UK: Energy Efficiency Scotland – How Might Your Business Be Affected?

 

 

 

 

 

 

Sarah-Jane McArthur - Brodies LLP

 

 

Earlier this month, at the All-Energy conference, the First Minister Nicola Sturgeon launched the Route Map and consultation on Energy Efficient Scotland (EES).

 

EES aims to launch a set of long-term energy performance standards for all buildings to achieve by 2040. It proposes a range of measures which are designed to improve energy efficiency in Scotland's building stock and to meet the Scottish Government's key policy aims of eradicating fuel poverty and meeting decarbonisation targets.

 

The initiative envisages the introduction of new legally binding targets and measures and the expansion of current programmes, such as the District Heating Loan Fund, the Low Carbon Infrastructure Transition Programme and the SME Loan Scheme.

 

Whilst the specific legal changes are yet to be decided, it is clear that this scheme is going to have wide scope and impact.

 

So, how might you or your business be affected?
 
Owner Occupier
 

Expect measures designed to ensure that your home achieves an Energy Performance Certificate (EPC) rating of at least Band C by 2040, or perhaps even earlier – this timeframe met with much opposition in parliamentary debate, with opposition MSPs arguing that it is lacking in ambition.

 

These measures are likely to start as encouraging measures (think low cost loans or grant funding for energy efficiency home improvements) but may progress into mandatory targets. So, if it is technically feasible and cost effective, you might be required to make home improvements – something which the Route Map estimates will cost the average dwelling up to £3,500.

 

Tenant or Private Landlord
 

Landlords of privately rented homes (and also likely student residences) will be expected to achieve an EPC rating of Band E from 2022, Band D from 2025 and Band C from 2030. The suggested measures for implementation are the application of these minimum standards at the point of rental from 2025 and in all private rented properties by 2030, with financial penalties for non-compliance.

 

Social Housing
 

The Energy Efficiency Standard for Social Housing introduced in 2014 already set a minimum EPC rating of C or D (depending on building type) for social houses. A new milestone is proposed for such properties to achieve EPC B by 2032. We'd expect the Scottish Housing Regulator to continue to be responsible for monitoring compliance.

 

Commercial Buildings
 

Non-domestic buildings such as offices, shops, leisure centres, factories and industrial units will be affected by new non-domestic sector requirements. The intention is to cover all buildings by energy efficiency regulation by 2040.

 

The approach will be slightly different to the domestic sector. There won't be target standards to achieve but instead there will be a benchmarking system which will assess building performance. Building owners could be required to undertake improvement work to meet energy efficiency targets identified by such assessments.

 

Again, the cost of any mandatory improvements will need to be borne by the building owner – although some support may be provided in the form of a non-domestic loan programme for SMEs. The benchmarking system will evaluate buildings based on what is best practice for buildings of a similar nature, either in terms of size or building type/use. A further discussion paper on decarbonisation measures for industrial processes is also expected later in 2018.

 

Public Sector Buildings
 

The Scottish Government voices its expectation in the Route Map that the public sector could achieve the EES standards ahead of 2040 – recognising the £38 million invested in energy efficiency projects in recent years. However, no new energy efficiency standards or measures are proposed for the public sector. The intention of the Scottish Government is to develop a baseline of public sector buildings, to determine how much improvement and support is needed, before introducing any binding energy efficiency measures.

 

Energy Sector
 

The introduction of mandatory long-term energy efficiency standards is intended to open pathways to investment and growth in the low carbon economy. A key aim of EES is to develop and support the supply chain and enhance skills development in the energy efficiency and heat sectors and the Scottish Government makes a commitment to actively promoting market opportunities for Scottish Companies. Notably, there is a proposal to introduce an investment prospectus providing market information and investment opportunities for developers and investors, with an aim to provide certainty and long-term delivery options for market players.

 

One last thought to leave you with
 

The EES proposals walk a line between voluntary measures intended to encourage energy efficiency improvements and mandatory measures intended to force energy efficiency improvements. For the first ten years of the programme the focus will be on encouraging and enabling. However, the Scottish Government has made it clear that, from 2030, they will be willing to enforce mandatory requirements to meet their energy efficiency ambitions.

 

What might these requirements look like? Discussion in the parliamentary debate on EES drew attention to California's newly approved plan to require most new homes in the state to be fitted with solar panels. Too bold a step for Scotland perhaps, particularly given our limited sunshine. However, developers may find themselves faced in the future with EPC pre-conditions for planning permission or (a more 'encouraging' measure) for properties with renewable energy installations to get easier access to permitted development rights.

 

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