Wednesday, March 29, 2017

Post-occupancy study reveals how to really cut energy use in offices

One of the buildings studied in the research.
 Note: A version of this article appeared in The Fifth Estate on 21 March.

A new comparative study on the energy performance of existing office buildings has thrown light on the impact of tenant behaviour and the value of comfort.

Energy efficient buildings will only perform as intended with close collaboration between project teams, property managers and technical staff, a new study commissioned by Skanska, Go4Energy and Cushman & Wakefield has found.

The study analysed 20 office buildings in Poland, 16 of which hold LEED or BREEAM certification – meaning they are intended to be highly energy efficient.

By separating the energy consumption of tenants from the building’s total energy consumption, the research highlights the importance of tenant behaviour on performance.

Go4Energy analysed the energy use of the buildings and found that “the share of electrical energy consumed by tenants in the building’s overall energy balance ranged from 14 per cent to 65 per cent”.

The tenants have a significant impact on the energy consumption of the building and the electricity it consumes, dependent upon what type of tenant they are and the technological processes they use, which is why the share of electricity consumed by tenants varies so much.

The study is intended to make it easier to develop better, more targeted energy management systems for buildings in order to realise further improvements.

Waldemar Olbryk, director for support functions at Skanska, said the report was “a comparative analysis” between their buildings and other office buildings in Poland, and that no such study had been done previously.

“We looked at them in terms of their features, age and environmental specification,” he said.

Suisse Credit building, Poland
One of the buildings studied in Poland.

The investor must care

The study found that the influence of the investor was a decisive factor in the designed energy performance of the building.

By supporting certification systems, the investor can achieve more than 30 per cent energy savings during the operational phase, meaning that the operating cost is reduced by up to £500,000 a year for the new office building studied in the report.

Certified buildings have a higher potential for energy savings due to the implementation of energy efficiency processes from the beginning, the report said.

But once completed and in use any further savings can only be made by the implementation of proper management processes.

The European perspective

European policymakers have identified the renovation of Europe’s inefficient building stock as a way to boost energy efficiency, as well as the economy. More than 75 per cent of European building stock is inefficient and the annual renovation rate across the EU is languishing at just one per cent.

The EU is currently revising its Energy Efficiency Directive, in order to put measures into law that will help it meet its UN commitments to cap global warming.

The European Commission’s bill is being amended by both the Council of Ministers and the European Parliament. Both members of the European Parliament and national diplomats must agree on an identical text before it becomes law. At the present moment Malta holds the six-month rotating presidency of the EU, and this is one of its priorities.

But leaked documents reveal that although member states will accept the executive’s proposed 30 per cent increase in energy efficiency compared to 1990 levels, they want them to be non-binding rather than compulsory.

Previously, in October 2014, EU leaders watered down the 2030 energy efficiency target to 27 per cent from a 30 per cent binding goal. Now, the Commission, which has vowed to put “efficiency first” in its energy policy, is arguing that the Paris Agreement justifies returning the draft target to 30 per cent.

Meanwhile, the European Parliament has backed resolutions demanding a 40 per cent binding efficiency target and is likely to call for greater ambition in the bill.

One of the results of the Polish study is a proposal to create a mechanism enabling the analysis of buildings according to the study’s methodology, which could help the wider European agenda.

There is a proposal to coordinate this project with the National Association for Sustainable Building Construction, which could bring huge savings across Europe, where the construction industry accounts for nine per cent European GDP and employees 18 million people.

Efficient buildings are evolving

The progressive areas of the industry are moving beyond where the EU leaders are debating, however.

Currently, the selling point for office buildings is around “performance based” comfort. This means the comfort level available for the user forms the basis of monitoring and verification by the management systems. The user’s working conditions, including ventilation, HVAC, lighting and so on are automatically adjusted and controlled.

With such buildings the most important goal is no longer to bring the greatest savings for the building owner but to provide a balance between the economics and the comfort and health of workers in the buildings.

Due to this trend, the definition of comfort is constantly expanding, in contrast to the traditional idea that there is only one factor (energy) that needs to be managed at the expense of others (for example, environmental quality of the internal atmosphere).

This is a valuable study that deserves translation into English (currently it is Polish only) and wider dissemination.

David Thorpe is the author of a number of books on energy, buildings and sustainability. See his website here.

Monday, March 20, 2017

How to reduce embodied emissions in the building supply chain

New guidance has been issued to help clients and the built environment know how and when to begin requesting embodied carbon measurements.

