Energy Efficiency Standard for Social Housing: peer review

7 Costs and Savings

7.1 Commentary on upgrade costs

The costs currently applied across the retrofit examples are averages and are typically applied with limited variation across different house types. Scale factors are applicable on several energy improvement measures (although not necessarily significant) and landlords should be aware of this. Other factors will however also impact on local costs. These include, in particular, contract scale economics on large programmes of work, and geographical factors which impact strongly in the Highlands and Islands.

Table 9 below examines the individual cost bases used in the original retrofit examples and provides typical costs from social housing activity. SPONS (2013) 'Rates and Costs' has also been examined and applied where available and appropriate. Table 9 shows that the costs applied for individual energy efficiency measures are, in general, accurate averages of actual costs currently incurred across the social housing sector. The exception to agreement with the Consultation document's average costs is condensing gas boilers where the current cost base of £2,500 applied to the retrofit examples is, in the view of David Adamson, high. Recent examples of social landlords' heating improvement work which David Adamson has examined indicate boiler costs in the range £1,600-£1,900. ( SPONS (2013) indicates boiler rates as low as £630, although we have not encountered rates as low as this in the improvement work that we have examined). The costs for microgeneration systems are also in some cases open to question; this is addressed further down this page.

Table 9: Cost commentary summary review

ENERGY MEASURE	SCALE DEPENDENCY	RETROFIT EXAMPLE COST	TYPICAL [33] CURRENT COST	COMMENTS
1. Solid Wall Insulation	Yes	£5,500	£5,160	Typical current costs are based on external insulated render (in this example 60mm Phenolic Foam Board plus render, U-value 0.30). Additional scaffolding costs will apply ranging from £2,800 in a mid-terrace configuration to £5,600 in detached configurations. 3-storey height assumed.
2. Cavity Wall Insulation	Yes	£500	£318	Typical current costs are based on 70m 2 area assuming cavity is 70 - 100mm wide. Where a cherry picker hire is required an additional to this cost at £600 per week and based on contractor installing 200m 2 CWI per day. This will raise the average current cost to approx. £518. Where cavity wall insulation extract and refill is involved costs are generally 4x the cost of standard CWI fill.
3. Loft Insulation	Yes	£500	£450	Typical current costs assume 60m 2 coverage with no insulation or less than 50mm existing in loft.
4. Loft Insulation Top-up	Yes	£283	£416	Typical current costs assume 72m 2 coverage adding 150mm to existing 150mm coverage. Retrofit example costs make no reference to additional thickness.
5. Floor Insulation	Yes	£1,200	(i)£600 (ii)£1,200	(i) 50m 2 - 150mm mineral wool hung in net between floor joists (U-value 0.30). (ii) 50m 2 - 150mm solid insulated board fitted between floor joists (U-value 0.15).
6. Heating Controls	Partial	£300	Unspecified	Cannot specify current costs as the nature of the heating controls remains unspecified within the retrofit examples.
7. Condensing Boiler	No	£2,500	£1,600 - £1,900	Typical current costs are based on recent RSL experience in Govan and Clyde Valley with price variations reflecting boiler quality. SPONS 2013 total rate costs for a Potterton Performa or equivalent gas/oil boiler are as low as £630. Central heating distribution costs will typically add £1,280.
8. Double/ Secondary Glazing	Yes	£3,700 (£450 per window)	£450 - £550 per window	Typical current costs allow for UPVC frame with standard low E 24mm double glazing. Unit costs can vary substantially by contract size.
9. Solid Wall Internal Insulation	Yes	No Retrofit Example Cost Provided	£3,800	50m 2. 42.5mm insulated board + 12.5mm plasterboard (u-value 0.46).
10. Additional Measures i. Biomass ii. SHW iii. PV iv. GSHP v. ASHP vi. Micro- CHP vii. Wind Turbine	No	£9,000 £4,000 £8,000 £10,000 £8,400 £4,500 £8,000	SEE NOTES ABOVE	Costs are highly dependent on system size and specification and whether distribution systems are included for heat pumps and boilers. See comments above.
11. CLFs	Yes	£15 - 3 rooms £18 - 4 rooms	£12 - 3 rooms £16 - 4 rooms	Current costs are reducing but retrofit example costs remain typical.

