Public Audit Committee [Draft]

Meeting date: Thursday, March 28, 2024

Official Report 684KB pdf

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“Decarbonising heat in homes”

The second item on our agenda is further consideration of the Auditor General for Scotland’s report on decarbonising heat in homes.

From the Scottish Government, I am pleased to welcome the director general net zero, Roy Brannen; Kersti Berge, director, energy and climate change; Catherine Williams, deputy director for heat in buildings delivery; and Sue Kearns, deputy director for heat in buildings policy. We have some questions to put to you. Before I get to those, I invite you to make a short opening statement, director general.

Good morning. Thank you again for bringing us along today. As the convener said, I am joined by Kersti Berge, Sue Kearns and Catherine Williams, who I hope will be able to answer questions on policy, delivery and the overall strategy.

At the outset, it is important to say that the Scottish Government very much welcomes the findings of the “Decarbonising heat in homes” report. Audit Scotland acknowledges the scale and complexity of the challenge that we face but also recognises the positive steps that we have taken and the capacity that we have built in order to deliver against the ambitions of the heat in buildings strategy.

This year, 2024, represents a significant year for heat in buildings, as we take forward our proposals for a heat in buildings bill and associated regulation, following a recent consultation. In advancing that, we find the specific recommendations that were provided by Audit Scotland to be constructive and helpful. We have already made progress on our response to specific recommendations, such as programme governance, which is now well advanced, with work in many cases progressing in parallel with our engagement with Audit Scotland, which has been really positive.

Nonetheless, we fully recognise the challenge that is inherent in decarbonising heat in our homes in a way that is fair, just, practical and affordable. As the report stresses, the Scottish Government cannot do that alone. That is why we have placed such emphasis on activities that will integrate our input with that of others, such as the green heat finance task force, which was set up to explore ways to encourage private sector investment, and work with local authorities to develop local heat and energy efficiency strategies.

Those activities provide important foundations that we will build on in the years ahead. The report notes the urgency with which the next steps must be taken. We agree, but we suggest that the actions that we have taken in recent years have put us in the best possible position to make further progress. As always, we will endeavour to answer the committee’s questions and, if we cannot do that today, we will follow those up in writing.

Thank you very much indeed, Mr Brannen. What I inferred from what you have just told us, but want to check for the record, is that you accept the recommendations of the Audit Scotland report. Can you confirm that?

Yes, we accept the recommendations.

Thank you. I will turn to one of the issues that are of particular concern for us, as elected members of the Scottish Parliament. Can you tell us why the Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights has proposed revised timelines for new regulations on heat in homes that are simply not compatible with the Scottish Government’s existing 2030 targets?

I will bring in Sue Kearns, who has done most of the work on the policy development. However, it is worth putting into context where the minister’s thinking has been on the development of the proposals to go out to consultation and, based on the consultation responses, where that bill might take us as it enters Parliament. Considerations include the cost of living crisis, the price of energy, the scale of the challenge in making sure that we have the right skills and the right supply chain and ensuring that we take everybody with us. Therefore, being fair, affordable and feasible are the key elements of how the minister has determined what goes out to consultation and, depending on the feedback on that consultation, what goes into the bill. Sue, do you want to say more about that process over the past year?

Yes—thank you, Roy. You are absolutely right. In working on the consultation for a heat in buildings bill, it became clear to us that it would not be fair, feasible or affordable to devise regulations that would be in line with reaching the target of decarbonising more than 1 million homes in the next six to seven years.

We need to be really careful, because the heat in buildings regulations will affect the homes of most people in Scotland, as well as businesses. Therefore, we looked carefully at the regulations and decided to go for a longer timeframe that would provide a smoother trajectory towards the target. Nearly half the homes in Scotland would have been touched. Given that we are at quite a low base at the moment, it would not have been fair to people in Scotland to adopt such a steep trajectory.

I have a point to add. Although what is proposed represents a slowing down compared with what we set out in the heat in buildings strategy in 2021, the Climate Change Committee, while emphasising the need for the measures to be implemented, has welcomed them as bold measures.

Okay, but we are in 2024, and the Scottish Government declared a climate emergency back in 2019. I understand why you mentioned the need to be careful and the need for extensive consultation, but why, in 2024, five years after a climate emergency was declared, are your plans still out to consultation? Why are we still talking about the need to take people with us? Why is it taking so long?

I do not think that it has taken us that long to get here. The team has done a huge amount of work over the past few years, going back to 2015. We have consulted 23 times on different elements of the building blocks of our heat in buildings policy, which include aspects such as social housing, new-build standards, the various funding schemes and the reprocurement of the warmer homes Scotland programme.

As a country, we face a massive challenge in this regard, and it is one that requires all of us—not just the Government or the four of us who are here—to bring society with us on that journey. The building blocks that Sue Kearns, Kersti Berge and Catherine Williams have put in place over that period of time have got us to the point where we have received the feedback from the consultation, which will be put in front of the minister, who will decide what goes into the bill. That bill will provide the certainty that the industry and society are looking for. That is what came out of the consultation—people need to know what will be required of them by when.

I think that we have done everything that we could have done up to this point to try to remain on target to achieve the 2030 climate change targets. It is clear that the CCC’s view is that reaching those targets by 2030 is no longer achievable. We have looked at the situation over the past year, have provided advice to ministers and have responded to ministers on the further challenges. We have got to a point at which, as the cabinet secretary said in the chamber two weeks ago, she is now considering all options, including legislation. I am sure that, in her own time, she will update the Parliament accordingly.

You have said a couple of times that this is the point that we have now reached. I remind you of what that point looks like. The target was that 1 million out of the 2.5 million homes in Scotland would be converted by 2030, but, as I read the Audit Scotland report, the figure is not 1 million out of 2.5 million; it is 26,000 out of 2.5 million, which is about 1 per cent.

