Ministerial foreword, Heat in Buildings Strategy

Buildings account for around a fifth of Scotland’s greenhouse gas emissions. Reducing these emissions is essential for Scotland to get to net zero. Achieving this transformation requires making changes to a large number of properties, effective technological solutions, those solutions being affordable, and buy-in from home and business owners. However, this also opens up significant opportunities to tackle issues like fuel poverty and poor housing and create green jobs.

Alternatives to gas

The vast majority of our homes use mains gas as their primary heating fuel (approx. 2 million). Hydrogen is one of a handful of potential routes which offer a mass-market solution to the challenge of decarbonising heat. Our evidence review of hydrogen for heat in buildings found that Scotland has a number of strengths in supporting the deployment of low carbon hydrogen, most notably relating to our natural resources, skills, and existing infrastructure.

Another potential source of heat in buildings is large scale adoption of heat pumps – an efficient way of producing heat from electricity by capturing the latent heat in the air, ground or water and using it for heating.

Our evidence review of heat pump use in Scotland concluded that appropriate design and installation are the most important considerations to ensuring heat pumps perform well in Scotland. Heat pumps are a mature heating technology used in several European countries, including countries with colder winters than Scotland. The review found no evidence to suggest that heat pumps could not operate effectively or efficiently in Scotland.

Different business models

One way of achieving net zero heating is through Heat as a Service (HaaS), 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.

Our report for the Heat in Building Strategy outlines HaaS business models that have been tried across Europe. It concludes that Haas could help overcome the two main barriers that put people off installing low-carbon heating systems: concerns about cost and comfort.

Economic considerations

Alongside upgrading and changing heating in existing homes is ensuring all new builds are zero emissions. 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.

In the six scenarios analysed in our report on the cost of zero emission heating in new buildings we found lifetime cost increases ranging from 25%-231% compared to the equivalent lifetime cost of heat supply using gas boilers. However, the stakeholder interviewed highlighted that 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 plays in a development after construction are also key factors.

We also looked at the balance of gas and electricity levies and their impact on low-carbon heating uptake.

Across all these considerations there are questions of how to design the most effective policy to implement the changes required. We looked at historical and ongoing experiences of technology phase-out policy, and by extension, phase-in, in the energy sector to identify lessons and learnings that Scotland can draw on.