Non-domestic buildings - heating systems: research report

3. Heat in the Scottish building stock

a. Overview

There are several publicly available data sources that provide insight on the mix of heating systems adopted in the existing non-domestic building stock. These are the Scottish EPC register and statistics from BEIS regarding RHI accreditations to date, although neither can be relied on to fully represent the current situation. These sources were examined for this project during the process of identifying case studies. Although neither proved valuable to this process, a high-level assessment of the information that they contain provides an understanding of why it is difficult to characterise heat in the Scottish building stock based on publicly available information.

b. EPC register

The Scottish EPC register contains data from the EPC certificates of 50,835 non-domestic buildings from 2013 until the end of the most recent quarter. The register only represents approximately a quarter of the non-domestic building stock, meaning the available data is not wholly representative of the total building stock. Unfortunately, EPC data does not indicate whether the heating technology was originally in place or if it was retrofitted.

Figure 1 below details the mix of technologies among the 49,358 buildings which are noted to have a main heating fuel (as opposed to being ‘unconditioned’). It indicates that over half of buildings on the register are already operating with zero direct emissions from their main heating fuel, as they are heated either by heat pumps, electricity, district heating schemes or waste heat.

c. RHI data

The non-domestic RHI statistics from 2011-2021 indicate that there have been 4,123 accredited RHI applications in Scotland. Figure 2 below indicates that nearly 90% of these applications, approximately 3,700, have been for biomass boiler systems. This is 7 times more than is registered in the EPC database (because the installation of a new heating system would not necessarily necessitate a revised EPC). Conversely, approximately 360 applications were logged for heat pumps, which is only 5% of the number in the EPC register. Together, these values exemplify the risk of relying on either dataset to characterise Scottish building stock.

The prevalence of biomass boilers among the RHI applications can be explained by two factors. Firstly, historical RHI payment rates favoured biomass boilers over other technologies. Additionally, biomass boilers are, in most cases (and as discussed subsequently) the easiest renewable heating technology to retrofit into existing buildings with incumbent fossil fuel boilers.

Unlike the EPC register, the RHI data breaks down the heat pump category by heat source. The accredited applications made for heat pumps since 2011 are split as follows:

• Air source: 30%
• Ground source: 64%
• Water source: 6%

Whilst these values clearly show that the majority of accredited applications were made for ground source heat pumps, it is not possible to ascertain if this split is representative of the spread of heat pump installations in Scotland.

4. Experiences of adopting zero emissions heating

The stakeholder experiences of adopting ZDEH across the 20 case studies varied. Whilst the scope of our research was to identify barriers to adopting zero-emissions heating, it was clear from the stakeholder interviews, that most barriers could also act as drivers for ZDEH. Given that all case studies showcased ‘successful’ implementation of ZDEH, this is not surprising. However, it is important to note that this creates an inherent bias to the following analysis, in that no barriers were insurmountable, since all ZDEH systems were installed.

We identified multiple factors which impact adopting ZDEH systems in non-domestic buildings, via the stakeholder interviews, which can be grouped into the eight categories below. The table below provides a brief description of the drivers and barriers and an overall score across all 20 case studies. The low, medium, high score is qualitative and represents the strength of the barrier or driver based on a count of explicit or implicit statements relating to the driver or barrier.

Table 1: Summary of the drivers and barriers to adopting zero direct emissions heating in non-domestic buildings across 20 case studies. The ‘overall rating’ is based on the count of stated issues across case studies (low occurring in 0-5 case studies, medium 6-10, high 11+).

Factors	Description	Barrier Rating	Driver Rating
Capital costs	The upfront cost of ZDEH compared to alternatives, which can impact the financially unfeasible project.	High	Low
Financial Incentives	The availability of financial grants or ongoing incentives that enable a ZDEH to be installed.	Low	High
Operational costs	The ongoing running costs and maintenance requirements of ZDEH compared to alternatives.	Low	High
Site constraints	The location, conditions, surroundings and business requirements of a site impact its ability to accommodate different ZDEH technologies.	Medium	Medium
Grid connection	The availability, ability, timing, requirements, complexity and costs of connecting to the grid.	Low	Low
Policy & regulation	National and local policy and regulations that could impact a ZDEH.	Low	High
Supply chain	Availability of the right products, people and expertise in the right place and at the right time.	Medium	Low
Soft factors	A range of end user factors can impact a project, including internal politics, internal policy, confidence and/or experience of a new technology, project planning, timing and considering the impact to end users.	High	Medium

