Please note that this research was conducted before gas prices increased at the end of 2021.The analysis is based on energy prices and installation costs at the time the research was undertaken, in late 2020.

The Scottish Government intends to develop new building standards to ensure all new homes use zero emissions heating at the point of use from 2024. Similar requirements are also due to be phased in for non-domestic buildings.  

This report looks at the costs of delivering zero emissions heating in domestic and (as far as possible) non-domestic new buildings. It identifies the factors that influence these costs and how they are split between different actors, including building developers, building owners and building users over the lifetime of a technology. 

We used a literature review and stakeholder interviews to inform a cost analysis model, which was used to analyse six new build scenarios: Scenario 1: Private housing development; Scenario 2: Mixed-use build-to-rent development; Scenario 3: Social housing development; Scenario 4: Small-scale rural development; Scenario 5: Student accommodation; Scenario 6: Primary school.

The cost analysis considered six zero emissions heating technology options within the cost analysis: air source heat pumps (ASHPs); ground source heat pumps (GSHPs); on-demand direct electric heating (dry system); direct electric heating (wet radiator system); new district heating network; and connection to an existing district heating network. It also considered building-level solar PV as an additional electricity source to feed into the selected electric heating system.

Key findings

Cost analysis

• In all six scenarios, the use of zero emissions heating technology options represented lifetime cost increases ranging from 25%-231% compared to the equivalent lifetime cost of heat supply using gas boilers.
• There is a significant difference in the cost optimum zero emissions heating solution, depending on whether it is considered in terms of capital expenditure (CAPEX), electricity running costs or lifetime costs.  
• Individual ASHPs appeared cost optimum on a lifetime cost basis in the scenarios with less dense developments. Lifetime costs were significantly lower in the scenarios where it was assumed that new developments could connect to an existing district heating network. A new district heating network also appeared cost optimum in the high-density mixed-use development.
• Since grid constraint costs were excluded from the analysis, wet and dry electric heating options offered a significantly lower capital cost, but with higher electricity running costs. 

Stakeholder analysis

• The stakeholder interviews highlighted how the choice of which zero emissions heating technology to use in developments was driven by more than just cost considerations. Commercial delivery models and the role that a developer played in a development after construction  were also key factors.
• Delivering zero emissions heating was perceived as a significant change in existing development processes for some interviewees; design and delivery processes were still being optimised and refined. There was greater evidence of innovation in the social housing sector. 
• This study highlights a potential gap in the sector for energy service organisations to deliver technology options with higher capital costs but lower running costs (i.e. optimising use of lowest lifetime cost).  

In order to achieve Scotland’s net-zero target, a low-carbon heating system will be required in virtually every property in Scotland by 2045. This is a significant policy and technological challenge.

This report seeks to inform the design of policy for the phase-out of fossil fuel heating by reviewing relevant historical and ongoing experiences of technology phase-out policy, and, by extension, phase-in, in the energy sector.

The case studies reviewed include natural gas grids, personal transport, electricity supply, electricity metering, transport biofuels and condensing boilers. 

 Key findings

• Major infrastructure transitions, such as gas grid repurposing, necessarily rely on an area-based approach rather than individual decision-making. Transitions in off-grid heating, by contrast, may involve individual household decision-making at the point of replacement.
• As is being seen in the transport sector, some phase-outs are driven by proactive supply side policies and international market competition. Close collaboration between government and businesses were also seen.
• Hybrid technologies, such as hybrid gas and electric heat pumps, are appealing ways of ameliorating the effects of phase-out because they offer less disruptive and perhaps more affordable solutions.
• A number of cases reviewed highlight the importance of how policy decisions are justified and communicated, suggesting careful attention as to how heat decarbonisation policy is developed and presented.

To achieve net-zero carbon emissions by 2045, Scotland needs to decarbonise heat and improve the energy efficiency of its buildings. This evidence review examines the potential of Heat as a Service (HaaS) to support this aim by providing a route to decarbonising heat in domestic properties in Scotland.

Heat as a Service is a term which covers a range of services that enable people to achieve a warm home in a variety of ways. These include services which provide or enable finance to purchase and install heating equipment; maintenance of heating equipment; energy efficiency upgrades of building fabric; paying for the amount of heat delivered to the home; paying for the temperature the home is heated to; paying flat-rate tariffs for the home to be heated; or combinations of these.

The report outlines HaaS business models that have been tried across Europe. We look into the potential benefits of HaaS for Scotland, and some of the barriers. Through case studies, we explore in more detail how different business models might work and be adapted to Scotland.

Key findings

To date, there is not much evidence as to what has been tried in terms of HaaS or how effective it has been in delivering substantial emissions reductions. However, the limited evidence suggests that some HaaS offers have potential to help get Scotland to net zero by accelerating uptake of low-carbon heating systems and improving energy efficiency. This would also improve outcomes for consumers, especially the more vulnerable, and support businesses in developing new, sustainable business models:

• Companies choose different ways to set their tariffs and finance their offers. 

• Different Haas offering must comply with different regulations, sometimes from a range of different regulators.

• Haas could help overcome the two main barriers that put people off installing low-carbon heating systems: concerns about cost and comfort. 

• There is not yet much evidence about what consumers like or dislike about Haas, but there are some likely drivers to Haas uptake. 

• Case studies provide insights into how HaaS could help Scotland meet its policy aims, but none describe a comprehensive solution at this stage. 

• The main challenges facing interested businesses are understanding regulations and learning to deliver HaaS in a commercially viable way. 

Hydrogen is one of only a handful potential heat decarbonisation routes which offer a mass-market solution.

This project was commissioned to help build a clear evidence base, using existing literature relating to all aspects of the use of hydrogen to heat buildings, including supporting infrastructure and costs. Lessons gained thus far from key projects have been synthesised along with a wide range of evidence sources on aspects such as technical feasibility, safety and costs.

Key lessons 

Across the literature, we identified some Scotland specific strengths and challenges at the system level value chain. These relate to Scotland’s unique position regarding natural resources, skills, and existing infrastructure. They are highlighted in more detail below:

• Scotland’s strengths include:
  • Good access to large volumes of natural gas, which is required for large-scale production of ‘blue’ hydrogen (methane reformation with carbon capture)
  • Strategic CO₂ storage capacity offshore to support carbon capture efforts (depleted hydrocarbon storage sites and aquifers)
  • St Fergus is a key delivery point for gas to the National Transmission System (NTS), which offers country-wide hydrogen-blending opportunities
  • North East Scotland has a wealth of skills, capabilities and infrastructure from the oil and gas sector that can be leveraged to support hydrogen and renewables development
  • High levels of wind curtailment resource for renewable electricity generation, which in turn can be used for ‘green’ zero-carbon hydrogen production via electrolysis
• Scotland’s challenges:
  • Scotland has limited existing centralised hydrogen storage ‘resources’ (e.g. salt caverns) for intersessional storage. Investments in new infrastructure (above-ground storage facilities) or new solutions (converting hydrogen into ammonia) would be required.

The Scottish TIMES energy system model is built using the TIMES platform, a modelling tool which is developed by an International Energy Agency (IEA) technology collaboration programme and used in 63 countries. It contains a detailed and up-to-date depiction of all Scottish energy flows and greenhouse gas (GHG) emissions, and explores the potential future benefits of a wide range of low-carbon fuels and technologies.

The Scottish TIMES model has provided evidence to inform Scottish Government climate policy in recent years. This report presents the findings of a technical review of the Scottish TIMES model. This involved considering model inputs and a number of diagnostic tests based on running the model with a test scenario. The review does not extend to considering whether the model has been used appropriately to support Scottish Government climate policy.

Summary conclusions

Review of model inputs

• The Scottish TIMES team has put considerable time into developing the model and keeping the data up-to-date.
• The team operates good quality assurance processes..
• A number of issues should be investigated further. These include the need for a reassessment of model boundary conditions, particularly for the GB electricity system, and some technology assumptions could be updated.

Outcome of the diagnostic tests

• The diagnostic tests identified a number of minor model data issues to investigate. 
• The GHG emission accounting system (i.e. how GHGs are counted across the economy) could be more robust.
• Overall, it is clear Scottish TIMES is a solid, well-designed model suitable for informing Scottish climate policy if used appropriately.

