Improving home energy efficiency - retrofit assessment review: policy report

Objective 4: Market Readiness

What is the current state of the retrofit assessment market in Scotland and its capacity to deliver an effective nationwide technical suitability assessment service?

Current Status and Barriers to Market Development

The housing market is currently heavily dominated by the new build industry, which offers greater economies of scale and higher profits for tradespeople. Retrofits require significantly more management input, driving up costs, while the available trades barely suffice for new builds. Housing owned by registered social landlords (RSLs) is a partial exception due to the economies of scale of servicing large groups of properties.

The retrofit market is also suffering from a legacy of poor practice. Historically, some government funded work has been for incorrect measures, wrong products, and lack of assessment of defects. Among decision makers, there is often a lack of understanding of building physics generally, and a lack of provision of proper advice and installation knowledge (albeit with good intentions).

There is also a pronounced deficit of competent assessors and installers, particularly in rural areas, which is exacerbated by limited training and funding options. Adequate assessment and design requires developing sufficient experience through practical training and professional practice, and this takes time to acquire. Professionals need to be equipped to evaluate buildings comprehensively, considering maintenance conditions, technically appropriate measures, and sequencing their delivery where some measures need to be installed before others. Currently these assessors are likely to be professionals such as experienced architects, building technologists, and building surveyors.

There are also practical problems posed by Scotland’s diverse and aging building stock, weather conditions, the urban/rural divide, and the need for decision-makers to understand that every building is unique. Whilst the use of archetypes is not without merit, particularly for planning area-based schemes, it needs to be recognised that any two buildings may appear identical but that on-site inspections may reveal different problems requiring bespoke solutions. Relying on basic surveys and remote inspections will result in problems not being identified, storing up more serious and costly problems in the years ahead.

Current provision of advice, education, and awareness raising presents another barrier to market development, and to ensuring a just transition. Whilst some householders will find advice given online or by phone sufficient to enable them to begin retrofit projects, this poses barriers for groups including those with physical and learning disabilities, those for whom English is not their native language, and those who struggle to engage with internet-based services. And once a retrofit journey starts, there is simply no substitute for in-person and on-site advice.

Naturally, funding, and uncertainty of long-term funding, along with a need for greater policy and regulatory alignment, poses its own set of challenges.

These barriers will need to be addressed through tackling both supply and demand.

Policy, regulatory clarity, and alignment

As HEETSA moves forwards we would expect questions to be raised as to how it will interact with building warrants. A building warrant is required for all building work unless the work falls under either regulation 3 or 5 of the Building Standards - work exempt from the building regulations (Regulation 3, Schedule 1) or work that does not require a building warrant but must still meet the building regulations (Regulation 5, Schedule 3). Even if retrofit work falls under Schedule 3 and doesn’t need a building warrant the building owner would still need to ensure that the work met the building regulations. In this context, HEETSA could serve to provide greater clarity to building owners by being a starting point that identifies whether a specialist retrofit building warrant will be required, enabling those managing a retrofit project to better plan ahead, and to help manage expectations. It could also be a competency included within the role of the approved certifier of design (ACD) scheme where HEETSA was the design process for works that fall within the scope of the standards. We would recommend consulting the industry on the scope of this role and whether the delivery model should include the approved certifier of construction (ACC). The latter is a delivery role, rather than design, therefore it should be discussed in the wider context of retrofit delivery model, beyond the design stages falling under the remit of HEETSA.

There is a risk that, if not coordinated, the Building Standards and regulations covering retrofits could diverge, which is unhelpful given the prominence of the former to non-specialists. Whilst it would be impractical to align these regulations so far as requiring all retrofit projects to bring properties up to the current standards for new builds, they should be aligned in a way that enables retrofit projects to identify pathways of measures to reach them over time. Going further, standards should be designed to enable pathways for all buildings to achieve net zero or better by a set date. This would also enable the identification of properties that can never realistically achieve this standard, and so may be better off being replaced. HEETSA provides an opportunity to provide greater long-term clarity as to how this goal can be most effectively achieved.

Emphasis on promoting certain measures and barriers to communal heating

Within policy and funding mechanisms (e.g., ECO), there is an emphasis on promoting certain measures over others. Currently, air source heat pumps (ASHPs) are one prominent example however, more detailed assessments may rule them out or favour other options. Assessments (e.g., EPCs) that focus on individual properties, and do not capture factors beyond the building envelope may also influence technical feasibility assessments. For example, an individual assessment may favour recommending an ASHP, but a community-scale retrofit project may identify grid capacity as a constraint, or highlight greater potential for energy savings from developing a communal or district heating system (assuming that these assessments are based on real, as opposed to modelled, energy demand data, which is often not the case).

