Heat and energy efficiency strategies: second consultation analysis

Executive Summary

Introduction

1. This executive summary provides a summary of the key findings emerging at each consultation question. The following chapters of this report then provide further detail and depth on the responses to each question.

2. In January 2017, the Scottish Government held a scoping consultation on Local Heat & Energy Efficiency Strategies (LHEES) and Regulation of District Heating, designed to gather views to help inform further development of the proposals prior to more detailed consultation.

3. In November 2017, the Scottish Government launched a second consultation, based on the evidence and views gathered from stakeholders. This consultation document set out more specific policy proposals for Local Heat & Energy Efficiency Strategies and Regulation of District and Communal Heating. It ran from November 2017 until February 2018.

Respondent Profile

4. 71 organisations and individuals, from the following respondent sub groups, submitted a response to the consultation:

Respondent Groups

	Number
Business & Industry	16
Network, Professional or Trade body	14
Local government	20
Third sector & Community	9
Public sector	5
Academic	3
Other	1
Total organisations	68
Individuals	3
Total respondents	71

Main Findings: Local Heat & Energy Efficiency Strategies

Local Heat and Energy Efficiency Strategies

5. Most of those who replied agreed with the proposed approach to place a statutory duty upon local authorities to work with relevant stakeholders to produce Local Heat & Energy Efficiency Strategies (LHEES).

6. There were requests for more information on the resources and support that will be made available to local authorities (e.g. when this will be delivered, amounts, length of funding period etc).

7. Respondents also commented on the need for more interim targets or milestones to be set within the 15-20 year period.

8. There were calls for clarity as to how LHEES will be reported, monitored and measured and suggestions that each LHEES will need regular reviewing or updating.

9. Several respondents were keen for local authorities (LAs) to work together or co-ordinate their efforts.

Statutory Duty to Report on Tackling Fuel Poverty and Climate Change

10. Of those responding to this question, a significant minority were broadly supportive of reporting about climate change and, to a lesser extent, fuel poverty, in the LHEES rather than in the Local Housing Strategy (LHS). A key reason was that this will help to align the areas of energy efficiency, carbon reduction and fuel poverty. A significant number of respondents noted the need for reporting to have a joined-up approach with other developments across Scottish heat policy. A key concern was that of resources, funding and support that will be needed to carry out the LHEES reporting requirements.

District Heating Zones

11. There was majority support across all respondent sub-groups for the proposed overall approach to zoning. A significant minority of respondents focused on factors to help with take-up of programmes aimed at energy efficiency, with some highlighting the need for commercial attractiveness and good conditions for investment, alongside funding. There were some concerns as to whether the zones will provide sufficient certainty to enable providers to commit to investment.

12. Community engagement was perceived to be a factor that would help with take-up and, alongside this, respondents referred to the need for district heating to be affordable to consumers. There were also suggestions for collaborative working across stakeholders at regional and national levels, reference to the need for more or improved data to be available in order to make zoning effective, and the need for the power to compel building owners to connect.

District Heating Consents

13. A majority of those answering this question noted their approval of the proposed district heating consent process or specific elements of what was being proposed, with local authorities being particularly supportive of the development of national guidance and support, noting that this would mean a consistent approach across Scotland. There was no outright disagreement with the proposed district heating consent process or specific elements of what was being proposed.

14. In relation to the developer of last resort, the preference from a majority of respondents was for a national body to adopt this role; primarily due to a lack of resources for local authorities to be able to take on this role. That said, there were also comments that the developer of last resort would need to be adequately resourced. A range of different organisation types including a national body or an independent body, were suggested as suitable for the role although there was no consensus on this.

15. In terms of the consents process specifically, there were some comments that local authorities do not have the necessary resources to be able to manage this, alongside suggestions for a central body that would issue and manage consents. There was some support for the consent process to be subject to the normal planning consent process, albeit this opinion was not universally held; and a very small number of respondents felt that the consenting process should be separate from the planning process. There were some calls for a robust system of monitoring schemes and reference to the need for accountability and transparency.

16. Most of those answering agreed that district heating operators should have similar or the same rights as other statutory undertakers for permitted development and wayleaves albeit that there was reference to the need for local authorities to have the necessary resources to undertake this role.

17. There were some requests for heat networks to be treated in the same way as other utilities in terms of reduced business rates and any other taxation breaks.

Socio-Economic Assessment

18. There was broad agreement for socio-economic assessment to be included as part of LHEES. The need for a whole systems approach that aligns with other policy areas such as the overall objective of reducing fuel poverty or climate change was cited by some respondents. However, some respondents in the business & industry sector and the network, professional and trade body sector commented that consideration also needs to be given to market demand and the commercial viability of each proposal. There were also suggestions that the Scottish Government should conduct an additional assessment prior to the ones already identified in order to scope and identify suitable areas of consideration for LHEES and exemptions to the policy, prior to placing a duty on local authorities.

