Chapter 3: Actions
Green Heat Innovation Support Programme
Our Heat in Buildings Strategy identifies Heat Pumps, Heat Networks and Energy Efficiency as the key strategic technologies needed to support the transition to Green Heat over the course of the next decade. These technologies are mature, readily available on the market, and have already been demonstrated at scale.
However, we believe there is scope for innovation to make green heating technologies easier to deploy, improve integration with the Scottish building stock, enhance efficiency and reduce operational and embodied carbon emissions.
This view is supported by feedback from our Heat Pump Sector Deal Expert Advisory Group, Zero Emissions Social Housing Taskforce and a recent ‘Technology Needs Assessment’[xv] conducted by Scottish Enterprise.
Supporting Scottish companies to respond to Green Heat innovation challenges provides an opportunity to build our competitive advantage, establish new Scottish supply chains, retain an increased proportion of spending through the Green Heat transition, as well as service a growing international market.
To help capture these benefits, we have established a new Green Heat Innovation Support Programme which will be delivered by Scottish Enterprise, and make available up to £17.6 million in support over the course of this Parliament.
The Programme will support Scottish based companies through a variety of channels, including:
- Support for developing ideas and testing concepts;
- Research & Development grant funding to support companies to further develop their solutions;
- Capital assistance to help companies introduce new products or processes to the market;
- Procurement based innovation challenges to develop solutions focused on the needs of consumers; and,
- Dedicated support for collaboration projects with European partners.
The programme will be live for applications on the 14th November 2022. For further details and to register your interest in the programme, please contact Scottish Enterprise.
Green Heat Hub Grand Challenge
In December 2021, our Heat Pump Sector Deal Expert Advisory Group made a series of recommendations to Scottish Ministers on the scope of a ‘Heat Pump Sector Deal’ for Scotland. The actions across this plan respond directly to the recommendations made by the Advisory Group, and we will publish a full, formal response in due course.
The report recommended that:
“Scotland's enterprise agencies should work with industry to support Scotland as a global centre of excellence for heat pump manufacture.”
In particular, “Scotland should consider options for creating, with heat pump industrial stakeholders, a heat pump industry hub to both directly support the large-scale roll-out of heat pumps in Scotland and ensure that this drives maximal economic opportunities and jobs for Scotland.”
Since the report’s publication, we have worked with Scottish Enterprise to develop a Heat Hub project in direct response to this recommendation. However, we think there is potential to expand the heat hub concept beyond a narrow focus on the heat pump sector to include the full breath of supply chain required to support the Green Heat transition.
We envision the Heat Hub being a focal point for collaboration, innovation and inward investment across the Green Heat supply chain, helping to anchor companies in Scotland, as well as providing a window onto Green Heat solutions for consumers. In practice, this may be a new physical or virtual space, or could be built upon Scotland’s existing innovation and enterprise infrastructure.
On 22 September 2022, Scottish Enterprise launched the ‘Green Heat Hub Grand Challenge’, to support consortia of organisations to develop proposals for a ‘Green Heat Hub’ to position Scotland as a leading location in Europe for Green Heat manufacturing.
The Grand Challenge will:
- Enable and facilitate industry, academic and third sector collaborations to drive leadership on the Green Heat transition; and,
- Develop an ambitious, robust, project proposal focused on the implementation and operational delivery of a Heat Hub in Scotland.
Following the completion of the Grand Challenge, Scottish Enterprise will work with consortia alongside public sector partners to review project viability and consider next steps.
Support for Skills and Training
Delivering a Skilled Workforce
The National Strategy for Economic Transformation (NSET) published in March 2022 set a ‘Skilled Workforce’ as one of the 5 policy programmes of action. Through the NSET Skilled Workforce Programme, we are committed to ensuring Scotland’s workforce and employers have the skills they will need in the future, including the skills to support the transition to net zero. It recognises that sectors of the economy, and roles within these sectors, will face different challenges in the coming years, and that many individuals will need to upskill and retrain at various points in their career. Reflecting the scale and nature of the challenges and opportunities ahead, the Skilled Workforce Programme focuses on three key projects:
- Adapt the education and skills system to make it more agile and responsive to our economic needs and therefore our net zero ambitions.
- Support and incentivise people, and their employers, to invest in skills and training throughout their working lives.
- Expand Scotland’s available talent pool, at all skills levels, to give employers the skills pipeline they need to take advantage of opportunities
In the immediate term our priority actions include:
- Establishing the purpose and principles for education and skills system reform and continuous improvement and ensuring that they align with our wider socio-economic vision for Scotland;
- Enhancing the content and reach of the Green Jobs Workforce Academy;
- Developing a stronger, simplified lifelong learning system, including support targeted at those who need it most; and,
- Launching a Talent Attraction and Migration Service to help employers recruit workers from outside of Scotland to help address labour and skills challenges.
