Heat and Energy Efficiency Technical Suitability Assessment (HEETSA): scoping consultation– partial BRIA

Section 1: Background, aims and options

Background to policy issue

The Scottish Government has clear commitments to reduce emissions from heating our buildings and improving their energy efficiency to support our statutory net zero climate and fuel poverty targets.

The Scottish Government’s Heat in Buildings Programme is taking action to provide advice, support, and funding to building owners and tenants on retrofitting their properties. It will also see us introduce new legislation which will underpin that action, to give certainty and set the framework for investment. That legislation will include:

• introducing a Heat in Buildings Bill to set a target for decarbonising heating systems by 2045; to create powers to set minimum energy efficiency standards for owner occupier and non-domestic properties; and developing particular requirements for large, non-domestic premises, including powers to require public sector buildings, to connect to district heating when available;
• progressing regulations under the Energy Act 2011 to introduce a minimum energy efficiency standard (MEES) in the private rented sector (PRS). These regulations would mean all privately rented properties, as far as possible, achieving a Heat Retention Rating of Band C on the reformed Energy Performance Certificate (EPC);
• laying regulations under the Energy Act 2023 to introduce reformed EPCs, which will introduce a new rating system for domestic and non-domestic properties to give improved information on a property’s energy efficiency, and the emissions and performance of its heating system.

For social housing, the Scottish Government continues to work with the social housing sector and stakeholders on the introduction of a Social Housing Net Zero Standard, using existing powers of the Scottish Housing Regulator. This standard will replace the second iteration of the Energy Efficiency Standard for Social Housing (EESSH2).

The Scottish Government recognises that when these new legislative and regulatory requirements are introduced, building owners and tenants will want to understand the specific impacts for their properties, especially where regulations could require them to take action. That means that building owners will normally want to seek the opinion and advice of experts before committing to retrofit new heating systems or energy efficiency measures.

The Scottish Government now wants to understand the role that assessment can play in supporting building owners seeking to improve the energy efficiency of, and reduce the emissions from heating, their property. We are proposing that a Heat & Energy Efficiency Technical Suitability Assessment be established as an optional additional step ‘beyond the EPC’ and are seeking stakeholders’ views on this. This assessment could be used in circumstances where it would be beneficial to building owners to have additional information on which energy efficiency measures and clean heating systems would, or would not, be appropriate for their building.

Our proposals focus only on the assessment process itself – the methodologies used and the skills and qualifications of the practitioners. They do not cover the subsequent installation of measures, where there are already existing quality assurance schemes such as the Microgeneration Certification Scheme (MCS) for the installation of renewable heating systems and TrustMark for the installation of energy efficiency measures.

Our initial proposals for HEETSA would build upon the reforms we are making which will ensure that the EPC sets out clearer and more relevant information on the building’s current and potential contribution to net zero. These will include a new rating on domestic certificates, setting out information on the emissions and efficiency of the current heating system and giving information on alternative, non-polluting heating systems. There will also be a new rating for heat retention, which will consider installed energy efficiency measures, and how these might potentially be improved.

In our Government Response^[1] we set out that we recognise the limits to the information that an EPC assessment can tell a building owners, and that we ‘proposed that EPCs act only as basic evidence to support compliance with mandatory standards, and to provide an initial signpost towards more detailed assessment and technical advice where needed’. We therefore proposed to develop a Heat & Energy Efficiency Technical Suitability Assessment and to set out further information on our approach – which we have now done in the consultation which this partial BRIA accompanies.

Purpose / aim of action and desired effect:

The purpose of this Scoping Consultation is to set out the Scottish Government’s initial proposals for the scope of a HEETSA and seek stakeholder views on:

• the overall concept of HEETSA and how it relates to the EPC and other parts of the heat and energy efficiency retrofit landscape;
• current assessment methodologies that could be used to underpin HEETSA and how potential gaps in the market could be filled;
• the skills, qualifications, and accreditation processes that would be needed to ensure that assessors were able to offer detailed advice to building owners on technical suitability of heat and energy efficiency retrofit measures;
• the circumstances in which HEETSA could be needed, how it could support proposed legislation and regulations for clean heat and energy efficiency, and what, if any, legal basis it should have.

