Warmer Homes Scotland: annual review 2017 to 2018

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.

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

During 2017/18 Warmworks leveraged additional funding in to the scheme in the following ways:

Scottish & Southern Electricity Networks (SSEN) 'Enabling Funding'

Since November 2016, Warmworks and SSEN have worked in partnership to help customers through the use of an "Enabling Fund". This provides help to Warmer Homes Scotland customers in SSEN supplied areas who need additional help, including support to clear loft spaces within the home and lifting of carpets in advance of an install as these works are not included in the Warmer Homes Scotland offer. SSEN has made available £100,000 of funding for this purpose, with the aim of helping to remove up to 200 people from fuel poverty over a period of 5 years.

During the 2017/18 financial year, the "Enabling Fund" helped 47 Warmer Homes Scotland customers by providing additional help. This leveraged in just over £13,000 of financial value to the scheme or an average of £279 per customer. Without the provision of this additional funding and the help it financed, these households would potentially have cancelled their Warmer Homes Scotland application and would not have been able to benefit from the full range of measures recommended for the property under the scheme.

A breakdown of how the "enabling fund" support was provided by month during 2017/18 is at Table 9.

South East Scotland, South West Scotland and Strathclyde and Central regions are not covered by SSE. Table 10 demonstrates how the SSEN Enabling Fund was distributed on a regional basis during 2017/18.

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 delivering Warmer Homes Scotland.

Table 9 - SSEN Enabling Fund support provided in 2017/18 by month

Month	Number of Drawdowns	Value (£)
April	1	250.00
May	3	1371.29
June	4	1265.00
July	5	1250.00
August	0	0.00
September	7	1746.29
October	9	2232.00
November	4	1272.00
December	2	620.00
January	4	827.50.
February	4	716.90.
March	4	1572.37
Total	47	13,123.40

Table 10 - SSEN Enabling Fund support provided in 2017/18 by region

Region	Number of Drawdowns
Highlands	10
Islands	8
North East	19
South East	1
South West	0
Strathclyde & Central	9
Total	47

Energy Company Obligation (ECO)

The Energy Company Obligation (ECO) is a Government energy efficiency scheme designed to tackle fuel poverty and help reduce carbon emissions. ECO2t was introduced on 1 April 2017 and this brought changes to the ECO regulations and the criteria for eligible measures. These changes resulted in some challenges for Warmworks, who manage the ECO process centrally on behalf of the schemes supply chain but despite these challenges Warmworks were successful in leveraging in £1,002,170 of ECO funding during 2017/18. This translates to an additional 219 installations resulting from ECO funding leveraged into the scheme during 2017/18.

Table 11 details the total level of ECO funding that Warmworks leveraged in during 2017/18. This demonstrates that Warmworks secured an average of £796 of ECO funding for each Warmer Homes Scotland customer who benefitted from this additional form of support. In total 1259 customers benefited from ECO support during the period of this review, representing 25.7% of the overall total number of households who received an installation under the scheme. When compared to the total number of customers who benefited from ECO support during 2016/17 (229) this was an increase of over 400%

Although data on each individual customer who received ECO support under the scheme during 2017/18 is unavailable, the increase in customers benefiting from ECO support under Warmer Homes Scotland and the increase in ECO funding achieved clearly demonstrates that Warmworks were active in sourcing ECO leveraged funding during 2017/18.

It should be noted that ECO funding arrangements is commercially sensitive data therefore it is not possible to publish a full in depth analysis of those households who were successful in benefiting from the additional support provided under ECO.

Table 11 - Total number of customers and ECO funding leveraged in 2017/18

Year	Number of Customers	Total Value (£)
April 2016 - March 2018	229	£212,419
April 2017 - March 2018	1259	£1,002,170

Scottish Gas Networks (SGN) Connections and SGN Enabling Fund

During 2017/18 Warmworks, who were already working with SGN were successful in securing additional funding from SGN to set up an enabling fund to provide the same support provided by the SSEN enabling fund to customers living in areas which are outside SSEN supplied areas. During 2017/18 17 customers benefited from this additional enabling fund.

The help provided under the SGN Enabling Fund was in addition to funding also leveraged into the scheme under the "Help to Heat" scheme. This scheme is also funded by SGN and offers free or discounted connections to the gas network for households that are in fuel poverty or at risk of living in fuel poverty. During the period of this review both SGN and Warmworks worked together to enable 248 fuel poor households to be assisted by the "Help to Heat" scheme.