a. Techno-economic factors

i. Capital costs

There was evidence of capital costs acting as a barrier to installing ZDEH systems in half of the case studies. For three community buildings, grant funding was necessary to facilitate installations of ASHPs. Four large-scale projects were also made possible through LCITP funding. Where grant funding was not required, this was most commonly because payback was anticipated through RHI payments. Conversely, there were six examples of subsidy-free or grant-free installations, although two of these were direct electric heating systems (significantly lower capital cost compared to e.g., AHSPs). For these two case studies, the low upfront cost of direct electric panel and space heaters (as well as other business drivers) resulted in these being selected over other, more expensive, options. Stakeholders from both organisations however commented on rising electricity costs and the need to retrofit to reduce their energy bills.

ii. Financial Incentives

The availability of a financial incentives was a driver for 14 of the 20 case studies, with stakeholders from two community and two public organisations voicing that these incentives made retrofitting ZDEH possible. The most common grant funding accessed was the LCITP and/or CARES and across all retrofit case studies except for two. Six case studies benefited from RHI payments. Despite not being an explicitly stated driver, it could be inferred that the two case studies that installed biomass boilers were motivated to do so due to very favourable RHI tariffs compared to those for other technologies (amongst other drivers mainly due to ease of integrations with existing systems). A further two case studies planned to receive RHI payments, however, in one case the conditions of the scheme changed during the refurbishment and its GSHP system was no longer eligible. Another case study was not able to complete an RHI application before the scheme closed due to lack of internal resource.

Three stakeholders indicated that grant funding spend deadlines added significant pressure to project timelines, as budgets had to be spent within certain periods (most commonly one financial year). This was noted as a barrier to community groups, who, due to low resources, do not tend to have ‘shovel ready’ projects that can be started up as soon as funding becomes available. This also caused issues for end users in finding contractors that could action the works within the specified time, limiting their tendering process to one response in two cases. One community case study which faced this barrier, was only able to overcome this as it had been previously supported to produce a Local Energy Plan, which highlighted viable energy-saving projects that could be actioned as soon as funding became available.

iii. Operational costs

Most case studies only considered running costs after installation. This included the two case studies with direct electric heating systems, which both highlighted high operating costs given the recent increase in electricity prices. Both are considering options to reduce electricity costs, including replacing direct electric with heat recovery to make use of the available ‘free waste heat’ from the building operations; and potentially adding a combination of solar PV, battery, and replacing direct electric with ASHPs.

Anticipated lower operational costs were noted as a driver to select certain technologies over others. For the biomass boiler retrofits the similar cost of biomass fuel compared to gas encouraged the selection and use of biomass boiler in the two case studies. The ASHP retrofits replacing direct electric systems at three case studies were driven by a desire to reduce the operational cost of the heating system. Similarly, the anticipated lower cost of operating a GSHP and WSHP compared to an ASHP factored into two further case studies.

Five stakeholders referenced that onsite renewable electricity generation helped to justify the operational costs of ZDEH. For example, in one case study direct electric boilers were originally specified, as it was cheaper to install than ASHP, and it was anticipated that generation from an onsite wind turbine would offset operational costs. However, the turbine was removed after a few years, and as operational costs were higher than expected, the electric boilers were replaced with ASHPs (and a payback has since been facilitated from this outlay). A grant-funded micro-hydro scheme was also installed at another case study to reduce the running costs of the GSHP system, ahead of the GSHP installation itself.

As noted in section 5.1b.iv, due to the limited data made available, it has not been possible to confirm any cost savings in practice, except for at one case study, where total electricity demand fell by a quarter following the ASHP installation.

iv. Site constraints

Site constraints were noted to be a barrier in seven case studies. This impacted the choice of ZDEH due to factors such as a lack of external or internal space, the location of the site, the proximity to other buildings, and business operations.

Two case studies specified ASHPs over DHNs due to site constraints. One case study found that the buildings onsite were too distant from each other to justify the costs of installing a new DHN. Another project had a preference to connect to a DHN but given the lack of an existing DHN in the vicinity of the site, the project also opted for an ASHP instead. Having a low temperature distribution network was thought to futureproof the site to enable connection to any future DHN in the area that might arise.

