Net Zero, Energy and Transport Committee

Meeting date: Tuesday, May 17, 2022

Official Report 724KB pdf

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Role of Local Government in Delivering Net Zero

Item 2 is an evidence session in relation to our inquiry into the role of local government and its cross-sectoral partners in financing and delivering a net zero Scotland. We launched the inquiry in December in order to look into progress at the local level in reaching national net zero targets.

Today’s session will explore how local government can work with private sector and public sector partners to meet the ambitious aims that are set out in the Scottish Government’s heat in buildings strategy.

We have four panellists. Joining us in the committee room are Teresa Bray, who is chief executive of Changeworks and is here on behalf of the Existing Homes Alliance; Roger Curtis, who is technical research manager at Historic Environment Scotland; and Professor Janette Webb, from the UK Energy Research Centre. Joining us remotely is Elaine Waterson, who is policy manager for Scotland at the Energy Saving Trust.

Good morning, everyone, and thank you for joining the committee this morning. We very much appreciate that you have given up your time to appear before us. We have approximately 75 minutes for this panel session and will move straight to questions.

My first question relates to the Scottish Government’s heat in buildings strategy. As the witnesses know, there is a target to retrofit and decarbonise 1 million domestic dwellings and up to 50,000 non-domestic buildings by 2030. Given your experience in your respective areas, what main challenges will local authorities and delivery partners face in meeting those 2030 targets, and how realistic are the targets?

I will begin with Professor Janette Webb and then move to Roger Curtis and Teresa Bray.

Thank you for the opportunity to speak this morning. Most of what I will say derives from a combination of research, evaluation of the energy efficient Scotland pilots and some related work on the development of district heating networks.

On the question whether the targets are feasible, although they are very ambitious, we need to be extremely ambitious given all the climate science and the dire warnings that we are getting about the state of our life support system, which certainly worry me.

It has to be done effectively. In Scotland, we have one important piece of the puzzle just about in place, although it needs to be moved forward at a very systematic and rapid rate. I refer to the proposition to introduce a requirement on all our local authorities to produce comprehensive local heat and energy efficiency strategies that cover every building, so that we know that we are all in it together. Every property owner—public, private or commercial—has to be involved in that programme. If that is done properly, it will provide the means and structure that we need.

We saw in the pilot some of the difficulties of doing that effectively in relation to local heat and energy efficiency strategies in smaller area developments. My colleague Teresa Bray will be able to speak about that in more detail than I can, but I can give an example. We saw in particular a lack of technical expertise in local authorities at the moment and the necessity of having enough expertise—very easily, directly and responsively accessible expertise—so that the local authority can be the intelligent agent and intermediary. Most of the local authority representatives we interviewed really wanted at least some more technical proficiency in house so that they could feel confident that they understood the significance and robustness—or otherwise—of the data.

A second issue is related to just that point: how do we get that data and make it accessible on a shared basis, and get good and agreed central data-sharing protocols that all the local authorities can tap into? There is a lack of good data—particularly on commercial sector buildings and small and medium-sized enterprise building stock—which needs resolving. The local authority officers who are in charge were also concerned about not being able to get the issue on to the agenda of senior management in their authority or on to that of council leaders centrally. They all told us that that needs to be a statutory requirement.

I will stop there and let someone else have a go.

Thank you. You raised a number of very important points, which I am sure that we will pick up on.

I put the same question to Roger Curtis.

HES has been involved in researching thermal upgrade options for traditional and historic properties since 2008. There is a briefing note that gives a bit more background to that. We are fairly comfortable with a suite of technical measures to bring most pre-1919 or hard-to-treat properties up to—certainly—energy performance certificate band C.

Holyrood park lodge, which is just across the road, is now an EPC band C without renewables, and we hope that phase 2 will achieve renewable intervention and an improvement in that EPC certificate. The committee is very welcome to look at that building after the meeting, if members have time. I can discuss that with the clerk.

On materials and interventions, there is a significant opportunity for Scotland to use organic and green materials that conform to what we now call the circular economy. To an extent, those principles have guided our materials selection.

The barriers to implementation are probably around skills and the supply chain. We know that there are significant shortages of labour and contractors for the existing workload of baseline construction, that 50 per cent of construction activity is in repair and maintenance, and that there is a significant backlog of repair shortcomings, as catalogued in the Scottish house condition survey.

We also know that energy efficiency cannot be addressed in buildings that are not properly maintained and coping poorly with the effects of climate change. In most parts of Scotland, climate change means more rain and more damage, frankly. Substandard buildings that are not well maintained are not able to be improved thermally. The supply chain, labour, skills and professional knowledge and understanding to specify repairs correctly are also important factors, but those are probably number 2 on the list.

I will stop there; perhaps we can revisit some of those issues, as the committee wishes.

Absolutely. I ask the same question of Teresa Bray and will then bring in Elaine Waterson, who joins us online.

The targets are very ambitious, but one of the big advantages we have is the strategy, which combines regulation—which is going to be a key point in delivering the targets—and levels of support. Meeting the targets is technically feasible because we do not have to find any new technology, but organisationally it will be very challenging.

One of the key things that we have to recognise is that we are looking at an eight-year programme to meet the 2030 targets, and part of the challenge with that is that we operate on a year-by-year structure, which undermines the delivery of the eight-year programme. For example, the Scottish Government provides funding to local authorities for energy efficient Scotland area-based schemes to help the fuel poor, but although the Government has outlined how much it will commit over time, it does that through a year-by-year allocation. The trouble with that year-by-year allocation is that local authorities need to wait for the allocation to come through.

Changeworks delivers for eight out of the 32 local authorities—we are the managing agent. However, it is challenging to get the programmes off the ground, do procurement and build demand each year, and because councils only get an annual settlement they cannot plan ahead. We do not build roads by asking how many miles we can build from start to finish in a year. It takes much longer to plan total regeneration. More than half our housing stock needs energy efficiency measures, and we have to change heating in great numbers of buildings, so we need to move to multiyear funding.

Political support is required. A lot of local authorities have net zero plans, but they do not necessarily see them through to the point of getting involved in housing across their area.

There needs to be better co-ordination between the Scottish Government, the Convention of Scottish Local Authorities and the Society of Local Authority Chief Executives and Senior Managers, and for them to say that the targets are a high priority and that delivering on them has to be seen as vital. The changes that are taking place are probably not as obvious when compared with some of the street active travel changes, but it is vital that we strengthen the links between different areas.

