Optimising the finding mix: Strategies for the scalable retrofit for warmer homes.

This is a summary of the panel presentation given and Homes UK Unlock Net Zero Solutions Hub on Wednesday 27th November 2024.

The Panel of Speakers 

The panel consisted of Andrew Tod, Head of Net Zero Carbon at Susreserve as Chair, Antoine Pellet, Head of retrofit credits at HACT, Tim Meanock, CEO and co-founder Tallarna, Clare Hasprey-Young, Regional sales Manager at Kensa, and Alexandra Rice, Commerical Officer and Unity Trust Bank. 

Monetising Your Retrofitting 

Antoine from HACT opened the panels short overviews of their areas of expertise. He talked about humanising the science, discussing HACT and its work in verifying carbon impact down to each house in the stock and calculate the benefit. This can be monetised by the HA/LA to help them drive through the social value. There is no cost to HA/LA for HACT. HACT started in 2022 with 6700 homes in pilot. 

Key is to be hyper local - support the communities and bring the funding to the community where it is needed most in a virtuous cycle.  

Private Funding Options 

Tim followed, discussing how Tallarna works with Social Housing landlords to help them access private funding. Many HA/LAs are struggling to access private finance that works with their loan covenants. Creating a project finance shared savings model with an off-balance sheet structure helps overcome this. 

Retrofitting creates income streams that can be monetised. Some of these can be used to raise and repay project finance and some can stay with the resident from day one. This reduces landlord’s capital contribution to projects. By monetising the value created by retrofits, we can enable more projects in a community and accelerate net zero. Tim reinforced the need to calculate how these income streams will be split to enable a tangible benefit to be left with residents.

Software can help with calculating projects’ income streams. Some of these are simple, like buying power at night when it is off-peak to serve houses during day, or selling power back to the energy market. These income streams can be financed and insured, importantly over a realistic term of up to 30 years, to keep the finance off balance and not impact landlords’ covenants. Insurance is also key for protecting residents’ project savings over the long term.

How Do We Open Up Funding at Scale?

Tim said it is important to generate a business case early on. This can be done at a desktop level and is key to getting stakeholders aligned and engaged to deliver the best option for them and their residents.

Ground Source Heat Options 

Clare stepped up to share the journey of Kensa. Their 20 years in business has seen them grow to deliver 50% of annual ground source heat pumps in the UK. They manufacture the smallest and quietest pump on the market with a high success rate and drive success through a shared ambient system which involves bore holes in to ground to serve multiple properties connected through a network system. Their system enables each individual property to have control over their energy use. Lifespan of this system is 100 years. Funding for Kensa is partly owned by Legal & General and Octopus, so pension pot funding enabling a tap to different funding options. Clare shared that Kensa has expertise in delivering E2E from feasibility to delivery of system.  

A Social Impact Focused Bank 

Alexandra of Unity Trust Bank shared that Unity is a traditional bank with a difference as it is a social impact bank, an ethical bank. Unity want to be part of the solution to help communities to thrive. They are aware there is a huge number of banks in the Social housing sector and Unity stands out as their articles of association are locked in to social impact lending - it is what they believe in and do. Unity are a commercial bank - supproritng net zero but also bring jobs, and income, into the communities. Alexandra mentioned a focus on delivering tangible impact, having installed a Chief impact officer, and recently created a new role of impact proposition to support the delivery of their 200m funding pot.  

2023  saw a transition initiative 25m to support projects up to 5m to enable HA/LA to get a top up of finance without the painful margin. As this slice is committed to community improvement - the debt is charged at a more favourable rate. 2024 and beyond Unity is planning on doubling the pot to 50m to help and commit to our common goal of net zero. Alexandra emphasised the need to support clients to not overcommit and ensure that they are working in a sustainable way.  

Question Time 

How Do We Open Up Funding at Scale?

Tim said it is Important to generate a business case as a desktop model to get the right financial model - using technology to enable this to ensure you build a case that parties can engage with to deliver the best option. Clare said good scoping is key - life cycle costs need to be modelled in to show longer term maintenance spends. 

Alexandra felt education is key - supporting clients to understand the implications. Although banks can’t advise sharing knowledge is important and thinking about the longevity of the property and the solutions being funded. Helping and signposting to places that can be helpful. It was muted that ideally one source of information shared by all around the financing options would be beneficial.  

Antoine said collaboration will be key, optimising learning and sharing to help others, also showing the benefit beyond the home in addressing social inequalities, for example the health and wellbeing, how that is linked to state savings, and GDP with impact on ability to work. 

Working On Empty Homes as Renovation is Happening if You Are Setting Up For Retrofit Do You Check That Insulation Is Covered Too to be Effective?

Clare said it is always good practice to set up for insulation and fabric first. Please download Sureserve's report to Government which discusses this fabric first approach in detail (link to Warmer homes report) 

Key Take Aways 

Alexandra said understand what your impact will look like now and in 5,10,15 years and beyond. The forecasting needs to be well done. Cost is an important driver - be clear on your future costs if you don't change as well. Global instability is a real consideration cost and ethical impact combined.  

Clare reinforced that there is no risk in looking at feasibility. Gather the information, understand the process. Kensa offer free feasibility reports.  

Tim suggests that normalising off-balance sheet finance will be key to delivering more retrofits at speed and scale. This is because off-balance sheet finance enables CFOs to be able to sign off on projects as it reduces landlords’ capital contribution and does not impact their existing debt. It is important stakeholders are shown this project finance opportunity in a way that is meaningful to them. 

Antoine said if you are delivering any maintenance work or retrofit as a HA/LA then talk to HACT who can help. 

 Sureserve would like to thank the panellists for giving their time and expertise to support Housing associations and local authorities working towards Net Zero.