Climate Change Plan: third report on proposals and policies 2018-2032 (RPP3)

Chapter 2 Buildings

This chapter combines the residential sector (all of Scotland's housing including owner occupied, private and socially rented homes) and the services sector (all non-domestic buildings in the public and commercial sectors).

The majority of emissions from buildings are generated by the use of energy, particularly for space and water heating in the residential and services sectors, and cooling in the service sector.

In the draft Climate Change Plan and in previous Reports on Proposals and Policies, the residential and services chapters were presented separately. However, in 2015 Ministers designated energy efficiency as a National Infrastructure Priority and committed to the development of Scotland's Energy Efficiency Programme ( SEEP), which is an integrated approach to improving the energy efficiency and supporting decarbonisation of the heat supply across the residential and services sectors. As such the residential and services chapters have been brought together as a single 'Buildings' chapter in order to better articulate our integrated policy response. The pathway graph below shows all pathways – residential, services and combined.

Where We Are Now

Figure 5: Buildings historical emissions

Emissions from Scotland's buildings in 2015 were 9.5 MtCO ₂e, accounting for about 20% of the total. Between 1990 and 2015 emissions from Scotland's buildings had fallen by 14%. Of these, emissions from residential buildings in 2015 were 6.1 MtCO ₂e, or about 13% of Scotland's emissions. Residential emissions have fallen 24% between 1990 and 2015, although they vary annually, driven by the severity of winter weather which fluctuates from year to year. Since 2009 when the Climate Change (Scotland) Act was passed, emissions have fallen by 15% – a reduction of 1.1 MtCO ₂e.

In the services sector total emissions in 2015 were 3.4 MtCO ₂e. Since 2009 when the Climate Change (Scotland) Act was passed emissions have fallen by 6%.

In 2016 there were 2.58 million residential dwellings in Scotland. The residential sector is very diverse varying in tenure, age, primary heat source and level of energy efficiency. In total, 23% of Scotland's occupied homes are socially rented, 15% privately rented and 61% owner occupied. It is likely that more than 80% of housing in use today will still be in use in 2050. Three-quarters of our homes were built before 1982 and one-fifth before 1919. Space heating and the provision of hot water account for over three-quarters of the energy we use in our homes. At present 79% of households use mains (natural) gas as their primary heating fuel, 11% of households use electric heating, 6% oil, while the remainder use other fuels such as biomass.

• In 2016, on average households produced 76 kg/m ² of CO ₂ emissions down from 88 kg/m ² in 2012

The energy efficiency of Scotland's homes has improved in recent years. In 2016, around two fifths (39%) of homes achieved an EPC rating of Band C or above. Scotland now has, proportionately, 32% more homes with the top three EPC ratings (A-C) than England ^[54] . The Scottish House Condition Survey ( SHCS) estimates that, in 2016, 94% of lofts had at least 100 mm of insulation, while the proportion of dwellings with cavity walls (which constitute 75% of the housing stock) recorded as insulated by the SHCS increased from 62% in 2010 to 72% in 2016. For the remaining 25% of dwellings, which have solid or other wall types, the proportion with insulation was 15% in 2016.

Historical data on the profile of non-domestic building stock for the services sector, and its energy use, is limited. An increasing amount of data is now available for those non-domestic buildings which have already had an EPC assessment, as required by the EU Energy Performance of Buildings Directive 2004, for the period since data was first recorded in 2013. The Scottish Government is undertaking analysis to establish a baseline for the energy efficiency of Scotland's non-domestic buildings. This work is due to be completed in 2018 and will be essential in helping monitor improvements in energy efficiency and in supporting the further development of policies targeted at the non-domestic sector.

Progress Since RPP2

This section sets out the progress that has been made since the publication of the second report on proposals and policies ( RPP2 ^[55] ) in 2013.

Smart meters

The rollout has commenced and 4.2 million meter installations have taken place across the UK. Some meters being rolled out do not meet the highest specification due to delays by the Data and Communications Company, who provide the communications platform for the technology. The Scottish Government supports the aims of the smart meter rollout, however, we continue to press the UK Government to ensure that the programme is delivered to the greatest number of Scottish consumers, at the lowest possible cost, while enhancing the benefits to the most vulnerable in our society and those at risk of fuel poverty.

We are keen to maximise the opportunities presented by the programme and are exploring the potential for synergies across energy efficiency programmes, including through encouraging signposting to Home Energy Scotland at installation stage and funding Home Energy Scotland to use smart meter data to improve customer's understanding of their consumption patterns and help reduce energy bills.

