Scottish Government

C2. Domestic Energy Efficiency

C2. Domestic Energy Efficiency

Improving the energy efficiency of the domestic sector is vital, as around 29% of all energy consumed in Scotland is used in our homes for space and water heating, cooking, lighting, and running electric appliances. Improving efficiency will help to achieve our key objectives of reducing green house gas emissions (25% of Scottish emissions derive from homes); reducing fuel poverty and household fuel bills; and sustaining and creating a significant number of jobs.

As well as ensuring that new homes are more energy efficient, we need everyone to realise how existing homes, including their own, need to change. Chapter 6 of our consultation paper indicated the significant level of activity needed for the domestic sector to achieve the major reductions in emissions required by the Climate Change (Scotland) Act 2009.

Many owners and landlords already understand the benefits of energy efficiency and have taken action. The rollout of smart meters will make householders more aware of their energy use, and people will be encouraged by friends, neighbours, prospective tenants, community groups, advice services and/or government to take action. The requirements to produce Energy Performance Certificates ( EPC) and Energy Reports as part of the Home Report will further this awareness among people selling and buying homes, backed up by the prospect of future regulation in this area. We want to reach a position where potential tenants and purchasers demand an energy efficient home as a matter of course.

Responses to the consultation document identified broad consensus on the sectors and types of property that should be prioritised for action. These include: encouraging behaviour and building change; focussing early activity on the private sector; continuing to improve standards in the social sector - particularly where social landlords are market leaders, as in hard-to-treat dwellings; and finding a balance between building conservation and energy efficiency aims.

This section outlines the action being taken, and some of the further work required, to continue to improve the energy efficiency of our housing stock through support, incentives, research, finance and, where appropriate, regulation. In summary:

• we will provide support and financial assistance for energy efficiency in existing housing, exploring all alternative funding sources available. We will work with the Energy Saving Trust ( EST) and private landlords to improve the uptake of existing incentive programmes;
• we will continue to work with the Department of Energy and Climate Change ( DECC) to improve deliverability in Scotland of future GB-wide programmes;
• we will work with DECC on the post-2012 Energy Company Obligation and the Green Deal to ensure that these policies and the UK Energy Security and Green Economy Bill are developed in a manner that will allow delivery in Scotland to meet Scottish circumstances. This will cover both domestic and non-domestic sectors.
• Historic Scotland will take the lead in researching and promoting energy efficiency in traditional housing;
• we will work with social landlords and other stakeholders to achieve carbon reductions in social housing, including developing an appropriate energy efficiency standard beyond SHQS; and
• we will strengthen guidance for Local Housing Strategies by issuing supplementary guidance jointly with COSLA.

As part of our work, we will continue to improve analysis of expected emissions, energy and cost savings in Scotland of GB and Scottish policies and programmes. Further information on the emission savings projected from current and planned policies will be set out in the Report on Proposals and Policies. As the actions set out in this section are progressed, and further options and technologies developed, we will continue to update our projections of predicted savings.

General Approach

As the majority of our work with reference to new buildings will be carried out via Building Standards, which are addressed with in Section C5, this section focuses on policies and programmes that deal with existing housing stock.

Figure 2.1: Policies and programme to improve energy efficiency of housing

Figure 2.1 shows the many programmes that provide support, incentives, finance and funding to improve energy efficiency in existing housing (see the Conserve and Save consultation paper for full detail). Our overall approach to energy efficiency in the domestic sector is to:

i. support and encourage people to take up energy efficiency measures, with incentives where appropriate;

ii. develop regulation measures to require action where necessary and where advice and support have been unsuccessful;

iii. work with UK Government so that large-scale GB-wide programmes are developed in a manner that supports Scottish households;

iv. as far as possible, ensure Scottish Government programmes continue to be designed to make the most of other sources of investment. For example, both the Home Insulation Scheme ( HIS) and Energy Assistance Package ( EAP) have been designed to increase uptake of measures supported through the Carbon Emission Reduction Target ( CERT).

Support and Incentives: Scottish Government Programmes

Action 2.1 Within available resources, we will continue to provide ongoing support and financial assistance for energy efficiency in existing housing, levering investment from energy companies and private householders wherever appropriate.

Support and incentives are currently provided to support directly those in fuel poverty and to provide incentives for those who are more able to afford energy efficiency measures, thereby driving forward both fuel poverty and emissions reduction objectives. For 2010/11, Scottish Government programmes total more than £85 million. ⁵ Going forward, programmes will focus on:

i. providing and levering in funding to improve the energy efficiency of fuel poor households - focusing funding on the most energy inefficient homes and households with limited assets and income;

ii. providing advice, incentives and opportunities to lever investment to improve the energy efficiency of other homes;

iii. accessing funding, for example European funding, and developing financing mechanisms with relevant partners for hard-to-treat homes and more innovative measures; also developing the industry, skills and supply chain needed to deliver much greater quantities of these measures in the coming years.

