Home Energy Efficiency Equity Loan pilot - call for evidence on potential national rollout: analysis of responses

Independent analysis of the responses to the call for evidence on the potential to develop an Equity Loan Scheme as part of the suite of support schemes for the decarbonisation of Scottish homes. Read the call for evidence: https://www.gov.scot/publications/equity-loan-scheme-call-evidence/pages/1/

Net Zero Policy Context

Question 4: What is your view on the contribution a nationwide Equity Loan scheme focused on both energy efficiency and decarbonised heat solutions can make towards supporting our climate change and fuel poverty targets?

Thirty respondents provided an answer to Question 4. Most were positive about the scheme's potential contribution to meeting the Scottish Government's climate change and fuel poverty targets. A few offered suggestions for how the scheme's impact could be maximised. A small number did not think the scheme would affect climate change and fuel poverty targets.

A belief that the scheme can support climate change and fuel poverty targets

The most common theme among responses to Question 4 was the belief that a national rollout of the scheme would support efforts to meet the Scottish Government's climate change and fuel poverty targets. Many agreed that a wider rollout could support the decarbonisation of buildings in Scotland and help more low-income households to reduce fuel costs.

"An equity system, with a streamlined legal system, would be extremely valuable in unlocking capital to resource essential energy efficiency and low carbon upgrades while enabling those in fuel poverty to significantly reduce their energy bills." (Individual)

"Propertymark believes expanding the Equity Loan pilot to a full nationwide support scheme will provide more homeowners (owner-occupiers and landlords) with an additional route to funding changes that can minimise their own or their tenants' fuel costs and support the Scottish Government's progress towards meeting its climate change and fuel poverty targets." (Propertymark)

Some noted that the scheme will help meet climate change and fuel poverty targets because it offers support to elderly households considered 'asset rich, cash poor' who may not be able to pay for home repairs or energy efficiency improvements any other way.

A few respondents felt that, even in the case of a national rollout, this scheme alone will not be enough to make a significant change in the energy efficiency of homes in Scotland. They suggested the scheme must be offered in addition to other public and private funding sources to meet climate change and fuel poverty targets.

"It is important to bear in mind that the Equity Loan is a niche product and it will not deliver the Scottish Government's climate change and fuel poverty targets alone but it will bridge an important gap in the market and play a role in ensuring that no one is left behind as Scotland transitions to net zero." (Energy Saving Trust)

"We think it likely that equity release options, including those being offered by the banks and building societies will play an important role in supporting investment to make homes more energy-efficient and to decarbonise the sector." (ALACHO[6])

Ways to maximise the impact of a nationwide rollout

Some respondents suggested ways to maximise the impact of the scheme on fuel poverty and climate change targets. A few advocated for the eligibility criteria to be broadened in a national rollout, making the scheme open to all. They felt that allowing more homeowners and landlords to access the Equity Loan would increase the rate at which buildings are made more energy efficient.

Other suggestions included investing in more publicity and visibility for the scheme and working with lenders to offer more flexible loans options to homeowners.

"There may also be benefits from Government working together with mortgage lenders to understand how the Equity Loan scheme can be blended with lenders' own green products. For example, a customer may be able to support a certain level of mortgage borrowing but would benefit from topping this up with an Equity Loan. This would be positive for all parties, with the customer able to choose their own blend of debt and equity, lenders able to use to brand of the scheme to promote their products, and for Government to spread funding more widely." (The Building Societies Association)

Belief that the scheme will have little impact

A small number of respondents felt that the scheme might not have a major impact on climate or fuel poverty targets. One suggested that the Scottish Government focus on other priorities to achieve climate change and fuel poverty targets, including green energy sources, hydrogen and charging points for electric vehicles.

Question 5: Please provide your views on the proposal to expand the Equity Loan pilot to a full nationwide support scheme.

Thirty respondents provided an answer to Question 5. Nearly all supported a nationwide rollout of the scheme. Some suggested changes to the scheme if it were to be rolled out on a larger scale. Two individuals did not support a national rollout.

Support for a nationwide rollout

The majority of respondents supported a nationwide rollout of the scheme, welcoming additional affordable routes to funding repairs, energy efficiency improvements and the decarbonisation of housing stock in Scotland.

"This will expand the range of offerings available to householders and will make a meaningful difference aligning with Government targets for the energy efficiency ratings of properties." (Organisation, anonymous)

A few respondents commented that a national rollout would fill the current gap in funding for those who are ineligible for the Scottish Government's standard interest-free loans or for support from the national fuel poverty programme.