Domestic Building Energy Standards (2010) New Build Properties

This policy was implemented in 2010 and results in lower emissions from new buildings. Standards set under this policy were further strengthened by a subsequent review which introduced further improvements to energy standards in October 2015 (see RPP2 proposals). Improved energy standards encourage both innovation and the deployment of low carbon solutions in construction.

Renewable Heat Incentive ( RHI)

The Scottish Government, through its various programmes, fully endorses and actively promotes the GB-wide RHI scheme to the benefit of householders and businesses across Scotland. Programmes include the Resource Efficient Scotland's Small and Medium Enterprise Loan Scheme ( SMEL), which, as of February 2018, provides a cashback incentive for energy efficiency measures in non-domestic buildings. The Home Energy Scotland Loan Scheme ( HESL) which is administered by the Energy Saving Trust ( EST), was amended in May 2017 to allow for an increased loan amount available for the installation of renewable technology, and since then these loans are also interest free. Scotland currently accounts for 19% of all accreditations under the non-domestic scheme and 20% of accreditations under the domestic scheme, well above pro-rata. The Scottish Government will monitor the supply of wood pellets for domestic biomass systems as part of its wider approach to the bioenergy sector in Scotland, which will include the development of a Bioenergy Action Plan.

Energy Company Obligation ( ECO) and Green Deal

Scotland has received more than its proportionate share of ECO measures, with latest statistics showing that by the end of June 2017 nearly 260,000 measures had been installed in Scotland, representing 12% of all ECO measures across Great Britain, which is above Scotland's population share of 9%. The UK Government ceased funding for the Green Deal Finance Company in July 2015, effectively bringing an end to the Green Deal, which had significantly underperformed against the UK Government's expectations.

Home Energy Efficiency Programmes for Scotland

Our Home Energy Efficiency Programmes for Scotland ( HEEPS) has made available over £500 million since 2013 (including the budget for 2018‑2019) in tackling fuel poverty and improving the energy efficiency of Scotland's housing stock. It has also leveraged additional funding from the Energy Company Obligation and the public sector of over £400 million to date. Including 2017‑2018 activity, almost 120,000 households in Scotland will have received an energy efficiency installation through HEEPS contributing to a reduction in domestic CO ₂ emissions and helping to save millions of pounds from fuel bills.

The SEEP transition will build on the success of HEEPS and will offer local authorities incrementally greater opportunities to deliver integrated energy efficiency projects.

District Heating Loan Fund

Since 2011, the District Heating Loan Fund has offered capital loans to support the development of district heating networks in Scotland. The scheme is available to provide loans for both low carbon and renewable technologies in order to overcome a range of technical and cost barriers. To date, we have offered over £12 million in loans to 45 projects.

CRC Energy Efficiency Scheme

The UK Government announced in the March 2016 Budget its intention to abolish the CRC and replace it with increased rates of Climate Change Levy ( CCL) and a new business energy reporting framework, commencing from 2019. The 2016 announcement only gave detail on the CCL rates for 2019-2020, and the UK Government announced in the November 2017 Budget that the subsequent CCL rates for 2020-2021 and 2021-2022 would be set in the 2018 budget. The proposed new energy reporting framework for the private sector was subject to consultation by the UK Government in December 2017 and the corresponding UK Regulations are expected to be introduced in 2018.

EU Products Policy

EU Products Policy is addressed through the Eco-design Framework Directive. An important element of this is improving the energy efficiency of products. This reduces electricity consumption and heat output. The emissions savings from using less electricity are factored into the Plan calculations in the electricity sector. The reduced heat output is shown in this section, reflected in a slight increase in emissions resulting from compensatory use of space heating. The overall effect, however, is to reduce total emissions. These policies continue.

Low Carbon Heat

The Scottish Government published the Heat Policy Statement ( HPS) in June 2015, setting out our heat hierarchy, and the actions and policies we are taking to reduce demand for heat and ensure its decarbonisation. The development of SEEP will continue to deliver the actions set out in the HPS, alongside those in the Scottish Energy Strategy, including ongoing support for the Heat Network Partnership and funding for district heating via the District Heating Loans Fund.

Domestic Buildings Energy Standards (2014) New Build Properties

This proposal is now a policy, implemented in October 2015, and is delivering intended outcomes. Emissions from new homes are now in the region of 75% lower than for buildings constructed to the standards applicable in 1990. Standards continue to encourage both innovation and the deployment of low carbon solutions in construction.

