Mr & Mrs Average are the key to the success of the government’s carbon-cutting domestic retrofit scheme. But are they ready to place their trust, and their hard-earned cash, into the hands of the industry? Elaine Knutt reports. Illustration by Alex Green.
Remember Mr & Mrs Average? When we last met them (CM May 2010), they were worried about inviting cowboy builders into their homes and had a poor perception of the industry. Since then, pay freezes and inflation have eroded their standard of living, and double-dip recession has dented their confidence. And now the Averages will determine the success of the government’s Green Deal initiative. Because if Mr & Mrs Average aren’t on board, the industry’s prospects of a sustained new multi-billion work stream will vanish quicker than you can say CO2 emissions.
There’s widespread concern that Mr & Mrs Average just won’t “get” the Green Deal. For owner-occupiers in the “squeezed middle”, it’s likely to involve a sizeable loan attached to the house that, in the current sluggish housing market, could shrink their home’s resale value by the same amount. Then they’ll be thinking about consumer protection issues: is the Green Deal provider trustworthy, will the measures deliver the promised cost savings, who’ll sort it out if it all goes wrong? Government-backed Consumer Focus, for instance, is concerned about new glazing and insulation making homes so air-tight that ventilation and condensation become a problem, an issue recently aired on the BBC’s The One Show.
For social housing tenants, who are used to the landlord taking responsibility for the fabric of their property under programmes such as Decent Homes, there are fears that shifting Green Deal responsibility to tenants will prove either unwelcome or unworkable. And for both tenants and owner-occupiers there’s the hassle of multiple visits to their property — and the simple issue that the Green Deal will have to compete with all the other claims on their time, money and attention.
More incentives
At DECC, which is currently finalising the details, take-up strategy has been undermined by the failure of high-street names such as M&S and Sainsbury’s to lend their credibility to the scheme as Green Deal providers. In its recent Green Deal consultation, the CIOB joined the UK-GBC, Carbon Trust and others in calling for more incentives, such as reduced VAT or stamp duty cuts.
Paul Joiner, director of sustainable building solutions at Travis Perkins, says: “There is a consistent message going back to DECC and No 10 about the level of take-up — we need clarity on what measures there will be to encourage it.”
In fact, all the concerns have contributed to a sense of Green Deal deflation: in 2011, the government talked of 100,000 Green Deal jobs, a figure that was reduced to 65,000 by November. A month later, the government’s Committee on Climate Change criticised the results of the government’s own impact assessments, which estimate that only 700,000 out of 6m unlagged lofts will ever be insulated under the Green Deal.
“A year ago the industry was very excited about the Green Deal, there was a report by Oxford University measuring the size of the market at £3.5bn a year. But as the details have emerged, the industry has become progressively less excited — the bubble has burst,” says Brian Berry, chief executive of the Federation of Master Builders.
But in the run up to October’s soft launch, Green Deal insiders remain optimistic. It’s pointed out that there will be a “latent” market for it: households and social landlords who have planned an energy-efficiency retrofit and view Green Deal finance as a tipping point to action. And work currently undertaken anyway — including an estimated 1m window replacements a year — will start to migrate to the Green Deal, helping to build awareness. “The Green Deal is a funding mechanism, an enabler. It’s a way of stimulating activity by giving people an alternative way of dealing with funding on retrofit,” says Rob Lambe, managing director of Willmott Dixon Energy Services, which is one of 22 Green Deal “pioneers” already signed up to offer the service.
Chris Hopkins, managing director of £10m turnover Essex-based M&E and renewables contractor Ploughcroft says the Green Deal will be slow to build, but too large to overlook. “It’s like the Feed-In Tariff. At first, no one knew about it and it took six months for word to spread. By 2013 I expect the Green Deal to be 20% of my workload,” he says. “SMEs should look at this as a boost to their business. It won’t kick-start the economy, but it’s a positive start in the right direction.”
The providers also emphasise that the Green Deal is being talked of as 20-year programme. Over that time, increases in energy costs — and their impact both on household finances and business growth — are likely to make it increasingly attractive to the Averages. “People are saying it’s a choice thing. But when I look at my fuel bills, the choice starts to be, do I get a new car or keep the house warm?” comments Tony Howard, head of new business development at CITB-ConstructionSkills.
