Energy funding What works? CIH London 30 th June 2014 Jamie Carswell
Tower Hamlets 1 Home Experience
1 Tower Hamlets — ALMO managing 21,400 council homes 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 3
1 Bid led — CESP programme driven by 6 eligible environment 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 4
1 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) 5
1 Stakeholder — Over-promise results in extreme relationships 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 6
1 Stakeholder relationships 7
1 Stakeholder relationships 8
What are the 2 principal risks in the system?
2 Risks: — Vertical integration in utility supply Utilities 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 10
2 Risk: — At least 2 regulatory shocks driving Funding carbon price in last four years: Framework – 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 11
2 — Lack of knowledge of broad strategic Risk: requirements to reduce carbon and Client-side 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 12
A de-risked 3 model
3 — Regime stability Solutions to market failure — 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 14
3 — Synergies with joining up with other Going forward on packages of works the ground in THH – 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 15
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