Q&A: retrofit

Q Have you received many approaches from social landlords looking to finance retrofit programmes?

A We haven’t had any approaches for that type of thing directly. The only approaches that we have had are for general funding – which could, of course, be for elements of retrofit.

Our energy team has received approaches from energy companies or special purpose vehicles sponsored by energy companies or entrepreneurial businessmen. They are looking at models and discussing with us ways of financing the renewable technology. We have had some modest degree of entrepreneurial approach but I have not seen anything from the social housing sector alone.

Q Do you anticipate that to change anytime soon?

A I don’t know. I think the priorities of the social housing world have not been in that sphere. I think they are almost looking at those entrepreneurs to bring them solutions, maybe with finance attached, which is the sort of thing that one or two have been looking at. The idea behind that is that these companies then have a package they can take to social landlords and offer to contract and install the technology, with the financing attached; a kind of leasing.

Q Is financing retrofit-based ventures commercially attractive for you as a bank?

A The issues are around getting value out of this. It is hard to temper the capital outlay and cost and the ongoing maintenance etc, against the type of charge that you will have to make. The economics are testing to say the least. I am still yet to be convinced that the pricing numbers stack up – even at large volumes.

When it comes to lending to social landlords to fund retrofit, we have seen nothing which makes a viable model without government support. But eventually it might be.

Q Is it just a case of making the numbers stack up or are there other problems too?

A There are lots of technical issues to overcome; issues like different house types, different tenant types, does the roof take the weight of solar panels? Then, most fundamentally, there is a disconnect between the landlord and their tenant as energy consumer. It is rare those run close enough to find a finance solution that covers them both. At the moment a tenant is receiving the low bills, so if a social landlord puts a solar panel on a roof, then who are they going to bill?

Q Do you have any advice for social landlords on the financing of retrofit?

A Social landlords have to sit tight and wait to see where the government spending review goes and see what incentives are there. Unless they are cash-rich and are prepared to come forward and take a long-term investment view themselves, then nothing will happen. But the good news is, a housing association ought to be able to run some [financial] models and take a long-term view.

Clive Barnett is head of housing finance at Royal Bank of Scotland