Get the demand rolling

Steven Heath details a five-point plan through which he views the UK’s readiness to deliver large-scale, low-energy renovation


 

We in the UK are the Cold Man of Europe according to Association for the Conservation of Energy (ACE) research, yet we have some of the lowest gas and electricity prices and highest household incomes in Europe. How can this be? ACE provides the answer The UK is ranked 14th out of 15 on space heating affordability, 7th out of 8 on the gap between current thermal performance and what the optimal level of insulation should be in each country, and last for fuel poverty out of 13 Western European countries.

The size of the task has been recognised by successive Governments, but the big questions are how to do it well and how to pay for it. The coalition has offered us Green Deal as a private loan mechanism supported by the Energy Company Obligation (ECO). Labour has recently announced a rebranding of Green Deal, perhaps with a subsidised interest rate, and a re-focus of ECO on area based schemes.

But, the headline statistics don’t look good:

• only 57 Green Deals plans live;

• 96 per cent of cash back money going to boilers;

• 0.9 per cent cavity wall and 2 per cent loft insulation installs through the Green Deal Cashback Scheme;

• few contractors offering solid wall insulation (SWI) to owner occupiers; and

• energy suppliers complaining the cost to them and energy bill payers of delivering their obligation will be three times the £1.3bn pa estimated by Government.

What state is the low energy retrofit revolution in? Much of the hard work has been done. Knauf Insulation at a global level has a five-point plan through which we view a country’s readiness to deliver large scale low energy renovation. Ironically, for all the poor numbers listed above, the UK has more elements nearly ready to go than almost all other European states.

Our five-point plan to get retrofit right is:

• do we have the supply chain to deliver the work required? Or rather, do a decent proportion of the 55,000 boiler installer companies, the 12,000 glazing companies etc offer whole house solutions rather than single measure options?

Answer: No – the building supply chain is highly fragmented, siloed and used to delivering single measures. But it could be if the demand was there.

• is relatively low cost private finance available for retrofit? The public purse can’t cover the £7bn - £11bn needed to do the job. We need institutional investors (or our pension money) invested in delivering warm homes.

Answer: Yes - The Green Deal or perhaps Labour’s re-branded Energy Save Scheme.

• is a subsidy available to cover installation costs where measures are not cost-effective for individual householders (i.e. can’t be repaid over a 25 year loan period)? This is neccessary as the measures offer a societal benefit as well as a benefit to the homeowner so it’s appropriate to use public money. Remember; if much of our heating is to be powered by electricity in the future, cutting home heating demand by a third impacts on how many power stations you need to build. Even if gas remains a major part of the energy mix, demand reduction reduces exposure to wholesale gas price rises and their knock on impact on all our bills.

Answer: Yes -The Energy Company Obligation.

• can the refurbishment offer guaranteed energy savings to homeowners?

Answer: No - it is unlikely we will ever get to that stage as people live in homes and they are unpredictable. But a thriving market will drive innovation in products and installation processes, meaning we get close to predicted savings in enough homes to gain the trust of both homeowners to retrofit and bond markets to buy Green Deal debt. An appropriately incentivised market will close the performance gap between predicted and real savings.

• are homeowners given a strong reason to renovate? What’s more, is that demand driver more than a simple monetary sweetener, but creating a real shift in mindset to stop the usual discounting or ignoring of future benefits? The four other points enable someone who has already made the decision to improve their home to do so. Mechanisms must also be put in place to persuade people to take the decision to improve their property in the first place.

Answer: No – there are a few monetary sweeteners in the current Green Deal offering, although at the time of writing only £1.8m of an available £40m has been spent.

At the moment, if we are to have an energy efficiency policy that is fit for purpose, one that can deliver warm comfortable homes that are affordable to live in despite future price rises - all five points need to be credible.

For all the criticism of Green Deal and ECO, once the demand for retrofit is there, the market, consumer organisations and the press should bash them into shape pretty quickly.

• Steven Heath is external affairs director (Knauf Insulation Northern Europe)

 

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