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Low Carbon Scotland: Meeting our Emissions Reduction Targets 2013-2027 - The Draft Second Report on Proposals and Policies

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5. Homes and Communities

5.1.1 Our homes are where we spend much our lives and choose to relax with our families and friends. Naturally, we want to make them comfortable, warm and welcoming but, in a time of volatile utility costs, this can be expensive. And the way we use energy in our homes and appliances also results in significant greenhouse gas emissions.

5.2 Our ambition for homes and communities

5.2.1 Our Sustainable Housing Strategy[95] (SHS) sets out our vision for warm, high quality, low carbon homes and a housing sector that helps to establish a low-carbon economy across Scotland. Following consultation, the SHS will be published during the first half of 2013 and will include a route map to 2030. The strategy's aims are to:

  • Make sure no-one in Scotland has to live in fuel poverty, as far as practicable, by 2016;
  • Deliver a step change in provision of energy efficient homes to 2030 through retrofit of existing housing and improved building regulations for new build homes;
  • Make a full contribution to the Climate Change (Scotland) Act targets; and
  • Enable the refurbishment and house building sectors to contribute to and benefit from Scotland's low carbon economy and to drive Scotland's future economic prosperity.

5.2.2 In addition to the SHS vision, we are aiming for a largely de-carbonised heat sector by 2050 with significant progress by 2030 through a combination of reduced demand and energy efficiency, together with a massive increase in the use of renewable or low carbon heating. Further detail on how we intend to achieve this will be in our Heat Generation Policy Statement, due for publication later in 2013.

5.3 Where we are now

5.3.1 In mid-2011, there were around 2.37 million households in Scotland, occupying 85% of the housing stock we expect to be in place by 2050. Household projections suggest over half a million additional homes will be needed to meet expected demand to 2035.[96] A fifth of our homes are now over 90 years old and a third more than 67 years old. Detached houses, with generally higher emissions than other domestic properties (tenements have the lowest) have dominated the new build market since the early 1980s.

5.3.2 Over three-quarters of the energy we use in our homes is from gas-fired boilers for space and hot water heating. For accounting purposes, emissions from domestic electricity use are part of the 'traded sector'. Therefore, reported emissions from homes arise almost exclusively from our use of gas for heating and cooking. In 2010, the residential sector produced 8.4 MtCO2e of greenhouse gas emissions, which was 15% of Scotland's total that year[97].

5.3.3 Indeed, in 2010, direct (non-electricity) residential emissions were 15% higher than in 2009, but only 2.3% higher than in 1990 - even though the housing stock has increased by more than 371,000 homes since then.[98] Emissions in this sector are volatile as they depend heavily on weather conditions. Although there has been a general downwards trend since 2000, 2010 was one of the coldest winters on record. Household energy costs rose by 76% in real terms between 2000 and 2010 - and may be expected to rise further. Better demand management can bring down energy bills and save money.

5.4 Decarbonisation policies and proposals

5.4.1 This section outlines policies and proposals that are driving the decarbonisation of our homes. They include UK and Scottish measures that will increase energy efficiency, provide consumers with improved information on energy use, and facilitate the decarbonisation of heat. The Scottish proposals are being developed or are under consideration by Scottish Ministers

Fabric improvement and heating efficiency policies

5.4.2 Our Energy Assistance Package[99] offers energy efficiency advice to anybody who calls the Home Energy Scotland Hotline or makes contact through the Energy Saving Trust's website, highlighting the most appropriate sources of assistance to the householder. It also provides tariff and benefits checking, and insulation and central heating measures (new systems or repairs) to those most at risk of fuel poverty. On our behalf, the Energy Saving Trust manages delivery of the package in partnership with a range of advice providers and energy companies.

5.4.3 The Universal Home Insulation Scheme (UHIS)[100] has provided free energy efficiency measures, including loft and cavity wall insulation, to Scottish households while delivering emission savings and helping to reduce fuel poverty. The scheme is delivered by local authorities in conjunction with local delivery partners. In 2012-13 all 32 local authorities were offered their share of a total investment of over £22 million.

5.4.4 And, under the Boiler Scrappage Scheme[101] we launched in 2010, householders - on a first-come, first-served basis - can receive a £400 voucher towards the replacement of certain inefficient boilers. The Scottish Government has a manifesto commitment to provide support for 30,000 boilers to be replaced during the course of this Parliament. The scheme is managed on our behalf by the Energy Saving Trust.

