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Carrots and Sticks: The Value of Renewables to Housebuilders
The success of renewable technologies such as onshore and offshore wind, solar PV and hydro has contributed to the large-scale decarbonisation of the electricity grid. But in order to meet our climate change targets, attention is turning towards heat. As can be seen in the diagram below, in Scotland, 51% of the energy we consume in our homes and businesses is used for heating. The graph on the right, however, shows renewables making up 17.8% of total energy consumption in 2015, but also the relatively small contribution of heat, so the importance of the sector is clear. Tightening regulations and a raft of Scottish and UK government targets are being put in place to help drive the decarbonisation of heat and housebuilders are central to those efforts. Here we look at the targets, what they mean for housebuilders and the opportunities brought by renewables in new build housing.
© Scottish Government, Scottish Energy Strategy
Targets and standards
In June Scottish Renewables published their response to the Department for Business, Energy & Industrial Strategy (BEIS) consultation on the Future Framework for Heat in Buildings. It’s a challenging time for housebuilders, with the UK government keen to encourage the building of more affordable homes but at the same time committed to phasing out high carbon heat during the 2020s.
In Scotland, meanwhile, the Scottish government’s Climate Change Plan sets out a number of targets for the residential sector, including a 15% reduction in domestic heat demand, 23% reduction in emissions from the residential sector and 35% of heat to come from low carbon technologies by 2032.
The domestic new build market has a key part to play in meeting these targets and Scotland’s Domestic Buildings Energy Standards for new build properties, implemented in 2015, has helped push down emissions from new homes to just 25% of 1990 standards.
According to the Climate Change Plan, these standards have already encouraged Scottish housebuilders to innovate and deploy low carbon solutions. Certainly, at Locogen, we have seen a steep uptake in new build renewables, particularly solar, but is there more that could be done, and is there a carrot for housebuilders to counter the stick of ever tighter regulations?
Are we heading towards zero-carbon homes?
New build homes each year add only a fraction to the total housing stock but, with an appetite for ever more efficient homes, regulations have tightened to the point that the inclusion of renewables in new build housing is becoming the norm.
In fact, it wasn’t so long ago that the UK government was committed to introducing zero-carbon new homes. These homes were also known as “2050-ready” referring to the Committee on Climate Change (CCC) view that the UK’s housing stock will need to be almost completely decarbonised by 2050 for the government to meet its climate change commitments.
The government shelved this commitment in 2015, but the London Mayor has since introduced a similar zero-carbon homes policy for the capital, and, with target deadlines getting closer, it’s possible that national policy will move in this direction once again.
What is a zero-carbon home?
A zero-carbon, 2050-ready, home is one with minimal carbon emissions and energy use. This is achieved through a highly insulated fabric, with low water demand and the fitting of, or connection to, a renewable energy system. To achieve a net zero carbon home, the consumption of electricity and natural gas is offset by the generation of clean energy in the home or nearby in the community. Exactly how this is achieved is left up to the developer, typically with combinations of insulation and renewable energy technologies.
This is slightly different from the Passivhaus standard, which is more prescriptive and demands that the home consume not more than 15 kWh/m² per year. So, the emphasis here is on eliminating the need for energy use, rather than a zero carbon or 2050-ready home, which uses technologies such as solar panels to offset that usage.
Why was the policy shelved?
We are not building enough new homes. The government has a target of at least 250,000 new build homes per year but we are only achieving around 160,000. The government is therefore concerned about any policy that adds cost to a new home and, potentially, makes those homes less affordable – especially for first-time buyers.
So how much more does it cost to build a zero-carbon home? According to Zero Carbon Hub, this would be around an additional 2.5% for a detached home, 2.6% for a semi-detached and 1.5% for a flat (ranging from around £7,000 to £2,200 on 2014 average house prices). It should be remembered, however, that these additional costs roughly halved between 2011 and 2014 and, with tightening standards for new build, that trend is likely to continue.
What about the benefits of low carbon homes?
