Warmer Homes Scotland programme: annual review 2018-2019

Part 5: Objective 4 - Value for Money

The fourth stated objective of Warmer Homes Scotland is to offer good value for money (VfM) by leveraging additional funding into the scheme.

To ensure VfM, Warmworks, on behalf of the Scottish Government, is required to leverage in additional funding to the scheme from sources other than the core Scottish Government budget to increase the number of households that can benefit from the scheme.

During 2018/19 Warmworks leveraged additional funding into the scheme in the following ways:

Scottish & Southern Electricity Networks (SSEN) ‘Enabling Funding’

Since November 2016, Warmworks and SSEN have worked in partnership to help customers through the use of an “Enabling Fund”. This provides help to Warmer Homes Scotland customers in SSEN supplied areas who need additional help, including support to clear loft spaces within the home and lifting of carpets in advance of an install, as these works are not included in the Warmer Homes Scotland offer. SSEN has made available up to £100,000 of funding for this purpose, with the aim of helping to remove up to 200 people from fuel poverty over a period of 5 years.

During the 2018/19 financial year, the “Enabling Fund” helped 31 Warmer Homes Scotland customers by providing additional help. This leveraged in just over £15,210 of financial value to the scheme or an average of £490 per customer. Without the provision of this additional funding and the help it financed, these households would potentially have cancelled their Warmer Homes Scotland application and would not have been able to benefit from the full range of measures recommended for the property under the scheme.

A breakdown of how the “enabling fund” support was provided by month during 2018/19 is at Table 9.

South East Scotland, South West Scotland and Strathclyde and Central regions are not covered by SSE. Table 10 demonstrates how the SSEN Enabling Fund was distributed on a regional basis during 2018/19.

The one customer who received support from the fund in South East Scotland did so because of the area boundaries that SSEN use are different from those used for the delivery of Warmer Homes Scotland.

The funds leveraged into the scheme through SGN and SSEN do not require Warmworks to breakdown the reason for the fund being used. All applications to these funds are reviewed on a case by case basis.

An example of how SSEN Enabling funding was used to assist a Warmer Homes Scotland customer is below.

Case Study

A householder living in South Uist, decided to get in touch with Home Energy Scotland (HES) after relying on a 35-year-old Raeburn oil heating system that was no longer efficient or meeting the needs of his family.

The householder had heard of someone else receiving a new LPG heating system under Warmer Homes Scotland and contacted Home Energy Scotland who confirmed that he was eligible for a referral to Warmer Homes Scotland.

An initial survey of the property by a Warmworks surveyor confirmed that the property was suitable for a new LPG gas boiler, the cost of which was partly funding through an enabling fund that is provided by Scottish and Southern Electricity Networks to give extra support on more complex or challenging jobs. The householder was delighted to receive assistance to enable the LPG tank to be provided.

As a result of the Warmer Homes Scotland installation and the SSEN enabling funding provided, the SAP rating in the property increased from 30 to 42 and the property is now more affordable and quicker to heat up. Previously the householder spent £200 per month on coal alone and he reported that the running cost for new LPG heating system for a four month period (September – December) was £500 which was a big saving for the family.

The householder and his young family were delighted with the new LPG heating system, installed under Warmer Homes Scotland with help from the SSEN Enabling Fund.

Table 9 – SSEN Enabling Fund support provided in 2018/19 by month

Month	2017/18		2018/19
	Number of Drawdowns	Value (£)	Number of Drawdowns	Value (£)
April	1	250.00	3	738.00
May	3	1371.29	4	2202.00
June	4	1265.00	4	1306.000
July	5	1250.00	1	57.00
August	0	0.00	0	0.00
September	7	1746.29	1	199.00
October	9	2232.00	3	1173.00
November	4	1272.00	7	1639.00
December	2	620.00	4	2484.00
January	4	827.50	1	400.00
February	4	716.90	3	632.00
March	4	1572.37	2	4381.00
Total	47	13,123.40	33	15,210.00

Table 10 – SSEN Enabling Fund support provided in 2018/19 by region

Region	Number of Drawdowns 2017/18	Number of Drawdowns 2018/19
Highlands	10	9
Islands	8	7
North East	19	14
South East	1	1
South West	0	0
Strathclyde & Central	9	0
Total	47	31

Energy Company Obligation (ECO)

The Energy Company Obligation (ECO) is a UK Government energy efficiency scheme designed to tackle fuel poverty and help reduce carbon emissions. Although ECO2T was introduced in 2017 and brought changes to the ECO regulations and the criteria for eligible measures, these changes continued to result in some challenges for Warmworks during 2018/19, as Warmworks manage the ECO process centrally on behalf of its supply chain. Despite these challenges Warmworks were successful in leveraging in £579,581 of ECO funding during 2018/19. This translates to an additional 129 installations resulting from ECO funding leveraged into the scheme during 2018/19.