5.4.5 From April 2013, UHIS, the EAP and the Boiler Scrappage Scheme will be replaced by our new National Retrofit Programme (NRP) and the Warm Homes Fund.[102] The NRP will refurbish or refit Scotland's older homes to make them more energy efficient. This will save people money on their fuel bills and reduce emissions while providing opportunities for businesses as we develop our low carbon economy. Building on the success of previous schemes, the core of the programme will be area-based strategies, aimed initially at fuel poor areas.

5.4.6 Local authorities will play a key strategic role in identifying fuel poor areas and stock that requires upgrading and developing projects to tackle this. Scottish Government funding of £65million per annum will be used to bring together a range of funding streams and lever maximum investment by the energy companies into Scotland. Initial pilot schemes supported by £3million of Scottish Government funding are demonstrating the potential of this approach to leverage investment.

5.4.7 We launched our Warm Homes Fund[103] in late 2012, to invest £50 million in green energy projects to further help heat homes across the country. The Fund provides grants and loans to install renewable energy measures such as biomass, hydro schemes, wind turbines and solar water heating. Councils and housing associations applying to the fund will be expected to use any income generated from their schemes to improve the energy efficiency of their existing housing. The fund will attract further finance from public and private sources.

Warm Homes Fund

Pilot schemesin Glasgow and the West Highlands will be the first to be benefit from the Warm Homes Fund. West Whitlawburn Housing Cooperative in Glasgow and West Highland Housing Association in Oban will both receive assistance for biomass heating schemes, helping more than 550 households to heat their homes more cost effectively.

5.4.8 Installing energy efficiency measures has traditionally required up-front payment - with the costs being recovered over time. We need to ensure that householders have access to finance for energy efficiency measures. The Green Deal[104] is a GB wide policy that enables householders and other occupants of buildings to install energy efficiency improvements without up-front capital costs. Instead, they will pay for them over a period of years through a charge on their electricity bills. At the heart of the Green Deal financial mechanism is the 'Golden Rule' that estimated savings on bills should always equal, or exceed, the cost of the improvements undertaken.

5.4.9 While householders will have access to finance, energy companies also have obligations. The Energy Company Obligation (ECO)[105] is a UK Government policy designed to replace both the Carbon Emission Reduction Target (CERT)[106] and the Community Energy Saving Programme (CESP).[107] The ECO requires energy supply companies to deliver energy efficiency measures to homes, with a twin focus on reducing heating costs for vulnerable consumer groups and saving carbon in hard to treat homes.

5.4.10 The carbon savings obligations are designed to ensure that support is available for measures such as solid wall insulation and hard to treat cavities, as well as providing targeted support for people in low income and rural areas. The home heating cost reduction obligation will support vulnerable, low-income households who live in the private sector and are entitled to defined benefits.

5.4.11 In Scotland, we will work to ensure that Green Deal finance providers are able to support households across Scotland. We will also work with the UK Government to ensure that Scotland-specific issues are fully recognised in the delivery of both schemes. Working through the Sector Skills Councils, the Scottish Qualifications Authority and Certification bodies we will ensure that there are sufficient qualified assessors and certified installers available to install the energy efficiency improvements in our homes. We are also developing an electronic register of buildings to support the delivery of the Green Deal and ECO.

5.4.12 Our Green Homes Cashback[108] scheme is aimed at increasing the activity around installations of energy efficiency measures and also creating confidence in the Green Deal Assessor market by paying for the consumer's assessment. This is a £20million programme which will be delivered during 2012-13 and 2013-14 and will provide up to £500 per cashback per household. Our Private Sector landlord cashback[109] will also contribute to the replacement of inefficient appliances and boilers. These schemes are run on our behalf by the Energy Saving Trust

5.4.13 In addition to improving the fabric of our existing housing stock, new homes need to be built to very low carbon standards. Housing built to 2010 standards emits 70% less carbon dioxide than housing built to the standards that existed in 1990. A review of Scottish domestic energy standards is currently underway and further review is planned for the future.

Promoting innovation in new-build homes

We launched our new £10 million Greener Homes Innovation Scheme in September 2012 to provide incentives for developers to build greener homes that go beyond the current minimum building standards requirements for energy efficiency.