I am repeating myself, but the challenge that we face is an incredible one. I knew when I came into post that achieving the target of decarbonising 1 million homes was always going to be a stretch. The target that was set by Parliament of reducing emissions by 75 per cent by 2030 was always going to be stretching. By using the TIMES model, which determined the envelopes for each of the different sectors, it is possible to determine how many homes we need to convert by a certain point.

Reaching the target of decarbonising 1 million homes by 2030 was always going to be stretching, particularly when we are requiring people to walk towards that in a cost of living crisis. There will be a cost to the individual. We will do the best that we can to protect those who most need protection, but it is a big challenge to reach the target of decarbonising 1 million homes.

We are not alone in that regard. The United Kingdom Government has the ambition of decarbonising 600,000 homes by 2028. According to the most recent figure from the National Audit Office, about 55,000 of those homes have been done. Therefore, the scale of the challenge is massive, not just for us in Scotland but for everyone in the UK.

Let me turn to another aspect of this, which is drawn out in paragraph 47 of the report, which tells us that the heat and building strategy progress report shows

“a spend of £170 million”.

Have you undertaken an assessment of the effectiveness of that spend?

I will bring in Catherine Williams on what we have managed to achieve for 2022-23. We are now monitoring the inputs—that is, the money that is apportioned in line with the strategy to deliver the outcomes that we are seeking—and what is achieved from them yearly across all the schemes.

As well as the annual monitoring report, at the start of this year we published, with the consultation, the monitoring and evaluation framework, which looks across one vision—to decarbonise our building stock by 2045—and three outcomes, namely, to reduce the energy that we use, move to a clean heating source and have a fair and transparent transition. If you have had a chance to look at the monitoring and evaluation framework, you will see that it is pretty detailed. It gives, by unit, exactly what we will measure, and we will publish that and make it transparent. That will be our ruler, if you like, between now and 2045.

Catherine, do you want to say a bit more about 2022-23?

Yes. The specific outcomes of the domestic schemes are in the bullets in paragraph 47. What we have delivered for the domestic side does not represent the whole £170 million, which is the total of our capital spend and includes spending on social housing, the public sector, the heat networks and a number of other schemes.

Underneath each of those schemes, we have scheme-by-scheme outcomes and outputs. For example, in our warmer homes Scotland scheme, which covers a large proportion of fuel-poor households, we monitor bill saving and standard assessment procedure rating improvements—bill saving on warmer homes Scotland is about £150 a year for an individual who benefits from that scheme. Each of those schemes has detailed assessments, and they align to the objectives that we are trying to achieve in the heat and building strategy.

I want to build on progress. Last year, we saw the installation of 6,000 heat pumps in our properties. That number needs to grow significantly—that is recognised not just in Scotland but elsewhere—but it is a 113 per cent increase from 2020 to 2023 and a 20 per cent increase from 2022-23, so we are starting to see progress. However, the thing that has come out most in the consultation is that people just want certainty on questions such as, “When will I be required to do this?”, “How will you support me if I am one of the most vulnerable people in society?” and “What wraparound will you put in place?”

I reflect again that 6,000 heat pumps out of 2.5 million households is way less than 1 per cent, isn’t it?

I want to pick up on something that the convener has talked about in relation to the numbers of heat pumps that have been installed. Do you monitor when the heat pumps have been deinstalled? I installed a ground-source heat pump; it was rubbish and cost a fortune, so I had to get rid of it. I know that many people have had the same experience—partly, because they have the wrong type of property. Do you monitor that, or is my heat pump still in your list as being installed?

That is a good question, Mr Beattie, to which I do not know the answer; I will ask colleagues whether they do. You have touched on an interesting point, which is that the advice to householders as we go forward on this journey together will be so important. We need to get to the point where we have accredited installers through the microgeneration certification scheme and where we have confidence in the suppliers so that we have products that are right and fit for purpose.

I believe that it is now the case in the country that we have good products that are being installed really well—I point you to Heat Geek, which is an organisation that does a great deal of work with OVO Energy. More generally, it is about trying to grow the network of individuals who can install heat pumps and provide the right advice to the owner.

I do not know your circumstances, but it requires quite a bit of calculation to get this right. In the early stages, quite a few individuals were probably trying to put in heat pumps not based on the required engineering and science to make them as efficient as possible. They are two and a half to five times more efficient than a gas boiler in producing heat if you get it right and if you do the calcs right, but that requires really good, solid advice.

I will bring in Catherine Williams on the specific question of whether we monitor extractions.

09:15  

My understanding is that the MCS data will only monitor installations. The figure of 6,000 was for air-source heat pumps only; there is a separate figure for ground-source heat pumps, which is much lower. We talk regularly to stakeholders across the country, in different forums, and we understand cases such as the one that you described, so we are not unaware of some of the challenges that people have at times.

To reinforce the point that Roy Brannen made on the importance of advice, as the market grows and we increasingly look to people to take early action, we need to support them and ensure that there is an ecosystem in place that grows and provides them with advice. You mentioned Heat Geek, and there are other organisations in Scotland providing independent and impartial whole-house assessment advice. We are keen for that area to grow, and we are looking at how we can support it.

We have consulted on using a technical suitability assessment tool. We hope to develop that, because we think that it will be useful for people to understand the heat or energy efficiency that their house is capable of.

Mistakes made on such things are costly.

Let me move on to the key question that I want to ask, which is about governance. This committee has often considered governance, and on many occasions we have seen that it is deficient. The Auditor General’s report said that there was concern about governance arrangements that had not been finalised. We understand that different programmes and risk management is in place, and Roy Brannen touched on the fact that you had improved governance. Would you like to tell us a little bit more about that? Do those improvements cover all of the issues that the Auditor General raised?

I will bring in Kersti Berge in a moment. Last year, when I came to the committee, I spoke about governance in the overall climate change programme and how important it was for us to get that right. Heat in buildings is one element of that. It is one of the seven sectors that has to have its own governance structure, and it has got that. In large part, for the years that the convener mentioned, when we were working on the policy and strategy, Sue Kearns had a programme board in place. As we have moved from strategy and policy to delivery, Catherine Williams’ board has also been up and running.

