Energy Efficiency and Low Carbon Market Research

The following research was commissioned by the Energy Savings Trust, in partnership with Scottish Enterprise, the Scottish Government and Zero Waste Scotland. This report presents the findings of research that aimed to capture a ‘snapshot’ of key insights into the energy efficiency and low carbon market in Scotland from both a demand and supply perspective. Specifically, it sought to identify likely future demand from key buyers, current supply chain characteristics, and any significant barriers and gaps in the supply chains ability to meet the needs of buyers, which may limit the uptake of Scottish products and services. It also sought to assess the supply chain’s likely ability to respond to the tenders to be issued as part of Scotland’s Energy Efficiency Programme (SEEP), and to provide recommendations for improving procurement processes and documents for suppliers. The findings will also inform the Sustainable Energy Supply Chain programme. This programme aims to develop and support those Scottish businesses (particularly SMEs) committed to delivering a high quality and professional service of assessments and energy efficiency / renewable installations.

The research involved a survey of 95 buyer organisations, representing housing associations (21), local authorities (6), industrial/commercial (44), higher/further education (HFE) (16) and the NHS (4). A survey of 80 suppliers representing installers, energy assessors or a combination of the two was also conducted. The responses from these surveys were subjected to a gap analysis, which reviewed and contrasted the details provided and enabled an assessment of the overall capability of the supply chain to meet future buyer requirements.

The research found that buyers anticipated a continued future demand for insulation works and low carbon heating services, particularly from housing associations and local government. On average, over the next three years housing associations expected to spend £864k each, local authorities expected to spend £850k each, and HFE institutions expected to spend £550k per institution. Demand was also expected from almost half of commercial/industrial respondents, with a focus on areas of lighting, voltage optimisation and heat recovery / ventilation, although spend per organisation was more modest – at approximately £10k each. There is a broad mix of installer and assessors operating in the current low carbon market in Scotland. Of respondents to this survey, suppliers typically had 10 employees or less and an annual turnover below £500k. 44% of respondents offered services across all areas of Scotland. Buyers expressed a few concerns expressed around access to suitably skilled suppliers, notably in island regions, without incurring a cost premium. Public buyers typically used Public Contracts Scotland (PCS) to advertise opportunities. By contrast, only 60% of respondents were registered on PCS. For a number of suppliers there was a perception that opportunities advertised via PCS were only for a small subset of larger suppliers and to some extent was a ‘closed shop’. The range of installation/assessor services presently offered by suppliers in the market was found to generally align with the existing and forecast future needs of buyers in the next three years with no significant gaps in service offerings. Both buyers and suppliers highlighted district heating as a potential growth area. However, smaller suppliers (typically 10 employees or fewer) were more heavily reliant on private households in seeking future value. Only suppliers with large turnover were carrying out significant scale of works with local authorities and housing associations.

A number of recommendations were made to assist the energy efficiency and low carbon supply chain in Scotland remain functional and capable of meeting buyer requirements. These include: encouraging consortia working amongst the supply chain; providing procurement guidance for suppliers to engage with public sector buyers; exploring supplier attitudes to multi-channel advertising of opportunities; offering consolidated service offering profiles of suppliers to buyers; providing procurement guidance and training programme for all local authority buyers; encouraging buyers to publish forward plans and/or prior information notices; encouraging more buyer and supplier engagement events; providing guidance for buyers on assessment of value for money; encouraging consistent procurement routes among buyers including a dedicated SEEP category in PCS; providing buyers with clear routes to obtaining funding (particularly over the mid to long term); avoiding time constrained funding allocations; and providing suppliers with a clear overview of the scale of funding available to buyers.