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8 SUMMARY AND RECOMMENDATIONS
8.1.1 The principal objective of this review as stated in the brief has been " to review and assess the effectiveness of the advice and support currently being provided to the domestic, public and business sector, and to establish whether it represents good value for money in terms of raising awareness, changing behaviours and attitudes and in achieving carbon savings".
8.1.2 The key focus of the review has been on the effectiveness of the support structure and the extent to which the programmes supported represent good value for money. The findings from this review will inform future policy in this area, providing an evidence base for the ongoing development of policy and strategy on energy efficiency and microgeneration.
8.1.3 The methodology that we have used to satisfy this objective has included extensive stakeholder consultation, surveys of households and organisations that have received advice and support through the funded programmes, a literature review and a desk based analysis of programme performance data. The review has been supplemented by a number of international case studies, which highlight areas of best practice in supporting the development of markets in energy efficiency and microgeneration. However, give the fact that a substantial part of energy policy as well as the wider regulatory and taxation framework is not devolved to the Scottish Government, the extent to which these measures could be implemented in Scotland is more limited. Overall, these tasks present a comprehensive overview of the mechanisms currently in place to promote energy efficiency and microgeneration in Scotland.
8.1.4 A summary of the key findings from the review in relation to the domestic, business and public sectors are presented in this chapter:
8.2 Support to Households
8.2.1 The Energy Saving Trust ( EST) is the principal organisation that delivers energy saving information and advice to the domestic sector. This has included items such as awareness raising campaigns and online advice delivered centrally by EST as well as telephone advice and event-based promotions delivered through the network of Energy Efficiency Advice Centres ( EEACs). The EST estimates that its annual activities result in lifetime carbon savings of around 200,000 tC. Overall, these figures suggest a total cost effectiveness of EST activity in the household sector of around £9/tC for the lifetime carbon savings generated.
8.2.2 The study included a self completion survey of households that had received information and advice from the EST and/or financial support from the Scottish Community and Householder Renewables Initiative ( SCHRI), generating over 1,200 responses. Results from our household survey indicate that information and advice provided by the EST had the greatest impact with relation to microgeneration, where around forty percent of all those installing these systems would not have done so without support from the EST. Additionality 8 was much less in relation to the implementation of behavioural changes (11%) and implementation of energy efficiency measures (13%).
8.2.3 However, while additionality is higher in relation to information and advice relating to microgeneration, EST support was more likely to be a necessary rather than a sufficient condition for implementation as grant support was also required in most cases in order for implementation of these technologies to occur.
8.2.4 The results from the household survey suggest that individuals that had received a face-to-face energy audit were more likely to implement energy efficiency measures compared to those who received an online audit. Individuals who did not receive any audit were the least likely to implement energy efficiency measures. Of all the potential energy efficiency measures discussed, those least likely to be implemented over the next two years were cavity wall insulation (65%) and condensing boiler (64%). These are the two most expensive measures and households require external contractors to be involved. In terms of the existence of a financial barrier hindering implementation, this was mainly cited in relation to the installation of condensing boilers.
8.2.5 Solar hot water panels were the most commonly implemented microgeneration technology. These had been installed by 13% of respondents to the survey, with a further 10% planning to install them in the next 2 years. This was followed by heat pumps which were installed by 6%, with a further 3% planning on installing them in the next two years. The results of the survey suggest that over the next two years, the two electricity generating technologies - micro wind and solar PV - could experience a rapid increase in their market, with the number of respondents stating that they will be installing these technologies increasing by ten-fold and over eight-fold respectively. While these findings underline a strong aspiration to expand the market for these technologies, the extent to which these aspirations translate into an equivalent increase in the number of installed systems is less certain.
8.2.6 Warm Deal, the fuel poverty programme aimed at improving the insulation envelope in low income households, was felt to be crowding out private investment in the form of Energy Efficiency Commitment ( EEC) investment. All of the energy supply companies stated that Warm Deal directly competes with the EEC provision and it would be appropriate for this programme to be discontinued and for all domestic financial support for insulation to be delivered through the energy supply companies.