Regulation of Private and Social Housing

The Energy Efficiency Standard for Social Housing ( EESSH) is currently being reviewed to consider progress towards 2020 and the setting of any subsequent milestone(s) towards 2050. Consultation was undertaken in the first half of 2017 on energy efficiency standards in the private rented sector. The Minister for Housing and Local Government informed the Local Government and Communities Committee in November 2017 that standards would be set out in the SEEP route map to be published in 2018. Proposals will allow for an appropriate lead in time for the sector to prepare. Following public engagement over winter 2017‑2018, the SEEP route map will also set out how the Scottish Government will incentivise energy efficiency in owner occupied homes

New build Non-Domestic Energy Standards for 2014

This proposal is now a policy, implemented in October 2015, and is delivering its intended outcomes. Our higher energy standards for new non-domestic buildings are resulting in emissions approximately 75% lower than for buildings constructed to the standards applicable in 1990.

Assessment of Energy Performance and Emissions Regulations (Non-Domestic Buildings)

This proposal is now a policy. Since September 2016, The Assessment of Energy Performance of Non-Domestic Buildings (Scotland) Regulations 2016 require owners of buildings over 1,000m² offered for sale or rental to assess, and ultimately improve, the energy performance and emissions of their building. Under these initial regulations, improvement may be deferred by reporting of annual operational energy use.

Public Sector (Additional Potential)

The Scottish Government launched the Non-Domestic Public Sector Energy Efficiency ( NDEE) Framework in March 2016. This framework has been designed to support public and third sector organisations procure energy efficiency retrofit work. The development of the framework highlighted the potential to support up to £300 million of energy efficiency retrofit activity across the Scottish public sector estate. The economies of scale and standardised approach offered by the pan-public sector framework is attractive to both the public sector and private sector – offering both better solutions and better value for money. The Scottish Government has established a NDEE Support Unit to accelerate the number of projects and the delivery timescales of public sector energy efficiency projects using the NDEE Framework, and support our wider ambitions around energy demand reduction. The Support Unit launched in October 2016 and is a four year single supplier contract, led by Mott Macdonald with value of up to £2 million.

Working with the Scottish Futures Trust, COSLA, Resource Efficient Scotland and the NHS, and supplemented by public sector loans funding through Salix, we are supporting the delivery of energy efficiency projects across the public sector estate and will continue to support delivery of the greener street lighting programme and delivery of district heating projects.

This proposal was implemented in March 2016.

Our Ambition

Figure 6: Buildings Emissions Envelopes

Over the period of the Plan, we expect to see an overall reduction in emissions of 33% (2.9 MtCO ₂e) from Scotland's buildings. To achieve this, emissions from Scotland's residential and non-domestic buildings will need to fall by 23% and 53% respectively.

In the short term (to 2020) emissions from Scotland's buildings are expected to fall to 8.7 MtCO ₂e, primarily driven by energy efficiency improvements, including wall and loft insulation, smart meters and programmable heating controls. Emissions are also reduced through continued deployment of low carbon heat in off-gas properties and other low regret options ^[56] in on-gas properties over the period of the plan. From 2025, the pace of emissions reduction increases as we begin to supply an increasing proportion of heat to on-gas buildings using lower carbon fuels, where they are a low or no regrets option.

This trajectory takes us towards our long term 2050 ambition that will see our buildings transformed so that they are near zero carbon wherever feasible. To help guide us towards our ambition and meeting our climate change targets we aim to achieve the following:

• Where technically feasible by 2020, 60% of walls will be insulated and 70% of lofts will have at least 200mm of insulation in the residential sector.
• By 2032, 35% of domestic buildings' heat will be supplied using low carbon technologies ^[57] , where technically feasible, and the buildings will be insulated to the maximum appropriate level.
• By 2032, 70% of non-domestic buildings' heat and cooling will be supplied using low carbon heat technologies ^[58] .
• By 2032, improvements to the building fabric of domestic buildings will result in a 15% reduction in domestic heat demand.
• By 2032, improvements to the building fabric of non-domestic buildings will result in a 20% reduction in non-domestic heat demand.

As mentioned, the Scottish Government recognises the importance of energy efficiency in achieving our climate change and fuel poverty objectives and has accordingly designated it a National Infrastructure Priority. The cornerstone of this is SEEP, which, when fully operational, will significantly improve the energy efficiency of domestic and non-domestic buildings, as well as decarbonise the heat supply of buildings where this is a local decision. This will include off-gas grid buildings and on-gas grid buildings where they are a low regrets option. By doing this it will make our homes, shops, offices, schools and hospitals warmer and easier to heat.

SEEP brings together and builds on our existing successful programmes, including our Home Energy Efficiency Programmes for

Scotland, the Energy Efficiency Standard for Social Housing ( EESSH), and our Public Sector Non-Domestic Energy Efficiency Framework. To the mid-2020s SEEP will focus primarily on energy demand reduction in all buildings across Scotland helping to tackle fuel poverty and making our businesses more competitive. In addition, during this period SEEP will establish solutions for switching heating supplies from high to lower carbon or renewable sources for properties off the mains gas grid, as well as encouraging appropriately-sited district heating. Beyond that we will review and further develop SEEP in the context of wider changes to heat policy, including on the future of the mains (natural) gas network, set by the UK Government ^[59] .

We consulted on the principles of SEEP in 2017 to support development of the programme. We also consulted on the role that Local Heat and Energy Efficiency Strategies could play in improving the energy efficiency of our buildings and decarbonising their heat supply, as part of SEEP. Consultation analysis reports on both consultations were published in November 2017. We will publish a route map for the Programme in 2018 outlining our long-term ambition for SEEP and milestones to meet this.

By 2032 We Aim To Achieve

• 23% emissions reduction in the residential sector
• 53% emissions reduction in the services sector
• to do this, we are aiming for: 60% of walls insulated by 2020
• low carbon technologies will supply heat to: 35% of domestic and 70% of non-domestic buildings
• 15% reduction in residential heat demand from energy efficiency measures
• 20% reduction in non-domestic heat demand from energy efficiency measures

Case Study

Standby heat exchangers at the North British Distillery in Edinburgh

Credit: North British Distillery Ltd.

Tynecastle High School and North British Distillery ( NBD) teamed up to benefit from heat recovery technology, which harnesses waste heat from beverage production and utilises it by supplying total duty heat and hot water demand for a school of 560 pupils, eliminating the need for fossil fuel use under normal conditions.

The equipment installed consists of a 1.5 MW standby heat exchanger at the NBD end connected via insulated stainless steel pipework to a heat exchanger within the school boiler house. The system was designed as part of the school's construction. The heat is supplied as hot water through pipework leading from NBD at a temperature of around 85 degrees Centigrade. Heat is transferred to the school heating circuits with a sophisticated control system.

Operational costs are minimal. Tynecastle High School benefits from significant cost savings and North British Distillery meets its commitment to maximise resource utilisation under the Scotch Whisky Association's Environmental Strategy ^[60] .

Policy Outcomes, Policies, Development Milestones and Proposals

This Plan introduces energy and emissions intensity as policy outcomes. These outcomes are already measured and allow us to show reductions in energy use and falling emissions which do not come at the expense of growth in economic output and the number of Scottish households, thus capturing the more efficient use of energy across the sectors.

Energy intensity in the residential sector measures the amount of energy required per household. It is calculated by total energy consumption divided by the number of households. Reducing heat demand from insulation measures is one factor that contributes to reducing total energy consumption but other factors, including efficiency improvements in boilers or other household equipment, also contribute.

Emissions intensity measures emissions per unit of output. In the residential sector the number of households is taken as the measure of output, while Scottish Gross Value Added ( GVA) is used as the measure for non-domestic output. Supplying heat from low carbon sources contributes to reducing emissions intensity but other factors, including energy efficiency improvements, can also reduce emissions and therefore reduce emissions intensity.

Energy productivity in the non-domestic sector measures the level of economic activity for each unit of energy being used. It is calculated as Scottish GVA divided by total energy consumption in the non-domestic sector. Enhanced energy efficiency contributes to improving energy productivity, which in turn helps businesses become more competitive, with investment in energy efficiency reducing operating costs and protecting against any rise in energy prices.

Policy outcome 1:

By 2032, the energy intensity of Scotland's residential buildings will fall by 30% on 2015 levels.

Policy outcome 2:

By 2032, the emissions intensity of residential buildings will fall by at least 30% on 2015 levels.

There are three policies that contribute to the development of policy outcomes 1 and 2.

Policies which contribute to the delivery of policy outcomes 1 and 2

1) Energy Company Obligation ( ECO) requires obligated energy supply companies to deliver energy efficiency measures in homes – mainly insulation-based measures and boiler replacements.

ECO is funded via a levy on energy bills and is a market-based mechanism allowing for delivery where it is most cost effective. From 2017 the scheme is worth £640 million per annum across Great Britain and is committed out to March 2022. Historically, 12% of measures have been delivered in Scotland, exceeding our household share. The UK Government's Clean Growth Strategy ^[61] , set out that they would "support around £3.6 billion of investment to upgrade around a million homes through the ECO, and extend support for home energy efficiency improvements until 2028 at the current level of ECO funding". The Scotland Act 2016 devolved some limited powers to Scottish Ministers over the delivery of ECO in Scotland. Utilisation of these powers is being considered by the Scottish Government.

