Heat in buildings strategy: island communities impact assessment

B) The ICIA (Section 8 Assessment)

49. The Islands (Scotland) Act 2018 requires an ICIA to:

• describe the likely significantly different effect of the legislation;
• assess the extent to which the Scottish Ministers consider that the legislation can be developed in such a manner as to improve or mitigate, for island communities, the outcomes resulting from the legislation; and
• set out the financial implications of steps taken under this subsection to mitigate, for island communities, the outcomes resulting from the legislation.

The following table sets out the key issues in this impact assessment and the mitigations in place.

Potential for higher installation and operational costs for low and heating systems, recognising impact of accommodation constraints, weather and travel disruption) and availability of appropriate funding and finance which takes account of these challenges

• Many of our existing Scottish Government Heat in Buildings Delivery Programmes such as Warmer Homes Scotland, Area Based Schemes, Home Energy Scotland Loans, and CARES provide advice and support to island households and communities. (See paragraph 32)
• Where not already in place, and as part of our forthcoming Islands Energy Strategy, we will review the evidence base and options for an 'islands uplift' across our delivery programmes as part of our commitment to provide additional support for rural and island homes for heat and energy efficiency.
• We will ensure that the remit of the forthcoming Green Heat Finance Taskforce will consider challenges to securing investment across islands communities.
• We will recognise the additional time taken to develop projects in islands settings and ensure that this is given consideration in project and financial planning.

Higher heating costs and high levels of fuel poverty

• We will ensure that islands communities have access to the range of guidance provided by Historic Environment Scotland to help with potential options for the installation of micro-renewables technologies, energy efficiency measures and climate change adaptations in listed buildings, traditional homes and buildings in conservation areas.
• We will ensure that forthcoming Scottish Government energy efficiency regulations will include exemptions as appropriate based on cost effectiveness and technical feasibility, and will be subject to further consultation.
• We believe that there is broad consensus about moving to a whole house approach to retrofit – as set out in PAS 2035 – most people agree it is a better way to improve people's homes. However we recognise that Scottish stakeholders remain concerned about some aspects of the PAS 2035 standard and the changes to the technical standards for energy efficiency measures (PAS 2030). The Scottish Government agrees that the new standards don't properly reflect differences in climate, geography and construction type in Scotland. In response and as proposed by SG officials, BSI has agreed that it would be helpful to engage with Scottish stakeholders. They have agreed in principle to set up a separate technical sub-group of the BSI Retrofit Standards Task Group for Scotland.
• We have also proposed holding a workshop with members of the BSI Retrofit Standards Task Group during November. We have asked Area Based Schemes partners to help identify the evidence for costs/benefits in terms of Scottish build types and specific aspects of the new standards (e.g. cold bridging or removal of gas boxes for EWI installations).
• We plan to publish our Quality Assurance Policy Statement later in 2021 outlining our requirements for QA including quality marks, standards, skills and consumer protection for heat and energy efficiency installation work.
• We are in discussion with TrustMark about setting up a separate pathway that reflects the requirements of Scottish Government schemes. Similar pathways exist for the UK Government managed schemes in England. In principle this would also enable some adjustment to how scheme providers apply PAS 2035 in Scotland.

Whole house retrofit and the suitability of standard energy efficiency measures and requirements for traditionally constructed buildings

