MD2080 Energy Leap Project

Type of decision: 
Mayoral decision
Code: 
MD2080
Date signed: 
15 February 2017
Decision by: 
Sadiq Khan, Mayor of London

Executive summary

The Mayor of London has set out the ambition of London becoming a zero carbon city by 2050. Achieving this will require economy-wide decarbonisation. London’s existing buildings are responsible for nearly 80 per cent of London’s CO2 emissions, and with 80 per cent of them likely to still be standing in 2050, a step-change in the pace and depth of our retrofitting needs to start now. 
The Mayoral consultation, A City for all Londoners, therefore sets out the intention to develop new and innovative approaches to energy efficiency, starting with an early trial of net-zero-energy retrofitting of homes. This paper seeks approval for the funding and implementation of the “Energy Leap” Project in order to deliver the Mayor’s commitment, as part of the Mayor’s Energy for Londoners programme.
Capital funding of £450,000 will be used to match-fund a small scale trial (of at least ten homes) to deliver the first net zero energy retrofits in London, working in partnership with social housing providers and boroughs.  
This MD also requests approval to receive and spend grant funding of $169,200 (USD) from the Carbon Neutral Cities Alliance (CNCA) to support the delivery of the project, following successfully securing a second CNCA Innovation Fund revenue grant. 
 

Decision

That the Mayor approves:

1.    the delivery of a zero energy retrofitting trial in 2017 (the ‘Energy Leap Project’);

2.    the allocation and expenditure of capital funding of up to £450,000 to match-fund the trial in partnership with social housing providers and boroughs; and 

3.    receipt and expenditure of $169,200 (USD) grant funding from the Carbon Neutral Cities Alliance (CNCA) to support the delivery of the project.
 