Many respondents to the consultation paper called for more investment in area-based delivery of energy efficiency measures. Scottish Government funding for area-based home insulation schemes ( HIS) was increased from £15 million in 2009-10, to £25 million in 2010-11. This included £10 million for a new universal access area-based energy efficiency scheme that will offer free energy efficiency measures to around 90,000 homes. In total, we expect around 300,000 homes this year to be offered the opportunity to take up energy efficiency advice and free or discounted insulation measures where their homes are suitable through these area-based schemes.

The new universal access scheme will both deliver many measures and give us valuable information on the most effective level of incentive required in this type of scheme. The new council tax discount schemes that local authorities are developing, as required by the Climate Change (Scotland) Act, will also provide a further incentive for home owners to take up insulation measures. These schemes will inform our focus on programmes going forward.

The Energy Assistance Package ( EAP) continues with a budget of £45.9 million over 2010-11. This focuses on providing a range of energy efficiency measures for people who are fuel poor: Stage 3 includes a package of standard insulation measures that are wholly or partly funded by energy suppliers; Stage 4 provides a range of measures which may include, for example, solid wall insulation and air source heat pumps, which can help hard-to-treat homes.

As well as these flagship programmes, the recent Energy Saving Scotland Boiler Scrappage Scheme provided an incentive for early replacement of G-rated boilers. It provided £400 towards the cost of a new boiler for up to 5,000 households.

Many of these programmes are delivered through the structure of the Energy Saving Scotland Advice Centres ( ESSACs), managed by the Energy Saving Trust to ensure that householders are informed of wider offers and advice available to them.

Action 2.2 We will regularly review energy efficiency programmes to make them more effective in achieving the outcomes of reduced fuel bills for Scottish households, reduced emissions, reduced fuel poverty, and a strong energy efficiency industry in Scotland. This includes increasing the uptake of
GB-wide programmes.

We are committed to continuing to improve Scottish Government energy efficiency programmes. We will monitor the performance of our schemes on an ongoing basis and tailor them in light of experience. For example, we have extended EAP Stage 4 eligibility for qualifying households from those whose homes have a SAP ( i.e. home energy rating) below 39 to those with a SAP rating of 54 or less. We are also evaluating the pilot Energy Saving Scotland Home Loans Scheme and will publish our evaluation in Autumn 2010.

The consultation paper's Strategic Environmental Assessment identified that the insulation of lofts and cavities may affect bats protected by the EC Habitats Directive. To combat this, Scottish Government funded programmes for loft and cavity wall insulation will consider how they may increase installer knowledge, particularly in areas where bats are most likely found.

Support and Incentives: GB-wide programmes in Scotland

Action 2.3 We will work closely with DECC in the development of future GB-wide programmes to improve deliverability in Scotland in order to make it easier for Scottish householders to benefit from these schemes.

As the costs of energy companies meeting their GB-wide obligations programmes are passed on to electricity and mains gas customers ⁶ we will take a dual approach to GB-wide schemes. This will:

i. ensure that Scotland can make the most of the existing GB-wide programmes through the way we design Scottish Government schemes; and

ii. support DECC in the development of future GB-wide programmes, as appropriate, in order to improve deliverability in Scotland.

As a first step we have set up the CERT Strategy Steering Group, chaired by the Minister for Housing and Communities. We are also working with DECC, energy suppliers, Ofgem and the Energy Retail Association to improve the data on delivery of CERT. In September 2010, figures for Scotland from the first and second year of CERT were published, showing an increase in the number of measures installed in Scotland from the first to the second year. ⁷ This is a positive outcome which, we believe, has been supported by the setting up of the Energy Saving Scotland Advice Centres and by programmes such as HIS and EAP being designed to provide referrals to CERT, as well as deliver other objectives. To ensure future schemes, such as the Energy Company Obligation which is expected to succeed CERT, are developed so that they are effective for Scottish households, the Scottish Minister for Housing and Communities has joined the Ministerial Oversight Group set up by UK Government for the Green Deal Programme.

Support and Incentives: Finance

Action 2.4 With relevant partners, we will investigate options for financing mechanisms for major energy efficiency measures in private sector housing.

In the consultation paper we suggested that, due to the significant sums involved in the work required in housing over the next decade, it is assumed that those who are able to pay will invest or borrow to undertake work. The upfront cost of major energy efficiency works, such as solid wall insulation and microgeneration, is currently still a barrier to householders taking up these measures.

