Heat in buildings strategy - achieving net zero emissions: consultation

Chapter 3 People

Transforming how we heat our homes and buildings will touch the lives of almost everyone in Scotland. It will involve changes in our homes, places of work and community buildings as we upgrade and roll out new heating technologies and energy efficiency measures.

People must be at the heart of this transition. We are committed to a just transition to net zero which means working with people, businesses and communities across Scotland to ensure they have a clear role in decision making, can access support and advice, and to help ensure that the burden of paying for the transition is spread fairly. We will also put in place the necessary protections, within our powers, to protect our most vulnerable citizens and to ensure that there are clear routes for redress when things go wrong.

Just Transition

The transition to net zero emissions will transform our society and economy, therefore the manner of our transition will be crucial. If we plan and prepare, building consensus about our collective future through dialogue and engagement, then we can ensure Scotland benefits from the opportunities of net zero. The transition can realise green jobs, a better environment and a healthy economy that supports our wellbeing. Failure to plan risks abrupt shifts, the loss of key industries and jobs, and deepening inequalities. This is why Scotland has committed to a just transition to net zero.

A just transition puts people, communities and places at the heart of our approach to climate change action. It ensures we work together in order to capture opportunities, tackle existing inequalities and exclusion, whilst anticipating and mitigating risks to those worst impacted so no one is left behind. As the pace of the transformation increases, the need for a collaborative just transition becomes ever more important. This approach is at the heart of Scotland’s ambitions to move to a wellbeing economy that prioritises society’s wellbeing as the core aim of our economy.

Taking people with us

The impact that heating our homes and workplaces has on our climate is not well recognised, and in the past people have been encouraged to install modern, efficient gas systems as a way to reduce emissions. Recent research suggests that only 49% of people identified gas central heating as contributing to harmful climate change emissions, and fewer than 20% of people said they would consider switching to a zero emissions heating system, with fewer than 2% having done so already.^[xxvi]

The transition will affect us all. So, it will be important that we are all involved in the decisions about how our homes and buildings are to be transformed and how the transition is managed. This will need to be underpinned by increasing awareness of energy efficiency and zero emissions heating systems, open and transparent decision making and an inclusive, people centred approach.

Building on the objectives and guiding principles of our draft Public Engagement Strategy for Climate Change^[xxvii], we will take this a step further to develop and begin implementing a bespoke public engagement strategy for heat in buildings, with a focus on:

• raising the profile of energy efficiency and zero emissions heating options so that people are aware of the benefits and begin to see them as a positive choice;
• enabling people to actively participate in shaping the development of Scottish Government policy and incentives as well as local level heat and energy efficiency planning; and
• promoting the support that is on offer from both the Scottish and UK governments to maximise take up over the 5 years of this strategy.

We will take steps to ensure that everyone, including owner occupiers, tenants, private and social landlords, SMEs and communities, has the opportunity to help shape the decisions we take at a national and local level on how we heat our homes and buildings in the future. We will consult extensively with stakeholders and citizens as we develop the regulations and delivery programmes proposed in this draft strategy.

We will learn from the practices used as part of Scotland’s Climate Assembly^[xxviii], a citizens’ assembly that is considering what measures are needed to achieve our emissions reduction targets. We will respond to the Climate Assembly’s recommendations and take action on them as we further develop this draft strategy.

To support public engagement, we will simplify our branding to make our schemes easier to identify and navigate, helping to build trust and awareness. To ensure that we take an inclusive approach, we will identify and support disengaged and vulnerable groups, ensuring that support is available to all of society and we will give due regard to equalities, and shall not unfairly discriminate based on any protected characteristics.

Summary of action we will take:

1. Building on the Climate Change Public Engagement Strategy, we will develop and begin implementing a bespoke public engagement strategy for heat in buildings in 2021.

2. We will respond to the Climate Assembly’s recommendations and take action on them as we further develop this draft strategy.

3. By 2023, we will have simplified our branding to make our schemes easier to identify and navigate, helping to build trust and awareness.

4. We will identify and support disengaged and vulnerable groups, ensuring that the heat transition is accessible to all of society, and we will give due regard to equalities, and shall not unfairly discriminate based on any protected characteristics.

Questions

9. What are the most significant actions we can take to ensure that Scotland’s people and organisations are meaningfully engaged in the net zero heat transition?

10. What in your view are the opportunities, if any, available to key organisations, such as local government, businesses and trade associations and community or other non-government organisations, in supporting this public engagement activity?