Natural building materials, which can offer greater benefits beyond energy savings, are often overlooked, and the need for maintenance and repairs may not be sufficiently flagged. HEETSA provides a valuable opportunity to address these imbalances.

Building Consumer Trust

The Scottish Government needs to recognise that many householders engage in retrofit projects reluctantly – understanding their benefits but needing greater incentivisation. Renovation projects often include retrofit measures but canny householders on fixed budgets will have an eye to which improvements result in the greatest increases to their property value, which may often favour aesthetic improvements (e.g., maximising ‘kerb appeal’). Tenants can have issues with understanding the need for and benefits of retrofit projects, and coping with the disruption they can create (e.g. decanting occupants whilst work is being done). And then there are those who are simply unconvinced and actively resistant to the net zero agenda. Therefore, when retrofit projects do not meet householders’ expectations and result in sub-standard or negative outcomes these directly impact on public trust, particularly when these are delivered as part of government-backed schemes.

The Scottish Government needs to help ensure that property owners can access expert and impartial advice about the best way to improve their home, recognising the different focus in decision-making and potential for bias. For example, both homeowners and businesses will be keen to deliver improvements at lowest cost but may miss out on longer term benefits as a result. The design of government retrofit schemes needs to reflect these facts and match investment with the right measures for each individual home. Where advice services are being offered to property owners, these need to be clearly impartial and recommendations should not be weighted in favour of particular improvements or businesses.

We recommend that the Scottish Government continues to review and improve the range of retrofit advice services being provided to Scottish property owners to ensure that proposed improvements are clearly appropriate and impactful in the medium and longer term.

Consumer Protection, Complaints Handling, and Redress

Currently there are a lot of complaints to trading standards in relation to retrofit works (e.g. spray foam insulation, issues with authorisation bodies, how to use heat pumps, missing DNO certificates, no smart export for solar panels). Consumer confidence and energy is very low and there is a high level of detriment. For example, spray foam insulation has been the subject of numerous complaints, with the same companies responsible for improper installations now charging to remove it. Processes are not clear as some traders need to be authorised, and some do not. Some funders require authorised traders and some do not. The consumer journey in relation to EPCs, funding and retrofit is very complex and confusing. Without thorough post-retrofit assessments to ensure installations are correctly set up and works are properly monitored, consumer issues will persist at a significant scale. Handover procedures are also key to this process to reduce complaints. Commissioning needs to be thorough, and occupiers should be being provided with detailed information and assistance in how to operate and maintain all aspects of their buildings.

As such, there is an opportunity for HEETSA to establishing stringent quality assurance processes and independent oversight to address these issues and enhance consumer trust.

Additionally, we recommend that the HEETSA process requires some assessment of occupant behaviour considerations by interviewing occupants, along with adequate site investigations, as a means of re-building customer trust. We note that some assessors already do this, and that community-scale retrofit projects invariably explicitly include these activities.

Funding and Financial Uncertainty

Insufficient levels of funding, short funding cycles, lack of long-term clarity, and instability in policy, all pose barriers to delivering retrofit projects and building consumer confidence. Whilst we recognise that these factors are not entirely within the Scottish Government’s control, it has created an antagonistic system, with further friction created where government policy does not sufficiently align with the needs of local authorities and housing associations, leaving them to work ‘creatively’ within restrictions.

Here, HEETSA provides an opportunity for owners to clearly scope what measures are and aren’t needed for an individual property or a group of properties, which can then be set against what funding is available. It also provides an opportunity to review the recommended measures against schemes for funding community-wide improvements (e.g., LHEES) to better align them for supporting deep retrofits, and so help reduce the costs of developing communal / district heating systems. And where funding is not available or is insufficient, perhaps because a measure is outwith the scope of a funding scheme, it would support the justification for the scope to be adjusted. In the case of reserved and partially devolved policies (e.g., ECO) it would support the Scottish Government’s efforts to amend schemes to better meet the needs of Scotland’s population and building stock.

Innovation and Collaboration

Many previous government initiatives for funding measures, and assessment methods, have been criticised for restricting innovation by being overly prescriptive, or favouring ‘modern’ solutions over the use of natural materials. These concerns were also raised with regards to the risk of HEETSA doing similar, particularly if it would be tied to any given assessment method.

