CRS64 Uptake of domestic energy efficiency measures

The Home Energy Efficiency Programmes for Scotland (HEEPS) (previously, the National Retrofit Programme) was launched in April 2013 in line with the recommendations in the Fuel Poverty Forum's 2012 interim report (Scottish Government, 2012b) on its review of fuel poverty strategy.

It is intended to deliver a transformational change in energy efficiency in homes by retrofitting existing housing stock.  The approach set out in Scotland’s Sustainable Housing Strategy recognised that measures necessary to meet both fuel poverty and emissions reductions targets (mitigation) needed to do more than previous schemes (Scottish Government, 2013b).   It set three targets:

(i)        Every home to have loft and cavity wall insulation where it is cost effective and technically feasible to do so.

(ii)      Every home with gas central heating to have a highly efficient boiler with appropriate controls.

(iii)     At least 100,000 homes to have adopted some form of individual or community renewable heat technology for space and/or water heating

Therefore HEEPS was designed for specific groups, benefitting from specific measures and to enable additional funding to be leveraged from the UK Green Deal (closed in July 2015) and Energy Company Obligation (ECO) – see below. HEEPS is actually a bundle of programmes with different but inter-related objectives:

1. The majority of Scottish Government budget for fuel poverty and energy efficiency programmes is allocated to Area Based Schemes (HEEPS: ABS).  Area Based Schemes are delivered by Local Authorities and prioritise fuel poor areas, providing a range of insulation measures.  It is intended to cover all homes in Scotland in the 10 years to 2023.  For 2015/16, £65M of funding was allocated to the 32 Local Authorities in Scotland, using a needs-based model to distribute the Core Allocation Programme (CAP) element (Scottish Government 2014a)[1].
2. The Affordable Warmth Scheme (HEEPS:AWS) which ran from April 2013 to March 2015 was available to households vulnerable to fuel poverty as defined by the UK Government’s ‘Affordable Warmth Group’ (Ofgem, 2014).  It typically involved a referral to ECO Home Heating Cost Reduction Obligation (ECO: HHCRO) for improvements to boilers or upgrading of loft and cavity wall insulation to those in receipt of qualifying benefits (ibid.).
3. The third element is the Energy Assistance Scheme (HEEPS: EAS)[2] which provides grants of between £4,000 and £6,500 to install ‘energy efficiency measures’ to home owners and tenants of private sector landlords, who are over 60, living in energy efficient homes without central heating and who are in receipt of a qualifying benefit (Ofgem, 2014).

The impact of HEEPS delivery for 2013/14 across all three initiatives is provided in Table 1.  Of the total of 34,358 measures implemented the majority (60%) improve energy efficiency by insulating the building fabric (wall or loft).  This is particularly the case in HEEPS:ABS where 82% of measures are focused on insulation.  Further, as a result of targeting, the majority of these measures (61%) were implemented by owner-occupiers or private sector landlords; generally energy efficiency levels are higher in the social rented sector.  This may reflect the relatively low base of the private sector at the start of this particular programme.  On the other hand, both HEEPS:EAS and HEEPS:AWS measures are more focused on improving heating systems.  Rather surprisingly very little work is done on draught-proofing windows and doors, a relatively low cost measure.

Table 1: HEEPS measures delivered by scheme 2013-14

The corresponding net gain in household income amounts to £224 million over the lifetime of the measures - defined to be 15 years for heating systems and 40 years for insulation measures (DECC, 2014a) – and lifetime emissions savings of 923 ktCO₂ – of the order of the average CO₂ emissions from 154,000 homes - at a cost of £74 million for fiscal year 2013 (FY13).

72% of the measures in 2013/14 were implemented through HEEPS Area Based Schemes; Table 2 provides a breakdown by Local Authority.  A total of just over £42 million was allocated in 2013/14 based on need which is defined in terms of a Local Authority’s exposure to fuel poverty and the type of construction of the housing stock in the region  (Scottish Government, 2014f).  Reflecting these criteria, allocations ranged from nearly £3.5 million for Glasgow to just over £0.4 million for Clackmannanshire.