Part 1: Non-confidential facts and advice

Introduction and background

1.1    We currently use more energy to heat and power our buildings in London than for anything else – buildings are responsible for nearly 80 per cent of London’s total emissions and the lion’s share of final energy use. Our domestic buildings are responsible for around 36 per cent of London’s total emissions. 
1.2    London’s homes have been built and developed over hundreds of years, and their energy efficiency varies significantly. London needs to overcome multiple challenges in relation to domestic energy efficiency including age, type and tenure of homes, and the lack of investment and stable government policy framework. Testing out new ways of retrofitting is therefore vital.
1.3    The Mayor is delivering successful domestic energy efficiency programmes across the capital, including RE:NEW and the recently launched Better Boilers scheme. However, a quarter of London’s homes that have been given an Energy Performance Certificate since 2009, have the worst energy ratings of E, F or G and are therefore wasting a large proportion of their energy . 
1.4    We therefore need to bring forward the next generation of retrofitting, test new methods of construction and technology that will demonstrate leadership to the rest of world, so they can follow suit. If we get it right, energy efficiency will be at the heart of London’s economy. By reducing energy use and cutting down on waste in London’s homes, we can reduce energy bills, protect the most vulnerable and improve occupant health, make our energy system more sustainable, regenerate communities, create jobs and drive down greenhouse gas emissions.  
1.5    The Mayor’s consultation, A City for all Londoners, therefore sets out a plan to “develop new and innovative approaches to energy efficiency, starting with an early trial of net-zero-energy retrofitting of homes”.
1.6    This commitment will be delivered through the Energy Leap Project, and is expected to make London the first capital city in the world to replicate the innovative Dutch Energiesprong retrofitting approach. Energiesprong is a transformational approach to delivering ‘whole house’ retrofits without subsidy. It uses state-of-the-art methods of construction to bring homes to net zero energy levels within a week, and is funded by guaranteed energy savings over 30 years (the retrofit contractors providing energy savings guarantees). The approach also improves the look and feel of the home and brings greater awareness to home energy use. To date, nearly two thousand Energiesprong retrofits have been delivered in the Netherlands, mostly within the social housing sector, as part of an 111,000-home volume deal between housing associations and builders. 
1.7    There is significant momentum across Europe and internationally for this initiative.  In July 2015, leading social housing providers, construction companies, trade bodies and expert organisations came together to form Energiesprong UK, a profit-for-purpose organisation with the intention of creating a ‘game-changing’ refurbishment sector (and the UK branch of the European programme team). In June 2016, and with help from the GLA, the European Energiesprong team secured €5.4m of EU funding through the Interreg NWE programme to help scale Energiesprong retrofitting in the UK, France and the Netherlands, and to stimulate mass uptake of zero energy refurbishments. International cities such as New York are also seeking to implement the model.
1.8    The GLA has undertaken considerable work, exploring the approach over the past two years, successfully demonstrating national and international leadership, including holding the first Energiesprong summit in the UK. Last year the GLA completed a Carbon Neutral Cities Alliance (CNCA) grant-funded independent transferability assessment undertaken by Frontier Economics, Savills and University College London. In addition, the GLA has been actively participating in Energiesprong UK, engaging with social housing providers and boroughs (including through roundtables and analytical support provided through the RE:NEW programme), and sharing learnings and plans with C40 and the CNCA. 
1.9    With several social housing providers and boroughs keen to provide properties and potential part-funding for a London trial, an offer of monitoring and evaluation support from Imperial College London, and a CNCA revenue grant to the GLA of $169,200, the provision of GLA capital match funding is being sought. 
1.10    If proven to work within a London context and deployed at scale, the model could help transform our approach to retrofitting homes and regeneration, and help significantly reduce fuel poverty in the capital.
Rationale for a retrofitting trial in London
1.11    There is a strong case for delivering a small scale zero energy retrofitting trial in London: 
•    we need a step-change in the pace and scale of retrofitting. The Dutch Energiesprong approach – which this project will seek to replicate – is focussed on creating fully integrated market-driven volume-deals 
•    GLA’s 2016 London Energiesprong Transferability Assessment highlighted a number of key barriers and challenges that need to be overcome, to enable zero energy retrofitting to be rolled out at scale through Energy Leap 
•    the Energy Saving Trust estimates that in post-1950s two and three bedroom social housing in London there is the potential for up to 270,000 zero energy retrofits to be delivered (equal to a third of London’s total social housing stock)
•    a trial will act as a first step to a large scale demonstrator, to deliver several hundred or thousand retrofits and overcome other key challenges including more complex building typologies and pepper-potting of leaseholders.
Proposed next steps 
1.12    We have already undertaken considerable engagement with social housing providers and boroughs and there is enthusiasm for demonstrating Energy Leap in the capital. We now plan to hold further roundtables with social housing providers to discuss the project scope and timetable at the end of February and cement interest in partnering on the trial project. In parallel, we will continue to engage with boroughs. This engagement will help us get a better sense of the potential partners for the trial. We then plan to conduct a competitive application process to identify recipients of the GLA funding (applicants being required to provide match funding), which will be evaluated using objective criteria. The highest scoring applicants will be required to enter into and execute a funding agreement on the GLA’s standard funding terms before any commitment is made to provide GLA funding.  
1.13    The final ten trial homes will be selected by the social housing provider or borough, in partnership with the GLA. Trial properties are likely to include terraced houses or purpose-built low-rise blocks of flats, with high levels of disrepair, and where fuel poverty is particularly acute. 
1.14    Following the selection of the ten trial homes, an outcome-based invitation to tender, will be issued by the recipients of GLA funding for the retrofitting works, with the zero energy refurbishments completed by mid-December. The specification is likely to require that each retrofit involves
•    a zero energy performance level, backed by an energy performance warranty 
•    quick delivery (the installation of the package should not require more than two weeks and allow occupants to continue living in the house for the greater part of the works)
•    a home energy performance contract (tenant ‘energy plan’), replacing an energy bill
•    a refurbishment package that is attractive to and accepted by the occupant(s). Social housing providers have been undertaking considerable engagement with tenants already, including through focus groups and surveys (which have shown significant appetite), to test the acceptability of the Energy Leap proposition to residents.
1.15    Concurrently, the GLA officers will be exploring with housing specialists how this solution can be applied to new build. A retrofit pilot makes a statement that if we can deliver zero energy refurbishments successfully; there is a much stronger argument for new build.
 

Objectives and expected outcomes

2.1    The key purpose of the Energy Leap Project will be to deliver the first ten zero energy retrofits in London. Each retrofit will demonstrate cutting edge building techniques, renewable technologies, and smart controls. The project will also enable London to:
a.    develop the first home energy performance contract for a zero energy refurbishment in London
b.    design successful large scale demonstrator projects involving thousands of retrofits
c.    provide a template for how London’s energy efficiency market and supply chains should be (re)organised to deliver whole house retrofit solutions
d.    evaluate the impact on social, environmental and economic factors through evaluation of the refurbishments (e.g. technical and financial performance, and impact on the health and wellbeing of tenants)
e.    kick-start innovation and encourage solution providers to prepare for the future 
f.    provide rapid evidence to inform the way we approach new build. 
 

