Time to stop tinkering

What’s going to give us a sustainable housing stock? Paul King, chief executive of the UK Green Building Council, tells Green Futures that the technical solutions are to hand, but the real problems are all about money.

Green Futures: Are we on track for the kinds of improvement we need to see to take our existing housing stock to sustainability, in the kind of time frame we need to see it?

Paul King: Absolutely not. It’s true that we’re getting a welcome ramping up of funding into the relatively easy targets –filling cavity walls, loft insulation and so forth – as we move from the Energy Efficiency Commitment (EEC) programme to the Carbon Emissions Reduction Target (CERT) scheme [see grey box below]. So we’re making some good progress on the easy stuff, and will make more through CERT, but on the big shift of achieving a 60-80% reduction in emissions from existing housing, we haven’t made anywhere near enough progress. You can’t help feeling that we’re just fiddling round the edges.
 
The next stage is made up of more costly improvements: installing super-efficient boilers and glazing, and for buildings without cavities, more challenging solid wall insulation techniques. And obviously if we’re serious about getting close to zero-carbon homes, there will ultimately be a residual energy need which will have to be met from renewable sources – the whole array of technologies, which at the moment are relatively expensive.
 
It will be interesting to see what becomes of the Green Homes Forum, which was announced in the 2008 budget and will take place this autumn. Government needs to respond to the setting of the Carbon Budgets by this time next year and therefore have a clear strategy for reducing emissions in the existing stock. It's going to take a monumental effort – across government, across the relevant industry sectors and other stakeholders – but we don't have a choice but to succeed.

GF: We’ve recently seen the introduction of home information packs [HIPs, which house sellers must now provide to prospective buyers] – albeit in watered down form. Are they having the kind of impact the government hoped?
 
PK: It’s very early days. Unfortunately, the water has been muddied for energy performance certificates [EPCs – an element in the home information pack which provides advice on how to cut CO2 emissions and fuel bills] because they have been entangled in other negativity surrounding HIPs. It will take time for them to emerge as an important driver in the market. But I think it will happen. Look at how CO2 emissions of cars have begun to creep into people’s consciousness, crucially aided by the banding of road tax in relation to emissions.

GF: Refurbishment of housing is a pretty unsexy market dominated by small building companies. What needs to be done to build their capacity to do these upgrades?

PK: It’s a real issue. If I was living in a draughty Victorian house and was even remotely interested in improving the energy efficiency of that home, I would be put off by not knowing where to get reliable help. I can’t see that changing until we have some form of accreditation for advisers and suppliers. Lots of people have come forward wishing to become accredited EPC providers and Code for Sustainable Homes assessors, so I think with the right framework we could see a new wave of both accredited installers and impartial advisers, helping householders save energy and invest in the right renewable energy kit.

I also think there’s an important potential for mortgage lenders here. People go to them to talk about borrowing large sums of money over 25 years, so they’re in a pivotal position to highlight the benefits of upgrading a home in terms of its running costs and the affordability of a mortgage, and to recommend suppliers and installers of kit. I think it will come. The Energy Saving Trust are interested in doing more certification, and the Co-op Bank already has an offer of this sort [see green box below] connected to moving house.

GF: Are there any magic bullets in terms of new technology?

PK: The cheapest energy is no energy, so energy saving is always the priority – turning things off, insulation and so forth. But for most properties there will be a residual energy demand that has to be met somewhere, and in an emerging market there are bound to be lots of competing technologies appearing to meet that need. Many will fall by the wayside, but that doesn’t mean there’s not a place for small-scale renewables. Solar thermal is now a well-proven technology wherever there’s reasonable sun, whereas we’re beginning to realise small wind turbines are not always effective in urban locations. We’re hearing more about ground, and even air, source heat pumps, but it’s horses for courses and I don’t want to back any particular technology.

“Buying and selling is the main time when enough money is changing hands for people to contemplate the more expensive upgrades”
 
GF: As the market slows and we head for a recession, is it going to get easier or harder?
 
