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Can Dutch deal succeed where the Green Deal failed?

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The Green Deal may have disappointed, but a new mass retrofit initiative is building support and making its way to the UK from the Netherlands where it has already seen success with social housing.

It’s fair to say that the Green Deal was a huge disappointment. Having drawn negative headlines throughout its life, it wasn’t a great surprise when the Conservative government finally put the policy out of its misery earlier this year.

Something still needs to be done, though, to retrofit the UK’s existing housing stock. And if the Green Deal wasn’t the answer, what is?

In the Netherlands, they think they might have cracked it. Daniel Kemp of the AJ’s sister title Construction News investigates.

How it works

The Dutch government-supported approach known as Energiesprong (‘energy leap’ in Dutch) has retrofitted almost 1,000 homes to date, with a total of 110,000 planned.

It works on four principles: high quality, to provide a warrantied, guaranteed energy performance; non-intrusiveness, so that refurbishments are all carried out within one week; affordability, with the retrofit financeable from energy cost savings; and improved look and feel of the house overall.

The third principle, the core concept of paying for energy efficiency upgrades via savings made on energy bills, is broadly similar to the Green Deal.

But the similarity ends there.

‘The main reason the Green Deal didn’t work is that it wasn’t particularly green or a deal in a commercial sense, because there was no energy performance contract,’ says Energiesprong UK programme director Arno Schmickler.

‘The main reason the Green Deal didn’t work is that wasn’t particularly green or a deal in a commercial sense, because there was no energy performance contract’

Arno Schmickler, Energiesprong UK

With the Dutch initiative, tenants’ energy bills are replaced by an energy plan, with the loan repayments included.

Each household’s plan could be different depending on the number of occupants and size of the home, but typically a household might receive a guarantee that their house is heated to 21 deg C whatever the weather, gets 200 litres of water per day, and an electricity bundle for lights and appliances of between 1,800 and 2,000 kWH per annum.

If the household exceeds any of this they would pay a surcharge, but with the increased energy performance of the house they would be unlikely to pay much – even in the coldest winters, the extra heating required for these well-insulated homes would be minimal.

All of these parameters are set during procurement by Energiesprong and are warrantied for at least 30 years by the construction company carrying out the installation.

Monitoring equipment provides real-time feedback, and if consumption of energy for heating or hot water exceeds projections, the contractor and housing provider will investigate whether a behavioural or technical issue is the cause.

The cost of the energy plan is roughly equivalent to the bill the tenant paid before, allowing the retrofit work to be funded at no cost to the household.

Mass market

Initial success in the Netherlands has been in social housing, which is the area Energiesprong is initially targeting in the UK.

‘We’ve started working with the social housing providers because they manage over the long term, with 100-year perspectives on their properties, and have asset management strategies of 25 to 30 years,’ Schmickler says.

‘As they’re not looking to sell their properties, you can really build a robust business case.’

A vital part of making the Energiesprong concept successful is achieving economies of scale.

In theory, as more prototypes are completed, the cost of the retrofit will fall while the energy performance goes up – until, sooner or later, you can complete the work cheaply and effectively.

Willmott Dixon is one of the founding construction partners (see box) and David Adams, Willmott Dixon Energy Services’ technical director, says that there are two obvious, decisive elements to making the scheme work.

‘The unit cost has to be driven down through industrialisation, that’s absolutely critical’

David Adams, Willmott Dixon Energy Services

‘The unit cost has to be driven down through industrialisation, that’s absolutely critical,’ he says.

‘And the financing has to work and stack up for the householder, or it won’t get mass scale and we won’t be able to drive the price down.

Schmickler talks about an initial deal with a number of UK housing associations to retrofit 5,000 homes in total – with the cost per unit fixed across all of those homes.

‘The housing associations will have to overpay for the first prototypes and probably won’t get the net zero performance – but that’s mutual learning, as the construction industry will also lose money developing them,’ he says.

‘At some point you reach the target deal, beyond which the cost goes down and the performance still goes up, but the price is fixed for those 5,000 units.’

He says those units are the initial working number here based on what’s been achieved so far in the Netherlands, but that future deals could be for ‘more or less’.

Private sector

With industrialisation of the process crucial to driving costs down and making the financial element stack up, it’s easy to see why social housing has been the initial focus.

But what of the owner-occupiers? The UK’s housing stock is among the least energy-efficient in Europe, according to the UK Green Building Council, so the private sector will have to be tackled as well in order to achieve significant reductions in carbon emissions.

This is another area where Energiesprong differs from the Green Deal – not only does it improve a home’s energy efficiency, but it also gives it an exterior facelift to it make it look much better, too.

This last principle could be the major difference compared with the Green Deal in unlocking mass-scale private sector refurb.

‘Energiesprong is not first and foremost about energy efficiency, as that in itself doesn’t appeal to the mass market,’ Schmickler says.

‘We are trying to position a high-quality, desirable product, to make your neighbours jealous – that really works.’

‘Energiepsrong is not first and foremost about energy efficiency, as that in itself doesn’t appeal to the mass market’

Arno Schmickler, Energiesprong UK

One reason for the low uptake of the Green Deal was the fear that homeowners might be lumbered with a high-interest loan attached to their property, potentially making it more difficult to sell the house.

But with Energiesprong, the idea is to increase the value of the home while retrofitting it by making it look better – with the energy efficiency benefits just one part of the overall package.

‘The owner-occupier isn’t holding onto the property for 30 to 100 years, let alone five years probably in the UK,’ Schmickler adds.

‘Therefore you need to encapsulate the value uplift almost on day one of installation.’

Adams agrees, arguing that owner-occupiers are “pretty savvy” about adding value to their homes.

‘The other element that’s really important, and that’s somewhat different than in Holland – thanks to Right to Buy there are owners dotted around in amongst [social housing tenants], so if social housing providers do it on their properties it will become attractive to their neighbours to give the whole neighbourhood a lift.

‘There’s a prize in there, isn’t there?’

Future potential

It’s clearly still early days for Energiesprong but the promise and potential is there.

‘It won’t be a silver bullet – it’s only appropriate for certain property types and it may be difficult to drive take-up outside of the social housing sector,’ says Richard Twinn, policy advisor at the UK Green Building Council.

‘But to overhaul our entire housing stock we’re going to need a range of mass-market delivery models and Energiesprong could help to lead the way.

‘It’s refreshing to see an approach which is based on outcomes – in this case zero energy – and which aims to deliver at scale.’

The scaling will be vital to the initiative’s success – if it doesn’t take off in a big way or if the process cannot be industrialised, the costs won’t come down and it will be hard to make it financially viable.

‘It’s refreshing to see an approach which is based on outcomes – in this case zero energy – and which aims to deliver at scale’

Richard Twinn, UK Green Building Council

‘Getting scale is important, and clearly the social housing stock has a significant opportunity to provide that catalyst,’ Adams says.

He adds that the founding partners have all put in £5,000 of funding so far, to “effectively provide a secretariat” at Energiesprong UK.

Most of the initial work will be done by the partners, with external funding sought if and when it is needed and appropriate to do so.

The focus to begin with will be on London, the Midlands, Nottingham and Newcastle, where Energiesprong’s housing partners are located, with no providers from the South-west or North-east on board yet.

The team is working on building the business case, making it robust, and creating the financial model such that the housing associations can commit to the final investment in the initial run of homes, with a target on that 5,000-home number.

Ikea efficiency

In the longer-term future, Schmickler sees Energiesprong as a ‘retail solution’.

‘We want to position this where you could walk into, dare I say it, Ikea, and buy your Energiesprong solution while you’re kitting out your home with new furniture.

‘That’s how easy it should become.’

He stresses that Energiesprong is ‘technology agnostic’, meaning that they won’t specify a particular method for contractors to use, only a level of performance.

This should suit contractors, as great technological advances shouldn’t be needed to achieve the project’s aims.

‘I don’t think very much of this is new, it’s just taken to an extreme,’ Adams says.

‘In terms of craning in pods for services units or panels, that happens within the construction industry every single day – that bit’s not new. The energy systems within Passivhaus are not new.

‘It’s about if we can get the costs down and the financing up so that the gap is sufficiently closed to be attractive on a mass scale.

‘This isn’t scary.’

Energiesprong UK founder partners

Energiesprong UK is a non-profit organisation limited by guarantee, with its 16 founding partners as the guarantors. They are:

Housing providers

  • Accord Group
  • Affinity Sutton
  • AmicusHorizon
  • Moat
  • Nottingham City Homes
  • Orbit Homes
  • Thrive Homes
  • Your Homes Newcastle

Construction

  • Beattie Passive
  • Mears
  • Sustainable Group (UK)
  • Wates
  • Willmott Dixon

Policy and trade bodies

  • Energy Saving Trust
  • National Energy Foundation
  • National Housing Federation
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