Taking into account the evaluation of the Energy Saving Scotland Home Loan Pilot, we will investigate the options for implementing Green Deal finance and/or another financing mechanism for household energy efficiency. We will continue to make Energy Saving Scotland Small Business Loans available to private sector landlords and to promote other funding opportunities, for example, the Landlords Energy Saving Allowance ( LESA).

Support and incentives: Specific construction types and technologies

Action 2.5 Historic Scotland will take the lead in researching and promoting energy efficiency in traditional buildings. As part of this, it will:

i. carry out research and case study projects, and disseminate findings to and through relevant partners, publications and digital media, in order to improve provision of advice, skills and qualifications for the public and professionals on energy efficiency improvement in traditional housing; and

ii. include energy efficiency in domestic properties in its existing and future regeneration and grants programmes, such as the Conservation Area Regeneration Scheme.

Historic Scotland is researching technical solutions to upgrading historic and traditional homes. It will work with the Energy Saving Scotland Advice Network ( ESSACs) in advising the public and building owners on appropriate ways of improving energy efficiency. It will provide technical input on the upgrade options for traditionally constructed homes in Scotland and, with additional partners such as SUST and the Housing Energy Efficiency Learning Network, improve advice to housing associations on appropriate interventions on traditional tenements.

In the short term, specific actions include:

• to investigate appropriate insulation options for traditional mass walls;
• to publish case studies (detached traditional dwelling and traditional tenement);
• to continue testing and evaluating specific interventions, such as for floors and wall insulation, in conjunction with academic and technical bodies;
• to disseminate research findings, case studies and advice via a range of media, through Learn Direct & Build, CIC Start (including an online video) and other partners, including a bid for an Intelligent Energy Europe funded project;

to work with Construction Skills to develop qualifications, for example for insulation installers and with professional bodies such as the Royal Incorporation of Architects in Scotland ( RIAS), the Royal Institute of Chartered Surveyors ( RICS) and graduate training bodies, to ensure appropriate course content for energy efficiency.

Historic Scotland will also provide research results so that we have the best evidence available and
GB-wide schemes can be developed to support improvement of traditional and historic dwellings in Scotland. It will work with energy companies to identify any opportunities for improvements and interventions that are appropriate for traditional buildings and can be used towards their CERT or CESP targets so that these receive funding from energy companies.

Regulation and Standards: Private sector - owner occupiers and private landlords

Action 2.6 We will further develop our powers to enforce energy efficiency standards in the private sector, including by publishing a Ministerial report on our position on regulation by the end of March 2011.

Many owners and landlords have already taken steps to improve the energy efficiency of their homes. However, despite the advantages of this in terms of warmer homes, reduced emissions and lower fuel bills, many others have not yet done so. The Climate Change (Scotland) Act 2009 introduced wide-ranging enabling powers to introduce requirements to assess the energy performance of houses and to require action to be taken based on these assessments. Our consultation on this action plan was used to start to explore the form that regulation might take and the timescales within which it should be applied.

The consultation received a wide range of different views on options for regulation. Following the consultation, we are continuing to investigate these options and to consider potential mechanisms for regulation. A Ministerial report on our position on regulation will be published by end March 2011.

The consultation also included exploration of specific options for regulating energy efficiency standards in the private rented sector based on the Repairing Standard. It indicated that privately rented housing is more likely to be rated 'poor' for energy efficiency than either social rented or owner-occupied properties, with around one in six private rented sector properties rated poor. The majority view from the consultation was that the regulation of energy efficiency standards in the private rented sector would be pursued best using the powers available under the Climate Change (Scotland) Act 2009 rather than through the Repairing Standard. This is based largely on the fact that the Repairing Standard requires a tenant to make a complaint before action can be triggered, whereas powers in the Climate Change (Scotland) Act 2009 afford greater flexibility. We will encourage voluntary action by landlords in the meantime, continuing to work with the Energy Saving Trust and private landlords to improve the uptake of existing incentive programmes and funding and to explore new initiatives for private rented sector properties (see p 68 of the consultation paper for details).

Local councils have powers to require owners to carry out works to repair their properties. There may be scope to extend these powers to require improvements in some circumstances. This could potentially apply to energy efficiency improvements, if there were support for making such works mandatory. We will include energy efficiency improvements in our investigations relating to local authority powers and improvement works.

Regulation and Standards: Social Housing

Action 2.7 We will work with social landlords and other stakeholders to consider how best to meet carbon reductions from social housing, including development of an appropriate energy efficiency standard beyond SHQS.