Recently, we have finalised a sponsorship group that sits above those, and we are happy to share the detail of that with Audit Scotland, if the team or the committee have not done so already. That group will include me, the director and a number of other deputy directors. It will bring the two programme boards together. We are running work on policy, the bill and strategy in parallel, and we are doing the same with work on delivery. Once we know what it is that we have to deliver and we have a clear plan, we will develop that plan for the end of 2024, and then the governance structure will monitor progress against it.

As well as that, and connected to the governance structure, we have engagement with enterprise agencies and local authorities. We also have a strategic group, which is effectively a critical friend, to keep a check on exactly how we are developing policy, strategy and future work.

Our governance has been evolving as the programme has evolved. Previously, there was more separation on the delivery schemes. Although they did their thing, because we did not have regulations driving that, and then we were working on policy development. However, in our new governance structure—which we will finalise in the next month or so—we will bring those two things together more. It was positive that Audit Scotland recognised the progress that we have made on governance and programme management. That is particularly strong in our work on heat in buildings, so I am pleased that Audit Scotland recognised that, and that we are setting ourselves up for a scale up in delivery.

Roy Brannen added that we have the strategic advisory group. We also have the two programme boards that sit under the cross-cutting senior responsible owner board, of which Roy and I are members. That sponsor group board feeds into the global climate emergency board. Heat in buildings is one of the seven sectors that contribute to the climate change plan, so there is a direct line of sight into that and, indeed, into the Cabinet sub-committee on climate change.

So the overall governance arrangements are not yet in place and are still evolving—is that right?

They are about 90 per cent there, if not more. We need a couple of non-executives on the strategic oversight board, but the arrangements are pretty much there.

What progress have you made on the monitoring and evaluation framework for the heat in buildings programme?

I might bring in Sue Kearns in a moment.

We have published the framework, so we are looking at the things that we will start to monitor and evaluate, and we will get into a rhythm of regular reporting. The document is pretty detailed, and I encourage members to have a look at it if they have not already done so. It outlines the main mission; the three outcomes; a series of sub-elements that we will measure, including the number of installations, the contribution to energy efficiency, skills and support for people in fuel poverty; and a number of enablers—things that will need to happen—including an increase in the supply chain and in the number of qualified accredited individuals. That is all laid out in the report.

I do not know whether Sue Kearns wants to say a bit more about that.

Roy Brannen has covered most of the points. We published the draft framework in November, and the plan is to have the first report by October. The framework will evolve as we make progress with our strategy. The framework’s design, which Roy Brannen laid out, is based on designs from the Climate Change Committee; we consulted it and the UK Government when designing the framework. It is about quantity, as Roy Brannen said, but it is also about quality, so we will measure some of the softer things around the numbers and use that information to track progress.

The framework will be an important tool for the committee because, once we get the proposed heat in buildings bill locked down, it will show a clear pathway outlining what we are going to deliver by when, which will determine the number of homes that we will deal with by certain milestones. We will use the monitoring and evaluation framework to track progress so that we can see whether, for example, we are on track to do what we said that we would do in five years.

In relation to the National Audit Office report on the UK Government’s position, the situation is similar. At the moment, the UK Government does not have the metrics to be able to track progress. Everybody is wrestling with the issue. Our framework is in a pretty decent state, and it will evolve over time. It is the starting point and will give us a guiding light that shows whether we are making progress.

The Scottish Government is developing a delivery plan for the heat in buildings strategy, which is supposed to be published by the end of 2024. Are we on track with that?

Yes.

That is a good answer. Thank you.

How are you ensuring that you have the staff and the skills that are needed to deliver the heat in buildings programme in the medium term? We hear all the time about huge shortages of people who are trained and skilled in this area, and that is certainly borne out by what we hear in the market. What is happening? How are you addressing that?

I will say a couple of things before I bring in Kersti Berge or another member of the team.

As I mentioned when I last spoke to the committee about overall governance, the Government does workforce planning to determine the right amount of workforce for the programmes that we have in front of us, given the pipeline and the available budget. That work continues—on Tuesday, the executive team had a session on workforce planning. There is always a tension between how much money we have, how many people we have internally and what they should be deployed to do. Ultimately, ministers decide what the pipeline priorities are.

Our directorate-general was intended to grow because of our work on key programmes, such as the agricultural reform programme, the heat in buildings programme and a couple of others. Kersti Berge’s workforce planning last year determined how many people would be needed. At that stage, that was based on work on a million homes, so the trajectory was quite steep. Clearly, given that there will be a different proposition in the bill, we now need to re-evaluate to determine what will be needed.

At present, we have enough people internally to run the programmes that we have in place. Externally, Skills Development Scotland has indicated that uptake in skills is matching demand. That is a reasonable place to be, but if we ratchet up demand, which we are clearly going to do, we will want the sector to ramp up accordingly.

We have a number of schemes in place that support young apprentices—for instance, we have a scheme for bolt-on qualifications to apprenticeships in heat in buildings installations at no cost. We have a mobile unit for heat installations, which is about to go up to Shetland at the end of the month to support people there on heat in buildings installations. We also have a scheme that supports installers to become MCS accredited.

We have a number of different elements in play to support that network to grow. There is a big prize at the end of this. As the Auditor General has said, more than £30 billion-worth of investment will be required. We want a large part of that to be recycled within Scotland, if at all possible.

Roy has covered a lot of the specifics of the support that we provide. I come back to why putting regulations in place is so important. Currently, people are a bit unsure, because they have watched what has happened in other parts of the UK in relation to the political commitment to progress with this. Once you get the regulations in place in a suitable form, that will send a clear signal to the market. Again, the Auditor General’s report sets out that that is happening. We would expect a significant scale-up at that point, and we have a number of measures in place to support that scale-up.

