Home Energy Efficiency Programmes Scotland: annual review 2016-2017

A review of how the Warmer Homes Scotland Scheme has performed and made progress towards meeting the scheme's stated objectives.

Part 5: Objective 4 - Value for Money

The fourth stated objective of Warmer Homes Scotland is to offer good value for money ( VfM) by leveraging additional funding into the scheme.

In order to ensure VfM, Warmworks, on behalf of Warmer Homes Scotland, is required to leverage funding from sources other than the core Scottish Government budget in order to increase the number of households that can benefit from the scheme.

Recommendation 11 of the 2015/16 Annual Review required that this review give full consideration to the total value added to the scheme through national and local partnerships in this way.

Warmworks is leveraging additional funding in to the scheme in the following ways:

i. Scottish & Southern Electricity Networks ( SSEN) ‘Enabling Funding’

Warmworks has continued its partnership with SSEN through the ‘enabling fund’, which was set up in November 2016 to help customers in SSEN-supplied areas who require additional work that is not included in the Warmer Homes Scotland grant to be carried out in preparation for their installation. This work can include, for example, support to clear access routes such as loft space within the home. SSEN announced £100,000 of funding available for this purpose, with the aim of removing up to 200 people from fuel poverty over the next five years. In the 2016/17 financial year, 47 Warmer Homes Scotland customers received additional help, leveraging just over £14,000 of financial value in to the scheme, or an average of £298 per customer. Without this assistance, these households would potentially have cancelled their application and would not have benefited from the full range of measures recommended for them.

Table 9 shows a breakdown of this support by month during 2016/17, and Table 10 shows how this support was distributed by region in Scotland. SSEN does not cover South East Scotland, South West Scotland or Strathclyde and Central Scotland. The 1 customer who received support from the fund in South East Scotland did so because of the area boundaries that SSEN use are different from those used for Warmer Homes Scotland.

Table 9: SSEN Enabling Fund support provided in 2016/17 by month

Month Number of Drawdowns Value (£)
April 0 0.00
May 2 500.00
June 5 1250.00
July 5 1574.00
August 7 2450.00
September 5 980.00
October 1 250.00
November 2 695.00
December 0 0.00
January 1 574.00
February 1 417.00
March 10 2411.00
Total 39 11101.00

Table 10: SSEN Enabling Fund support provided in 2016/17 by region

Region Number of Drawdowns
Highlands 8
Islands 9
North East 21
South East 1
South West 0
Strathclyde & Central 0
Total 39

ii. Energy Company Obligation ( ECO)

A key source of additional leveraged funding to Warmer Homes Scotland is the Energy Company Obligation ( ECO), and Warmworks manages this centrally on behalf of the supply chain.

Throughout 2016/17 leveraging ECO proved challenging in terms of ensuring compliance with the complex requirements of the scheme. The changes in ECO compliance that also took place required a period of adjustment to ensure that Warmworks could comply with all requirements consistently.

In considering the total level of ECO funding leveraged in 2016/17 as shown in
Table 11, it can be inferred that an average of £928 of ECO funding was secured for each Warmer Homes Scotland customer who benefited from this additional support. The number of customers that benefited from ECO (229) during 2016/17 represents approximately 4.3% of the total number of households who received installations under Warmer Homes Scotland, which is a relatively small number given the overall scale and reach of the scheme. However, this is expected to increase as the challenges faced in compliance during 20167/17 are ironed out. Without data on each individual customer who received ECO support via Warmer Homes Scotland during 2016/17 it is not possible to determine whether all available support is being secured for Warmer Homes Scotland customers at all times based on eligibility criteria of ECO. It should also be noted that the data on ECO funding arrangements is commercially sensitive so it is not possible to publish a full in depth analysis of those households for which ECO funding is leveraged under Warmer Homes Scotland.

Table 11: Total number of customers and ECO funding leveraged in 2016/17

Year Number of Customers Total Value (£)
April 2016 - March 2017 229 212,419

iii. Scottish Gas Networks ( SGN) Connections

In 2016/17 Warmworks and SGN continued to work together to ensure that households could access the ‘Help to Heat’ scheme, which offers free or discounted connections to the gas network for households that are in fuel poverty or at risk of living in fuel poverty. As illustrated by Table 12, this means that 439 customers were able to benefit from a new gas connection and a new, energy efficient heating system without having to pay the cost of the connection. That adds up to £704,846 of additional investment leveraged into the scheme, and a considerable benefit for those households.

