Introduction

Fuel poverty disproportionately affects island communities.

Evidence consistently shows that island communities experience the highest levels of fuel poverty in Scotland. The latest fuel poverty data, disaggregated to a local authority level, rank the 3 island authorities in the top 4 local authorities with the worst fuel and extreme poverty rates. These authorities also have the worst fuel poverty gap, ranking 1st to 3rd. Of the local authorities with islands in their jurisdiction, Argyll & Bute has above average fuel poverty rates, Highland, average, and North Ayrshire slightly below average^[1]. Argyll & Bute and Highland are in the top quartile of authorities with the worst fuel poverty gap with North Ayrshire just in the lowest.

Fuel poverty in island communities is systemic and linked to the wider energy system. Fuel poverty in these areas is not incidental but structural. Island communities host a disproportionate share of renewable energy generation and infrastructure and yet face some of the highest energy costs in the UK^[2]. There is a strong feeling in island communities that their voice is not sufficiently heard at either Holyrood or Westminster. While energy policy is largely reserved, the Scottish Government does have some levers. Energy efficiency measures are the biggest game changer beyond a radical reduction in electricity prices.

The off‑gas grid and remote geography significantly shape the fuel poverty landscape. Data from the 2024 Scottish House Condition Survey (SHCS) illustrates the structural challenges: fuel poverty rates are broadly similar in rural (28%) and urban areas (29%). However, significantly higher rates are found in remote small towns (47%) and remote rural areas (38%). Extreme fuel poverty[3] is also more prevalent in rural areas (17%) than in urban areas (13%).These patterns reflect higher reliance on electricity and unregulated fuels in off‑gas grid areas, particularly in island and remote rural communities. The recent improvements in fuel poverty statistics, noted in the 2024 SHCS findings, mask ongoing pressures. The improvement in the fuel poverty and extreme fuel poverty figures is being undermined by the ongoing energy price shock. As a result, the reduction in energy costs reflected in 2024 data does not fully capture current lived experience.

Energy efficiency is a critical lever for change. Beyond fundamental reform to reduce electricity prices, improving the energy efficiency of housing stock represents the most immediate, alongside fuel poverty crisis funding, and impactful intervention available to reduce fuel poverty. Current policy responses recognise but do not fully address the scale of the challenge. The Scottish Government has introduced targeted measures acknowledging the additional pressures faced by island and rural communities, including the Island Cost Crisis Emergency Fund, rural-specific adjustment to the fuel poverty definition, and rural and island funding uplifts^[4]. However, these measures are not proportionate to the scale of the cost challenge faced in these areas.

If poverty and inequality are to be addressed in island communities, fuel poverty must be given greater strategic priority than is currently evident in policy and investment decisions. The revised Tackling fuel poverty in Scotland Strategy, due by the end of December 2026, should recognise the needs of islands in particular as well as remote rural communities. The Panel makes the recommendations which follow on targeting resources to where they are most needed to combat fuel poverty and the need to ensure that UK energy policy and tests of change work for Scotland’s island communities. The National Islands Plan 2026 sets out 7 strategic objectives and our recommendations align with these and demonstrate how these recommendations can be implemented in a specific policy area. Community wealth building is the key approach to implementing the National Islands Plan, and community wealth building is at the heart of our recommendations. Augmenting existing resources to match need and harnessing the community wealth building opportunities from the continuing growth in renewable energy generation would tackle the issues which confine island communities to fuel poverty.

While there is a unique impact of the fuel poverty drivers on island communities, the islands are also a microcosm of the issues faced by Scotland and beyond in the Net Zero energy transition. These include the challenges of electricity pricing, energy efficiency measures, low carbon heating systems, and the gaps between power generation, transmission, and consumption, as well as how energy infrastructure hosting does or does not benefit local communities. The challenges facing island communities also therefore face other communities in Scotland and beyond, particularly other remote and rural ones. We therefore recognise that although the findings which inform these recommendations emerged from discussion with Scotland’s island stakeholders, they are also likely to be transferable and relevant in other contexts, particularly remote and rural communities experiencing fuel poverty.