Profit potential and jobs in greening old buildings

Sensemaking / Profit potential and jobs in greening old buildings

As the UK Government grapples with high targets, businesses are finding ways to profit from the low-carbon building agenda – and creating jobs in the process. Andrew Brister reports.

09 Dec 2011

As the UK Government grapples with high targets, businesses are finding ways to profit from the low-carbon building agenda – and creating jobs in the process. Andrew Brister reports.

In the UK, the halo has slipped from the self-proclaimed “greenest government ever”. First, Chancellor George Osborne performed if not a U-turn then a sharp right, when he blamed a decade of environmental laws and regulations for “piling costs on the energy bills of households and companies”, at the Conservative party conference. Now, a nascent solar industry reels in the face of the slashing of the Government’s Feed-in Tariff (FIT) scheme – one that has done so much to create jobs at a time of stagnant economic growth.

One thing remains certain. The UK Government has to meet its legally binding commitment to reduce greenhouse gas emissions by 80% come 2050, from a 1990 baseline.

Buildings account for almost half of all carbon emissions, so tough legislation (such as the Building Regulations and the Carbon Reduction Commitment) comes as no surprise. It’s combined with carrots to bring about changes in new building design and encourage the retrofitting of existing stock, such as the Renewable Heat Incentive and the forthcoming Green Deal. Due to launch in October, this aims to help consumers afford energy efficiency improvements by removing the need for them to pay upfront. Instead, the costs will be recouped over time via a charge on their energy bills [see 'Can the Green Deal win Britons over?']. This much awaited scheme could lead to the upgrade of 500,000 homes a year, and Energy Secretary Chris Huhne has high hopes that it will create 100,000 jobs in home refurbishment alone by 2015.

“The potential for low-carbon growth is enormous”, says Business Minister Mark Prisk, co-chair of the Government’s recently established Green Construction Board. “There are approximately 25 million existing homes to be retrofitted by the end of 2050. This is a huge business opportunity that small construction firms should grasp.”

With such a huge prize, an enormous prize, how do we make this work?

Some larger construction firms are at the ready. Willmott Dixon Re-Thinking is embarking on a range of projects to explore the most efficient ways to greet the opportunity at scale, working with partners and the supply chain. As David Adams, the Director in charge of retrofit at Willmott Dixon, puts it, “The rewards are actually quite astonishing. [The Green Deal] could create jobs now, which will be paid for in the future, without going into debt!” But, he asks, “With such a huge prize, an enormous prize, how do we make this work?”

Like many potential Green Deal providers, Adams and his team are keen for more detail to emerge on the nitty gritty of the scheme. “We need to see what incentive mechanisms are going to be put in place, to give us a steer as to how big this market will actually be”, he says.

A consortium of industry leaders, including energy services provider Carillion, the DIY giant Kingfisher, EDF Energy and PricewaterhouseCoopers [PwC], is working on the business plan for a non-profit organisation, to be called the Green Deal Finance Company. The aim is to create a single national body that can provide finance to all accredited Green Deal providers on an equal and open basis. Paul Davies, the lead partner at PwC, believes it will create “a highly competitive market which will compete on cost, reliability, lifespan and technology”.

In the meantime, other funding models are already attracting business, such as that offered by the Carbon Trust, with financial backing from Siemens Financial Services UK. Worth up to £550 million over three years, this is designed to help businesses invest in both energy efficiency and other low-carbon technologies such as biomass heating. “We are pushing our members towards the Carbon Trust scheme Implementation Services and Siemens Finance, rather than the Green Deal”, says David Frise, Head of Sustainability at the HVCA, the UK’s trade association for building engineering services. Why? Firstly, he explains, “because the scheme is up and running a year ahead of the Green Deal. And also because the Carbon Trust is an organisation clients are aware of and trust [due to its] track record and an understanding of energy saving projects. The Green Deal is an unknown quantity, and the credibility of the Department for Energy and Climate Change (DECC) is not high following the FiT review.”

But whether the funding comes from the Green Deal or elsewhere, Carillion is preparing itself for a busy time ahead, as more people become aware of the opportunities. “We’ve been a specialist in the low energy retrofit arena for many years, but the Green Deal brings this to the forefront”, says Carillion business partner Keith Richardson. “We will work with both the private and public sector to recommend measures to improve energy performance, from the installation of cavity wall and loft insulation, and new heating systems, to solar thermal and solar PV.”

Carillion has seen some 400 people come through its Bedford Training Academy in the last two years, acquiring skills in all areas of low-energy retrofit. “We are providing opportunities for our electricians to develop skills in solar PV, or our gas engineers to work with biomass, for example”, says Richardson.