2) The Scottish Government allocated £116 million in the Budget for 2018‑2019 to support delivery of energy efficiency measures via the Home Energy Efficiency Programmes for Scotland ( HEEPS).

HEEPS brings together a range of funding streams including our area-based schemes which are delivered by local authorities, Warmer Homes Scotland which is the national fuel poverty scheme delivered by Warmworks Scotland and HEEPs loans, and helps to lever maximum investment under the ECO in Scotland.

3) Social landlords will meet the Energy Efficiency Standard for Social Housing in 2020.

Introduced in 2014, social landlords must ensure their properties meet the first milestone for minimum energy efficiency standards by 2020. Standards are based on Energy Performance Certificate ( EPC) Energy Efficiency Rating and vary by property type. EESSH is currently being reviewed to consider progress towards the 2020 milestone and the setting of further milestone(s) towards 2050.

Policy outcome 3:

By 2032, non-domestic energy productivity to improve by at least 30% on 2015 levels.

Policy outcome 4:

By 2032, the emissions intensity of the non-domestic sector will fall by at least 30% on 2015 levels.

There are two policies that contribute to the development of policy outcomes 3 and 4.

Policies which contribute to the delivery of policy outcomes 3 and 4

1) The Low Carbon Infrastructure Transition Programme ( LCITP), co-funded by the European Regional Development Fund ( ERDF), supports investment in decarbonisation of business and the public sector through £76 million funding to 2018, with an additional £60 million allocated from 2018-2020.

LCITP offers a range of support mechanisms including project development, expert advice and funding (where applicable) to support the development of substantive private, public and community low carbon projects across Scotland. The intervention focuses on supporting the acceleration of projects to develop investment grade business cases allowing them to secure existing streams of public and private capital finance. In addition, the programme collates evidence on recurring barriers and challenges to projects and shares this intelligence with investment communities to ensure the refinement of all parts of the system to support the transition to a low carbon economy where possible.

2) The Scottish Government launched the Non Domestic Public Sector Energy Efficiency ( NDEE) Framework in March 2016. This four year framework has been designed to support public and third sector organisations procure Energy Efficiency retrofit work.

The development of the framework highlighted the potential to support up to £300 million of energy efficiency retrofit activity across the Scottish public sector estate. The economies of scale and standardised approach offered by the pan public sector framework is attractive to both the public sector and private sector – offering both better solutions and better value for money.

3) The Scottish Government has established a NDEE Support Unit to accelerate the number of projects and the delivery timescales of public sector energy efficiency projects using the NDEE Framework and support our wider ambitions around energy demand reduction.

The Support Unit launched in October 2016 and is a four year single supplier contract, led by Mott Macdonald with value of up to £2 million.

Policy outcomes 1, 2, 3 and 4.

There are six policies, three policy milestones and three proposals which contribute to the delivery of all policy outcomes.

Policies which contribute to the delivery of Policy outcomes 1, 2, 3 and 4

1) SEEP will radically improve the energy efficiency of Scotland's homes, and buildings in the commercial, public and industrial sectors. It will build upon a transition programme which offers local authorities incrementally greater opportunities to deliver integrated energy efficiency projects.

Our Programme for Government (2016-2017) confirmed a minimum of £0.5 billion for SEEP over the four years from 2017‑2018. In 2017‑2018 our investment is in our existing programmes which are supporting delivery of measures on the ground.

2) The Scottish Government is already funding SEEP Pilot projects in 22 local authorities.

The Scottish Government awarded £9 million funding in 2016‑2017 and £4.6 million in 2017‑2018 for SEEP pilots to test integrated solutions to improve the energy performance of residential, commercial and public buildings, and investments to decarbonise the heat supply. Within the SEEP pilots, 12 local authorities are also considering approaches to Local Heat & Energy Efficiency Strategies ( LHEES) supported by Resource Efficient Scotland, Scottish Futures Trust and our Enterprise Agencies. The pilots will be evaluated and contribute evidence to support the design of SEEP.

3) All homes and businesses will be offered a smart meter by 2020 under a UK Government initiative, providing the opportunity for a greater understanding of final energy consumption.

We are keen to ensure an effective rollout of smart meters and that it occurs in such a way as to maximise benefits to consumers – particularly those who are vulnerable or in fuel poverty.

