#83 - Andrew Sutton: The Long Game: Quality, Risk, and Scaling Sustainable Housing

Simon Jones sits down with Andrew Sutton, co-founder and Chief Innovation Officer at SERO, to explore the challenges and opportunities in retrofitting UK housing stock and how these parallel the challenges in ventilation and air quality.

• Current retrofit efforts suffer from political cycles creating boom-bust patterns that make scaling difficult
• Approximately half of a typical £35,000 retrofit cost is already in planned maintenance budgets
• We need to move from product-based specifications to outcome-based approaches focusing on healthy environments, affordability, and carbon reduction
• Data-driven building monitoring is transforming how we evaluate success, creating feedback loops that drive quality improvements
• We should reframe retrofit as normal home improvement rather than a specialist activity
• Bringing in private finance, particularly pension funds seeking long-term returns, can help smooth out funding cycles
• New business models can share savings between residents and landlords, generating income streams for further improvements
• By aggregating electrical generation and storage capabilities across housing portfolios, homes can function as distributed power stations
• Construction often responds well to clear requirements when they know they'll be measured and held accountable
• SERO focuses on creating pathways for homes that map steps to achieve net-zero carbon, healthy, affordable living environments

Andrew Sutton LinkedIn

SERO 

Chapters

• 0:00 Introduction to Retrofit Challenges
• 9:00 Quality and Risk in Housing Renovation
• 24:15 Breaking the Boom-Bust Funding Cycle
• 36:30 Measuring Success Through Real Outcomes
• 51:22 Data-Driven Retrofit and Monitoring
• 1:07:30 Supply Chain and Skills Development
• 1:20:45 CERO's Approach to Scalable Solutions

Transcript

Simon: 0:00

Welcome back to Air Quality Matters. We already have the tools and knowledge we need to make a difference to the quality of the air we breathe in our built environment. The conversations we have and how we share what we know is the key to our success. I'm Simon Jones and coming up a conversation with Andrew Sutton, co-founder and chief innovation officer at CERO. So I've spent a bit of time with Andy over the last couple of years and he is, as anyone will tell you, one of the thought leaders in the UK around retrofitting and renovating the UK housing stock. I don't use the word thought leader lightly and CERO, the company that Andy co-founded, does not undertake what it does lightly either. I've seen it from within the focus on better outcomes, quality control, scaling, but in the right way. All of the things you hope the sector would be, you can find in the team there at CERO, and they are early adopters when it comes to better ventilation Always a good way of getting on my sunny side. This was a conversation about the sector, how we deliver better quality at scale and how we move away more broadly from this boom bust cycle we've seen and, of course, a good sprinkling of air quality and ventilation. I hope you enjoy this conversation as much as I did. Don't forget to check out the sponsors in the show notes and at airqualitymattersnet.

Simon: 1:30

This is a conversation with Andrew Sutton. So the reason I thought it would be interesting to chat to you, and particularly through the lens of CERO, is retrofit is so analogous to the challenges that we see in ventilation. You know, listening to the podcast, all he was talking about the skills challenge, the scaling challenge, risk management out poor outcomes, dealing with political cycles. All of these things affect everything in the built environment and retrofit is no different, right? We?

Simon: 2:16

We're kind of plagued in retrofit with this kind of boom bust cycle political ideology, ideology, the latest scheme, the next phase of something. It feels like it's a stuttering, stop-start process the whole time, which is enormously challenging for supply chains, for consistency it's hard for quality and skills and scaling and investment in the sector and ultimately, I guess, for consumers and the customers to know where they stand from year to year with things. I'm not saying it hasn't consistently got better, but it's challenged by that environment. So what I thought would be an interesting conversation with you, particularly what I know about you and CERO, is, through this kind of lens of quality and risk, how we start to break those cycles and start to deliver the kind of sustainable trajectory need to scale the built environment to where it needs to go. So I appreciate it's a big question, but it's that I'm really interested in your perspective on that because I think there's a lot of crossover into the our world of ventilation and air quality. Do you know what I mean and do?