These skills are already being put to use in the north of England, thanks to a partnership between Carillion Energy Services and Sheffield City Council. Their Free Insulation Scheme is designed to make it as easy as possible for homeowners and private tenants to benefit from loft and cavity wall insulation. The scheme draws on major energy suppliers’ obligations to help their household customers make savings in CO2 emissions under the Carbon Emission Reduction Target (CERT). Funds from the energy suppliers are matched by the council, with the aim of improving the efficiency of homes at no cost to the occupant. Over 30,000 households have benefited, typically enjoying savings of up to £118 a year on energy bills. Sheffield City Council believes the scheme has so far been worth more than £5.4 million to the city through green jobs, reduced energy costs and indirect benefits to the wider economy.

“With recent Government figures showing nearly half of Britain’s homes lack adequate insulation, the example set by Sheffield could be a blueprint for other local authorities across the country”, says Keeley Sharp of Carillion Energy Services.

But it’s not just homes that are set for a makeover. Firms will no doubt be encouraged by consultants Ernst and Young’s report into the potential of the Non-Domestic Green Deal, which covers commercial and other buildings. It estimates that a 10% take-up would result in a market for energy efficiency measures in small and medium business that, by 2020, would be worth £800 million a year. Ernst and Young urges the Government to adopt a more business-centric mindset in its forthcoming consultation, to make sure the benefits of participation are clear and compelling enough to persuade businesses to get involved.

In London, the Mayor’s RE:FIT programme is set to help hundreds of public sector organisations retrofit their premises. It works by appointing a pre-qualified energy service company (ESCo) to undertake a range of efficiency measures. The ESCo guarantees that these will achieve a set level of energy savings over a defined payback period, helping the organisation to justify its investment.

Loans to help finance the costs are available through the London Green Fund, set up by the Mayor’s Office. The 42 buildings that piloted RE:FIT, with a £7 million investment, saw savings of up to 40% in energy, collectively saving the city £1 million a year in fuel bills, with a payback period of seven years.

“There is a massive economic prize coming from retrofitting activity, not least in terms of the solid investment opportunity it represents for private businesses”, said Mayor Boris Johnson. “It is [also] a massive potential generator of employment. In the same way that tens of thousands were employed by our hunger for fossil fuels, so in the 21st century, we need the private sector to invest in green growth.”

Some quick thinkers are already investing in new energy efficiency ventures. One promising start-up is Anesco. It offers energy efficiency and microgeneration services, including solar power, renewable heating, insulation and building energy management systems, as well as energy efficiency consultation, to domestic and commercial customers in the UK. Around half of Anesco’s projects are ones where the customer does not provide the capital for any technology investment upfront. Anesco makes the investment on the customer’s behalf, and pays itself out of the savings.

They say: ‘We haven’t got any money.’ We reply: ‘You don’t need any.’

“We go into businesses and say this is how you could improve on energy efficiency”, says CEO Adrian Pike. “The first thing they say is: ‘Look: we haven’t got any money.’ We reply: ‘You don’t need to put any money in: the capital investment will be paid for by the energy savings.’ From a sales point of view, that is not a difficult sell…”

The new venture, formed at the end of 2010, has already attracted £6 million of equity investment from clean technology investors Zouk and SSE, and is on track for a £26 million turnover in its first year. It just goes to show that there’s a big prize waiting for those who can make low-carbon buildings a no-brainer.

At your leisure

Working in partnership with Gateshead Council, Willmott Dixon Construction refurbished a 1920s swimming pool that might otherwise have been demolished and rebuilt from scratch. The project saved the council substantial sums of money, and opened five months earlier than a new-build equivalent.

The scheme was delivered under a partnering contract, so the design team was employed by the contractor. First, the design was agreed and approved, and then contractor Willmott Dixon fixed a maximum price to implement the project, under guarantee.

From the outset, the project was set a target of “very good” under the BREEAM energy assessment method. Willmott Dixon Re-thinking ensured sustainability was integral to the scheme, which included a combined heat-and-power plant, along with measures to increase daylight by 20%.

Well matched

Spend a day at the cricket and come home with some of that crisp white padding… For your loft, that is.

Durham County Cricket Club has teamed up with Carillion Energy Services and Northumbrian Water Ltd to help its members and supporters save energy and water in their homes. At a recent test match against Somerset, supporters were offered advice on insulation, efficient heating systems, energy monitors and installing solar panels at a free energy awareness session. Club members are also being offered free water saving kits that could save up to 95 litres of water a day.

It’s all part of Durham CCC’s commitment to become one of the most carbon-efficient international test venues. Plans include a solar PV array on the Club’s media centre, and a project to offset the carbon footprint of fans’ travel by funding a wind farm in India.

Andrew Brister is a freelance journalist who specialises in sustainability and the built environment.

Photos: Anesco / iStockphoto / thinkstock

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