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 Services Ruth Abbott, head of housing standards, City of York Council George Munson, energy and climate change manager, Leeds City Council Catherine Monaghan, head of North of England, Energy Saving Trust

Green Deal and Energy Company Obligation Retrofitting Housing Siobonne Brewster Strategic Development Director

4 Summary Green 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 proofing 4.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 Challenges Business 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 Mobile:

Ruth Abbott Housing 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)

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. ework/ www. ework/

 Council Priorities Protecting the environment, building stronger communities and Create Jobs and Grow the Economy.  York Housing Strategy Aim 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

 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 31 st 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

 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

 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

 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

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 !

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 Deal Local Authority Operating Model SPV Green Deal Payments Installation companies Install and manage Contract Marketing PV Meter/deemed Benefits Finance Payments Other Banks Non-recourse finance Green Deal + FIT payments Energy Companies Hard to treat subsidy Delivery Partner Contract LAs Buffer capital PWLB EIB

Further analysis produced an accessible market for retrofit – LCR 37 Notes ¹ 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 □ £560 m 1 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