Tackling fuel poverty in Scotland: a strategic approach

Chapter 2 – Understanding Fuel Poverty

The Fuel Poverty Act provides a new definition of fuel poverty and sets out the ambitious targets that must be achieved by 2040. The technical annex that accompanies this strategy, sets out the definition and includes related material on who is more likely to be in fuel poverty.

How we will end fuel poverty

This Strategy is the start of a long term commitment to help build a better country - one where access to affordable energy is considered a right and not a privilege - and will contribute to improved health and wellbeing for people across Scotland.

We have identified a comprehensive list of actions required to deliver our ambition of eradicating fuel poverty. These actions will address the four drivers of fuel poverty. The actions are set out in Annex A but are also referenced throughout the Strategy.

To ensure that our approach continues to take account of the needs of those in fuel poverty, we will consult with people with lived experience of fuel poverty when making changes to our approach. These changes may be suggested by emerging evidence or identified by the Scottish Fuel Poverty Advisory Panel in order to make systematic progress in tackling fuel poverty.

SG Action - We will consult with people with lived experience of fuel poverty when making any new regulations under the Fuel Poverty Act

Ending fuel poverty will require a collaborative approach involving a wide range of organisations from across Scotland, all of whom want to help eradicate fuel poverty. We provide more detail on the partners that we will work with to achieve our goal in Chapter 8.

Amongst our most important partners in our efforts to tackle fuel poverty will be local authorities, who are currently required to set out their plans for how to tackle fuel poverty in their Local Housing Strategies (LHS).

Refreshed LHS guidance was published in September 2019 which reflects the new fuel poverty definition and the statutory targets. We will refresh this guidance further, to reflect the approach taken within this Strategy, incorporate the enhanced heating regimes and reflect the new uplift for our remote rural and island communities.

As part of our approach to decarbonising buildings, local authorities will also be required to produce Local Heat and Energy Efficiency Strategies (LHEES). LHEES will set out the long-term plan for decarbonising heat in buildings and improving their energy efficiency across an entire local authority area. Local authorities will set out within their LHEES how poor energy efficiency will be removed as a driver of fuel poverty. We provide more detail on the LHEES process in Chapter 3.

The Scottish Fuel Poverty Advisory Panel

Our progress in meeting the fuel poverty targets will be overseen by a new, statutory public body, the Scottish Fuel Poverty Advisory Panel. Together, the Panel will have a wide range of collective knowledge and experience which will allow them to provide informed advice to Scottish Ministers.

The role of the Panel will be to support and challenge Government at all levels on our efforts to tackle fuel poverty. The Panel will also encourage and foster a partnership approach to tackling fuel poverty across the public, private and third sectors.

We will continue to monitor our progress towards meeting the targets and will publish a report every 3 years to set out what we have achieved and what further steps we believe are necessary. Furthermore, we will publish a revised Strategy no later than 2026 which will take account of the progress we have made and outline any changes required to ensure that we meet our targets. Further information on how we will monitor and report on progress is contained in Chapter 9. The Panel will consider our progress reports and provide advice separately to Scottish Ministers, which may include changes to the Fuel Poverty Strategy or other recommendations.

How much it will cost

By 2033, we will ensure that all homes across Scotland will have achieved the equivalent of an Energy Performance Certificate (EPC) C, where technically feasible and cost effective. Under the current EPC framework, which utilises the Energy Efficiency Rating (EER) as the headline indicator of energy efficiency, we estimate that delivering EPC C across fuel poor households will cost up to £3 billion. This cost is based on a scenario where we continue to allow for the installation of fossil fuel heating systems in reaching an EPC C.

Yet our climate change targets necessitate a step change in the way we heat our homes and buildings. We have also estimated the required level of capital expenditure where existing fossil fuel heating systems are replaced with zero-emissions heating. In this scenario - which relies on the deployment of heat pumps, electric resistive heating, microgeneration technologies, and fabric measures - the total capital cost of upgrading fuel poor households to EPC C was estimated to be up to £6 billion^[5].

We also recognise the additional challenges faced by those in fuel poverty and the importance of going beyond this standard for these households to help further reduce their energy costs. Our ambition is to maximise the number of fuel poor households having attained the equivalent of an EPC B by 2040. Delivering this ambition across all fuel poor homes is expected to cost up to £4 billion when allowing for fossil fuel heating systems in reaching the standard, and up to £5 billion when only allowing for net zero consistent heating technologies. Additional detail on the modelling exercise used to inform these cost estimates is included in the accompanying technical annex.

This analysis is predicated on having first achieved an EPC C across fuel poor homes and reflects the cost to achieve an EPC B using the metric currently used to assess the energy efficiency of a dwelling under the standard assessment procedure (SAP), the Energy Efficiency Rating (EER)^[6].

The fuel costs used to estimate the number of households in fuel poverty were based on 2017 fuel prices and do not therefore take account of the recent substantial increase in fuel prices. This increase in fuel prices may increase the number of fuel poor households relative to our estimate at the time of the modelling exercise. The estimated total costs of attaining EPC B and C for fuel poor households may therefore be higher than noted if this analysis were undertaken using recent fuel prices.

We must ensure that as we eradicate fuel poverty we also meet our climate change objectives. This means changing the type of heating systems we rely on to decarbonised alternatives. It also means ensuring that the way that we measure energy efficiency encourages the installation of zero emissions heating while also ensuring that we do not increase the rate or depth of existing fuel poverty. In order to do this, we are currently consulting on reforming the way we measure EPCs so that it aligns with both our net zero and our fuel poverty objectives. This is discussed further in Chapter 3.

Both of these changes will naturally impact the estimated costs of delivering a higher standard of energy efficiency across fuel poor homes. We will therefore publish an updated estimate of the cost required to achieve EPC B across fuel poor homes in 2022, following the conclusion of the domestic EPC reform consultation which seeks to address the future of how we evaluate energy efficiency.