Costs per measure ranged from nearly £7,000 in Angus, where 154 EAS Measures were implemented (central heating system installations in the main) in less than 0.5% of the housing stock, to less than £500 in Renfrewshire where impact in terms of absolute numbers was an order of magnitude greater at over 2% of the housing stock, although the majority of interventions (93%) were ABS (loft and wall insulation). Neither East Dunbartonshire nor Orkney implemented any ABS measure, focussing instead on heating systems.  This is surprising particularly for Orkney, which has one of the highest rates of fuel poverty in Scotland (Scottish Government, 2014d). By contrast, Eilean Siar (Western Isles), another area of high fuel poverty, has the highest rate of implementation at nearly 6% of households.

Allocations for Area Based Schemes increased by over 50% to £65 million for 2014/15, continuing to be the largest proportion of the overall budget of £103 million (Scottish Government, 2014e).  The average allocation for FY14 is a little over £2 million, ranging from nearly £7 million in Glasgow, a 100% increase on the previous year, to just £374,000 in East Renfrewshire, a cut of nearly a fifth. The only other region with a reduced allocation is East Lothian, although there is no pattern in the housing or deprivation data that explains why this should be the case.  At the other extreme, Renfrewshire stands to improve its allocation by over 350%.  Orkney’s allocation for 2014/15 remains the same as the previous year.

Advice and guidance on scheme qualification and application support is provided through Home Energy Scotland http://www.energysavingtrust.org.uk/home-energy-scotland which received £3million in 2013-14. 49,404 households contacted the service in 2013/14, over 45,000 representing nearly 90,000 people took some form of either energy saving (95%) or income maximisation [debt] (10%)[3]advice.  Their funding increased three-fold for 2014/15.

HEEPS also provides advice on claiming energy related benefits and tax credits - income maximisation - as well as identifying eligibility to discounted energy rates offered by energy suppliers.

Energy Company Obligation

The Energy Company Obligation is a GB-wide scheme that was launched in January 2013 to address some of the barriers to uptake that had been identified in earlier programmes.  ECO1 (2013-15) was designed work alongside the Green Deal in the domestic sector, providing assistance to low income and vulnerable consumers living in hard to treat properties[4].  It placed obligations on all energy suppliers with more than 250,000 customers and supplying more than 400 GWh of electricity or 2,000 GWh of gas to deliver carbon and heating cost reductions.

Targets are apportioned to the obligated suppliers based on their market share and established in The Gas and Electricity (Energy Companies Obligation) Order 2012.

There were three main ECO obligations:

• Carbon Saving Obligation (CSO) covering the installation of measures like solid wall and hard-to- treat cavity wall insulation, which ordinarily can’t be financed solely through the Green Deal.
• Carbon Saving Communities Obligation (CSCO) providing insulation measures to households in specified areas of low income. It also makes sure that 15 per cent of each supplier’s obligation is used to upgrade more hard-to-reach low-income households in rural areas.
• Home Heating Cost Reduction Obligation (HHCRO) - also known as the Affordable Warmth Obligation - providing heating and insulation measures to consumers living in private tenure properties who receive particular means-tested benefits. This obligation supports low-income consumers who are vulnerable to the impact of living in cold homes, including the elderly, disabled and families.

In the 27 months of the programme from January 2013 through to March 2015, Scotland accounted for 11.5% of all ECO measures across Britain.  140,635 households received support from the three ECO schemes: 44% of these (72,772) measures were delivered under CSO, 30% (49,887) were delivered through CSCO of which nearly a fifth were in rural areas ahead of the rural sub-obligation, a significant impact given the additional cost of reaching rural and especially island communities.  Finally, 25% (41,197) measures were implemented through the Affordable Warmth scheme reaching the most vulnerable households, all of which were referrals through HEEPS:AWS according to data from the Energy Saving Trust (Scottish Government, 2014f).  Table 3 presents a summary of the ECO programme impact in terms of measures implemented from 2013 to date; a further breakdown by administrative area and parliamentary constituency is available.  

Uptake has improved by 5 ½ percentage points over the course of the programme to date.  GB-wide that uptake of course was tied to the success of the Green Deal (DECC, 2015b; UK Government 2015b).