Andy: 3:29

something about X or Y and some money comes through and everyone scales up. You know, we saw it Green Deal, we saw it in. You know, some of the devolved nations Wales did schemes like Arbed Scotland have had different funding schemes over the years and they've all kind of created this, as you say, a boom, and then, as the political will or the intent has migrated, it's never quite translated into business as usual and I think retrofit has got exactly the same problem. And ventilation. I mean, I see ventilation as an integral part of retrofit but if you think of them differently, they've both been something which is considered in isolation and what we're really talking about is getting homes to be a good quality eternally for the people that live there, getting the residents to have comfortable, affordable, healthy homes, and that's the goal. And when you think of it in that context, retrofit is just asset management and ventilation is just part of asset management, is part of ensuring that the homes are right for human habitation, right, and we, for some bizarre reason, we've never quite got that. And I think both ventilation as a part of wider retrofit are on this journey into kind of normalization and I think England's wave three funding from renamed SHDF is moving in a positive direction because the way the funding is longer and the spending review announced, I think, 5 billion of leverage funding to go into the 13 or something. So billion was leveraging finance, which I think is one of the ways that we solve this.

Andy: 5:24

Wales has been slightly further ahead historically the last five, 10 years. They've already got retrofit funding as a regular yearly item into their budgets. But I think crowding in private investment is one of the things that we're doing as CERO to be able to bring in patient long-term investment, pension funds and the like. That allows us to move slightly away from the boom-bust cycle of grant because we have a five-year electoral cycle. There will always be an element of those things. Now governments can make decisions about putting funding into separate arm's-length bodies. Some of that happens in Wales, some of that happens, I think, in Scotland. But there's always an element of political will that influences those separate arm's length bodies. Some of that happens in Wales, some of that happens, I think, in Scotland, but there's always an element of political will that influences those, yeah, and it doesn't always have to be negative, does it?

Simon: 6:12

It's just that the next minister or the next political party? I mean, we're relatively fortunate in the UK that the political parties are both at the moment anyway quite centrist, so the difference between them is Depending which two parties you're talking about these days?

Andy: 6:30

Yeah, for sure, Right yeah, of course.

Simon: 6:32

Yeah, let's not go down that route. But the differences, the global differences between them are fairly close. But it's understandable that somebody always wants to put a stamp on something, wants to frame, has a slightly different agenda, and even that is quite unsettling, isn't it? Because that's, that's rephrasing how you write grant proposals. It's, it's that there's a different metric for how something is measured. It's always the buzzword yeah, what's?

Andy: 7:04

the buzzword how do I and that's where I think um, with retrofit and ventilation, moving it to business as usual and bringing in private investment to supplement? So I mean the average retrofit, and you know everyone will have their own view about what that comprises and how much exactly it costs. But we would probably say it's somewhere in the region of £35,000 to retrofit a home and initially you run those numbers and at macro level you go, oh, we can't afford it and all these kind of things. But when you break that down, a good half of that £35,000, call it £18,000, is going to be already in a planned maintenance budget for social landlords and probably for private landlords if they're a sort of corporate, are running it as a business rather than a second home that they let out. So half that money is already in a budget for boiler replacement, for window upgrades or for window replacement, for roof replacement over time. All of those elements are in there, including ventilation. That should be in that budget as well. Probably isn't a sufficient amount, but that still shouldn't be a big line item. So really what we're saying is spend that £18,000, you know, notional value for the typical home wisely, in line with how your home improvement plan for the journey, the pathway of the home is. You're then probably going to get a little bit of support from governments devolved wherever in some form, but that might be five, six thousand pounds, probably a bit less as we go forward.