Julie Hirigoyen, chief executive of the UK Green Building Council
Julie Hirigoyen, chief executive of the UK Green Building Council.

 The built environment sector places a strong focus on reducing operational carbon emissions in buildings, however embodied emissions often fall by the wayside, despite often accounting for a large proportion of overall emission. New guidance from the UK Green Building Council seeks to fix this by helping clients of built environment projects to commission embodied carbon measurements.

There is already much guidance on measuring the embodied carbon of buildings, but the unique feature of this new guidance is its focus on the contractual demands clients can place on their supply chains.

It begins by outlining the basics of embodied carbon and goes on to give an overview of possible approaches with examples of clauses that could be included in supply chain contracts and practical tips on how to use the outcomes of the resulting assessments.

Launching the guidance at Ecobuild, the UK’s annual exhibition and festival of ecological building, Julie Hirigoyen, chief executive of the UK Green Building Council, said: “We want to see the built environment fully decarbonised and this has to include both embodied and operational carbon. So we continue to advocate for embodied carbon to become a mainstream issue in building design, construction and maintenance.

“As such, we are encouraging our client members and other clients in the industry to create their own embodied carbon briefs by making effective use of this guidance.

“Also, we are working with cities and other local and national authorities to encourage the assessment of embodied carbon within the public sector planning and procurement process.”

David Picton, from multinational facilities management and construction services company Carillion, is one of the supporters of and contributors to the guidance.

“Measuring, tackling and reducing embodied carbon is the hidden prize in shaping a better built environment,” he said.

“We are hoping that this guidance will drive clients, designers, contractors and suppliers to work side by side to develop and maintain infrastructure with the lowest possible carbon content.”

The document will be useful for any financial investors whether in the building of new structures, or the refurbishment of existing ones, and can apply to any type of built structure.

It is not a methodology or standard for the measuring of embodied carbon. Instead it sets out a framework within which such measurements can be gathered and acted upon.

Why do it?

Globally, buildings account for 32 per cent of energy use and 30 per cent of energy-based greenhouse gas emissions. To contribute to the goal of limiting global temperature increase to 2°C the sector must reduce its emissions by a total of 84 gigatonnes of carbon dioxide by 2050.

Since the Paris Agreement 91 countries have included some kind of commitment relating to buildings in their Intended Nationally Determined Contributions – their declarations of their commitments to meeting the terms of the Agreement.

There is a strong economic case for considering embodied carbon. For example, buildings have a relatively low cost when compared to many operational carbon saving solutions.

Action to reduce embodied carbon in the building process encourages more efficient “lean build” and resource efficiency, thereby lowering costs. It also unlocks innovation and can be a helpful way for clients to compare the pros and cons of assets. It also achieves credits in some building assessment sustainability rating schemes.

Chart showing the relative embodied and operational carbon of present and projected future buildings.
Chart showing the relative embodied and operational carbon of present and projected future buildings.

What is it?

A structure’s embodied carbon is the total greenhouse gas emissions associated with its production.

International standards have been developed to help companies manage their carbon footprints, such as PAS 2080:2016 Carbon management in infrastructure.

The embodied carbon impact of building assets is more significant than has been previously thought. Recent research has uncovered that over a 30 year period these emissions typically account for over 50 per cent of the total carbon emitted for some kinds of buildings.

Charts showing the relative carbon costs of different building types.
Charts showing the relative carbon costs of different building types.

Julie Hirigoyen says that as buildings themselves become better insulated and more airtight, thereby reducing the carbon emissions associated with their use, the proportion of the total carbon emissions that are associated with the production of the elements increases.

It is important to remember that all assessments of embodied carbon are only estimates unless they are based on data specifically relating to the constituent parts as used up to the point of the handover of the building to the client.

They are only as certain as the quality of the data available at the time of assessment, and may be based on standardised assumptions about the life cycle of assets, such as maintenance regimes.

It’s also important to decide when the measurements are to start, what the boundaries are, and whether you are comparing like with like.

When should the process start?

Chart showing the process of producing a 'carbon brief'.
Chart showing the process of producing a 'carbon brief'.

Achieving embodied carbon emissions reduction has the greatest impact if considered at the early stages of the construction project when the design and choices of materials can be influenced.

The two major wins for improvement arise from retaining and re-using elements of an asset – in other words minimising the introduction of new carbon emissions associated with production.