The Programme builds on progress already made within the education and skills system to support the transition to net zero, which includes the publication of the Climate Emergency Skills Action Plan and the launch of the Green Jobs Workforce Academy.
Since publishing our draft Heat in Buildings Strategy for consultation in February 2021, we have increased our investment in Green Heat skills and training opportunities, including:
- Delivering £1.49 million of support through our National Transition Training Fund, supporting over 3,350 projected participants to access courses for heat pump, energy efficiency and retrofit construction skills.
- £160,000 capital investment for colleges in the north of Scotland for heat pump and thermal insulation training equipment, with further investment in the South of Scotland colleges provided by the SP Energy Networks Green Economy Fund.
- Unlocking over £140,000 of funding to help plumbing and heating apprentices to access additional training on heat pumps, supporting training for 84 apprentices in 2021.
We recognise the need to continue our support for skills and training and therefore, to support the implementation of this Plan we are:
- Undertaking a refresh of the Climate Emergency Skills Action Plan setting out our approach to planning for Green Heat Skills
- Bringing together education, skills and industry experts through the CESAP Implementation Steering Group with the aim of balancing skills supply and skills demand around Heat Decarbonisation
- Improving the content of the Green Jobs Workforce Academy ensuring information and advice reach the right people at the right time.
- Continuing to work with our skills agencies and training providers to identify and address any gaps in training provision or support
As discussed in chapter 1, many of the core skills required to support the Green Heat transition already exist in the Scottish economy and can be supported through relatively short upskilling courses. For example, plumbing and heating engineers have many of the core skills required to install zero emissions heating, but may require upskilling on unfamiliar technologies such as heat pumps.
However, we recognise that there is a need to grow the number of people employed in the Green Heat sector to meet forecast future demand, as well as replacing workers leaving the workforce.
Many roles in the heat and building improvement sectors rely on apprenticeships as the sole route of entry, which in turn requires businesses to create such opportunities within their workforce. It is important that we maximise the apprenticeship pathway and that this training is well aligned to the Green Heat agenda. However, we recognise that alongside the apprenticeship route, there are also opportunities to build new pathways into the sector without compromising on quality, or the integrity of trades and professions.
Skills Development Scotland are currently working with industry through the Climate Emergency Skills Action Plan, Heat Decarbonisation Sub-Group to consider these issues broadly and implement changes that will support workforce growth in the future.
Ensuring adequate capacity to upskill and train the workforce is fundamental in supporting future growth of the sector. Recent investments means that there is broadly sufficient infrastructure in Scottish Colleges at current levels of demand for training.
According to the Energy Skills Partnership, there are currently 10 colleges in Scotland with capacity to train up to 150 heat pump engineers each month through relatively short upskilling courses for trained heating engineers, with an additional 4 colleges under development. Three colleges in Scotland currently offer training for thermal insulation with a further two training facilities due to open later this year. Wider training provision for Green Heat skills also exists in manufacturer training centres and other private sector settings across the country.
However, we recognise that training is not equally available across all geographic areas and in some instances, people need to travel considerable distances to access specific training. For this reason, we have invested in a mobile training centre for heat pump installation, accessible to any college in Scotland while being hosted by South Lanarkshire College, which will be capable in delivering on site training in rural areas across Scotland. This resource will come online by the end of 2022.
Coordinating a Dynamic Local Skills Response
It is vital that skills support and training provision are aligned at a local level with business needs and future local demands.
Skills Development Scotland are currently leading on pathfinder research to build the evidence base in the Glasgow City and Shetland Council area. This will build an understanding of forecast skills demand and identify gaps, providing a model for undertaking such an assessment in other areas.
The pathfinder research will be complete spring 2023.
Financial Stimulus and Public Procurement
As outlined in Chapter 1, we have committed to stimulate early growth in the Green Heat sector by making available £1.8 billion of funding for zero emissions heating and energy efficiency deployment over the course of this Parliament.
Part of this funding is being made available directly to individual property owners through grants, loans and cashback funding and, as discussed further below, we are exploring ways in which to directly subsidise Green Heat deployment through the supply chain.
However, we are also distributing a substantial portion of our funding at scale as grants for larger infrastructure projects, through contracts delivered by scheme administrators, or through work programmes in the public estate or social rented sector. These large scale funding programmes include:
- Our Warmer Homes Scotland Contract
- Area Based Schemes (ABS) - Delivered via Local Authorities
- Social Housing Net Zero Heat Fund
- Scotland’s Heat Network Fund
- Green Public Sector Estate Decarbonisation Scheme
It is essential that we harness the power of public procurement to translate our investment through these large scale programmes into tangible developments within the supply chain. This means building a visible pipeline of opportunities for the supply chain to gain work generated through our funding, and working across the public sector to coordinate and streamline contracting approaches wherever possible.