• We will ensure that islands communities have access to the range of guidance provided by Historic Environment Scotland to help with potential options for the installation of micro-renewables technologies, energy efficiency measures and climate change adaptations in listed buildings, traditional homes and buildings in conservation areas.
• We will ensure that forthcoming Scottish Government energy efficiency regulations will include exemptions as appropriate based on cost effectiveness and technical feasibility, and will be subject to further consultation.
• We believe that there is broad consensus about moving to a whole house approach to retrofit – as set out in PAS 2035 – most people agree it is a better way to improve people's homes. However we recognise that Scottish stakeholders remain concerned about some aspects of the PAS 2035 standard and the changes to the technical standards for energy efficiency measures (PAS 2030). The Scottish Government agrees that the new standards don't properly reflect differences in climate, geography and construction type in Scotland. In response and as proposed by SG officials, BSI has agreed that it would be helpful to engage with Scottish stakeholders. They have agreed in principle to set up a separate technical sub-group of the BSI Retrofit Standards Task Group for Scotland.
• We have also proposed holding a workshop with members of the BSI Retrofit Standards Task Group during November. We have asked Area Based Schemes partners to help identify the evidence for costs/benefits in terms of Scottish build types and specific aspects of the new standards (e.g. cold bridging or removal of gas boxes for EWI installations).
• We plan to publish our Quality Assurance Policy Statement later in 2021 outlining our requirements for QA including quality marks, standards, skills and consumer protection for heat and energy efficiency installation work.
• We are in discussion with TrustMark about setting up a separate pathway that reflects the requirements of Scottish Government schemes. Similar pathways exist for the UK Government managed schemes in England. In principle this would also enable some adjustment to how scheme providers apply PAS 2035 in Scotland.

Availability of the required level of skilled supply chain for installation, and maintenance for low and zero emissions heat

• As set out in the Strategy we will develop a new 'Heat in Buildings Supply Chain Delivery Plan' by Summer 2022, which will Include a specific focus on developing local supply chains, attracting inward investment, and securing local jobs, training and skills, particularly in our islands and remote communities.
• The Climate Emergency Skills Action Plan (CESAP), published in December 2020 identifies construction, including building retrofit as a priority area for the net zero transition, and proposes immediate and longer-term actions to support people to reskill, retrain and access the growing number of good, green jobs. We will continue to drive delivery of skills and jobs through the CESAP delivery, including the new Green Jobs Workforce Academy and the Green Jobs Skills Hub and ensure that this work identifies islands challenges in relation to skills and jobs as a key area of focus.

Consideration of local infrastructure in the roll out of low and zero emissions heat including availability of national electricity grid and resilience

• We will consider local infrastructure in the roll out of actions in the Strategy. Our CARES programme has supported some of Scotland's most remote and rural off-grid communities to upgrade their energy systems, making them more resilient and sustainable for the future. We have made £3M available this financial year against a range of projects and will commit to the development of a further forthcoming call under CARES to support the ongoing journey of these remote communities towards net zero.
• As set out in our Heat in Buildings Strategy, we will continue our Heat Electrification Strategic Partnership with Scotland's electricity network operators, and use this forum to ensure that the upgrades required are delivered when and where they are needed and that the Local Heat and Energy Efficiency Strategies (LHEES) framework can inform this. This will include supply to islands and rural communities.
• We will ensure the planning system enables and encourages the deployment of low and zero emissions heating, including the networks they require. We will make it a requirement for Local Development Plans to take into account LHEES and identify new and existing heat networks and associated ancillary infrastructure.
• We continue to work with Ofgem in line with the jointly agreed principles for development of Scotland's electricity networks to ensure that Scottish Government targets and ambitions as set out in the Strategy are fully considered as part of decisions on network investment.

Ongoing community engagement

• Our national CARES programme will continue to support communities to work together to address, and champion, heat decarbonisation. Through this we are working to understand further the models and solutions most appropriate for communities in Scotland.
• Local Heat & Energy Efficiency Strategies (LHEES) will provide a long-term framework for taking an area-based approach to planning and delivery of the heat transition. LHEES will enable a locally-tailored approach, taking into account the unique characteristics of islands. These Strategies also form a basis for local public engagement and will be in place for all local authority areas by the end of 2023.
• We will continue to draw advice from stakeholders and advisors through a variety of channels, building on our productive Heat Decarbonisation External Advisory Group. This group will be adapted as part of our revised governance arrangements for the Heat in Buildings Strategy and we will ensure that remote, islands and rural communities are represented in this process.
• We will ensure that challenges and opportunities in different communities across Scotland are recognised through the development of our Public Engagement Strategy for Heat in Buildings. The forthcoming National Public Energy Agency will provide leadership and coordination to deliver on our heat decarbonisation targets, which will include public engagement across Scotland to ensure that people are aware of and understand the changes that are necessary, and can access the right support at the right time to meet their needs. The Public Engagement Strategy will provide the framework to guide how the Agency can best achieve this in practice. Further details will be set out in due course.