Internal and external space was noted as a barrier to choosing certain ZDEH. In one case study, a lack of external space was a barrier to installing GSHP, with ASHPs being chosen. Conversely, a GSHP was chosen over an ASHP in two further case studies, due to the GSHP system having no external parts. In one of the GSHP case studies this was important given the coastal climate and in another this was concerning the visual impact. Although not a direct barrier to installing the chosen technology, the two case studies that did retrofit biomass boilers had limited onsite space and required compact, containerised solutions. In both cases, this constraint significantly reduced the number of contractors who could provide suitable systems. Two further case studies selected heat pumps over biomass boilers due to the requirement of fuel sourcing and associated transportation and storage logistics (one case study being located on an island).

Site characteristics also relate to business operations that may prevent certain technologies physically fitting in the buildings. For the two direct electric case studies, electric panel heaters and VRFs were opted for due to the sensitivities of the process environment and critical business processes. Both demonstrate how business critical processes are prioritised over heating system considerations. The availability of a waste heat resource arising from refrigeration was another site characteristic that led to a bespoke heat pump system being selected and could lead to future changes for another case study.

The condition of an existing building’s fabric was not noted as a constraint to retrofitting ZDEH. This can be partially explained by the specificity of the case study projects, as in two cases, buildings installing ASHPs were already of a high fabric efficiency standard (one being PassivHaus) and in another, a DHN connection was made to a building that was previously derelict so was undergoing fabric upgrades anyway.

v. Grid connections

Grid connection costs impacted three case studies. The six-figure cost of grid connection and reinforcement works would have been a barrier to one case study, but SSE provided grant funding to cover these costs. However, the specification of heat pumps did not impact the grid connection costs explicitly. Additionally, the development of the data centre required a new substation for a seven-figure cost. This was not seen as a barrier, given the nature of the business, overall site power requirements, and financial backing from the parent company. In this case the main driver for grid capacity was power rather than heat. The third case study was located close to the gas grid but deemed the gas connection to be expensive and unjustifiably disruptive to the surrounding area and opted for a heat pump instead.

Across the other case studies, no issues with grid connections or costs were experienced, even where heat pumps were replacing direct electric heat, or where a new building was developed on a site with an existing correction.

b. External factors

i. National Policy

National policy, specifically the Net Zero target, was referenced by six stakeholders as a driver to installing ZDEH over alternatives. These stakeholders all represented public bodies or educational institutions. Five of these also cited their own climate agendas as motivations to install ZDEH systems. Whilst this may seem low, this can be partially explained by the high portion (45%) of case study projects which are located off the gas grid, where electrically driven heating is the preferred option for reasons other than policy (i.e., availability of options, security of supply and operational costs). This is also likely to be the case because half were completed before the NBHS or the Net Zero legislation were announced.

ii. Local policy

Local authority policy was only noted to act as a barrier to one case study. In this case the Council wanted to connect the new building to a gas DHN, however the building owner wanted to pursue a ZDEH solution, as the Council’s proposal was deemed to be incompatible with their ambitions for the building to be net zero. To address this, a heat pump DHN was successfully proposed this to the Council as an alternative.

Planning permission was not a barrier for any of the case studies. However, two stakeholders mentioned that they had to retrospectively seek planning permission (for biomass boiler and ASHP retrofits) due to impending grant funding spend deadlines. A further biomass boiler case study appointed consultants to model the impact of the proposed installation in order to satisfy planners. Both representatives of biomass boiler case studies indicated that they would not expect planning permission to be as easy to acquire now or in the future, given increasing concerns around the impact of emissions.

iii. Regulation

Regulation was cited as a driver for one case study, as low carbon technologies were required for the project to meet building standards. It was not cited as a barrier for any of the case studies.

iv. Design brief

Being able to meet design briefs was an issue for two case studies due to the cost and required criteria. In one case study the high cost of designing to PassivHaus standard was a barrier to specifying ASHP initially, as the extra cost of an ASHP compared to electric boilers was deemed an unjustifiable expense. However, it was later deemed to be a more suitable choice for the building on an operational cost basis and subsequently retrofitted. The second case study targeted a BREEM ‘Excellent’ rating for its swimming pool, which was achieved. However, it did not achieve an ‘A’ EPC rating as intended, due to having a higher hot water load than a leisure centre without a pool would have.

v. Supply chain

Supply chain issues were cited as a barrier for rural locations, and sites with constraints or special requirements. Project managers from three case studies in the Highlands, and two Island case studies, indicated having limited options for contractors and installers in these rural and remote locations. No stakeholders from urban developments cited this issue. Contractor limitations were also found to be an issue affecting maintenance, as discussed in section d.

