Grant funding critical for public sector decarbonisation.

How Strategic Planning Leads Us Towards Net Zero

By Nadim El Bakri, Senior Energy and Carbon Analyst at Salix

The urgency of climate change is undeniable, with the need to achieve net zero emissions becoming increasingly vital. The United Nations reports that over 140 countries have committed to this global cause, underlining the pressing reality of this climate emergency. In Scotland, the Climate Change Act (2019) has set a target to reach net zero by 2045, emphasising the strategic approach required to combat this crisis effectively.

Setting objectives is the foundational step to defining goals, but numerous challenges must be overcome along the way. Among these challenges, the financial aspect undoubtedly stands as a significant hurdle.

The UK government estimates that decarbonising UK public sector buildings could cost between £25 and £30 billion. While this figure is indicative and based on current market prices, it provides a clear indication of the financial effort needed over the next 11 to 16 years to achieve the net zero target.

The Scottish Government has shown a strong commitment to decarbonising the public sector as part of its climate change goals. Since 2007/2008, the Government, in collaboration with partners, has executed over 1,100 energy efficiency projects with an investment exceeding £82 million. These projects have contributed to eliminating more than 750,000 tonnes of CO2 over their lifetime, but more is needed to achieve the set target.

While energy efficiency and fabric enhancements are crucial for boosting building energy performance and reducing heat losses, they cannot entirely replace the buildings’ heating demand. However, they play a crucial role in enabling the installation of technologies like heat pumps, which can meet a building’s full heating demand by relying on electricity instead of fossil fuels like gas, oil, or coal.

In 2021, the Heat in Buildings strategy was unveiled, outlining a £1.8 billion investment towards energy efficiency and zero-carbon heating in Scotland. This includes a substantial allocation of £200 million over five years specifically for improving energy efficiency and decarbonisation in public sector buildings. The Scotland’s Public Sector Heat Decarbonisation Fund falls within this funding initiative, aiming to assist local authorities, universities, and arm’s-length organisations in decarbonising their buildings by replacing outdated fossil fuel heating systems with heat pumps and other low-carbon technologies. Launched in July 2023, the scheme is supporting 12 projects valued at over £17 million, facilitating the elimination of nearly 53,000 tonnes of CO2 over the next 22 years.

While a preliminary comparison of carbon savings between loan and grant-funded projects may not show significant differences, the core distinctions lie in the projects’ scope and guiding philosophy. Projects funded through loans contribute significantly to reducing carbon emissions, but 10 out of the 12 projects supported by Scotland’s Public Sector Heat Decarbonisation Fund are entirely eliminating their reliance on fossil fuels in selected buildings.

Two major aspects highlight the difficulty of comparing these financial tools:

1. Financial restrictions imposed on public sector bodies in Scotland may hinder their ability to borrow money, impacting both grant applications and loan borrowings.

2. The extended payback period of decarbonisation technologies poses challenges when combining high equipment costs with infrastructure costs, necessitating grants for funding.

Despite the growing emphasis from public sector bodies on heat decarbonisation plans, significant financial constraints could impede their implementation.

Initially, the substantial investment required for low-carbon heating technologies like heat pumps and biomass boilers can pose a barrier for public sector bodies with limited budgets. Accessing consistent funding can also be challenging due to competition for grants and subsidies, limiting their availability and scope. Moreover, the long-term financial benefits of heat decarbonisation may not be immediately evident, making it challenging to justify upfront expenditures amidst other financial priorities.

In conclusion, while loans are essential for gradually improving building energy performance, full decarbonisation can only be achieved through continuous grant funding. Grants have less stringent criteria that could enable wider participation of public sector organisations. As the world races to combat climate change, strategic allocation of grant funding will be pivotal in ensuring success in achieving net zero emissions.

References:

Net Zero Coalition | United Nations

Reducing greenhouse gas emissions – Climate change – gov.scot

Net Zero by 2050 – Analysis – IEA

FEMP Unveils Historic Funding Milestone: $104 Million Investment Advances Net-Zero Initiatives Across Federal Facilities | Department of Energy

Recipe for a Liveable Planet: Achieving Net Zero Emissions in the Agrifood System

Climate change: Decarbonising UK public buildings to cost £25-30bn

The rise of energy-efficient heat networks in the UK’s public sector

Heat Decarbonisation | Pembroke college

Figures from Salix Internal reporting

This article appeared in the July/August 2024 issue of Energy Manager magazine. Subscribe here.