8.3 Support to businesses
8.3.1 There are three principal organisations that deliver consultancy support to the business sector in Scotland to improve energy efficiency, encourage the implementation of microgeneration technologies and reduce carbon emissions. These are the Carbon Trust ( CT), Business Environment Partnership ( BEP) and the Business Advisor Network ( BAN). While good referral networks appear to be in place, a large number of businesses still felt that it could be time consuming and difficult for them to find out what support is available and there was a preference for a clear one stop shop approach.
8.3.2 The overall carbon displacement resulting from projects implemented during 2005/2006 amounted to nearly 280,000 tC, over the lifetime of the projects, of which 95% was attributed to programmes operated by the CT. This was followed by 3% from the BAN and 2% relating to the BEP.
8.3.3 In terms of comparing financial inputs with the outputs and outcomes generated by the support, the cost effectiveness ratios vary significantly between each of the organisations. Support delivered by the CT is the most cost effective, costing £10/tC over the lifetime of projects. The focus on higher energy consuming businesses, where the potential for carbon savings is significantly higher, means that cost effectiveness of support can be maximised. The BAN and BEP exhibit much less cost effective ratios ranging between £58/tC and £63/tC for BEP and BAN respectively.
8.3.4 The findings from the business survey suggest that additionality was lowest for the energy audits provided by the EST Business Advisor Network as 35% of firms that received a BAN energy audit indicated they would have implemented all of the measures without the support. This compares to 20% for the CT and 10% for the BEP.
8.3.5 The results also suggest that businesses were most satisfied with the services provided by the BEP, which received consistently high ratings across all areas. Businesses liked the structure of BEP support which offers a holistic approach to resource efficiency as well as the personalised and ongoing high quality support which they provide. The BEP support had a particularly strong impact on skills and knowledge transfer and on enhancing social responsibility, while the CT had the strongest impact on cost savings and on carbon emission reduction.
8.3.6 Financial barriers were reported as the principal reason for not implementing all of the recommended measures by 62% of all respondents, followed by 18% that referred to internal organisational barriers. Financial barriers were most important for smaller businesses as well as a number of organisations within the public and education sectors.
8.3.7 Loan Action Scotland ( LAS) is the main delivery mechanism for the provision of interest free loans to businesses to encourage the implementation of energy efficiency measures. A similar scheme is also delivered by the Carbon Trust, although this is not actively marketed in Scotland. Over half of the firms surveyed as part of this study that had not received a loan through LAS stated that the receipt of an interest free loan would be likely to have resulted in a higher proportion of energy efficiency measures being implemented.
8.3.8 The overall cost effectiveness of the LAS scheme was £9/tC in 2006/7, but has fluctuated considerably over the past five years from a peak of £60/tC in 2004/5. The cost-effectiveness of the programme has varied depending on the scale and efficiency with which it has been implemented and more recently has benefited from a move towards a more simplified financial appraisal for applicants using a credit profiling service, which was recommended in the LAS evaluation and brings it in line with the system used by the Carbon Trust loan scheme.
8.4 Support to public sector
8.4.1 The public sector receives consultancy support through both the Carbon Trust and Energy Saving Trust Local Support Team, while interest free loan funding is provided through the Central Energy Efficiency Fund ( CEEF). A further interest free loan scheme, Salix Finance, which operates principally in England and Wales, has also operated in Scotland within the higher education sector.
8.4.2 The cost effectiveness of CEEF is reported as being on average £66/tC across wide portfolio of loans. The Salix loans in Scotland exhibited a cost effectiveness ration of £29/tC, although this is not directly comparable with the ratio for CEEF. One of the means through which the cost effectiveness of the CEEF scheme could be increased would be for a greater proportion of projects to be focused on more cost effective measures such as insulation.
8.4.3 Overall feedback from the survey of public sector organisations highlights the highly additional nature of CEEF funding. It was felt that none of the projects discussed would have happened without the existence of CEEF funding, given the capital borrowing constraints apparent within these public sector organisations.
8.4.4 The structure of training and consultancy support for public organisations was felt to be overly complicated with a sense that there needed to be a better sectoral separation between the CT and the EST. In contrast with the situation in the rest of the UK, the EST has developed a much more prominent role with regard to local authorities through the retention of the Local Support Teams. This has now extended to involvement in the development of action plans following on from the Scottish Climate Change Declaration, as well as the delivery of training across local authorities, rather than just in relation to social housing.
