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The falling costs of building zero-carbon homes

The government’s stated aim of building all homes to its Zero Carbon Standard from 2016 onwards is still some way off. But a recent report from the Zero Carbon Hub has revealed that the added costs of building to the standards have halved in the past two years. So why the cost has come down and what more needs to be done to implement the standard across the industry?

Heated debate around the cost of living has dominated politicians’ debates over energy in recent months.

The government is simultaneously trying to secure our future energy supply with new nuclear schemes such as Hinkley Point C, while also working to reduce people’s bills through the Green Deal and the Energy Companies Obligation.

This is high on the agenda because the cost of energy is rising and is expected to keep doing so for the foreseeable future.

Part of this conversation is the government’s Zero Carbon Standard, a target for all new homes by 2016. The aim is for all new-build residential properties to mitigate the carbon emissions they produce on site from regulated energy used.

Zero carbon analysis

Since the policy was announced, there has been concern over the additional cost associated with building to the standard. But this cost has been falling and is continuing to fall, as a recent analysis by the Zero Carbon Hub shows.

The report, Cost Analysis: Meeting the Zero Carbon Standard, shows that the additional cost of building zero-carbon homes has roughly halved since the Hub’s initial analysis in 2011.

“The more you get into advanced strategies, the greater the cost. There’s a choice for housebuilders about how they want to do it and how they want to please their customers”

Nicola O’Connor, Zero Carbon Hub

For a detached house, the additional cost is now in the range of £8,500 to £9,500, while for a semi-detached house it is £4,500 to £5,100.

A mid-terraced house built to the standard will cost £4,100 to £4,600 more and a low-rise apartment will have £2,300 to £2,500 of additional cost attached.

The cost varies depending on what strategy a housebuilder employs, with the aforementioned cost ranges based on what Zero Carbon Hub calls ‘Scenario 1’: a combination of fabric energy-efficiency, an efficient gas boiler, solar photovoltaic panels and Allowable Solutions.

Other combinations of different heating technologies and PV could further reduce energy at extra cost, but ZCH considers Scenario 1 to be the most cost-effective way of achieving the standard.

Zero Carbon Hub projects director Nicola O’Connor says: “Basically, the more you get into advanced strategies, the greater the cost. There’s a choice for housebuilders about how they want to do it and how they want to please their customers.”

Why are costs falling?

Costs are falling for a number of reasons, but three in particular stand out: the falling cost of solar PV panels and glazing; innovation by the industry to allow thermal airtightness to be delivered more cost-effectively; and the fact that the definition of zero-carbon itself has changed.

“We now have a more rational definition of zero-carbon,” says Willmott Dixon Energy Services technical director David Adams. “It’s still a stretch, but it’s now in a sensible space.”

The definition has evolved since it was introduced and now incorporates offsite mitigation through Allowable Solutions and excludes so-called ‘unregulated’ emissions from appliances such as computers and televisions, as these are deemed to be out of housebuilders’ control.

Convincing customers and clients

One of the biggest challenges is convincing customers and clients that it is worth adding the extra cost to their homes.

“It’s a tough one and we don’t pretend otherwise,” Ms O’Connor says. “We’re starting to show that if you calculate energy bills you see a massive difference between an old Victorian home, say, and a new-build property of the same size.”

“What we haven’t been very good at to date is showcasing that message of how it benefits customers, particularly for new build”

Nicola O’Connor, Zero Carbon Hub

ZCH estimates that owners of a three-bedroom semi-detached Victorian house with some modern-day improvements will spend £1,670 per year on energy, compared with just £780 for a new home built to 2013 regulations.

Ms O’Connor admits that ZCH and the industry could be better at communicating the benefits to customers. “What we haven’t been very good at to date is showcasing that message, particularly for new build,” she says.

“It’s not even just about cost. We need to help people understand how to use these new homes, show that they are high-quality and a healthy environment to live in.”

Housebuilders’ role

The role of housebuilders and contractors is important, as it is the industry that will ensure the changes are implemented properly and become part of normal practice.

“Energy prices won’t go backwards,” Mr Adams says. “We have to remember that what we’re building will be around for a long time, so the challenge is to implement these measures as cost-effectively as possible.”

Ms O’Connor says housebuilders “have a responsibility to meet the standard” but there will be flexibility to combine different methods to do so.

“It will be really interesting to see which strategies housebuilders go for – it may be different for larger companies compared with smaller ones.

“We’ve assumed builders will make use of Allowable Solutions because the price per tonne of CO2 saved is likely to be lower.

“The more they do on site, however, the lower energy bills will be for customers. So it’s a fine balancing act and a strategic decision that they will have to make.”

Willmott Dixon hasn’t done much with Allowable Solutions to date, but Mr Adams sees it as “an interesting proposition to develop our business model”.

Zero carbon for non-domestic buildings

As the journey to zero-carbon homes continues, the government and the industry will start to look more closely at applying the standard to non-domestic properties.