I think that we have covered most of what we are doing, but you are absolutely right—if we do what we need to do with devolved powers here in Scotland, we will need to scale up, because demand will be much higher than it is now. Hopefully, the UK Government will come in on the back of that, because there is also a range of asks of the UK Government.

It seems that heat in buildings is one of the most complex areas because of the sheer variety of configurations and construction of buildings. There is no one-size-fits-all model. Solutions for blocks of flats and so on do not appear to be there yet, and it is not clear to me where that is going. Are we satisfied that we have people who have the skills and the ability to understand these complex problems and come up with solutions?

I will bring in Sue Kearns on how the bill deals with the variety of our stock. I think that 36 per cent of our total housing stock is tenements and flats—that is just a fact of Scotland’s history. A large proportion—18 per cent—is pre-1919. There is a wide variety of stock.

New build is covered, as the new build standard is out. As of 1 April, any new build has to have a clean heating system installed if it is to go through the planning process, but you are right that the existing stock will be the challenge. The regulations need to be able to accommodate those who can easily walk towards a solution quickly and those for whom it will be a bit harder. The green heat finance task force part 2 report will look at how to mobilise finance into a wider global solution for those properties, rather than having individuals trying to do it themselves.

Sue, do you want to add anything?

The proposals that we have consulted on are also based on exemptions and abeyances—we call them variations. Those give more flexibility to people according to their circumstances and to properties according to their characteristics. Those will be built into the regulations, so it will not be black and white that you have to do X by Y. There will be discretion and flexibility.

Tenements, which are characteristic in themselves, as Roy Brannen said, make up 36 per cent of the housing stock. We have a challenge there in relation to common works and different owners. An energy efficiency requirement will be part of the regulations for people living in tenements where it is technically feasible and cost effective.

In parallel, the Scottish Law Commission is working on a law reform project that is looking to set up compulsory owners’ associations in order to carry out common work. That is a particular issue in itself on the heating side. Catherine Williams, do you want to talk about the practical solutions for flats and tenements?

It is right that certain technologies do not exist, but we are talking to and working with stakeholders who are looking at options for flats and tenements that are in between individual heat pumps being installed in one’s home and large-scale district heating. Large-scale district heating will probably be suitable for about 20 per cent of Scotland—it is particularly suitable for larger urban areas—but we think that different technologies such as smaller heat networks will be suitable for flats or whole streets in other areas and for properties in rural communities.

As part of the transition out to 2045, a diverse range of solutions will be developed and deployed. There will not just be individual heat pumps in individual homes.

09:30  

The deputy convener, Jamie Greene, has some questions.

I have the cold, but I will try to struggle through this.

I want to take a step back and look at the bigger picture. The Scottish Government estimates that it will cost £33 billion to deliver its heat in buildings strategy. We know from the Auditor General for Scotland’s report that around £1.8 billion of public funding has been committed, but I understand that £600 million of that is as yet unallocated and that around £0.5 billion of it is dedicated to supporting people who are in fuel poverty. That does not leave much for physical intervention. I guess that less than £1 billion of public money is going into physical intervention to move homes towards the strategy. My overarching question is: where will the other £32 billion come from?

I have said all along that the transition to net zero for all of us will involve a combination of public funds, individuals and the private sector. The Government cannot afford to do the entirety of it. We cannot afford to decarbonise 2.5 million homes, and nor would it be right for us to do so. The key element will be how we mobilise those funds to support the transition such that they see a rate of return for the investment. That is the purpose of the green heat finance task force, whose part 1 report looks principally at what the transition means for individuals. Where can people go to get the support that they need when regulations stipulate that they need to do something by a certain date? The second aspect of the report is how we mobilise large capital. We regularly hear that there is a lot of capital out there that people are willing to invest not just in heat in buildings, but across the net zero transition. How do we attract that, and what is in it for people who can make the journey happen?

As the Auditor General says in his report, the Government cannot do this alone. It needs a multitude of people to support it if we are going to get anywhere near it.

Let us look at those points individually. The Government has an ambition and Parliament has mandated it to achieve that. Public funds will be allocated to try to deliver it, and the Government will go as far as it can within the realms of public finance. I understand that. However, 2 million individual households are operating on mains gas, and many of them are in the sorts of properties that you have spoken about—antiquated and poorly insulated properties. I think that the last estimate was that around 35 per cent of those households are in fuel poverty. What is in it for those people? Is the Government taking a carrot-and-stick approach or is it coming along with the stick only and saying, “We’ve changed the law and you must now convert to a different type of energy.”? Why on earth would people do that, or why should they?

The biggest question that the country faces is whether or not we believe in achieving net zero by the middle of the century. Do we believe in Scotland making its contribution to meeting the world’s challenge on global emissions? Fundamentally, that is a matter for all of us. Unless we take the pathways that will be determined by our contribution to meeting that global challenge, none of us will get there.

It is not the case that the approach involves the stick only. The upside is cleaner, warmer and more efficient homes over time, with lower energy bills for individuals and the growth in jobs and opportunities that will potentially come about from the transition.

Would you not argue that that should be the case anyway? Even if we had no green energy targets and no net zero ambitions, we should be making our homes better insulated, warmer and cheaper to run anyway.

I agree 100 per cent.

Surely the Government could have been doing that over the past 15 years.

It has. Work has been done for many years through the warmer homes Scotland scheme and area-based schemes, which are there to support the most vulnerable in society and take people out of fuel poverty. That is where the investment has helped. I think that, since 2015, about £249 million has been invested in around 35,000 households, with an average cost of about £7,000 to convert those properties into low-energy-loss, high-efficiency homes, and I guess that that support will be on-going.

This is a matter for ministers, but I see the focus of the support going forward being on those who most need it in the transition. The rest of us will need to walk towards what the regulations stipulate, with sufficient time and safeguards to cater for those who are struggling to make that transition.