Smart meters

5.4.14 Whilst much can be achieved through funding incentives, support and regulation, good information is also a critical factor in driving down energy use. We support the UK Government's plan to install smart meters for gas and electricity in every home by 2020. A smart meter, together with an individual display unit (IDU) provides real-time information about energy use and costs, encouraging better household energy management. The roll-out across the UK, by energy suppliers, will take place between 2014 and 2019, although suppliers estimate that five million meters will have been installed prior to the official go-live date.

Fabric improvement and heating efficiency proposals

5.4.15 Ambitious work is already underway through the policies and programmes described above. However, we recognise more will need to be done and the following proposals are currently under consideration or in development.

5.4.16 We aim to continue our National Retrofit Programme to cover the whole of Scotland. This could involve a continuation of effort on hard to treat properties such as tenements, combining energy efficiency measures with tackling disrepair.

5.4.17 Regulation may need to play a part in improving energy efficiency. In the SHS consultation, we sought views on if, how and when to set minimum standards of energy efficiency for private sector housing. Feedback from the consultation will inform a stakeholder working group that will consider the issues and develop draft regulations for consultation.

5.4.18 Responses to the draft Sustainable Housing Strategy supported a lead in time between consulting on draft regulations and the application of any standards to allow time for householders and landlords to prepare for the changes. Scottish Ministers have previously stated that we would not look to set minimum standards before 2015 and our proposal at this stage assumes a minimum standard for all private sector housing to be introduced in 2018 (the same timescale being considered for the private rented sector in England and Wales).

5.4.19 We also need to consider social housing standards. Social landlords are already required to meet the Scottish Housing Quality Standard by 2015, and this includes an energy efficiency element. We propose to introduce a new energy efficiency standard for social housing in 2013 setting initial targets to be met by 2020. This will further improve the energy efficiency of social housing, reducing energy consumption and fuel poverty and driving down emissions.[110]

5.4.20 New build domestic energy standards 2014. As part of the review of building regulation energy standards in response to the recommendations of the Sullivan Report,[111] we are consulting on the potential to cut new-build emissions by around 45% compared to 2007 standards. In practice this will mean there will generally be less air-infiltration, improved fabric insulation, better heating controls, heating systems of greater efficiency and, for some building types, greater use of low carbon technologies - such as micro-generation - and innovative measures - such as wastewater heat recovery - to reach the emissions reduction standard.

New techniques and technologies

Scotland's Housing Expo held in Inverness in 2010 showcased master planning, passive energy techniques and new building technology in low carbon building design. The homes were designed to tight cost limits, some with predicted annual heating costs of less than £100.

5.4.21 Our modelling suggests that there is an additional technical abatement potential of approximately 0.65MtCO2e by 2027 through improvements to the carbon efficiency of the housing stock. We intend to produce a detailed proposal in RPP3 on how we may realise this potential.

Decarbonising heat policies

5.4.22 The Scottish Government's current policies and action on low carbon and renewable heat are set out in our Renewable Heat Action Plan,[112] in the 2020 Routemap for Renewable Energy in Scotland [113] and the Scottish Government's outline of a draft Heat vision which was published in January 2013 alongside the draft RPP2.

5.4.23 The Renewable Heat Incentive (RHI), a UK policy, was introduced in 2011 to incentivise the use of heat produced from renewable non fossil fuel sources, such as wood fuel or heat pumps. It is key to us meeting our Scottish target of 11% of heat demand from renewables by 2020 and will play a significant role in decarbonising the heat sector by 2030. We have developed a range of supporting actions to increase deployment of renewable heat technologies in Scotland.

5.4.24 The RHI is being implemented in phases. Phase one focuses on the industrial and commercial sectors. The UK Government has also provided further short term support for installations of renewable heat technologies in the household sector through the Renewable Heat Premium Payment scheme[114]. Under the scheme, up-front costs for the installation of renewable heat generation will be met by installation owners, with the incentive guaranteeing them a reasonable return on investment.

5.4.25 The UK Government has recently consulted on proposals for a Renewable Heat Incentive for the domestic sector. The scheme is expected to be in place in summer 2013. The RHI is worth about £90 million to Scotland over four years, including the grant scheme for domestic users, with the sector expected to create up to 1,350 new jobs in this timescale.

5.4.26 The District Heating Loan Fund[115] offers loans to support both low carbon and renewable technology solutions to a range of infrastructural issues and the costs of developing district heating networks. We have allocated at least £5million to the scheme over this spending review period. It is open to local authorities, registered social landlords, SMEs and energy services companies in Scotland.