Whilst we do not recommend that HEETSA is deliberately designed to promote innovation, if it is as agnostic as possible to all measures, and any assessment method or funding stream, it should be able to avoid this pitfall. In addition, the original proposals for HEETSA, as developed in this report, recognise that retrofit projects are inherently collaborative exercises, and this could be enhanced through a delivery framework that requires collaboration. If this is done successfully, new innovations should become an emergent benefit.

Tackling the Skills Shortage

Tackling the insufficient supply of skilled professionals means increasing support for professionally accredited degrees and encouraging more young people to take them to ensure a long-term supply of skilled professionals. However, this will take time (at least several years) to begin to have an impact, and so it will also be essential to draw on our existing workforce – adults and professionals with transferrable skills – to retrain and upskill them into retrofit roles.

These issues are explored in more detail under Objective 3 of this report and Sections 5.2, 6.8, and 6.12 of the Technical Report.

Rethinking the Retrofit Journey

Building the market for retrofit projects means recognising that there is no standard ‘retrofit journey’. To be successful, a HEETSA needs to be cognisant of all possible starting points and how they can be leveraged to result in the maximum energy efficiency gains and co-benefits. This means allowing for the fact that different households will have different starting points, different motivations, different levels of understanding, and different limitations.

Examples of starting points include, but are not limited to:

• Householders actively deciding to undertake a deep retrofit project
• Householders deciding to renovate their properties and then considering energy efficiency improvements as part of that project
• Householders seeking or being given targeted energy efficiency advice that triggers a wider retrofit project
• Householders receiving related support (e.g., for fuel poverty or health reasons) which identifies the need for retrofit measures
• Householders receiving advice or information on energy efficiency measures by installers as part of receiving other services (e.g., boiler servicing)
• RSLs and private sector landlords being subject to energy efficiency and related regulations being required to upgrade properties
• Householders being advised by community groups and/or recruited into community retrofit projects

A HEETSA needs to be designed to work for everyone from engaged and informed self-funders through to fuel poor and otherwise vulnerable householders, and those who may be actively resistant to improving the energy efficiency of their properties.

Enabling a Just Transition

If HEETSA is enable a just transition that ensures all Scottish buildings are energy efficient, comfortable, and healthy, with affordable energy bills, its design needs to learn from past mistakes. It needs to avoid unintended consequences such as favouring urban properties over rural and remote properties, effectively writing off some property types by not being applicable to them, and the risk of the costs of improvements being passed on to tenants by way of increased rents. These issues are explored further in under Objective 4 in Section 6.24 of the Technical Report.

We recognise that many measures needed to address these risks fall outside HEETSA’s scope. However, if it can achieve its objectives, become an umbrella process for delivering retrofits, and avoid the pitfalls that exist or have existed in previous retrofit and built environment policies, we would hope that it could serve as an example of best practice that would result in spillover benefits to related policies and policy agendas.

Summary

We appreciate that the opening sections under this objective paint a fairly bleak, albeit realistic, assessment of the current state of play. Unfortunately, we cannot change the past and the impact that some policies and schemes (both devolved and reserved) have had on consumer engagement and public trust in the retrofit and net zero agendas. We also recognise that far from all of these problems have been caused by the Scottish Government, and some of the solutions are partially or fully outwith the scope of its devolved powers. However, it is also important to recognise the positive benefits that previous policies and schemes have had, and to understand how, why, and where these benefits have been delivered.

With this in mind, there are steps that could be taken to build the retrofit market and rebuild confidence and trust among the public and all those involved in delivering retrofit projects:

• Working across policy silos (including within the built environment and energy) to do more to align retrofit policy and regulation with areas such as the Building Standards, building warrants, and communal and district heating.
• Tackling the skills shortage (see Objective 3).
• Tackling conflicts of interest, and improving consumer protection, complaints handling, and redress.
• Recognising that there is no standard retrofit journey, and designing retrofit policies to capture all possible entry routes and motivations (or lack of them) for undertaking retrofit projects.
• Recognising that enabling successful retrofit projects, and doing so equitably, will be vital to enabling a just transition, and doing more to align the design and delivery of government policy and regulation with this broader goal in mind.

Whilst we began this objective with a summary of bad news stories, we are of the view that the development of a HEETSA-based retrofit process presents a significant opportunity to turn the current situation around, and deliver a more sustainable and equitable Scotland.