The Scottish Housing Quality Standard ( SHQS) requires that social housing in Scotland has cavity wall insulation (where technically feasible and appropriate), loft insulation, hot water tank and pipe insulation, and full central heating system of acceptable efficiency. Registered Social Landlords and local authorities have set out how they will fund and meet the SHQS for all social housing by 2015 as an important first step that can be taken to help improve energy efficiency. We will publish guidance to help landlords target their SHQS activity more cost-effectively.

The requirements of the Climate Change (Scotland) Act 2009 are such that by 2020 social housing will need to meet higher levels of energy efficiency beyond those arising from the achievement of the SHQS by 2015. We will work with all social landlords to develop an appropriate standard beyond the SHQS to help meet the requirements of the Act. As noted above, we will engage with the UK Government to seek to ensure that social landlords in all parts of Scotland are able to take full and fair advantage of financial support from any future GB-wide programmes.

We also need to identify new funding opportunities, such as the inclusion of innovative energy efficiency improvements in social housing as a fundable activity under European Regional Development Funding allocations. Energy efficiency in social housing, and low carbon local heat and heat and power projects for domestic and non-domestic buildings will be priority activities for the next round of urban ERDF allocations (see Action 9.2).

We have launched the Housing Energy Efficiency Learning Network with the Scottish Federation of Housing Associations ( SFHA) and the Scottish Centre for Regeneration. The network will provide advice to organisations and to individuals working in housing on issues such as available sources of funding, examples of best practice, and existing and new technologies to help improve energy efficiency in existing and new housing.

We will use the outputs from the SFHA Carbon Portal Pilot Project to inform the potential future use of thermal imaging technology to detect energy consumption performance and to target and promote sustainable energy reduction measures to households. This project, which received Scottish Government funding, will assess the viability of using a set of processes, methods and online tools to achieve a step-change in energy efficiency in social housing. There are two elements to the project: thermographic imaging of around 10,000 homes both before and after insulation; and property insulation.

Mainstreaming energy efficiency

Action 2.8 We will strengthen guidance for Local Housing Strategies by issuing supplementary guidance jointly with COSLA on local authority coverage of climate change. This will be a key step in progressing further local councils' activity on energy efficiency and climate change towards a more strategic approach that is integrated with fuel poverty and mainstream housing policies.

Our consultation on this plan included the future of the Home Energy Conservation Act 1995 ( HECA), recognising the role that HECA has played in raising the profile of energy efficiency. This reflected a commitment to review the future of HECA after 10 years and the need to ensure that HECA duties remain relevant in the context of the new relationship with local councils under the Concordat. Most consultation respondents, and almost all local councils responding, did not consider that the information gathered under HECA made a significant contribution to planning local activity on energy efficiency. Most respondents, particularly local councils, preferred that it be incorporated within other reporting mechanisms such as Local Housing Strategies ( LHS).

Therefore, and within the spirit of the Concordat, we do not intend at this time to require further data reporting under HECA. Instead, local authorities will address energy efficiency within their Local Housing Strategies and, where relevant, this will be included in Single Outcome Agreements. The Housing (Scotland) Act 2001 places a statutory duty on local authorities to prepare an LHS. It provides the strategic direction to tackle housing need and demand and informs future investment in housing and related services. COSLA has worked closely with us in streamlining strategic planning for housing, and the Local Housing Strategy is now the sole strategic document dealing with housing and related issues, across all tenures, including fuel poverty.

On 24 May, we published our Housing Policy Reform discussion document, Housing: Fresh Thinking, New Ideas. Meeting head-on the prospect of a sustained and substantial squeeze on public spending, this explored new thinking and fresh ideas and paved the way for a national discussion about housing in Scotland. It recognised that good quality homes make an essential contribution to our health and well-being; that they reduce the environmental impact of our activities; and that energy efficiency is an important aspect of housing quality.

The discussion document has engaged housing agencies and other stakeholders in a debate on how we can bring climate change into the heart of housing policy by asking challenging questions such as: 'How can we ensure that home owners take responsibility for the energy efficiency of their properties?'; and 'What does the challenge of climate change mean for the balance of investment between new homes and improving existing stock?'.

It has made clear that housing is central to the achievement of the emissions targets set out in the Climate Change (Scotland) Act 2009. While noting the progress that has been made - for example, through the Scottish Housing Quality Standard, building regulations and the Energy Assistance Package - it recognises the immense scale of the challenge. It also recognises that alongside the significant costs involved, there will be real and noticeable benefits in terms of reduced fuel bills and green jobs across the construction sector.

The discussion document will be followed, towards the end of 2010, by a policy paper that outlines the Scottish Government's housing policy for the next 10 to 15 years.