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Brexit adds uncertainty to tough times for the social housing sector, but innovation shines a light at the end of the tunnel

Brexit adds uncertainty to tough times for the social housing sector, but innovation shines a light at the end of the tunnel

The RSL sector needs help to remain the largest market for microgen in the UK – manufacturers and utilities must provide the momentum government measures do not.

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2015 will be tough, but social housing still presents a big opportunity for renewable technologies

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.

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2014 market roundup – Low carbon heat is still on the runway, engines are hot, but it’s not taken off … yet

Whole house low carbon heating solutions have grown slowly over the last 4 years, with new installations likely to only reach ~23,000 units for 2014. Despite the domestic RHI (Renewable Heat Incentive) in April 2014, no significant boost of installations has been observed yet.

*2014 = forecast

Why is the low carbon heat market not growing more quickly?
Our research under the Microgen Insight Service this past year shows – despite much potential to grow sales – the low carbon heating market faces many barriers holistically across the customer segments and installer base.

Insight from Owner-occupiers
Our third annual on-line survey with homeowners showed that appeal and awareness of microgen has side stepped over the last three years. Customer awareness of the RHI is low (13%) and appeal is not significant (‘appealing’ to around one-in-three people) – our research shows that many homeowners find the RHI complex. Supporting this, the feedback from customers who participated in our focus groups really hit home the key messages from homeowners - “high upfront cost” remains the largest barrier, something that the RHI cannot directly overcome. Extensive marketing and education is needed from industry as a whole to seriously push the market forward.

Insight from Installers
Many in-depth interviews with small, medium and large, local and national installation companies showed how there is a skilled and confident installer base, but they are not ‘pushing’ microgen. Microgen is “a hard sell” – high upfront cost and low customer demand are the two key factors why more installers do not actively promote it. This supports the argument that extensive marketing and educating of end customers is needed from industry to unlock higher customer pull, and get installers interested.

Insight from Housing Developers
Research with small, medium and nationwide house builders revealed that the majority will not even give microgen a glance without legislation prescribing it. With the back step in regulations this year, the government is highly unlikely to achieve zero carbon homes target by 2016, and the requirement to use microgen to meet building regulations is at least another year away. A key opportunity to gain some traction with low-carbon heating (it’s easier to install in new build) pushed further down the line.

Insight from Registered Social Landlords (RSLs)
RSLs remain the biggest customer segment paving the way for microgeneration – but over the last 12 months there has been signs of their engagement with microgen wobbling, given the continuous difficulties to get funding. RSLs are typically pro-microgen as it provides a long term, secure investment with justifiable benefits to their tenants (warm homes, better health, lower fuel bills, etc.), but with changes to the benefits system and funding being pulled from under their feet, RSLs are struggling to take full advantage of the RHI so far.

What needs to happen for low carbon heat to take off from 2015?
We didn’t expect 2014 to be a big year for the RHI due to the long lead times for low carbon heating technologies, as well as the other obstacles outlined above. But we are optimistic that the domestic RHI will have a more positive impact in 2015 as marketing efforts increase.

There are a lot of opportunities for industry to adopt more innovative approaches to really push microgen forward. We do see installations growing more quickly if industry focuses on:
  •  Marketing to, and education of, end customers (e.g. to simplify the RHI)
  • Technology innovation (e.g. Hybrids, fuels cell m-CHP)
  •  New business models (e.g. ESCOs)
  •  New financial propositions (e.g. ‘Product for free’)
  • The connected home (e.g. integrating microgen with other smart appliances)
Our 2015 research programme is currently being drafted around these topics. To learn more about how the Microgen Insight Service can help your low-carbon offering succeed, contact Research Service Manager
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