Meeting of the Parliament

Meeting date: Thursday, November 22, 2018

Official Report 1046KB pdf

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Energy Efficient Scotland

The next item of business is a statement by Paul Wheelhouse on energy efficient Scotland. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.

14:17  

Today we have published three consultation analysis reports for energy efficient Scotland. This statement is an opportunity to update Parliament on those reports, our recent discussions and our intended next steps.

As we develop energy efficient Scotland, the Scottish Government is continuing to invest heavily. By the end of 2021, we will have allocated more than £1 billion since 2009 on tackling fuel poverty and improving energy efficiency; since 2008, 1 million measures have been delivered through a range of United Kingdom and Scottish programmes to more than 1 million households.

When it scrutinised the draft climate change plan, Parliament asked the Scottish Government to set out a credible framework for decarbonising the heat supply, so in May we set out an ambitious, yet credible, plan to make our buildings more efficient—a plan that would make it the norm to invest in energy efficiency, with the aim that all Scotland’s homes should achieve an energy performance certificate rating of at least band C by 2040.

Those proposals are just a first step; we will do more. However, we are starting in the right place by focusing on energy efficiency. Many of those who responded to the recent consultation supported our proposals and agreed that a 2040 target is the right one. South Lanarkshire Council noted:

“The 2040 target allows 20 years to address building improvements which ought to provide sufficient time to plan for and fund any necessary improvements, where technically feasible and cost effective.”

However, there were those who shared the view of members in this chamber that an earlier target should be set, suggesting 2030, 2032 and 2035 as alternatives. Arguments can be made for going faster, but we are concerned that moving too quickly would not only cause an inflationary effect on prices per intervention but potentially be detrimental to the Scottish economy by driving an increased need to import equipment and installers from outside Scotland, rather than developing and growing locally based supply chains here at home. Our approach will better allow us to seize the opportunity for our local supply chain, bringing local economic and social benefits. It might also undermine public confidence if we were to move too fast; it is imperative that we have credible, deliverable proposals and can take the public with us.

Let us not forget that, when combined with investment in our non-domestic premises, it is anticipated that total public, private and third sector investment will potentially reach £12 billion by 2040.

In its recent progress report, the UK Committee on Climate Change praised energy efficient Scotland, noting:

“The Scottish approach represents best practice in a number of areas, including setting standards well in advance, with a regulatory backstop for owner-occupied homes, and a statutory underpinning. This provides a strong example of an effective policy package to drive emissions reductions and other outcomes, including on fuel poverty.”

Those calling for an accelerated target have yet to set out an alternative credible delivery plan that overcomes the risks and missed opportunities. However, we recognise that there is support for faster action, and we believe that it is only right that we consider that. As such, we will publish a consultation in January on how the programme could be accelerated and seeking views on the risks and how they can be overcome.

Before I go on, I must mention fuel poverty and the important role that energy efficient Scotland will play in addressing it. In June, my colleague Kevin Stewart introduced the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill, which sets the target that, by 2040, no more than 5 per cent of households will be in fuel poverty.

We are listening. For example, we have introduced new low-carbon heat and enabling measures into the warmer homes Scotland programme. We continue to pilot and discuss greater flexibilities with our rural and islands authorities to strengthen the design and delivery of their area-based schemes.

I am also pleased to inform Parliament that Mr Stewart and I will begin work next year to prepare a suite of legislation to support the delivery of energy efficient Scotland. That will include primary legislation but, given limited parliamentary time and the additional pressures that are being placed on committees by Brexit, we will, where appropriate, also look to use the powers that are already available to the Scottish Government, for example under the Climate Change (Scotland) Act 2009 and the Energy Act 2013.

In the new year, Kevin Stewart will publish draft regulations for minimum energy efficiency standards in the private rented sector and will look to introduce them to Parliament ahead of summer recess, with the aim of having them in force from 1 April 2020.

I confirm that Kevin Stewart will also bring forward proposals later next year that will put more meat on the bones for the owner-occupied sector with regard to the encouragement and mandatory phases that we have set out.