8.4.5 The ESTLST support was felt to be very important as it is local face-to-face support and the EST also provides useful promotional material, educational support, help with grant application for SCHRI and other services. However, there was support from all energy managers for the LST to be integrated within one organisation that provided support to the public sector.
8.5 Recommendations
8.5.1 The review of energy efficiency and microgeneration support in Scotland has highlighted a number of areas where actions could be undertaken by the Scottish Government to improve the delivery of support in Scotland. However, it is also clear that the scope of actions that can be implemented by the Scottish Government is constrained by their more limited role in relation to energy policy, with substantial aspects remaining under control of the UK Government. .
8.5.2 A set of recommendations for the Scottish Government are detailed below, based on the extensive evidence base compiled as part of this review.
Recommendation One
The Scottish Government should consider the development of a virtual organisation, comprising of an overarching brand and executive committee of key funders to facilitate a more streamlined approach to the delivery of energy efficiency and microgeneration support in Scotland.
8.5.3 As the EEC and the CCL are reserved matters, with the Scottish Government having very limited influence over these funding streams, a single agency approach for Scotland, along the lines of the Norwegian example, would be less effective as it would be unable to bring together these key sources of funding under its control. While this review does not recommend the establishment of a separate legally constituted energy agency in Scotland, the development of a virtual organisation in the form of an overarching brand and executive committee is something which could be explored further.
8.5.4 Ideally, this would cover all sectors encompassing support for the domestic, public sector and businesses in order that there was a consistent and coherent approach across all Scottish government funded support, in order to maximise its impact in the marketplace. Alongside the Scottish Government, the most important organisations that should be represented on the executive committee are the energy supply companies, as they constitute the most substantial source of non-government funds which are being allocated to energy efficiency measures.
8.5.5 The findings from the primary research undertaken as part of this study underlined that businesses and pubic sector organisations found the current structure of support to be confusing and overcomplicated. There is a need for a clear delineation and demarcation of responsibilities between different agencies to ensure that their respective roles are clearly understood within the marketplace. There is also a preference for a clear entry point for energy efficiency advice and support (and also potentially resource efficiency encompassing support for waste reduction). This could include the development of a powerful portal website, which included a comprehensive and user-friendly searchable database including all of the support for domestic, public and private sectors along the lines of the German example discussed elsewhere in this study.
8.5.6 In addition, there is potential for the generation of economies of scale in direct marketing and awareness-raising by subsuming marketing effort by delivery agencies within one overarching brand.
Recommendation Two
The Scottish Government should ensure that support delivered to the business sector, particularly SMEs, is developed as part of a more holistic resource efficiency approach, which facilitates skills and knowledge transfer to within the firm. Support should also be targeted in areas where its impact will be higher, both in terms of additionality and carbon savings.
8.5.7 Support delivered by the CT is the most cost effective, costing £10/tC over the lifetime of projects. The focus on higher energy consuming businesses, where the potential for carbon savings is significantly higher, means that cost effectiveness of support can be maximised. The BAN and BEP exhibit much less cost effective ratios ranging between £58/tC and £63/tC for BEP and BAN respectively.
8.5.8 The findings from the business survey suggest that additionality is lowest for the energy audits provided by the EST Business Advisor Network as 35% of firms that received a BAN energy audit indicated they would have implemented all of the measures without the support. This compares to 20% for the CT and just 10% for the BEP.
8.5.9 The lower additionality of the BAN energy audits suggests that for a larger number of businesses, the energy efficiency measures recommended as a result of the audit are more self-evident, and are more likely to be implemented anyway by the business. This would suggest that in these cases face-to-face audits are not necessary, and more could be done with these businesses remotely, such as through provision of advice over the phone, or through the promotion of more self-help guidance.
8.5.10 Feedback on the BEP suggests that it has an effective business model, which could be used more widely as an approach to business support. An ongoing personal relationship, which facilitates implementation through ongoing advice and guidance over the phone, was felt to be an important aspect to the model, reflecting its higher level of additionality.
8.5.11 The results also suggest that businesses were most satisfied with the services provided by the BEP, which received consistently high ratings across all areas. Businesses like the structure of BEP support which offers a holistic approach to resource efficiency as well as the personalised and ongoing high quality support which they provide. The BEP support had a particularly strong impact on skills and knowledge transfer and on enhancing social responsibility, while the CT had the strongest impact on cost savings and on carbon emission reduction.
