Retrofitting homes for net-zero

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In advance of the Local Government, Housing and Planning Committee’s (‘the Committee’) debate on “retrofitting properties for net-zero” on 18 January 2022, this blog takes a closer look at the topic. The debate follows an evidence session (focussing on homes) in November 2021. After the meeting, the Committee wrote to the Scottish Government, and received a response on 11 January 2022.

Homes account for around 13% of Scotland’s total greenhouse gas emissions. Therefore, to meet the target of reducing emissions by 75% by 2030, and the net-zero target by 2045, Scotland’s homes will need to become significantly more energy efficient and use zero or almost zero carbon heating sources.  

What is retrofitting?

Retrofitting is the addition of new technology or features to older systems in homes to improve air tightness and to make them more sustainable and energy efficient.

Examples of energy efficiency improvements include:

  • loft, floor and wall insulation
  • draught proofing
  • secondary, double or triple glazing.

Examples of zero or near zero emissions heating systems include:

  • heat pumps
  • direct electric heating
  • biomass boilers
  • connecting a house to a heat network supplied by a low carbon or renewable heat source.

The scale of the challenge

The Scottish Government’s Heat in Buildings Strategy (‘HiB strategy’), is clear about the scale of the challenge. For example:

  • Most homes still use gas for heating. Only around 11% of households have a zero or near zero emissions heating system.
  • Recently, around 3,000 renewable heating systems were installed each year. Zero emissions heat installations must scale up to provide a total of at least 124,000 systems installed between 2021 and 2026. The installation rate will need to peak at over 200,000 new systems per annum in the late-2020s.
  • The Scottish Government proposes that homes must meet Energy Performance Certificate (EPC) rating C or better in the future (see more below). In 2019, less than half (45%) of Scotland’s homes were rated EPC C or better.

Despite the scale of the challenges, there are wider social and economic benefits, as well as environmental benefits, from upscaling retrofitting activity. The Just Transition Commission’s report noted that investment in heat and energy efficiency will create jobs and new opportunities, in installation, construction-related trades and manufacturing.

There may be health benefits too. The risk of respiratory and cardiovascular illnesses is higher in cold and damp houses. An efficient heating system, high levels of insulation, and a good ventilation system can improve health and wellbeing.

The HiB strategy provides a broad framework for its plans to achieve net zero emissions in Scotland’s buildings. A range of work around regulation, public engagement, supply chain and skills development is on-going.

The costs of retrofitting are challenging

The cost of retrofitting homes will vary depending on the type of building, existing levels of energy efficiency, and the type of heating systems being replaced.

The Scottish Government estimates that the average cost of installing a heat pump and improving energy efficiency is around £12,000 per home.  Average costs for upgrading an off-gas grid property (often in rural areas) to an EPC Band C could be higher, in the region of £17,000.

The high upfront costs and sometimes uncertain payback periods can put people off making changes to their homes.

The Scottish Government has committed £1.8 billion over the lifetime of this parliament for energy efficiency programmes and renewable heat schemes.

The Committee heard some concerns about accessing funding for retrofitting with one witness describing it as an ‘alphabet soup’ that was difficult to navigate. The Scottish Government’s response made a number of points about funding, including that the new National Public Energy Agency will have a role in streamlining the process.

The HiB strategy estimates that the total investment required to transform homes and building for net-zero will be at least £33 billion.  The Scottish Government is establishing a new Green Heat Finance Task Force to provide advice and recommendations on potential new financing models.

Affordability could be improved if costs of new heating systems come down. The UK Government says that it wants to ‘challenge industry to innovate and improve the affordability and appeal of heat pumps’, reducing installed costs by 25-50% by the end of the decade.   

Some zero emissions heating systems may be more expensive to run due to the higher price of electricity compared to gas. This creates a tension between Scottish Government commitments around fuel poverty and its climate change ambitions.

Policy on energy markets is reserved. The UK Government states that it is working to address energy pricing that can act as a barrier to heat decarbonisation. It plans to launch a call for evidence on options for energy levies and obligations to help rebalance electricity and gas prices.

Public engagement is critical to the heat transition

The HiB strategy acknowledges that public understanding of the role of heating in causing greenhouse gas emissions is low. The Committee was concerned about this lack of awareness. As the Existing Homes Alliance argues, to ensure a just transition everyone needs to be involved and the process for accessing advice and support must be easy. 

The Scottish Government is developing a bespoke public engagement strategy for heat in buildings. It plans to retain the support and advice services currently operating as Home Energy Scotland and is also working to establish a National Public Energy Agency. The Agency’s remit will include informing the public and providing expert advice.

Councils will have to develop local heat and energy efficiency strategies (LHEES) – long-term plans for decarbonising heat in buildings and improving energy efficiency in their area. Community engagement will be an important part of these strategies.

The Scottish Government plans new legislation for energy efficiency and zero emissions heating

For energy efficiency, the Scottish Government proposes that where “technically and legally feasible and cost-effective” all homes should meet at least EPC Band C by 2033.

Earlier backstop dates for homes in the private rented sector (2028) and fuel poor homes (2030) may apply, with later backstop dates for multi-tenure and mixed-use buildings (2040-2045).

Social landlords are already working towards the Energy Efficiency Standard for Social Housing (EESH 2) which requires all social housing to meet EPC Band B by the end of December 2032. The Committee previously heard concerns from social landlords about the cost of meeting EESH2, which were reflected in the Zero Emissions Social Housing Task Force report.

Details still need to be finalised. For example, the EPC requirements will only apply where it is “technically and legally feasible and cost-effective to do so”. It’s not yet clear what this might mean in practice, how many of Scotland’s homes might be covered by such exemptions, or, for owner-occupiers how legislation will be monitored and enforced.

Legislation will also require the installation of zero or very near zero emissions heating systems in existing buildings no later than 2045.

This will support the Scottish Government’s commitment to phasing out the need to install new or replacement fossil fuel boilers in off-gas properties from 2025, and in on-gas areas from 2030.

Consultation on the approach to the regulations will happen later in 2022.

A different approach may be required for mixed use and mixed tenure buildings

The HiB strategy says that a different approach, which considers the whole building rather than individual homes, may be more appropriate for mixed tenure and mixed-use buildings.

People living in flats can already face challenges in maintaining and improving their buildings.

Members of the Committee visited a traditional tenement retrofit project in Glasgow. The project team said that tenement maintenance was crucial, arguing that retrofitting is a part of a broader set of important housing questions, including tenement law reform

Supply chain and skills

Scaling up retrofitting activity has implications for the supply chain and the skills needed. The Committee heard concerns about the availability of skilled labour in rural areas.  

The Scottish Government argues that its investment and regulatory plans will help provide certainty and build supply chain confidence to invest in training, skills and new projects. 

Again, there is a range of work ongoing. For example, the Scottish Government is working with industry to co-produce a new ‘Heat in Buildings Supply Chain Delivery Plan’ by Summer 2022.

In their recent Progress in reducing emissions in Scotland 2021: Report to the Parliament, the Climate Change Committee said that Scotland was ahead of the rest of the UK in setting out building decarbonisation policy but this needs to be delivered. As it said:

“…Now the focus must be on making concrete progress on the roadmap against targets for energy efficiency, funding and the roll-out of low-carbon heating..”

Kate Berry, Senior Researcher (Housing), SPICe