RETROFITTING HOUSING: How will the Green Deal impact on domestic energy efficiency plans?

Tony Reeves, chief executive, Bradford City Council (chair)Siobonne Brewster, strategic development director, Carillion Energy ServicesRuth Abbott, head of housing standards, City of York CouncilGeorge Munson, energy and climate change manager, Leeds City CouncilCatherine Monaghan, head of North of England, Energy Saving Trust

Green Deal and Energy CompanyObligation

Retrofitting HousingSiobonne Brewster

Strategic Development Director

4

SummaryGreen Deal

• The Green Deal is the Government’s flagship policy for achieving low impact housing in existing stock and, as a result, the targets set by the Climate Change Act.

• A financing framework will enable the provision of energy efficiency measures to all householders, collected by a charge on energy bills in order to avoid paying upfront costs or making this a smaller amount. This framework will also extend to non domestic buildings.

Energy Company Obligation (ECO)

• ECO replaces CERT, CESP & Warm Front and alongside Green Deal will additional provide support to vulnerable groups and hard to treat housing.

5

Delivery• Whilst some measures will be funded solely by Green Deal finance and some under the

ECO, the Government expect the majority of households to receive packages of measures jointly funded by a mix of the two funding streams seamlessly.

• A market based solution is proposed to help energy suppliers make a significant proportion of their ECO subsidy fairly available to those Green Deal Providers who can commit to delivering in a cost effective way. The Government believes the role of local authorities and other local partners is also likely to be crucial in ensuring effective and intensive delivery of the ECO and Green Deal in particular areas.

6

What is Green Deal?

• The Green Deal (GD) is a financing mechanism available to those who wish to install energy efficiency/ carbon reduction measures in their homes and don’t wish to pay the full amount upfront.

• Measures are repaid through the energy savings on the electricity bill, but unlike a traditional loan, the GD charge is attached to the house, not the individual..

• Only approved measures by accredited installers following accredited assessment can be installed and financed through GD.

• At the heart of the Green Deal Policy is the “Golden Rule”, which determines how much finance can be borrowed. It operates on the principle that the total amount borrowed via the Green Deal Finance mechanism must be less than or equal to the expected savings made on the energy bill. Savings will not be guaranteed, as fluctuating energy prices or behaviour changes can not be controlled however the Golden Rule is there to offer a basic level of protection for consumers”.

7

What is ECO?

• Energy Company Obligation (ECO) is an obligation on the energy suppliers to support household energy efficiency.

• It is estimated that ECO will create a market of £1.3 billion pa in the delivery of energy efficiency improvements to vulnerable householders as well as being used to supplement the financed delivery of solid wall insulation to hard-to-treat properties.

• The £1.3bn funding pot will be financed via a levy on consumers energy bills and divided between the three targets below:

• The targets within ECO are:

• Carbon Saving

• Carbon Saving Communities

• Affordable Warmth

8

Energy Company Obligation

Affordable

Warmth

Carbon

Savings

Comm’ty

Carbon

Reduction

• Private tenure -£350m pa on tackling fuel poverty. • Criteria – Benefit checked – as in consultation (similar to SPG) and now added Working tax

credit <£16k if has a child or disability and now with children up to 16 or 18 in in fte. DECC estimate 2.9 million households.

• This is important for us with our affinity partners and making Green Deal work.  (This was previously only a 25% share).

• Measures – cavity wall and loft insulation alongside any measure that improve ability to heat home (space or water) against SAP. Boiler replacement permitted where not working, not working to full efficiency and not economic to repair – awarded full score (assume secondary heating no boiler under SAP). Boiler repairs permitted (A and B) up t0 5% of total compliance provided with aftercare for boiler – 1 -2 years, score based on 1/12 or 2/12 pf full boiler score. Replacement of working boilers permitted but will score low so not likely to be competitive

• Referrals through independent body• Available to Private

• £190m pa to help low income households install). Includes access for Social landlords but will still excludes them from the affordable warmth pot.