The costs of the scheme reported by the supplier companies with obligations for the delivery of ECO are not disaggregated for the four home nations.  Across Britain as a whole the scheme is estimated to have cost in excess of £2.3Bn exclusive of £190M of administrative costs.

Green Deal

The Green Deal was launched on 25 February 2013 in Scotland.  It used a five-step process from Assessment to Installation involving a number of actors[5] – Assessors, Providers and Installers – leading to a ‘live’ plan. Repayments for any of the recommended measures that were implemented were guaranteed to be no more than what a typical household would have saved in energy costs (the Golden Rule).

However, UK Government funding for the Green Deal Finance Company was terminated in July 2015 due to “low take-up and concerns about industry standards” (UK Government, 2015c).  The fact that 3,119 ‘live plans’ in Scotland accounted for 46% of all of the plans In development across Britain adds weight to that assessment.  Future funding releases to the Green Deal Home Improvement Fun were also discontinued even though the third release of the fund was fully allocated (UK Government, 2015d).  Table 4 provides a summary of the impact of the programme in Scotland to March 2015.

Green Homes Cashback Scheme

The Green Homes Cashback Scheme is a Scottish Government funded initiative that provides a rebate towards the costs of installing measures recommended in a Green Deal Advice Report.  It ran in 3 Phases between November 2012 and March 2015. 

In Phases 1 and 2 (November 2012-January 2015) 35,265 rebate vouchers were issued of which 19,182 had been paid to June 2015 at a cost of £13.6M. The majority of the measures implemented were LED lighting retrofits (32%) although upgrades to gas condensing boilers (24%) and heat controls (17%) were heavily funded too.  Phase 2 ran from June 2014 to March 2015.  4,628 vouchers were issued of which 3,763 had been paid to June 2015 at a cost of £9.6 million.  Upgrading heating systems to condensing gas boilers accounted for the majority of the work undertaken (46%), adding to the 39,324 households, which had upgraded under the earlier Boiler Scrappage Scheme (see below). 

The HEEPS Cashback Voucher Scheme replaced the Green Homes Cashback Scheme in April 2015; no performance data is available yet.  It is available to owner occupiers and private rented sector landlords and tenants, where the property is in council tax bands A to C.

An equivalent fund for social housing providers launched in 2013 on a first come first served basis was exhausted early by August 2014 having supported 45 projects in over 6,000 properties across Scotland at a cost of £8.1 million (Energy Saving Trust, 2015)

Table 1: HEEPS measures delivered by scheme 2013-14

As a result of 20 years of energy efficiency initiatives, the average SAP rating (energy efficiency and environmental impact) has risen from an average of 46 in 2002 (Scottish Executive, 2002a) to 66 in 2013 (Scottish Government, 2014b).  Schemes have been implemented at both GB (Northern Ireland has had separate schemes throughout) and national (Scotland) scale (Table 5 and Table 6, respectively).

Most of these schemes imposed an obligation on the energy supply companies who financed their remedial measures through a levy on domestic charges.

Energy Efficiency Standards of Performance (EESoP) had targets for around 20 TWh of energy savings – electricity and later gas - with a corresponding 8.6MtCO₂ emissions reduction over the lifetime of the measures. Over the 8 years of the programme, 21 TWh of energy savings – equivalent to around 5% of the annual energy consumption of the sector - were realised GB-wide, representing around £250M of household cost savings and emissions reductions of the order of 6 MtCO₂.

The first phase of the Energy Efficiency Commitment delivered 86.8 TWh of absolute energy savings against a target of 62TWh, although the scheme failed to deliver supplier specific targets with a shortfall of around 1TWh as a result of 2 suppliers falling out of the scheme due to insolvency. Some 4.5TWh of these savings were achieved through uplifts (for specific measures) and area bonuses contributing to the surplus, which was carried forward (selectively) to EEC2.  The independent assessments carried out Eoin Lees Energy remove uplifts and other ex-ante agreed measures (Lees, 2006 and 2008).  Rosenow and Galvin (2013) provide an evaluation that takes account of rebound/pre-bound/free-rider effects.  6 TWh (7% of the overall scheme saving) was achieved in Scotland.