There will be a need for support for local authorities from national energy agencies. There is a skills shortage right across the country and across a range of skills, and it will not get any better, particularly with fewer people coming from Europe. The skills are not there, so a lot of people will have to transition and we need to consider how that can be made easier for them. That could be done through draft job descriptions for everybody or training and retraining the workforce. A lot of the workforce is there already, but they need to be reskilled, so we need to consider how that can be made easier and how we can engage with Business Gateway to make it happen. Organisationally, it is very challenging, and it is more about how we deal with that than it is about technological changes.

I will bring in Elaine Waterson on the same question.

I echo what others have said. We think that Scotland has the right level of ambition, that the challenge is right if we are going to address the climate emergency and that Scotland is addressing climate change in a much more proportionate way than the other countries in the United Kingdom.

The key point is that business-as-usual activity will not cut it. The pace and scale of activity need to be accelerated very significantly.

09:45  

To echo what Jan Webb said, I think that there is a lack of expertise in many local authorities. Where expertise has been provided to local authorities, it is already making a big difference. For example, the Danish mentoring scheme has provided really helpful support to local authorities such as West Dunbartonshire Council and Shetland Islands Council. It enabled the Queens Quay project in West Dunbartonshire to be designed and built to a really good standard and it helped Shetland to upgrade its existing heat network by advising on pipework specifications.

When expert support is provided, it really makes a difference. We will need a lot more of that.

I also flag up that the responsibilities that we are talking about are all additional ones for local authorities, which will need to be resourced effectively if they are to be able to deliver on those responsibilities and make their appropriate contribution to climate change mitigation.

Thank you for those answers. A number of issues have been highlighted. Who will finance the transition towards the decarbonisation of heat? We have heard from local authorities that they simply do not have the financial resources for that. It is a huge question, but I ask you to touch on whether you have seen good examples in pilot schemes or any feasible mechanisms for financing the transition and the heat in buildings strategy.

As Teresa Bray said, multiyear funding for local authorities is necessary to keep the plan moving, because it must be a delivery plan and not just a strategy that gets filed somewhere, which can happen in many policy areas, as we know.

One way forward for the financing, which would also bring costs down, is to work area by area. I will use the example of the programme that is coming to my street. If we were told that there was a set price, with built-in advice and support and an end-to-end hand-holding process, far more people on the street would be willing to contribute. They would see that there are savings to be made based on bulk procurement from that process.

We spoke briefly about the potential for a series of housing archetypes, which would also help with planning area by area. At the same time, that approach serves the function of public engagement. When I talk to colleagues and friends about the heat in buildings programme and energy efficient Scotland, which have been around for the best part of 10 years, I find that many people are still not aware that they need to get going. It all becomes part of the engagement strategy and awareness raising. Of course, property owners could opt out, but the regulation would come in behind that to ensure that they act.

I will suggest an interesting possible route to financing for people in homes who are in the considered self-funding category. An element of grant is always helpful because it makes people feel that they are being directly supported and incentivised, although it must always be backed by regulation. Another way forward, to which some consideration was given a couple of years ago in Scotland, is to use local savings and loan associations—in our case, that means the credit union network—to provide affordable, low-interest finance with the Scottish Government as guarantor in case any of the loans are not repaid. The evidence from European comparators suggests that that approach has worked pretty well and there has been pretty low default in other parts of Europe.

In the commercial sector, reputation matters. I have seen that in some of the research on private sector domestic and non-domestic landlords. In the Australian scheme, the National Australian Built Environment Rating System industry standards are used to pull standards up because commercial property owners are required to advertise and make it clear that, because the energy performance of their buildings is at a very high standard, there are advantages to taking a lease with them rather than with another property company.

Many commercial landlords will act on the basis of regulation or because regulation is coming in. We have seen with the minimum energy efficiency standards in the private rental sector for domestic tenants that landlords will act on the basis that they know that it is coming in and that they will have to comply. Typically, they can arrange finance for that.

Of course, some landlords will try to avoid it but, by and large, compliance will be in place, certainly on the part of the bigger landlords. There will inevitably be a need for a mop-up behind that with public funding, but in general we have seen in other countries that the use of relatively small amounts of public funding can bring in larger amounts of private funding behind it.

Thank you for those insights. You make a number of good points.

I will bring in other panel members. To follow up on those points, if there is eventually more understanding in the marketplace that home owners will have to meet this expense largely from their own sources, will that have an impact on house or building prices over time? Roger, maybe you can touch on that first, given your experience in the sector.

The financial landscape is not really my area, but I have picked up several sniffs. I support Professor Webb’s comment about area-based schemes where the typologies are limited so the technical variation is less and there are scales of procurement and so on.

The retail finance sector is looking at the refurbishment space. We have been approached by a start-up in relation to financing for this sort of work. The financial sector is looking at the area, and a bit more work or investigation could be done by people who are better versed than I am on how much it could cover. As was mentioned, it will be a broad mix, with a selection depending on the circumstances of the home dwellers in the area. I will stop there, because that is not my lead area.

It is interesting that what is assumed to be the standard retrofit cost per housing unit varies quite a bit depending on who you talk to, but private finance certainly puts it in the region of £20,000. It is that sort of figure, which is a little higher per housing unit than several planning assumptions that I have seen.

One of the key factors will be to make sure that we get the information out there, whether that is through a public information campaign or something else. It will be very important to let people know what is happening.

Regulation will also be vital, because people will start factoring in the cost when they come to sell their property. There are already indications that the market is factoring it in. If someone’s property has low energy efficiency or—this is probably a better example—they have already installed air source heat pumps, particularly in areas that are off the gas grid, that has an impact on price. Prices may come down where there is low energy efficiency, but that would probably be beneficial because, to a large extent, those works need to be done.

The trouble with the property market is that it has become so unaffordable for the vast majority of the population and particularly for young people, so an impact on property prices would be a good thing if it results in better homes in the long term. Our homes are here for the long term—people often live in homes that are 100 years old—so a temporary blip in the property market would probably be useful.