5.4.27 In June 2012 we announced a £5 million boost to the budget for Home Renewables Loans[116], and an increase in the amount available for renewable heat to £10,000. The loans are providing support to individual householders to install renewable technologies in their homes and are available until March 2013 through the Energy Saving Trust, who have seen a sharp rise in the levels of interest since the announcement.

Use of biomass

Scottish Government policy is to promote the use of biomass plants for heat or for combined heat and power, with new plants relatively small in scale. This is to optimise local supply, serve localised heat markets and maximise efficient use of a limited fuel source.

Wood fuel use for energy production has more than tripled in the last five years. We are currently reviewing the blend of support available for biomass to establish a more appropriate balance between the support available, policy priorities and competing needs for the resource.

5.4.28 Heat mapping is fundamental in the development of our ambitions to decarbonise heat. Heat maps help identify and define future renewable heat opportunities in an area, particularly heat networks. We have already funded heat mapping in Highland, Fife and Perth & Kinross and we are rolling out the heat mapping programme to all local authorities in Scotland with the aim of creating a pan-Scotland heat map.

5.4.29 Heat mapping will support delivery of Scottish Government programmes such as expenditure under the REIF, the Warm Homes Fund, the District Heating Loan Scheme and implementation of the recommendations of the Expert Commission on District Heating as well as ensuring increased uptake of the Renewable Heat Incentive in Scotland.

Decarbonising heat proposal

5.4.30 While we are taking forward significant activity on decarbonising heat in Scotland, we recognise the need for a more strategic approach for significant decarbonisation of heat by 2030. Our new ambitious proposal for decarbonising heat, expressed in a new vision, hierarchy and Heat Generation Policy Statement, will include both the domestic and non-domestic sectors. As the majority of the emissions abatement is likely to fall in the non-domestic sector, details are at paragraph 6.5.10 in the next chapter. Given the significant policy work still to do in this area, the final abatement split between the Homes and Communities sector and the Business, Industry and Public Sectors may change.

5.5 Supporting and enabling measures

5.5.1 Access to information is vital to help people make low carbon decisions from transport through to energy efficiency in the home. We have invested in the network of Energy Saving Scotland Advice Centres (ESSacs)[117] to provide free advice and support across a range of energy efficiency matters to householders, businesses, communities, and local authorities and housing associations. This service will also provide the impartial remote advice service for Green Deal.

5.5.2 Important information is also available to existing and prospective property owners through Energy Performance Certificates (EPCs).[118] They are required on completion of construction and at the point of sale or rental and provide energy efficiency information, allow comparisons to be made. They are accompanied with advice on ways in which energy efficiency of the building concerned could be improved in a cost-effective manner.

5.5.3 Information and support is also vital for community action. Communities working together can often achieve more than households and individuals acting alone. Our Climate Challenge Fund[119] supports local communities in developing their own solutions for reducing greenhouse gas emissions. Since 2008, nearly 400 communities have undertaken projects from energy efficiency and insulation projects to active travel and sustainable food production. The fund empowers communities to deliver projects that are relevant to them and which leave a positive and sustainable legacy for the future. The fund supports communities to generate an income from their low carbon activity, where this can be achieved within State Aid rules, and the income is reinvested in further project activity which is consistent with a low carbon future.

5.5.4 The Junior Climate Challenge Fund operates alongside the main fund and supports projects which are designed, developed and delivered by young people (under 18s) whose future actions are crucial to the delivery of our climate change targets. The young people are engaged throughout, with funding decisions made by a youth panel.

5.5.5 Many people in Scotland live in historic and traditionally built houses and tenements which can be difficult to treat. Not only is it challenging to make these buildings more energy efficient, but there are often constraints related to their listed status. Historic Scotland is developing technical guidance[120] on how to improve these properties and a number have already been published.

Traditional buildings

Traditional buildings should not be seen as inevitably "hard to treat" buildings, although they may need a distinct approach to adaptation. Historic Scotland is carrying out a number of refurbishment pilots to test the effectiveness of different interventions in traditional buildings and to develop cost effective improvements in thermal performance that respect their fabric and the appearance. A variety of dwelling types have been chosen, including small detached rural properties, a village hall and 19th and 20th century tenements in Edinburgh and Glasgow. The buildings are currently being monitored.[121]

5.6 Costs and benefits

5.6.1 Decarbonising our homes will bring a multitude of benefits to both households and businesses. This section summarises the costs as well as highlighting the main benefits.