The Scottish Government’s objective in making these initial proposals is to safeguard consumers by developing a technical suitability assessment which ensures that building owners can:

• understand which measures are appropriate, i.e. identify the ‘right’ measures when improving their energy efficiency and changing their heating systems – those which are technically appropriate for that building;
• understand which measures are not appropriate, i.e. be aware of the ‘wrong’ measures – energy efficiency measures which could create further problems such as dampness, mould, or condensation; or clean heating systems which are insufficiently sized to maintain warmth.

Our aims in these proposals are therefore:

• that all building owners have a trusted and recognised route to access the highest quality assessment of the technical suitability of their buildings to receive clean heating systems and install energy efficiency measures (including information on when it would not be appropriate to do so);
• that building owners have access to an additional assessment, beyond the EPC, which can help support their compliance with, or exemption from, mandatory standards – in particular in more complex-to-decarbonise buildings such as traditional and protected buildings, those in tenements, or those in rural areas^[2] ;
• that the methodologies used to undertake such assessments have been properly quality-assured and approved as being fit-for-purpose;
• that the assessors undertaking such assessments are properly skilled, qualified, and capable of offering technical advice;
• that wherever possible, HEETSA will act as an additional safeguard to protect consumers by reducing the potential risk of building owners installing energy efficiency measures which would be technically inappropriate, which could then cause subsequent problems such as condensation, damp, or mould; or clean heating systems which are insufficiently specified to be able to heat the building effectively.

The outcome we are seeking is for all buildings to be able to achieve a good level of energy efficiency in a way that is most appropriate for that building, and to transition to the clean heating systems that are the most suitable, taking into account the building’s unique characteristics (its construction, location (potentially utilising analysis from Local Heat and Energy Efficiency Strategies) and condition) and potentially also occupants’ behaviour.

Our proposals have been informed by stakeholder responses to both the EPC Reform consultation in 2023, the Heat in Buildings Bill consultation in 2023-24, stakeholder workshops during summer 2024, and an independent research project undertaken for the Scottish Government during 2024-25, which is published alongside this scoping consultation, and which we acknowledge has informed our proposals.

Our HEETSA proposals are also being developed to support the Scottish Government’s parallel consultation on a Private Rented Sector Minimum Energy Efficiency Standard (PRS MEES)^[3].

Options considered so far

We have considered two options for the development of HEETSA, so far, in our policy development. We will reflect further on alternative options, if needed, if they emerge during further consultation:

Option 1 – Do nothing (leave the retrofit assessment market to develop without government oversight)

This option would retain the assessment market in its current form:

• EPC assessments would be subject to full government oversight
• Wider retrofit assessments would not be subject to any government oversight

In this scenario, consumer safeguards would be limited to the EPC part of the market only, where government already specifies:

• approved methodologies
• approved skills and qualifications of assessors
• the form in which an EPC should be reported and certified
• the circumstances in which an EPC is required

The other, emerging, part of the market, for retrofit assessment, would continue to grow and develop with no government oversight to specify:

• approved methodologies for retrofit assessment
• required skills and qualifications of retrofit assessors
• the form of any certification and reporting of the results of a retrofit assessment
• the circumstances in which a retrofit assessment may be required

At this stage in our policy development, the Scottish Government does not believe that doing nothing is a credible option. There has been significant expansion and growth of the retrofit assessment market ‘beyond the EPC’ during the past decade, providing welcome additional products to ensure that consumers can have access to more bespoke, detailed, technical information on which energy efficiency measures are right for their building. Many of those products come with strong industry-led standards to ensure quality and to safeguard consumers.