The additional costs of low, or even zero-carbon homes must be weighed against the benefits they bring. For homeowners, they will be cheaper to run and more comfortable than standard homes, with the added allure, for some potential home buyers at least, of the knowledge that they are contributing to a more sustainable lifestyle. With costs coming down and exacting emissions targets to meet, zero-carbon homes may yet prove to be an attractive option for government.
What’s the value of renewables for housebuilders?
We can see the attraction of low emission, or even zero-carbon, homes for government and, if costs continue to fall, home buyers, but what’s in it for housebuilders? Our work with Scottish housebuilders has helped us form an understanding of the drivers in the industry. Time is money and housebuilders don’t want anything to delay the build schedule. Selling homes is paramount, so any complex works that could delay that process will not be welcomed. Similarly, the installation of renewables must be integrated into the build schedule - in much the same way that solar panels are now integrated into roofs. This means working closely with builders, while also selecting appropriate technologies.
The role of renewables companies in new build housing
Certainly, doing this efficiently and having the expertise to offer an end-to-end service from SAP calcs and EPC certs to installation, certifying and maintenance is important but can renewables companies add more value to housebuilders? We think we should, and can.
As alluded to above, housebuilders exist in an extremely competitive marketplace and it’s unrealistic to expect them to innovate if that innovation adds cost and puts pressure on margins. Perhaps, then, it is part of our role, as a renewables company, to bring ideas to the table – ideas that can sharpen a competitive edge rather than dull it.
There is little doubt that the uptake of renewables in new build housing is driven in large part by regulation but there are other factors at work. More of us are becoming concerned about our impact on the environment and, as our homes are often the largest investment we make, many of us want to ensure they are as sustainable as possible. We are also aware of rising energy prices and buying a new home is the perfect opportunity to protect ourselves from these costs. The house buying public is also becoming more educated about the Renewable Heat Incentive (RHI) and how these payments can help fund an extremely efficient renewable heating system. These factors, therefore, are creating a new breed of house buying customer, who is looking for more from his housebuilder than just a ‘me-too’ approach to renewables.
New business models for renewables in new build properties
A properly specified and installed renewable energy system can add value to a property and reduce ongoing energy costs. But there are opportunities, too, to adopt new business models to add more value to the house buyer while protecting, or enhancing, profit margins. Installing air source heat pumps, for example, gives the opportunity for the builder to offer customers a ‘free’ heating system. Here, Locogen supplies and installs the heat pumps at no charge in return for collecting the RHI payments. The house buyer then gets an efficient, low maintenance heating system at no cost, and the house builder saves on the cost of the heating system, thus increasing margins.
Whatever business model is adopted, and whatever technology is deployed, it is vital that the renewable energy company has the experience and expertise to deliver a high quality and reliable solution, and the resources to provide a seamless service. Our renewable energy engineers have been installing low carbon heating systems since 2004. In that time we have completed several hundred projects, encompassing everything from single homes to multiple new build projects, retrofits and large commercial properties. Currently, we are working on a number of exciting projects, including shared loop heat pumps serving multiple properties and solar PV on new build developments.
We offer a turnkey renewables service to house builders, taking care of the entire process and simplifying the build. Our services include:
- SAP calculations
- U value calculations
- Thermal bridging analysis
- New build dwelling Energy Performance Certificates (SAP)
- Existing dwelling Energy Performance Certificates (rdSAP)
Specification & Design
- Concept/ feasibility with budget costings
- Planning applications / input
- Building warrant applications / input
- Liaise with local authorities and other contractors
- Detailed drawings and specification with bill of quantities for direct purchase/ pricing
- Prepare tenders and manage process
Commissioning & Verification
- Inspect work on site if needed
- Certification if required
Making renewables work harder for new build projects
It is clear from all the targets and energy standards mentioned above that the ‘stick’ of ever-tightening regulation is here to stay but it is also clear that there is a carrot, too. Embracing renewables in new build homes gives the housebuilder the opportunity to differentiate themselves, creating a USP from use of innovative renewable energy solutions and protecting margins with new financial models. So, if you’re a builder looking to make renewables work harder for you and your customers, we’d be delighted to help. Contact us if you’d like to arrange a chat with one of our consultants.