Supporting positive impacts

The mitigating actions outlined above will not only help address identified issues and challenges, but enhance the positive impacts heat decarbonisation will bring to islands communities including the following:

• Abundant renewable energy resources (ability to generate heat locally),
• Opportunities for engaged and motivated communities to be part of the heat transition,
• Enhanced island community engagement and sense of community.
• Through CARES we will continue to support and champion the opportunities for communities to engage with heat decarbonisation project models.
• Through the Islands Energy Strategy we will support opportunities for island communities to engage with the heat transition in a direct and meaningful way.
• We will deliver against the commitment in the 2021-22 PfG to support Carbon Neutral Islands (including pilots for islands to run on 100% renewable energy, with at least 6 islands over this Parliament to enabled to become fully carbon neutral by 2040, as forerunners to a net zero Scotland by 2045).
• Opportunities for more niche technologies (such as water source heat pumps and heat networks for small communities).
• Overall we recognise some properties may be more constrained in terms of technology options available, limited by location and property type, proximity to the gas network, impact on the fabric of historic buildings, space constraints, and capacity of the electricity grid. In 2022 we will set out our position on the role of bioenergy for islands and remote areas.
• Opportunities for the local supply chain,
• Harness the opportunity for development of skills and jobs within island communities to deliver change.
• We will publish a Heat in Buildings Supply Chain Delivery Plan by Summer 2022 and will co-produce this with industry, ensuring it sets out the opportunities for local islands supply chains.
• Opportunities to promote renewable tourism and local business.
• Will we will work with the Scottish Government Islands Team to ensure that renewable and heat decarbonisation projects are linked in with opportunities to promote local business and projects as part wider tourism strategies and plans.
• Promoting resilience in islands building stock (by improving the fabric) for future generations,
• Opportunities for increased thermal comfort and health.
• We will continue to prioritise action on energy efficiency to deliver regulations to support the installation of energy efficiency first improvements in all buildings (e.g. roof, windows, wall and floor insulation, both the retrofit of existing buildings and increased energy performance of new buildings.
• protection of the unique natural environment of Scotland's islands and rural communities through climate change mitigation.
• We will continue to deliver on the actions set out in the Strategy in order to achieve our ambition to remove emissions from the way we heat our homes and buildings.

Financial implications of the transition to zero emissions heat for Scotland

50. We estimate that the total building investment required to transform all homes and buildings in Scotland to zero emissions by 2045 is likely to be in excess of £33 billion.

51. The Scottish Government will kick start this transition with at least £1.8 billion of capital funding during the next five years. We will expand existing delivery programmes to focus on accelerating deployment over the next 5 years against the following four strategic priorities: (1) those least able to pay, (2) investing in strategic technologies in low or no regrets areas, (3) showcasing Net Zero Leadership and share learning through early adoption in key areas of focus and (4) investing in innovation and demonstration to drive forward competitive advantage. We know that this cost cannot be borne by the public sector alone and are establishing a new Green Heat Finance Taskforce to identify innovative ways to maximise private sector investment and find new ways to help individuals and organisations spread the upfront cost of investing and making their properties warmer, greener and more efficient.

52. Costs for mitigating actions are outlined below where known. However for the islands uplift, commitment to enhancing support available for rural and remote households and future CARES programme calls will be developed as part of the development of the Islands Energy Strategy 2022.

Conclusion

53. In the lead up to publication of the Heat in Buildings Strategy, the Scottish Government consulted extensively - on the draft Strategy through public consultation and through continued engagement with key stakeholders including in the Heat Decarbonisation External Advisory Group.

54. Desktop evidence gathering, consultation with island communities, local authorities and other relevant stakeholders have provided an understanding of the unique island issues in relation to the Strategy and the potential impacts the Strategy may have on these communities.

55. Specifically, the Scottish Government will undertake the mitigating actions outlined within this ICIA, and in noting the high-level nature of the Heat in Buildings Strategy, will require subsequent delivery programmes and regulatory legislation to have regard to island communities and undertake additional ICIAs as relevant under the Islands (Scotland) Act 2018.