Chart showing the opportunities to achieve embodied carbon emissions reduction at different stages of a construction project.
Chart showing the opportunities to achieve embodied carbon emissions reduction at different stages of a construction project. More opportunities for reductions exist earlier in the construction process.
Chart showing how the ability to influence the whole life carbon cost of a building reduces over the building's life in contrast to the accuracy of assessments of that total carbon cost, which improves.
Chart showing how the ability to influence the whole life carbon cost of a building reduces over the building's life in contrast to the accuracy of assessments of that total carbon cost, which improves.

Conceptual diagram showing the different options to influence carbon reduction (and how much you might save) at the successive stages of infrastructure delivery.
Conceptual diagram showing the different options to influence carbon reduction (and how much you might save) at the successive stages of infrastructure delivery.
Since elements such as the sub-structure or super-structure and assemblies like walls are the aspects of a design that typically have the highest material volumes and masses, significant gains can be made by reducing these.

For example is possible to examine and improve the proposed mixes of concrete to incorporate higher levels of cement replacement or recycled aggregate.

The guidance lists various datasets and tools that could be used as well as targets that might be adopted, and goes on to describe how the assessments could be benchmarked.

British Land, which is one of the largest property development and investment companies in the UK, is already adopting the above approach. It expects embodied carbon emissions to be measured and reduced for all developments it undertakes costing over £50 million (AU$80.7m).

The company has an aim to reduce the measured emissions from product stage and construction of “landlord” elements by 15 per cent. Each review that it conducts has a champion, usually the structural engineer, and he or she will conduct the review with reference to British Standard EN 15978.

This divides the product stage into three elements – raw material supply, transportation and manufacturing process. The reduction in carbon emissions must be demonstrated through clear assessment and detailing.

Civil engineering company Walsh Construction has also been adopting this approach. It has found that involving clients in reducing embodied emissions from their projects helps carbon savings to “rise considerably”.

“Walsh have shown that it is possible to achieve over 60 per cent savings,” Walsh director Peyrouz Modarres said at Ecobuild.

“Such significant savings of embodied carbon clearly demonstrate the importance of close client engagement as a vital contribution to reducing embodied carbon.”

David Thorpe is the author of a number of books on energy, buildings and sustainability:

Visit his website here.

Tuesday, March 14, 2017

A common language for energy efficiency could encourage investment

 This article originally appeared on The Fifth Estate on 7 March.

A US-European initiative has been launched to standardise data on energy efficiency in buildings so that investors, building owners and developers can amalgamate, share and analyse data in a common format. What’s more, its adoption is being made easy and free.

The purpose of developing a common language is ultimately to create a marketable financial product that enables investors and building portfolio owners to compare the relative benefits of investing in energy efficiency projects in different buildings or portfolios of buildings.

The “Building Button” Specification is an initiative of the Investor Confidence Project (ICP), and applies to commercial and multifamily occupancy buildings. It is applicable in three contexts: technical due diligence, financial underwriting and actuarial data.

The specification will allow any organisation to share project data across platforms to reduce underwriting costs, build confidence in energy savings and ultimately drive greater market demand for energy efficiency.

The specification is for a standard XML dataset, and is based upon the US Department of Energy’s Lawrence Berkeley National Laboratory’s (LBNL) Building Energy Data Exchange Specification (BEDES) for a building energy efficiency retrofit.

It also fits into the full range of existing ICP protocols to facilitate data collection for ICP investor ready projects. A project overview spreadsheet containing 388 rows can be seen here, colour-coded according to which context the data is relevant.

Typically data necessary for actuarial underwriting and to conduct technical due diligence for investment in energy efficiency projects is locked away in PDFs, spreadsheets and proprietary tools.

Standardising this data helps to give investors and building owners increased confidence in energy savings because they are based on the experience derived from empirical, project-level data from many previous projects.

?Institutional investors, rating agencies and markets for secondary transactions also demand volumes of normalised data in order to have confidence that the industry can deliver results prior to making large capital investments.

Involved in developing the Building Button Specification were project developers, technology providers, investors, insurers, program administrators and other market actors.

They were able to point out and evaluate what type of data, and their formats, they themselves used and felt were helpful when they examine the cost effectiveness of an energy efficiency project.

ICP sees this as the first step towards the reality of standardised industry-wide “big data” for the energy efficiency industry and is calling on all those interested in energy efficiency data to participate in further development of this opportunity through upcoming webinars, technical forums and more.

The BEDES team has allocated engineering resources to make adoption of Building Button easy and cost free for anyone who collects or distributes building energy performance data by offering to map their existing data sets into Building Button / BEDES-compliant formats.

You can sign up here.

David Thorpe is the author of a number of books on energy, buildings and sustainability. See his website here.