While Scotland undoubtedly has benefitted from these schemes, it is difficult to determine precisely to what extent, as a disaggregation to the national level is not readily available for all schemes. The OFGEM review of EEC1 (cited in Halcrow, 2013) for example suggested that energy savings in Scotland were 22% lower than would be expected based on its pro-rated share of households, equivalent to around £17 million of investment by the energy companies.  On the other hand between April 2008 and December 2012 over 540,000 households received free or subsidised professionally installed cavity wall or loft insulation measures under CERT (Scottish Government, 2013b).  By the end of 2012 less than 1% of Scottish households had no loft insulation, while 58% had 100mm or more.

Table 6 summarises energy efficiency initiatives that have been implemented in Scotland over the last 20 or so years, all of which were aimed primarily at vulnerable target groups in Scotland.  Some of these schemes included social as well as economic and environmental objectives.  The Warm Deal (1999-2006), for example, used community benefit clauses in public procurement policy to stipulate that measures must be implemented by companies taking on ‘New Deal’ trainees, creating 26 apprenticeships, 31 work placements and 454 training opportunities during the course of the programme.  Under the Home Energy Programme that preceded HEEPS, £150 million was invested between 2009 and 2013 on fuel poverty and energy efficiency measures with an estimate net gain of £700 million in household income and a saving of 3 MtCO₂.  In total some 900,000 measures have been installed in Scottish households with nearly 1 in 3 properties (700,000) having benefitted from energy efficiency support with an average net gain in household income of around £200-£250 p.a. (Scottish Government, 2015).

The cost effectiveness of these schemes varies.  The average price per tonne of CO2 saved in the Universal Home Insulation Scheme (UHIS) was around £22 compared with £311 for the Boiler Scrappage Scheme.  However, the Energy Saving Trust note that the performance data do not factor for customer choice, customer service, delivery time or administrative costs all of which are important considerations in evaluating the success of these schemes.  They suggest that the £478 million saving to customer bills in the Energy Assistance Package – an initiative in the Home Energy Programme that replaced the Warm Deal and Central heating Programme in 2009 - ignores social value – the contribution of the employment (including apprenticeships) on the wider economy directly attributable to the Programme - which it estimates at an additional £34.8million.

The Smith Commission, following the 2014 referendum on independence, proposed devolution to the Scottish Parliament of certain elements of ECO, the Warm Home Discount scheme, Winter Fuel Payments and Cold Weather Payments. Energy efficiency will remain a priority policy area in Scotland, particularly once the additional energy powers have been fully devolved (Smith Commission, 2014; UK Government 2015e).

Originally intended to run for 3 years, ECO was extended in 2014 through an Amendment to the ECO Order (2012) to run for a further two years with new targets, which reduce the carbon saving target and include new measures (loft and cavity wall insulation and district heating) to be eligible under the revised scheme rules.  As noted above, the Green Deal was terminated in July 2015, which will presumably have a significant impact on access to support for the implementation of ECO measures in England and Wales. 

In Scotland on the other hand, HEEPS schemes have been extended temporally and in number.  In 2015/16 the Scottish Government will make available £65 million of grant funding through the Home Energy Efficiency Programmes for Scotland.  Budgetary concerns remain though with respect to achieving the third HEEPS:ABS target of 100,000 homes adopting some form of individual or community renewable heat technology for space and/or water heating (Scottish Parliament, 2014).

The Green Homes Cashback Scheme has been replaced in with the HEEPS Cashback Voucher Scheme with a budget of £15 million.  £10 million will be available for individual households for vouchers of up to £5,800 (more in remote and rural areas) to install energy efficiency measures like solid wall insulation, while £5 million will be available for social landlords. Funding for social landlords will be prioritised for those with off-gas properties to ensure those social tenants in the least energy efficient properties needing most assistance are able to receive it. Over 20 social landlords are expected to benefit from this funding[1].

HEEPS Warm Home Scotland (HEEPS:WHS) replaced  HEEPS:EAS in September 2015 with a budget of £224 million through to 2022. 