As illustrated at Table 12, this means that 248 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 is the equivalent of up to £375,061.31 of additional investment leveraged into the scheme and represents a considerable benefit for those households to which it provided help. In addition, 17 customers were able to benefit from the SGN Enabling fund which amounts to and additional £2,886.41 of leveraged funding into the scheme.

Table 12 - Monthly break down of the number of free or discounted gas network connections and Enabling Fund allowances provided by SGN to Warmer Homes Scotland customers in 2017/18 and their equivalent monetary value

Month	Number of SGN Allowances Leveraged	Value (£) SGN	Number of SGN Enabling Fund Allowances Leveraged	Value (£) SGN Enabling Fund
April	26	36895.10
May	35	46391.40
June	31	50881.87
July	17	26934.92
August	25	34451.43
September	19	27296.67
October	19	34474.91
November	8	10771.19
December	4	6613.10
January	23	32215.13
February	17	27741.79	7	1019.41
March	24	40393.80	10	1867.00
Total	248	375,061.31	17	2886.41

As a result of Warmworks efforts to leverage in additional finance, through the SSEN Enabling Fund, ECO, the SGN "Help to Heat' and SGN Enabling Fund the total monetary value leveraged into Warmer Homes Scotland in the 2017/18 financial year was £1,393,242.10.

Figure 14 shows the percentage contribution to this total, broken down by funding source. The ratio of leveraged finance through the scheme equates to £1 of additional funding leveraged for every £19 of Warmer Homes Scotland grant spent compared to £23 in 2016/17.

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 2017/18 by source

Recommendation 7 - An 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.

Home Energy Scotland (HES) Loans

It is expected that in the majority of cases Warmer Homes Scotland customers will have their installations fully funded under the scheme. However, in some circumstances, where the Warmer Homes Scotland grant level is insufficient to cover the cost of measures recommended for the property, the customer is asked to make a financial contribution towards the cost of their installation.

In these circumstances, the customer has the option to apply for an interest-free Home Energy Scotland Loan. These loans are funded by the Scottish Government and because of this they cannot be considered as funding leveraged into the scheme from an external source. However, Warmer Homes Scotland and its customers benefit from the existing fuel poverty support framework, funded by the Scottish Government. This demonstrates both the integration and added value of these schemes which help to deliver value for money across all of the Scottish Government funded fuel poverty initiatives designed to reduce the impacts of fuel poverty across Scotland.

Table 13 - Comparison of the number and value of HES Loans offered versus those paid in full to Warmer Homes Scotland customers in 2017/18

Month	Loans Offered		Loans Paid Out in Full
	Number	Value (£)	Number	Value (£)
April	3	4041	5	4860.79
May	1	3477	4	4986.93
June	2	2845	1	540.75
July	4	4259	4	5000
August	0	0	2	5195.54
September	3	3990	0	0
October	4	5003	1	1500
November	4	4190	3	2604.13
December	6	6285	3	4890.32
January	5	6672	3	4390.32
February	2	1340	2	2445.16
March	2	1945	3	3893.54
Total	36	44,047	31	40,307

Table 13 shows that during 2017/18, HES made 36 loan offers to Warmer Homes Scotland customers, a 7% decrease from loan offers made during 2016/17 and that 31 of these loan offers were accepted and paid out in full.

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 (in such cases EST will recover the part payment) including the applicant no longer requiring the HES Loan to pay the required contribution, or the applicant deciding that they cannot go through with the installation due to the upheaval the nature of the work requires.

Table 14 - Regional break down of HES Loans paid in full to Warmer Homes Scotland customers in 2017/18

Region	2016/17			2017/18
	Number of Loans	Value (£)	Average per Customer (£)	Number of Loans	Value (£)	Average per Customer (£)
Highlands	5	7,819	1,564	5	5,482	1,096
Islands	1	952	952	2	3,163	1,582
North East	2	2,004	1,002	2	1,745	872
South East	5	5,989	1,198	6	11,286	1,881
South West	3	2,272	1,857	1	9,87	987
Strathclyde & Central	10	11,198	1,120	15	17,644	1,176
Total	26	33,534	1,282	31	40307	1300

During the 2017/18 financial year 31 loans were paid out in full by HES to Warmer Homes Scotland customers, a 19% increase from 2016/17. The average loan value across loan recipients was £1300.

As shown in Table 14 the provision of HES Loans to eligible Warmer Homes Scotland customers were randomly distributed by region across Scotland and, as during 2016/17, the majority of the loans provided were to customers in the areas with the highest population density. The average loan paid out to customers, by region during the review period was £1,300 representing an increase of 1.4% from 2016/17.