Suggested changes to the scheme before a nationwide rollout

Some respondents felt that changes to the scheme were needed before they fully endorsed a national rollout. These included:

  • more flexibility in the range of measures and the methods used to install them;
  • broadening the eligibility criteria;
  • streamlining the legal and administrative process involved;
  • more clarity behind the focus of the scheme (e.g. whether the priority is reducing fuel poverty or decarbonisation);
  • having a dedicated team within the Scottish Government to support all aspects of the process.

One respondent highlighted the need to ensure enough skilled technicians are available to deliver quality retrofit across Scotland before a large scale rollout of the scheme.

Importance of support service

A few respondents stressed that if the scheme is to be rolled out on a larger scale, it is important to keep a bespoke and tailored support service in place.

"If support for homeowners through the process is going to be less tailored/more generic due to costs then the complexity may deter people. This is a particular risk given that the households most likely to use this route are those that are vulnerable and who may be less familiar with finance arrangements and less confident about applying. The success of the scheme may depend on the continuing provision of more bespoke/individual guidance and support through the process." (Organisation, anonymous)

Two respondents suggested that in the event of a national rollout, it would be best if local services offered the handholding support. Stakeholders at the Call for Evidence webinar agreed with this, noting that local services will have more knowledge of the local market and housing stock. However, one stakeholder suggested that a centralised service would be the best way to ensure consistent support is delivered across all areas.

Stakeholders at the Call for Evidence webinars were asked to comment on how the support scheme could be tailored to efficiently serve the needs of the individual, while also scaling up the coverage of the service. Many used the opportunity to emphasise the importance of maintaining the handholding support service, due to the scheme's complexity and the vulnerability of many of the applicants.

"What I have found is that some of the clients are vulnerable and do need extra assistance... We have vulnerable people, we have people that have mental health problems and it can be challenging for them, we have to take them through that journey. So I would imagine that, given the complexity of some of the problems, you would need somebody to guide them through that process." (Webinar participant)

"I think the key thing with this is that these jobs are complex. And where you've got repairs and energy efficiency measures, you're quite often going to have more than one contractor involved. And so having someone there to support households who are normally more vulnerable, definitely not used to dealing with these things, I think sort of adds a lot of value because it can get really complex." (Webinar participant)

Several suggestions about how the the support service could be delivered effectively in the event of a national rollout were raised by webinar participants. These included:

  • ensuring any future support services are able to support on the technical aspects of the process (e.g. inspecting works, recommending contractors) as well as providing administrative support and information;
  • having a combined support/information service in place for all SG Home Energy Efficiency and fuel poverty schemes;
  • Home Energy Scotland providing some of the handholding support;
  • including a portion of the cost of the support service into the loan amount.

A few participants felt it was important that households have access to ongoing support after works are completed, to ensure that new measures and heating solutions are being used effectively and efficiently.

"If we're installing quite complicated new forms of technology - heat pumps, solar panels - an element in terms of the interventions being successful will be human behaviour and understanding about how to actually use the technology to best potential. Will there be capacity for ongoing support for householders, to be able to check in with them to ensure that they are using the technologies as efficiently as possible?" (Webinar participant)

One respondent raised concerns that a scaling up of the support service would result in a lot of the information and support being moved to an online format. They felt it was important that some of the support provision remains offline, and that in-person support remains available so that households without digital skills or access can still access support.

Those against a national rollout

Two respondents did not support a national rollout of the scheme. They felt that the scheme would not make an impact on climate change and fuel poverty, and the Scottish Government's efforts should be focussed on other priorities.

Q6. Do you have a view on which energy efficiency measures and zero-emission heating solutions should be included in the list of eligible measures? Please explain your position

Twenty-five respondents provided a comment in their answer to this question. Similar numbers raised the three most common themes of discussion; endorsement of the pilot measures, discussion of energy efficiency, and comments on net-zero measures.

Endorsement of the pilot measures

Endorsement of the list provided in the pilot was a prevalent theme. The list was described as 'good', 'adequate and met the needs of clients', and 'ensures that options (particularly for heating) are not restricted'. One local authority endorsed the list but proposed a regular review to allow new and emerging technologies to be included.