The Scottish Government welcomes these industry-led initiatives as a solid basis upon which to base HEETSA, but at present we do not think that they go far enough in covering the four areas of potential government oversight outlined above.

There remain gaps in retrofit assessment methodologies, particularly around assessment of potential clean heating systems or of more complex-to-decarbonise buildings such as tenements or traditional and protected buildings. In these cases, the Scottish Government, at this stage in our policy development, thinks that government oversight is likely needed to ensure that these gaps are filled and that consumers have access to the full range of retrofit assessments that are needed to support the overall objectives of our Heat in Buildings Programme.

We also think that there may be benefits in ensuring standardisation of any certification or reporting of the results of a retrofit assessment, to ensure that bodies which may rely on this evidence (such as for eligibility for government programmes, as evidence for compliance with / exemption from regulation, or for lenders seeking consistent information for making loans) have a consistent format for doing so. This could also include the results of a HEETSA report or certificate being recorded in a digital building log or in generating a revised EPC for the buildings following the results of the more detailed technical assessment of current and potential ratings.

We recognise that the EPC itself could be strengthened to take on the role of a HEETSA, but have discounted this, as our view, set out in our Government Response, is that the EPC should continue to only be a basic and standardised initial assessment. The EPC will continue to be required at trigger points to provide basic information about buildings to prospective buyers or tenants and will signpost the need for a more detailed technical suitability assessment before any retrofit work is carried out.

Option 2 – Develop HEETSA (bring government oversight to the retrofit assessment market) (preferred option)

This option would allow the retrofit assessment market to continue to grow and evolve, but with government oversight to allow particular methodologies and practitioners to be accredited or approved.

In this scenario, consumer safeguards would be extended beyond the EPC part of the market and into the wider retrofit assessment market, allowing government to also specify:

• approved methodologies for retrofit assessment
• required skills and qualifications of retrofit assessors
• the form of any certification and reporting of the results of a retrofit assessment
• the circumstances in which a retrofit assessment may be required

This option would allow the Scottish Government to ensure standardisation and consistency across retrofit assessment methodologies and to plug any gaps in the market. This would help to better safeguard consumers by making sure that there were a comprehensive range of methodologies to assess the technical suitability of energy efficiency and clean heating measures across all different parts of the building stock.

We think that government oversight will support the market to develop the products needed to ensure that consumers have access to technical advice in all circumstances. This is particularly important for more complex-to-decarbonise buildings such as tenements or traditional and protected buildings, or for assessing the technical suitability of different types of clean heating systems.

This option would allow the Scottish Government to ensure that retrofit assessors met minimum skills and qualifications requirements before offering an assessment, again safeguarding consumers against the risks of poor-quality advice or unskilled professionals.

This option would also allow government to create requirements for standardised reporting and certification of retrofit assessments, including how they could be recorded or registered, such as through a digital building log or in a revised EPC, which could then be recorded on the EPC Register. At this stage in our policy development, we think there could be benefits to standardisation of reporting / certification in terms of HEETSA being able to support eligibility for government funding programmes, compliance with / exemption from regulation, or for lenders seeking consistent information for making loans.

None of our proposals would prevent the retrofit assessment market from continuing to develop and evolve outside of government oversight. We want to strike the right balance between allowing the retrofit assessment market to continue to grow and evolve, whilst at the same time ensuring consistency and quality assurance. This is a similar approach to the one used for quality assurance schemes such as the Microgeneration Certification Scheme (MCS), with government approval of providers giving consumers assurance around quality and any issues of redress.

These schemes do not prevent other providers from installing renewable heating systems or fitting energy efficiency measures but offer consumers additional protections. Requiring these additional protections might become a condition of particular government regulations or funding programmes which currently rely on schemes such as MCS or Trustmark as a condition of eligibility. We are exploring whether HEETSA might be used in the same way. Government oversight would therefore be about accrediting particular methodologies or providers as meeting the HEETSA standard, but it would not prevent other methodologies or providers continuing to be offered outside of that standard.