11. In your opinion, could any of the proposals set out in this strategy unfairly discriminate against any person in Scotland who shares a protected characteristics (age, disability, sex, gender reassignment, pregnancy and maternity, race, sexual orientation, religion or belief).

12. In your opinion could any of the proposals set out in this strategy have an adverse impact on children’s rights and wellbeing?

Helping people make informed choices

Ultimately the success of the transition depends upon a variety of interventions individuals make in their homes and that organisations make in properties that they own or lease. We want individuals and organisations to see energy efficiency and low and zero emissions heating as a positive choice, know what the options are, and know where they can get help and trusted advice.

We will retain the support and advice services currently operating as Home Energy Scotland and Energy Efficiency Business Support at the core of our delivery schemes. Together they provide free and impartial advice on energy efficiency, energy saving and zero emissions heating to households, businesses and other organisations across Scotland. The public sector can access similar support via the Public Sector Project Support Unit. Third sector and community organisations can access support via the Community and Renewable Energy Scheme (CARES).

As we accelerate the transformation of Scotland’s homes and workplaces, we will invest in growing our advice services and adapt and improve them so that they continue to meet the needs of the Scottish public. As an initial step we will improve our digital presence and the advice and support that can be accessed online. We will also extend the support on offer via Home Energy Scotland and Energy Efficiency Business Support to provide more in-depth and targeted support for households and SME businesses installing zero emissions heating systems. Our delivery programmes are discussed in more detail in Chapter 6.

We will learn lessons from and build upon successful marketing campaigns such as Greener Scotland and existing programmes, such as Home Energy Scotland and Energy Efficiency Business Support. We will also relaunch and expand our Green Homes Network so that people can learn from households, businesses and organisations who have already taken action to make their property warmer, greener and more efficient.

Summary of action we will take:

5. We will invest in growing our advice services so that they continue to meet the needs of the Scottish public. This includes improving our digital presence and extending the support on offer to provide more in-depth support for installing zero emissions heating systems.

6. We will expand our Green Homes Network so that people can learn from other householders, businesses and organisations who have already made the transition to warmer, greener and more efficient buildings.

Questions

13. What further action can we take to support people to make informed choices on the energy efficiency and heating options available to them?

14. What is your view on the current level of support and advice provided through existing services such as Home Energy Scotland and the Energy Efficient Business' Support service?

15. Are there any further suggestions that you could provide on how the customer journey through these delivery services could be improved, in light of the ambitions set out in this strategy?

Consumer Protection

Consumer organisations have highlighted consumer protection and mis-selling in the zero emissions and energy efficiency sector as an area of current and growing concern as the rate of installations increases, and have highlighted the opportunity to improve reporting and redress systems for consumers. In the worst cases consumers have been victims of scammers who actively set out to deceive them, incurred significant costs and ended up with measures that are of poor quality or dangerous.

Consumer protection is reserved to the UK Government, with only powers over consumer advocacy and advice devolved to Scottish Ministers. We are therefore currently unable to create a statutory consumer protection framework for heat and energy efficiency.

However, positive steps have been taken by Home Energy Scotland, Trading Standards Scotland and others to raise awareness of scams, and support consumers to find reputable installers, but there is an ongoing requirement to monitor and address the identified issues to mitigate the risk of harm to households.

In Chapter 9 we propose adopting the latest retrofit standards to ensure consumers receive high quality work carried out by skilled operatives. We are also considering the use of the UK Government endorsed TrustMark quality assurance framework which includes a Consumer Code and Consumer Charter.

More generally, we will publish our Scams Prevention Strategy in the coming weeks, which will set out actions we will take with partners to improve public awareness, data sharing and enforcement to help protect consumers in Scotland against scammers.

As we design new heat and energy efficiency policies, regulations and delivery schemes, we will aim to create the necessary environment to allow exemplary practice to become the norm and to ensure that confidence in energy efficiency and zero emissions heat measures is not undermined by poor or illegal practice. We will work closely with consumer groups to continuously monitor and identify potential issues and take mitigating action where they arise.

The independent Energy Consumers Commission, which will be incorporated into Consumer Scotland once established, will have an important role monitoring the consumer impacts of the rollout of energy efficiency and zero emissions heating and representing energy consumer interests. We will work with the Energy Consumers Commission and Consumer Scotland and a range of Scottish consumer representative organisations to ensure that issues of consumer detriment are identified and addressed, focussing on consumer understanding, accessibility, costs, redress, and support for vulnerable consumers. Specifically, we will work with energy companies, the Energy Consumers Commission and others to explore how best to engage energy consumers to help them understand their energy needs and the longer-term benefits of different heating types.