Finally, a new HEEPS Loans Scheme launched in April 2015 with a £14 million fund, administered by Home Energy Scotland will support owner-occupiers and registered private sector landlords in Scotland.  The repayment period varies based on the amount borrowed (up to a maximum of £10,000), but those taking out higher value loans will be able to pay back over 10 years.[2]

Several of these schemes – HEEPS:Cashback, HEEPS: Loans and HEEPS: AWS – require a Green Deal Advice Report as a pre-requisite to accessing funding.  While the Green Deal assessment framework remains open[3], the implementation process in the medium to long-term is somewhat uncertain. 

1. Proposed changes to the tax credit system outlined in the UK Budget in July 2015 will disqualify some target groups for energy efficiency schemes focused on exacerbating fuel poverty in Scotland which is determined as the percentage of income required to maintain a dwelling within the parameters – temperature and the required heating hours - of a well-defined (enhanced) heating regime (Scottish Executive, 2002b).
    
2. Energy efficiency is set to become a national infrastructure priority as a result of the ambition to decarbonize the entire energy system (Scottish Government, 2015).  The cornerstone for this work will be Scotland’s Energy Efficiency Policy (SEEP), which will provide an offer of support to both residential and non-residential buildings to improve their energy ratings.  The new programme is due for launch in 2017/18 once the requisite additional powers on energy recommended by the Smith Commission have been fully devolved (Smith Commission, 2014; UK Government, 2015), following the recommendations of Clause 68:
   
   Powers to determine how supplier obligations in relation to energy efficiency and
fuel poverty, such as the Energy Company Obligation and Warm Home Discount,
are designed and implemented in Scotland will be devolved. Responsibility for setting the way the money is raised (the scale, costs and apportionment of the obligations as well as the obligated parties) will remain reserved. This provision will be implemented in a way that is not to the detriment of the rest of the UK or to the UK’s international obligations and commitments on energy efficiency and climate change.
    
3. The same transfer of power may also help to alleviate unintended and contradictory outcomes that have become apparent in UK-wide energy efficiency schemes and those operating under devolved powers: actions that can be taken by the Scottish Government are constrained by their more limited role in relation to energy policy, substantial aspects remaining under control of the UK Government (Halcrow, 2013).

In their recent assessment of emissions reductions in Scotland, the UK Committee on Climate Change note that:

 “Scotland has made good progress in a number of areas and is often leading the UK: There has been good progress in deploying renewable electricity generation capacity, in installing community and locally-owned energy projects and in rolling out area-based energy efficiency programmes”. (Committee on Climate Change, 2015b)

Energy efficiency improvements are crucial elements to Scotland’s response to climate change, playing an important role in building adaptive capacity.  Demonstrable progress has been made over the last 20 years as a result of a range of demand side policies, specifically addressing improved insulation of the building fabric and remediation of heating systems. 

However, as Energy Action Scotland noted in 2014, Scotland is not in control of either fuel prices or the parameters of schemes funded through consumer energy bills.  One element of this has since been addressed in the Smith Commission’s consideration of devolved energy powers (Smith Commission, 2014 paragraph 68). Additionally, commenting on the barriers to tackling fuel poverty and improving energy efficiency, they conclude that in rural off-grid areas ECO and HEEPs are not working as intended and that longevity of schemes and quality assurance of the work need additional focus. Here too, devolved powers will remove some of the existing constraints.   The report does recognise too that there are also elements of HEEPS - the single-access point for public advice (Home Energy Scotland) and the area-based schemes – that are already working well (Energy Action Scotland, 2014).

Specific challenges for the delivery of energy efficiency measures in Scotland were recognised in Securing Our Share (Scottish Government, 2009).  Policy design over the four years to the start of the HEEPS programmes and subsequently has sought to address these issues, as outlined in italics below:

•  Scotland has a more dispersed and lower population density meaning potentially higher costs for reaching rural and island communities.   

This is reflected in the relative fuel poverty rates and in the penetration of HEEPS measures in Table 2, for example.

•  Scottish house types, construction and property sizes are different which may make energy savings less cost effective. For example, where there are cavity walls, these tend to be wider due to different building codes and practices in Scotland. 

Coverage of cavity wall insulation increased from 23% of Scottish households at the end of 2010 to 48% at the end of 2012.

• Scotland has more flats (Scotland 36%, England 17%, Wales 9%), which provide fewer opportunities for spend and savings. 

