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In an ideal world every occupied building in Ireland would be energy upgraded to the highest standard, tapping into numerous benefits for the building occupant, the construction industry and society as a whole. Construct Ireland is calling for the introduction of pay as you save, a repayment model which offers the potential of making significant energy upgrade investments achievable in the vast majority of Irish buildings, as Jeff Colley reveals.
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In an ideal world every occupied building in Ireland would be energy upgraded to the highest standard, tapping into numerous benefits for the building occupant, the construction industry and society as a whole. Construct Ireland is calling for the introduction of pay as you save, a repayment model which offers the potential of making significant energy upgrade investments achievable in the vast majority of Irish buildings, as Jeff Colley reveals.
If money were no object, virtually every occupied building in Ireland should be energy upgraded to cutting-edge levels. Numerous benefits would be felt across society, including cutting Ireland’s annual e6bn energy import bill, reducing carbon emissions and associated costs, creating exportable green skills and technologies which could drive our economic recovery, and improving the health, well-being and productivity of Irish people due to the resulting improvement in living conditions.
But the hard truth is that money is an issue, both in terms of the public purse and the Irish people in general. Sustainable Energy Ireland’s Home Energy Saving scheme, still in its infancy, may well have a quoted budget of e49m for this year, and may even succeed in keeping its overall budget of e100m over the next few years. The e50m pledged for energy upgrading low income housing this year, and the e12m Greener Homes scheme budget for installing renewable heating systems may also be spent. However, if an Bord Snip’s recommendation that SEI’s budget should be cut by e40m is realised, that clearly points towards a drop in the amount of funding available to subsidise the greening of Ireland’s building stock.
Another problem which may affect SEI’s budgets for their various schemes is the difficulty in getting Irish people to apply for grants. The low income sector excepted, where 100 per cent of the cost of energy upgrade measures is covered, albeit for a limited number of buildings, it may prove difficult to persuade Irish homeowners that grants of roughly 30 per cent justify covering the rest of the cost of paying for energy upgrade measures. This is understandable. With no imminent sign of price increases in the energy market, and little chance that carbon tax will be set at a high enough level to force substantial change it may be difficult to convince people that they should pursue an energy upgrade. In conditions like this, it may only be a motivated minority of people concerned about climate change or the health issues of living in damp, draughty buildings who are prepared, finance permitting, to invest in energy upgrade work. Even these people may be disenfranchised by the confusion of conflicting advice on which options will save most energy, and by stories of upgrade attempts gone wrong.
Obstacles of this nature must be overcome if any significant volume of energy upgrade work is to be realised. Construct Ireland believes that there is a realistic route to addressing these problems and substantially energy upgrading the vast majority of buildings in Ireland – an approach developed in the US called Pay As You Save (1) (PAYS). This approach, developed by Harlan Lachman and Paul A Cillo of Vermont’s Energy Efficiency Institute over the last decade, places little or no requirement for state subsidy in the form of grants or any other fiscal measure, and eliminates all disincentives to anyone investing in efficiency technologies in their building, whether they’re the owner or tenant of the home, office or any other building type in question. It can also be used to cover the cost of achieving high levels of energy efficiency in the construction of new buildings, although perhaps only in cases where prompt occupancy can be proven.
How does PAYS work?
In short, PAYS offers people the opportunity of energy upgrading the building they occupy, without requiring them to provide upfront finance and without placing a debt obligation on them. A PAYS tariff is instead assigned to the building through a utility bill. Customers who sign up to a PAYS tariff see an immediate financial benefit, as the repayment tariff is set up to cost less than the amount of energy that the customer has avoided using. For instance, if a customer uses PAYS to reduce their annual energy bills by an estimated e1000, the PAYS tariff would cost e750 – a net saving of e250.
Under PAYS, the repayments for the energy upgrade work on an energy bill would always be lower than the cost reduction caused by the energy savings achieved. To achieve this, Lachman and Cillo developed what they call the ¾ - ¾ rule. Firstly, the amount of the monthly payment cannot exceed three quarters of the estimated saving, which means that the customer will get immediate financial savings – even if their savings estimates are off by as much as 25 per cent. Secondly, the payment term for PAYS products cannot be longer than three quarters of the measure’s estimated life – thereby ensuring that customers don’t keep paying for technologies that they no longer use.
The payment obligation is attached to the property through the electricity meter rather than to a specific owner or occupant. A PAYS tariff is included on the energy bill until all costs associated with installing the measures have been repaid, including repairs, missed payments, interest, programme fees, and so on. If the occupancy of the property changes hands, the new occupant who receives the savings from the installed measure assumes the obligation to pay the PAYS tariff on their energy bills. If there’s a gap between occupancies, the repayment period is extended accordingly.
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