The Heat Networks (Scotland) Bill will regulate the heat networks market for the first time. This will include the introduction of a licensing system which will place conditions on operators to provide this essential service in line with the interests of network users. The UK Government has also confirmed that it intends to legislate in 2021 to introduce minimum consumer standards across the heat networks market, including in Scotland. We support the UK Government’s intention to legislate in this area and introduction of Ofgem as a regulator of the sector. To enable alignment of regulatory regimes we have written to the UK Government to request that its legislation provides powers for Scottish Ministers to amend the functions of Ofgem so that it may act as the licensing authority for Scotland under the provisions of the Bill. This would only be used should that be the consensus view following consultation.

Summary of action we will take:

7. We will work closely with consumer groups to continuously monitor and identify potential issues and take mitigating action where they arise.

8. We will work with the Energy Consumers Commission and Consumer Scotland and a range of Scottish consumer representative organisations to ensure that issues of consumer detriment are identified and addressed, focussing on consumer understanding, accessibility, costs, redress, and support for vulnerable consumers.

Questions:

16. What are the most appropriate steps we can take within our powers to ensure sufficient consumer protection for supported energy efficiency or zero emissions heat installations?

17. Do you have views on whether we should adopt the use of the UK government’s TrustMark quality assurance framework?

Addressing Fuel Poverty

Today in Scotland, a quarter of households are in fuel poverty^[4] with around half of these living in extreme fuel poverty. The median fuel poverty gap^[5] in 2019 was £700 in 2015 prices. The Fuel Poverty (Targets, Definition and Strategy) (Scotland) Act 2019 requires that by 2040, as far as reasonably possible no household in Scotland is in fuel poverty and no more than 5% of households in Scotland are in fuel poverty and no more than 1% of households in Scotland are in extreme fuel poverty, and the median fuel poverty gap is no more than £250 adjusted for 2015 prices (see figure overleaf). Therefore, as we scale up deployment of energy efficiency measures and zero emissions heating systems, we must also redouble our efforts to tackle fuel poverty so that we achieve our fuel poverty targets.

We know that the prevalence of fuel poverty is higher in remote rural (43%) and remote small towns (34%)^[xxix]. One important reason for this is that not all of these households have access to the gas network, since the fuel poverty rate for homes with electricity as their primary heating fuel is 43% compared to 22% for gas^[xxx]. The majority of households using electricity in Scotland, whether in urban or rural settings, currently rely on traditional emitters such as storage heaters.^[xxxi]

Fuel Poverty Targets

In the year 2040, as far as reasonably possible no household in Scotland is in fuel poverty

No more than 15% of households in Scotland are in fuel poverty

No more than 5% of households in Scotland are in extreme fuel poverty

The median fuel poverty gap is no more than £350.

2030

No more than 10% of households in Scotland are in fuel poverty

No more than 3% of households in Scotland are in extreme fuel poverty

The median fuel poverty gap is no more than £300.

2035

No more than 5% of households in Scotland are in fuel poverty

No more than 1% of households in Scotland are in extreme fuel poverty

The median fuel poverty gap is no more than £250.

2040

Homes with higher levels of energy efficiency tend to have lower rates of fuel poverty (See figure below)^[xxxii], although a high level of energy efficiency does not guarantee that a household will be removed from fuel poverty, due to other drivers of fuel poverty such as low income and high fuel prices. Even where a household remains in fuel poverty after extensive retrofit, the enhanced energy efficiency can reduce the depth of their fuel poverty and provide them with improved levels of comfort.

As set out in the 2018 Energy Efficient Scotland Route Map we believe that homes with households in fuel poverty should reach higher levels of energy efficiency. We want to see homes with fuel poor households improved so they reach an energy efficiency rating equivalent to EPC C by 2030 and equivalent to EPC B by 2040.

These targets for fuel poor homes will guide our national and area-based delivery programmes. This will mean maximising the level of improvement possible within limits affordable to the public purse.

As we transform our homes and buildings over the next two decades it will be imperative that we do so in a way that continues to help eradicate fuel poverty and protect our most vulnerable citizens. It will also be important that we protect, and wherever possible, enhance the competitiveness of Scottish businesses.

