we very much welcome involvement of the social housing sector from the outset.