• Criteria – 15% IMD (multi depravation index) soft boundaries and looking at rural areas. List of areas will be published. population under 10,000 also must be in receipt of AW qualifying benefits

• Measures – loft, cavity and other insulation (270,000 fuel poor households). Aims to increase support for fuel poor, drive more cavity, loft insulation alongside GD, promote and area based approach

• £760m. Solid Wall and Hard to Treat Properties• SW or hard to treat cavity can be packaged with other measures – that prevent heat loss from

homes (and district heating)

9

Size of Potential Markets• 27 million homes have significant potential for energy efficiency

installations

• Current activity pre Green Deal is approx 25,000 installations (mostly large projects in social housing)

• Some measures will decrease as CERT and CESP close

• Estimate believe that 3 million homes will benefit from Green Deal requiring almost 6 million measures over the period to 2020

• Average funding for Green Deal thought to be in the region of £2,600 with the average total cost being approx £6,900

• It is projected that the following products will be the most popular in order:

1. Heating controls 2. Loft installation (>60mm to 270mm)3. Draught proofing4. Double glazing 5. Cavity wall (easy)

10

What do we already know?

Key Findings

Qualitative Focus Groups have been conducted showing customer views:

“Scepticism, because I’m one of these that believes

you get nothing for nothing. If it’s the

government advertising this, it’s gonna cost you!”

• Energy Savings – for the majority this about saving money not energy saving

• Green Deal as a concept - relatively positive but there were some reservations and it is a complex proposition

• Financial concerns – increasingly sceptical of “deals” maximum spend; interest rates

• Trust issues – scepticism – just more of the same

• What happens on event change – technology changes or you move house

• Triggers – free assessment; cash incentive

• Knowledge – what measures are consumers comfortable with?

• Credible Providers – energy suppliers, DIY stores, supermarkets government backing

“I’m into anything saving energy… I’m not worried

about the planet, I’m more interested in my pocket

actually!”

11

Green Deal Key ChallengesBusiness View

• Business and investor confidence

• Volumes to support this investment

• Energy Company Obligation – clarity and a smooth transition

• Finance

• Customer understanding and engagement

Consumer View

• Government backed message versus solely market driven message

• Many consumers are sceptical of deals, green and loans even if not a loan!

• A positive experience and clear benefit

• Easy and little disruption

• Complex survey and measure challenges “It’s got to be advertised for people to be confident”

“If there are lots of names you could get schemes that aren’t

what they seem”

“Give us all the information clearly – ideally something

you can keep like the digital switchover

booklets”

12

What is needed?• A mixed approach to the market – through LA, RSL, brand names

including energy companies

• Low cost, secure finance.

• Organisations need confidence to enter the market.

• Homeowners need a clear, reliable and confidence building experience.

• Community Engagement – who would you listen to?

• A mixed supply chain approach building on a number of different routes between the finance, the customer and the installation. Trusted local tradesman, community groups, larger city led schemes, larger organisations all working together.

• An understanding and commitment to energy efficiency and combating fuel poverty by us all.

13

Green Deal Opportunities

• A new approach to funding energy efficiency – No or little upfront costs

• The appeal of the “loan” remaining with the property

• New players coming into the market – creating new energy and

competition

• Increasing energy prices and understanding of climate change issues

• Regulatory drivers – more stick if needed

• A real challenge but also a chance to do more.

14

Any questions?

Thank you for your time

Contact details:

Siobonne Brewster

Strategic Development Director

Carillion Energy Services

Email: siobonne.brewster@carillionplc.com

Mobile: 07508 766 025

York’s Approach including the Leeds City Region

Ruth AbbottHousing Standards and Adaptations Manager

37% of York’s carbon Emissions come from the Domestic sector. This equates to approx.400,000 tonnes of Carbon(enough to fill 200,000 double deckers)

York's Approach –Targets

Industry and Commercial

37%

Domestic Kt CO237%

Road Transport

Kt CO226%

York's Carbon Dioxide Emissions in 2009

Overview of City Climate Change related Policies Climate Change Framework & Action Plan

◦ 40% reduction by 2020 and 80% by 2050 (linked to CC Act 2008, EU and Friends of Earth)

◦ Modelled to understand key areas to focus on◦ 10 themes - including creating sustainable homes◦ Linked to Private Housing Strategy but also

focuses on h/h advice, general awareness, community campaigns – Green Neighbourhood Challenge, sustainable design and construction, microgeneration promotions

◦ www.http://www.york.gov.uk/environment/sustainability/climatechange/2framework/

York's Approach –Targets

Council Priorities Protecting the environment, building

stronger communities and Create Jobs and Grow the Economy.