"In our view it is important not to be too prescriptive about the technology that can be used but to focus on the impact that it will have and quality control around the design and installation process. That observation aside we think that the list of eligible works applied during the pilot is appropriate and included the necessary flexibility to ensure that other works, not specifically mentioned, can be considered." (ALACHO)

Comments on energy efficiency measures

Another common theme was suggestions for changes or additions to the eligible energy efficiency measures. These varied and included:

  • Using as wide a range of insulation measures and materials as possible, including those considered vapour-open, which are excluded by many funding schemes.
  • One respondent supported specific energy efficiency measures on the list without clarifying if they felt the other measures were inappropriate.
  • A suggestion that the measures and solutions should be aligned to those identified within the 'fabric first' approach recommended by the 'Zero Emissions Social Housing Taskforce Report'.
  • Shetland Islands Council described challenges around installing insulation measures if PAS 2035 compliance is required in the future.

A small number of responses focussed on the value of taking a 'fabric first' approach so that the property's condition is improved before assessing which heating solutions could be used. One individual suggested "Passive measures first; insulation, draught stripping, windows, doors, render". Elmhust Energy also called for a 'fabric first' approach. Another response noted homeowners may be more comfortable with familiar improvements, e.g. double glazing and insulation, and argued the role of these measures and a fabric first approach should not be underestimated.

Comments on zero-emission heating solutions

The variety of comments about zero-emission heating solutions included:

  • every carbon negating measure to be permitted and incentivised;

solar energy to be a primary focus;

  • air Source Heat Pumps and Solar PV with battery storage to be included;
  • funding connections to local district heating schemes and heat networks;
  • including boiler options using hydrogen (generated from renewable sources);
  • one respondent supported specific heating solutions on the list without clarifying whether the other measures were considered inappropriate;
  • South Lanarkshire Council called for consideration to include heat retention storage heaters, infra-red heating, microgeneration, micro hydrogen, and battery storage. They also suggested the inclusion of smart devices and control systems to enhance efficiencies. Similarly, Energy Saving Trust called for only including the most efficient electrical storage heaters on the list;
  • one respondent noted homeowners can be less comfortable with unfamiliar solutions such as air source heat pumps. They argued that more could be done to raise awareness of these solutions, given the importance of net-zero heating systems to the Scottish Government's fuel poverty plans.

Concerning fossil fuel heating solutions, one respondent noted their agreement with their removal from the list of eligible measures in the expanded scheme. Another called for fewer carbon fuelled heating options (in line with increasing zero-emission options). Energy Saving Trust commented that gas connection should no longer be an eligible measure after 2025, given the phased withdrawal of public support from that date.

Other measures to include

Some respondents highlighted other measures they felt could be eligible, including:

  • installation of electric vehicle charging points;
  • small scale or Micro wind and Micro-hydro, primarily for remote rural communities;
  • measures that might increase uptake of the Equity Loan offer or further improve wellbeing. For example, Energiesprong in the Netherlands offers new kitchens and bathrooms for the wider retrofit offer;
  • fire safety measures, to be carried about in advance of the new 2022 requirements.

Other less commonly mentioned themes

A few respondents commented that nothing should be excluded from a list of eligible energy efficiency measures and zero-emission heating solutions as long as they help achieve decarbonisation and reduce fuel poverty.

A small number mentioned the need for flexibility. They felt the list of eligible measures should not be too prescriptive about the technology or solutions, as these are likely to vary by type of property and across different parts of Scotland.

Other singular points raised by respondents included:

  • a call for homes to be assessed professionally as part of the application process and for implementing Building Renovation Plans (BRP);
  • one respondent with a negative view of the scheme felt none of the measures should be included.

Stakeholder webinar feedback

Discussion in the stakeholder webinars about the eligible measures echoed the above themes. Participants considered the list to be comprehensive. A few called for the list to be open to new technologies and flexible to include a variety of measures to suit different properties or repairs.

On energy-efficient measures, aligning with responses to the Call for Evidence, many participants advocated a fabric first or whole-house approach. There were suggestions to ensure the eligible measures could make homes wind and watertight and that there should be consideration of how some measures are classed. For example, replacement double glazing could be considered an energy efficiency measure rather than a repair.

Some stakeholders expressed reservations about air source heat pumps, including the challenge of using them to heat larger homes and installing them in the social housing stock. There was discussion around the importance of follow-up conversations with loan holders to ensure that any zero-emission heating solutions installed are being used efficiently in one webinar.

A few noted the inclusion of oil and LPG heating on the list, which they assumed would be removed given the Scottish Government and Scottish Green Party's Cooperation Agreement which includes an end to public subsidies for oil and LPG boilers. One commented that this would place pressure on the air source heat pump supply chain.


Email: heatinhomesequityloan@gov.scot

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