There is a huge amount of private finance looking for a home in low-carbon areas, but investors want to aggregate the demand. That is a real issue. They are not interested in lending £10,000 or £20,000; they are dealing with hundreds of millions of pounds. Whether that involves pension funds or long-term investors, they want to shift away from energy-intensive industry to something that gives a good return, and energy efficiency gives a good return if we can make the financial models work. Aggregation will therefore be vital. Edinburgh is already considering how it could aggregate the demand to take an area-based approach, with hundreds of millions of pounds or £1 billion being spent to make that happen.

Resource funding is required to lever in that private finance and get those creative minds together to think about how we can create a model that will achieve a return on that. Our tenemental stock has already been retrofitted with electricity and gas. We are going to have to similarly retrofit it with heat, but what model is going to supply that? Will it be done by the current utility companies or is there an opportunity for new business models—probably a public-private partnership—that could lever in large amounts of money to change the heating source? While we are putting in the heating, we can also address the energy efficiency, bundling that into a single package. In that way, as people pay for heat, they will also pay for their energy efficiency measures.

Resource funding is needed, and economic minds are needed to see how we can create such models for the future of our country. It has been done in Denmark and other countries that have district heating throughout. Many of those projects are owned by local municipalities. If we are to do something like that, we will need to decide on some structures so that it can be replicated across the country. There is not an issue with the overall capital; it is about how people get access to that. There will be a role for some grant funding for the fuel poor and to encourage the early adopters, but the state cannot pay for everything.

Thank you for those insights.

As Teresa Bray said, the public purse cannot foot the full bill, but it is important that we ensure that the costs are fairly distributed and financed in a way that means that people who are less able to pay or are vulnerable can access public financing while self-funders have suitable attractive financial propositions that can support the required level of investment.

There might be merit in looking at the approach of on-bill financing, which is already being used in some parts of Europe. For example, in the energy sector in the Netherlands, the Energiesprong model works by replacing the bills that residents would have paid to energy companies with an energy plan that costs the householder no more than the bill that they would have paid to the utility company. The energy plan is paid to the housing provider. There could be real merit in looking at that sort of model for Scotland.

It is also worth noting that, in Scotland, private funds are already levered in to some extent through the use of Scottish Government loans for energy efficiency and low-carbon heating technologies. However, they are paid back by householders themselves.

I thank the panel for their answers. I wanted to bring everyone in to address those wider questions in order to set the scene. We might not have time to bring all our witnesses in to answer each question from members. I will bring in Fiona Hyslop now.

Thank you for joining us. I want to look further at the place-based approach. It is clear that there is evidence that that approach could help, as we have already heard with regard to area-based schemes. Our inquiry is about local authorities, but I do not think that anybody in the last evidence session mentioned local authorities in relation to the place-based approach, although we were primarily looking at owner-occupiers in that discussion. What changes would be needed for local authorities to be involved in a place-based approach in the public and private sectors? For owner-occupiers, might that best be left to a new vehicle, which you mentioned in those last answers to the convener? I ask Janette Webb and then Teresa Bray to answer that.

When I mentioned area-based schemes, I was assuming that local authorities would be instrumental in identifying the areas and doing the costing and prioritisation through the local heat and energy efficiency strategies for their areas, and that they would certainly be part of a co-ordination body. Of course, we would probably need to have different customised plans in place in different areas.

10:00  

In the evidence from our own and other, similar research, we have found that local authorities tend to be trusted as intermediaries by different parties. For example, SMEs that were involved in earlier trials—although those trials were not as area based as they should have been—in the green homes grant local authority delivery scheme in England appreciated the involvement of local authorities. They said, “We get a good contract that runs well, and we get paid—we like that. We have worked well with the local authorities.”

The evaluation of that scheme was very positive. No real negatives came back from the tradespeople who were involved and, similarly, householders said that they found it helpful that the information came from the local authority and that the scheme was backed by it. That got householders involved, and it made them think that it was a valid and legitimate scheme, so they went ahead and did it and were pleased with the results. Unlike the green homes grant voucher element of that programme, the local authority delivery aspect worked well. Some of the householders were self-funding.

Local authorities have a vital role. They have an understanding of their communities and of the physical stock and the restrictions. As Janette Webb mentioned, it is key that local authorities have full ownership of the local heat and energy efficiency strategies. Sometimes, there is a danger that those are seen as technical documents, but they have to be owned by local authorities, because they have a key role in building partnerships and co-ordination.

Local authorities have ownership of the area-based schemes that we manage on their behalf. Changeworks will come in to manage the contractors and liaise with householders. The reporting still goes to the local authority and they require oversight to see how it fits in with their priorities; they prioritise how they tie in their stock with the owner-occupier. The local authorities may not need the technical skills to have a clerk of works on site, but they need to have ownership at a policy and strategic delivery level.

Do any improvements need to be made?

There is a lack of skills and a lack of resource funding, which is key. I know that resource funding is being looked at. There needs to be recognition that a project does not just fall to a single local authority officer. There needs to be more senior management ownership and the political will for that. Delivery is another area that is pulled into other departments such as procurement and planning. Those services need to be adequately resourced, because you could easily hold up a project if you did not have sufficient procurement officers—for example, if you had only half a dozen on a project.

Local authorities also need support for some of the areas that I mentioned, such as district heating. They are likely to have a key role in partial ownership, and how that can be structured needs to be considered. There needs to be some support—perhaps Scotland-wide consultancy support—for different models for local authorities. That is all part of the planning that needs to take place with those projects. Local authorities do not have the skills and they do not have the ability to access technical skills, so we should consider what frameworks need to be put in place for local authorities to have a key role in strategic delivery.

Thank you. I will move on to a question for Elaine Waterson. Owner-occupiers and those who are not in fuel poverty are expected to be proactive in seeking information, advice and support about decarbonisation. What would or could be the role of local authorities in an area-based, zoned, street-by-street or place-based approach? How do we unlock and stimulate that collective action?

The local heat and energy efficiency strategies will play a key role, because that information will allow people to know the most appropriate heating source for their property. Do they live in an area that is likely to be served by a district heating network? Are they in one of the small areas that might be served by hydrogen? Is the solution electrification and, if so, does that mean a heat pump or direct electric heating? The local heat and energy efficiency strategies will, from that perspective, be key to ensuring that people make the right decisions about how to heat their homes.