Andy: 8:27

Despite the spending review, there's not enough money in the system to grant fund everything. What we can then do is say, well, actually, if we bring in maybe nine thousand pounds, something like that, towards the retrofit as well, you suddenly see that you've got, if my math works, eight plus 9 plus 18 gets you to that typical value. But really the new money in there is relatively small and it's about spending it all in an aligned fashion. So, knowing what your goal for ventilation is, knowing how you're assessing the home, being able to then factor that in so that when you're going in to do the windows you're putting in the right trickle vents that's the strategy validating that they're in place in the correct, correct size for the, for the occupancy, that they have the ability to be maybe oversized compared to your assumed occupancy, so you can push that if the occupancy is higher, being able to run that through. So you're, you're making it business as usual and I think ventilation to some extent, and retrofit historically have been something else we do.

Simon: 9:26

That's really interesting. You say that, and I think that in there lies an interesting and subtle difference between countries. So the focus in Ireland where I live, particularly to meet the national target, has been based around deep retrofit and the process. There has been the development of one-stop shops or organisations to curate and bring together major renovation in the housing sector, so they see it as a one-hit wonder. On properties, I would say the values are similar or in line, but just in euro equivalence, maybe a little bit more perhaps, and the governance structures are kind of embedded within the one-stop shops, whereas in the UK we've had a much more single measures approach, I would say traditionally, traditionally to renovation, like the very early days in ireland where somebody would come and lag a loft and then do a cylinder and somebody would replace windows at some point and it's kind of quite piecemeal. So we've developed these structures here, haven't we? With things like um, past 2035 and management of risk of retrofit and a lot of that has been embedded, to try and pull together those very disparate and separate chains into a consolidated process.

Simon: 10:54

What you were saying there that I found really interesting was this kind of grown up and nuanced approach to retrofit where you say, particularly with housing authorities or people that are managing stock, that they're spending this money anyway. Right, that through cyclical maintenance, planned maintenance, capital investment, reactive maintenance, all of these things that are happening in the built environment. As you say, over a five or ten year period, probably they're going to have done half of the retrofit anyway. But that requires a very particular plan, doesn't it? That requires skills and knowledge that when a trickle vent is being put in, that it's being done as part of a plan for retrofit.

Simon: 11:41

And we hear at a European level these ideas of renovation passports, that this concept of a planned journey for a building, whether it's happening in the space of nine months or whether it's happening over 10 years, that somebody has sat down at some point with the requisite skills and gone, this is a good plan for the building and that presents some unique challenges, doesn't it? When you start, it opens up and smooths out. This financial element stops the need for everything being hit at once, but it does require some skills and knowledge. Doesn't it in the sector that if stuff is, if a boiler is being replaced, that somebody's gone? Why isn't this a good story for a heat pump? Or if the roof is being maintained and scaffolding is going gone, why isn't this a good story for a heat pump? Or if the roof is being maintained and scaffolding is going up, why isn't this a good time for a solar panel that the construction sector hasn't got? It hasn't had a great track history in the past for thinking intelligently and systems thinking these kind of things, has it.

Andy: 12:44

No, it hasn't, and so I completely agree. That is one of the key challenges I mean. With CERO, we started out very early on. We actually built a whole home survey tool to try and capture all the data we need to make that informed, intelligent decision for the journey, for the pathway, as we call it, of the home, and we still produce pathways that map out, in a series of steps, how that home can get to net zero carbon, healthy, affordable, comfortable all of the things that we're trying to achieve. And of course, that can be one step.

