MEGS-KT Lecture 2 Chris Newman Parity Projects 24th October 2012
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This document discusses the creation of a "Conduit" to help small- and medium-sized enterprises (SMEs) participate in the UK's Green Deal program. The Conduit would provide SMEs with a clear route to obtaining work on Green Deal projects and allow them to compete with larger providers. It would offer customers a recognizable brand and reduce costs for SMEs through economies of scale. Key issues to resolve include the financial model, how leads will be assigned, and engaging with Green Deal providers. The next steps outlined are to complete initial legal and business planning and seek funding.
MEGS-KT Lecture 2 Chris Newman Parity Projects 24th October 2012
- 1. Parity Projects Green Deal Bits and Bobs A “Conduit” for SMEs 24th October 2012 www.parityprojects.com
- 2. Me www.parityprojects.com
- 4. 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 www.parityprojects.com
- 5. home energy m a s t e r p l a n www.parityprojects.com
- 6. Section 2 – Current Energy Use www.parityprojects.com
- 7. Section 3 – Measures Evaluated www.parityprojects.com
- 8. Section 3 – Measures Evaluated www.parityprojects.com
- 9. 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‟ www.parityprojects.com
- 10. Section 4 – Bespoke Combinations www.parityprojects.com
- 11. Section 6 – Detailed Analysis www.parityprojects.com
- 12. CROHM www.parityprojects.com
- 13. Fuel Poverty Assessment % in fuel poverty Improved Dwelling SAP www.parityprojects.com
- 14. Wall Scheme Training Specifications Quoting and Ordering Discounts ECO Insurance www.parityprojects.com
- 15. Building Monitoring www.parityprojects.com
- 16. 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) www.parityprojects.com
- 17. The Green Deal: a new approach to financing and delivering retrofit... Lifestyle „safety net‟ Assessment Costs Loan Administration Costs repayment 7% APR Energy Bill Reduction Owner 1 before Owner 1 after work work www.parityprojects.com
- 22. RHI and Feed in Tariffs Are applicable but: • Revenues cannot be used as Green Deal savings in calculations • House eligibility criteria will stand www.parityprojects.com
- 23. 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 www.parityprojects.com
- 24. • 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 www.parityprojects.com
- 25. Conduit Partners Federation of Master Builders (FMB) National Federation of Builders (NFB) Building and Engineering Services Federation of Small Businesses (FSB) (B&ES) (formerly HVCA) The Electrical Contractors' Association Institute for Sustainability (IfS) (ECA) Royal Institute of British Architects British Institute for Interior Design (RIBA) (BIID) Royal Institute of Chartered Surveyors The Renewables Sector (RICS) www.parityprojects.com
- 26. SME Functions in retrofit Energy Advice “gateway” Providing locally relevant advice and signposting to customers Home Assessment The Green Deal Adviser Additional Surveys Detailed measurement, etc Design coordination/PM An essential role in good, whole house retrofit Installation Services General works or specialist installations Check/Audit Installations Working for alongside Providers, Building Control etc Training and Accreditation Helping to „upskill‟ the nation‟s workforce www.parityprojects.com
- 27. How do SMEs What are the barriers Conduit? currently fit? to entry? • They will be at the end of • Maintaining leads will be • Needs scale - minimum the supply chain. tricky size? • Present at key trigger • Very complex scheme • To what degree to we points but little motivation • What are the new skills automate the process to mention GD required? Training? • Maintain face-to-face • Traditional procurement • No money to mange the contact and keep cost route. process? down. • Could sell in leads to • Marketing costs • Got to be a good brand. others? • Liabilities will flow • Maintain independence • PV – D-rating downhill? in the market. requirements • Payment terms – 90 • Trade associations as a days? provider. • Cash flow risk. • Needs „critical mass‟ • F.I.T. is in constant flux • Multi-skilling is expensive www.parityprojects.com
- 28. 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-up 4. Will broaden the economic benefits of the scheme 5. 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. www.parityprojects.com
- 29. Different GD Delivery Models www.parityprojects.com
- 30. Different GD Delivery Models www.parityprojects.com
- 31. Where does the Conduit fit in? www.parityprojects.com
- 32. Key Principles/Aims • 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 www.parityprojects.com
- 33. Broad Model – Top Down Customers Loan Provider Green Deal Provider GD SME Conduit Assessors Installers www.parityprojects.com
- 34. Broad Model – Bottom Up Customers Loan Provider Green Deal Provider GD SME Conduit Assessors Installers www.parityprojects.com
- 35. Broad Model – Bottom Up (2) Customers Loan Provider Loan Provider Loan Provider Green Deal Green Deal Green Deal Provider Provider Provider GD SME Conduit Assessors Installers www.parityprojects.com
- 36. 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 www.parityprojects.com
- 37. 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 www.parityprojects.com
- 38. 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 www.parityprojects.com
- 39. Next Steps Key milestones 1. Funding for setup 2. 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 1. Dealing with enquiries from SMEs through the website 2. Discussions with potential Provider partners (inc. LAs) 3. Discussions with funders - £200,000 www.parityprojects.com
Editor's Notes
- #14: Best chart!Took houses and upgraded to see how many remained in fuel poverty using actual income survey and houses in the sample.Flat at first as not many being improved.Big drop when hit 80/82!
- #27: So SMEs (can) fulfil all the roles, but GD will require them to be part of a framework
- #28: 150 companies participated in these
- #31: The other likely model is the ‘one-stop-shop’ approach. Organisations with lots of in-house capability and perhaps subcontracting to national specialists if and when needed. These are unlikely to be small companies. This model is pulling contenders from various parts of industry – insulators who will try to do general contracting; general contractors who will widen their expertise in insulation services etc.
- #32: A: just marketing role. Lots of cost and little controlB: Set up as a GDP. At this point may be too risky and expensiveC: Seems to be the favoured option – “lead contractor” role.
- #36: But this approach has even more strength.The Conduit is able to find the best Green Deal provider for the client but most importantly, if the Green Deal doesn't quite fit the ambitions of the client, find another source of finance if it is indeed needed at all. They key issue is that the smaller practitioner who is already working with the client can add energy efficiency measures that may be outside of their expertise and competency by using other members of the conduit, in the assurance that they will hang onto the work that were already aiming for.