To provide a strategic approach to energy efficient Scotland, we have proposed that local authorities should produce local heat and energy efficiency strategies, or LHEES for short. They will be the foundation of energy efficient Scotland at a local level, and will identify opportunities for energy efficiency improvements and heat decarbonisation around Scotland.

Having LHEES in place will help to de-risk investment by providing invaluable market information, and will give Scottish businesses the confidence to invest in people, skills and equipment, thereby giving a clear signal of the long-term commitment to energy efficient Scotland.

Due to the comprehensive picture that will be provided by LHEES and their benefits, we believe that it is optimal for delivery against our climate and economic objectives that LHEES are placed on a statutory basis. However, I recognise that there are resource implications for that, and that local authorities would require additional support. That is why Kevin Stewart and I are committed to working with our partners, the Convention of Scottish Local Authorities and local authorities—I will say more about the partnership later—to understand what support they need and enable us to understand the circumstances in which LHEES could be most suitably placed on a statutory footing.

We have already funded 23 local authorities to undertake LHEES pilot projects, and I am committed to supporting the remaining nine local authorities to undertake similar pilots. Alongside the pilots, which are crucial to learning for our future approach, we will shortly establish a working group to produce guidance on the development and implementation of LHEES, with the intention that the group will report in the first quarter of 2019.

I will briefly touch on the supply of low-carbon heat before concluding. Right now, the majority of our heat is supplied using carbon-based fuels and we have a significant challenge ahead if 45 per cent of heat demand is to be supplied by low-carbon fuels by 2032. It is vital that we consider the advice of the Committee on Climate Change and other experts as we respond to that challenge and ensure that the deployment of low-carbon heat is consistent with long-term decarbonisation goals. That is why we are focusing on rolling out low-carbon heat where it makes sense, regardless of long-term decisions.

The Scottish Government currently runs a number of schemes to pilot, test and support low-carbon heat, including the low-carbon transition programme, the district heating loan fund and our home energy Scotland and resource efficient Scotland loan schemes.

To prepare Scotland for life after the UK-wide renewable heat incentive, I confirm that we will shortly start work to strengthen our policy framework for low-carbon heat. That will have a specific focus on off-gas areas and will begin with a call for evidence, to be published in early 2019, which will sit alongside and complement our work to develop a draft bioenergy action plan.

I can confirm that, while further developing our low-carbon heat policy, we intend to prepare legislation to introduce regulation and licensing for the district heating sector, which is a devolved responsibility. That regulation will be commensurate with the scale of this emerging market, and I will shortly commission an advisory group to inform the development of a licensing regime and associated license conditions. Our leadership on this issue has been recognised by stakeholders in Scotland and from further afield, and the Competition and Markets Authority, a respected economic regulator, has agreed with our assessment that the market would benefit from regulation.

We are also investigating the potential for granting permitted development rights and wayleaves, to put district heating developments on a similar footing to other utilities. As part of the consultation in January, we will seek evidence on whether further incentives can be made available to the sector, within the constraints of competition and human rights laws.

Under the current devolution settlement, it is not within our gift to make consumer protection provisions to ensure that customers of heat networks receive the same protections as users of other utilities. However, I am having positive discussions with my counterpart, Claire Perry, the UK Minister of State for Energy and Clean Growth, as we look to agree how the CMA’s recommendations can be implemented as intended, as a coherent package for the benefit of consumers.

I want to close today on an important note about partnership. Achieving our vision will require the Scottish Government to work in partnership with a variety of sectors and organisations. As I have mentioned, local government is a key partner and, earlier this month, I met Councillors Heddle and Whitham, who are the spokespeople for the Convention of Scottish Local Authorities on, respectively, environment and economy, and community wellbeing, to discuss local government’s key role in steering the shape of and delivery of energy efficient Scotland. We have agreed to strengthen that partnership by establishing a high-level strategic group that will embed our commitment to active partnership, shared risk and joint strategic decision making.

