Energiesprong integrates investment into the energy efficiency of the existing building stock with long-term strategic asset management approaches, while 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 approach to retrofit and its pace will not achieve the level of energy efficiency needed to meet the UK’s national policy objectives of reducing carbon emissions and 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 Energiesprong approach:
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:
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.
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.
Most maintenance to an Energiesprong house is included in the retrofit, meaning that budgets for maintenance and refurbishments can be combined.
Incremental refurbishment improvements do not change how the market and its supply chains operate. Net-zero refurbishment re-orientates the market; new solutions will emerge more quickly and will be a better fit to what is required.
Net-zero refurbishment is much more attractive and more fun for people than energy savings alone. This is especially important in the private sector.
A huge gap exists between the frontrunners – those who want to move forward – and the traditionalists who simply want to continue doing what they’ve always done. The traditionalists will always be the overwhelming majority; and for that reason, ambitious refurbishments seem a hard sell. However, as soon as the collective demand of the frontrunners is organised, a new market develops.
Instead of trying to refurbish every house, focus on the right type of housing stock. Choose houses with a homogenous typology, limited issues with planning regulations, no significant under-heating, a lot of maintenance that needs to be done anyway, and those that present a secure investment for a social housing provider. Once a refurbishment solution provider has developed a refurbishment proposition for one of these houses it can be sold multiple times, meaning that the innovation investment can be spread out over larger volumes. Once suppliers start developing additional concepts for varied typologies and factories have been developed that can provide flexible packages (both for cladding solutions and interior insulation), the ability to be more flexibile will increase, thereby enabling construction companies to provide solutions for houses with more diverse characteristics. This is a continuous process where solutions get smarter and the scope of housing types increases as skills develop.
To change the dynamics of the current market, it’s essential to create an initial demand of a certain volume. It’s easier to do this in the social housing sector and work on a limited number of similar solutions, rather than in the private sector where homes are more diverse.
Financing conditions, marketing and the regulation of solutions are different in the private sector but, once the technical concepts have been developed using housing association stock, it becomes much easier to penetrate the private housing market as the product is available and can be seen to work.
Finding solutions to the challenges that Energiesprong faces requires a focus on both the sectors and their supply chains. Energiesprong uses 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 towards a completely new system of working.
An independent market development team is key to suceess, and is much more effective than simply bringing together a group of people who are already working in the sector. The aim is to change the status quo of the sector and quickly alter existing interests, attitudes and working practices.
An integrated approach is necessary in order for net-zero energy refurbishments to succeed. The following issues need to be addressed so that tenants pay the same energy costs to their social housing providers as they previously paid to their energy company.
The business case for Energiesprong used by social housing organisations is based on transforming tenants’ energy bills into energy plans. An energy plan is a ‘service fee’ (or an increase in rent) that costs the tenant the same as was previously paid to the energy company. This fee can be seen as the instalment on the loan taken out for the refurbishment. It should be noted that tenants are protected from future energy price rises as the investment is a fixed cost and therefore the energy plan can be too.
For the social housing provider, 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 number 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). Houses are connverted to all-electric. If tenants exceeds what’s agreed (room heating of 21 degrees, defined volume of hot water per day), they consume more energy. This results in them paying more to the energy company, with which they still have a supply contract.
For the electricity consumed by their lights and appliances, a tenant receives a bundle (like a mobile phone plan) based on a typical household’s energy consumption. If the tenant’s consumption does not exceed the agreed limits, the cost is covered in the bundle. If, however, consumption exceeds the limit, the tenant pays an excess charge per kWh (to the energy company). Although tenants might have to pay more for their energy during the winter, they will probably pay less than before their Energiesprong refurbishment as Energiesprong houses have much better insulation and are much more energy-efficient.
An Energiesprong refurbishment inclues the installation of in-house monitoring equipment to provide real-time feedback to tenants. If the tenant’s consumption of energy for heating and hot water exceeds the projected energy performance of the E=0 (net-zero energy) home, the construction company and social housing organization will investigate the cause and find out if it’s behavioural or technical, before addressing the issue.
