our approach

Energiesprong UK's objective is to drive product and process innovation for attractive, affordable, financeable net-zero energy refurbishments in the UK.

This consists of the following three aspects:

1. principles of our approach

2. Market development team

3. Integrated approach with most important aspects

1. Principles of our approach

Energiesprong integrates investment into energy efficiency of the existing building stock with long term strategic asset management approaches looking at a general investment cycle of about 30 years. Existing practice is driven by short-term, single retrofit measures which are not aligned to asset management cycles and thus lead to a significant opportunity lockout over time. The current pace and retrofitting approach will not achieve the level of efficiency needed to meet the policy objectives of reducing carbon emissions and of providing warm and affordable homes.

To solve this, Energiesprong UK is pioneering a market transformation approach based on the Dutch example, which delivers fully integrated net zero energy refurbishment packages, supported by long-term performance guarantees aiming to make the solution commercially financeable and scalable.

The following principles explain the rationale of the approach:

Principle 1:

Guaranteed net-zero refurbishments are more attractive investments than piecemeal measures

Net-zero energy means that a house should not consume more energy for its thermal space heating, hot water, light and appliances than it produces over a period of a year. This level is chosen for a number of reasons:

1

Energy performance guarantees can be given on a net-zero energy refurbishment, because external factors (building characteristics) are no longer important. This is not the case with level B-label refurbishment, which makes a performance guarantee problematic. It is much easier and cheaper to finance a product with a guarantee to generate an extra income stream from the energy savings.

2

A house after a net-zero energy retrofit is like a new house. In fact, Energiesprong houses are of a higher standard than is required under existing building regulations. As a result, the payback period can be spread over a longer time, resulting in a far better business case.

3

Most maintenance to the house is included in the retrofit implying that typically budgets for maintenance and refurbishments can be combined.

4

Incremental improvements do not change the status quo of how the market actors operate. When setting the bar high, current market mechanisms cannot sustain, because they are incapable of achieving the new level of ambition. Net-zero refurbishment re-orientates the market; new solutions will emerge more quickly and will be a better fit to what is required.

5

Net-zero refurbishment is much more attractive and more fun for people than energy savings alone. This is especially important in the private sector.

Principle 2:

Front runners have the potential to make the change

A huge gap exists between front running actors that want to move forward and the mainstream actors that do as they used to do. When looking at statistics the mainstream will always be the overwhelming majority. For that reason ambitious refurbishments seem a hard sell. But as soon as the collective demand of the frontrunners is organised a new market develops.

Principle 3:

Focus on the right housing stock will kick start the market

Instead of trying to refurbish every house, focus on the right housing stock: collect a volume with a homogenous typology, limited issues with planning rules, no high share of under-heating, a lot of maintenance that has to happen anyway and that presents a secure investment for an association. Once a refurbishment solution provider has developed a refurbishment proposition for one of these houses it can be sold many times, meaning the innovation investment can be spread out over larger volumes. Once suppliers start developing additional concepts for varied typologies and have flexible factories to fabricate packages (both for cladding solutions and interior insulation), the ability to apply a greater amount of flexibility will increase, enabling construction companies to fabricate solutions for houses with more diverse characteristics. This is a continuous process where solutions will get smarter and the scope of housing types increases as skills develop.

Principle 4:

Start with social housing: private market comes later

To change the dynamics in the market, the initial scale of demand is essential. It is easier to organise sufficient initial demand that can be steered in asking for the same kind of propositions when working together with housing organisations than when you would try this in the private market.

Financing conditions, regulation and marketing of solutions will be different in the private sector, but once the technical concepts have been developed using the housing associations stock, it is much easier to penetrate the private housing market (as the product is available and can be seen in the market).

2. Market development team

The approach to finding solutions to all the challenges needs to focus across the sectors and their supply chains. Energiesprong deploys an independent, not-for-profit market development team that works to alleviate regulatory barriers, create the necessary financing conditions, organize demand for net-zero energy refurbishments and steer the construction sector to move to a completely new system of working.

To be successful, an independent market development team is key as supposed to merely bringing together a working group of people from existing parties that are actors in the domain. The interests, attitudes and working methods vested in these parties have led to the status quo, as it exists today. The objective is to change that rapidly and using the same ingredients is not a good basis to create a different outcome.

3. Integrated approach with most important aspects

An integrated approach is necessary in order for Net Zero Energy refurbishments to succeed. The following aspects will need to be handled so that tenants will pay the same energy costs to the social housing organisations as they use to do to the utility company.

The business case: from an energy bill to an energy plan

The business case for the social housing organisations is based on transforming the energy bills of tenants into an energy plan. This energy plan is a ‘service fee’ (or increase in rent) that costs the tenant the same as the bill that was previously paid to the utility. This fee can be seen as the instalment on the loan taken for the refurbishment. It should be noted that tenants are protected from future energy price rises as the investment is a fixed cost and the energy plan can therefore be too.

For the social housing organisations, which will (most likely) borrow (part of) the money for the investment from a financier, there needs to be a positive internal rate of return. The level of that return depends on a range of factors.

 

The approach, based on what is currently successfully being implemented in the Netherlands, is that households will get a warranty on a minimum guaranteed thermal energy supply (room heating and hot water. If they exceed this (room heating of 21 degrees, defined volume of hot water per day), they consume more energy, which implies they will pay excess electricity consumption to the utility with which they still have a connection and contract (houses are converted to all electric).