Let me be clear: any complaints that the Scottish Government is just kicking the can further down the road with more consultation cannot be further from the truth. As we work together to identify and plan for our transition to a low-carbon future, we are continuing to invest heavily through energy efficient Scotland. As I have said, this Government will by 2021 have allocated £1 billion to energy efficiency since 2009, with over £500 million spent in this parliamentary session alone. However, we also have an obligation to the people of Scotland to get this right. That is why we are investing in maintaining and nurturing a dialogue with individuals, organisations, representative bodies and colleagues right across the chamber.

I look forward to taking members’ questions.

The minister will now take questions on the issues that were raised in his statement. I will allow about 20 minutes for that. I ask members who wish to ask a question to press their request-to-speak buttons.

I thank the cabinet secretary for advance sight of his statement, and I draw members’ attention to my entry in the register of members’ interests with regard to renewable energy.

It is with huge regret that I must point out that, although the Scottish Parliament’s settled will on 10 May 2018 was to bring forward from 2040 to 2030 the target for all homes to reach EPC band C rating, the Scottish National Party has yet again chosen to ignore Parliament when it suits it. When the cabinet secretary and Kevin Stewart begin to prepare their suite of legislation next year, they would do well to note the cross-party support for all the amendments that were lodged that day.

As for complaints that the Scottish Government is just kicking the can further down the road with more consultation and working groups, they are exactly the truth. Under the fig leaf of inflationary prices, the Government is going to commit households to another decade of wasted energy and environmental costs. Can the cabinet secretary provide the evidence that his proposal is less detrimental than the one that was wished by this Parliament?

I thank Mr Burnett for unintentionally promoting me.

I certainly recognise that Parliament’s vote in May was significant, given the good debate that we had about the energy-efficient Scotland route map. We have been consulting on that route map over the summer; I hope that Alexander Burnett understands that we need to listen to the evidence that has been submitted to us.

It is not universally accepted that accelerating the programme will benefit either the outcomes that are being sought or the development of local supply chains. As I said in my statement, we heard during the consultation clear voices suggesting that we should pursue the original timescales.

We are keen to launch a consultation in January to seek views. I would welcome views from members all around the chamber, including Alexander Burnett, on how we can accelerate the programme so that it finishes earlier. However, the member must recognise the implications for inflation of costs of individual interventions in households. Costs will be driven up if we do not have in place a supply chain to respond over that timescale.

We also need to reflect the desire of local authorities and others to develop local economic opportunities, which I thought Alexander Burnett would have welcomed.

It is also the case that the work is not being done in isolation. We are continuing to invest heavily in our programmes through area-based schemes, which Kevin Stewart leads on, and through the non-domestic estate, in which we are investing almost £30 million this year. Over this session of Parliament we will invest £500 million. I point out to Alexander Burnett that that is significant public investment at a time when there is no equivalent scheme in England.

I thank the minister for advance sight of his statement. He started by saying that he is certain that 2040 is the right target date, but then said that he wants to consult again just to be on the safe side. Will he confirm that that further consultation will consider only bringing forward the target and not pushing it further back?

The minister also proposes to put local heat and energy efficiency strategies on a statutory footing, but did not really say anything about how those strategies would be supported. I welcome his commitment to talk to councils, but when will he be able to tell Parliament and councils what support and resources there will be for those strategies?

I welcome the minister’s proposal to regulate district heating. Will that enable district heating to be placed in local development plans? The case for permitted development rights and wayleaves for district heating has been strongly made. Will the minister undertake to conclude his investigation into that matter as rapidly as possible, so that the provisions are in place before regulation and licensing of the sector begin?

I will try to get through those questions.

On the 2040 target date, we believe that that is the right timescale. We are trying to reflect the sentiments of Parliament—which Alexander Burnett accused me of not doing—and other stakeholders who believe that we should accelerate the programme, so we will consult. The purpose of the consultation is to find out whether there is a credible way of achieving that acceleration.

There are, however, competing tensions. The faster we accelerate, the more difficult it is for the supply chain to respond. If we have a long policy signal and provide commitments to delivering the regulatory framework and follow that through, that will provide a stable basis for private business to invest.