4) The Renewable Heat Incentive ( RHI) is a GB-wide scheme created by the UK Government (with the agreement of the Scottish Government).

The domestic RHI was launched in April 2014 and provides financial support to the owner of the renewable heating system for seven years. The non-domestic RHI provides finance to the owner of the renewable heat technology for 20 years, including where this is supplied to householders through district heating schemes. The scheme covers England, Wales and Scotland and is targeted at – but not limited to – off-gas heat use. There is no commitment by the UK Government to fund the RHI beyond 2020‑2021. During the development of SEEP we will consider what sort of funding mechanisms are needed into the 2020s and 2030s to enable continued take-up of these technologies. Uptake of the RHI is supported by Scottish Government programmes including Resource Efficient Scotland's ( RES) advice and support service and loan funding via the RES Small and Medium Enterprise Loan Scheme ( SMEL).

5) The District Heating Loan Fund helps address the financial and technical barriers to district heating projects by offering low interest loans.

The scheme is open to local authorities, registered social landlords, small and medium sized enterprises and energy services companies with fewer than 250 employees. During the development of SEEP, we will consider what sort of funding mechanisms are needed to continue to support the expansion of district heating networks.

6) The Heat Network Partnership is a collaboration of agencies focused on the promotion and support of district heating schemes in Scotland.

Through its support to local authorities and practitioners, it is building capacity and project development capability to support heat planning and programme delivery work that will be developed by local authorities, the Scottish Government and its partners, as part of the wider SEEP programme in future.

Policy development milestones which contribute to the delivery of all policy outcomes

SEEP is the cornerstone of our efforts to reduce emissions from Scotland's buildings. The Scottish Government undertook an initial consultation on the principles and initial design of SEEP in early 2017. The responses to these consultations have been considered for the development of SEEP.

1) SEEP will put in place regulation and standards providing long-term certainty and making it the norm to invest in energy efficiency.

Respondents to the SEEP consultation in 2017 indicated that standards and regulations should be clear and long term in order to promote confidence amongst both investors and consumers. We also consulted on proposals for minimum energy efficiency and condition standards in private rented housing in 2017 and published a Consultation Analysis Report in November 2017. We will set out our next steps in the SEEP route map in 2018.

2) SEEP will make an offer of support to all building owners.

The route map will set out the steps we will take to deliver our commitments on energy efficiency and low carbon heat. As SEEP develops we will provide continuity through our existing programmes, including our national advice services (Resource Efficient Scotland and Home Energy Scotland); and financial support such as HEEPS loans, SME loans, District Heating Loans and Salix loans for the public sector.

3) SEEP will be delivered nationally and by local authorities

We will continue to evaluate and monitor the ongoing SEEP Pilots to influence the SEEP transition programme and final design of the SEEP programme.

The Scottish Government will publish a route map for Scotland's Energy Efficiency Programme in May 2018 setting out our long term ambition for the programme as well as milestones to meet this.

Policy proposals which contribute to the delivery of all policy outcomes

1) Review of energy standards within building regulations.

Staged improvements to energy standards within building regulations have resulted in emissions from buildings built to current standards being, on aggregate, around 75% lower than those of buildings built to standards in force in 1990. A further review of energy standards will commence in 2018 and will investigate a number of measures that offer the potential for further abatement from new buildings and where work is undertaken in existing buildings.

2) The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 now requires assessment and improvement in the energy performance and emissions of larger non-domestic buildings (those over 1,000m²).

Initially, an option to defer improvement where reporting on annual operational energy use is available to building owners. Improvement delivered under these regulations will be monitored to inform early review of both the scope and level of improvement sought from existing buildings with the intention to review from 2018 leading to amended regulations in 2020.

3) We will work with our partners, including the UK Government, local authorities and utility providers to determine the best approach to heat decarbonisation for buildings currently heated by natural gas.

The gas transmission network is reserved (regardless of the gas transported through those pipes) and the UK Government is considering solutions to long term heat decarbonisation post 2030. This will involve gathering evidence and analysis to fill key knowledge gaps in the options available, such as the future of the gas grid, electrification of heat and district heating, and the significant impacts on infrastructure that any one or a mix of these options would require. Policy decisions are not expected to be made by the UK Government until the next parliament, i.e. from 2022. We will look to put forward a more detailed proposal on how we will realise this potential in subsequent climate change plans as our understanding of the best approach develops.

Monitoring

Policy output indicator for policy outcome 1

1) Change in energy intensity of residential buildings from 2015 ^[62] .