PK: A slower market will probably mean people staying put for longer. People are also increasingly concerned about the rate at which energy bills are going up – and they’ll probably go up another 20% at least in the coming year. So there may be more of an incentive for householders to improve the house they’re in. In that context there are lots of opportunities to stimulate action – for financial institutions to offer preferential home improvement loans, for the DIY market to be promoting energy-efficient products, and for government to be doing its bit by reducing VAT on efficient products to enable householders to future-proof their homes. That said, the utility companies have identified the buying and selling of houses as the only points at which the sums of money changing hands are large enough for people to contemplate the more expensive upgrades. So those incentives – or energy price rises, or both – are going to have to be significant to prompt uptake of more radical measures.

GF: Is there any appetite in government for pushing energy prices up that high?

PK: It’s very hard for politicians to talk about pushing up the price of energy because it forces people to save it. It’s about as palatable as telling everyone flying should be more expensive. That’s why I think we are going to need a fundamental shift in the way we regulate the energy supply industry. The EEC and now CERT are fine but the industry sees them principally as a tax, working against the grain of a business that is still predicated on selling as much energy as it can to as many people as possible. We need to create a market where profitability comes from selling as little power as possible, via efficient energy services, incentivising the industry to upgrade the efficiency of homes. That’s why the UK Green Building Council is advocating a system in which the government sets a cap on the amount of energy that can be supplied. It’s an idea that’s gaining some support: we’ve talked to the main political parties about this, and they’re all giving it consideration as a possible next step after CERT. If we’re going to make this kind of move, industry needs to know now that that’s what will be coming in 2011. I believe it could be done, particularly at a time when we are looking to reduce our dependency on foreign energy imports.

GF: Social housing providers are sitting on a large proportion of the existing stock. Are they showing the way?

PK: Some people in the social housing sector are quite unhappy about being placed on a fast track to zero-carbon homes [for new-build housing]. They’ve been asked to go straight to level three of the Code for Sustainable Homes faster than the private sector, and they claim they are having to meet costs on products and technologies without the economies of scale which they argue would be there if everybody were going at the same pace.
 
The irony is that when the Code was introduced, people said that government should go further faster, and this is one of the ways it did so. But I think that more could be done via the Housing Corporation to upgrade the existing stock. The Corporation has been ahead of the game in recognising that upfront investment in energy efficiency would have long-term gains for people living in the homes they fund: there hasn’t been the value gap seen in the private market where the people selling the homes are not going to see the benefit of reduced bills. The Corporation also supported the introduction of the Ecohomes XB environmental assessment tool for improvements to existing buildings, which was specifically designed for social housing. Now we’d like to see it made mandatory for the registered social landlords it funds to use this assessment tool, and to introduce systematic upgrades.
 
GF: What else should government be doing?

PK: We tend to forget that, at the same time as he announced the 2016 target for zero-carbon new homes, Gordon Brown also announced that we should have all homes low-carbon in the same time frame. So the first thing we need is a clear articulation from government about what that means. Then there are plenty of ideas around that could bring change. What about stamp duty rebates for people who make significant improvements to their new homes within the first six months? What about getting local authorities to link energy efficiency to council tax bandings? It proved very popular when they tried this in Braintree, with the council working with the utility company (British Gas) to offer cash back on council tax bills. We’d like to see the roll out of smart metering, to get people engaged in their own energy consumption. And let’s have a premium paid for energy sold back to the grid, to encourage people to invest in micro-generation. Exporting power back to the grid attracts a fraction of what it costs to consume, whereas in Germany it’s the other way round – the feed-in rate is five times the price to the consumer.
 
GF: Do you think government is ready to face the possibility that the lifestyle of middle England just doesn’t work?