I will add two points to that. First, the Audit Scotland report was quite complimentary—actually, I should choose my words carefully: it said that we had made “good progress” on energy efficiency, on which there has been a big focus.

My second point relates to Roy Brannen’s first point. Buildings account for about 20 per cent of our emissions. We know that, globally, in the UK and in Scotland, we need to reduce those emissions. It will happen at some point. Yes, the costs are challenging, but buildings will need to be decarbonised. Once that is done, the people who have undertaken those investments will know that their buildings will be more valuable, because people will know that buildings have to be decarbonised, and theirs will already have been. However, that is not to underestimate the costs and the support that people need.

Absolutely. The 2.5 million occupied homes account for 15 per cent of Scotland’s greenhouse gas emissions, using that phraseology. That is not the lion’s share of our emissions as a country, and it sounds to me that we are asking those with the least to do the most in this scenario and that legislation will force them to do so.

Let me give you a practical example because, out there in the real world, people want to know what all of this means for their household. My flat in Greenock is in a Victorian tenement with six flats, most of which are poorly insulated. None of them is double-glazed, and all of them run on gas boilers—to various extents of success, I should add. In that scenario, when the Government says, “Right, we’ve changed the law and you’re all going to have to move to some new green energy system, although we don’t know what it is yet,” the first question that all my neighbours will ask me is, “How much is that going to cost me, because I don’t have any money right now?”

Sue Kearns can walk you through where the consultation on the bill is just now in terms of those steps, because we have set out quite clearly what has to happen to whom by when, and how people can get support.

Can you say what the Government will do to support people in the scenario that I have outlined? I do not know the answer to that question.

As proposed, there are two elements to the heat in buildings standard: energy efficiency and clean heat. The clean heat side of the standard involves there being no polluting heating after 2045, and the energy efficiency side involves there being a minimum energy efficiency standard for owner-occupiers by 2033.

The first thing to say is that the reason why we have energy efficiency as part of the heat in buildings standard is for fuel poverty mitigation, not for emissions reduction, primarily. The aim is to help people by ensuring that they live in a warmer home that is easier to heat. As Roy Brannen set out, the Scottish Government already provides direct support for that, targeted to those who need it most. If someone who is in vulnerable circumstances rings up the helpline to look for advice and support, they will be directed to the support that the Scottish Government can offer.

We are trying to make the arrangements for the minimum energy efficiency standard by 2033 as simple as possible. There will be two ways to determine whether the standard has been met. One way is a fabric efficiency measure, and the other way—in my view, the simpler way—is through a list of measures that people can use to determine whether they have already got those things in their household and whether it is technically feasible for them to put them in. We have kept those measures within a certain cost threshold, so, in most cases, they are the ones that the data tells us will be fairly cost effective to put in and will bring a benefit to people in the longer term.

Support is in place, and what we are demanding from people—if it is a demand—is reasonable in terms of that simple list of measures.

That sounds helpful. I am not entirely convinced that there is good public awareness of the support that is currently available. As I have said, from chatting to my neighbours, I do not think that any of them would know where to go for support for insulation, for example, so there is a massive exercise to be undertaken there. However, the big, fundamental issue is that two million homes are still gas mains supplied. What are we asking them to do? Are we asking them switch off that gas supply? I am sure that the energy companies would have something to say about losing a million customers.

At the moment, 81 per cent of people are connected to gas and use gas for their heating; the rest use a variety of other sources. You are right that we want to move to a model that reduces emissions and therefore a model in which people use a more efficient and less carbon-intensive heating system. That is where we need to get to by the middle of the century—2045—if heating is going to play its part as one of the seven sectors on our journey to net zero.

The Audit Scotland report sets out quite well the range of different solutions. The main solutions will be heat pumps and heat networks, although there is a lot more around that. Nobody will be asked to switch off their gas before they have another heating system in place. There is a range of different technologies, but those are the two main ones.

I might hand over to Sue Kearns or Catherine Williams on this but, with regard to people understanding what will happen in their areas, local authorities are setting out their local heat and energy efficiency strategies, which set out the types of heating that are most suitable for different parts of their areas. That will be refined down to identify heat network zones that are clearly suitable for investment in a heat network.

I do not know exactly where you live in Greenock, but there could be a heat network zone there, for example. I am in central Glasgow, and it is very likely that that will be the case there.

A combination of approaches will be taken with regard to technologies—there are more than just heat pumps and heat networks—and there will be a geographical map of what needs to happen where.

I might have covered most of the things that Sue Kearns was going to say.

We are going round in circles now, because Catherine Williams can come in in a minute, but what is missing so far is saying when people will be required to act. We have already talked about energy efficiency and the 2033 target for owner-occupiers. However, for heat, the target date is 2045, unless you are asked to act as a result of an earlier trigger. The trigger that we have consulted on is property purchase. We think that that is a fair trigger, because when people move into homes, they are already looking for financial support and looking to do stuff to their homes so, when people are looking to buy a home, they could possibly build that in to planning for, say, a mortgage.

That is the first trigger, and that is what we have consulted on. If the regulations come into force before 2030, that will be the trigger that will apply. It will not stop people selling homes. The obligation will be on the purchaser of the property, and we think that that will give people time. There will be a grace period, so people will not move in and immediately have to rip out the existing heating system. We consulted on that and suggested a period of two years. We will be looking at the responses to the consultation to determine what we think should go into the bill. However, we think that that should be a good amount of time to let people think about how they can change their heating.

Again, exemptions will apply, and there will be flexibility. Therefore, if you are in a property in which it is difficult to change the heating system or if you are in a heat network zone and a heat network is coming to your area, you will not be asked to change your heating in the meantime.

The average price of a property in the streets that I am talking about is about £35,000. You will crash the property market in that area if you suddenly require people to put in five £10,000 heating systems.

Yes. A lot of work is being done on the impacts on the property market and, as I have said, we are looking at potential unintended consequences, including in the housing market. Therefore, we think that we will need to build in a degree of flexibility to that regulation.