There are already a number of operational procurement frameworks designed to support public sector contracting for zero emissions heating and energy efficiency works. This includes Scotland Excel’s Energy Efficiency Contractors Framework which hosts 46 suppliers, 37 of which are Scottish businesses and is expected to be worth £800 million in total over the lifetime of the contract.
We are working closely with partners in Scotland Excel and Procurement Scotland to continuously review the framework contracting landscape and identify any gaps in provision.
Going forward, where possible we will adopt a new condition through our large scale programmes that any work procured with our funding is advertised through the Public Contracts Scotland online portal, including large scale sub-contractual work tendered after the primary contract award. We believe that this will help to strengthen our signal to the market and improve visibility of opportunities across the sector.
Procurement Case Study – Warmer Homes Scotland
Warmer Homes Scotland is our national scheme working to make homes warmer for those living in, or at risk of, fuel poverty by providing support for insulation and heating measures. More than £187 million has been invested through the scheme since its launch in September 2015 helping over 27,000 households throughout Scotland.
The scheme is currently operated under contract by Warmworks.
The procurement of the Warmer Homes Scotland scheme incorporated a number of community benefit obligations for the service provider to deliver, including an Energy Skills Plan which set mandatory targets for the provision of employment and training opportunities throughout the lifespan of the contract.
A collaborative and successful contract management approach has seen the initial targets met, and then subsequently expanded to deliver over 150 apprenticeships, more than 700 new jobs and over 3000 training and up-skilling opportunities across Warmworks and their supply chain.
We are currently procuring a new scheme provider for Warmer Homes Scotland and have set new, enhanced, mandatory targets for the provision of employment and training opportunities. The new scheme is due to go live in July 2023 and will report performance against community benefit commitments annually.
Green Heat Installer Engagement Programme
The Green Heat transition will mean substantial changes for existing suppliers and businesses operating in the heat and energy efficiency industries. It is important to ensure that businesses are fully prepared for the introduction of regulatory drivers and that those wishing to participate in the transition are given early notice of changes that will affect their business. This is particularly true of the installer supply chain which is dominated by small and micro-businesses and sole traders.
The Sustainable Energy Supply Chain programme is funded by the Scottish Government and administered by Energy Saving Trust. Since 2013 it has provided support and assistance for businesses in Scotland to help them participate fully and effectively in the supply chain for energy efficiency and micro-generation measures and installations. Over 4,000 people have benefited so far from the support provided by the programme.
We are now re-launching the programme as the ‘Green Heat Installer Engagement Programme’, with a dedicated focus on working with installers in the heat and energy efficiency supply chain. The programme will:
- Build awareness of policy developments as we bring forward further detail on our plans;
- Collate intelligence and feedback from the supply chain;
- Develop best practice guidance, toolkits and case study material for installers to benefit from their peers; and,
- Support installers to become a trusted voice to consumers in the Green Heat transition
Green Heat Supplier Led Incentive
It will be essential for the supply chain to develop new, attractive, propositions which streamline the Green Heat transition for consumers and coordinate delivery. We want to ensure that our funding programmes are designed to stimulate innovation within the market and that we realise any opportunities to drive down the cost of Green Heat installation.
We have a long history of offering financial support for zero emissions heat and energy efficiency through our Home Energy Scotland Loan and Cashback Scheme. We have committed in the Heat in Building Strategy to replace this cashback offer in 2022/23 with a new standalone grant scheme.
To date, this support has been offered directly to consumers, who are then responsible for sourcing their own suppliers to deliver products and services with advice and support from our Home Energy Scotland service. Since 2019, over 10,500 zero emissions heating, micro-renewable and energy efficiency measures have been supported in this way.
Feedback from industry through our Heat Pump Sector Deal Expert Advisory Group has suggested that to achieve the scale required to deliver upon the ambitions set in our heat in buildings strategy, a complementary approach to subsidising Green Heat works may be required to allow suppliers to develop compelling propositions which they can take directly to consumers.
We are therefore exploring the potential for a new supplier led funding scheme to be delivered in Scotland. We believe this may help to sharpen the impact of our financial stimulus, drive supply chain development through economies of scale and also provide a vehicle to drive up quality standards alongside wider fair work, diversity and equality objectives.
To better inform our decision making we are procuring specialist advice, research and analysis to inform the delivery and design of the scheme. Also, in recognition of potential sensitivities associated with the introduction of such a scheme, we will launch a public consultation later this year to seek views from a broad spectrum of stakeholders.
Both our advice on scheme design and public consultation are expected to conclude early 2023 and will be made publically available, at which point we will set out next steps.
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