We will continue to build the evidence base on the interactions between our fuel poverty and climate commitments, and apply that knowledge to our policy design and to our programmes, mitigating any risk of unintended consequences, and tracking progress and learning by doing in order to adjust immediately where unintended consequences nevertheless arise. As we further develop each of the actions set out in this strategy we will undertake an assessment of the impact they will have on fuel poverty. We will only take forward actions where they are found to have no detrimental impact on fuel poverty, unless additional mitigating measures can also be put in place.

In the final version of this Strategy, we will publish a set of guiding principles to underpin our commitment to no one being left behind, ensuring our approach neither increases the fuel poverty rate nor increases the depth of existing fuel poverty.

In the nearer term in order to protect those in fuel poverty, we will reshape and target our energy efficiency and heat programmes. We will continue to use our delivery programmes to target support to fuel poor households, to maximise the number of households in fuel poverty achieving a level of energy efficiency equivalent to EPC C by 2030 and EPC B by 2040.

The Competition and Markets Authority found that up to 90% of heat network customers face similar, or lower, bills than those with standard gas boilers^[xxxiv] and heat networks can cut both emissions and bills.

There are examples of projects delivered through our existing energy efficiency and heat schemes, that have provided zero emission heating systems and improved insulation that reduced both carbon emissions and fuel bills. For example, for some properties, heat pumps can help reduce bills where they are replacing older, more inefficient oil and gas heating systems. Increasingly there is also the option to deploy heat pumps alongside other measures such as solar PV or battery storage to help further reduce electricity bills.

However, when a heat pump replaces a modern, efficient gas boiler, the greater efficiency of the heat pump may be insufficient to offset the higher price of electricity and the household’s running costs may therefore increase^[6].

High standards of energy efficiency can help to reduce the overall demand for energy, and alongside energy saving behaviours can help to ensure running costs remain affordable. We will continue to take an energy efficiency first approach as it enables the rollout of low and zero emissions heating, as well as being an important factor in tackling fuel poverty.

Case Study: Heat Pump installation in Orkney

An increasing number of heat pumps are being installed to address fuel poverty through our Warmer Homes Scotland programme. Feedback received from households suggests many are benefiting from consistently warmer homes, and in some cases cheaper bills, when switching from predominantly old electric storage heaters to air source heat pumps.

An example is Mr K from Orkney. Mr K was living with an inefficient heating system that was very expensive to run despite it not even heating the whole house. Mr K knew he could not afford to keep paying the bills every month. With help from Home Energy Scotland, Mr K accessed support for installing a heat pump.

Mr K has already noticed a difference in his bills and quality of life:

“Our bills have decreased by half since we installed the air source heat pump and this will save us around £1000 a year, maybe even more. We are also warmer and we are living in a comfortable home where you don’t have to wear coats in the house to keep warm. People actually come to our house to visit us now because it’s so warm and their home is cold, so they visit us to keep warm and have a cup of tea. It’s a magical system, more people should know about this and the impact it could have on older people’s lives.”

We remain committed to phasing out funding for fossil fuel heating systems by 2024, where it is not detrimental to our fuel poverty objectives and we will take a “low and zero emissions heating system first” approach (see Chapter 6) and take steps to increase the number of zero emissions heating systems installed through Warmer Homes Scotland and our Area Based Schemes, with delivery targeted at those households who can benefit most from installing a heat pump or connecting to a heat network.

Our advice and support programmes will continue to support energy efficiency measures, and for those households requiring additional support these services will continue to provide help on tariff switching, energy behaviours and make onward referrals to ensure that all households receive the support for which they are eligible. Being on the right energy tariff can have a significant impact on bills.

Taking a ‘Low and zero emissions heating system first’ approach

Households will be offered a low or zero emissions heating systems in the first instance, but we will avoid installing these systems in households where it would push them into fuel poverty or worsen the depth of fuel poverty. Where installing a zero emissions heating system would have a detrimental effect on fuel poverty we will support the household to install energy efficiency measures and in the short term (up to 2023) will support the installation of a replacement fossil fuel system under our Warmer Homes Scotland scheme. Following further research, if appropriate, we will look to maximise opportunities to install secondary technologies, enabling measures such as solar PV and thermal storage to help reduce running costs in order to further support the deployment of low and zero emissions heating systems.

