1. Executive summary
In response to the global climate crisis, the Scottish Government has established a commitment to reach net zero greenhouse gas emissions by the year 2045. In contribution to this, the Scottish Government announced incoming legislation that will mean all new homes given planning consent from 2024 must use renewable and zero emissions heating systems. These heating systems will need to have zero direct emissions at point of use.
In November 2020, the Scottish Government appointed Locogen to deliver an evaluation of renewable and zero emissions heating systems in 21 recent or live Scottish affordable housing projects. The key objectives of this study were to:
- Assess the estimated, actual, and counterfactual costs of the projects' heating systems.
- Determine the drivers behind decision making for each project.
- Provide recommendations for further study in future evaluations.
1.1. Limitations to this study
There were several limitations to this study which are important to consider and caveat. These include:
- The sample size of projects was small and so caution should be taken when drawing conclusions from this research.
- The capital costs of heating systems displayed only include the procurement and installation of the heat generation and storage system and not the distribution system. In some cases, the costs are estimates and therefore are subject to change.
- This study only considers heating system capex and opex, which is defined as the running costs experienced by tenants. We believe it is important to also consider carbon emissions, building fabric capex and maintenance costs when making decisions on new build regulations.
1.2. Stakeholder interviews – key findings
The key findings from our RSL and Council stakeholder interviews on their experiences with Low and Zero Carbon Generating Technology (LZCGT) affordable homes projects are:
1. Meeting tenant needs, site characteristics, regulations, funding availability and sustainability ambitions are key motivating factors for RSLs and councils to use LZCGTs.
2. The expertise and motivations of internal and external decision makers and stakeholders strongly influenced the decision-making process in projects.
3. Capex is one of the main influences on heating system choice, with LZCGT heating systems found to be an expensive aspect of total costs when compared with non-LZCGTs.
4. Most stakeholders were not concerned about LZCGTs impacting electricity network costs, due to these being considered at an earlier stage in the project or by other stakeholders.
5. Rural and hard-to-reach areas are experiencing higher costs and a local skills gap, but otherwise supply chain issues were not being experienced for LZCGTs.
6. There is a gap on monitoring new LZCGTs, which could provide important evidence on real-world running costs.
1.3. Cost data – key findings
The key findings from our project cost data analysis are:
1. LZCGTs are £2,000 to £5,000 more expensive per unit than the default on-gas option, this being gas boilers with solar PV (as gas-based new build homes in Scotland are required to have renewables). For off-gas systems, there is no real default non-LZCGT option, so these projects are more likely to opt for LZCGTs than on-gas projects.
2. There is a vast range in capex, even for the same technologies (particularly ASHPs), but less variation within projects across various unit sizes. Shared systems, including DHNs, are more expensive than individual ones.
3. As per Table 1, LZCGT equipment and installation capex ranges from £5,000 per unit (individual ASHPs in large rural project) to £11,500 per unit (GSHPs in large rural project).
4. Of the technologies considered, GSHPs have the lowest operational cost, followed by ASHPs, then Solar-PV based systems. Due to the standing charge for gas, gas boiler systems are more expensive to operate than any of the LZCGTs considered (aside from biomass DHNs, which aimed to be cost-competitive with gas).
5. Due to the limited data for most LZCGTs and high variation in the projects themselves (sustainability levels, locations, sizes, unit types, procurement process), trends and programme-averaged values are presented with low confidence and are highly caveated.
|LZCGT||Gas counterfactual||Off-gas counterfactuals|
|Capex range||£5,000 - £11,500||£3,000 - £6,500||£4,400 - £11,800|
|1-bed opex||£121 - £216||£216||£274 - £433|
|4-bed opex||£199 - £294||£294||£409 - £710|
Based on our research, we propose the following actions to inform the development of the 2024 standards and ultimately increase the uptake of LZCGTs in affordable homes.
1. Consider the costs of higher-specification building fabric for all sustainability standards.
2. Further investigate the cost difference between sustainable homes standards, comparing like-for-like projects and costing new future requirements.
3. Analyse real-world running cost data for LZCGTs and compare to SAP estimates and the carbon-intensive counterfactuals.
4. Survey tenants to determine their comfort levels and overall satisfaction with their LZCGT systems
1. Continue affordable homes funding and Greener standard premium and add a LZCGT premium to support additional cost.
2. Make cost breakdown reporting a standard requirement for affordable homes funding.
3. Facilitate best practice and knowledge sharing between LAs, RSLs and developers to support a higher take up of LZCGTs.
4. Look into how to upgrade SAP to better specify LZCGTs, predict running costs more accurately, and include a wider variety of LZCGTs.
1. Create a rural skills consortium to support rural developments.
2. Support innovative business models that might lead to subsidy-free affordable, sustainable, and net-zero homes in the future.
3. Create price transparency on LZCGTs capex and opex to drive market growth.
4. Encourage energy suppliers to offer more attractive electricity tariffs for LZCGTs.