Table 12: Monthly break down of the number of free or discounted gas network connections provided by SGN to Warmer Homes Scotland customers in 2016/17 and their equivalent monetary value

Month Number of Allowances Leveraged Value (£)
April 26 41550.49
May 37 59165.54
June 43 71289.39
July 30 50048.95
August 33 47591.29
September 27 45735.78
October 25 44165.12
November 38 57393.52
December 41 69309.11
January 45 75137.55
February 46 70262.25
March 48 73196.56
Total 439 704845.55

In conclusion, when added together the total monetary value leveraged in to Warmer Homes Scotland through the SSEN Enabling Funding, ECO and SGN Connections during 2016/17 is £931,276. Diagram 1 shows the percentage contribution to this total, broken down by funding source. If customer contributions are also included, the ratio of leveraged finance through the scheme equates to £1 of additional funding leveraged for every £23 of Warmer Homes Scotland grant spent; or, in percentage terms, it can be said that the scheme is operating a rate of leveraging of 4.4%. This additional funding is important to the long-term sustainability of Warmer Homes Scotland, particularly given the current economic climate and public sector budget constraints.

Figure 14: % of funding leveraged by Warmer Homes Scotland in 2016/17 by source

Figure 14: % of funding leveraged by Warmer Homes Scotland in 2016/17 by source

Recommendation 10 - A full appraisal of the strategies, processes or protocols Warmworks has in place to leverage additional financial support into Warmer Homes Scotland should be undertaken. This should focus on challenges faced in leveraging additional funding and how these can be overcome, seeking opportunities for leveraging funding from new sources and making any recommendations for improvement where required. This should also include an assessment of how this funding is being used on the ground i.e. what are the most common ‘enabling’ activities, the least common, the most expensive, any regional variations in activities, etc.

iv. Home Energy Scotland ( HES) Loans

In cases where the Warmer Homes Scotland grant level available to a customer is insufficient to cover the cost of recommended measures, the customer is required to make a financial contribution to cover the funding shortfall. These customers have the option to seek an interest-free Home Energy Scotland Loan. The Scottish Government funds these loans and so they cannot be considered externally leveraged funding. However, it is still important to recognise that Warmer Homes Scotland and its customers benefit from the wider Scottish Government funded fuel poverty support framework currently in place, evidencing the integration and complementarity of these schemes. This helps deliver value for money across all of the Scottish Government’s fuel poverty initiatives.

Table 13: Comparison of the number and value of HES Loans offered versus those paid in full to Warmer Homes Scotland customers in 2016/17

Offered Vs. Fully Paid 2016/17
Month Loans Offered Loans Paid Out in Full
Number Value (£) Number Value (£)
April 2 1904 0 0
May 1 952 0 0
June 4 4601 1 2000
July 4 3891 3 2910
August 3 3316 2 1950
September 2 3100 6 7512
October 4 5055 1 2620
November 5 4649 0 0
December 1 923 1 1480
January 6 8723 0 0
February 3 5506 8 11126
March 4 5186 4 3936
Total 39 47,806 26 33,534

Table 14: Regional break down of HES Loans paid in full to Warmer Homes Scotland customers in 2016/17

Fully Paid 2016/17 (by Region)
Region Number of Loans Value (£) Average per Customer (£)
Highlands 5 7819 1564
Islands 1 952 952
North East 2 2004 1002
South East 5 5989 1198
South West 3 5572 1857
Strathclyde & Central 10 11,198 1120
Total 26 33534 1282

As Table 13 shows, HES made 39 loan offers to Warmer Homes Scotland customers in 2016/17; however, not all of these were accepted. There can be a number of reasons why customers do not accept the Home Energy Scotland Loan offer, or withdraw from receipt of the full loan value during the draw down period. Without more in-depth data on the withdrawal reasons given to the Energy Saving Trust, who manage the Home Energy Scotland Loans on behalf of Scottish Government, it is not possible to assess what these may be.

HES paid out 26 loans in full to Warmer Homes Scotland customers. This totalled £33,533, representing an average loan value across recipients of £1,290. From the information in Table 14, we can see that the provision of HES Loans to eligible Warmer Homes Scotland customers in 2016/17 was randomly distributed by region in Scotland with most loans provided to the areas with the highest population density. The range of the average loan value paid out to customers, by region, during this period was £905.

Recommendation 11 - A review of Home Energy Scotland Loans should be undertaken to establish if their purpose should be widened to include enabling measures for Warmer Homes Scotland.


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