Specialist building services contractors risk falling behind in the sustainability race with new competitors flooding into the market as the opportunities for retrofitting existing homes and offices grow, says David Frise, Head of Sustainability at the Heating and Ventilating Contractors’ Association (HVCA).
More commercial landlords are prepared to invest in making their premises energy efficient as they are able to charge a premium rent and reduce their running costs at the same time – a double positive whammy for the bottom line.
One office block in London has successfully increased rents from £20 to £26.50 a square foot following an extensive refit that involved replacing the old central heating system, improving draught proofing and cutting the use of artificial lighting.
The Carbon Trust says that reducing carbon emissions from offices by a third by 2020 would save UK businesses £4bn in running costs. They quote upgrading heating, low energy lighting and greater use of natural ventilation as “simple and low cost” measures that can be quickly and widely applied.
As a result, developers and commercial property owners are racing to raise money to carry out the necessary works.
Utility companies, including Centrica and EDF, are gearing up to provide the technical services as are major players from the wider commercial world such as M&S and Tesco with still more lining up to provide the finance, including some of the world’s largest hedge funds.
Energy efficiency is now big business. The Government’s Green Deal, which kicks in next year, will bring private investors into our market in a very big way. Initiatives like the LDA’s Buildings Energy Efficiency Programme (BEEP) will seek to bring together practitioners, planners and funders in a partnership to roll out very large programmes of building retrofits. There is a big prize for building services firms to go for, but we must avoid taking a back seat.
Financially savvy operators will move in quickly to secure the contracts – and they speak a language understood by business clients. IT providers are also well placed to engage with clients on a strategic level about delivering sustainability. Having secured large contracts, they may well sub-contract parcels of work to specialist contractors, but the most lucrative parts of the deal will be snaffled by others leaving us with the ‘hospital jobs’ – the low margin, commodity work.Yet, it is the humble contractor who is at the sharp end of the delivery mechanism. We understand better than anyone else how to make low carbon technologies work by integrating them with existing buildings and already installed systems.
And the Golden Rule must be that these solutions deliver what they promise. Clients are now buying performance not products. Single technology suppliers can only offer the promise of delivery, they cannot deliver complete solutions – and the financial model on which all of this is based is delivery. The loans provided by the Green Deal are dependent on them being repaid from actual energy savings – unless the systems actually deliver carbon and energy cuts the financial model will collapse.
77% of HVCA members are already involved in delivering sustainable building services with 62% actively installing renewables and 45 per cent project managing complete sustainable projects. The core expertise exists within the sector, but needs to be leveraged to take advantage of the new opportunities because ‘business as usual’ will not be enough to secure the economic future of our sector.
There are major technical shifts going on as well. It is now government policy to electrify the country’s heating supply and de-carbonise the National Grid. Installing gas boilers is not the long-term future for this industry.
District heating schemes and energy from waste are other fast moving areas and there will be a growing role for building services powered by biogas. The business opportunities are there, but they are starting to look very different to those specialist contractors are used to – they may be more subtle and not as obvious as in the past, so we have to adapt to avoid being left behind.
We also have to make the best of what is already installed and improve the performance of ‘traditional’ building services technologies. It is not sustainable to rip out and replace on a grand scale. The Feed-in Tariff system is in real danger of distorting the market by incentivising people to invest in an expensive renewable solution that might not be appropriate for their building when a far better use of the money would be to improve what is already installed.
Building owners need to understand the principle of the energy hierarchy where you first tackle basic improvements, such as improving insulation, upgrading windows, adding controls to existing energy consuming appliances, adopting solar shading to reduce overheating in summer, and perhaps looking to make better use of passive systems such as daylighting and natural ventilation to reduce energy demand. Only then should you consider additional technological changes to further reduce energy costs and carbon emissions.
Green Deal loans could finance thousands of the basic energy efficiency upgrades that deliver major savings – both in terms of bills and carbon. As fuel costs rise over the coming months and years, these investments will start look even more attractive.