Monday, February 06, 2017

Fact-checking Scott Morrison on affordable housing

The Australian Treasurer Scott Morrison has been seeking solutions to the problem of affordable housing in London. So let’s do some fact-checking on his position.

Australian Treasurer Scott Morrison
Australian Treasurer Scott Morrison 
Note: This post first appeared last week on The Fifth Estate.

Australia’s housing crisis

First – the scale of the problem: the thirteenth annual international house price survey by Demographia recently ranked Sydney’s home prices behind only Hong Kong, ahead of London and New York. It concluded:

“Hong Kong is the least affordable, with a Median Multiple of 18.1, down from 19.0 last year. Sydney is again second, at 12.2 (the same Median Multiple as last year). Vancouver is third least affordable, at 11.8, where house prices rose the equivalent of a full year’s household income in only a year. Auckland is fourth least affordable, at 10.0 and San Jose has a Median Multiple of 9.6.”

Whether or not you believe these exact statistics, there is no doubt that there is a supply crisis.

And, as with London, while the obvious solution may be to build more homes, the important shorter-term questions need answering of who owns the homes – occupiers or investors – and whether they are “affordable” or premium. The longer-term solution is: who builds them?

In a tight market, the more homes are owned by investors, the fewer can be owned by occupiers. This simple arithmetic is at the heart of the debate raging in Sydney, which Scott Morrison continues to dodge by refusing to admit that ending negative gearing might be a solution.

Negative gearing

Negative gearing allows property investors who make a loss to reduce the tax they pay on other income. According to ABC there are over two million landlords in Australia, over 60 per cent of whom claimed they made a loss (averaging about $10,000) in 2013-14, and so benefited from this.

Ending negative gearing – critics like Morrison’s own Liberal Party colleagues say – would reduce the incentive for investors to buy properties, easing the supply.

The Capital Gains Tax discount has also been blamed for the housing crisis. This was introduced by the Howard Government and generally results in half the profits from the sale of an investment property escaping tax.

Since being introduced in 1999 buying property as investment has increased substantially.

Whom does negative gearing benefit? Research by the Grattan Institute has revealed that the top 10 per cent of income earners, before negative gearing, get almost half the benefits.

The research body has dispelled the myths propounded by the pro-negative gearing lobby here and here.

The property industry argues that tax incentives for investment housing encourage more homes to be built. But more than 93% of property lending is for existing housing.

The Labor Party has proposed restricting negative gearing to new homes from July 2017, and halving the CGT discount to 25 per cent.

Speaking in London, Mr Morrison said this would not work and that changing negative gearing would make it harder to save for a house, because it would put rents up.

Fact-checking Morrison

Is this true?

No. In fact the opposite is true. While rents rose a little in Sydney and Perth when the Hawke government restricted negative gearing in 1985 they were stable in Melbourne and fell in Adelaide and Brisbane.

The Grattan Institute puts the rise in Sydney and Perth down to population growth and insufficient residential construction due to high borrowing rates and competition from the stock market for funds.

This week in London, Morrison was also quoted as saying: “What’s interesting in the UK is they’ve never had negative gearing. Yet they have the same and worse affordability problems than Australia has.”

That’s not quite true either, because landlords have had other kinds of tax relief. These were curbed in 2015 by the British government, with the then Chancellor George Osborne saying they gave investors buying homes to let a “huge advantage in the market” over people buying homes to occupy themselves.

Morrison also said on Sunday: “They have an even bigger problem than we do here, people pay more of their income in rents there, and they pay more of their incomes on their mortgages than they do in Australia”.

Is this true? According to the Resolution Foundation British high-earners with mortgages pay 20 per cent of their income toward their mortgage, while low-earners pay 28 per cent – and those on benefits are losing more than half their income. (These figures are a year old.)

In Australia, the most recent official data is even older – from 2013-14 – and doesn’t distinguish between high and low earners. It records that on average home owners spent 16% of their gross weekly income on their mortgage (down from 18% in 2011–12), while the figure for renters was 20%.

So Morrison may be right.

How do other countries compare in terms of housing supply and demand? According to the ANZ Bank Australia currently lacks around a quarter of a million homes, or 2.6% of its current housing stock (9.6 million). In the UK, house building is at around half the rate it should be.

In the social sector, there is a severe shortfall. The figure below compares the indexed number of households on social housing waiting lists, the number of vacant dwellings and the social housing shortfall as a percentage of the total social housing stock, from 2010 to 2015 in England alone:

England is not therefore exactly a success story wen it comes to housing. Does this make you wonder if Morrison might be looking for a solution to his problem in the wrong place?

What policies might work better?

In a paper published this month in the journal Housing Studies, the authors, from the universities of Adelaide and South Australia, conclude that “Australian governments need to adopt more effective housing policies if they are to meet the needs of the 700 000 to 1 million households who live in unaffordable housing”.

No surprise there. But what should they be? Morrison favours social bonds as a way of letting investors buy into the provision of affordable housing.

Does this work? In the UK most social housing is provided by housing associations which have charitable status. Most of these do issue bonds to raise finance. Here is a link to a list of the current issues and their returns.

Yet despite this, social renting is in long term decline compared to private renting, according to official statistics. And in the private sector, rents are 50% higher: private renters spend a greater share of their income on housing (30 per cent) than mortgage owners (23 per cent) or social renters (20 per cent) according to the Resolution Foundation.

Bonds may be part of the answer. But it’s more complicated than that.

The Joseph Rowntree Trust in the UK specialises in research into inequality and poverty, including housing and affordability. In 2013 it conducted a major study into how to finance the supply of new affordable housing which Morrison would do well to read.

Analysing innovative policies from the UK and abroad that help to increase the supply of below-market-price housing:
  1. It found that a general shift upmarket, lowering subsidies and trying to encourage affordable rather than social housing doesn’t work: it results in higher rents and more limited security of tenure.
  2. It cautioned against the use of state-backed guarantees in a climate of low interest rates.
  3. And it came out in favour of competition among providers (both for profit and non-profit) because it encourages efficiency and innovation and lowers subsidy costs.

What else works?

Like Morrison, the left-wing think tank the Institute for Public Policy Research (IPPR) (Hull and Cooke, 2012) supports the idea of local authority pension funds investing in housing newbuilds – but unlike Morrison it also supports grants for new home buyers.

But probably the most comprehensive review ever of different funding mechanisms, by the Cambridge Centre for Housing and Planning Research (CCHPR) Funding future homes: an evidence base, found that no one approach wins out. Instead, all the models have strengths and weaknesses.

It also cautioned against importing solutions from one place into another, saying that “any serious cross-national application of innovative models needs to be placed into a suitable context”.

The Rowntree Trust also agrees that you can’t just take a single policy from one country and apply it in another – because conditions are so different.

Morrison therefore needs to take great care if he wants to transplant a policy from the UK to Sydney.

If there is any other single unanimous conclusion it is that the CCHPR and the Rowntree Trust both also feel that the local government level is the one best suited for identifying and driving the most appropriate mechanisms to deliver affordable housing.

“Local fiscal incentives and local institutional structures for mobilising savings or capital set against the local regulatory context for affordable and social housing are important general success factors”, says the CCHPR’s report on page 32.

Perhaps Morrison would have been better off staying at home after all.

PS: Although Morrison himself does not declare any homes he owns for renting out, the Coalition’s MPs own collectively 331, more than double the Labor Party MPs. Turnbull himself owns 4. I wonder how many of them benefit from negative gearing?

David Thorpe is the author of a number of books on energy and sustainability. See my website here.

Tuesday, January 31, 2017

The Green Deal is to rise from the dead

[Note: This is an updated and partial version of the article published last week on The Fifth Estate website.]

The UK Government’s sale of the Green Deal Finance Company, which finances energy efficiency retrofits, has slipped through almost unnoticed – and the Green Deal is to be relaunched by the private sector.

The GDFC’s new owners, Greenstone and Aurium, have stated their intention to commence the financing of new Green Deal loans by the end of the current quarter.

The sale

The sale was ordered by the Conservative MP George Osborne when he held the post of Chancellor of the Exchequer in an attempt to reduce government debt.

Like the Green Investment Bank, the Green Deal Finance Company was set up in 2012 (this was the year when the Conservative-Liberal Democrat alliance wanted to be “the greenest government ever”). It was a not-for-dividend company whose job was to provide low-cost financing to households for energy efficiency improvements to their homes.

It failed.

Originally, its 55 members came from the public and private sector and included energy companies, trade associations, local councils and potential green deal installers. They provided some of the start-up cash, with the rest provided by the Green Investment Bank and the European Investment Bank.

It had expected to deliver around £300 million of financing for Green Deal Plans before 2014. But it was an abysmal failure, and I have documented why here.

Last year it was lambasted by the Public Accounts committee, whose chair, Meg Hillier MP, said: “This blinkered approach resulted in a truly dismal take-up for Green Deal loans and a cost to taxpayers of £17,000 for every loan arranged. Savings in CO2 were minimal.”

