Energy Efficiency - the Scottish approach 23 February 2016 Jonathan Grant Scottish Government

Key to our efforts to: –Reduce carbon emissions and meet our climate change targets –Eradicate fuel poverty and hence tackle broader inequalities … and deliver broader economic benefits. Why are we interested in Energy Efficiency? Scottish Energy Policy: Great progress in decarbonising electricity. Now need to reduce demand for heat. Annual Demand: Heat vs Electricity (GW) Improve energy efficiency

Domestic Energy Efficiency Energy efficiency is measured using Energy Performance Certificates (EPCs) on A-G band scale Impressive progress in Scotland:  Since 2008, we have installed more than 900,000 measures in homes in Scotland to improve their energy efficiency.  The share of homes rated EPC band C and above has increased by 71% since 2010  We now have proportionately 53% more homes with a good EPC rating (C or above) than England.

Progress in cutting residential CO 2 Emissions Homes ~1/4 of total emissions Energy efficiency crucial for reducing housing emissions. Other factors affect housing emissions:  occupant behaviour  outside temperatures  and number of houses Aim in RPP2 is to reduce housing emissions by 37% by 2020 and 51% by 2027 from 1990 baseline. Probably down c15-20% in 2015

Fuel Poverty Defined as needing to spend over 10% of household income on fuel bills in order to maintain a satisfactory heating regime. 35% of households in Scotland are fuel poor by this definition. Scottish Government remains committed to eradicating fuel poverty, as far as is reasonably practicable, by end of drivers of fuel poverty: energy prices energy use/efficiency household incomes Eradicating fuel poverty requires concerted action across all 3 drivers. Scottish Ministers advised by Fuel Poverty Forum. Prices are key. If energy prices had only risen in line with CPI inflation since 2002 then fuel poverty today would be 9.5%.

Wider benefits of investing in Energy Efficiency In addition to carbon savings: Tackles fuel poverty by helping to cut energy bills (and boost local spending) Supports jobs in local communities: £50 million supports 650 full-time jobs – potentially dispersed right across Scotland Regeneration and urban renewal Physical and mental health benefits Carbon savings Economic growth Tackling inequality

Sustainable Housing Strategy Improving domestic energy efficiency, tackling fuel poverty and supporting sustainable growth Information IncentivesRegulations Home Energy Efficiency Programmes (HEEPS): - Area-based schemes - National scheme - Loans / innovative finance Plus: Max UKG funding Energy Performance Certificates (Home Reports) Advice Services Marketing Campaigns Smart Meters Energy Efficiency Standard for Social Housing (EESSH) Regulation of Energy Efficiency in Private Sector (REEPS) New Build Standards

Challenging funding position In addition to general fiscal constraints, UK Government changes to the Energy Company Obligation (ECO) in Dec 2013 reduced the amount of funding available for energy efficiency. Scottish Government responded by increasing its spending on energy efficiency and fuel poverty: £119m in 15/16 is highest ever. Meeting the £200m p.a. overall investment target recommended by the Energy, Environment and Tourism Committee. Source: Scottish Government estimates and projections (subject to revision). Changes to funding for energy efficiency in Scotland

Scotland’s Energy Efficiency Programme - SEEP Scotland’s Energy Efficiency Programme will provide an offer of support to buildings across Scotland – domestic and non- domestic – to improve their energy efficiency rating over a year period. It will continue to provide support to households suffering from fuel poverty, and will also seek to leverage further private investment into improving energy efficiency to support the development of loan schemes. The new programme will look to introduce multi-year funding that will give our delivery partners the certainty they need to deliver ambitious energy efficiency projects.

Energy Efficiency Standard for Social Housing (EESSH)

What is the EESSH? The EESSH is the minimum energy efficiency standard for all Scottish social housing introduced in March It has been developed by the Scottish Government to reduce fuel poverty and climate change emissions. The standard was co-produced with a working group of Scottish social landlords using peer-reviewed modelling and case study examples from social housing across Scotland. Progress is monitored by the Scottish Housing Regulator (SHR). Landlords must ensure that all social housing meets this standard by December 2020.

How does the EESSH work? The new standard is based on achievement of minimum EPC energy efficiency (EE) ratings. These differ dependant upon the dwelling type and primary fuel used. Landlords have freedom to decide which measures to install. The standard does not require landlords to install all the measures included on an EPC.

Ratings EESSH minimum ratings for 2020 EE Rating (SAP 2009) Dwelling typeGasElectric Flats6965 Four-in-a-block65 Houses (non-detached)6965 Detached60 Other fuels – SHQS requirements.

Projected benefits Savings in fuel cost – £130m pa for tenants, average of £210 & possibly more depending on fuel price inflation. Reduced carbon emissions – 1,275 tonnes per dwelling or 761kt for social housing sector – equivalent to all household emissions from Aberdeen and Dundee combined.

Estimated costs Social housing sector already 64% compliant after SHQS. £310m estimated cost for 88% compliance using only “Reasonable Measures.” £900m estimated total cost for 99% compliance using all available measures.

Funding ECO: Measures are generally ECO eligible and (post 2018) it is expected that a new Scottish ECO will be operational. HEEPS ABS - Mixed tenure and “enabling” funding to support admin costs and the challenges of involving owner-occupiers. Others include: RHI, Green homes cash-back for social landlords (now closed), SG loans. SEEP will develop new loan schemes.

Exemptions & Review Temporary exemptions including legal, cost and refusals review will consider progress to date, funding position, design and next milestones.

Information The EESSH website: examples of case study properties, available measures and funding sources; implementation guidance; temporary exemptions guidance; regulation information; and a guide for tenants.