The costs in table 9 can also be applied to the range of harder-to-treat retrofit examples (see Section 5), where the cost of many improvement options are similar to those applied across the general housing stock in. One of the most significant issues in the harder-to-treat sector is solid wall construction, where improvement costs will increase significantly through the need to over-clad as opposed to cavity fill. Table 10 shows costs for more ambitious and complicated communal improvements such as district heating and over cladding of large multi-storey flats.

Table 10: cost Commentary summary review system built housing

Stock type	Retrofit details	Net cost	Cost per unit
9-storey block, 204 dwellings	Installation of communal gas heating system with new energy centre (central plant room) installed within existing structure	£825,000	£4,000
Two 15-storey blocks, 172 dwellings	Installation of communal gas heating system and construction of new energy centre	£2.1m	£12,200
As above	External cladding and associated structural works	£4.1m	£23,800

With regard to the microgeneration measures, it is more difficult to validate these costs as they are more subject to changes in the short to medium term: e.g. PV costs have dropped radically in recent years since the FIT scheme was introduced; the RHI may or may not have a similar effect on some of the heat-generating technologies. Measures also come in many different sizes and some will have greater associated costs than others, which will inevitably affect overall costs. Without specifications, it is hard to establish the accuracy of these costs. The following observations can be made, however:

• If the biomass system refers to a biomass boiler, the quoted cost would appear lower than average. In any case, however, it seems more likely that social landlords would consider biomass primarily in terms of communal heating systems, rather than individual boilers or stoves.
• PV costs continue to fall. A 4kW system may be sourced for less than £8,000 at present, however a typical social housing PV installation is more likely to be 2.5-3kW, which will be cheaper again: £5-6,000 is possible. Costs are likely to continue to fall for this technology.
• The GSHP cost seems low; costs are more likely to range between £12-15,000.
• Some social landlords have installed ASHPs for less than the quoted figure.
• Micro- CHP currently has very limited take-up; its relevance to meeting future standards is therefore uncertain.
• It is unclear what size of wind turbine this cost refers to; very small-scale building-mounted turbines should cost less than this but these are rarely specified in social housing. More typical domestic turbines ( e.g. 6kW) may cost closer to £25-30,000 per unit. However, installation of small-scale wind turbines by social landlords is currently limited; if wind is under consideration it seems to be more common for the focus to turn to larger-scale turbines - which are likely to fall outside the remit of the standard.
• For all renewable energy systems, some level of specification should be included in the final standard to put the suggested costs in context. In particular 'micro wind' should be defined, as definitions vary and wind turbines can vary considerably in size and power and still be deemed small.

Communal systems have not been included in the retrofit examples, however brief discussion of these is useful to provide a comparator, as larger-scale retrofit projects are often preferred by landlords for a variety of reasons. Costs in table 10, taken from 2012 retrofit projects of non-traditional social housing blocks in Edinburgh, illustrate the potential financial outlay that may be expected. These are specific examples that are useful indicators for social landlords considering similar large-scale improvements. They also serve to highlight the importance that plant room location has in determining costs; if it can be absorbed into the existing structure this is likely to save significant amounts and result in a more cost-effective system.

7.2 Costs and savings

Energy and CO ₂ savings for the different property types are provided within the individual retrofit examples. At the Scottish Government's request, these predicted savings were aggregated across the Scottish social housing stock, to provide an indicator of the potential impact of complying with the EESSH (using the SHQS as a baseline).

As with any aggregated projections, these figures come with a number of caveats. To extrapolate the results of a small number of retrofit examples to a larger number of dwellings across the stock (such as the 645,000 homes in the Scottish social housing sector) relies on several assumptions, and for a full stock model analysis, significantly more than 35 example buildings should be used. Therefore, the aggregated results of this study are designed to be indicative estimates of the potential CO ₂ reductions, energy savings and refurbishment costs that might be expected for the Scottish social housing sector to meet the EESSH.

7.3 Aggregated figures and assumptions

All savings are shown in the table 11, and refer to the measures required to meet the EESSH that are additional to meeting the SHQS; therefore, for those retrofit examples that already reach the EESSH by virtue of reaching the SHQS, there are no additional measures (or costs). It should be noted that, for thirteen property types (12 of which are electric), applying the original list of 'further' measures by 2020 was not sufficient for them to meet the proposed ratings. If these were not retrofitted to the same standard as the other example properties, this would reduce the CO ₂ savings and capital costs.