The issue of regulation is an important one in the establishing Energiesprong. The ability of social housing providers to receive additional income from the tenant in the form of an energy plan is important if the cap on rent would otherwise be exceeded. Initially in the UK, this is not a problem as there is enough stock that has sufficient room to increase charges without hitting that rent cap. However, some adjustments to allow rents to be increased without any legal problems (and therefore allow access to larger volumes of housing stock) could be beneficial for any future scaling up of Energiesprong in the UK.
The creation of an extra income stream for social housing providers is the engine of the Energiesprong business model. The ability to charge an energy service remuneration fee is, however, restricted, and this issue needs to be addressed. The starting point should be that the tenant’s living costs both before and after the refurbishment should be comparable.
Planning consent is a particular issue with external wall insulation (EWI) and cladding. Although they can make a house look much nicer, it should be acknowledged that it’s important to preserve the facade and original features of old and attractive buildings. However, certain agreements to simplify planning procedures can help the installation process, and such arrangements have been agreed in the Netherlands.
Currently, refurbishment solutions are typically procured with lots of different specifications by the homeowner (either a private occupier or a housing association). Innovation will only develop fully if procurement is performance-based and only requires: guaranteed energy and indoor climate performance; short installation times; a steer on the total cost of ownership; and an appealing design. Mass demand should ask for no more no less. It’s essential that freedom to innovate is left to the suppliers, and that they are allowed to come up with the best ideas based only on these performance indicators.
In order to reduce costs while achieving consistently high standards of quality and short installation times, it’s essential to encourage the construction sector to start developing and producing integrated solutions that are industrially produced, rather than project-based, craftsmanship-oriented piecemeal solutions.
A transformation towards industrialization, prefabrication, consistently high quality, lower costs and continuous innovation, needs to have a product first. Energiesprong has defined the quick to install, net-zero energy refurbishment with an energy performance guarantee as that product. The concept drives continuous improvement by a refurbishment solution provider who needs to provide the guarantee and also ask its suppliers to deliver new and better components.
All houses are different. Even those that look the same (terraced, for example) are rarely exactly the same as they differ slightly here and there. Therefore, the factories making the Energiesprong packages need to be flexible, so that they can make wall and roof solutions for different dimensions and use different mounting mechanisms.
This new concept for production is based on 3-D laser scanning techniques that allow a quick, cheap and precise scan to be made of all the relevant dimensions of a house. These dimensions are fed into a building information model that generates the technical drawings for the factory producing the packages.
Because the companies providing Energiesprong are asked to give an energy performance guarantee for each house, they are constantly optimising between the cost of extra insulation, smarter installation, extra energy production capacity and reduction in the demand for electricity or hot water. This kind of environment drives innovation and the integration of solutions.
However, these types of innovation will only happen if there is scale. This means that companies need to develop flexible packages that can be both produced in factories and personalized where desired.
The Energiesprong approach, which is based on what is currently being successfully 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 (ie room heating of 21 degrees, certain amount of hot water consumption), they will consume more energy. This means that they will pay more to the energy supplier with which they still have a connection and contract.
For the electricity consumed by their 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, the cost is covered by the bundle. If, however, consumption exceeds the agreed limits, there is an excess charge per kWh, payable to the energy company. During years with cold winters, for example, a tenant might use more energy than is agreed in the annual bundle, in which case a surcharge will be applied. However, this will be less than before the Energiesprong refurbishment as the insulation will be much better than previously, and the house will be much more energy-efficient.
In-house monitoring equipment is installed in Energiesprong refurbished houses, in order to provide real-time feedback to tenants. If the consumption of energy for heating and hot water exceeds the projected energy performance of the net-zero energy home, the social housing provider and construction company will investigate, find out if it’s behavioural or technical, and address the issue.