Year	2020	2025	2032
Change in energy intensity from 2015	-10%	-17%	-30%

Policy output indicator for policy outcome 2

1) Change in emissions intensity of residential buildings from 2015 ^[63] .

Year	2020	2025	2032
Change in emissions intensity from 2015	-5%	-13%	-30%

Policy output indicator for policy outcome 3

1) Change in non-domestic energy productivity from 2015 ^[64] .

Year	2020	2025	2032
Change in energy productivity from 2015	10%	20%	30%

Policy output indicator for policy outcome 4

1) Change in emissions intensity of non-domestic sector from 2015 ^[65] .

Year	2020	2025	2032
Change in emissions intensity from 2015	-10%	-20%	-30%

Implementation indicators for policy outcomes 1, 2, 3 and 4:

1) Average energy efficiency levels of domestic buildings increases.

2) Grouped domestic energy efficiency ratings improve.

3) Percentage of domestic properties with loft and wall insulation increases.

4) Total renewable heat generation in Scotland increases.

5) Installed capacity of non-domestic RHI increases.

6) Amount of renewable heat paid for under the domestic RHI scheme in Scotland increases.

7) Further analysis to establish a baseline for non-domestic buildings' energy efficiency and emissions data.

Explanation for selection of indicators

• An increase in the average energy efficiency of domestic buildings will contribute to reducing energy intensity and emissions intensity in the residential sector.
• An improvement in the energy efficiency profile of the domestic building stock will contribute to reducing energy intensity and emissions intensity in the residential sector.
• An increase in insulation levels will contribute to reducing energy and emissions intensity in the residential sector.
• An increase in the level of renewable heat generation will contribute to reducing the carbon intensity of Scotland's heat generation in both the domestic and non-domestic sector.
• The installed capacity of renewable heat receiving payment under the non-domestic RHI shows the level of non-domestic renewable heat supported through the RHI scheme, which contributes to reducing the emissions intensity of Scotland's heat generation.
• The level of renewable heat supported through the RHI scheme contributes to reducing the emissions intensity of Scotland's heat generation.
• The Scottish Government is currently undertaking further analysis to establish a baseline for non-domestic buildings' energy efficiency and emissions data against which progress under the Climate Change Plan can be measured, drawing on UK-wide data sets and building-specific meter-point data.

Enabling Factors and Wider Impacts

SEEP can help create multiple benefits, including:

• A substantial Scottish market and supply chain for energy efficiency services and technologies. SEEP will help to support jobs and businesses within the local and national economy. Every £100 million spent on energy efficiency improvements in 2018 is estimated to support approximately 1,200 full-time equivalent jobs across the Scottish economy ^[66] . SEEP will help to realise economies of scale, thereby helping to drive down the cost of energy efficiency measures. There will be opportunities for SMEs and third sector organisations to deliver and/or support the delivery of energy efficiency measures.
• Health and early years improvements through people living in warmer homes. These proposals will affect the majority of households, however they will provide the biggest benefit to households living in poverty, both in rural and urban areas, who struggle to pay their bills, and who spend more time at home or where they require higher indoor temperatures.
• Improving the energy efficiency of homes will also help households collectively to save hundreds of millions of pounds on their fuel bills over the lifetime of this Climate Change Plan, money which is then available to be recycled into local economies. Some of the measures needed to improve a building's energy efficiency, e.g. external wall insulation, lead to changes to its outward appearance, which contribute to community regeneration objectives.
• Regeneration of communities through upgraded building stock. Investment in building fabric improvements for commercial and public buildings can support wider regeneration and better place outcomes.
• Enhanced business competitiveness and cost savings for frontline public services. Support through SEEP for investment to improve the energy efficiency of non-domestic buildings has the potential to deliver improved energy productivity and therefore enhanced competitiveness for business and the third sector, if costs are lower.

We are aware, however, of the potential risks arising from decarbonising the buildings sector. If the capital costs of improving the energy performance of domestic buildings and of installing low carbon heat technologies, and the operating costs of running them, are higher than current systems, then households could find energy bills are less affordable, which could have adverse effects on fuel poverty. Current energy prices mean that gas is the cheapest heating fuel for many households. Running costs for heating homes in the future will depend greatly on energy prices at that time which cannot be predicted with certainty in the long term.

Inbalancing these risks is the reasonable expectation that improvements in technology and manufacturing processes will continue to result in significant reductions in the cost of energy efficiency measures. For example, UK Government data show that the average cost of small-scale solar PV panels fell by a cumulative 15% to 20% in real terms over the 3 years to 2016‑2017.