Subject to the described approximations, the results suggest that the additional capital cost of reaching the EESSH (from an SHQS baseline) would be in the region of £2.2bn across the stock. This cost is split between the chosen measures as follows:

• Condensing boilers (43% of total cost)
• Double/secondary glazing (24%)
• Heating controls (5%)
• Storage heaters (4%)
• Loft insulation top up (3%)
• Floor insulation (1%)
• Compact fluorescent lighting (less than 0.5%).
• External wall insulation (19.5%)

In terms of impact, the £2.2bn cost would save a total 4,387GWh/yr of primary energy (see note below concerning primary energy), equivalent to 839,263 tonnes of CO2 per year. Refurbishing to this level thus costs £2.66 per kgCO2 annually saved..

These figures are subject to the following assumptions and caveats:

• Savings for the retrofit example dwellings refer to gas or electric-heated versions. The savings for electric-heated dwellings have been approximated for all non-gas heated dwellings; this is a limitation of the size of the sample used. It is assumed, based on Scottish averages, that 67% of homes have mains gas heating, ^[34] but these homes are not evenly distributed. This ratio is used for each typology when weighting the savings;
• Disaggregation of the Scottish social housing stock is restricted to the retrofit examples used. The effects of orientation, wall/floor/glazing/roof type, micro-climate etc. are not accounted for;
• All savings are based on SAP modelling exercises of the retrofit examples and should be treated as such;
• The savings use SHQS as a baseline, so all calculations relate to the effect of meeting the enhanced EESSH (where achieved)
• Not all retrofit examples were actually retrofitted in this aggregation exercise:
  • 57 examples were retrofitted (applying the 2020 'further' measures):
    • 53 met the EESSH
    • 4 will not reach the proposed ratings (of these, 1 would, if the 'advanced' measures were applied, but three would still not reach the proposed ratings )
  • 9 examples were not refurbished:
    • None already met the proposed ratings by virtue of having met the SHQS
    • For all 9 examples, no 2020 'further' measures where suitable. However, eight would meet the proposed ratings if the 'advanced' measures were applied
• All energy savings (kWh) refer to primary energy, in accordance with the headline figures given with current Energy Performance Certificates ( EPCs). This is, in effect, the energy used at production ( i.e. power plant) level, not that used at secondary ( i.e. householder) level. Primary energy consumption figures will be higher as they include all the distribution and production losses of energy, as well as that consumed by end users. These figures should therefore not be confused with domestic consumption figures that households and landlords might be more familiar with, from billing information. For example, in accordance with SAP/ RdSAP guidance, 1kWh of 'secondary' electrical consumption is equivalent to 2.9kWh of 'primary' energy consumption. Likewise, 1kWh of secondary gas consumption is equivalent to 1.02 kWh of primary gas consumption. Standard CO ₂ intensity factors (kgCO ₂/kWh) are usually applied to secondary energy values.

7.4. Validation

In order to cross-reference these projections, the above figures were compared to a recently-published report from WWF Scotland ^[35] . This report sought to assess the resources needed to deliver a 42% saving across the entire Scottish housing stock, using a consultant's (Verco) in-house modelling tool, capital costs from the Energy Saving Trust and CO ₂ savings derived from SAP 2005. A number of other assumptions were different from our analysis, for instance a greater focus on lower-cost measures, most of which are already delivered in social housing through the SHQS. The WWF study established costs ranging from £6.3-9.4bn for the entire stock. Based on a pro-rata share of 27% for social housing, this would give a corresponding range of £1.7-2.5bn (in comparison to the £2.2bn calculated for this Peer Review).

7.5 Recommended approach for harder-to-treat stock

Based on the phasing of measures in the consultations, some stock types ( e.g. multi-storey flats, external deck access flats) did not originally meet the proposed ratings through 'further' measures. To reach the proposed ratings, 'advanced' measures such as solid wall insulation and double glazing are required. As part of the validation exercise, measures such as solid wall insulation, were Modelled. Together with hard-to-treat cavity wall insulation, solid wall insulation in particular is likely to be specified by social landlords in advance of 2020: it is an established technique (particularly externally for multi blocks, which also tend to be in sole or majority ownership of the landlord), there will be funding available through ECO, such housing is likely to be attractive to energy companies to fund and these homes need to be affordable to inhabit. (Some traditional tenements will also not meet the proposed ratings , however these are likely to require different upgrade measures and have more mixed-tenure and consent issues.) Furthermore, some internal wall insulation measures, favoured by Historic Scotland in terms of breathability are below the specified U-value needed to secure ECO.