Green Deal assessment
The general outlines of the Green Deal are now clear, if complex. Mr & Mrs Average will either seek out or be offered a Green Deal assessment of their home, based on EPC/SAP estimates and an estimate of the household’s actual energy use, from a trained assessor linked to a specific Green Deal provider. The provider, which will also draw down funding to pay for the works and arrange the loan agreement with the Averages, may charge for the assessment process, absorb the costs or perhaps access DECC’s £200m Green Deal “sweetener” fund to recover the cost.
The next step is a Green Deal Plan governed by the so-called Golden Rule: the up-front cost of installing one or more approved Green Deal technologies must be covered by the savings in the Average’s fuel bill over an agreed period up to 25 years. Providers must also abide by the Consumer Credit Act, which sets criteria on credit advice, cooling-off periods and charges. Interest rates will be set by the government, but it will be open to providers to provide discounts, offers, or cash-back deals.
Consumer protection has been a central concern for DECC: as well as the fear of creating a cowboy’s charter, it faced the spectre of Australia’s Green Loans scheme, where poor-quality foil loft insulation led to accidents and deaths. Contractors can become registered Green Deal installers if they meet the PAS 2030 quality criteria set by one or more of 20 certification schemes, including FENSA for replacement windows, and NICEIC for electrical work. Once the firm is accredited and listed in the forthcoming Green Deal Register, any installation it carries out will be deemed Green Deal compliant.
A Green Deal oversight body, to be announced in July, will monitor both the providers and the certification bodies. “The [consumer protection] framework is reasonably rigorous, but whether it is rigorous enough, if and when the cowboys rush in, will be reviewed in due course,“ comments David Strong, a member of DECC’s skills and training working group. But it’s a delicate balance: too slack and consumers suffer, too many barriers and SMEs call foul. In fact, the FMB’s Berry is already concerned that Green Deal accreditation costs “will increase the cost of retro-fit work to a point where it’s not possible to get involved”.
Detailed photographs
But Consumer Focus is worried about what actually happens in people’s homes, from the accuracy of the SAP-based initial assessments to the reliability of renewable technologies. “We recognise it’s an iterative process, we are continually learning about how buildings work,” says Liz Lainé, policy manager for low carbon homes at Consumer Focus. “I’d like to see Green Deal providers making offers that recognise there’s a margin for error and that consumers’ behaviour [in terms of energy use] will have an impact.”
Lainé’s second point is on the quality of the works. “We see the main challenge for the industry and government as how quality will be monitored and enforced. We want to avoid a trail of installers, assessors and inspectors all wanting access to your property.”
Lainé suggests that installers can use GPS technology to take detailed time and location-stamped photographs of the works in-situ — especially measures such as cavity wall insulation that will ultimately be concealed.
Consumer campaigner Which? has recently expressed concern about the consumer protection on offer, warning that Mr & Mrs Average are vulnerable to confusing finance deals, or inaccurate assessments. The Averages will be able to complain to the Green Deal provider who must offer an independent conciliation service, while the oversight body will also monitor complaints. But if the cost and energy savings fail to materialise — leaving the Averages paying out more than expected — Green Deal providers will be able to point to the fact that the plan was only an estimate, not a guarantee.
But Tony Howard of CITB-ConstructionSkills is optimistic that the very structure and visibility of the Green Deal will offer consumers extra protection. “There will be a network of people definitely qualified and competent, you will have a point of redress, and you should have a fixed price for the project. For consumers, it gives them clarity, and the ability to contract with a high-profile organisation. The Green Deal provider will want to protect its asset — the loan — so will make sure the work is done properly.”
Willmott Dixon Energy Services and Gentoo (see box) are hoping that Mr & Mrs Average do indeed draw confidence from these issues. They both plan to partner with local social housing providers to roll-out the Green Deal to their tenant base, and then use their visibility in an area to start a dialogue with owner occupiers. They will have to sell a complex service and package, and communicate with Mr & Mrs Average from initial contact to the end of the loan.
Willmott Dixon Energy Services’ Lambe says that the involvement of local authorities and RSLs should help to stimulate the marketplace for social tenants and owner occupiers alike. But he warns: “The whole issue of consumer protection is vital — people need to trust and believe in the Green Deal provider, and the quality and validity of their systems. Green Deal assurances are a step beyond what consumers get normally, but we do still have to get the balance right. If it’s over-protected then it’s unaffordable.”