Catherine Williams wants to come in but, on that point, the bill is in draft form—proposals are being consulted on. As parliamentarians, you will get the opportunity to consider whether those provisions are fit, appropriate and right for your constituents. In effect, that is the key safety net. Over the past four or five years, we have consulted widely and taken expert advice on all the ramifications, and we continue to do so. We have put forward a proposal that meets the needs of our getting to net zero in the sector, but, ultimately, it will be for Parliament and society to determine whether that is something that we wish to do and the pace that we need to do that at.

Good morning. I will continue the discussion about public participation. Roy Brannen said that we need to bring everyone in society with us. Let us be honest—the pace and the sea change that we need are not quite happening yet. Are the subsidy schemes that are in place enough to accelerate that process and drive it forward, or do both Governments need to do more to assist with that?

09:45  

I am sure that members have all had a look at Home Energy Scotland’s website. It has a really good tool for supporting individuals who are considering either improving the efficiency of their homes or changing to a clean heating system. It walks them through the process, provides a calculator and tells them exactly which grants and loans they would be able to receive.

I agree that we have more to do on engagement. At the minute, I do not think that it is in everybody’s consciousness that we need to do that. In our approach to the bill, we published a strategy on communications, which explored how we could work together—not just within the Government, but across all stakeholders. It was not meant to be a public-facing document; it was more about how we, as a group of stakeholders and individuals in the market, could work together to mobilise society and point individuals in the right direction for getting the best advice, as we walk through the changes next year.

Significant support is currently available from both types of funding: loans and grants. Catherine Williams can say a bit more about what the average household could receive through that process. We have allocated £60-odd million this year. We will target the biggest chunk of the £300 million that is allocated for this year at the warmer homes Scotland scheme and the area-based schemes, for the people who most need support. The £64 million is targeted at the rest of us who would like to move towards clean heating systems and have more efficient homes.

The figures speak for themselves, do they not? We are doing 6,000 systems per year, but we need to do 166,000 per year. What will cause the massive acceleration that is needed for people to participate and engage with us?

The regulations will be the trigger to make that change happen.

The trigger will be the regs.

Willie Coffey asked who else we need support from: we need the UK Government to act in a number of areas. The Scottish Government can act only within its existing powers on controlling pollution from individual homes. We are working with the UK Government and are looking for it to take action on several fronts. For example, we have continually called for a rebalancing of electricity and gas prices, which could help significantly. We cannot control the policy on sale of gas boilers or requirements for manufacturers to have a certain proportion of heat pumps. The UK Government is now going ahead with the clean heat mechanism, which requires that proportion, so that will be helpful as well. However, we need it to set out more detail on its policies on phasing out oil and gas heating systems.

Could councils could play a bigger role? How are they getting on with replacing gas central heating systems in their housing stock? Could the wider public engage with that? Councils will get the benefit of economies of scale when they buy many units. Could the wider public perhaps tap into that and get cheaper prices? It is appreciated that the subsidy scheme is not delivering the sea change that we are after.

I will come in on that, then perhaps Sue Kearns can talk about the social housing sector, with which we work closely as stakeholders and which we are targeting with specific regulation.

I agree absolutely with Mr Coffey’s point about economies of scale from delivering at pace, and using a social housing landlord or local authority to then roll out systems almost street by street. We would really like to see such a model being used. That approach could also bring in private finance and create an investable model. That is very much within the scope of what was explored for the green heat finance task force’s part 2 report, as it considered how we could develop such models.

Social housing landlords already do that, and we work in partnership with local authorities through the area-based schemes to support some private owners. The approach therefore exists on a small scale, but we want to grow it. There is not an oven-ready package for exactly how to do that, but we are working through a number of prototypes and examples and exploring how we could overcome the barriers to deploying it, how the Scottish Government could create interventions to support it with others in the wider market, and how we could come together through bodies such as the Scottish National Investment Bank to support that in the long-term future. Such a model is very much in our minds.

Sue, do you want to touch on social housing more specifically?

Social housing is not included in the heat in buildings bill proposal. It is being dealt with separately and according to a standard. The standard that the social housing sector works to is being reviewed. As a result, we have had a consultation on a new net zero standard for social housing, which will allow providers to build on their expertise in energy efficiency and to add planning to convert their properties to clean heat over the next two decades. We have had more than 100 responses to that consultation. We will consider them and will produce the new net zero standard later in the year.

Roy, it seems to me that if a home owner wants to make the transition for themselves, they are on their own. They do not have the benefit of tapping into a mass supplier and getting economies of scale. Potentially, there is a route through the local authorities, if they take the lead. Just last month, a House of Commons committee said that there could and should be a greater role for local authorities to drive the sea-change transition that we hope for.

I will let Sue Kearns talk about the local authorities’ energy efficiency schemes and their work to categorise exactly what they have in their areas—what would benefit from networks and what would benefit from other types of solution.

We have worked with the local authorities to get them to produce local heat and energy efficiency strategies—LHEES. I am sure that you know that they now have a statutory duty to produce those. Eleven, I think, were produced by the end of last year, and we expect that about 22 will have been published by the end of March, which is coming up very quickly. Of the 10 that will then be outstanding, probably seven will be published over the summer, and we are chasing up the final three. So, I hope that by the end of summer nearly all the local authorities will have their local heat and energy efficiency strategies. The point of them is to look at opportunities for heat supply and heat demand in their areas. In particular, that is the basis on which they will then designate heat network zones, which will be a very important step.

Catherine—do you want to say a bit more about that?

Yes. The LHEES are very much designed as a vehicle through which we can work with local authorities on moving from plan to delivery over the coming years and decades—in particular, with the larger-scale schemes.

As I said, we have thought hard about the matter and have been working with many stakeholders on the barriers to doing that, which often involve local authority capability and capacity. We have funded, until 2027, all the local authorities to have LHEES offices to support development of the strategies.

