**5. Discussions**

Integrating energy modelling, LCA, and financial modelling helps us to understand various aspects of heat pump uptake scenarios. Energy savings results emphasize that EEI could help to reduce energy demand by 16% in the CE scenario even though the housing stock is increased by 19% by 2050. The uptake of heat pumps could reduce the energy supply by 82% when coupled with ambitious EEI in the CE scenario.

The main heating types in Orkney are electric heaters and oil boilers, so heat pump uptake could help to reduce use-phase-related GHG emissions by 98% in the CE scenario (from 26,681 tCO2e to 659 tCO2e), but this requires strong commitments in terms of EEI and heat pump deployment. Even though the electricity mix is 100% renewable, GHG emissions coming from the production of materials used for electricity supply technologies make it difficult to reach the net zero target. CE principles could help to reduce the impact of the manufacturing phase with greener production lines and eco-design principles.

ASHP perform better than other heating technologies (oil, LPG, coal and wood boilers, and electric heaters) in terms of heating costs with the optimized operation. Total cumulative heating costs paid by end-users in Orkney could be reduced by 84% in the CE scenario (from £23.0 million to £3.7 million). This could be achieved by the 100% uptake of heat pumps coupled with more efficient houses and changes in energy prices in the future. Increased levies on fossil fuels and reduced levies on electricity could make the electricity market more competitive in the future to accelerate the transition.

Financial analysis results show that self-financing or financing options without any support are not a desirable path for fossil fuel consumers in the baseline scenario. High installation costs of heat pumps still stand as a barrier. The highest benefits are achieved with Boiler Upgrade Scheme (BUS) grant and Home Energy Scotland (HES) loan and cashback scheme with £659 and £3613 for consumers using oil boilers, respectively.

Total discounted savings in the baseline model could be tripled with the CE scenario with the help of reductions in electricity prices and increases in fossil prices with a carbon tax in the future. Moreover, self-financing and financing without support options also create positive savings for all fuel types in the CE scenario due to more efficient houses with lower electricity prices.

EEI maximize fuel savings whereas high upfront cost is significantly high, especially in unrefurbished houses. Energy modelling results show that the heating demand of an unrefurbished house could be reduced by 40% if the house is insulated, so the new building category is the best option for the optimum heat pump operation. The CE scenario could help to avoid negative savings resulting from EEI measures and creates a financially viable solution for end-users. Therefore, the CE scenario offers significant potential benefits.

EEI measures are consequential for the optimum performance of heat pumps; however, it requires a £130 million investment for the entire island. Therefore, these measures also require support to become more engaging to consumers. This support could be around up to £14,000 grant for unrefurbished houses (around 5300 houses in total) and up to £7500 grant for refurbished ones (Around 3150 houses in total). These grants could also be flexible for different archetypes based on their initial project cost, and these figures could provide around £108.5 million to support the entire island. The remaining savings (£21.3 million) could be achieved by reductions in electricity costs and project costs with the help of EEI measures. New grants and incentives could also be introduced, such as vouchers similar to BUS/HES grants for some part of the total cost, interest-free loans for the remaining part of the cost, and removing VAT on equipment and labor costs.

Electricity load results emphasize that detached houses have the highest peaks due to their higher energy consumption, but the new building category has the lowest load results. Therefore, EEI could help to reduce peak loads. At the Orkney level, a combination of Comfy Heat and E12 tariffs provides a more even spread of hourly load profiles. The maximum peak load is 26.5 MW in the baseline scenario whereas it reaches 51.2 MW in the CE scenario. When the increase in the heat pump capacity is considered (1203% increase in total daily system loads from 14.9 MW in the baseline to 194.2 MW in CE), a 93% increase in maximum peak loads is seen. In order to achieve this, a competitive electricity market with a high number of off-peak hours, such as the E12 tariff, or more equally spread off-peak hours throughout the day, such as the Comfy Heat tariff, is required.

Orkney is facing a high level of fuel poverty due to lower average income and higher energy prices than the mainland. Moreover, the housing stock is older than the national average. Accelerating the heat pump uptake could help to reduce the negative impacts of volatility in oil prices and energy security problems with the help of a high level of renewable electricity generation. However, high installation costs of heat pumps and EEI require financial support, such as grants, incentives, and interest-free loans. The highest potential savings at the individual household level and island level could be achieved with these subsidies.
