PART 3: Revised Fuel Poverty Strategy
The Panel recognises that the Periodic Report and our reflections on it represent a significant opportunity to influence what the 2026 revised fuel poverty strategy looks like. As set out above, and notwithstanding the tight timescales presented by the current parliamentary timetable, the Panel’s view is clear: a comprehensive strategy review is required by the end of 2026, with the output being a revised strategy. It is essential that the revised strategy includes a clear and credible fuel poverty reduction plan to achieve the statutory targets. In doing this a greater emphasis must be placed on the monitoring and evaluation of progress, alongside flexible policy actions where monitoring and evaluation highlights insufficient progress and/or heightened fuel poverty need. The Panel would also advise that consideration is given to the alignment of periodic reporting, strategy reviews and the fuel poverty target dates.
In our previous advice on the Strategy, we set out several recommendations. These complement other recommendations we have made throughout the lifetime of the Panel (see Appendix 2 for a full list). Rather than repeat these, we have here focussed on those most relevant to our review of the Periodic Report.
We begin our consideration of the revised fuel poverty strategy by highlighting key contextual challenges for the revised strategy, and what must be addressed to create an environment in which fuel poverty targets can be met.
Contextual challenges for a revised strategy
Despite some positive progress, Scotland’s housing still has very low rates of energy efficiency. Accelerating the rate of improvements to the energy efficiency of the housing stock is a prerequisite for meeting the statutory targets and will require increased investment and strong leadership. The revised Heat in Buildings Bill should provide a vehicle to address accelerated delivery, make clear how it relates to the mitigation of and reduction of fuel poverty, and contributes to the fuel poverty targets.
Alongside improving energy efficiency, there needs to be an increased awareness of challenges around how energy is used in the home. As above, this includes self-rationing, self-disconnection, the incorrect use of technologies (including mistaken beliefs about which cost less) and inadequate ventilation or under heating. As the cost of living remains high, these behaviours will remain critical drivers of lived experience, and the Scottish Government should therefore develop a strong-evidence base of their impact and consumer thinking to tackle energy inequalities. At the same time the contribution of third sector advice services which remain under pressure should be recognised as part of a more integrated and holistic approach which can help drive behavioural change. The Scottish Government should take stock of advice models, their funding arrangements and what works best.
The Scottish Government should also create a fuel poverty delivery plan which includes how to increase low household net income as related to the attainment of the fuel poverty targets. This should cover a consideration of taxation levers, a cash first versus fuel bills first approach, and the balance of support for major policy actions, including the flexible energy discount mechanism and development of minimum income guarantee. One, as of yet untested view (to our knowledge), is that by protecting the fuel poor, a flexible energy discount mechanism (sometimes called a social tariff) would facilitate net zero because vulnerable consumers would be protected. If the intention is to work with or influence UK level funding, clear and accountable actions should be laid out, not just statements of aspiration. Where there are complementarities and trade-offs with UK government actions, these should be set out and evidenced.
High energy prices have had a significant impact on rates of fuel poverty and energy price volatility continues. With the transition to decarbonised domestic heating, to meet the fuel poverty targets it is essential that there is affordable and stable long-term electricity pricing. The recent announcement on the Review of Electricity Market Arrangements (REMA) to retain a single national, but reformed, GB-wide wholesale market to improve the efficiency of our future power, sees the move away from the potential of zonal pricing. It is imperative that the revised fuel poverty strategy makes clear (a) the extent to which high energy prices are affecting the fuel poverty targets, (b) how key UK-wide policy and market reforms will affect the targets, and (c) where the opportunities for Scottish Government to influence lie.
Fuel poverty levels are highest in remote rural Scotland[31]. The Panel has researched the high levels of fuel poverty in remote rural communities, including on islands. We are of the view that given the specifically challenging circumstances for those in fuel poverty in these communities, they have a different starting point for decarbonisation. We recommend that island and remote rural communities have a specific, more focused and co-ordinated, approach for tackling fuel poverty with clear leadership and enhanced resources.