London, U.K. — (METERING.COM) — August 17, 2009 – “Pay as you save” (PAYS) could offer a real and workable solution to financing low energy housing refurbishments, with no upfront cost to the householder in many cases, according to a new report from the United Kingdom Green Building Council (UK-GBC).
Further PAYS could also be effective for funding “consequential improvements” and in reducing some of the upfront costs of new build low energy homes.
Under PAYS a low energy refurbishment provider uses finance from a third party to cover the upfront costs of the low energy work. An obligation to repay is linked to the property over an extended period of time and the repayments are calculated to be less than the savings that will be made on the fuel bills. At a change of tenure the benefit of the measures and the obligation to pay is transferred to the new householder.
The report points out that with some 45 percent of the U.K.’s emissions coming from existing buildings, it is clear that a significant and comprehensive program is needed to upgrade the performance of the existing building stock to meet the target of an 80 percent reduction in emissions by 2050 as set out in the Climate Change Act. Rightly government has said that emissions from homes and buildings should be “approaching zero” by 2050.
The UK-GBC says there is broad support for the PAYS concept. However, there are a number of barriers – technical, financial, behavioral, and legal – to overcome in order to turn the concept into a practical proposition.
In the first instance PAYS should be aimed at “the willing” 4 percent to 20 percent of householders, the report says. However, achieving the mass take up required to meet the government’s carbon reduction targets is likely to require additional and powerful incentives such as stamp duty/council tax or other market mechanisms.
Further, a subsidy scheme will still be required to ensure that the savings are greater than the costs using a PAYS approach when applied to the breadth of the housing stock and at a mass scale.
The report also notes that smart meters could potentially play an important role in showing the householder the energy savings that have been made. With the smart meter rollout underway this opportunity would need to be progressed rapidly.
The UK-GBC proposes that the upfront costs supported by PAYS be up to £10,000. The typical net savings (after the annual PAYS charge obligation has been met) would be of the order of £50 to £200 per year (based on gas heating) depending on the extent of the upgrade undertaken.
Examples of measures that the PAYS could support include floor insulation, heating controls, PV panels, ground source heat pump, aerated shower heads, etc.
Measures including cavity wall, loft insulation and low energy lighting that cause little disruption in the home and have a relatively quick payback, are being provided by the Carbon Emission Reduction Target (CERT), and will be delivered to the majority of homes that need them by 2014-16.
The government has proposed that to meet its carbon reduction targets 400,000 households per year will need to access a comprehensive package of home energy improvements, rising to 1.7 million households per year by 2020. The estimated costs, including renewable heat technologies, range from approximately £5,000 to £30,000 per property. This would equate to an investment in refurbishment of £5 billion to £15 billion a year through 2020.
The UK-GBC is a membership organization that aims to bring clarity, purpose and coordination of sustainability strategy to the U.K. building sector.