Recommendation Three
The Scottish Government should seek to ensure that the funding available through the Energy Efficiency Commitment that is leveraged into Scottish households is maximised in the next round of EEC funding from 2008 - 2011.
8.5.12 Scotland's pro-rata share of EEC 3 funding would amount to around £75m per annum, twenty times the amount allocated by the Scottish Government for energy efficiency and microgeneration support in the domestic sector ( EST and SCHRI). However, early indications suggest that the energy supply companies are unlikely to allocate this level of funding in Scotland, with one supplier with a significant market presence in Scotland already indicating that most of its EEC3 funding is likely to be allocated to projects in the rest of the UK.
8.5.13 The development of strategic relationships with local authorities has been central to this approach. The energy supply companies are funding council tax rebate schemes in a number of English local authorities as part of an integrated package to increase installation of energy efficient measures, primarily cavity wall insulation. This scheme does not operate in Scotland, restricting the scope for a partnership approach between energy supply companies and Scottish local authorities.
8.5.14 While it is acknowledged that funding has now been provided for an EEC strategy manager to be based within the Energy Saving Trust in Scotland, for this post to be most effective, there needs to be a more strategic understanding between the energy supply companies and the Scottish Government to assess how available EEC funding can be maximised in Scotland. This could include projects involving the large scale implementation of energy efficiency measures in the domestic sector to ensure that cost effective opportunities designed to make a significant contribution towards EEC3 targets were developed in conjunction with Scottish local authorities. For example, a high profile co-ordinated campaign for cavity wall insulation targeting all suitable Scottish properties (covering both the fuel rich as well as the fuel poor priority groups) could provide the type of focused and cost effective measure, generating extensive economies of scale to maximise leverage of EEC funding.
8.5.15 In addition, the energy suppliers also stated that the ability to identify low income households is extremely important to minimise the search costs involved in implementing energy efficiency measures within this priority group. This requires public agencies to share information with energy suppliers in order that these households can be identified and targeted effectively.
Recommendation Four
The Scottish Government should explore means of tackling the market barriers to the implementation of energy efficiency measures in the household sector and should further investigate the feasibility of measures suitable for hard-to-treat properties
8.5.16 Cavity wall insulation is a highly cost effective measure which can be installed with minimal disruption and lead to extensive savings in energy bills. However, our survey of households highlights that it still suffers from the negative experiences arising from poor installation and defective and toxic materials which were prevalent when it was first introduced during the 1970s and early 1980s. This could be addressed through an effective public information campaign and the development of more effective partnerships with energy supply companies, as has been developed in England through the council tax rebate scheme.
8.5.17 Creating a more receptive market for cavity wall insulation among Scottish households would facilitate the more extensive implementation of this measure through EEC funding. Campaign endorsements by democratically elected councillors and members of parliament have also proven to be important in securing higher levels of public participation in the installation of energy efficiency measures.
8.5.18 In terms of the existence of a financial barrier hindering implementation, this was mainly cited in relation to the installation of condensing boilers. While the development of a subsidised loan scheme would be one means of encouraging uptake, as has been pioneered with Glasgow City Council, more extensive partnership working with the energy supply companies in a more market based approach should be explored further to assess how uptake can be increased.
Recommendation Five
The Scottish Government should consider the greater development of an area based approach to the implementation of energy efficiency measures.
8.5.19 In order to best target resources to communities with lower levels of energy efficiency, it is recommended that a more strategic area based approach be considered. The Warm Zones approach in England is regarded as a model which could be replicated more widely in Scotland, combined with Energy Action Zones which is an approach that has already been developed in Scotland through Innovation funding from the Energy Saving Trust. These area-based initiatives could be developed further in Scotland, involving greater partnering between local authorities, energy suppliers and the Sustainable Energy Network, particularly in relation to the private rented and owner occupied sectors.
8.5.20 An area based approach also provides greater potential to provide face-to-face energy audits to households, by generating much higher economies of scale in the provision of this service. This is part of the approach adopted by the Energy Action Zones. The results from the household survey suggest that individuals that had received a face-to-face energy audit were more likely to implement energy efficiency measures compared to those who received an online audit. Individuals who did not receive any audit were the least likely to implement energy efficiency measures.
Recommendation Six
The Scottish Government should consider developing further the provision of high quality advice as a means of supporting the microgeneration sector in Scotland.