19. A significant minority of respondents welcomed the commitment to provide statutory guidance for socio-economic assessment in the form of a detailed methodology, laying out an overarching process and providing standard assumptions. They felt this would ensure consistency across local authorities and stakeholders.

20. Reference was made to the need for the process for socio-economic assessment to be accessible, consistent, comprehensible, and transparent; with requests that this should not be overly burdensome or time consuming. There were also some suggestions for the effectiveness of socio-economic assessment to be reviewed on a regular basis, and for best practice to be developed as skills develop.

Data for Local Heat and Energy Efficiency Strategies

21. A small number of respondents noted their support for proposals for data for LHEES, with comments that local authorities need a comprehensive picture of heat demand and surplus heat.

22. Views were mixed as to whether data on surplus heat should be provided on a voluntary basis, with some noting that voluntary measures are unlikely to obtain the required data for the development of LHEES. Allied to this, there were some suggestions for industry to provide energy consumption data on a mandatory basis, although this was not generally supported by data providers on the basis that this could be commercially sensitive information.

Further Call for Evidence for industry heat data

23. Only small numbers of respondents referred to types of data information that industry might be willing to provide, instead referring to data protection requirements, the need to anonymise data or the commercial sensitivity of data. There were some suggestions that central management of data would help resolve these issues.

24. There were a small number of references to data that is already available such as Standard Assessment Procedure (SAP) or Energy Performance Certificates (EPC), albeit that there were some comments that there are limitations on what is currently available.

25. The need to engage directly with industry and professional associations was cited by some respondents, primarily in local government or network, professional and trade bodies; along with the need to offer reassurances that data will be treated as confidential or suggestions that confidential data sharing agreements should be used to allay industry concerns.

26. A few respondents suggested the Scottish Government would need to mandate organisations to provide the required data.

27. Only a small number of respondents cited any data that could be provided without compromising the effectiveness of organisations, although there were some comments that some data is already publicly available.

Main Findings: District Heating Licensing

Licensing for District and Communal Heating

28. There was broad support for the overall approach to district heating licensing, with various advantages being cited; these included consumer protection and consistent standards around service levels, service contracts and continuity of supply. A licensing system was felt to be important by some because district heating operators will effectively operate a supply monopoly.

29. Independent scrutiny, monitoring and evaluation were seen to be important by a few respondents across most sub-groups, alongside regular reviews to ensure that district heating networks are meeting their aims. While there was broad support for a licensing system, a very small number of respondents, primarily in the business & industry sector, felt there is a need to strike a balance between the obligations placed upon developers or operators and the rights to facilitate developments. Concerns over the challenge of enforcement were raised by a few respondents in the business & industry and network, professional and trade body sectors.

30. There were some suggestions that licensing requirements should build upon the content of the Heat Trust or that awarding a licence should be dependent on registration with the Heat Trust and the Association for Decentralised Energy’s (ADE) forthcoming compliance scheme, particularly as this would ensure regulatory alignment over the UK.

Consumer Protection

31. A significant minority of respondents noted their support for what was being proposed in relation to consumer protection, with some suggestions that this could be built into the consent and procurement processes.

32. Some respondents, primarily within local government, business & industry and network, professional and trade body sub-groups, noted a preference for mandatory, rather than voluntary, protection schemes, based on the standards developed in the Heat Trust Scheme Rules, although there were some requests from business & industry respondents for a balance so that protection is fair and proportionate, offering protection to the consumer while also encouraging development.

33. Ongoing dialogue with the UK Government was important to some respondents, so that Scotland and the rest of the UK would adhere to the same standards and avoid regulatory divergence. There was also reference to the forthcoming Competition and Markets Authority Review into domestic heat networks, with respondents noting that this should inform arrangements for consumer protection.

34. There was general support for a robust complaints resolution process, with requests for a district heating ombudsman service to include counselling and conciliation services to achieve dispute resolution. The complaints resolution service would need to be easy to access and use for consumers.

35. Given that district heating is a relatively unknown form of heating, respondents noted the need to increase awareness of its benefits through information campaigns, as well as providing jargon-free and consistent information via a range of different information channels. It was felt that advice should be offered by an independent and impartial organisation(s). Respondents cited a wide range of different types of advice that should be offered to consumers including advice on tariffs, prices, costs, billing, standards for billing, repairs and so on.

Enabling Connections

Heat Users

36. Almost half of respondents noted their support for the proposed approach to connecting heat users, although some had provisos. These included the need to raise awareness and educate consumers about the benefits of district heating as well as encouragement to connect. While not proposed in the consultation paper, a few respondents, primarily within the local government and business & industry sub-groups, spontaneously noted their support for the power to compel connection – particularly for public sector organisations, although a similar proportion of respondents disagreed with the power to compel.