Potential model development

The model could:

• Have improved GHG emissions accounting.
• Provide more value through a wider range of uses, for example by exploring future uncertainty.
• Be used more efficiently if a system were developed to produce the output data and analyses that stakeholders require.
• For the model to continue contributing high-quality evidence to inform Scottish policy, there is a need to ensure that there is sufficient technical modelling capacity within the Scottish Government.

European countries vary greatly in terms of how residential buildings are heated. These differences, built up over decades, reflect national resource endowments, economic resources and technical infrastructures. They also reflect different governance approaches and policy choices. 

In this report, we review the heating technologies and heat policies of nine European countries: the UK (with a focus on Scotland), the Netherlands, Norway, Sweden, Finland, Denmark, France, Germany and Ireland). We assess how government policy has been used to change the way heat has been delivered, and current approaches to policy-driven heat decarbonisation. We set out in detail the policy instruments – financial incentives, regulations and tax structures – that are used to drive countries toward zero-carbon heating. Where available, we also present information on how each country is developing policies and targets for the decarbonisation of heating.

The implementation of the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 has set a new climate change target for reducing emissions that aims to bring Scotland’s emissions to net-zero by 2045. Achieving this target will require a sound understanding of likely greenhouse gas (GHG) emissions (or reductions) arising from national, strategic and project level decision-making.

The requirement to consider the impacts of a plan, programme or strategy (PPS) or proposed development on GHG emissions is captured as part of a wider assessment under the Strategic Environmental Assessment (SEA) and Environmental Impact Assessment (EIA) regimes where relevant. This research seeks to review current practice in considering greenhouse gas (GHG) emissions as part of these processes, focusing in particular on:

• methodologies used to assess GHG emissions impacts
• the level of detail included in these assessments
• how these emissions are reported and communicated

The project also records observations on the effectiveness of the approaches taken to reporting and communicating these findings.

Key findings

Strategic Environmental Assessment (SEA)

We reviewed ten Environmental Reports prepared between 2015 and 2020 for the SEA case studies. The case studies included local development plans, local authority level plans and strategies for climate change, renewable energy, transport, woodland, a sub-local tourism strategy, and two national level case studies covering climate change and a circular economy. Based on this review we identified that:

• The environmental baseline information included a range of data relevant to GHG emissions.
• An overlap between topic areas as part of the SEA process often results in information relevant to GHG emissions being considered and reported under other SEA topic headings but not being explicitly used to inform the assessment of GHG emissions impact (and not captured under the associated SEA heading of ‘climatic factors’). As a result GHG emissions are not comprehensively reflected in a single specific area of the assessment process.
• Reporting under a single SEA heading of ‘climatic factors’ results in a lack of distinction between reporting of impacts on reducing GHG emissions (mitigation) and actions to adapt to the effects of climate change (adaptation).
• The majority of the Environmental Reports did not clearly set out the basis for considering the significance of the impact on climatic factors, for example whether significance was related to the baseline, local or national targets.
• The case studies did not use specific tools (for example carbon calculators) to assess GHG emissions; instead assessment approaches adopt a qualitative approach that use the SEA scoring system[1] and associated descriptive text, and indicate a direction of travel in GHG emissions (e.g. increase or decrease).

Environmental Impact Assessment (EIA)

We reviewed ten Environmental Impact Assessment Reports (EIA-R) or equivalent, prepared between 2009 and 2019. The case studies cover a wide range of projects across a number of different consenting regimes and include wind farm developments, road construction, mining, forestry, marine infrastructure, mixed use and a recreational development. Based on this review we identified that:

• Although the case studies were intentionally selected because they contained some level of assessment of GHG emissions, the majority (eight out of ten) did not provide baseline data on GHG emissions. In line with IEMA guidance, some case studies provided justification for this by stating that the baseline is considered to be ‘nil’ as the site is currently undeveloped, meaning that there are no associated emissions.
• Two of the case studies included GHG emissions data at a national level, reflecting the wider impacts of the developments beyond the site boundary.
• The majority of the case studies (seven out of ten) included quantified assessment information for the construction phase of the development, commonly covering direct, indirect and embodied emissions. These examples often include the quantification of emissions such as embodied carbon within construction materials, the associated transport emissions from construction material delivery and onsite plant fuel usage.
• Six of the ten case studies included some degree of quantification of operational GHG emissions. Only four of these fully covered direct, indirect and embodied emissions.
• Despite the guidance advocating a life-cycle approach, the assessment of GHG emissions at the decommissioning phase is the least well documented. This is often scoped out on the justification that the emissions cannot be accurately predicted due to the lifespan of the project.
• The majority of the case studies reviewed employed some form of tool as part of the assessment. Most commonly such an approach was used to record either embodied GHG emissions in the required construction materials or GHG emissions associated with transport movements.
• Inclusion of quantified GHG emissions data is more likely where relevant quantified information is already available for the project (e.g. material quantities or vehicle movements) that can be used to determine corresponding GHG emissions.
• The approach to determining the level of significance of the GHG emissions arising from a project varies. In eight of the case studies a lack of baseline data prevented this being used as the basis for determining impact significance. A lack of regional or local GHG emissions targets also means that there are no meaningful benchmarks against which to judge significance.
• Where GHG emissions data is provided this is often clearly communicated, with the ‘payback’ approach often adopted for wind farms as an example.

Future implications

The SEA case studies highlight that significant effort is put into the qualitative assessment of GHG emissions in SEA. However, there is scope for the various elements of the assessment process (baseline, assessment questions, definition of significance and monitoring) to be joined up more comprehensively.  The qualitative nature of the plans, policies and strategies being assessed defines the approach to the assessment of GHG emissions.

There is evidence of good practice with respect to the quantification of greenhouse gases in EIA from the case studies. Some of these examples have used supporting tools which could be more widely applied. The express consideration of greenhouse gases in EIA only became a formal requirement in 2017. EIA practitioners are also continuing to gain more experience in the assessment of GHG emissions impacts.

The declaration of a climate emergency, commitment to achieving net zero emissions and local authority level actions being taken to respond to this, is likely to lead to an increase in i) the collection of relevant data, ii) co-ordination of existing data, which could inform these assessment processes, and iii) expertise and engagement of decision makers and consultees in SEA and EIA scoping and development.

In recent history, the British electricity sector landscape has changed as more renewables, particularly solar and wind, are connected to the power system. Since 2004, electricity generated from renewables in the UK has increased tenfold, and in 2019 37.1% of total electricity generated was from renewable sources.  These changes have far-reaching implications for the operation of national electricity networks and for ensuring security of supply.

The larger renewable installations are connected to the high voltage transmission network that interconnects the whole of Britain. Smaller ones are connected into the regional lower voltage distribution networks that, typically, transfer power from the transmission network down to each individual electricity users.

The technology used to convert the primary energy source into electricity is very different for renewables such and wind and solar from that used for thermal sources such as fossil fuels and nuclear fission. A common feature of wind and solar generators is the use of power electronic converters. Although the uptake of renewables is in keeping with Britain’s emissions reduction and renewable energy targets, it has the side effect of displacing conventional fossil-fuelled generation and the technical characteristics that these synchronous machines provide to power system operation. As a result, the British Electricity System Operator, National Grid ESO (NGESO), frequently needs to pay conventional power plants to come online and deliver key system services to ensure the security of electricity supply.

Going forward, in April 2019 NGESO announced a target of being able to operate a GB electricity system with zero-carbon generation by 2025. In practice, this means that NGESO aims to operate the system without needing to take actions that would restrict the dispatch of zero-carbon generation in favour of providing balancing services using unabated fossil fuel power plants, avoiding the need to “constrain on” such generators in addition to any that the wholesale electricity market might already be using. In order to achieve this, new service specifications and procurement mechanisms will be required to give NGESO the option of accessing services from zero-carbon technologies rather than coal and gas plants.

Current and emerging system operability concerns in GB cover a broad range of topics. Work recently completed at the University of Strathclyde, outlined in this report, has reviewed: how NGESO currently uses balancing services to manage the power system; possibilities for the future provision of frequency response and reserve; prospects for short circuit current support from power electronic converters; and market changes required to avoid the need for NGESO to constrain on fossil-fuelled generation to support system operability in 2025.

