Energy funding What works? CIH London 30 th June 2014 Jamie - - PowerPoint PPT Presentation

Energy funding What works?

CIH London 30th June 2014 Jamie Carswell

Tower Hamlets Home Experience

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Tower Hamlets Homes — ALMO managing 21,400 council homes — 12,400 tenants, 9,000 Leaseholders — £165m decent homes programme — History of single element programmes — 15 year old stock condition survey — 60% single solid wall build — High reported levels of condensation — High pockets of fuel poverty

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Bid led environment — CESP programme driven by 6 eligible LSOA — 2011 Soft market testing exercise demonstrates very high levels of subsidy — ‘Win-win’ alongside DH programme — 2012 Failure to close deal with utilities — ECO successor based on best two LSOA : mainly EWI for 600 homes — Revised market engagement with utilities — Autumn Statement 2013 — Withdrawal of British Gas — Renegotiation on far-reduced ECO

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What went wrong — Our stock knowledge did not have the level of detail for high level indicative real cost certainty — Procurement requirements — Planning driving cost escalation — Block detailing for EWI drives further cost uncertainty (even with the best stock condition survey) — Technical EWI challenges – particularly around external services — Legacy of other bid-led environments (eg cavity wall programmes)

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Stakeholder relationships — Over-promise results in extreme disillusionment at senior client level — Repeated postponement makes programme coordination very hard — Getting caught in the middle of inter- utility hostilities — Contractor credibility hard to maintain

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Stakeholder relationships

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Stakeholder relationships

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What are the principal risks in the system? 2

Risks: Utilities — Vertical integration in utility supply chain – lack of cost transparency makes procurement and market comparison hard — Lack of Utilities incentive in long term viability of the asset: – Discharging carbon obligations vs reducing fuel poverty — Utility commercial framework – a far bigger game — Few penalties for poor behaviour with individual landlords

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Risk: Funding Framework — At least 2 regulatory shocks driving carbon price in last four years: – 2012 Lack of certainty over end of CESP regime – 2013 Autumn Statement driving EWI — Continuing short term instability: – the CERO uplift in early 2014, distorted the market and didn’t allow sufficient time to mobilise – Allowing easy to treat CWI under CERO undermined efforts to tackle hard to treat cavity blocks — Continuing lack of certainty drives lack of market engagement

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Risk: Client-side — Lack of knowledge of broad strategic requirements to reduce carbon and fuel poverty — Lack of knowledge of detailed scheme costings — Size of gap funding requirement: ECO funding currently only 10% of estimated cost of works and fees — Leaseholder penetration is high: funding contribution varies and alterations to flues for EWI depend on good access — Planning constraints: particularly with brick buildings

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A de-risked model 3

Solutions to market failure — Regime stability — A central pot for social landlords – Allowing utilities to concentrate on core business – ‘One stop shops’ for landlords — Strategic approach to supply chain management: – EWI suppliers ‘boom’ ‘bust’ — Pump-priming up-front investment to establish detailed scheme costs — Longer term economics – EWI with 15-20 year paybacks – Landlord relationship with utility supplier

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Going forward on the ground in THH — Synergies with joining up with other packages of works – Post decent homes regime – Fuel-switching projects — Greater stock knowledge and comprehensive understanding of fuel poverty and condensation — Investment in behaviour change – UKPN Vulnerable Customers and Energy Efficiency Project

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