It should be borne in mind that the total cost of the programme might be up to £12 billion. Neither the Scottish Government nor local government can afford to commit that resource, so we want to lever in as much private and third sector investment as we can. The long-term certainty that will be delivered by LHEES, in particular, will be very important in that process. We are engaging with the Convention of Scottish Local Authorities as a key partner in delivering energy efficient Scotland through the LHEES process. We need to understand what resource base it will take to enable COSLA to deliver that.

We recognise that there are resource challenges. This is a new responsibility, and we do not have a bottomless pit of funding—as, I am sure, Lewis Macdonald will acknowledge—but we want sensible dialogue with our colleagues in COSLA. To date, the discussions have been very constructive, which I welcome.

We are also looking at how we might, in providing the regulatory environment for district heating, tackle issues including wayleaves. Again, that will provide investors with confidence that timescales can be met cost effectively and that financial and project delivery risks can be reduced, which will also help with the cost of borrowing capital for private sector projects.

I am happy to engage with Lewis Macdonald. I am sure that Kevin Stewart, who leads on all planning matters and, indeed, on the domestic energy front, would be keen to engage with Opposition spokespeople on how we can achieve consensus on the issue.

We move to open questions. There was a lot in those questions and answers. I ask members to avoid making statements and to get straight to questions, please, because I have a lot of requests.

Can the minister assure me that there will be recognition of the different issues in rural areas, and will he ensure flexibility in delivery?

I certainly can provide that reassurance to Gail Ross. Our programmes already take account of the different costs of delivering energy efficiency measures in rural areas, and we are looking at where additional flexibility can be introduced. For example, we recently introduced new measures in our warmer homes Scotland scheme, including ground-source heat pumps, micro hydro, micro wind, micro combined heat and power, asbestos removal, installation of new and replacement liquefied petroleum gas tanks, and replacement of existing unsafe oil storage tanks. Those measures will be of particular help to households in rural and island areas that are not served by the gas grid; as I have mentioned, we are focusing on helping communities and individuals who are off the gas grid. We continue to work closely with local delivery partners and we are listening to their ideas.

We are now in an environment in which the Islands (Scotland) Act 2018 is in force. I hope that we will, as we develop the island communities impact assessment tool between now and the second half of next year, be able to apply that to any future proposals and projects.

Of course, the same points as I made about questions go for answers.

If the Government is open to “going faster” on meeting EPC targets, is it also open to going faster on dealing with fuel poverty than is suggested in the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill?

Through the energy efficient Scotland route map, we will tackle energy inefficiency as a driver of fuel poverty. We are convinced that the timescales that we have set out in the route map are correct—for the reasons that I gave and will not repeat, they are right—but we will provide a consultation opportunity in January for those who have credible proposals on delivering the programme faster. If we can go faster than is outlined in our plans, that will help to tackle fuel poverty.

My colleagues Kevin Stewart and Aileen Campbell have laid out a clear and focused approach to tackling fuel poverty in the Fuel Poverty (Target, Definition and Strategy) (Scotland) Bill. As I said in my statement, they are focusing on providing a solution that will leave fewer than 5 per cent of households in fuel poverty by 2040.

There are parallel strands of work. We want to work with other members to tackle fuel poverty.

Does the minister agree that we need to tackle poor-quality insulation installations by contractors that claim to work under Government or industry-funded schemes, and which leave sometimes vulnerable householders with no paperwork and no proper recourse to have damage to their properties fixed? The issues appear to be associated mainly with UK Government schemes, but what more can the Scottish Government do to enhance consumer protection?

Dr Allan has raised an extremely important point. I referred to consumer protection in relation to district heating, but given the wider investment that the Government is making, we agree that it is imperative that we protect householders when they have work done to improve their homes and make them more energy efficient.

Through Scottish Government run energy-efficiency schemes, we are putting in place provisions to protect consumers—for example, the warmer homes Scotland contract requires that installations be completed to a high standard, and all measures are inspected to ensure that they are completed to a high standard. We wish that such conditions applied to other schemes across the UK.