Changes to the criteria for eligible measures for which ECO can be claimed and changes to ECO regulations following the introduction of the UK Government’s ECO2T in 2017 resulted in a disruption to the flow of ECO funding leveraged into the scheme during 2018/19.

In addition, a number of sub-contractors installing measures under Warmer Homes Scotland reported that they were finding it increasingly difficult to access ECO funding simply due to how the scheme is administered. A significant amount of paperwork is needed for quality assurance purposes and this is often duplicated, for example to meet PAS2030 certification standards. There is also no standardised or consistent approach to the requirements by the energy companies.

Some energy companies require forms to be submitted electronically whilst others require a signature on a hard copy of the same form. This was highlighted as a particular challenge for contractors to enable them to meet the timescales to submit ECO claims. This increases their costs in delivering energy efficiency measures in Scotland.

It should be noted that the transition to ECO3 during 2018/19 may continue to impact on Warmworks’ ability to leverage in ECO funding, which may further reduce the annual carbon savings achieved by the scheme during 2019/20.

Table 11 details the total level of ECO funding that Warmworks leveraged in during 2018/19. This demonstrates that Warmworks secured an average of £732 of ECO funding for each Warmer Homes Scotland customer who benefitted from this additional form of support. In total 792 customers benefited from ECO support during the period of this review, representing 21% of the overall total number of households who received an installation under the scheme. When compared to the total number of customers who benefited from ECO support during 2017/18 (1259) this was a decrease of 37%. This reduction may in part be due to the fact that fewer applications were received and processed overall and the challenges associated with the market conditions outlined above.

Although data on each individual customer who received ECO support under the scheme during 2018/19 is unavailable, the decrease in customers benefiting from ECO support under Warmer Homes Scotland and the decrease in ECO funding achieved demonstrates that, despite Warmworks actively sourcing ECO leveraged funding during 2018/19, the challenges resulting from the transition to ECO2T and uncertainty about the introduction of the new ECO scheme – ECO3 during 2019/20 has resulted in a decrease in ECO funding leveraged into the scheme.

It should be noted that ECO funding arrangements is commercially sensitive data therefore it is not possible to publish a full in depth analysis of those households who were successful in benefiting from the additional support provided under ECO.

Table 11 – Total number of customers and ECO funding leveraged in 2018/19

Year	Number of Customers	Total Value (£)
2017/18	1259	£1,002,170
2018/19	792	£579,581

Scottish Gas Networks (SGN) Connections and Enabling Fund

Warmworks was also successful in securing additional funding from SGN to create an Enabling Fund. This was used during 2018/19 to provide the same support provided by the SSEN enabling fund to customers living in areas which are outside SSEN supplied areas. During 2018/19, 45 customers benefited from this enabling fund. When compared to 2017/18 an additional 28 households benefitted from the SGN Enabling Fund in 2018/19 and in percentage terms this represents an overall increase of 61%.

The help provided under the SGN Enabling Fund was in addition to funding also leveraged into the scheme under the “Help to Heat” scheme. This scheme is also funded by SGN and offers free or discounted connections to the gas network for households that are living in or at risk of fuel poverty. During 2018/19 both SGN and Warmworks worked together to enable 171 fuel poor households to be assisted by the “Help to Heat” scheme. This is a 31% reduction in the number of households assisted in 2017/18 (248).

This means that during the period of this review 171 customers were benefitted from a new gas connection and a new, energy efficient heating system without having to pay the cost of the connection. That is the equivalent of up to £297,021 of additional investment leveraged into the scheme and represents a considerable benefit for those households to which it provided help. In addition, 45 customers were able to benefit from the SGN Enabling fund which amounts to an additional £11,779 of leveraged funding into the scheme.

As a result of Warmworks efforts to leverage in additional finance, through the SSEN Enabling Fund, ECO, the SGN “Help to Heat’ and SGN Enabling Fund the total monetary value leveraged into Warmer Homes Scotland in the 2018/19 financial year was £903,591.