“I definitely think there are lessons to be learned and the definition of zero-carbon that we’re developing could be applied in the non-domestic sector,” Ms O’Connor says.

“The challenge is there are hundreds of different types of buildings, so the upfront modelling of energy usage is a lot more challenging.”

More time is available in this area, with new non-domestic buildings not required to be zero-carbon until 2019. But Ms O’Connor says many companies are starting to meet the standard anyway as they realise it makes more sense in terms of costs.

Mr Adams says Willmott Dixon already builds “beyond the regulations” for some clients. “But some further clarity from the government on the trajectory for zero-carbon in non-domestic properties would help, as we can then more efficiently join the journey,” he says.

UK Green Building Council chief executive Paul King says the report “demonstrates that industry will invest, innovate and find effective solutions to challenging performance standards as long as it’s given long-term clarity and certainty about the direction of travel from government”.

“We urge government to do the same for non-residential buildings,” he adds.

“While the cost of building to zero-carbon standards in this sector is likely to add a cost premium in the immediate future, this will fall as significantly as it has done in the housing sector if business knows exactly what to deliver and when it is expected to do so.”

Another potential challenge facing housebuilders is the looming skills shortage.

“We have to make sure teams are upskilled so that they understand not just the theory behind what needs to be delivered by 2016, but that it is actually being delivered in practice,” Ms O’Connor says.

Mr Adams, however, believes it’s a “better problem to have than low volumes”.

“There’s a lot to learn anyway in this space, so I’m sure it’s better to approach these challenges in a buoyant market,” he says. “The challenge is not less, but the attitude to meeting it is better.”

Gaining further clarity

Looking ahead, ZCH expects the costs of building to the standard to fall further – to perhaps less than £3,500 to build a new zero-carbon semi-detached home.

The aspiration is for energy bills for the aforementioned three-bedroom semi-detached house to fall to £450 per year by 2016.

For housebuilders and contractors, clarity from government over the zero-carbon standard is crucial to improving energy-efficiency.

“It would be helpful to get absolute clarity on when zero-carbon will start. Moving the zero-carbon definition into an even more sensible space would help 90 per cent of dwellings meet the standard by 2020”

David Adams, Willmott Dixon

“It would be helpful to get absolute clarity on when zero carbon will start,” Mr Adams says. “Moving the zero-carbon definition into an even more sensible space would help 90 per cent of dwellings meet the standard by 2020.”

Closing the gap between as-built design and real-life performance will be crucial to meeting the standard.

“It only makes sense to people if they can see the results in the real world – it can’t just be theoretical,” Mr Adams says.

But whether a building is being used for residential or commercial purposes or something else entirely, one thing remains constant: the owner or occupier has to be convinced about the benefit of adding extra cost to meet the zero-carbon standard.

“With highly efficient homes, energy bills will be lower,” Ms O’Connor says. “It’s about better making the link between the cost and the benefits the consumer or occupier gets on site.”

Achieving the zero-carbon standard

Below are the three steps to achieving zero-carbon and how they were considered in the study. Each of the eight scenarios analysed included a different combination of these, with at least one element from each of the three steps.

Fabric energy-efficiency

How it’s calculated This is determined by the annual space heating and cooling demand in kWh per sq m, assessed using the Standard Assessment Procedure.

In the study Two levels of FEES were considered in the study: the minimum requirement and an advanced practice standard that includes higher-performing elements.

Onsite low and zero-carbon heating or energy generation

How it’s calculated The standard requires a specific level of onsite CO2 emissions to be achieved, termed ‘carbon compliance’. Zero Carbon Hub says that, generally speaking, “the more energy-efficient a home is, the lower its carbon emissions”.

But the Dwelling CO2 Emission Rate (or the kilograms of CO2 per sq m per year as calculated in SAP) is determined by a combination of the energy requirement, the efficiency by which this energy is supplied, and the type of fuel used to provide it (eg grid electricity, gas, solar, etc.)

In the study Different technical solutions can be used to provide heat and power, including efficient gas boilers, PV panels, solar hot water systems, biomass heating, air and ground-source heat pumps, combined heat and power units and larger community solutions.

The study focused on those that were most widely applicable and that represented lower-cost options: efficient gas boilers, PV panels, SHWS and ASHP.

Allowable Solutions

How it’s calculated No specific measures were included in the analysis, but the central assumption of a cap of £60 per tonne of CO2 saved (taken from the government’s consultation on Allowable Solutions) was used as a proxy.

The actual price cap is still to be determined, with options of £36, £60 or £90 per tonne of CO2 being considered (although it could be less).

In the study When using Allowable Solutions, the cost incurred by the housebuilder or developer is equivalent to 30 years of carbon savings. Therefore, if the cap is £60 per tonne of CO2 saved, the cost to the housebuilder is £1,800 per tonne of CO2.

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