The Scottish Energy Strategy aims to: strengthen the development of local energy; protect and empower consumers; and support Scotland’s climate change ambitions while tackling poor energy provision.
One of its priorities is to promote consumer engagement and protect consumers from excessive or avoidable costs. It also aims to promote the benefits of smarter domestic energy applications and systems for all consumers.

The Scottish Government commissioned several linked research projects to support its work on promoting consumer engagement and protecting consumers as part of Scotland’s low-carbon transition.

The programme of work, completed in 2019, consisted of:

1. Reviewing current approaches aimed at identifying groups of energy consumers in the UK.
2. Developing an approach to identifying specific groups of energy consumers, identifying eight specific groups or archetypes.
3. Reviewing forthcoming changes in energy policy to identify those changes likely to impact on energy consumers. These changes were grouped into policy changes associated with:
   • smart energy; 
   • decarbonising energy supply; and 
   • energy efficiency.
4. Considering the implications of a subset of these policy changes for each specific energy consumer group to highlight how they may impact differently on each consumer group.

The research highlighted that the energy policy landscape is changing significantly, and that forthcoming changes in energy policy are likely to impact on consumers in a variety of ways. The impacts of specific changes in energy policy on each of these groups of consumers can be modelled. Among other things, we model the implications of a switch to time of use (TOU) tariffs; increased uptake of electric vehicles (EVs); and the future for domestic heat pumps and solar photovoltaics (PV) systems for different consumer groups. Overall, the modelling shows that those with higher incomes are more likely to participate in the evolving smart energy market and benefit from new technologies and energy market solutions, raising equity and distributive concerns.

Our research outputs comprise five reports including a summary report which gives an overview of the project and the main findings.

Scotland has committed to achieving net-zero greenhouse gas emissions by 2045. Heat is at the core of Scotland’s energy system, accounting for approximately half of the energy consumed by homes and businesses. This makes heat the biggest element of Scotland’s energy use and its largest source of emissions. The Scottish Government (in line with advice from the Committee on Climate Change) has identified heat networks, or district heating, as one of the ‘low-regret’ options – low cost and with relatively large benefits – for heat decarbonisation. Its Climate Change Plan 2018[1] (CCP) focuses on significant reductions in emissions from buildings, both residential and non-domestic.

This study supports the emerging regional and national policies associated with the development and deployment of low-carbon heat networks (or district heating) by examining potential waste heat sources in Scotland that have received limited attention. Heat networks, or district heating, involve providing heat to homes and businesses via insulated pipes in the form of hot water or steam.

 The study assesses the waste heat potential of 10 different sectors (distilleries, breweries, bakeries, paper and pulp, laundry, supermarkets, data centres, electricity substations, waste-water treatment plants (WWTP), and landfill) using a variety of data sources and calculation steps.

 Waste heat potential:

• The study has identified a waste heat potential of circa 1,677 GWh across some 932 sites in Scotland. 
• The largest waste heat potential was estimated to be in the distillery and waste-water treatment sectors. Bakeries and paper and pulp are the other sectors with high waste heat potential.

Opportunities:

• Data centres, breweries, supermarkets, laundries, bakeries and paper and pulp sites have relatively high heat demand in their local areas. As a result, these may provide potential for district heating (DH) opportunities.
• 237 sites (equivalent to 25% of all the waste heat sites we identified, with a total waste heat potential of 146,554 MWh), have an existing DH scheme within 500m.

Recommendations:

• Further investigation is recommended on the technological aspects of waste heat recovery from WWTPs, distilleries and paper and pulp mills, as these sectors have relatively higher theoretical waste heat potential. 
• There is a need to review and assess the heat recovery technologies suitable for capturing waste heat from electricity substations. 
• The viable distance for the distribution and use of waste heat will vary depending on several factors. Further research in this area and/or reviews of the technical and commercial aspects of recovering and re-using waste heat in district heating systems would be advantageous.
• As only a simplified proximity analysis was undertaken, it would be advantageous to conduct additional analysis to explore the opportunities for supply / demand matching in more detail.