The Energy and Climate Change Department (DECC – since abolished) oversaw the Green Deal and believed that the Green Deal Finance Company would provide loans of over £1.1 billion by the end of 2015. The actual figure was £50 million!

The finance company incurred large financial losses as a result of the low demand resulting in DECC writing off £25 million of the cash it loaned to it. It stopped offering new Green Deal Plans in July 2015.

The new owners

The board of the GDFC last week announced the sale of its wholly-owned subsidiary, GDFC Services, for £40 million.

The new co-owners are Greenstone Finance, which invests in organisations focused on financing in renewable energy and energy efficiency, and Aurium, which describes itself as “a structured finance boutique with a focus on renewable energy”.

They say they will continue to service the existing Green Deal loans and will commence financing of new Green Deal loans this quarter.

Richard Twinn, policy advisor, UK Green Building Council, welcomed the sale, commenting that “the limitations of the Golden Rule mean it will only be attractive to a specific part of the able-to-pay market. But in the absence of a policy alternative from government, the possible reignition of a pay-as-you-save mechanism could provide a viable option for households on moderate incomes to make improvements to draughty homes.

“However, one of the big failures of the Green Deal the first time around was the lack of incentives from government to drive uptake. Unless government grasps the nettle this could well become a problem once again.”

The Green Deal was established to address the fact that the UK has some of the most thermally inefficient housing in Europe. Its loans let customers, including landlords, improve their homes by installing energy efficiency products.

The loans are repaid as part of a customer’s electricity bill, which may (critics say: only if heating was provided by electricity) be reduced by the savings generated from the measures the loan financed – a “Pay-As-You-Save” scheme. The loan remains with the property – ensuring the payments are made by the person who benefits from the energy saving.

Kilian Pender, founder and chief executive of Greenstone Finance, commented on the acquisition and the relaunch by saying, “We believe that the concept of repaying your loan as you save on your energy bills is an excellent one and with the significant private investment that we have secured, we’re looking forward to rolling the Green Deal finance scheme out across the country. We will provide homeowners a cost-effective way to improve their homes and quality of life.”

Energy assessment company Elmhurst said it looked as if the new organisation was willing to breathe new life into the pay as you save model, observing that “the private rental market is certainly an opportunity for Green Deal”.

It said that some commentators believed that the legislation on Minimum Energy Efficiency Standards – which make it unlawful for landlords to grant a new lease on properties that have an energy performance certificate rating below E, from 1 April 2018 – actually allow some landlords to avoid bringing up their properties to the required E rating. But “with the re-launch of the Green Deal, this loophole looks like being closed”, it said. “The first task for the organisation will be re-launching the loan scheme and getting traction in the market place. This is definitely one to watch this year.”

David Thorpe is the author of:

The UK's Green Investment Bank should be given an IPO

[Note: This is an updated and partial version of the article published last week on The Fifth Estate website.]

The UK Government’s sale of the Green Investment Bank (GIB) – potentially to Australian financial services group Macquarie Group – is unraveling, with Parliament told the bank has a “dismal and terrible environmental record” and an “appalling track record of asset-stripping”. 

The government is soon expected to announce the winner of a bidding contest to buy the Green Investment Bank. Australian bank Macquarie is understood to be the preferred bidder, although the terms of the arrangement are shrouded in secrecy.

But controversy over the sale has led to reports suggesting it could be abandoned and the bank floated on the Stock Exchange instead.

The Financial Times has quoted an unnamed Whitehall official as admitting that an IPO (initial public offering) was possible but not imminent.

“It’s jumping numerous steps to suggest a decision has already been made,” he is reported as saying. “It’s jumping several hurdles and issues.”

Meanwhile, many others are calling for the sale to be abandonned.


The GIB is a taxpayer-owned “for profit” bank created in 2012 and allocated £3.8 billion of funding from the UK government with a mission to accelerate the UK’s transition to a greener economy. It has done well. The bank invests in a range of renewable energy projects, including energy-to-waste, anaerobic digestion, biomass, offshore wind – and it launched a €100m green bond at COP 22 in Marrakesh in 2015.

The Conservative Chancellor of the Exchequer George Osborne’s plan was always that it should eventually be able to operate independently of Government, although many on the left opposed this. The sale was ordered by Osborne when he held the post of Chancellor in an attempt to reduce government debt.


The widely-touted possibility that Macquarie – which has offered £2 billion – could end up winning a competition to buy the bank has raised concerns.