Under this option, we are therefore still considering the circumstances in which HEETSA could be needed, and whether or not there are any circumstances that it could be required. The Scottish Government has powers that would allow it to bring in market oversight through regulation, or alternatively this could be through issuing guidance. We are therefore also seeking stakeholder views on the potential impacts of any market oversight being a statutory or non-statutory process.

Sectors and groups affected

At this stage in our policy development, the Scottish Government anticipates that the following groups may be impacted by these proposals:

• Business – those involved in the retrofit assessment market, including practitioners within existing schemes such as PAS:2035, the RICS Residential Retrofit Standard, Passivhaus EnerPHit scheme; those operating in the EPC assessment market such as Approved Organisations; those involved in property advertising, letting, conveyancing and lending; those manufacturing or installing energy efficiency or clean heating measures who may draw on the results of a HEETSA
• Consumers – including current and prospective home and building owners, landlords and tenants
• Local authorities
• Government programmes or regulations which use EPCs or retrofit assessments to determine eligibility or evidence compliance with regulations

Businesses operating in the retrofit assessment market would be impacted by introduction of government oversight through HEETSA. This could create new opportunities if it led to further growth in the market such as through government commissioning the development of new methodologies to plug gaps in the market, or if government was to specify circumstances in which a HEETSA was required. It could also constrain how those businesses operate if it introduced new regulatory requirements or guidance. For businesses operating in the EPC assessment market, HEETSA could create new opportunities for expansion, or create synergies with their existing business models. For businesses in the estate and lettings market, HEETSA could introduce an additional layer of information that they would need to understand when properties were being marketed to consumers, and clear guidance would be needed on how the results of any assessment were to be expressed in any property advertising. Likewise for conveyancing solicitors, if HEETSA was to be used as evidence to support whether a building complied with, or was exempt from, a mandatory standard (on grounds of technical infeasibility), they would need clear guidance on how to take this into account when completing property transactions. Lenders would likewise be impacted and would likely want to see HEETSA results reported on a consistent, standardised basis, to allow them to make comparisons across their portfolios.

Consumers would be directly impacted by our proposals for HEETSA since HEETSA would fill current gaps in the retrofit assessment market, particularly for assessment of clean heating systems and for more complex-to-decarbonise buildings such as tenements and traditional or protected buildings. HEETSA would therefore benefit consumers seeking evidence beyond the EPC of the potential technical suitability of energy efficiency or clean heating system measures for their building. Introducing a government-backed scheme would not remove consumer choice in the market, but would provide additional safeguards, for those consumers who wished to have them, of the assurance of government-backed methodologies and practitioners who were required to operate to government specified quality standards. The results of a HEETSA could be used by consumers to support their eligibility for government funding programmes, lenders’ products, or to evidence compliance with / exemption from regulatory standards. The results of a HEETSA could therefore help to support landlords who wished to, in evidencing how their building could or could not comply with the proposed PRS MEES. For consumers in more complex-to-decarbonise buildings such as tenements or traditional and protected buildings, HEETSA would provide an additional level of assurance beyond the EPC on which measures were technically appropriate to install, and which were not – helping to safeguard against potential adverse consequences such as dampness, condensation or mould, or preventing inappropriate clean heating systems being installed.

Local authorities have enforcement responsibilities for EPC legislation and have been proposed as enforcement bodies for the PRS MEES regulations. They would want to understand how the results of HEETSA could be taken into account when a landlord or building owner wished to evidence compliance with / sought exemption from, a regulatory standard.

Government programmes or regulations which use EPCs would be able to use HEETSA as a means of determining eligibility for funding programmes, such as confirming which measures were technically suitable to be installed, and which were not, and therefore which could be funded. HEETSA would also be able to be used to support compliance with government regulatory standards as outlined for local authorities above.