8.5.21 Government investment to support the further development of the microgeneration sector in Scotland has involved both direct subsidies of various microgeneration technologies as well as the provision of advice and guidance. A high number of consultees identified a lack of specialist, impartial microgeneration advice available for households and businesses as one of the most important gaps in the current provision of support for energy efficiency and microgeneration.
8.5.22 It was reported that the available advice is very general and may not always consider the particular situation of the household/business to determine the suitability of technologies. This specialist advice should also involve help with the decision-making and planning process in order to choose the right technology. Therefore, it is important that the future funding of microgeneration ensures that sufficient resources are allocated to ensuring the delivery of high quality advice and guidance in relation to developing the sector in Scotland.
Recommendation Seven
The Scottish Government should investigate further the optimum mix of regulation and taxation that is applied to the private housing sector to encourage a higher rate of implementation of energy efficiency measures
8.5.23 Levels of energy efficiency in the private sector housing stock in Scotland are now less than in the socially rented sector. Substantial sums of money are being spent within the social rented sector by local authorities and housing associations to ensure that they meet the Scottish Housing Quality Standard, ensuring that they make progress towards higher levels of energy efficiency in their housing stock.
8.5.24 Minimum energy efficiency standards are in place in relation to new buildings through building standards. An increase in the energy efficiency rating of new dwellings was one of the key revisions to building standards which was introduced earlier this year. In addition, SPP6, which was published in March 2007, requires that "all future applications proposing development with a total cumulative floor-space of 500sq.m. or more should incorporate on-site zero and low carbon equipment contributing at least an extra 15% reduction in CO2 emissions beyond the 2007 building regulations carbon dioxide emissions standard". The combination of these two measures provides a powerful means of encouraging higher levels of energy efficiency and microgeneration within the new build housing sector.
8.5.25 However, there are currently no minimum energy efficiency standards required within either the existing private rented or owner occupied sectors, which account for nearly three quarters of the housing stock in Scotland. While owner occupiers do have an incentive to invest in energy efficiency measures as they benefit directly from the financial savings accruing from these investments, this is not the case within the private rented sector. This is termed the split-incentive barrier. There is currently very limited incentive for landlords to invest in energy efficiency measures as they do not benefit from the financial savings which accrue, which are captured by tenants.
8.5.26 The private rented sector in Scotland currently performs least well in terms of the energy efficiency of the housing stock, and results from the Scottish House Condition Survey suggest that fuel poverty is more likely to be experienced in this sector compared to within the social housing and owner occupied sector. Greater consideration should be given to how best to target private landlords as well as owner occupiers and leverage more EEC funding into the private housing sector. This is also likely to require a greater focus on the private housing sector as part of local authority HECA and fuel poverty strategies.
8.5.27 Further regulation of the existing private housing sector (in addition to social housing and new build) would be one potential means of encouraging further levels of energy efficiency within the Scottish housing stock. This could involve extending SQHS to private housing and making use of the Energy Performance Certificates as a means of ensuring that these standards were adhered to when existing houses within the private sector changed their tenancy or ownership. However, this would be a highly radical move, and much greater research regarding the implications of such a move are likely to be required before introducing mandatory energy standards within the private housing sector.
8.5.28 In addition to regulation as a policy lever, housing is one of the few areas where control of taxation is under the jurisdiction of the Scottish Government. The council tax is a mechanism which has already been adapted by a number of English local authorities to encourage the implementation of energy efficiency measures through a system of rebates funded by the energy supply companies. The system of local taxation in Scotland is currently under review and the council tax is likely to be replaced by an alternative system of local taxation based on ability to pay.
8.5.29 The international case studies underline how the taxation system can be used to encourage higher levels of energy efficiency in a combined carrot and stick approach, which is revenue neutral and does not increase the overall burden of taxation. The fundamental premise is that products with lower rates of energy efficiency are taxed at a higher rate, with taxation decreasing as levels of energy efficiency increases. The most energy efficient products benefit from a rebate which compensates for the higher costs involved in purchasing a higher energy efficient product by recycling the income from taxing the poorer performing products. This provides a means of accelerating the market towards a higher level of energy efficiency, without increasing the burden of general taxation. This same approach could be used as part of the approach to local taxation on housing.
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