York Housing StrategyAim 4 To improve the condition, energy

efficiency and suitability of existing homes and create attractive, sustainable neighbourhoods.

Private Sector Renewal Strategy Aim 6 Create sustainable homes and reduce carbon emissions from the domestic sector

York's Approach – Priorities and Strategies

Range of grants in the past aimed at the Private Sector – some based on eligibility others targeted on an area basis

Wrapping up York – extended until 31st December 2012 – free loft and cavity wall insulation funded under CERT

CESP funded scheme in the Hull Road area –only eligible area in the city – whole house approach helped by an LCR bid

Work with LCR through the DEEP project

York’s Approach- History and current

Work with the LCR Go Early Pilots – solid wall pilot in three areas of York Development of the business case which seeks a longer term solution maximising The Carbon Saving Obligation of ECO and helping residents access the Green Deal. ( initially a 3 year plan )

In the meantime Look at ways of maximising the two elements of ECO especially the Affordable Warmth element from day one but also the Carbon Savings Communities Obligation

York’s Approach- The Short Term

Focuses on the hard to treat (solid wall insulation )

Fostering good relationship with community groups- effective resident engagement

Cross department engagement (planning/highways/housing/sustainability)

Draw down on ECO subsidy if available but top up with an interest free loan.

Establish a network of assessors and contractors

York's Go Early project

We will target three areas in York predominately in the private sector – both traditional and non traditional construction types.

There are about 500 homes in the area but we are aware seeking to improve up to 50 homes.

Main concern at the moment is the delay around ECO

York's Go Early project

• HECA retained (in England) and revitalised

• HECA ‘s New guidance issued in July – emphasised that councils should play a strategic and enabling role to deliver green deal – You can’t ignore it !

Home Energy Conservation Act 1995

Thank you

Questions?

The Green Deal and Leeds

Contents…

□Leeds City Region DEEP

□Current energy efficiency priorities in Leeds

□Green Deal & ECO Challenges and opportunities LCR possible partnership

□Conclusions and discussion points

LCR DEEP□Statement of intent

LCR has ambitious energy efficiency plans

□Series of principles Long-term private/public partnerships Whole-house approach to energy efficiency LA brand and standards, private sector delivery Open up market to SMEs - significant job creation

□Practical projects already underway…

□29

Green Deal & ECO: challenges & opportunities

□Managing the transition from grants to loans

□Securing a good deal for low income and fuel poor residents

□Maximising the local economic benefit

□Right approaches to new niche markets…

Frameworks and partnerships

LCR DEEP

For Green Deal delivery

36

Green DealLocal Authority Operating Model

SPV

Green Deal Payments

Installation companies

Install and manage

ContractMarketing

PV Meter/deemed

BenefitsFinancePaymentsOther

BanksNon-recourse finance

Green Deal + FIT payments

Energy Companies

Hard to treat subsidy

Delivery PartnerContract

LAs

Buffer capital

PWLB

EIB

Further analysis produced an accessible market for retrofit – LCR

37

Notes¹ Estimate of those unlikely to take up cavity wall insulation based on poor take up under free schemes (estimate 50% of outstanding

cavity only)² Those in Fuel Poverty may not achieve the Golden Rule and therefore may not be eligible for Green Deal without heavy or full subsidy

□£560m1

LCR T

otal

Housin

g Sto

ck

Cavitie

s do

ne

Cavity

Wall

Lag

gard

s¹

Dwelling

s in

Cons.

Are

as (9

0%)

Liste

d Dwell

ings

New B

uild

(Pos

t 199

5)

Back

to b

ack

(90%

)

Afford

able

War

mth

Elig

ible

Acces

sible

-

200

400

600

800

1,000

1,200

1,400

1,252

462

206

207 79 14 88

37 43

115

Number of houses (‘000)

□577

□£2.3bn

□market

□size

Other Fuel Poor(2)

Conclusion and discussion

GD & ECO = fundamental change to established energy efficiency and fuel

poverty approaches

□Do nothing not an option

□Tough, but there will be a market

□Real ambition will give many advantages

Ability to attract ECO funding Ability to generate local jobs Long-term energy and carbon savings