Jez Cutler: merchants have to look at how they adapt to changes.
Think before you go green
Published: 22 October, 2010
Jez Cutler, group environmental manager of Travis Perkins, looks at where the market for environmental products is heading and how merchants must make informed choices before throwing themselves into a green arena. Lisa Arcangeli reports.
The green loan scheme that allows people to pay for energy-saving measures such as solar panels after they have had them installed was launched by the Labour Government back in March. The move is part of the Government’s new Warm Homes, Greener Homes Strategy aimed at bringing about a green transformation of Britain’s homes over the next decade – making them more comfortable, warmer and cheaper to run.
‘Pay as You Save’ links the cost of installing energy-saving eco measures to the home instead of the individual, allowing payments to be spread over decades. The idea is that the consumer pays less back each month than the amount they would save on the energy they have used.
The loan is passed on with the house when it is sold, enabling householders to enjoy the long-term benefits of a more energy-efficient home and lower bills.
All the political parties agree that Pay as You Save is the way forward, but the devil is in the detail, according to Jez Cutler, group environmental manager of Travis Perkins.
What is needed, he says, is more certainty on how the mechanism to fund the retrofit of existing homes for a low carbon economy is going to work.
Mr Cutler believes a scheme like this will hold merchant sales back as “the market for sustainable products in the broadest sense is almost exclusively regulatory-driven. Not many people take it up as a matter of choice because it means spending more on an asset that isn’t reflected in the capital value.”
This leap of faith will depend on the detail that goes into refining the scheme. “We might find that the supply chain into this new market is very different from the one we are all used to,” Mr Cutler points out.
“Depending on where the money comes from, it could be difficult for merchants and distributors to get a fair share of the market,” he says.
Information about this scheme is set out in Department of Energy and Climate Change’s Detail Guide, which explains how the Government will contribute to the 80% cuts needed to help to halt climate change by 2050.
Several trials are going on but, as Mr Cutler explains, primary legislation is required before the scheme goes ahead and that will take time. “Then, we have to convince the market that consumers want to make these improvements and want to fund them through this scheme.
“People don’t want to be in debt,” he argues. “And, in order to contribute towards reducing the carbon emissions from existing homes, people will have to borrow up to £10 000, repayable on the same terms as a mortgage.”
Convincing the market
From a product distributors’ point of view, Mr Cutler explains, “CERT, the Carbon Emissions Reduction Target, which is due to finish in March 2012, is the major source of funding at present.
“Then there is CESP, the Community Energy Saving Programme.
It places an obligation on energy suppliers and electricity generators to meet a CO2 reduction target by providing energy-efficiency measures to domestic consumers. It provides funding – but not on the same scale that Pay as You Save will leverage on the market,” Mr Cutler explains.
“The money to fund this scheme will come from loans. Possible permutations of how those loans might work including supplying the money, the product, installing that product as well as specifying it as one package is very much alive. Even companies like Marks & Spencer are looking to get into this market.
Challenging the existing supply chain
“We have to be aware that possibly, both CESP and Pay as You Save challenge the existing supply chain model because of where the funding is coming from; plus the fact the fund may seek to limit where products are purchased.”
He cites the British Gas model. It is positioning itself as the number one installer of low-energy, low carbon products in addition to being an energy provider.
“British Gas is unlikely to use independent merchants or even multiple merchants for its supply chain. It is more likely to do the deal directly with the manufacturer,” Mr Cutler relates. That, of course, leaves merchants out in the cold.
“Merchants have to look at how they will adapt to these changes,” he warns. “There is a lot of uncertainty and it is critical when a market is fragile and immature to seek confidence and certainty. At present, we’re simply not getting it,” he states.
Travis Perkins is a member of the Construction Products Association and urges other merchants to look towards this and other associations who are aware of these issues for greater information as things develop.
The national merchant is aware that in the race to provide environmental products to its customers. “We must take care to offer our customers the high quality products they expect from us,” says Mr Cutler.
“We want customer insight so that we can be more aware of what type of offer we supply. It’s easy to say ‘there must be a market for sustainable products, so we will brand everything with a green label’.
“That is not a road we want to travel down. We want to have an effective environmental offer,” he relates.
Building fabric solutions
“The market is in retrofit, not newbuild. We need to get the existing housing stock right,” he says. “To do that you have to bring in building fabric solutions over energy-generating solutions.”
Mr Cutler believes the real pick-up in the market will be from those products merchants already sell. “We’re talking about insulation – sealing buildings properly with the right windows and doors.”
Former Labour Minister for Housing and Planning Margaret Beckett said recently that the industry would not get the massive uptake of sales until someone develops internal clad insulation that looks like and can be applied like wallpaper, Mr Cutler notes.
There also needs to be innovation in the doors and windows sector, he adds. “A lot of the insulation currently being produced is good, but often it has not been installed properly.
“Because this market is regulatory-driven and regulations always work on the fewest possible people, you are going to get most of the demand from a relatively small customer base.”
That, he says, is why every merchant must ask whether the mass market is really ready for the roll-out of environmental technology centres.
“We need to promote the environmental message in a better way. I’m not convinced that these types of centres would pay for themselves.”