Aside from locational issues, the choice of suppliers was limited by specialist requirements that arose due to site constraints. Two biomass boiler retrofit case studies received only one and two tenders respectively, which in one case led to higher capital costs than budgeted for. An ASHP case study had requirements for the retrofit to be conducted over evenings and weekends, which made it more difficult to find contractors willing to meet this constraint. There was also an issue with obtaining electrical components, including compressors and fans, for the custom WSHP due to limited availability of parts.

c. Soft Factors

Across the case studies there were a wide range of soft factors that impacted the selection of ZDEH systems in most case studies, including internal sustainability ambitions, stakeholder confidence, internal expertise, ZDEH perceptions, potential end user impacts and project timing.

i. Building owner/operator concerns

There were perceived concerns in two case studies that certain ZDEH would not be suitable for buildings with high heat demands or to provide the required flow temperatures (~100°C) for the existing heat distribution system, hence biomass boilers were selected.

Stakeholder confidence with certain technologies and/or internal expertise were soft drivers for five case studies. Having prior experience with specific technologies and expert knowledge on hand to help steer decisions helped two case studies. In both cases, external feasibility studies were conducted to validate the ZDEH technology choice too, further boosting confidence. A further three case studies had existing internal expertise which helped to deliver the systems, identify grant opportunities, and drive the process.

Ambitions to minimise emissions and showcase sustainability drove internal decision making towards ZDEH technologies in all eleven case studies located on the gas grid, and in two off-gas grid case studies. One of these case studies had to work hard across multiple departments and personnel to update their internal policy to specify ‘no gas’ when developing new buildings, which was achieved. This required a lot of time and a significant cultural shift to enable all-electric heating and provide enough confidence that moving away from gas heating and gas back-up systems was viable.

ii. End-user impacts

Anticipated end user impacts guided four of the case studies. For hospital and care centre case studies this was important given the occupancy profile. This limited the technology choice for the hospital since the heat supply could not be interrupted, meaning that technologies that couldn’t provide the same temperature as the existing gas system were automatically ruled out. End user considerations restricted the location and construction period for a biomass boiler in another case study, due to building users requiring high security onsite. This required a containerised system to be built offsite, which significantly constrained the number of viable solutions and contractors. A fourth case study also considered the impact of the heating system on the end users and undertook significant building simulation modelling to model and validate the heating and ventilation system size and requirements against various occupancy levels anticipated in the new building.

iii. Timing

As mentioned in a.i, the requirement to spend grant funding by the end of a financial year added significant pressure to four case studies, tenured by community and public organisations. For two of these case studies, the impact of this pressure was that planning permission had to be sought retrospectively. This issue was noted to be exacerbated by the limited resource of the community group who led the project. Limited resources also impacted a case study that could not apply for the RHI in time before the scheme closed in 2021.

Timing played a role in the selection of ZDEH technology for three case studies, tenured by private organisations. For example, installing heating to meet current needs rather than proactive planning due to uncertain company growth, and developing the building ahead of potential DHN infrastructure.

d. Overarching differential experiences

Through conducting the case study interviews, differences were noted in the extent to which issues are experienced. Below, the impacts on the type of technology, organisation and building are discussed, as well as those relating to location. These differential experiences are based on 20 case studies and should not be taken as a representative sample of Scotland’s non-domestic built environment.

i. Type of technology

The principal barriers to installing each of the technologies in scope have been identified as follows from the case studies:

• Direct electric heating: Higher operational costs versus heat pumps.
• WSHP and GSHP: Site constraints.
• ASHP: Visible external parts, concerns regarding operation in costal locations, and higher capital costs versus direct electric systems.
• DHNs: Requirements for heat demand density, an anchor load, for a long-term strategy and the need to negotiate across disparate parties.

ii. Type of organisation

Public organisations, such as the NHS and Local Authorities, are usually governed by central objectives, particularly regarding financial and environmental policy. For example, several Local Authorities in Scotland have declared a climate emergency. In this respect, there is a degree of pressure on these organisations to lead by example – as evidenced by the high portion of public buildings found during the case study longlisting process. Of the seven case studies of public buildings, climate policy was cited as a driver for six of these, although in some cases, under alternative names including ‘sustainability’ and ‘carbon management’.