Figure 11 shows the percentage contribution to this total, broken down by funding source. The ratio of leveraged finance through the scheme equates to £1 of additional funding leveraged for every £26 of Warmer Homes Scotland grant spent compared to £19 in 2017/18 or, in percentage terms, it can be said that the scheme is operating at an additional funding leverage rate of 3.7%.

This additional funding is important to the long-term sustainability of Warmer Homes Scotland, particularly given the current economic climate and public sector budget constraints.

Home Energy Scotland (HES) Loans

It is expected that in the majority of cases Warmer Homes Scotland customers will have their installations fully funded under the scheme. However, in some circumstances, where the Warmer Homes Scotland grant level is insufficient to cover the cost of measures recommended for the property, the customer is asked to make a financial contribution towards the cost of their installation.

In these circumstances, the customer has the option to apply for an interest-free Home Energy Scotland Loan. These loans are funded by the Scottish Government and because of this they cannot be considered as funding leveraged into the scheme from an external source.

However, Warmer Homes Scotland and its customers benefit from the existing fuel poverty support framework, funded by the Scottish Government. This demonstrates both the integration and added value of these schemes which help to deliver value for money across all of the Scottish Government funded fuel poverty initiatives designed to reduce the impacts of fuel poverty across Scotland.

Table 12 – Comparison of the number and value of HES Loans offered versus those paid in full to Warmer Homes Scotland customers in 2018/19

Month	Loans Offered		Loans Paid Out in Full
	Number	Value (£)	Number	Value (£)
April	1	1445	1	799.71
May	0	0	3	2252
June	0	0	4	4187
July	0	0	1	500
August	1	2330	0	0
September	1	500	0	0
October	1	5600	0	0
November	1	500	0	0
December	0	0	0	0
January	0	0	0	0
February	2	3500	6	7477
March	0	0	3	3400
Total	7	13,875	18	18,616

Table 12 shows that during 2018/19, HES made 7 loan offers to Warmer Homes Scotland customers, an 80.5% decrease from loan offers made during 2017/18 (36 loan offers) and that 18 loan offers were accepted and paid out in full in 2018/19 which in percentage terms represents a 42% decrease from 2017/18 (31 loans paid out in full).

Data on the Warmer Homes Scotland measures paid through HES Loans is unavailable as information on the measures finally installed under the scheme is currently not provided to Home Energy Scotland.

There can be a number of reasons why customers do not accept the Home Energy Scotland Loan offer, or withdraw from receipt of the full loan value during the draw down period (in such cases EST will recover the part payment) including the applicant no longer requiring the HES Loan to pay the required contribution, or the applicant deciding that they cannot go through with the installation due to the upheaval the nature of the work requires.

Table 13 – Regional break down of HES Loans paid in full to Warmer Homes Scotland customers in 2018/19

Region	2017/18			2018/19
	Number of Loans	Value (£)	Average per Customer (£)	Number of Loans	Value (£)	Average per Customer (£)
Highlands	5	5,482	1,096	7	5330	761
Islands	2	3,163	1,582	2	1600	800
North East	2	1,745	872	2	3000	1500
South East	6	11,286	1,881	3	3687	1229
South West	1	9,87	987	0	0	0
Strathclyde & Central	15	17,644	1,176	4	4999	1250
Total	31	40,307	1300	18	18,616	1034

During the 2018/19 financial year 18 loans were paid out in full by HES to Warmer Homes Scotland customers, a 42% decrease from 2017/18. The average loan value across loan recipients was £1300.

As shown in Table 13 the provision of HES Loans to eligible Warmer Homes Scotland customers were randomly distributed by region across Scotland and, as during 2017/18, the majority of the loans provided were to customers in the areas with the highest population density.

The average loan paid out to customers, by region during the review period was £1,034 representing a decrease of 20% from 2017/18.

Recommendation 7 - Establish if there is a common reason for the decrease in the uptake of HES Loans to eligible Warmer Homes Scotland customers and if actions can be taken to make these a more attractive options with a view to increasing uptake.

Recommendation 8 - Establish the feasibility of data on final measures installed under Warmer Homes Scotland with HES Loan assistance being provided by Warmworks to Home Energy Scotland and establish which measures are most commonly funded by HES Loans and if these represent value for money.