Our Home Energy Scotland advice service already provides a tariff switching service, in partnership with Citrus Switch, and we will continue this service in future. We will continue to work with energy retailers to ensure that households have access to tariffs suitable for their individual circumstances. We will also encourage energy retailers to develop new tariffs tailored to zero emissions heating systems and continue to press for reforms so that customers with pre-payment meters are able to access similar tariffs to direct debit customers and can benefit from smart meters to access the low and zero carbon technologies that these can unlock.

Energy tariffs which reward flexibility are another route to helping to keep costs of heat down and are also likely to have an important role in enabling a smart and responsive energy system. Flexible tariffs can offer lower per unit prices during periods where supply outstrips demand, with higher prices in times of peak demand. Flexible energy tariffs, when combined with thermal or battery storage, microgeneration and energy efficiency, can help to reduce bills by decoupling heat use from heat production, and encourage heating use to avoid peak times. We will work with energy retailers and encourage them to introduce tariffs compatible with zero emission heating systems, which help consumers maximise the benefits.

To ensure that the most vulnerable consumers are supported during this transition we will work with network companies to ensure vulnerable households moving to heat pumps are identified in distribution network operators’ vulnerable customer strategies, in order that these customers’ needs can be prioritised in the event of any loss of service.

We will conduct analysis to consider the distributional impacts of decarbonising our homes and buildings and further quantify the impact of making our homes and buildings warmer, greener and more efficient on those on lower incomes and those in or at risk of fuel poverty and look at options to mitigate negative impacts which can be brought forward over the longer term.

Small-scale renewable generation and storage, including solar thermal and photovoltaic (PVs), thermal and battery storage could potentially provide a source of energy and flexibility for consumers, helping to reduce bills and tackle fuel poverty. We have supported a number of projects which have set out to demonstrate the role of domestic scale renewable generation and storage in alleviating fuel poverty. During 2021-22 we will evaluate these projects to understand further the cost-effectiveness of this system-based approach. If shown to be cost-effective and capable of delivering both fuel poverty and emissions reduction objectives we will consider, if appropriate and affordable within available budgets, adjusting our delivery programmes so that they can offer a wider set of micro-renewable and storage measures to be deployed in combination with energy efficiency and zero emissions heating measures.

Summary of action we will take:

9. We will publish guiding principles to underpin our commitment that no one is left behind in the heat transition, ensuring our approach neither increases the fuel poverty rate nor increases the depth of existing fuel poverty and ensures that those on lower incomes or in or at risk of fuel poverty are protected from any negative impacts. This will include the effective design and targeting of our fuel poverty and heat in buildings programmes.

10. We will continue to build the evidence base on the interactions between our fuel poverty and climate commitments, and apply that knowledge to our policy design and to our programmes, mitigating any risk of unintended consequences, and tracking progress and learning by doing in order to adjust immediately where unintended consequences nevertheless arise.

11. We will continue to prioritise energy efficiency measures through our delivery programmes, as this will enable the roll-out of zero emissions heating, as well as help to tackle fuel poverty.

12. We will take action through our delivery programmes to maximise the number of homes with households in fuel poverty achieving a level of energy efficiency equivalent to EPC C by 2030 and EPC B by 2040.

13. We will take a zero emissions first approach in our delivery programmes and will phase out funding for fossil fuel heating systems by 2024, where it is not detrimental to our fuel poverty objectives.

14. We will work with energy retailers to ensure households have access to the right tariffs, that tariffs tailored to zero emissions heating systems are available, and continue to press for customers with pre-payment meters to access similar tariffs to direct debit customers.

15. We will commission further analysis during 2021-22 to consider the distributional impacts of decarbonising our homes and buildings and quantify the scale of impact on those in or at risk of fuel poverty or on lower incomes and look at options available to Scottish Government to mitigate these impacts.

16. During 2021-22 we will conduct research to understand the cost effectiveness of thermal, electrical storage and rooftop solar PV to support households to reduce bills, and where this proves effective consider support for them through our existing delivery mechanisms.

Questions

18. In your view, is there any further action that we, or other key organisations (please specify), can take to protect those on lower incomes, and those in or at risk of falling into fuel poverty, from any negative cost impact as a result of the zero emissions buildings transition?

19. What are your views on our approach to phasing out funding for fossil fuel heating systems by 2024 where it is not detrimental to our fuel poverty objectives? Do you think that this could be achieved any sooner than 2024, and if so how?

20. What changes can be made to the Strategy to help maximise positive impacts and minimise negative ones on people experiencing fuel poverty and other vulnerable groups?