Will the forthcoming Green Deal prove to be big business for the m&e sector? Andrew Brister hears from a sceptical industry that remains to be convinced
The greenest Government ever? It's hard to remain convinced following the coalition's slashing of the subsidies to the Feed-in Tariff scheme, lukewarm commitment to the Renewable Heat Incentive and Chancellor George Osborne blaming a decade of environmental laws and regulations for 'piling costs on the energy bills of households and companies'.
And, the Government's green proclamations will seem a trifle hollow to the thousands of workers laid off from a nascent solar industry following the FiT cuts earlier this year. Carillion Energy Services alone, formed following the acquisition of heating and renewables specialist Eaga in 2011, is making 1400 posts redundant following the cuts to government funding.
Yet, the UK's legally-binding commitments to reduce greenhouse gas emissions remain: there are steep targets of a reduction of 34 per cent by 2020, 50 per cent by 2030 and 80 per cent by 2050 from baseline 1990 levels. The Building Research Establishment says that 60 per cent of the buildings that will be standing in 2050 are already built and 40 per cent predate 1985 (the year that Building Regulations relating to fuel and power were first introduced under Part L). So, if the UK is to come anywhere near meeting the Government's carbon reduction targets, it is vital that we look at retrofitting today's technology into yesterday's buildings. Will the Green Deal be the vehicle that brings about the necessary change in our existing stock?
The coalition certainly thinks so. It estimates that the scheme could lead to 500,000 homes a year being upgraded and see 100,000 new jobs in the home refurbishment sector alone by 2015. The Government has established the Green Construction Board to help make things happen.
Enormous growth potential
The Board's co-chair, Business Minister Mark Prisk said: 'The potential for low carbon growth is enormous. There are approximately 25 million existing homes to be retrofitted by the end of 2050. This is a huge business opportunity that small construction firms should grasp.'
Firms looking beyond housing to the commercial sector will no doubt be encouraged by Ernst & Young's report into the potential of the Non-Domestic Green Deal (NDGD). It estimates that a 10 per cent take up in NDGD would equate to:
· an annual market size for energy efficiency measures in small and medium business of up to £800 million by 2020; and
· around 5 per cent of the carbon savings required from sectors not already included in the EU Emissions Trading Scheme to meet the UK's 2020 targets.
Bill Easton, director in Ernst & Young's power and utilities team, said: 'The NDGD provides a significant opportunity, both for the UK as a whole and for small and medium sized business, in terms of economic and environmental benefits. However, important challenges remain, particularly around whether the benefits of participation will be compelling and sufficient enough to overcome perceived risks surrounding effort and costs of participation and the reliability of the results.'
Wiith the October launch looming, there are still big question marks over how the scheme can be delivered, according to David Frise, head of sustainability at the Building & Engineering Services Association (B&ES). 'There is not a single building engineer working today who meets the Green Deal competence criteria,' he said. 'There are also no training courses available because the criteria were set in line with new national qualifications that are not yet in place.'
As a result, nobody can be measured against the requirements of PAS 2030 - the specification that provides the quality standards to which all energy efficient measures funded by the Green Deal must be installed, explained Mr Frise: 'The Government's intentions are good, but this betrays their lack of understanding about how the industry works.'
Steve Hale, managing director of m&e consulting engineer Crofton, agrees: 'The Green Deal certainly has the potential to deliver and is a good idea. However, the concern is that due to the way the Government handled the FiT issue, businesses may see it as the child that cried wolf and avoid jumping in too deep for fear of getting their fingers burnt if the Government changes its mind. A lot of businesses were hurt and had to scale down when the Government made changes to FiT regulations.
'I can visualise a situation where the Government reduces the amount of money available for the Green Deal due to high uptake. And for this reason, I believe the industry will be wary of getting caught out in the same way the solar photovoltaic industry has,' Hale continued.
'From a business point of view, the Green Deal has the potential to create a huge low carbon-refurbishment market, providing there is sufficient take up,' said Ian Lyall, joint managing director at m&e contractor EIC. 'This could be a great boost to the sector and create, or at least safeguard, jobs - although the Government's prediction that it will create 100,000 jobs within five years remains to be seen.
'The real challenge for the building services industry itself will be whether enough people have the skills needed to build and design cost-efficient sustainable solutions,' said Mr Lyall. 'Large companies and those with extensive experience of providing sustainable alternatives, like EIC, will be ahead of the game, but how will the smaller players fare? In particular, in the current economic climate, how many companies will be prepared to train their staff before there is sufficient demand from customers?'
'Even if it goes ahead, the take-up will not be anything like enough to get us close to the targets set for 2050,' says Martin Layzell, associate at consultant ZBP. 'On the domestic side, homeowners would rather buy the latest LED TV than spend their money trying to get their fuel bills down. It would have to be mandatory if you want to make a difference, but even then you would have to question whether regulations would be enforced.'
Mr Lyall argues that the impact of the Green Deal will be driven by the reality faced by customers, and incentives may be needed. 'Critics have argued that it will be difficult for customers to have confidence in the scheme if initial estimated savings are based on averages rather than on personal energy use. It may be that further incentives are needed as the cost savings will be too small to make it worth their while.'
Peter Gurr, technical manager at Wessex Renewables, also has doubts: 'Concerns include the cost and bureaucracy of becoming accredited, and whether the public will have an appetite for a scheme which, in the early years of an installation, may make no immediate difference to their energy bills,' he says.
With the industry uncertain as to whether or not to invest in accreditation and training, what do contractors think is needed? 'Setting a clear direction for low carbon policy is essential, yet seemingly never-ending consultations continue to hamper key decisions,' says Colin Robertson, sustainability manager at NG Bailey.
'Take the example of mandatory Greenhouse Gas reporting for business. It is something that a large number of the UK's leading businesses support, that was laid out in the Climate Change Act as far back as 2008, and that should have been decided upon last year. Yet, a decision continues to be postponed. Add to that the shifting CRC goalposts and yet another consultation on how to 'simplify' the scheme.
'Cutting carbon is morally right, cuts costs and creates opportunities. However clear, decisive, legislative direction is essential to helping businesses of all shapes and sizes make the necessary investments happen,' says Mr Robertson.
'The Government's desire to cut carbon emissions and promote sustainability should certainly be commended. However, its next steps should be seeing what works, where there is need for further incentives and what other barriers customers or companies are facing, and then amending the scheme accordingly,' said EIC's Ian Lyall. It seems that many contractors will sit and wait for exactly that.