Equality comments

3.1    The GLA will take appropriate steps to ensure that there are no potential negative impacts expected on those with protected characteristics. Those with protected characteristics will gain from the positive benefits of this scheme in equal measure should their homes be selected for trial, and there will be equality of access to participate in the delivery and benefit from the project, without discrimination. A further review will be undertaken if there is a wider roll out of the scheme following the outcomes of the trial. 

3.2    The trial will comprise homes with high levels of disrepair and potentially fuel poverty. It is therefore expected that this scheme will have a positive impact on lower income and fuel poor households directly through the home refurbishments and support they will receive, and by catalysing greater awareness of energy use and the opportunities to reduce their consumption. 
 

Other considerations

4. Other considerations

4.1    The key risks and issues for delivery of this project are set out in the table below:

Risk

Likelihood (out of 5)

Impact

(out of 5)

Rating

Mitigation

Partners (i.e. social housing providers and boroughs) have insufficient interest or do not secure budget.

1

1

1

Continue to engage with housing providers and boroughs including through roundtables before the start of the financial year 2017-18. A number of partners are already engaged and in the process of identifying suitable properties and budgets. While multiple delivery partners would be preferable, a minimum of one delivery partner is needed.

Planning authorities are unwilling to grant permissions for proposed retrofitting solutions, or permissions are delayed.

 

1

2

2

Stock analysis to date has aimed to avoid potentially sensitive areas (e.g. conservation areas). Early engagement with planning authorities will be undertaken.

Budget overrun or ten retrofits becoming unaffordable due to costs of implementation being significantly higher than expected.

1

4

4

The construction industry has already indicated a readiness to provide retrofits at a competitive price. We therefore intend to continue to engage solution providers / supply chain(s) to ensure cost estimates are accurate, and identify key price sensitivities.

 

5    Project costs

5.1    The GLA has successfully secured a second CNCA revenue grant, of $169,200, to cover trial’s staffing, marketing and associated project costs. Furthermore, we have also agreed with Imperial College London for them to conduct the monitoring and evaluation of the project, free of charge. Therefore no additional revenue funding for this project is required. 
5.2    Trialling the first ten zero energy refurbishments is expected to require capital expenditure of around £750-800k (c£75-80k per home retrofit, depending on specification).  Several housing providers and boroughs are ready to commit homes to a trial and have informally offered part-funding (up to £35k per home retrofit) and key players within the construction industry have indicated a readiness to provide retrofits at a competitive price. 
5.3    Capital funding of up to £450,000 in total is therefore sought to enable the GLA to provide funding as a contribution toward recipients’ costs of projects comprised in the trial, including a small contingency.

6    Governance and oversight

6.1    The project will be overseen by the London Energy Efficiency Team within the Environment Unit, with a new Project Officer managing the day-to-day delivery. An Energy Leap Project Steering Group will be established to guide and inform the direction of the trial, sign off on (or escalate) key decisions, and play an active role in the dissemination of outputs and outcomes. 
6.2    Advising and observing CNCA and C40 cities will be invited to join quarterly teleconference meetings to be informed of progress, manage project interdependencies, and help steer the project.
 

Financial comments

7.1    The paper is seeking approval for capital funding of £450k as match-funding, to fund a trial of zero energy refurbishments to ten homes, with average cost per home retrofit being £75k-£80k.  The budget for this project will form part of the 2017/18 GLA budget which will be agreed in March 2017. The remaining match-funding (up to £350k), will be met by housing providers and boroughs. The project has also secured $169.2k USD, (circa. £135.7k; FX $1.246USD, 08/02/17,UKForex), to cover Revenue expenditure associated with the project.

 

Planned delivery approach and next steps

Activity

Timeline

Recruit and set up project team

 

February-March 2017

 

Roundtable with social housing providers

 

end-February 2017

 

Delivery partner selection –  ITT launched

 

end-March 2017

 

Delivery partners appointed – trial property shortlist finalised

 

end-April 2017

 

Tenant consultation complete and trial property list finalised

 

end-May 2017

 

Contractor(s) appointed for retrofits

 

mid-August 2017

 

Designs and permissions finalised and installation commences

 

November 2017

 

Retrofitting complete

 

mid-December 2017

 

Project monitoring and evaluation

 

January – March 2018