“This preferred bidder, Macquarie, not only has a dismal and terrible environmental record, it also has an appalling track record of asset-stripping,” said Green MP Caroline Lucas during a recent parliamentary debate.

This view was echoed by former Tory Energy Minister Gregory Barker who said on Twitter that he was “increasingly alarmed that sale of #GIB will now see it broken up so much it threatens its future as [an] enduring institution”.

And Labour MP Ian Murray tabled an early day motion calling on the government to halt the proposed sale of the bank.

Furthermore, it has just emerged that Patricia Rodrigues, the former investment banker who helped set up the state-owned bank, is now working for the bidders as managing director at Macquarie Infrastructure and Real Assets.

On Wednesday 25 January the sale was debated in the House of Commons. Business Secretary Nick Hurd tried to reassure MPs the bank would not be sold to an asset stripper but was tight-lipped on the sale procedure.

Macquarie themselves have also fought back against the accusation that they would hollow out the bank but admitted they would dramatically restructure it.

This has not reassured Green MP Caroline Lucas who Tweeted yesterday:

The opposition business secretary, Clive Lewis was quoted by City AM as saying, “The government should never have wasted valuable time and money prepping the GIB for privatisation in the first place.

“With our economy stalling because of the government’s incompetent handling of Brexit, the GIB needs a laser-like focus on developing future low-carbon technologies. Instead it’s had to deal with uncertainty generated by this ideological and ham-fisted privatisation process.”

It has been widely criticised for not being sufficiently visionary or for not backing community energy, but it has been a success all the same, particularly in supporting the difficult-to-finance offshore wind industry.

According to the bank’s chief executive, Shaun Kingsbury, this industry has now “come of age” as a mainstream asset class, driven by rapid improvements (and falling costs) in technology, installation, supply chain, operational maintenance and financing.

Just a few days ago the bank issued a report showing that its Offshore Wind Fund has exceeded its original £1 billion investment target. It has invested in five offshore windfarms with a combined capacity of 1447 megawatts.

Having backed 85 projects to the tune of £2.7 billion, GIB is in need of a capital injection. With the UK government lacking cash even for the ailing National Health Service, those funds are not likely to come from the taxpayer.


It is in this context that a previously shortlisted bidder – Jonathan Maxwell, chief executive of Sustainable Development Capital Ltd (SDCL) – threw a spanner in the works two weeks back, offering to match Macquarie’s bid.

He has urged the Tory energy minister Nick Hurd to reject the Macquarie bid, asserting that his consortium – which includes the state-backed Pension Protection Fund (PPF), the US’s Hancock and Japan’s Mitsui – is the “best alternative” to meet the government’s goals for GIB. His move is backed by Caroline Lucas.

Unlike Macquarie, SDCL exclusively provides energy efficiency retrofit project finance, backed by specialist funds in the UK, Ireland and Singapore, with new funds coming on stream from New York and China.

SDCL also provides financial advisory services through an investment banking group that operates in sectors linked to resource efficiency and sustainable development, such as renewable energy, energy efficiency, water and waste management and recycling, sustainable land management and low carbon transport.

Maxwell issued a statement saying: “We believe that an IPO [for the GIB] by 2020 is viable and this has been an important consideration behind our approach to the privatisation. An IPO should be feasible and attractive once the GIB’s portfolio has been built out.

“This government could retain a stake in the GIB in the meantime to benefit from the expected future growth ahead of an IPO and achieve value for money for the UK taxpayer.”

David Thorpe is the author of a number of books on energy and sustainability. See his website here.

Monday, January 16, 2017

Swansea barrage represents a key opportunity

Charles Hendry's report into the exciting Swansea Lagoon has given it the thumbs up.

The former energy minister concludes:
"I started this process with interest but sceptical. The more evidence I have seen, the more persuaded I have become that tidal lagoons do have an important role to play and there should be a government strategy in place to help this happen."
But it is not a cheap source of power. It has enemies. Among them is Jonathan Ford, writing yesterday in the FT,

Strangely, he quotes John Constable of the so-called Renewable Energy Foundation (REF), who lambasts it. The REF is a bogus organisation that does the opposite of what its name suggests. A simple Google search will reveal this, such as this piece

That aside, it is important to factor into any calculation about this investment that the lagoon will last 3-4 times longer than Hinkley or any other nuclear power station, and so its costs should be factored over around 100 years.

Hydroelectric power dams last for a at least this length of time. Admittedly the conditions for the barrage are slightly more stressful, being in salt water, but the area of Swansea Bay to be occupied by the barrage is a doubly sheltered one – both by the Bristol Channel and the horseshoe shape of the Bay itself.

