Much work has been done on developing low carbon technologies to help homes across the UK lower their emissions. These low carbon products are often out of reach financially for many homeowners. A pioneering new consortium is putting barriers to affordable retrofit in its sights.

As part of the Government’s Green Home Finance Accelerator (GHFA) funded through the Net Zero Innovation Portfolio (NZIP), Energy Systems Catapult, in partnership with digital mortgage lender Perenna, and Home Energy Management System (HEMS) provider, Heatio, will support the development of a long-term, fixed rate green mortgage specifically aimed at incentivising domestic home retrofits.

The Challenge

23% of the UK’s carbon emissions stem from housing alone. Despite years of innovative testing and trialling of low carbon heating solutions, the cost of the products remains high. Owing to this, many homeowners are unable to overcome the financial hurdle of retrofitting their properties, resulting in homes that are inefficient. This is compounded by the lack of solutions to fund improvements, with the Green Finance Institute (GFI) acknowledging that current finance products do not encourage homeowners and landlords to invest in property improvements.

Energy Systems Catapult research amongst participants in their Living Lab found that of those considering insulation measures, 16% abandoned their plans, with 34% of those participants reporting that this was due to the lack of financial savings available and low levels of confidence that the solution would reduce their energy costs by enough to cover the costs of the insulation.

With the UK’s mortgage market currently worth an estimated £316 billion, bringing new green finance products to an established market that meet regulatory approval, satisfy consumer demand, and drive retrofit measures in homes, is not a simple task. Perenna’s green mortgage offering is set to disrupt the market and incentivise low carbon retrofits.

The Solution

The Department for Energy Security and Net Zero has awarded funding to a Perenna-led consortium to create consumer-friendly green finance products. The funding has been awarded as part of the GHFA. The GHFA is part of the UK Government’s Net Zero Innovation Portfolio (NZIP). The consortium is testing consumer appetite for the provision of a 20–30-year fixed rate green mortgage that rewards homeowners for retrofitting their home with low carbon technologies and upgrading the fabric of their home.

The project will bring together two key strands of work: consumer research, and modelling and data collection. With experience in developing consumer-friendly products such as Heat-as-a-Service (HaaS) and a dedicated consumer insights team, Energy Systems Catapult will be responsible for project management and will take the lead in building understanding of customer requirements. The Catapult will also provide retrofit modelling of different housing archetypes relevant to the proposition using their Home Energy Dynamics tool to support product refinement and strategy.

Perenna’s customers will benefit from the insights provided by the gathering of real-life home data instead of a traditional survey approach. Heatio will install their Home Energy Management System (HEMS) which will combine smart meter data, artificial Intelligence, discreet sensors, machine learning, and intelligent business modelling. This will give an accurate and clear energy profile for customers’ homes and a roadmap of improvements and technology recommendations. Once installed the HEMS will validate the energy reductions in the home and connect renewable technologies for demand flexibility services.

The project aims to measure the baseline thermal performance of a property pre and post retrofit, to determine that there has been a reduction in primary energy demand and thus providing investors with evidence that their financial support is helping to lower carbon emissions.

Arjan Verbeek, CEO at Perenna, said: “We are excited to start working on this project with the great teams at Heatio and the Catapult. Perenna’s ambition is to use our unique funding model to help homeowners across the country realise the benefits of retrofitting. Achieving this aim requires collaboration, and the Green Home Finance Accelerator project gives us an opportunity to work with industry experts to develop a truly innovative green mortgage proposition.”

Simon Roberts, MD at Heatio said “We are absolutely delighted to have the opportunity to work alongside Perenna and Energy Systems Catapult on such an exciting programme on the UK’s energy transition. This project will allow us to utilise Heatio technology to drive consumer confidence and decision making with a data driven approach. We are thrilled to be able to pilot our Home Energy Management System alongside such a fantastic green finance innovation”.