Roger, will you give us your perspective on area-based approaches, particularly with regard to pre-1919 properties, many of which might be owner occupied? What role could Historic Environment Scotland play in supporting such approaches? You might be aware of the myth of Historic Environment Scotland being somehow an inhibitor rather than an enabler of change, particularly with windows. Will you also reflect on what the draft national planning framework 4 will mean for conservation and how it might be used by Historic Environment Scotland to celebrate our heritage in some dynamic way? I realise that that is quite a big area to cover, but I am interested in hearing your views on it.

We are already doing area-based schemes, and we are leaning in on specific typologies in certain areas. We absolutely support the role played by local authorities; indeed, we are working with Glasgow City Council on a couple of pilot projects in the south side of the city. We can offer an element of technical reassurance on some things, and we can support the typology model. Local authorities have a very good granular understanding of their local areas, the services, the routes, the access and the strategic plan that Elaine Waterson mentioned.

On options for improving the fabric of buildings, we have identified that every building can be substantially improved, and we have generated significant savings even in what you might call highly protected structures. Nearly all of the 3 per cent or so of properties in Scotland that are listed can be improved very close to the standard, although we should, of course, take into consideration embodied carbon and so on.

HES recently issued a green recovery statement, which is about the role of the existing and historic environment as a catalyst for wider improvements in society, whether they be community based or based on aesthetics, wellbeing or sense of place, all of which are core to our identity. As has been noted, the density of older buildings is much higher in some of our town centres, and there is a very big focus on tenements in particular. Certain technologies are better suited to such environments; indeed, we have already talked about district heating schemes being very suitable for the tenement typology in many age bands. Different things suit different property types.

We certainly see ourselves as supporting that work, whether through direct advice to local authorities or by smoothing the path for consents and some other statutory applications. We know that improving the existing housing stock will be a massive part of dealing with the problem, and we stand by to provide support and offer suggestions. We have also published quite extensively on the matter, and many reports that are coming out are focusing on the shorter term, given that we need to make carbon savings now. The fact is that we really need to aim for domestic-level improvements over the next 10 to 15 years, even though we are planning for some of the interventions to have a 60 or 70-year lifespan.

Did that catch all your questions?

What is Historic Environment Scotland’s view on double or triple-glazing historic buildings?

We are pretty comfortable with various advanced glass options. When we look at the circular economy, embodied carbon and the widest carbon story of construction materials and how they are used, there is a discussion about what those materials could be but, when it comes to windows performance, there are better-performing products, particularly glass, that we can fit. We can make that happen. It is horses for courses and there are different options, but we are fairly comfortable with the approach. The issue is not a barrier at all.

I think that the convener will want to move on, so it might be helpful if Historic Environment Scotland wrote to the committee with its views on NPF4 from a conservation perspective, because the committee has a wider interest in that regard.

Sure. Thank you.

I will bring in Monica Lennon, who is joining us online.

Good morning, everyone. We have heard about the key barriers that local authorities face when they are trying to maximise their involvement and success in making homes warm, healthy and aligned with net zero aims. Professor Webb, you talked about a lack of technical expertise. What expertise do local authorities have to buy in? What skills and expertise need to be advanced in Scotland?

Are you asking about the skills and expertise that are needed in or by local authorities?

Yes.

It might help if I gave an example. We looked at the use of European Union technical assistance funds—in particular, the European local energy assistance fund, or ELENA—by a number of local authorities and the Welsh Government. Local authorities and the Welsh Government received funding—in this case through the European Investment Bank—to develop an in-house team that would understand how to plan, cost and implement local energy developments. For the first time, a significant group of people was brought together as an in-house team.

Quite strong strings were attached to the funding. I think that the ratio was 1:20—that is, for every euro that was given in grant, the recipient had to guarantee that they would get €20 back in commercial or other matched investment. In the ELENA schemes in British local authorities—I do not think that there were any in Scotland; they were in England, and there was one in Wales—we found that, for every euro of technical assistance funding that came into those local authority teams, €37 came back in investment into local energy initiatives. That was a really effective use of public funding to bring in a much bigger volume of commercial funding for district energy developments.

In Scotland, there is now the £300 million commitment to green heat network developments. I think that that could be used in a similar way, to create technical assistance teams that could develop district heating networks in the areas that people have mentioned. The University of Edinburgh has heat network developments in central Edinburgh, and it is trying to plan for a future without gas combined heat and power in heat network technologies.

We need technical assistance to be in place at scale in urban centres, where heat networks look to be an effective solution to decarbonising heat. There is also, of course, a need to capture waste heat and unused heat from industry and secondary sources, as well as a need for big-scale heat pumps and, potentially in some areas of Scotland, hydrogen as a heat network source.

I do not know whether I have gone far enough on your question.

10:15  

Thank you, Professor Webb. According to my notes, you said that there is a lack of technical expertise in local authorities and that there needs to be more in-house technical proficiency. The committee hopes to make recommendations to the Scottish Government and to local government. What action do you recommend to address the technical expertise challenge that you have mentioned?

When we interviewed local authority officers who are involved in the year-on-year area-based schemes and energy efficient Scotland pilots, they said that, in order to do the work more systematically and on a planned and strategic basis, most local authorities are looking for at least one full-time-equivalent member of staff, if not two. Of course, in some of the smaller authorities, there might be a shared resource.

That is where the proposals for a public energy agency in Scotland come in. The planning needs to be co-ordinated between the national agency and the local authorities, so that we can see what will work most effectively, whether some of the technical resources can be shared, and how that would work. Would we put authorities together in an area where that made sense? I know that, in the greater Glasgow and Clyde area, with which I am reasonably familiar, officers who have worked for a fairly long period on the potential for district heating network developments have said that it does not make sense to have the strict geographical boundaries of council areas and that we should instead plan across areas to optimise the economies of scale and to connect up as many properties as possible.

Obviously, there has to be a degree of flexibility, but investment in our local authorities is certainly needed.

Does Roger Curtis want to add anything on technical expertise in local authorities?

No, thank you. I support Professor Webb’s point about the scale of support at an organisational level.

I think that, quite quickly, the issue will default to the ability of contractors and trades to deliver the work on the ground. That ability is under pressure already with the existing schemes at the present levels, including at the basic repair and maintenance level.

With that trade requirement goes the qualifications that installers will need. At the moment, we are under capacity in that regard. Not many installation training schemes are running in Scotland at the moment. We have a package that we hope that further education colleges will take up—it is a course in retrofit for pre-1919 and traditional buildings. Much though we would like to, we cannot train Scotland, although we would be happy to do so with the appropriate resourcing. However, the approach needs to be national. Every FE college needs to train a cohort of installers so that local authorities have levers that they can move.

The feedback from Glasgow as of last week is that, when we put something out to tender, we are not sure what will come back and, if something comes back, whether that will be in September, October, November or whenever. Whichever flavour of retrofit we are talking about—whether it is the older stuff or the more recent post-war stuff—there is a real capacity gap in the industry and an education and training gap. Those are pretty fundamental for delivery at the area level.

That is interesting. What did you mean when you talked about resources? Are there not enough resources to meet the demand for training places?

At the moment, there are not enough contractors doing the work. If you talk to anyone, whether they are involved in new build, refurbishment or thermal and energy upgrade, you will find that they are waiting for the construction sector. People in that sector are rushed off their feet. That is the capacity question that I am talking about. Yes, there is a shortfall in local authority organisational capacity and capacity to understand the question, but the scale of that is probably more modest. The issue is the delivery at scale by contractors and, indeed, the professionals—the architects, surveyors, designers and specifiers—although the numbers are a wee bit smaller there. The issue is about the actual folk on the ground doing the installation work and the qualifications that need to go with that.

In the interests of time, I will move on to my next question, which relates to the issue of multiyear funding. Teresa Bray, earlier, you talked about the fact that the current approach, which uses annual settlements, makes it hard to plan ahead. Would you recommend that there should be multiyear funding models for local government?

It is vital for the allocation of funds for the area-based schemes that there is multiyear funding for local authorities. At the moment, indications are given, but there has to be a contractual agreement so that the local authority is able to enter into contracts and plan the work ahead. Single-year funding just does not work. The Existing Homes Alliance Scotland has been asking for multiyear funding for many years, and it has to be put in place.

It may be that you are not able to guarantee that a local authority would get, say, £3 million for each year, but if you could guarantee £3 million for the current year, £1.5 million for the following year and £0.5 million for the year after that, and review that every year, that would create a degree of certainty that would make a huge difference to what it was able to deliver.

To pick up on your earlier point, authorities need to have some skilled project managers—technical project managers as well as organisational project managers, because, often, those people are pulled in all directions. If we want the projects to be managed properly and in a creative way, there must be some people who can see them through and who can manage them through the structures in the local authority with regard to the necessary resources, procurement, building standards and the like.

Multiyear funding is key for all of that, because those projects will not be completed in one year. In relation to a self-funded area-based scheme, you would expect to be in that area for five to 10 years, so that people are in the right position to take action in their homes. We are talking about long-term projects—you cannot do six months in one area and six months in another. There must be a long-term approach in those areas.

That is helpful. You also talked about the importance of political will and buy-in from senior management in local authorities. What would help to achieve that? Are you aware of any local authorities in Scotland in which there is good visibility of these issues, perhaps due to the existence of a committee on net zero? Should there be more net zero committees, such as the one that we have in the Scottish Parliament? What would help with regard to the way in which administrations organise themselves? Some of them will vote this week on who is in charge of what committee, so it would be helpful to know what would help to ensure that there is a joined-up and strategic approach in each local authority.

Often, local authorities will have a net zero committee or task force. However, particularly if they still own their own housing stock, there can be a divergence from the responsibility for housing, which is the key area with regard to how a local authority can influence things, as a quarter of carbon emissions are from heating, if we exclude industry. There must be a consideration of how local authorities can co-ordinate their housing committee and their zero carbon committee. Housing is often seen as the poor relation, so people need to think about how they can bring that in.

Scottish Borders Council is an example of a local authority that does not own its own housing. Therefore, it has had to be more creative, because it does not have the in-house skills and understanding of the housing stock that would enable it to move forward in that regard. As a result of the force of circumstances, it has had to think widely about how it can tie in the local college around the issue of skills development. Its levers have had to be more on the partnership side than on the delivery side, because it does not hold its own housing stock.

Thought must be given to how the team that is responsible for housing talks to other people all the way up the chain to, say, corporate strategy. I sit on the Edinburgh Climate Commission, and we work with Changeworks to deliver work around housing. People need to think about how we can get those areas to tie into what needs to be done. Middle and senior management, who are often overstretched, have to understand that they have a role to play in the delivery of net zero.

We need to give examples of the opportunities that exist. Sample guides for responsibilities could help, as could a discussion of how procurement can stop things happening. That is often one of the issues for local authorities because, by their nature, they are often forced to be quite risk averse, so we need to get procurement colleagues across Scotland to be more creative in their delivery.

Similarly, planners have their own responsibilities. How could planners be much more creative in thinking about what could be done? It is about the sharing of good practice and engagement. A small team that works in a local authority often gets quite isolated, and how we get that co-ordination in order to bring new ideas into those functions needs to be driven at a senior management level.

Thank you. That is really helpful.

I have not heard from Elaine Waterson so, before I pass back to the convener, I will ask her if she has anything to add.

I do not have anything to add, thank you.

Thank you, Monica. Next up is Liam Kerr, to be followed by Mark Ruskell.

Good morning. To get into a couple of specific issues, I will go back to a question that the convener asked. Roger Curtis said that the rough cost of retrofitting a property is £20,000. Teresa Bray followed that by conceding the convener’s point that, if retrofitting is not done, there could be a drop in house price. She suggested that a blip in the property market would be beneficial. I counter that by saying that a blip would not be beneficial for people who have bought their house but who do not have £20,000 or the time to retrofit. They could end up in negative equity. How can people who are in that situation be persuaded to retrofit?

At the point of sale, there might not be an opportunity to pass on the obligation to the person who is buying the house. Therefore, there has to be an opportunity to do so through regulations that require that obligation to be passed on. There will be a need for long-term planning so that people can plan ahead.

For people who are struggling—the fuel poor—there will be a need for grant funding. Significant amounts of public funding are being put in, which can make a huge difference, particularly in relation to external wall insulation projects. All householders make some contribution to that, and loan funding is provided, often at a relatively low level of up to £1,000 that is repayable over 10 years. Those projects are often seen as achievable, and they can really improve the amount of money that households save on their fuel.

It will be more difficult for people who find themselves in negative equity and do not have the money to invest in their homes, which is where grant funding will come in. However, when people start to plan ahead, they will have to prioritise dealing with the heating and energy efficiency over putting in new bathrooms and kitchens, which is often a debate that is had. We are not talking about the poorest people, who are possibly the people whom you are thinking about; however, householders will be required to make their buildings suitable for the future, and to accept that different forms of heating will be required. If we do that, difficult conversations will need to be had with people, and political leadership will be required.

It certainly will be a difficult conversation.

My next question is for Elaine Waterson. Teresa Bray talked about loan funding, and the Energy Saving Trust delivers the Home Energy Scotland programme for the Scottish Government. Your most recent annual report highlights that interest-free loan funding of £38,500 is available to owners and landlords to help with energy efficiency and installations. In 2021, the number of loans that were given out to properties was just under 1,300. There are around 1.9 million private properties in Scotland, which begs a few questions. Is the Home Energy Scotland funding sufficient, why is take-up so low, and how can it be increased?

You are absolutely right that there is a massive gap between the existing take-up and the take-up that will be needed if Scottish Government targets are to be met. That goes back to my earlier point about the need for a massive increase in the pace and scale of activity.

10:30  

You asked whether there is enough Scottish Government funding in that regard. We need more private investment, because the public purse cannot pay for everything. The green heat finance task force will play a big role in identifying how lots of the activity can be financed.

As others have said, we need regulation to create the necessary levels of demand. People need to know exactly what needs to happen to their homes, and by what date, so that they can plan for the changes.

My final question is for Teresa Bray. A recent report by the Existing Homes Alliance suggests that—I am paraphrasing, so correct me if I am reflecting it wrongly—people are concerned that, if they install a heat pump, they will then see a district heating system coming down the track and think, “I’ve invested £20,000 when I could have waited.” As a result, they are reticent to make such an investment. If what I have said is a correct reflection of your report, how can those uncertainties be addressed? Do you see a role for local authorities in that regard?

Yes. Local authorities have a vital role through their local heat and energy efficiency strategies. Those strategies need to get into the details by saying that the authority is going to zone certain areas for district heating but expects alternative approaches to decarbonising heat to be used in properties in other areas. People can take a guess at the moment. Those who live in tenements can guess that district heating will probably be required, but it is much more difficult in other areas. We need clarity as soon as possible, because the lack of it is making people delay decisions.

Some broader indications could be given. We could make it clear to people who live in relatively small villages that there is unlikely to be district heating, although there is the question about the role of new builds. Local authorities could provide clarity in that regard. In some ways, it is more important for the information to be provided than it is for the information to always be optimal, because there is always a danger of waiting for more information before making a decision. The difficulty is that, if decisions are delayed, it will cost people more to heat their homes. It is better to make a decision rather than to wait another five or 10 years to see what comes down the road. It will cost householders more if decisions are not made.

Thank you.

I want to go back to Janette Webb’s comments about street-by-street or area-by-area schemes. It feels as though we have been talking about such schemes for a long time. There was the example from 15 years ago of Kirklees Council being successful in that regard. What is getting in the way of delivery? I have seen some area-by-area schemes being rolled out as a result of the energy company obligation, but those have not been extended to occupiers in communities. What is the barrier to moving at pace and at scale on a street-by-street basis? How will the local heat and energy efficiency strategies deal with that?

It is partly about the wait-and-see attitude, which we have discussed. LHEES and other strategy and delivery plans are not yet perceived to be in place, although I know that many local authorities would say that they know pretty much what is what and how to proceed. However, there is still the sense that we are not quite there yet, so people are not sure what to do.

There is also a lack of certainty in other areas, including year-on-year financing, which Teresa Bray talked about. Local authority officials are often on year-to-year contracts, so they are not clear about whether they will be in charge of how the work is done in the future, and they might not have the political leadership behind them.

In councils where such an approach has worked better, the finance team, the chief executive’s office, the spatial planning team and the net zero or climate change team have typically been well aligned and in agreement with each other and have that political leadership at the front, saying, “Right—we’re going with this.”

Sometimes there are divisions within council structures, and council officers have to rely on the good will of colleagues, which I have to say is in reasonably short supply at present, because of the pressures on everyone in public sector roles or in the commercial sector to do lots of work in a compacted time. We also need the financial piece to be there if we are to encourage that area-by-area approach.

I live in Edinburgh and own a house there, but I am not aware of the City of Edinburgh Council being in a position to make an area-by-area offer to those of us in our own properties who can afford to pay the associated costs or who would look to borrow to cover some of them. There needs to be a systematic process but, as colleagues have mentioned, it is also difficult to find tradespeople. We recognise the importance of an area-by-area scheme, but the fact is that we do not yet have a critical mass of contractors who are ready to pick up that work. That said, the evidence from other areas is that such an approach works well, because SMEs, in particular, can get a body of work all at once, allowing them to plan and do this sort of thing in the most effective way.

Teresa, do you want to come in on that?

There are a number of issues to highlight. First, the demand has to be there. Local authorities should be saying, “We need to have these services in place,” because nothing will happen without that being clearly articulated. In Edinburgh, for example, there is the Edinburgh Partnership; there are the seeds of looking at what development is taking place and what support can be provided, particularly with regard to multi-occupancy properties—say, four-in-a-block flats—where the right to buy has been exercised. However, those properties do not make up the majority of the stock.

There are huge swathes of self-funded people, and we need sufficient support for them. Home Energy Scotland has a role in providing advice but, for things to happen practically on the ground, we need to articulate what they are. For example, people might need support to find tradespeople; there is also joint purchasing, which can happen through an area-based scheme; there is a need for specification and quality control; and, most important of all, there must be post-installation support. After all, shoddy work needs to be rectified, and if new types of heating systems are being put in, people need to know how to use them.

Perhaps we need something like a retrofit agency. In Manchester, for example, the Carbon Co-op has been developed, but those kinds of individual third-sector organisations are probably not sufficient to drive the sort of schemes that require support to be given throughout the country. In a city such as Edinburgh with a tight geographical hub, you could well have a central agency with people sent out to support the activity but in, say, the Highlands area, which has a very different geographical nature, you will not be able to provide such support out of Inverness alone. Instead, there will need to be much more locally dispersed schemes.

How will all this be paid for? Is it all about information and making it clear to people that they will be paying for these technical skills? They will be happy to pay contractors, but who is going to be paid to manage them? Is there a need for initial grant funding or what might be called seedcorn moneys? We also have to look at the structure of grant funding that is provided through, for example, Home Energy Scotland, because no element of that is allowed to be used for professional fees.

However, as has been said, every local authority should be expected to do this and to look at how these approaches can be created. There will probably be different models, depending on the geography of the area in question, for example, or whether there is greater corporate responsibility, but we need to articulate the support that is required and to recognise that this is about providing not just advice but support throughout the whole customer journey.

You have all spoken about LHEES a fair bit, and I have a couple of follow-up questions on those. We are now passing regulations requiring councils to produce their strategies and delivery plans by the end of 2023. Is everything in place to enable that to happen? Do you have concerns?

I would also like to ask about the scope of LHEES and the inclusion of public and commercial buildings in the mix. Earlier, you said that every building should be included, but does that include historic buildings and public and commercial buildings? Can we get all the heat sources linked into those strategies? With commercial heat sources, could people say, “No thanks—we’re not interested in this”? Could people resist connection to district heating or whatever?

I ask for your final reflections on LHEES and where we might be going in that respect.

I will just add one thing. You asked about barriers, and one of the key barriers—although it also provides a kind of opportunity—is people, in that most people do not know that their next heating system will not be the same as their existing one. We need major public engagement and awareness raising to push things forward and create a demand from the bottom up.

Are we ready to see LHEES come to life and turn into significant delivery plans? One of the missing areas, apart from lining up all the technical expertise, which we have talked about quite a lot, concerns how councils will use the multicriteria and socioeconomic assessments to develop their costing and prioritisation plans.

The Carbon Trust commissioned and came up with a pilot model, which it ran with a few local authorities, and they were broadly positive, but the feedback that we got when interviewing across the board among the trial LHEES local authorities was that they did not quite know how to use the multicriteria assessment. Roughly speaking, it put one third weighting on carbon costs—for whole-life-cycle carbon—and one third on fuel poverty. The remaining third was split between the costs of finance, economics, the local economy and so on—the other stuff. Not surprisingly, that was found to require quite a lot of judgment, and people felt uncertain about exercising that.

Our sense is that we need the sort of support, direction, training and guidance, back-and-forth and co-ordination that we would get from a public energy agency to ensure that we use the multicriteria assessment to best effect and get the results that we need.

Local authorities are going to struggle, because they do not have specific LHEES officers. Those should be a dedicated resource. There needs to be an understanding at a senior level of how important the strategy is for the future of the people living in local areas and for local authority delivery.

You asked whether all commercial properties and the like will be included. You will not get all the ducks lined up, so it would be better to have some certainty for the majority of people. If some individual properties are not included, so be it, but if you can hit 80 per cent, that will be great. You should not be worried by not being perfect. The level of the climate emergency is such that we must progress the strategy. If you keep holding out in order to get everybody tied in, it will not work, and there must be some flexibility for things to change with time. A good process can help. In Shetland, everybody now wants to be on the heat network, as it is seen as being a good thing there.

People must be prepared to take some risks. That is difficult politically, because some things will go wrong, and I recognise that it is difficult for you as politicians. However, we should be putting in a heat network and putting in the pipes, as Leeds City Council is doing—it is installing pipes down its roads. There is a chance that the pipes might not be needed for heat but, whenever workers are digging up a road, they can put in pipes. The cost of that is relatively small if a council is already carrying out works, should that be a planning requirement.

You need to start making some decisions, as do local authorities, and we have to build a political consensus on the decisions that are made. A political consensus has been built for the strategies, but it must be built for the delivery as well. That will not be straightforward. People have to be prepared to pay for it, and our country has to pay for it, which is a challenge.

10:45  

Roger, do you have anything to add?

No—nothing significant.

I thank the witnesses for their answers so far; they have covered a fair bit of what I was going to ask about. However, we have not yet touched on the fact that tenements and other older buildings leak heat, and that there will be huge technical challenges and legal barriers in respect of insulation and decarbonising heat for those types of properties.

What are the barriers to maximising fabric efficiency in older properties? I will come to Roger Curtis on historical properties, but first I ask Teresa Bray to talk about older properties in general. Are we restricted in moving forward by a need to retain the aesthetic appearance of such buildings? Should we be allowed to change that? I would be interested to hear your views on that.

There are solutions that do not require such changes. I have been arguing that decisions have to be made, but there are technical challenges—for example, in the way in which things are assessed. The energy performance certificate does not always reflect the situation in a tenement. As a tenement owner, you know that your windows are an issue, because you can see all the heat leaking out. As Roger Curtis has often said, the solution is to get your shutters working. If we had a uniform process to redesign shutters so that they all worked, that would make a big difference.

There are also options for internal wall insulation that involve new technologies. For example, certain fibres can be used to carry out internal wall insulation without losing a building’s cornicing and the like. A building need not lose its key aesthetic elements; the windows might look a bit different, and there might be slight issues with reflectivity, but does that really matter? Historic Environment Scotland has moved forward on that, as Roger Curtis can tell you. The windows might look a bit different, but the sandstone need not be changed significantly.

You might want to change what your stairs look like—if you have lovely tiling, that might be an issue, but a lot of stairs could be improved by having insulation inside them.

We should not get too hung up about those issues, and things are changing to reflect what is required. However, the process has to be made easier. Could we have deemed consent rather than people having to go through listed building consent, planning and the like? The administrative processes could be made simpler.

I saw that Roger Curtis gave a certain look there—I would be interested in hearing his views. Should any changes be made regarding the options for tenements, listed buildings and conservation areas so that the processes are all the same rather than being different in each local area?

I support Teresa Bray’s comments. As a typology, tenements are actually quite efficient. The principal elevation is mostly glazed, as she mentioned, and most of that glazing has been through two or three changes already. In many cases, the type of glazing that she and I are after is probably better than what is there already, so there is almost a conservation gain. There are a lot of opportunities for external wall insulation on gable ends and rear elevations. We should remember that a lot of that work should be folded into the maintenance cycle—that has not really been happening, so there is a double deficit. There are a lot of technical options for tenements, so we are comfortable on technically appropriate solutions.

Again, I highlight that we are about to start a pilot project with Glasgow City Council specifically on Eglinton Street. It is not necessary to choose between aesthetics and energy efficiency; we need a fusion of both. We should remember that a lot of properties have been refurbished quite aggressively already, so the internal restrictions are often very modest. There is a great opportunity to fuse local development, economic regeneration, local materials and the supply chain with aesthetic regeneration in order to really move us forward. The HES green recovery statement tries to capture that in a better way than I can put it.

I do not think that changes to the planning arrangements are needed, because, in my book, a hell of a lot can be done within the LBC environment—I have provided links to our retrofit guide. The number of listed buildings is modest compared with the total number, and there is a lot of improved glazing in Edinburgh and very good glazing in Glasgow and everywhere else, so I do not see that issue as a barrier. It is just about understanding the work and doing it properly.

In Aberdeen—although not in my constituency—I know that there is a listed building that cannot get anything done bar single glazing. Roger Curtis probably knows which building I mean. How do we manage that?

There is always the odd exception. I do not know the case, but comments have been made about inconsistency in application across local authority planning areas in Scotland. I understand that, and I hear about it quite a lot from manufacturers and sometimes from contractors. There is work to do to harmonise that application.

I emphasise that we have glazing solutions pretty much up to the wire. There might be the odd example involving a particular window, but we can address that with other measures, such as secondary glazing. Most things can be captured.

I hope that that helps.

Thank you.

The final questions are from Natalie Don, who joins us online.

My question follows on from the previous responses. My colleague Fiona Hyslop touched on the written evidence from Historic Environment Scotland, which raises concerns about how NPF4’s new focus on sustainable development and the climate and nature emergencies

“relates to subsequent policies and whether any relative weighting applies”.

Should policies to address the climate and nature emergencies take precedence over other planning policies? I believe that Roger Curtis stated earlier that there has been some success with listed buildings. How could we best strike a balance between preserving historic urban environments and future proofing them for climate change? I will go to Roger Curtis, naturally, for that.

We have seen over the long term that established urban settlements are, by their nature, very durable, because they were built with adversity in mind, particularly with respect to flooding. We see climate change issues, mainly in relation to water being in the wrong place, and we are reaping a bit of a bitter harvest as a result of the absence of maintenance.

I do not think that it is an either/or matter. The innate sustainability of existing communities, both social and physical, should be a cause for celebration and investment rather than a perceived millstone in relation to compliance with reduced carbon targets.

We need to strike a proportionate balance, in which we use embodied carbon considerations and avoid the outcomes that the traditional environment faces. We should remember that we are trying to speak for the traditionally built environment—not just the much smaller historic quotient—which absolutely has its part to play in relation to durable, natural and sustainable materials, low toxicity and good indoor air quality.

We are just trying to be a bit cautious about carbon absolutism. Operational energy alone is important, but we are seeking to bring many other factors into the discussion to have a more nuanced and—dare I say it?—longer-term approach to the traditional and historic environment, which, as we know, in the urban centres of Scotland, is a defining characteristic on which a lot of economic wellbeing depends. It is about how we consider those issues and present them to the world and our citizens.

Thank you.

My other questions have already been answered, so, unless any other witnesses would like to comment, I will pass back to the convener.

I believe that Liam Kerr has a brief supplementary question.

I want to briefly follow up on the answers that two of you gave to Jackie Dunbar in relation to tenements. Replacing a window might be the best thing to do, but that is not cheap. Even replacing just one window is not cheap. Again, the question seems to be: who pays for that? People who have bought, say, a two-bedroom flat will not necessarily be fuel poor, but, equally, they will not be able to spend £20,000 to put in a new window or to put stuff in the walls to insulate the property. Who should pay for that?

I think that £20,000 was an overall average figure. As I indicated, a tenement is a very economically effective dwelling. The figures will come through as our pilot progresses, but I suggest that upgrade and improvement of a central property within a tenement would cost less than that.

The financial model of borrowing, access to capital and lending is not really my area, but let us not make the perfect the enemy of the good when it comes to retrofit. We have articulated that view in our refurbishment approach. We should get to an EPC band C for properties, which will reduce the operational cost for those residents. Repair and upgrade might be a better carbon solution, and a more affordable solution, than wholesale replacement.

A combination of things will be needed. Not everybody will be able to pay at once. It is possible to take a smaller-scale approach—for example, someone could replace the windows in their sitting room but not bother with the bedrooms. That would provide quite a saving, because that is the room that people normally live in. There is a role for grant funding for some groups, but, in the long term, there will need to be models of finance whereby people can afford to pay.

We are talking about making savings over a 20-year period. Energy efficiency measures are cost-efficient investments that provide a net benefit, so we need to think about how we fit in financial models to allow such replacement. It might well be that that will not happen until the property is sold and the people move on from their two-bedroom flat. They might get a slightly lower value for their home. The process will take time.

The fact that we are building new homes that will have to be retrofitted is appalling. No one who moves into a new-build home should have to retrofit their home. That should be built into the price.

It is a difficult conversation to have. Not everyone will be able to afford such measures at the moment. The public purse should support the most fuel poor. Some people will be able to afford to have such work done. However, there is a difficulty when it comes to the people in the middle who do not see themselves as being able to self-fund, but who do not fall into the category of fuel poor. Will it take longer to retrofit those houses? That will probably be one option.

However, because energy efficiency measures provide a positive return on carbon investment, there is a role for private finance. The cheapest way of buying carbon is by doing energy efficiency. People are after carbon, and if we can do that through energy efficiency and monetarise that, people will want to invest in it. From a carbon point of view, energy efficiency is much cheaper to do than planting woods and offsetting. The issue is how we create the necessary business model. Economists will need to work that out.

People are crying out for it. The price of land is going up in Scotland because people want to plant forests. How do we make offsetting work for energy efficiency measures?

That brings us to the end of our allocated time. I thank the witnesses for their comprehensive answers and their insights. It has been very useful for the committee to hear from each of you. Thank you for taking part. Enjoy the rest of your day.

I suspend the meeting briefly while we set up for our next agenda item.

10:59 Meeting suspended.  

11:05 On resuming—