What’s the bright idea?

Energy will become one of the defining issues of this century. Rising energy prices, the finite supply of oil, and climate change will have a dramatic effect on the way we plan, design, build, and power our homes and communities.

We know that action is needed. More than a quarter of the UK’s carbon emissions are produced by the energy we use to heat, light and power our homes. That’s more than twice the amount produced by the nation’s fleet of 32 million cars.

Earlier this month the government unveiled plans for a new decent-homes style standard for energy efficiency in social and private rented housing. This would see all social housing reach a new ‘warm homes’ standard by 2020 at a cost of up to £19 billion.

Zero carbon is not a zero cost game, but it is relatively simple to build a new home that meets high standards of environmental efficiency. There are also other benefits to be had. For example, new homes that minimise energy use will meet consumers’ aspirations in years to come, and as a result may boost their market value.

However, the real challenge is in existing homes. Some 80 per cent of the homes we will be living in by 2050 have already been built, and the cost of bringing these homes up to standard runs to many billions. How can we meet it?

Our own attempts to meet this challenge have proved expensive thus far. Our Whitechapel 2050 project in Preston saw us retrofit homes to deliver 80 per cent carbon reductions. It cost nearly £18,000 per home.

Ouch. Whitechapel 2050 showed the cost per property of fully retrofitting a home is extensive - and it would be far beyond the reach of housing providers to bring every property up to standard.

How, then, will this cost be met on a large-scale basis? To retrofit the country’s existing housing stock will require significant investment of £5-15 billion per annum to 2020. As yet, there is no market for this - either in terms of consumer demand, the supply chain or the clear funding to bring these together. Given the reluctance of consumers to invest in even the most cost-effective energy efficiency measures and the limitations of public funding, innovative financing measures will be required.

Yes, there are existing funding streams and limited public funding initiatives such as the government’s warm front programme and its recently announced warm homes programme for rented homes, but they do not get anywhere near meeting the costs involved in tackling the UK’s carbon problem.

This shortfall has led to a number of ideas which will help plug the capital funding gap needed to retrofit millions of homes - pay as you save, feed-in tariffs, renewable heat incentives and energy service offerings.

Yet for these mechanisms to work they require private finance, at typically low interest rates. To help encourage private investment, Places for People has been working with others to create a financial model, called the carbon investment fund.

We believe this model could help create a new low carbon market, encourage greater energy investment, and maximise the use of existing financial resources such as warm front.

Our idea could support both the Conservative party’s green new deal proposal - which includes creating an entitlement for every home to be fitted with up to £6,500 of energy efficiency improvements, with costs being repaid through fuel bills - and the warm front household energy management strategy launched by the government this month.

But it would generate the far more realistic levels of funding required in housing.

The retrofitting would be funded by private investors, working with the banking sector and would enable home improvements such as energy-efficient lighting, modern boilers, and cavity wall and loft insulation. The investors would then recoup their costs through energy bills over a 25-year period.

The carbon investment fund would create a vibrant multi-billion pound market with many different energy providers - anyone from the likes of Tesco or B&Q, through to Age Concern, or even whole towns. It would offer consumers the opportunity to improve the efficiency of their home, at no cost to them.

It would also require no extra public funding, create tens of thousands of new jobs in services and manufacturing, and improve energy efficiency for communities across the UK.

The challenge is not about talking up the size of the problem, but how we deliver and meet the costs in tackling the UK’s growing carbon problem. The solution is available if the UK has the appetite to be radical and innovative and within five years we could have a new industry that housing providers could lead from the very first day.

Steve Binks is group director of finance and IT at Places for People

Have your say

You must sign in to make a comment