Others point out that Mr & Mrs Average might not have to be persuaded to sign up. Chris Hopkins at Ploughcroft, who has recently joined DECC’s Green Construction Board to represent SMEs, believes that his business will benefit from “accidental” customers. When Mr & Mrs Average suffer a boiler breakdown, for instance, Ploughcroft or any other accredited SME linked to a Green Deal provider will be able to offer them access to Green Deal finance to pay for the replacement they might have bought anyway. “I think there will be a bottom-up approach — tradesmen will bump into small opportunities all over the domestic marketplace,” says Hopkins, who anticipates that his £10m turnover business will be able to ally itself to five or six Green Deal providers nationwide.
Builders merchant Travis Perkins has formed an alliance with Green Deal provider Toriga Energy, one of the 22 pioneer providers, on similar thinking. “If a family builder identifies opportunities with their existing customers, they can tell the customer they need a Green Deal assessment [via Toriga],” says Paul Joiner, director of sustainable building solutions.
Shake-up of the market
Joiner also believes that the arrival of the Green Deal — and the commodification and consumerisation of domestic retrofit work — will herald a major shake-up in the market. “There will be a different set of specifiers and new ways of doing business, and new businesses entering the market that need a reliable supply chain. So as well as our direct involvement, we’re gearing up for a market that will change as a result of Green Deal,” says Joiner.
So will the Averages sign up? Unless they were already looking at replacement windows or a solar thermal system, the answer is probably “not immediately” — it’s too complicated, too new and too much of an unknown. But if the Averages live in a typically “leaky” home, then the basic principles of the Green Deal offer a way of improving comfort and reducing their bills. Over time, that message will gradually be communicated via the press and word of mouth — leaving Green Deal providers who can offer the right customer experience with a door at least half open.
What do the Averages think of it so far?
Pilot projects and opinion polls conducted so far paint a mixed picture of the Averages’ likely uptake of the Green Deal. But DECC is keen to promote the experience of Gentoo, the social landlord-to-contracting group based in Sunderland.
In its second Green Deal pilot Gentoo is offering solar PV, new boilers and double glazing — marketed as an “Energy Saving Bundle” — to tenants in a mixed portfolio of 1,200 flats, bungalows and semis. So far, up-take is running at 86% and Gentoo is consulting with the rest.
Gentoo has applied the Golden Rule — that the upfront cost of installing technologies must be covered by fuel bill savings over an agreed period — to the interventions, making it a credible test of the Green Deal. But it has subsidised the work so acknowledges that repayments are lower.
However, such subsidies will be open to any council or RSL that wants to invest in its housing stock long-term and is able to raise loan finance against the Green Deal income stream. “Customers aren’t repaying the full costs, but the charge is substantial enough to be test of the principle,” says Andrew Clark, commercial analyst at Gentoo Green. Another feature of the pilot is that tenants re-pay the loan via an additional weekly service charge. Other landlords will be free to offer a similar arrangement.
But most of all Gentoo believes that tenants have been convinced by one-to-one meetings and the word-of-mouth “buzz” generated by the scheme. “First we engaged everyone through an awareness day. We have dedicated consultation staff who did one-to-one visits. It gets everyone talking about it, we’ve found it to be highly beneficial,” says Clark.
The pilot follows Gentoo’s participation in an earlier Pay As you Save pilot. “We also got a high take up then. Our experience shows that tenants respond well to having an element of choice. And the Green Deal is also personal we bring people with us in the process,” says Clark. Gentoo now hopes to use a similar model to work with other housing associations.
Other social landlords still have their doubts. In a recent survey by Willmott Dixon and magazine Inside Housing, landlords were asked to score the expected popularity of the Green Deal with tenants on a scale of one to five, with five being high. Just 2.5% picked five, while 16% went for a four. However, 45.4% of respondents predicted it would prove unpopular and a further 14% were undecided.
As for owner-occupiers, a survey in late 2011 of 2,000 homeowners by Ernst & Young found 79% thought their homes were already energy efficient, while less than 10% were planning to install loft or cavity wall insulation.
On the other hand, the fact that more than 40% blamed the high cost of energy efficiency measures for not improving energy efficiency further could be viewed as a positive for the Green Deal.
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