PK: I think the tendency to look for silver bullets is a fatal flaw in the drive for more sustainable homes. We see lots of different initiatives, with varying levels of ambition, but they don’t really add up to a lifestyle package. We need to tackle behaviour change in the round, and create a context in which people think about their carbon footprint in its entirety. But it will continue to be very difficult for government to do this when its own approach – to building regs, planning, transport and so on – is so resolutely not joined up. How the internal structure of government can be made to work more effectively to join these issues up is perhaps the biggest challenge of all.

More scope for green lending?Can mortgage lenders help prime the pump for low-carb refurb in Britain’s existing homes? A new Campaign For Green Finance, launched in Parliament this January by the All Party Parliamentary Climate Change Group, is certainly looking to the financial services sector to do more to back both energy efficiency improvements and domestic power generation.

Solar water heating, photovoltaic panels or the latest home-scale combined heat and power units come with initial capital costs that can be pretty daunting. Favourable interest rates on ‘green’ loans can make a crucial difference in this equation.

The Ecology Building Society is the kind of lender you’d surely expect to be sympathetic, and indeed, says the society’s Paul Ellis, “we'll reward borrowers with 1% off the Ecology's Standard Variable Rate on mortgage funds used to equip their homes with energy saving solutions and renewable energy generation”. There’s a similar scheme on offer at the Co-operative Bank, where Catherine Turner reports “a steady level of interest… showing that there is a genuine enthusiasm from consumers in making their homes greener”. Both these pioneering products are cash advances available to existing borrowers only. But if we’re getting stuck in an economic downturn, it might be one place to start nurturing those green shoots of recovery.
A CERT FOR THE FUTURE
Where once we had the EEC, now we have the CERT. It’s arcane language outside the industry, but these bits of acronym jargon actually represent the major plank of current government policy for targeting investment on cutting existing household carbon.

CERT is the one that counts now. It’s the Carbon Emissions Reduction Target, and it sets government- approved targets for the energy supply companies to meet, by actions to help their customers consume less fossil fuel. Kicking in from this April, it’s expected to stimulate some £2.8 billion worth of activity over its three-year lifetime to 2011 (at least 40% of that being aimed at vulnerable households including those in fuel poverty). This means it broadly doubles the investment targets of the previous scheme (the old Energy Efficiency Commitment – EEC).

CERT is broader, too, in the measures it encourages – now including not just energy efficiency measures and consumption cuts, but renewable microgeneration in the home too, and the use of wood for domestic heating.

So will CERT suffice to get all the suppliers focused on carbon-efficient service provision rather than fuel sales? The government will be looking to leader businesses to show the way.

First off the mark with a CERT proposition to stimulate consumer interest in carbon cutting has been British Gas. They’re already the pioneers of working with local authorities to incentivise beneficial change through council tax systems: their innovative scheme to subsidise loft and cavity wall insulation with Braintree Council has been rolled out nationwide, to the extent that they had worked with 70 councils by the beginning of this tax year. The track record to date, with the company funding tax rebates in some cases as high as £125 per household, is 16,000 completed installations. Survey work in Braintree suggests that 82% of respondents first heard about it through their local authority, while 78% of the takers confirmed that the council tax refund was the clincher in getting them on board.

Building on this experience, British Gas’s latest proposition involves a £400 subsidy for its solar water heating package (which otherwise costs £4,200 in a typical house). In a neat reinforcement of the ‘first things first’ message, it’s a precondition that householders should already have taken up the subsidised insulation scheme. Apart from that, it works in much the same way: the local authority is responsible for promoting the offer (typically in tandem with its council tax notices), there’s no need to be a British Gas energy customer, and you get your rebate once the work is completed. Thereafter, of course the savings – in cash and carbon – should run and run.
 
Paul King was talking to Ben Tuxworth, director of communications at Forum for the Future.

26 June 2008

Ben Tuxworth

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Paul King
The UK Green Building Council is the recently born sibling of a global network of such bodies, all committed in their different ways to campaigning for a sustainable built environment. Its 250+ members include some of the biggest players in the industry, alongside a diverse mix of developers, engineers, architects, NGOs and public sector organisations.