37. There were suggestions from some respondents in the business & industry sector and network, professional and trade bodies, that district heating should operate under a separate legal regime rather than under the planning process. This was because it was felt that other legislation exists to help reduce heat demand and that any new dwellings meeting 2015 building regulations will include low and zero carbon generating technologies.

Surplus Heat Suppliers - Further Call for Evidence

38. There was majority support for the proposed phased approach to non-domestic sectors with potentially usable surplus heat, although there were some references to the need for incentives to be offered to accommodate different drivers for different sectors and organisations to share surplus heat or for encouraging connection to help mitigate the long payback periods within this sector. There were also suggestions of a need to engage with organisations and the need for encouragement to engage.

39. While respondents felt that Phase 1 and Phase 2 are likely to be successful, not all were supportive of Phase 3; they felt that while the first two phases allow for collaboration, the third phase could bring together unwilling partners and could be of limited value.

40. There was support from a majority of those responding to this question to require all regulated non-domestic sectors with potentially usable surplus heat to carry out energy efficiency assessments, including heat (and its recovery), and onsite and offsite use, and implement recommendations where feasible, although there were some requests to define ‘feasible’. Again, there were some suggestions that incentives need to be offered to ensure private sector compliance.

41. Respondents felt that energy efficiency (including heat) could be assessed across the regulated non-domestic sectors via The Energy Savings Opportunities Scheme (ESOS). Other suggestions for assessment were made but only by very small numbers of respondents.

42. There was support from around half the respondents answering this question for the existing energy efficiency requirements for Part A sites to be applied to Part B sites. A range of benchmarks or criteria were suggested for use in assessing energy efficiency; these included the sector or nature of an organisation’s activities. Some existing approaches were cited, with most reference to the use of Energy Performance Certificates (EPCs) as a possible starting point.

43. Respondents felt that all industrial processes should be included in assessing energy efficiency.

Enabling Activity and Additional Areas for Consideration to Support the Regulatory Approach

44. There was majority support for the establishment of a national delivery mechanism to support local authorities in delivering their proposed functions for LHEES, district heating and Scotland's Energy Efficiency Programme (SEEP, now Energy Efficient Scotland) more widely. It was generally felt that the proposed functions were appropriate although some additional functions were also outlined.

45. There were some requests for flexibility so that the LHEES can offer an individualised approach taking into account local input.

46. Governance of the national delivery mechanism was an issue cited by some respondents, although there was no consensus on the type of governance that should be adopted.

Incentives

47. While various suggestions were made on the most cost-effective way of supporting schemes that are socio-economically appropriate and in line with the local authority LHEES, respondents tended to focus on grants, loans and incentives as they help to de-risk and progress projects. There were also calls for funding to be consistent, to have appropriate delivery lead times to allow for adequate planning, scoping and best value, and to be long term. There were some suggestions that business rates and rateable values could be reduced to provide greater confidence to network developers and owners.

Wider UK Heat Market Reform

48. Over half the respondents agreed with the consultation proposals.

49. There were some suggestions of a need to consider other technologies alongside district heating. There was also reference to feasibility studies currently being undertaken and the need for these to feed into evidence for the Scottish Government.

50. There was support for the approach published by the ADE Taskforce.

Main Findings: Assessing Impact

Equality

51. There was general agreement with the need to protect groups of people who may be more vulnerable to the impact of fuel poverty, with very few potentially negative impacts being outlined by respondents. There was reference of a need to engage with consumers.

52. Respondents noted the need to ensure that protected characteristics should be included and addressed in LHEES and that developing strong consumer protection will ensure that vulnerable groups are protected. Key themes emerging included that protected characteristics must be taken into account in the socio-economic assessment; that there is a need for training, guidance and examples of best practice; that there is a need for a wide ranging engagement process involving all relevant individuals and utilising a wide range of channels; and broad agreement that developers should adhere to considerate communication in terms of minimising disruption.

Business and Regulation

53. Respondents tended to focus on potential costs in relation to the Business and Regulatory Impact Assessment, rather than potential savings. The key cost identified was that local authorities would have increased costs due to the need for additional resources, staff and expertise. There was also some reference to potential costs for businesses because of the regulations under which they would have to operate.

54. Likely savings outlined included the potential for residents to make savings on their heating bills. There were also some suggestions that non-domestic organisations might have reductions in the Climate Change Levy, CRC Energy Efficiency Scheme or EU emissions trading system (EU ETS).

Privacy

55. The key theme emerging to this question was of the need for LHEES to incorporate the requirements of the Data Protection Act; and also some reference to the need to consider the new General Data Protection Regulation (GDPR) requirements being introduced in May 2018.