Andy: 13:15

If someone wants to do a deep retrofit, go in, do it all in one go, but more often than not, the UK is taking this approach of in slices, and that does make economic sense. If you're replacing end of life, then you do get to the point of okay, well, let's swap it out at this point, because we've used the 15 years on that boiler and we're now reviewing and checking. But it does absolutely, as you say, require thinking ahead, so that you know most boiler replacements from the outside of social housing are distress purchases and so you need the supply chain and the skills so that when someone, if it's a homeowner, when their boiler breaks, firstly, they need to have been aware that they were heat pump ready and ultimately, every home can be run by heat pump. The question is whether it can be run affordably. So they need to be aware of heat pumps, they need to be aware of the direction of travel from government, that electrification is the way that we'll be decarbonizing our building and indeed most of our transport. And they need to be able to phone up their preferred heating engineer and say my boiler's broken, can you come and fit me? And the heating engineer needs to have the supply chain and the skills to go. Yeah, I can get that in by the time that you need hot water next. And of course, at the moment they can't you phone up and they say my boiler's broken, they go right, I can get a boiler in by the end of the day. Or I can give you six weeks or two months before I've got the survey and ready for the heat pump. So I think there's a little bit of a way to go, but I do think the joined up approach is ultimately key, having that single source of the truth.

Andy: 14:51

And back in my days at BRE I did a number of projects around building passports or renovation passports or logbooks or we're going to get precious about the name. But, as in many ways, what I see the pathway as being it's, it's effectively a map of how this gets tackled so that when you get to the next milestone, the stepping stone on that journey, you say, okay, well, I'm at this point, I'm replacing my windows. The things I need to check are the? U value.

Andy: 15:19

Is one, say, 1.2, if you're being slightly economically um, prudent, if, um, and you know that you need a certain ventilation area for those trickle vents, because you know your strategy is a decentralized mechanical extract, and that's the questions you're asking when you go back to the installer to get the kit, if it's your own home or as a social landlord, when you're procuring your contractor.

Andy: 15:43

But I think, having that technical skill we can't assume the whole sector, especially beyond sort of large-scale landlords, is going to have that we need to be able to embed that into a manual that allows you to go right. When you do this, you get that. You know, a combustion engine car tells you a particular type of oil that you're supposed to top up your engine with, because that's the oil the manufacturer says you should use. We need to be kind of getting to the position whereby we're saying right, well, when you change your windows, this should be checking that you've got an extraction rate of 15 litres, or because the maths have been done by someone who's technical at the time when you're not under pressure to turn it around and the data is available for you.

Simon: 16:37

Yeah, I guess that kind of technology lock-in or product lock-in is just happening every day of the week in every part of the country all over the world where there's something happening to a building and something is being replaced because it's broken, or making a noise or news to happen, and there isn't a pause at that point to go right, okay, what's the long-term plan for this building and how does it fit in with the national renovation plan? And, like you say, boilers are being replaced every day because you it's middle of winter, you've got kids to bath. Like this is a nightmare. Are you really going to wake a week, wait a week and a half for a survey before you then have to wait six weeks for a heat pump and so on and so forth, like so? That's one of those cycles we've got to figure out how to.

Simon: 17:31

But I can't remember who it was, but russell smith or you, or somebody said at some point actually we could probably do with just stopping for for five years and actually just having a retrofit plan for every building in the country and starting there. That actually then you would lose a few years of not actually doing anything, but you would then catch up because you would then have a plan for every home, because we lose that. That's one of those cycles. We're losing Every time somebody replaces windows, every time somebody has to do work on a roof, every time somebody's rendering the outside of the home or repainting it. All of these things make it much harder for somebody to come along and present a retrofit plan for the property, because now you have to take account of whatever has been put in in the last couple of years yeah, I, I agree.

Andy: 18:24

I mean the pause for five years. I maybe would. I think the challenge, you know, we're still sadly looking at 2.7 degrees already and that's not going to be a pretty world to live in. So we need to keep going. The urgency needs to be there.

Andy: 18:39

But I completely agree and with the power of compute these days, the ability to run large-scale individual pathways, I mean we run. If we don't use an archetype based approach, we run every home as a unique outcome. I, you know, fully bought into the each home counts report back from um pete burnford but pete bonfield back in the day, that principle is entirely capable to run each home at scale and we're running thousands of homes through. We're working with Welsh government to do this and last winter we were doing boiler replacement for Welsh government unable to pay scheme because it was distress. We had to accept that actually the more important outcome here was the right outcome for the resident but we were still running that individual home uniquely. There are a number of organizations that could scale that out and you could actually produce 27 million passports, 27 million pathways for homes quite quickly.