There were some 575,000 dwellings in 2012 that could not be insulated in the loft space.

•  Area based approaches, which have proven to be a very cost effective delivery mechanism, have, in the past, been more developed in England and Wales. 

While there is insufficient data available yet to assess the cost effectiveness of HEEPs, the delivery cost of the Home Energy Programme that preceded it compare well with the delivery costs of ECO for the UK as a whole.

•  In the past, the Scottish Government’s Fuel Poverty Programmes were displacing CERT spend as the insulation measures available under the CERT Priority Group were largely the same as those previously available through the Warm Deal and Central Heating Programmes. 

HEEPS was designed to leverage ECO funds each year into Scotland.

•  Some energy supply companies may have found it easier to concentrate their CERT activity closer to their core domestic markets in England and Wales. 

As suppliers of energy in Scotland, devolved powers will require them to focus their energy efficiency activities in ECO2, for example, equally in Scotland regardless of their location.

In this context, the Committee on Climate Change’s recommendations to Scottish Government (Committee on Climate Change, 2015b) are relevant for the future:

• Carry out an evaluation of current energy efficiency programmes (especially the area-based schemes) to help determine the best way to implement supplier obligations as they become devolved.
• Develop effective energy efficiency schemes for multi-tenanted properties as flats make up 38% of the housing stock.
• Make energy efficiency funding available over a sufficiently long timescale to ensure that complex projects can be completed.
• Ensure that policies effectively target electrically-heated homes both in terms of energy efficiency improvement and incentives for low-carbon heat.

Adopt ambitious minimum energy efficiency standards in both owner-occupied and privately rented sector housing within the regulations planned for consultation in spring 2015.

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https://www.theccc.org.uk/wp-content/uploads/2015/06/6.736_CCC_ASC_Adaptation-Progress-Report_2015_FINAL_WEB_070715_RFS.pdf

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UK Government (2015a) Green Deal, Energy Company Obligation and Insulation Level in Great Britain: Quarterly Report to March 2015, available at: https://www.gov.uk/government/statistics/green-deal-energy-company-obligation-eco-and-insulation-levels-in-great-britain-quarterly-report-to-march-2015

UK Government (2015b) Green Deal: energy saving for your home, available at https://www.gov.uk/green-deal-energy-saving-measures/overview

UK Government (2015c) Green Deal Finance Company Funding to End, available at: https://www.gov.uk/government/news/green-deal-finance-company-funding-to-end

UK Government (2015d) Third Release of the Popular Green Deal Home Improvement Fund fully allocated, available at: https://www.gov.uk/government/news/third-release-of-popular-green-deal-home-improvement-fund-fully-allocated

UK Government (2015e) Scotland in the United Kingdom: an enduring settlement, available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/397079/Scotland_EnduringSettlement_acc.pdf

UK Health Forum (2014) Fuel poverty: How to improve health and wellbeing through action on affordable warmth, available at: http://www.fph.org.uk/uploads/UKHF- HP_fuel%20poverty_report.pdf 

DECC (2015c) Sub-national gas consumption, available at: https://www.gov.uk/government/collections/sub-national-gas-consumption-data

DECC (2015d) Sub-national electricity consumption, available at: https://www.gov.uk/government/collections/sub-national-electricity-consumption-data

DECC (2015e) United Kingdom Housing Energy Fact File, 2013, available at: https://www.gov.uk/government/statistics/united-kingdom-housing-energy-fact-file-2013

Energy Saving Trust Home Energy Efficiency Programmes, available at: http://www.energysavingtrust.org.uk/home-energy-efficiency-programmes

SPICe (2015b) Fuel Poverty in Scotland, Liddel, G. SPICe Briefing Papers, Scottish Parliament Information Centre (SPICe), available at: http://www.scottish.parliament.uk/ResearchBriefingsAndFactsheets/S4/SB_15-13_Fuel_Poverty_in_Scotland.pdf

Scottish Housing Condition Survey, Scottish Government, available at http://www.gov.scot/Topics/Statistics/SHCS

Lead author: Mike Bonaventura (Crichton Carbon Centre)

Gareth Feeney , Housing Sustainability Strategy, Housing, Sustainability and Innovative Finance Division, Scottish Government.