We also provide strategic support through things such as the Heat Network Support Unit, to help local authorities and others to develop feasibility studies, and we have recently expanded that activity to support the more strategic planning that is linked to LHEES.

That is the vein in which we need to think about how we, as the Scottish Government, can continue to provide support to allow local authorities to lever in the opportunities that are in those plans.

I have one more point to make on that. Heat networks offer an enormous opportunity for local authorities to co-invest with private sector partners. A good example is the project in Midlothian in which the local authority is partnering with Vattenfall, which is a very well-known energy company and heat network provider. Heat networks involve investment in a large piece of kit—a bit like what happens in electricity generation and electricity networking—which allows those who end up using that heat network to pay off the cost of assets over a relatively long time. The project in Midlothian is a good example; things are developing in other local authorities, as well.

My last question is on energy prices. The fact that energy prices in the UK are among the highest in Europe is probably beyond our control. However, electricity is four times dearer than gas. People know that, yet we are asking them to make the transition to an energy system that is four times more expensive per unit than what they use at the moment. How on earth do we overcome that and take people with us on that journey?

One of our requests of the UK Government is about shifting the balance of levies from electricity to gas in order to free up the abundance of renewable energy that is flowing into electricity to make it much more affordable. That is under consideration, but that needs to happen pretty quickly, along with the decision on hydrogen. The longer the process of considering the potential for hydrogen to play a part in the gas grid goes on, the more uncertainty is created about what people should do. The UK Government said that it would make a decision by 2026, but the NAO and, I think, the CCC have said that consideration needs to be given to bringing that forward in order to provide certainty for others in the system.

What will happen with the gas grid thereafter? As we transition off the gas grid, we will still have an asset—or a liability. Who will pay for that? How will that be compensated for as we move through to the final transition?

There is also the issue of a clean heat market mechanism, which involves the idea that if a company manufactures products such as gas boilers, it should also manufacture a proportion of clean energy systems to drive deployment and uptake of such systems. Again, responsibility for that rests with the UK Government. The teams are involved in a lot of work to make sure that those things happen as quickly as possible to support our ambitions, which are, in effect, the same as those of the UK Government. At the end of the day, we are all trying to get to the same place.

Do you think that electricity pricing is the key driver for the transition that we want?

At the moment, I think that that is the case, but Kersti knows more about the electricity market, because she came from the regulator.

Electricity pricing is a really significant factor. As you said, electricity is four times more expensive than gas. However, as Roy said earlier, heat pumps are becoming increasingly efficient: they now have much higher efficiency ratings, which means that the amount of heat that is obtained from a unit of energy is significantly higher—it is 2.5 to 5 times the amount of energy that is used. That helps to offset the running costs quite a bit. However, a heat pump is still more expensive to buy and install than a gas boiler. Therefore, overall, it is still slightly more expensive to have a heat pump, but not 4.5 times as expensive.

I come back to your point about the need to rebalance gas and electricity prices. Such a rebalancing will impact on electricity use not just in homes but in other sectors, including transport and industry.

I can provide a statistic that might be helpful. Recently, someone—I cannot remember who it was—did a calculation that was based on average household unit prices for March 2024, which used a seasonal coefficient of performance of 3, for heat pumps. That would be equivalent to cost parity with about 85 per cent of all gas boilers. If we can get heat pumps operating efficiently—this relates to Mr Beattie’s point about installation—and get them working at the 2.5 to 3 performance coefficient level, we can pretty much get cost parity with gas boiler systems.

That would be the case provided that all the other measures, such as good insulation, zonal controls and 80mm insulation for tanks, are in place. Those are all things that we are advocating need to be done in order to obtain an energy performance certificate C level of good home energy efficiency. We are not talking about overly complex measures: 270mm loft insulation, 80mm insulation for water tanks and zonal controls are all things that should be manageable in most properties in the country.

Thank you for those answers.

We have a final suite of questions, which will be asked by Graham Simpson.

We have covered some really interesting ground and a number of excellent questions have been asked.

I want to pick up on some of the stuff that has been said already. We talk about setting a minimum energy efficiency standard for homes, but how can we measure that? Jamie Greene mentioned his flat. Nobody knows what I have in my house—you do not know what insulation I have. Even I do not know how thick the insulation in my house is, so how on earth can we measure all this?

10:00  

I will bring in Sue Kearns to talk about the complexities of EPCs.

We need to get to the point at which homes use about 120kW per square metre per year—anything less than that means that the home is well insulated. We can work things out by proxy. By looking at the type of system and the floor area in the average house and at whether it has any other measures, we can make a rough approximation. However, assessors can do that work for us. For our warmer homes Scotland scheme and our area-based schemes, assessors look at a home’s EPC at the start and the end of the process to see whether it has changed as a result of installing various types of measures. There are people who are well versed in trying to support individuals.

We have tried to remove the issue relating to the minimum energy efficiency standard by having a list of measures. If you have those measures, such as insulation and draught proofing, that is fine. If you have not got them and it is not feasible technically for them to be done, that is also fine. That makes things easier.

An alternative method involves looking at fabric efficiency, which is linked to energy performance certificates. As most people here will know, we do not think that the energy performance certificate system, as it stands, is fit for purpose. When we consulted on that last year, we got quite a lot of responses. We will be finalising what we will be doing in that regard later this year.

As it stands, the energy performance certificate is based on cost. Someone could improve their EPC by installing a gas boiler, which would obviously not align with the net zero policy, so we propose to add extra metrics on the fabric efficiency of the building and on emissions. That will help, too.

There will be two ways of looking at energy efficiency. There is the EPC, which looks at fabric efficiency at a high level, and the list of measures. In addition, as I said, we have consulted on producing a technical suitability assessment tool, which will be more tailored to the individual house or property. I think that that will be very useful for people.

The point that I am getting at is that, if you set in law regulations that say that householders need to do X, Y or Z, how on earth will you make me do anything to my house without coming into it?

