By John Sinfield; Managing Director (Knauf Insulation Northern Europe)
Life, and the first Star Wars prequel, teaches us ‘there is always a bigger fish’. I suspect that the fish must at some point have an upper limit, but it’s a good place to start to share some of our experiences over the last twelve months. Experiences that I suspect have been mirrored across many boardrooms in the energy efficiency industry.
We are a commercial organisation and as such we require our sales staff to offer 12 months forward sales projections at year-end. Then begins the dance. They offer conservative ones – an insurance policy – I tease out the discounting. I then have to go to my CEO and offer an aggregated projection where…. well clearly I wouldn’t dream of discounting!
Now of course my CEO has similar conversations with my equivalent managing directors around the world, aggregates the numbers we give and presents those figures to the group level board. In truth the fish don’t get much bigger than that but you get the idea.
This year, and indeed last year, retrofit and specifically Green Deal and ECO have caused some very difficult conversations wherever you sit on the food chain. Early on we had a lot of shrugging of shoulders and at the end, a lot of shaking of heads.
Now I’m sure the Minister, or indeed shadow Minister, don’t see their raison d’etre as making my life easier or enriching the insulation industry. However let’s be clear, higher energy efficiency sales mean:
- More people will be protected against rising fuel bills – permanently rather than a one-off £50 rebate
- More savings will free up hard-pressed household finances, which will be recycled into the UK economy and mean fewer people will face the tough choice between heating and eating
- The early winter deaths figure will start to go down rather than up 29% as it did last time
- Hospital admissions will decrease and more people will be able to leave hospital sooner
- And of course it means we will finally be tackling Europe’s draughtiest housing stock in a meaningful way.
That only touches on the social angle, economically it means:
- More jobs, particularly local jobs, will be created
- A significant reduction in the demand for energy from housing will mean less exposure to, or at least hedging against, the high cost of building future energy generation capacity
- And of course it means the money will be kept in the UK economy rather than exported to foreign gas producing lands
- Even better, it means the Green Deal finance process will be up and running and we will start to see pension fund money invested in improving our leaky housing stock.
Then of course you have the primary policy ambition Green Deal was designed to deliver: carbon reduction and climate change mitigation. A subject that’s taken a bashing recently but one that I hope will be pushing its way back up the priority list, given recent scientific output and freak weather events.
But going back to the sales conversation with my CEO, this is only half the story. The next part of the dance is to discuss future capital investment. Here, I am once again competing against my German, French, US and myriad other counterparts. Suffice to say my recent discussions included: solid wall insulation and hard to treat cavity investment, as well as engaging with key players in area-based programmes.
Well, those proposals have certainly taken a hit, particularly after George Osborne announced in his Autumn Statement that the energy companies’ target for insulating solid wall homes will be slashed by two thirds – meaning they are now only required to tackle 100,000 homes by 2017. What’s more, those most likely to lose out in these changes will be the community based solid wall insulation programmes that are primarily delivered through social housing and local authority providers – a heavy blow for communities where local jobs will now be under threat.
However, I don’t want this to come over as though ‘all is down to Government.’ Despite recent events I’m still making those pitches for investment. We, as an industry, need to get better at several things. Firstly, we need to communicate the benefits of our products to householders more effectively. While we need subsidies to address householders discounting or even ignoring the future benefits retrofit can bring, in the past we’ve relied too heavily on the supplier obligation to persuade householders to accept those benefits. For this reason, Knauf Insulation has stepped out of its role as a manufacturer and into uncharted territory, by developing the HeatBleed messaging and software. Have a click below to find out your HeatBleed.
The messaging, built around the latest behavioural insights research and the five-second calculator, is proving very successful as an engagement tool with both householders and our customers.
The industry also needs to get better at ensuring every possible measure for creating savings is available to the householder and to make sure those savings are closer to the modeled predictions. We’ve invested in significant research with Leeds Metropolitan University and there is one area in particular where I hope we will see a return on that investment this year – watch this space. We are also looking at further investment programmes around real performance – but no more on that now.
To wrap up, I hope the message is coming through loud and clear: certainty and consistency are the keys! Get something that you think works and then be willing to put financial AND political capital behind it – that means bringing in genuine demand drivers, such as linking stamp duty to energy efficiency.