As part of the validation process, inclusion of external solid wall insulation was noted, as a means by which the vast bulk of these property types can reach the proposed ratings. However without subsidy support, these measures may not always be cost-effective. In this regard ECO funding should be available for most solid wall insulation systems. There are however uncertainties over the price per tonne of CO ₂ saved, and whether social landlords will have to meet some of the costs. If funding wasn't available at an appropriate level to facilitate improvements, some property types will be unable to achieve the proposed ratings in EESSH. If issues of affordability were to arise it might be necessary to treat these buildings as a single group contributing towards meeting the standard and efforts to reduce the sectors overall carbon emissions.

It is argued that using the EESSH should be designed to drive forward the retrofit of system-built and high-rise properties drawing down on ECO funding. Cladding these poorly performing properties with EWI will not only impact positively on achieving CO ₂ targets but also help to address concentrations of fuel poverty. It should be noted that the Housing (Scotland) Act 2001 sets a statutory duty on the Scottish Government to eradicate fuel poverty in Scotland, as far as is reasonably practicable by November 2016. In this context the Scottish Government needs to demonstrate that tackling these properties is not reasonably practical either on cost or technical grounds. What is practical will vary between buildings: therefore it is recommended that as part of the EESSH, landlords should demonstrate what practical steps have been taken to minimise tenants' fuel costs, including a full investigation of external wall insulation options.

In terms of what is practical there is strong evidence from the former Community Energy Saving Programme ( CESP) that energy companies will target properties a) with potentially high CO ₂ savings from EWI and b) where they can work with social landlords to manage improvements rather than tackling multiple private households. If projects were deprioritised there is no guarantee that today's level of funding and low costs of borrowing will be available in the future.

Table 11 Aggregated Cost of Retrofitting from SHQS to EESSH

Retrofit Examples	Primary Energy savings (MWh/yr)			Carbon Savings (tCO2/yr)			Total no. in typology	Cost of retrofit (£)			Cost of retrofitting typology (£M)	Refurbished? (Y/N)		Was EESSH met by 2020? (Y/N)
	Gas	Other	Weighted	Gas	Other	Weighted		Gas	Other	Weighted		Gas	Other	Gas	Other
A1 - Pre 1919 solid wall flat - GF	7.7	0.0	5.1	1.5	0.0	1.0	14,000	£2,800	£0	£1,848	£26 M	Y	N	Y	Y
A2 - Pre 1919 solid wall flat - MF	6.2	0.0	4.1	1.3	0.0	0.8	13,000	£2,800	£0	£1,848	£24 M	Y	N	N	N
A3 - Pre 1919 solid wall flat - TF	7.9	6.3	7.4	1.5	1.1	1.4	8,000	£3,083	£3,983	£3,389	£27 M	Y	Y	Y	Y
B4 - Interwar cavity flat	7.3	1.4	5.3	1.4	0.3	1.0	25,000	£6,500	£1,050	£4,647	£116 M	Y	Y	Y	Y
B5 - Interwar cavity house - mid-terr	8.6	0.0	5.7	1.7	0.0	1.1	8,000	£3,083	£0	£2,035	£16 M	Y	N	Y	Y
B6 - Interwar house - semi-detached	10.4	0.0	6.9	2.0	0.0	1.3	28,000	£3,083	£0	£2,035	£57 M	Y	N	Y	N
C7 - Four-in-a-block - lower	9.4	3.7	7.5	1.8	0.7	1.4	58,000	£2,800	£1,200	£2,256	£131 M	Y	Y	Y	Y
C8 - Four-in-a-block - upper	10.0	2.8	7.5	1.9	0.5	1.4	38,000	£3,083	£1,050	£2,392	£91 M	Y	Y	Y	Y
D9 - Post-war flat 1950-64	5.8	7.4	6.4	1.1	1.3	1.2	58,000	£2,800	£4,750	£3,463	£201 M	Y	Y	Y	Y
D10 - Post-war 1950-64 - mid-terr	8.1	0.0	5.4	1.5	0.0	1.0	24,000	£3,083	£0	£2,035	£49 M	Y	N	Y	N
D11 - Post-war 1950-64 - semi-detached	11.2	0.0	7.4	2.2	0.0	1.4	55,000	£3,083	£0	£2,035	£112 M	Y	N	Y	N
E12 - 1965-83 flat	6.0	5.0	5.7	1.1	0.8	1.0	45,000	£6,500	£4,750	£5,905	£266 M	Y	Y	Y	Y
E13 - 1965-83 - mid-terr	12.7	1.4	8.9	2.5	0.3	1.7	38,000	£6,783	£283	£4,573	£174 M	Y	Y	Y	N
E14 - 1965-83 - semi-detached	11.4	0.0	7.6	2.3	0.0	1.5	43,000	£3,083	£0	£2,035	£87 M	Y	N	Y	N
F15 - 1984-91 flat*	5.3	1.2	3.9	1.0	0.2	0.8	14,000	£6,515	£1,065	£4,662	£65 M	Y	Y	Y	Y
F16 - 1984-91 - mid-terr**	10.2	0.0	6.7	2.0	0.0	1.3	4,000	£6,798	£0	£4,487	£18 M	Y	N	Y	N
F17 - 1984-91 - semi-detached**	11.6	1.8	8.3	2.2	0.4	1.6	5,000	£6,798	£3,700	£5,745	£29 M	Y	Y	Y	N
G18 - 1992-98 flat	6.2	2.3	4.9	1.2	0.4	0.9	13,000	£6,515	£4,765	£5,920	£77 M	Y	Y	Y	N
G19 - 1992-98 - mid-terr	5.9	3.1	5.0	1.1	0.6	1.0	5,000	£3,098	£4,750	£3,660	£18 M	Y	Y	Y	Y
G20 - 1992-98 - semi-detached	6.8	3.5	5.7	1.3	0.6	1.1	3,000	£3,098	£4,750	£3,660	£11 M	Y	Y	Y	Y
H21 - 1999-present flat	1.5	1.1	1.4	0.3	0.2	0.2	17,000	£2,815	£1,065	£2,220	£38 M	Y	Y	Y	Y
H22 - 1999-present - mid-terr	2.7	1.8	2.4	0.6	0.4	0.5	5,000	£3,101	£1,351	£2,506	£13 M	Y	Y	Y	Y
H23 - 1999-2007 - semi-detached	2.6	1.6	2.2	0.4	0.3	0.4	6,000	£3,101	£1,351	£2,506	£15 M	Y	Y	Y	Y
HTT3&4 - High rise	4.7	9.8	6.4	0.9	1.8	1.2	36,000	£5,500	£5,500	£5,500	£198 M	Y	Y	Y	Y
HTT5&6- Hi rise deck access flat***	12.0	11.6	11.9	2.4	2.1	2.2	12,000	£5,500	£5,500	£5,500	£66 M	Y	Y	Y	Y
HTT7&8 - Concrete Flats***	11.6	8.6	10.5	2.3	1.6	2.0	16,000	£8,457	£5,642	£7,499	£120 M	Y	Y	Y	N
HTT11 - Concrete Semi	8.5	20.1	12.5	1.7	3.9	2.4	7,000	£5,783	£5,500	£5,687	£40 M	Y	Y	Y	Y
HTT9 - Timber frame semi - pre-1950	17.1	12.7	15.6	3.3	2.2	2.9	3,000	£8,583	£5,500	£7,535	£23 M	Y	Y	Y	Y
HTT10 - Timber frame semi - post-1950	11.1	0.0	7.3	2.1	0.0	1.4	17,000	£3,083	£0	£2,035	£35 M	Y	N	Y	N
HTT12 - Steel frame semi	7.9	20.6	12.2	1.6	3.7	2.3	6,000	£5,783	£5,500	£5,687	£34 M	Y	y	Y	Y
Other	8.3	4.3	6.9	1.6	0.8	1.3	21,000	£3,382	£1,328	£2,684	£56 M
TOTAL			4,387,233			839,263	645,000				£2232 M

*Energy and CO ₂ savings calculated relative to 'Baseline' where this was already in line with ' SHQS 2015' requirements ( i.e. no measures required prior to EESSH improvements)
**Gas energy and CO ₂ savings calculated relative to 'Baseline' where this was already in line with ' SHQS 2015' requirements ( i.e. no measures required prior to EESSH improvements)
*** Values reported represent the average of multiple example dwellings described by this typology