 

For the electricity consumption for lights and appliances, tenants receive a bundle (like a mobile phone plan) based on the typical household’s energy consumption. If the tenant’s consumption does not exceed the limits set by the bundle, it’s covered; if consumption exceeds the limits, there is an excess charge per kWh (to the utility). Years with excessive cold winters might require a bit more energy as well (although the effect is much smaller compared to ‘normal’ houses due to insulation quality). Such years may cause a surcharge to be imposed (as would be the case in the current situation, only now the surcharge will be smaller).

 

Monitoring equipment is installed to provide real time feedback to tenants (monitor in the house). If consumption of energy for heating and hot water exceeds the projected energy performance of the E=0 home, the construction company and the social housing organizations will investigate what the cause is and find out if the cause is behavioural or technical and address the issue.

 

Regulation plays a role in the feasibility of such a setup. The ability of social housing organisations to receive additional income from the tenant in the form of an energy plan becomes relevant if the cap on the rent would otherwise be exceeded. For the initial volumes in the UK this is not a problem as there is enough stock that has sufficient room to increase charges without hitting that cap, but for scaling further some adjustments could be beneficial. In the Netherlands, the case was similar and sufficient volume was available for which the rent could be increased without legal problems, but a law change enabling housing associations to charge an energy performance remuneration for guaranteed E=0 house irrespective of rent levels is expected to pass in the next two months, which would enable a larger stock to benefit from these solutions.

Before-After

Energy performance remuneration

Housing providers financial envelope to invests benefits in case the energy cost savings create an extra income stream for them. This is the engine of the business model. The ability to charge an energy service remuneration fee is however restricted. This issue needs to be addressed. The point of departure remains that the costs of living before and after the refurbishment for a tenant should be comparable.

Planning

In particular with outside wall insulation (cladding) solutions the planning permits are relevant. Cladding can make a house look much nicer, but Energiesprong acknowledges that in particular for older estates, the look of the external façade is beautiful and rightly so protected. However, certain agreements on planning rules to simplify the installation procedures can help the implementation. In the Netherlands such arrangements have indeed been made (this also included clearance on checks aimed to protect local fauna such as birds and bats for which nesting arrangements have been included in certain retrofits).

Different procurements

Currently, refurbishment solutions are typically procured with lots of specifications by the homeowner (either a private occupier or a housing association). Energiesprong is convinced that innovation will spur if procurement is performance based and only requires: guaranteed energy and indoor climate performance, short installation times, steer on total cost of ownership and an appealing design. Mass demand should ask for no less, but also no more. It is essential that full freedom to innovate should be left to the suppliers in order to come up with the best ideas based on these performance indicators only.

 

Different offerings

In order to decrease costs while achieving constant high standards of quality and a short installation time, converting the construction sector to start developing and producing integrated solutions that are industrially produced instead of project-based, craftsmanship-oriented piecemeal solutions is essential.

A transformation in the construction sector towards industrialization, prefabrication, constant and high quality, lower costs and continuous innovation, needs to have a product first. Energiesprong has defined the quick to install, E=0 refurbishment with an energy performance guarantee as that product. This concept allows there to be continuous improvement by a refurbishment solution provider who needs to give the guarantee and to also ask their suppliers to deliver new and better components.

Houses are all different. Even the ones that look the same (e.g. terraced houses) are mostly not exactly the same as they differ a centimeter here and there. Therefore, factories making the packages need to be flexible so they can make wall and roof solutions for different dimensions and different mounting mechanisms.

The basic idea of production is based on 3-D laser scanning techniques that allows making a quick (and cheap) scan of all the relevant dimensions of a house with great precision. These dimensions are fed into a building information model generating the technical drawings that then steers a flexible factory producing the packages.

Because companies are asked to give an energy performance guarantee on the house, they are constantly optimising between costs for extra insulation, a smarter installation and extra energy production capacity or reduction in electric or hot water demand. This drives innovation and integration of solutions.

These types of innovations will only happen if there is scale. This implies that companies need to develop packages that can be produced in flexible factories and personalized where desired.

Solution providers are asked to guarantee both the energy performance of the house as well as the indoor climate. This performance guarantee ideally is as long as the technical lifetime of the refurbishment (this can be 30 or 40 years). With such long terms, it may be needed to cover the risk of discontinuity of the solution provider (f.i. in the case of future insolvency of the company).

The approach, based on what is currently successfully being implemented in the Netherlands, is that households will get a warranty on a minimum guaranteed thermal energy supply (room heating and hot water. If they exceed this (f.i. room heating of 21 degrees, certain amount of hot water consumption), they consume more energy, which implies they will pay excess energy consumption to the utility with which they still have a connection and contract.

For the electricity consumption for lights and appliances, tenants receive a bundle (like a mobile phone plan) based on the typical household’s energy consumption. If the tenant’s consumption does not exceed the limits set by the bundle, it’s covered; if consumption exceeds the limits, there is an excess charge per kWh (to the utility). Years with excessive cold winters might require a bit more energy as well (although the effect is much smaller compared to ‘normal’ houses due to insulation quality). Such years may cause a surcharge to be imposed (as would be the case in the current situation, only now the surcharge will be smaller).

Monitoring equipment is installed to provide real time feedback to tenants (monitor in the house). If consumption of energy for heating and hot water exceeds the projected energy performance of the E=0 home, the solution provider and the social housing organizations will investigate what the cause is and find out if the cause is behavioural or technical and address the issue.