5.6.2 The energy efficiency retrofitting of existing homes and driving up energy efficiency standards for new homes will reduce the amount of energy people have to use and result in financial benefits, reducing fuel poverty. In some cases improving energy efficiency and upgrading homes may prevent ill-health resulting from living in cold damp housing.

5.6.3 The proposals and policies described will require significant investment in housing from the Scottish Government, consumers, energy companies and other sources. Annex A and the technical annex published with this RPP2 provide further information about these costs.

5.6.4 We aim to make Scotland the most attractive place in Great Britain for energy companies to invest in energy efficiency. Decarbonising homes has the potential to create many jobs through, upgrading existing homes, installing domestic renewable technologies and developing export markets. This will require new skills, for example, in modern methods of construction, and multi-skilling to enable retro-fit. It will also require the retention of specialist traditional skills for older and historic buildings. We will only be able to take advantage of these economic opportunities with a skilled and adaptable workforce.

Thermal renovation and job creation

While it is not straightforward to quantify the benefits in terms of job creation, the French Ministry for Ecology, Energy, Sustainable Development and Spatial Planning has estimated that 'for every €1million of investment in property-related thermal renovation, 14.2 jobs are created or maintained in the field of energy performance-related work'[122].

5.6.5 We will continue to encourage industry to recognise the important role of training in preparing for these growth opportunities. There may be a need for new recruits, including currently under-represented groups, and returners affected by the recent economic downturn. Our National Training Programmes have at least 500 places in energy and low carbon industries. The introduction of the Green Deal will also result in training requirements for Green Deal assessors and potentially an element of up-skilling for installers.

5.6.6 We aim to ensure continuity for installers, particularly in the insulation industry. There will be new employment opportunities for installers, particularly with solid wall/hard to treat wall insulation, an industry so far relatively undeveloped in Scotland. The Green Deal will provide opportunities for SMEs as well as large businesses.

5.6.7 Driving down costs of energy efficiency measures will be particularly important in encouraging uptake. Social landlords are well placed to act as pioneers because of their ability to plan and manage major improvement programmes and offer economies of scale. This may be important in driving down costs of more expensive types of wall insulation and developing new approaches that can then be applied in the complex owner-occupier market.

Highlights of Progress to Date

In 2011-12 around 12,000 householders benefitted from the Boiler Scrappage Scheme and £7.5 million has been allocated for 2012-2013 to allow a further 18,000 householders to benefit, with a view to realising the manifesto target of 30,000 boilers three years early. It will also help us to reach the milestone we set in RPP1 that every home with gas central heating should have a highly efficient boiler.

The Scottish House Condition Survey (SHCS) shows that, by 2011, 65% of dwellings had 'good' energy efficiency ratings compared to only 31% in 2002.

The SHCS also shows good progress against the milestones we set in the first RPP that every home in Scotland should have loft and cavity wall insulation by 2020, where this is possible and cost-effective. In 2011 only 2% of lofts had no loft insulation, while 86% had 100 mm or more; and two-thirds of homes with cavity walls had these insulated. More than 400,000 Scottish homes benefitted from cavity wall and loft insulation measures in the four years to the end of 2012.

Since 2007, we have provided nearly £13 million in grants and loans direct to householders to help install micro-generation and we continue to fund the Home Renewables Loan Scheme to help householders benefit from the UK Feed in Tariff and Renewable Heat Premium Payments.

5.7 Homes and Communities abatement summary

Homes & Communities Earliest start date Annual Abatement (KtCO2e) 2020 Annual Abatement (KtCO2e) 2027
Policies
Smart Metering 2012 88 95
Domestic Buildings Energy Standards (2010) - New Build Properties 2010 76 142
Renewable Heat Incentive (Domestic) 2011 78 80
Energy Company Obligation (ECO) and Green Deal (GD) 2013 104 132
National Retrofit Programme: Scottish Government Fuel Poverty and Energy Efficiency Programmes 2013 207 207
Warm Homes Fund 2013 23 22
District Heating Loan Fund 2011 36 36
Proposals
Domestic Buildings Energy Standards (2014) - New Build Properties 2014 22 55
Regulation of Private and Social Housing 2014 63 152
National Retrofit Programme: Insulation and Heat Programme 2018 33 167
Low Carbon Heat (Domestic) 2013 99 609
Additional Technical Potential in Fabric and Energy Efficiency 2018 210 650