MEGS-KT Lecture 2 Chris Newman Parity Projects 24th October 2012

www.parityprojects.com

Parity ProjectsGreen Deal Bits and Bobs

A “Conduit” for SMEs

24th October 2012


Me



Who we are

• Assessment of Individual Dwellings (HEM)• Assessment of Stocks of Dwellings (CROHM)• Specification of Measures (Wall Scheme)• Training Services• Building Monitoring• Project Management• Consultancy


home energy m a s t e r p l a n


Section 2 – Current Energy Use


Section 3 – Measures Evaluated


Section 3 – Measures Evaluated


Section 4 – Bespoke Combinations

No Brainer - usually set to include cheap measures with quick paybacks

‘you’d be silly not to’

Some Consideration - slightly more expensive or longer paybacks

‘probably worth it for your budget but have a talk with others who will be footing the bill too’

Green Halo - slightly more expensive or longer paybacks

‘ideally I’d like to spend £20,000 over 10 years with a overall payback of 30 years or below’


Section 4 – Bespoke Combinations


Section 6 – Detailed Analysis


CROHM


Fuel Poverty Assessment

% in fuel poverty

Improved Dwelling SAP


Wall SchemeTraining

Specifications

Quoting and Ordering

Discounts

ECO

Insurance


Building Monitoring


Green Deal• Measures for homeowners/ residents/ landlords/

businesses with some of the costs paid for by finance and a charge against the property’s electricity meter

• Amount of finance available is determined by Golden Rule taking into account payback, standard use, in use factors, lifetime of measure

• ECO• Carbon Saving Obligation (£760m pa)• Carbon Saving Communities (£190m pa)• Affordable Warmth obligation (£350m pa)


The Green Deal: a new approach to financing and delivering retrofit...

Energy Bill Reduction

Loan repayment

Owner 1 before work

Owner 1 after work

7% APR

Lifestyle ‘safety net’

Administration Costs

Assessment Costs






RHI and Feed in Tariffs

Are applicable but:• Revenues cannot be used as Green Deal savings

in calculations• House eligibility criteria will stand


Conduit

• Lip service to SMEs being part of the Green Deal- the ‘market’ led approach isn’t kind to SMEs- lots of big players expected to be involved

- a race to the bottom?

- Corporate GDP expected to want to control whole process

- Barriers to entry are high – not least knowledge about the barriers, complexity and bureaucracy

• SMEs could even lose current market share


• Will increase the overall size of the retrofit market

• Emphasis on “whole house” solutions

SMEs both excited and concerned by the prospect

Conduit aims to help SMEs work together to get involved in the Green Deal and shadow Green Deal


Conduit Partners

Federation of Master Builders (FMB) National Federation of Builders (NFB)

Building and Engineering Services (B&ES) (formerly HVCA)

Federation of Small Businesses (FSB)

The Electrical Contractors' Association (ECA)

Institute for Sustainability (IfS)

Royal Institute of British Architects (RIBA)

British Institute for Interior Design (BIID)

Royal Institute of Chartered Surveyors (RICS)

The Renewables Sector


Energy Advice “gateway” Providing locally relevant advice and signposting to customers

Home Assessment The Green Deal AdviserAdditional Surveys Detailed measurement, etcDesign coordination/PM An essential role in good, whole house

retrofitInstallation Services General works or specialist

installationsCheck/Audit Installations Working for alongside Providers,

Building Control etcTraining and Accreditation Helping to ‘upskill’ the nation’s

workforce

SME Functions in retrofit


How do SMEs currently fit?

What are the barriers to entry?

Conduit?

• They will be at the end of the supply chain.

• Present at key trigger points but little motivation to mention GD

• Traditional procurement route.

• Could sell in leads to others?

• PV – D-rating requirements

• Maintaining leads will be tricky

• Very complex scheme• What are the new skills

required? Training?• No money to mange the

process?• Marketing costs• Liabilities will flow

downhill?• Payment terms – 90

days?• Cash flow risk.• F.I.T. is in constant flux• Multi-skilling is expensive

• Needs scale - minimum size?

• To what degree to we automate the process

• Maintain face-to-face contact and keep cost down.

• Got to be a good brand.• Maintain independence

in the market.• Trade associations as a

provider. • Needs ‘critical mass’


Why we need a Conduit

A strong presence for SMEs in the energy-focussed refurbishment market is desirable for many reasons:

1. Homeowners will desire more than just a choice of high street brands.

2. Local businesses are often preferred and trusted, and deliver higher quality

3. SMEs key to realising trigger points for take-up4. Will broaden the economic benefits of the scheme5. SME must be able to protect their existing market

If there is no deliberate effort by SMEs to access the GD, homeowners and businesses and will lose out.


Different GD Delivery Models


Different GD Delivery Models


Where does the Conduit fit in?


• Offers SMEs a clear and consistent route to gaining/retaining work, allowing them to compete with large Providers (both bottom-up and top down)

• Offers customers (households & other organisations) a recognisable brand

• Provides an appropriate level of support to members• Reduces costs through economies of scale• Maintains a high quality of workmanship and service• Interacts in collaboration with other industry initiatives which

seek to support SMEs• Is also relevant outside the Green Deal

Key Principles/Aims


Broad Model – Top Down

Green Deal Provider

GD SME Conduit

Loan ProviderCustomers

Assessors Installers


Broad Model – Bottom Up

Green Deal Provider

GD SME Conduit

Loan ProviderCustomers



Broad Model – Bottom Up (2)

GD SME Conduit

Customers


Green Deal Provider

Loan Provider

Green Deal Provider

Green Deal Provider

Loan Provider Loan Provider


Key issues already “decided”• It is a ‘Cooperative’• Three membership types:

• Industry Groups• Lead-finders• Practioners

• It will be not-for-profit : members will be for-profit• Homeowners pay for an assessment and get a refund• The software ‘machinery’:

• Pre-pricing of works (where possible)• Automated tendering and contract• Simple recording of progress and completion• Quicker payment

• Potential for interim payments to be made


Key issues to be resolved

• The financial model – the Conduit needs to pay for itself (!)• Charge members through the process BUT• Return surpluses (profit) • Preferred financial model:

• Membership fee (not annual)• Leads fed into the Conduit• Access to quotation• Management charge at end


Key issues to be resolved

• To what extent GDPs will want to engage• Liabilities and quality assurance in the chain• How to assign leads / divide work fairly / transparently• The name!• APPRENTICES – direct employment


Next Steps

Key milestones

1. Funding for setup2. Public announcement (early July)3. Completion of initial legal advice (late July)4. Completion of initial business case (late July)5. Funding for setup (December)

On-going

6. Dealing with enquiries from SMEs through the website7. Discussions with potential Provider partners (inc. LAs)8. Discussions with funders - £200,000

Documents

MEGS-KT Lecture 2 Chris Newman Parity Projects 24th October 2012