Energy partnerships are the key to sustainability | Social housing series part 3

The UK’s carbon emission targets are among the most ambitious in the world, and as 23% of the UK’s carbon emissions come from housing, construction and development will have to be substantially and rapidly rethought.

To incentivise developers to consider their product’s lifetime carbon footprint and the carbon cost of building, there are a growing number of green financing options available to sustainable projects. These fundraising sources make low and zero-carbon energy housing economically viable in ways that it might not have been before and are particularly important in the affordable housing sector, where margins are slim and the end clients may be unwilling or unable to pay a premium for lower-impact energy. 

Sustainable energy supply must be built-in, cheap and convenient if it is to work at all. This requires market knowledge and practical expertise. The technology now exists to make it possible, and the funding is available to make it profitable.

Developing rules for future homebuilding

The Future Homes Standards and Future Buildings Standards consultations, conducted by the Government in 2019 and early 2021, together with the Grand Challenges Buildings Mission set out a new development landscape in which gas boilers and central heating are not allowed. Instead, clean energy such as solar (plus storage), district heat networks and ground, air or water-source heat pumps warm homes and offices. Future-proofing features such as provisions for cooling, electric vehicle (EV) charging hubs, and improved ventilation are encouraged with financial advantages and fewer planning restrictions.

Elsewhere, discussions have focused on the infrastructure needed to make last-mile deliveries more efficient, low and no-traffic areas and providing green spaces for mental health that will require further changes to building plans.

Several factors have to be included to make a development sufficiently sustainable to qualify for green funding. While insulation, low power electrical appliances and lower-carbon construction methods are now essential for obtaining planning permission, to be truly sustainable the development will also need to be powered by green energy.

District heating networks

Some affordable housing providers have had success with district heating networks and there are now more than 17,000 networks around the UK. Heat networks can be far more efficient than individual gas boilers, and give a greater degree of individual control than community heating schemes of the past.

The Heat Networks Delivery Unit was set up specifically to provide exploratory grants and advise local authorities on the complexities of local heat networks in the UK, and is worth noting where housing is developed under a local authority joint venture. In addition, the Heat Networks Investment Project provides capital funding to gap fund heat network projects in England & Wales.

District heating networks, unlike electricity or gas supply, are unregulated apart from metering and billing. Their increasing popularity has led to calls for Ofgem or another independent body to take on an oversight role, but no decision has yet been made.

In addition to heat, there must be electricity. To ensure that developments remain carbon neutral over an extended lifetime, the power supply must be sufficient to meet possible future cooling needs or electric car, bike and scooter charging as well as the current standard requirements. Ground mounted or rooftop solar combined with battery storage can make a substantial contribution.

Working together with clean energy developers

One way of accessing green energy is for housing providers to partner with clean energy developers to deliver generation assets which are, post construction, transferred to the housing provider or local authority. One example of this is the Warrington Borough Council and Gridserve development.

At the end of 2019, Gridserve completed a new solar farm and battery complex built for Warrington Council. The 34.7MWp facility with 30MWh of battery storage which was one of the first subsidy-free developments to be undertaken in the UK, provides power to the north-west town. The project is anticipated to return more than £150m in 30 years and comfortably meet the town’s carbon emission targets.

This project could provide a replicable model for local government and affordable housing providers, working in conjunction with clean energy developers, to copy wholesale when planning their sustainable builds.

However, depending on the nature and the mix of retain / sell in the development, solar rooftop combined within individual in-unit batteries may be more applicable. Consideration will need to be given to the basis that the scheme is developed on and how ownership is passed to the housing provider and/or individual buyers. 

Another area which lends itself well to collaboration is the provision of EV charging hubs. However, the specialist knowledge needed to deploy this relatively new technology - particularly when blended into a multi-technology scheme with solar and storage - combined with the capital investment required versus short-term revenue streams, can be prohibitive to including this within a development. This is where partnering with an EV charging hub developer can be beneficial. The affordable housing provider can provide its tenants with charge points at a very low risk while the developer brings specialist expertise to the table and is forecasting against increased longer-term usage. 

Collaborative solutions

Collaboration may be the solution to delivering green energy and infrastructure, overcoming the barriers of technology mix, delivery expertise, capex costs or access to funding, but picking the right developer is important. Reputation in the market and experience of delivering similar schemes should be considered as they will impact on the developer’s ability to deliver the scheme on time and within budget thus protecting the affordable housing provider’s reputation.

There are a number of frameworks that affordable housing providers can use to call down development partners, however we would always recommend engaging with an independent advisor, such as TLT.  It is important to discuss the parameters of the scheme to ensure its fit for purpose, and to choose the best partner to achieve the country’s climate targets and access the sustainability-focused finance that could make a wave of new, zero-carbon development possible.

In case you missed it, in part one of our social housing series we looked at the role of green finance in securing funding for retrofit projects. In part two, we explored the opportunities available through partnerships to help RPs meet the growing list of challenges facing the sector.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions