2014 was a tough year for RSLs and 2015 looks set to be too. According to our latest research, carried out via in-depth interviews as part of Delta-ee’s Microgen Insight Service, which shows that although UK councils and not-for-profit housing associations’ level of awareness and appeal for low-carbon technologies (i.e. ASHP, GSHP) is increasing, this is not always translating into more sales.
The annual opportunity is far greater than represented by the current market lull, but the barriers – which are growing in number and size – must be addressed by the supply chain.
In this blog, I provide a few suggestions as to how suppliers of renewable technologies can maintain a strong market position in the current lull.
What can key players in the supply chain do to get the market out of its current lull?
- Lobbying for upfront incentives, given that RSLs are more comfortable with them and historically prefer them. It allows RSLs to budget and understand opportunities better.
- Trying to make the RHI (domestic and commercial) work, by providing support throughout the application process.
- Reducing upfront cost of renewable technologies – although easier said than done – would go a long way in driving uptake.
- Offering maintenance packages could help address the growing concern around the lack of expertise being available to maintain renewable systems
Here are some reasons as to why the microgen market has experienced a slow 2014.
1. One of the key issues has been around incentives for installation of renewable technologies. The problems here are twofold: the first being the lack of upfront incentives. RSLs are more familiar with upfront incentives and find them easier to use. Furthermore, they help reduce the upfront cost, making the business case for installation of renewable technologies more attractive.
The second problem is around the complex nature and protracted journey of the domestic RHI, and its level of uncertainty beyond 2016.
2. Many RSLs have decided to focus on exploiting ECO measures, and improving the thermal property of their housing stock (i.e. wall and loft insulation, window glazing). In addition, with more innovative, lower cost non-microgen products such as infrared heating panels starting to appear on RSLs’ radar, the competition for renewable technologies is set to increase further.
3. There is a level of uncertainty around policy, and more specifically around the “right to buy” scheme. After last month’s general election, the legislation is to be updated to include housing association homes (as well as council housing), allowing tenants who have lived in housing association properties for three years, to buy them at a discount price.
It is one of RSLs’ main concerns given that it will have a direct impact on the amount of funding they can secure and the interest rates at which they can borrow money, directly as a result of having fewer assets.
Although 2014 proved a bit of a slow year for RSLs, the sector still presents a sizeable opportunity for renewable technology providers. It will require a big push from all players in the value chain – given that renewable products could become even more expensive, following a recent announcement from the European Court of Justice with regards VAT levels increasing to 20% – but together they can overcome the growing number of barriers that lie ahead.
To find out more about this research or the Microgen Insight Service, contact me or Steven Ashurst.