Can Government’s ambitious retrofit target be achieved?

A key element of the Government’s Climate Action Plan will see 500,000 homes around the country retrofitted to bring them up to B2 energy rating. This is a tall order by any standards. In many cases, a retrofit will involve wall insulation, roof insulation, floor insulation, window upgrades, new ventilation systems and the installation of an air-source heat pump. Doing that to half a million houses by 2030 is ambitious to say the least.

“It is an ambitious target but that’s great,” says KPMG corporate finance director Tomás Murray. “The Government’s retrofit taskforce has made a good start. They looked at what worked and what hasn’t worked in other markets and have identified the barriers to be overcome. Part of the Government plan is to group homes together as much as possible. That will work with local authority homes in particular. They own the buildings and are paying for the retrofit. That’s a clever thing to do.”

SSE Airtricity director of energy services Stuart Hobbs echoes those sentiments in relation to the scale of the ambition and the progress so far. "It's a great north star for businesses like ourselves if we are to build new business models around retrofitting," he says.

Significant outlay

Among those key challenges is funding. "Grant schemes tend to be cyclical and seasonal and run from March to October," he notes. "Business organisations don't think like that. They need an always-on grant programme that fits in with normal business operations. If they are going to invest in plant and machinery and so on they need some certainty that support schemes will be always on."

And then there is the outlay for homeowners, which is significant. "A retrofit can cost anything from €20,000 to €70,000 depending on the size of the home and the complexity of the project," Hobbs points out. "The grant is only about 25 to 30 per cent of that. Key thing will be affordability of funding. We have partnered with An Post to offer a 4.9 per cent headline rate of interest. We have also seen the credit unions and AIB coming in with special funding offers as well."

Energia has also seen strong interest in its offer, according to Andy Meagher, Energia customer solutions director. "Households across Ireland are ready and willing to make energy improvements, as exemplified by the success to date of the CU Greener Homes Scheme, which Energia launched earlier this year with the Irish League of Credit Unions and House2Home," he says.

“The scheme is a complete ‘one-stop shop’ solution for households looking to undertake home energy upgrades, including installation of heat pumps, solar installation, insulation and deep retrofits,” Meagher adds.

“While there is clear demand, research conducted in advance of launch showed that close to two-thirds of people are unaware of the significant grants available to them. This illustrates the need for the Government to build public awareness and focus on accessibility so that households can avail of the right solution for them.”

Affordability is key, as international experience shows. Murray points out that the relatively successful German scheme provided funding at interest rates of between 1 per cent and 4 per cent. In the United Kingdom, where the scheme was the subject of a parliamentary inquiry due to its very poor outcome, the rates were more than double that at between 8 per cent and 10 per cent. Murray also notes that the tenor or term of the loan is important – if it is too short payments will be too costly and the energy cost savings won’t come near to meeting them.

Even with affordable funding, there remains the significant matter of finding the people to carry out the retrofits. “The Government needs to work on ensuring that there are skilled workers to meet the demand – with an estimated 27,000 construction industry workers needed for the retrofitting programme, something which Minister for the Environment and Climate Eamon Ryan has himself admitted is a huge challenge,” says Meagher.

“Therefore, to ensure the best success of the scheme, investment needs to be put into promoting construction work and ensuring that when households, local authorities and housing associations decide to avail of the supports in the scheme, the workers are there for them.”

‘Fragmented’ market

Murray describes the market for retrofitting contractors as “quite fragmented”. “We carried out an analysis of registered contractors on the SEAI website,” he explains. “There are about 1,500 of them and we did some sampling which showed that approximately two-thirds of them are very small businesses with just two or three employees. For this to be delivered at scale we need some of the bigger construction players to come into the market.”

“We have been flagging this as a concern,” Hobbs adds. “How are we going to resource what will be a significant national programme at the same time as 30,000 homes are being built annually under the Housing for All plan? Can we produce and access the skills required? However, there is alignment between Government departments on delivering the skills through apprenticeships, retraining schemes under just transition programmes and so on. Organisations like ourselves need to invest in training as well. It’s a challenge we must meet together if we are to meet the ambitions of Government. We must also look at bringing in skills from overseas.”

He calls for a national collaborative effort to overcome the twin barriers of funding and resourcing. “What the Government is doing is very positive, but we also need to see the deployment of national resources through the Namas of this world and the Irish Strategic Investment Fund. I can’t think of a better place to invest the State’s money. It would stimulate employment, contribute to our emissions reductions targets and offset potential penalties for missing them.”

Meagher is optimistic for the success of the programme. “The Government itself has acknowledged that this is ‘one of the most challenging infrastructure projects in the history of the State’,” he says. “However, with the support of the public it can be achieved.”