Any increase in running costs is mostly likely to have adverse effects on households already living in poverty, particularly those households that spend on average more time at home, including households where members are retired, living with a disability or have young children cared for at home, as well as households living in the least energy efficient homes.

Similarly, any increase in the capital and/or running costs of energy efficiency improvements and low carbon heat technologies in non-domestic buildings in the public and commercial sectors could make energy bills less affordable, which could have adverse effects on business competitiveness and provision of frontline services.

Scottish Government grants will continue to target low income and fuel poor households, as has been the focus through HEEPS to date. SEEP will also develop a range of support and incentives, including loans for households able to make a contribution.

Case Study

External wall insulation in Dunfermline

Credit: McAteer Photograph for Changeworks

In 2014, Fife Council secured almost £3 million from the Scottish Government to reduce fuel poverty and carbon emissions by making homes in its area cheaper to heat. A key aim was to install external wall insulation in 540 homes in Dunfermline, saving householders an estimated £83,000 a year in energy bills and cutting carbon emission by 1,020 tonnes of carbon dioxide per property, per year.

Depending on the balance of cost, need and potential for improvement, external wall insulation is offered free or at a heavily subsidised rate in selected areas under the Scottish Government's Home Energy Efficiency Programmes: Area Based Schemes ( HEEPS: ABS). Fife Council worked with Changeworks to manage and deliver the project, in partnership with Home Energy Scotland.

The Scottish Government will work with end users and delivery partners to ensure that SEEP's delivery programmes are designed to emphasise cost-effective energy efficiency and heat decarbonisation measures that reduce energy bills and enhance competitiveness. We will work with households, businesses and the public sector to ensure SEEP supports these cost-effective measures, including on evidence and evaluation where needed.

Planning system

Residential

The planning system is already well-placed to support the addition of energy efficiency measures to existing buildings. National Planning Framework 3 and Scottish Planning Policy are supportive of development that is resource efficient and which creates distinctive places. Where external changes are required, extensive permitted development rights are in place which allow for measures such as external insulation without the need for a planning application. Where a building is in a conservation area or is 'Listed' then consents will often be required, and in such cases the climate change benefits will need to be balanced against the special features which form the basis of a conservation area or listed building. There is also scope for innovation in development of energy efficient product to improve efficiency of buildings in heritage settings. Scottish Planning Policy is clear in its support for the development of heat networks in as many locations as possible.

Services

A planning application will generally be required for energy efficiency measures which affect the external appearance of non-residential buildings. Our National Planning Framework 3 and Scottish Planning Policy are supportive of development that is resource efficient and which creates distinctive places.

Behaviour Change in Scotland's Energy Efficiency Programme

The following three key behaviours are identified by the Scottish Government's Behaviours Framework ^[67] and are the objectives of SEEP:

• keeping the heat in (insulation, draught proofing, double glazing, etc.)
• better heating management
• installing more energy efficient heating systems or generating your own heat.

Behaviour change is already at the heart of our energy efficiency programmes and will continue to be so as SEEP is developed and rolled out. Our delivery programmes are installing insulation and more efficient heating systems on the ground and helping property owners invest in energy efficiency. The Scottish Government also funds Home Energy Scotland and Resource Efficient Scotland who provide free, impartial advice to property owners including on energy saving behaviours. Advice is also embedded into our domestic area-based schemes to help households maximise the benefits of energy efficiency improvements, for example by adjusting heating systems.

As we develop SEEP the Scottish Government continues to review how we can best act to influence behaviours. To support this we have undertaken a series of ISM workshops examining how to:

• create demand for energy efficiency in housing,
• encourage uptake of loans (for energy efficiency improvements),
• engage householders with their heating controls.

The findings of these workshops are helping to inform the development of SEEP, which will be set out in more detail in a route map in 2018. In addition, during 2016 and 2017, we undertook a series of Climate Conversations ^[68] with the Scottish public to assess public views on climate change and on potential actions to tackle it. The conversations included discussion of what life might look like in Scotland in the year 2030. These conversations showed that people have generally positive attitudes towards energy efficiency and renewable energy.

The sustained effort outlined here over the period to 2032 will support and encourage low carbon behaviours discussed in the Climate Conversations, taking account of the different factors which influence behaviour in different housing tenures and building types. Energy efficiency and a low carbon heat supply will be considered desirable attributes and, in many cases, the social norm for home improvement, business competitiveness and public sector efficiency. The high energy efficiency of the building stock will help to minimise the impact of any fuel price rises which may impact on bills in future.