Energy consumers and the transition to net zero

A blog post by Consumer Scotland Energy Policy Manager Andrew Faulk

In November last year, the Scottish Government published consultations on both a draft Heat in Buildings Bill, and a new Social Housing Net Zero Standard.

The consultations set out the anticipated timescale and pathway for decarbonising home heating. A backstop date of 2045 will apply, by which time the expectation is that heating systems  which create climate change emissions at the point of use will exist only in exceptional circumstances.

To get to that point, action is needed in two areas:

  • improving the energy efficiency of homes, so that they can be heated more effectively and cheaply
  • installing low carbon heating, as appropriate to the individual building

The draft Bill consultation proposes trigger points at which private householders will have to take action on heating, linked to house sales and the availability of connections to heat networks.

While it is important that the effective minimum expectations are in place, overall aims are more likely to be achieved if accompanied by a package of measures to encourage and support action by consumers.

Following from that, this article looks at what has worked in the past and highlights some areas for future consideration. It draws on our recent research on the transition to net zero which shows clearly  that the great majority of consumers are concerned about climate change but identify a lack of information and, in particular, cost as key barriers to adapting their energy behaviours. 

How well do these proposed policies and research findings match up with real world experience?

The Scottish House Condition Survey tracks progress over time in insulation. It shows that considerable progress was made in insulating lofts and cavity walls, especially in the early 2010s.

These low cost measures are proven to cut the amount of heat needed in homes. They were offered at no cost to most consumers through large scale Scottish Government programmes, linked to UK Government schemes available at the time, and promoted through trusted local organisations. The UK wide programmes were significantly reduced in scale in 2013, while smaller scale, programmes continue to run in Scotland, now focused mainly on solid wall insulation.

Similarly, regulations on strengthened energy efficiency standards for gas and oil boilers mean most  boilers in Scotland now use less fuel than was the case in the past to deliver the same heat output.

The combination of these measures has meant that both carbon emissions and bills for many households are lower than they would otherwise have been.

New homes are now built to higher standards of energy efficiency than in the past and higher standards still are under discussion.

Further, regulations on the power consumption of electrical appliances and the wide use of  the A-G energy efficiency ratings system have also pushed up standards.

Going further,  just over 8% of homes in Scotland are now fitted with low carbon technologies, of which solar panels are by far the most popular measure, with more consumers installing panels in response to high electricity prices.

Two things are common to almost all of these actions:

  • they make financial sense for consumers regardless of their views on climate change – indeed promotion often places more emphasis on reducing costs than environmental factors
  • these measures involve minimal disruption, and wider consumer protection measures help provide  confidence to homeowners

While there has been progress, challenges remain

The consultations make clear that much more is required. While there is still limited scope for lower cost measures like those above, other measures that entail higher upfront costs are needed.

Solid wall insulation is likely to be necessary to improve the energy efficiency of some, especially older homes, around 19% of all those in Scotland. While the draft Bill does not propose this as a requirement, such insulation is likely to be needed in many cases to ensure heating bills are reduced and heating systems work efficiently. Installation of solid wall insulation can often involve significant disruption and high costs.

Solid wall insulation may also be needed for more modern buildings which have cavity walls which can’t be insulated because of prevailing weather conditions or because of the building construction.

Further, 37% of Scotland’s households live in flats or tenements and, even where lower cost measures are technically feasible for those homes, there’s still the administrative barrier. It can be hard enough to organise communal repairs, far less get consent for energy efficiency improvements.

Given that background, it’s not surprising data shows take up of both cavity and solid wall insulation is driven at present almost entirely by publicly funded programmes.

Much of the debate also focuses on heat pumps, with the Committee on Climate Change emphasising their role delivering low carbon heating. 

The take up of heat pumps has been limited in practice though. Just 18,000 homes in Scotland had one by the end of 2022, although installation rates are increasing, with over 6,000 fitted in 2023.

Positively, Nesta’s research on the experience of owner occupier households using heat pumps in all GB countries shows that heat pumps provide comparable levels of satisfaction to mains gas or heating oil systems.

However, that research also found the installation process for heat pumps to be typically longer and more complicated than installation of a gas or oil boiler, and more commonly involving additional work to upgrade insulation or pipework and radiators - all likely to create barriers for consumers. Capital costs are also more expensive than fossil fuel boilers, although  grants and loan finance are available in Scotland.

An additional concern, recognised in the current consultations, is high price of  electricity. Historically, heat pumps have typically been around three times more efficient than gas boilers, meaning that an electricity cost one-third the price of gas was needed to provide comparable bills overall. However, Nesta found emerging evidence that newer models were more efficient, and some industry sources quote efficiencies of five or over.  

So, depending on the efficiency of the heat pump to deliver equivalent running costs requires an electricity supply cost of between one-third and one fifth of the price of the comparable fuel. At time of writing mains electricity is currently close to four times the price per unit of mains gas, although the picture is a little more favourable compared to heating oil. While bespoke new heat pump electricity tariffs are emerging which reduce that cost, understanding and accessing those tariffs is another potential barrier for consumers.

Complementary technologies such as  solar PV and or home batteries can also reduce effective running costs of heat pumps, but will not be practical for all homes. Overall, reducing the cost of electricity relative to fossil fuels remains important if heat pumps are to be consistently cheaper to run.  

In dense urban settings, heat networks, which can utilise heat from a range of sources, are a more likely technical solution. In these systems, radiators in many individual houses or flats are fuelled by a single large and communally managed boiler or heat pump.

Heat networks are common in many European cities, but can be complex and expensive to install. Local Authorities in Scotland are currently preparing Local Heat and Energy Efficiency Strategies which will set out possible ways forward in relation to heat networks, but, by their nature, individual consumers can only connect where a system is available – the consultations suggest this may become a requirement in future.

Practical approaches to help consumers reduce the climate impact of their energy use

As with all new technologies, falling prices and greater familiarity will grow markets, reduce costs and drive technological improvements. But, despite widespread engagement with the purpose of the climate change targets, consumer decisions are strongly influenced by economics and real world practicalities as much as climate change concern. This is particularly the case during the current energy crisis, which our regular Tracker surveys show are placing consumers under significant financial pressure.

So, what might support for energy consumers in Scotland look like in response?

Firstly, the basic building blocks need to be in place. Data show that many people find it difficult even to contact their energy supplier and that trust in suppliers is limited – Ofgem has recently introduced measures to address this issue. Addressing these concerns is essential given energy suppliers’ key role as one of the first points of contact in consumers’ journeys to cut bills and carbon. Suppliers are also responsible for the roll out of smart meters, often seen as an essential first step towards better energy management.

Secondly, easier access is needed to more tailored advice, building on the Home Energy Scotland service already in place. Advice and support are needed which starts with and responds to consumers’ individual circumstances and attitudes, recognising the barriers they face. Existing solutions generally work well for consumers living in semi-detached houses in the suburbs, but, as above, are often not suitable for those living in a block of flats in a city, or for those in exposed, solid stone houses in remote rural areas.

Thirdly, greater consideration is needed of both economics and the (in)convenience of consumer decisions - the customer journey - based on evidence of what has worked. The evidence suggests that consumers respond to financial incentives, backed up by clear advice on the costs and benefits of measures suitable for their homes, and confidence that support will be easily and affordably available for maintenance and repairs whenever necessary.

Finally, we need to recognise that early adopters of all new technologies tend to be better off, more confident consumers, whereas energy affordability and cost of living remain the critical challenges for many consumers, particularly those in vulnerable circumstances – continued appropriate support for these consumers must also be available.