How Innovators are disrupting the UK Building Tech/Home Energy Sector
The UK domestic building and energy sector is ripe for a shake-up. But first- let’s look at the key problems.
Embarrassingly big ‘Performance Gap’
There is a thing called the ‘performance gap’ in UK house building which is the difference between what the building is designed/meant to do and what it actually does in the real world. Studies have suggested that actual in-use energy consumption can be 2 to 5 times higher than what was planned for during the design stage (Zero Carbon Hub, Carbon Trust).
It is not so much a gap as a chasm.
The CEO of a UK building tech company recently told me that when he described this UK performance gap to a visiting executive from a listed Japanese housebuilder, the guest nearly fell of his chair. In Japan, the gap is in the low percentages.
There is much therefore that needs addressing when it comes to energy compliance in UK buildings.
Fortunately, several strong drivers are now converging to build a credible case that things are about to improve. Innovative companies with the right business model may be well positioned to materially disrupt this dinosaur of an industry.
Drivers of change
The following drivers will change how UK buildings are designed, built and retrofitted over the next 10 years.
The first is regulation and standards.
The government’s Future Home Standards requires a 75-80% reduction in carbon emissions by 2025 compared to current new build regulations. Many have called for this to be brought forward to 2023. (The government published its long-awaited response to the 2019-20 consultation on changes to Building Regulations in England implying that there will be interim targets of 31% reductions along the glide path to 2025).
In addition, no new fossil fuel gas boilers will be permitted from 2025 with the idea that the building fabric will be suitably energy efficient to allow the decarbonization of the heat (through electrification and heat pumps) to enable these properties to become net zero over time. There are also a whole range of additional concepts from green mortgages and green leases to building passports that the Green Finance Institute (GFI) is working on with forward looking building companies. The political, corporate and social momentum now appears too significant for incumbent and lagging housebuilders to throw sand in the wheels of this process and lobby away any regulations they don’t like.
The second driver is corporate action.
Forward looking companies are now racing to announce their latest Net Zero plans.
The large contractor firm, Willmott Dixon, set out in its new sustainable development strategy, ‘Now or Never; our decisive decade’, plans for its new building and refurbishment projects to be net zero carbon in operation by 2030, and for its supply chain to be net zero carbon by 2040.
The head of Legal and General announced in 2020 that ‘all new L&G homes will be net zero by 2030’ reinforcing the belief that this is the decade of change. Legal and General feel that there is such an opportunity in this space that they have set up their own modular house building firm.
The third driver is digitalization
Digital technologies have been a bit slow in penetrating the energy and building sector, but they are now making up for lost time. The ability to capture data points from a variety of locations, whilst predicting future energy use based on weather forecasts and customer patterns, enables the customization of energy use to the actual profile of a building and its specific fabric. Other digital technologies allow load to be shifted through storage to accommodate variable pricing through the day and night. These are all capabilities that arise from harvesting the intelligence that digitalization creates.
New Build or retrofit?
New build activity gets most of the media and public policy attention and is the ‘easy bit’ from a technological fix perspective. At the moment however, this only accounts for around 170,000 units built per year although the government hopes to increase this to an annual target of 300,000 units.
However, there are 29,000,000 existing homes in the UK that also need to be retrofitted if the net zero targets are going to be met.
EPCs or Energy Performance Certificates are the current (although universally criticized) measure of performance for UK buildings. Of these, there are 11m that still need to get to the EPC C level which may be mandated for any rental properties by 2030. As of 2017, nearly 50% of social housing was below the EPC C level. This compared to nearly 75% of Private Rented Sector properties being below the EPC C level. There is a long way to even get to EPC C let alone B or A.
Keeping it simple in the building and energy world
For customers to stay warm in a net zero compliant way, service providers need to manage a complex and detailed set of choices.
For anyone who has looked at the details of an individual energy efficient new build or retrofit project, it soon becomes clear that things can rapidly get complicated.
What choices do you make?
Double glazing or Triple glazing windows? Air source or ground source heat-pumps? Nest or Hive or other less well-known intelligent energy systems? Roof insulation of 180mm of rigid foam or 300m of mineral wool? Underfloor insulation and smart water tank? Mechanical ventilation with heat exchangers? Small or large PV array? Chinese or Tesla battery? Octopus Agile tariff or Good Energy new tariff? Single EV charger or 2 way V2G charging? What level of air-tightness testing?
Given this complexity, developing a best-fit solution for a particular building profile requires an in-depth understanding of both the building context as well as the energy space.
Core skillsets required include the ability to leverage smart building design, select appropriate building fabric options, install appropriate on-site renewable energy generation and storage, integrate intelligent energy management systems, and stack revenue streams through using flexibility/demand response and innovative time of use tariff pricing.
Very few customers or even landlords are going to have the skill sets or inclination to truly understand and manage this.
Here come the disruptors
Fortunately, a number of new companies are now emerging with the intention to use a technology-agnostic smart integrator model to give customers what they really want- a simple offering based on lower cost green comfort.
One example of these new types of companies is Sero Technologies- based in Wales, the two founders James Williams and Andy Sutton have brought together their respective backgrounds in energy and building to deliver a ‘comfort-as-a-service’ offering to large landlords. The smart use of data analytics coupled with real industry experience allows the right configuration of energy technologies and solutions to be matched to the appropriate type of housing. This results in a win-win situation where the material energy savings achieved can be shared between the landlord, the tenant, the financiers and Sero.