Let's recall nuclear power's toxic legacy, and EDF's abysmal record, and nuclear power stations' own unreliability (often offline for weeks at a time for maintenance and safety), which should also should be factored in. 

Balance this against the modular nature of the turbines in the barrage (if one fails the others will keep working) and the predictability of the electricity (from the predictability of the tides).

Ford argues that nuclear is continuous source of power and the barrage is not, but the barrage has the ability to store energy (as water) within itself. The imminent availability of cheap electricity storage technologies will also help match supply with demand.

Tidal barrage and lagoon schemes are a new technology. Backing them will position the UK well as a world expert, leading to further lucrative business for UK plc.  China is already utilising it.

We have delayed long enough and let China get ahead. Let's get on with it.

Monday, December 19, 2016

Why residential eco-retrofits are failing in the UK

Retrofit projects to make homes more energy efficient are failing, especially when their design is dictated only by financial values, according to the Sustainable Traditional Buildings Alliance (STBA).

It is backing a “Responsible Retrofit” program incorporating health and heritage values and not just financial ones, in order to encourage a new attitude to giving old homes makeovers.

About 25 million British homes were built before 1990 and are in need of retrofits to bring them at least up to modern standards for energy efficiency. And it is generally considered more economic to retrofit the whole house at one go, as I argue in my book the Earthscan Expert Guide to Sustainable Home Refurbishment.

Yet there are many unintended consequences of existing retrofit programs, especially piecemeal ones. They may lead to unhealthy indoor environments, condensation and mould, fabric decay and other problems that affect occupants.

Often programs fail to meet their targets for reducing greenhouse gas emissions and energy use, and in some cases even result in an increase in both of these.

Part of the problem is that there is often not a whole house/building approach when retrofit measures are applied. But even when there is a whole building approach similar consequences can ensue. This is because there are different ideas of what is involved in a whole building retrofit. So what are these different ideas?

Table of different types of whole house eco-retrofits

Responsible retrofits

An earlier report from the STBA called Responsible Retrofit of Traditional Buildings found that most of the problems that occur with retrofits are at the interfaces between elements, technologies for building processes, or through the interactions between the measures taken, people, and the buildings they occupy, many of which are not fully understood.

This is not just a technical issue. Buildings, and people, behave differently and interact differently depending upon the social, economic and environmental context in which they find themselves.

All of these aspects need to be taken account of. The aim of retrofits should be to look for multiple wins: such as how to improve occupant health, the long-term condition of the building fabric, and make it easy to live in.

To achieve this they need to examine the way thermal energy is conducted through the building and where moisture travels and how it is managed, throughout the year-round weather conditions and patterns of occupancy. This is especially true where different materials meet each other.

When retrofits do fail, it’s not “just because we do not sufficiently understand traditional buildings, or have the wrong approach or the wrong standards or skills”, the STBA says.

“It is because we have an economic and political system which is driving misallocation of finance, land and housing, depletion of natural resources and pollution.”

This is really the reason why The Green Deal programme failed so abysmally, as I have shown before – and why the German equivalent has succeeded.

What values should be incorporated then? The STBA says we need to account for heritage, well-being, community, biodiversity and health – values which, for most people, give meaning to their world more than money does.

But the organisation is pessimistic this can happen without an ethical approach being taken to the allocation of finances for retrofitting. It believes that this demands that the economy and society should “have sustainability and culture at their heart”.

That is why it is issuing a call to rethink the whole approach. It argues:

“The process of retrofit, if carried out correctly, has great potential not only to repair the environment but also to improve people’s lives. Unless we start with the Whole House Advanced/Responsible Retrofit position our efforts will lead to unintended consequences and may be counterproductive even in the most narrowly measured terms.”

To this end the STBA has launched a Responsible Retrofit website, which is full of resources, one of the most useful of which is the Guidance Wheel.

This interactive tool represents over 50 measures that can be used in the refurbishing of the buildings and allows you to explore their interrelationships including the user’s interest, motivation and knowledge about the building:

SCreen grab of interactive tool for over 50 measures that can be used in the refurbishing of buildings

Since its launch, it has been taken up by several other organisations, including the Society for the Protection of Ancient Buildings and Construction Excellence Wales.

But until it is mainstreamed into the general drive to upgrade the performance of all older buildings, rather than just heritage ones, then piecemeal retrofitting, driven by economics, will prevail in the marketplace, and with it the risk of failure to deliver the desired outcomes.

David Thorpe is the author of: