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How to avoid our low energy retrofit ambitions being stretched

How to avoid our low energy retrofit ambitions being stretched

By Steven Heath; External Affairs Director for Knauf Insulation Northern Europe

According to Association for the Conservation of Energy (ACE) research, in the UK we are the Cold Man of Europe, yet we have some of the lowest gas and electricity prices and highest incomes in Europe. Why?

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.

Conclusion: it is the energy efficiency of the homes. So, welcome or not, an energy price freeze, group switching, breaking the big sixes‘ stranglehold, or even separating out the energy supply and generation markets do not constitute sole or even collective long term answers. Instead, we need a low energy retrofit revolution.

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 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% of cash back money going to boilers;
• 0.9% cavity wall and 2% loft insulation installs through the Green Deal Cashback Scheme
• Few contractors offering Solid Wall Insulation (SWI) to owner occupiers
• 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

Knauf Insulation’s 5 point plan for a low energy retrofit revolution

Internally, Knauf Insulation at a global level has a 5 point plan through which we view a country’s readiness to deliver large scale low energy renovation.

Our five point plan to get retrofit right is as follows:

1. 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.

2. 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

3. Is a subsidy available to cover installation costs where measures are not cost-effective for individual householders? This is necessary 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

4. 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.

5. 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 £1.8 million of an available £40 million has been spent. Labour suggests they may put in additional monies or use the Government’s balance sheet to enable a subsidised interest rate. This is welcome, but on its own it doesn‘t create the mind-set shift required to get the revolution going.

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 5 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. From the industry’s point of view, they had better do it soon as current market inactivity means investment is placed elsewhere and much needed skills are lost to other sectors or the dole queue.

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