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June 3, 2021
After 15 years in the sector, I know that that the solutions needed to rapidly scale up net-zero retrofit currently don’t exist. And if we don’t invest in developing them immediately, they never will. That’s the bad news.
The good news? Our work on deep retrofit projects in the UK means we at Energiesprong know it’s possible to create warmer, more comfortable low carbon homes, that are attractive to tenants, providing new jobs and a thriving, green economy.
But the stop-start nature of retrofit pilot projects to date can mean learning isn’t shared and applied across the whole supply chain, cost reduction opportunities are lost and demand for net-zero housing isn’t visible. The result is that scale-up at the speed we need is impossible, unless we change our approach.
That’s why I am so excited that today marks the launch of our Innovation Partnership, which has been developed as part of the Mayor of London’s Retrofit Accelerator Homes programme, alongside our partners, Turner and Townsend.
Building on Energiesprong’s learning, this ground-breaking approach to procuring and developing deep retrofit solutions is designed to unlock up to £10billion of market potential and kickstart large-scale, whole-house retrofit for UK homes.
Creating a new approach to procurement
When supporting landlords and suppliers with their first Energiesprong projects, we had great opportunities to learn how the structure of the procurement exercise can have a huge impact on the project.
Competitive bidding is fine when you are supplying things you have already made thousands of. But what about when you’re supplying something you have not yet made? Designing a new solution takes time, which is a risk when you may not win the contract.
The Innovation Partnership is a new way of doing procurement– finding what is needed at this point in the net-zero journey: a partner to create a net-zero retrofit solution, not necessarily the solution itself. This approach is perfect for when the product or service you want doesn’t yet exist.
Pairing six social landlords with ‘Solution Providers’ (who are responsible for design, delivery, guaranteed performance, and in some cases maintenance), provides a runway for suppliers to develop new net-zero solutions targeted to hit specific performance targets and cost reduction.
How does it work in practice?
One of the challenges we recognised early was that procurement required suppliers to put a lot of design work in at risk, often in a short time frame. We tested a new approach in our Nottingham project in 2018, with bidders paid a modest fee (£10,000)during a Competitive Dialogue process, to allow time and design work. For the Innovation Partnership, bidders will receive £30,000 for the design stage to contribute towards costs and have two months to complete this work.
And they aren’t competing with each other; if they create a solution that works within the gross maximum price, they can deliver the prototypes. If these work, they continue to pilot stage, then into scale-up, and finally they get a spot on the national framework, which enables any UK housing provider to purchase their solutions.
What does it need to succeed?
Taking the learning from our previous projects, the Innovation Partnership process has identified some key qualities for success which are embedded at the heart of the project.
The project will feature a collaboration hub which allows the landlords and Solution Providers to work together to overcome common challenges, similar to the way automotive factories and the offshore wind accelerator work.
From manufacturing techniques to component solutions, it’s designed to create the learning and openness needed for the industry to progress. We are currently recruiting for the Collaboration Hub Manager – check it out.
Guaranteeing a market
When we set out to consider the process, we were very conscious of ‘procuring something which doesn’t exist’ and in such a new market, we didn’t want to lock out any new providers. We carefully weighed up the decision to include a framework at the end, because by the time the scale up stage is completed, we expect there to be more than 2,000 homes delivered, with at least five retrofit solutions on the market.
However, investment is required, both in time, and in money, from the supply chain and their backers. If they are to do this, they need to know they are going to sell more than a few hundred products. Having the opportunity to sell thousands of products each year through the framework has the potential to galvanise the supply chain and to generate investment in the solutions which make those products appealing.
Creating cost-effective solutions
I know that the sector – from housing providers to policymakers – sees energy efficiency as a no-brainer. But the works can be disruptive, and the costs are high. To create a more viable pathway to deliver net-zero homes, we need appealing products, solutions and business models to make things quicker and cheaper.
Using our cost-benefit appraisal tool, a core part of the Innovation Partnership, solution providers are able to design the net-zero solutions which are most viable, taking into account up-front investment cost, whole life cost, and any savings or income which can be realised.
The Energiesprong Comfort Plan approach – where tenants pay a fixed fee for guaranteed heat, hot water and light and appliances - also means solutions which save tenants more money will create better income streams for landlords.
Net-zero is the future
From the UK’s climate targets to the upcoming Social Housing Decarbonisation fund, achieving net-zero is a priority. But we need the structures that will deliver shared learning, tried-and-tested solutions, innovation, cost reduction and, ultimately, homes retrofitted.
The Innovation Partnership is something we can do now while we wait for the more complex technologies and system questions to be decided. It’s win-win and we can’t wait to get started.