For local authority area-based schemes, all authorities are required to provide a quality-assurance service, including access to a formal complaints process, on-site monitoring of the quality of the works and post-completion advice. We are learning lessons from previous schemes and have established a short-life working group on quality assurance, consumer protection, skills and the supply chain, which will report its recommendations shortly.

I declare an interest as the honorary vice-president of Energy Action Scotland.

The target is deeply unambitious. People are going to food banks now to ask for coal bags because they cannot afford the fuel to cook a meal. Is the minister really asking them to wait until 2040 to put the cooker on? Why is the budget for energy efficiency just a quarter of what experts have said is required?

To put things in perspective, I note that we are spending more than £146 million in the current year on energy efficiency. That is not lack of ambition; that is delivery.

I fully recognise that some individuals are in difficult situations. We want to help them as soon as we can, so I assure Jackie Baillie that we are investing now and that we will continue to invest throughout the parliamentary session in area-based schemes, which Kevin Stewart leads on, and more widely in tackling poverty and improving the living conditions of the people of Scotland.

I gently suggest that Jackie Baillie should not be a scaremonger. We continue to invest. Although we talk about completing the programme by 2040, in the route map we prioritise tackling in the earliest phases households that are in fuel poverty, and we aim to get those properties up to EPC band B by 2040.

The UK Government has allocated £320 million over the next three years to ensure a steady pipeline of district heating projects whereas, in Scotland, £60 million must be shared between several types of renewable heat development. As part of January’s consultation, will the minister seek evidence on how a steady funding stream for district heating could be put in place?

I recognise the point that Mr Ruskell makes. It would be in everyone’s interest if we could provide longer-term certainty about funding. The finance secretary, Mr Mackay, is looking in the round at the issues for a number of strands of Government funding to try to provide as much certainty as possible for investors and for the public and third sectors.

We take the point seriously. I hope that, when the budget is announced on 12 December, Mr Ruskell will see more detail on the issues.

I thank the minister for early sight of his statement.

The minister said that he is listening to the issues around fuel poverty. Did he hear the strong criticism from those who gave evidence to the Local Government and Communities Committee yesterday about the failure of ministers to include a rural minimum income standard in the new definition of rural fuel poverty, which risks resources not being targeted at where they are most needed? Will he work with the housing minister to ensure that the fuel poverty bill is properly island proofed so that those resources go to places such as Orkney, which has the highest level of fuel poverty?

I recognise the importance of those issues in my capacity as not only energy minister but islands minister. Those issues have been raised with me previously. I know that Mr Stewart and Ms Campbell are working hard to invest strongly in housing provision in the islands and to ensure that there is funding to tackle the issues through the area-based schemes. I am working with the island authorities to fine tune those schemes to make sure that we are reflecting some of the dimensions that Mr McArthur raises.

I should point out that there is a high level of investment per intervention in each of the island areas. I do not want to play about with numbers, but each of the island authorities would be happy to supply Mr McArthur with information about the generous contribution from the Scottish Government to support energy efficiency.

Island authorities across Scotland are affected by a number of pressures that are outwith our control. We can do what we can with the resources and policies that we have. We want to work with UK Government ministers to tackle fuel poverty. I will certainly work with the member on tackling those issues in the Orkney Islands.

Will the minister provide more detail on how the Government will work with local authorities to ensure that its ambitions are met?

Local government is a key partner and I alluded to that in my statement with respect to the delivery of energy efficient Scotland. We already work closely with local authorities across Scotland on, for example, the delivery of our home energy efficiency programmes, the area-based schemes, and the energy efficient Scotland transition programme.

As I said in my statement, I recently met Councillors Heddle and Whitham, the COSLA spokespeople for environment, the economy and community wellbeing, with whom I discussed local government’s role in delivering energy efficient Scotland. Those representatives of COSLA show a clear desire for a genuine partnership to work on jointly designing and tailoring the energy efficient Scotland programme. We have agreed to strengthen our partnership and will establish a high-level strategic group that will embed our commitment to active partnership with local government, including shared risk and joint decision making.

I apologise to colleagues for arriving late for the minister’s statement, and I thank the Presiding Officer for calling me nonetheless. I also declare an interest as a farmer.

Notwithstanding the minister’s assurances to Gail Ross, he will be aware that the energy efficient Scotland route map does not adequately address the problem that is emerging in rural Scotland, where housing stock with low energy efficiency creates fuel poverty and makes worse the growing mental health problems that were recently highlighted in the Ayrshire Post. What special measures will the minister take to deal with those interlinked and growing problems across rural Scotland that cannot wait until 2040 to be resolved?

I am not sure whether Mr Scott caught this, but we are focusing on tackling off-gas grid areas as one of our key priorities. That has a strong impact on rural areas. I certainly give the member my undertaking that we are listening carefully. The route map was presented very much as an all-Scotland document, but it makes specific reference to the rural dimension. We are reflecting on that.

Although 100 per cent of Scotland is covered by the programme, we need to reflect the local context in island and rural areas. As I outlined to Gail Ross, there are a number of ways of doing that. I am happy to engage with the members on issues in South Ayrshire that affect his constituents. I reassure him that we are focusing on tackling areas with a high level of fuel poverty, many of which are rural areas, but we are also trying to tackle the particular context that rural areas face.

How do the plans that the minister announced support local economies and the development of supply chains?

Through energy efficient Scotland, we are putting in place a framework of standards that help to make it the norm to invest in energy efficiency, which helps to drive the market. We also propose to create demand for improvements in energy efficiency through the establishment of the local heat and energy efficiency strategy.

On the basis of the feedback that we have had from business and the supply chain, we believe that that will be extremely helpful in providing invaluable market information. It will also help to facilitate cross-border projects where there are two different local authorities. There are many areas, such as Glasgow, in which the suburbs straddle the boundaries, and there might be proposals for local heat or district heating projects that might require that structure to provide investor certainty.

In reference to a point that Lewis Macdonald made earlier, which I failed to refer to, those documents could potentially have an important role in the planning process, in providing a structure to inform planning decisions.

The financial memorandum that accompanies the fuel poverty bill that was published in June allows only for additional administration costs. However, we know that if we are to tackle the issue of the 24 per cent of households in Scotland that are in fuel poverty, it is likely that that budget will have to double. Will the minister look again at the financial memorandum that accompanies the fuel poverty bill, and at realistic figures for tackling fuel poverty?

I would direct Mr Rowley to engage with my colleague Kevin Stewart on issues regarding the fuel poverty bill.

On the issue that he raised around cost, perhaps with regard to the local heat and energy efficiency strategies, we recognise that this is potentially a new responsibility that will fall on our partners in local government, and we are keen to have a dialogue. We want to have a genuine discussion with local authorities about resource implications and the balance between central and local resources that is required. Smaller local authorities face greater challenges in delivering new functions and we will obviously take that into account in deciding what structures are in place for energy efficient Scotland and how we jointly govern that.

The minister mentioned district heating. On the basis of his announcements today, how confident is he that the private sector will move forward in district heating, which we have not seen a huge amount of so far?

The member is absolutely right. We are learning from jurisdictions such as Denmark—we have a memorandum of understanding with the Danish Government. In that country, district heating forms over half of the heating market. That has taken some time to develop and we can learn lessons from how Denmark has achieved that. Realistically, up to 20 per cent of housing stock in Scotland may be suitable for district heating projects.

The provision of local heat and energy efficiency strategies will send a strong signal to the market about the investment opportunities, by identifying the zones in each local authority area that are most suitable for the delivery of district heating.

To reduce barriers to development and provide conditions on the ground to grow the market, we are investigating how to put district heating on the same footing as other utilities. For instance, we are exploring, as I said, permitted development rights and wayleave issues.

I understand from the market that Scotland and London are way ahead in terms of their attractiveness to private investors, and I hope that that continues.

That concludes questions on the statement on energy efficient Scotland. We managed to grant all requests and I thank everyone for the way in which they conducted the session.