Obviously, we are looking at compliance and enforcement, which are very important. That is the stick part, if you like, of the regulations, and there is a lot of work to do on that. I know that the Minister for Zero Carbon Buildings, Active Travel and Tenants’ Rights wants enforcement measures to be seen as a last resort and does not want them to be in place during the early stages following the regulations. Obviously, we want people to understand the benefits of taking such steps before we go to enforcement, but we are looking at that.

Describe the “stick part” in a bit more detail, please. For a lot of people, this will just pass them by. If the Parliament passes a bill on heat in buildings, that will all be very interesting, but most people will just get on with their lives and will not do anything unless—I do not like this—you force them to do something. How will you force people to do these things?

That will be decided by ministers; it is not for me to say how that will be done. The issue will be consulted on.

And by members of the Scottish Parliament, I presume.

Absolutely.

Well, indeed.

The first trigger point will be the point of purchase, and there will be a grace period. As is the case when people go through the conveyancing process, those who provide legal support will bring to people’s attention whether the property complies with the regulations. There will be points in time when it will become normal to say, “I want to buy the deputy convener’s property. He doesn’t have anything in place in that respect, so I’ll offer a lower price, because I know I’ll have to do that as we go forward into the grace period.” I think that that will become a normal activity as we start to go through the cycle of properties coming in and out of the market.

People want to make their homes more energy efficient and to see their bills come down as a result. Do we need to create a place that people can go to to get impartial advice and maybe help with arranging work?

That is the role of Home Energy Scotland, in effect. We have built a really good organisation that gives brilliant advice and has great assessors, and people who phone it will be talked through what type of property they have and what would help them. I guess that my biggest concern is that it is clear that we have more work to do to make sure that everybody knows about that. Last year, we supported about 135,000 calls to the service, but that could triple, quadruple or increase by a factor of 10 if we get the word out that people can go and get advice from the service that is sitting there.

I mentioned how people can get specific advice on their homes and on plans for whole buildings. There are organisations out there that take what we call a retrofit co-ordinator role, which is a valuable skill set. As we think about future requirements for skills and the supply chain, we need to think about how we can grow that skill set. It exists in places, and organisations are thinking about how they can invest in it and roll it out nationwide. However, we want to understand the different models for that and how we can support organisations to develop that throughout Scotland.

We want to move towards what is now recognised as the standard that we will need post-2035, which basically means that we look at the fabric of the building first and that we build tight and ventilate right. If we get those three things happening more regularly in the coming period through the work of installers and retrofitters, we will no longer have properties—I mentioned the 18 per cent of properties that are pre-1919—that are not fit for purpose in terms of energy efficiency.

There are two steps. The first is that people need to know where to go for advice, and the second is that they must get good advice when they go there. On the first step, we have recently scaled up our marketing and public awareness campaigns. You might have seen our knitted caterpillar, which is increasingly appearing in places across Scotland. However, it does not matter what the image is—the important thing is that people start to recognise it and know that they can go to Home Energy Scotland and get advice. When they do that, they get good advice.

We had 1,700 responses to the consultation, which is a pretty big response to a consultation on something that, as Mr Simpson said, is possibly not in everybody’s sight at the moment. It can feel as though it is decades away rather than in the near term, but that was a big response and we have a lot of great content that will help to shape the next steps as we go through this year.

Okay. There was mention of councils producing local heat strategies. What is the level of detail in those? Do they set out when certain things will be done? I presume that they will identify areas that councils believe are suitable for district heating. Do they set out timescales for when that could come in?

I see the local heat and energy efficiency strategies as the first cut. Local authorities have procured consultants and the initial documents are detailed pieces of work, but they do not represent detailed delivery plans. Local authorities have published delivery plans alongside them, but they tend to focus on how feasibility studies and business cases will be developed, because the zones are often indicative and further work may be needed to understand the heat demand in the area and how what is proposed would work. They may say that there will be a heat network zone by a certain date and set out the steps that need to be taken to move towards that.

For example, if you look at Glasgow’s LHEES, you will see a lot of detailed mapping and identification of zones, and one of Glasgow’s next steps is to look at how it is going to procure a joint venture partner to work with it. Its delivery plan focuses on that, because that is how it sees that it can bring the heat network zones through over the coming decades.

Who takes the lead? Is it the council?

It will vary. Glasgow City Council is actively taking the lead on that. We would expect local authorities to take the lead, but they have different skill sets and capabilities and they will need more or less support. We already provide support for heat networks through the Heat Network Support Unit, which is supporting a range of councils. We look to have a tailored offer and to work with councils to understand their needs and support them in different ways, including through regional procurement models and bringing councils together. There is a very active group of councils in the north-west that have come together to think about the net zero agenda and develop plans.

According to the Auditor General, 34,000 homes are connected to heat networks, most of which are fuelled by gas. How are we going to move away from that and ensure that neither the current heat networks nor new ones are fuelled by gas?

Heat networks are quite neat in that you can change the source of the heat or the energy and add bits of kit. That simplifies things a lot. It is not easy to add a bit of kit when you have to dig up the street, but the networks are quite flexible. If there is a requirement to decarbonise heat, you can change the heat source.

We often see heat networks in new-build developments, which are subject to the new build heat standard. The Shawfair example that was mentioned—the joint venture with Vattenfall—is focused on a new-build development. In a few days’ time, all new builds will be required to have clean heating building warrants. That will prevent new gas heat networks from being developed. The focus will be on clean heating that is aligned with our heat in buildings regulations and the wider building standards and other regulations that sit alongside them, which will support the transition to clean heat.

Thank you very much indeed for that evidence session. It has been very useful. There might be some issues on which we need to follow up, but I think that you have furnished us with comprehensive answers to the questions that we have put to you. I thank Sue Kearns, Catherine Williams, Kersti Berge and the director general, Roy Brannen, for their time this morning.

I will suspend the meeting to allow for a change of witnesses.

10:12 Meeting suspended.  

10:17 On resuming—