Additionally, the public organisations interviewed had energy and facilities staff who focus on designing, project managing the implementation of, and managing energy systems. It was also evident that public bodies are also more likely to procure external work via frameworks, and to develop or retrofit multiple buildings under one programme, leading to economies of scale.

Large private organisations are also likely to have a centralised energy and environmental strategy. The three large commercial organisations represented among the case studies, all cited sustainability as one of their main drivers to install ZDEH. It can be inferred that branding was also a motivator for these organisations, as a result of climate change concerns among the public forcing sustainability and environmental impacts of operations higher up the business agenda in recent years.

Smaller private organisations with small or single-building estates are the least likely to have either internal teams with specialisms in energy, or established procurement strategies. This increases the ‘unknown’ element of adopting ZDEH and reduces the likelihood of benefits from economies of scale. However, community organisations are most likely to fall into this category, and they tend to have the most opportunities for external funding of both consultancy on and implementation of ZDEH. All four of the community group projects within the case studies (along with one for a small charity) received grant funding and free advice from consultants via CARES or Zero Waste Scotland. Conversely, the remaining five private organisations who delivered ZDEH projects independently received no grant funding.

iii. Type of tenure

There was only case study which has a tenant organisation, rather than having staff from same the organisation as the owner (or a subsidiary). In this case, issues arose due to the handover process between the owner and tenant organisation. Although it is not possible to suggest whether this issue is representative of other leased buildings, it is clearly important to ensure that ZDEH systems and their controls are thoroughly explained to new tenants in order to ensure correct operation and a positive user experience.

iv. Type of building

Depending on the building’s usage, the required temperature or pattern of heat delivery may impact the suitability of certain technologies. For example, a biomass boiler was selected for a hospital as it was deemed to be the only solution that could meet the existing heating system’s temperatures, which was required to avoid overhaul to the internal heat distribution system, as this would have disrupted operations within the hospital.

Planning class (i.e., building usage) and ZDEH technology choice had no impact on each other for most of the case studies. This means that in most cases, the decision to install a particular ZDEH system was not linked to the use of the building. Aside from the hospital referenced above, the supermarket was the other exception to this, as the waste heat available from its refrigeration system provided a heat source for space heating.

The type of building also impacts whether backup heating systems are required, with ten case studies in total incorporating backup systems. Six case studies (including two newbuilds) have gas or oil backup systems. Three further buildings have direct electric back-up systems. All of these buildings provide services to the public (in the form of education, events, leisure, health or retail) meaning that building operations and/or income are linked to user comfort, in that users may chose not to attend or may be put at risk if the building is not adequately heated. Lastly, a data centre with direct electric heating had a diesel generator to provide resilience to power cuts, although that was notably to ensure continuing power supply (and therefore business activities) rather than heat supply specifically.

v. Locational differences

Of the ten case studies in urban locations, all of these installed ZDEHs (or biomass boilers) in order to reduce emissions compared to existing or potential gas heating systems. Six of these utilised external funding (including RHI) in order to do so.

In rural locations that are not served by the gas grid, ZDEHs are more common, and building owners and end-users are less likely to consider these to be novel technologies – this was clear from discussions with rural stakeholders. Similarly, the high costs of oil and LPG heating lead to an enhanced financial case for implementing ZDEH instead of (or to replace) these fuels. The increased prevalence of ZDEH rurally is exemplified by the high number of case studies (9 of 20) that represent off gas grid locations.

However, stakeholders in remote rural locations have expressed that they pay a premium for installation and maintenance of ZDEH systems, due to lack of competition between contractors. This is because there are often few or no local options, and those who are willing to attend from further away will pass their travel and accommodation costs onto the customer. Three case studies were affected by this.