Simon: 19:40

It would be close enough. Yeah, it would be close enough quickly, it'll be close enough.

Simon: 19:45

Yeah, yeah, it'll be close enough, and, and I think you've got to create that. Stop, though, and you're at that point where where, anytime anything is gonna happen to a property, there's some form of a gateway that makes somebody stop and go. Okay, yes, but we should check how this fits in with so and so, because actually there might be some money for this. You were kind of want to incentivize people to say look, your windows need replacing, but actually, if we just have a look at how this fits in with the passport, there might actually be some grant money available for that. But we might just have to think about this slightly differently and just get somebody professional and involved at the right point, rather than it just happening and yeah, I think that touches on one of the problems that the construction sector has had for decades.

Andy: 20:26

It's kind of the design and build really kicked in in the 80s that we have a largely unregulated, larger landlord, social landlords, a little bit better regulated. Past 2035 is clearly trying to close that risk management gap. But we are a relatively unregulated delivery. We don't have an independent person going and checking every install and measuring everything and from where we are, that's a long way away from being viable unless we can bring the power of compute again back in and do some of that digitally. But the independence of knowing what outcomes you're trying to achieve, and I think having that kind of you should check whether it's in line with the pathway and then once you've done it, you should check it did what it was supposed to do, that the pathway needed it to do, and that's not product specific, that's just a generic requirement of outputs.

Andy: 21:18

You know what's the goal of this replacement measure, whether it's a boiler to a heat pump or whether it's ventilation changes and moving to a dmev system. It's understanding what those goals are at the start, setting it as a metric, making it as intelligible as possible uh, especially beyond the sort of the landlord sector into owner occupiers, allowing them to say, right, this is what I need. The sector can go okay, I know that it's a format that maybe is maybe, the format is standardized. We all know these are the key metrics. Yes, and then you can go back and hopefully someone independent of the installer can just validate that yeah, that's, that's what they did. It was a different product than that or it was done slightly differently, but actually the metrics that matter.

Simon: 22:21

you can check at the end to go yeah, it's, it's done, tick it off, load it back up to the we've done this bit of the works. To ventilation with the discussions I have with people about ventilation that it's kind of been designed by product and specification previously. In plain English, what that looks like is a fan's broken. I need to replace it with another fan that's equal or approved or similar, and there isn't anybody that goes. Well, okay, actually, what does this building need or what does the situation need? So have we got a plan? And then do we check at the end of the process that we got what we wanted to in the plan? I mean, it's basically project management 101, isn't it really? I mean, this isn't rocket science, but what happens is is people have preferred products, preferred suppliers, they have processes and procurement chains and all of that stuff. And the measurement of success is has a thing been installed and turned on by somebody? Check job done and move on, and that's how that's the measurement of success, largely in the maintenance of buildings.

Andy: 23:40

But it's not that. It's not rocket science to say, well, actually, no stop, what's the plan for this? Because there will be differences construction and in many sectors but they will all have their own subtle differences along the way and it's being able to pull back and go. Does that affect the outcome we're trying to achieve? So we've got a fantastic team that are running retrofit services. We produce the medium term improvement plan. We clearly put ventilation in as the first step and we very rarely find a home that has ventilation that really is working as well as it should be.

Andy: 24:10

But we had a story recently. The team were. We had a retrofit installed, switching a home over to a heat pump. We had assumed in our medium-term improvement plan a certain flow temperature on the heat pump system. We sent that out to a retrofit designer. So the system and heating engineer designed the heat pump. They assumed a slightly different flow temperature and we checked that and came back and said, okay, well, you're the designer, that's fine, you know, we've made assumption, we'll change our assumption. And the installer went in and installed it with a different heat photon again, and so we were in this position where we then had three different flow temperatures and actually with that home we had some of our harbouring.

Andy: 24:47

We could actually monitor the delivered flow temperature on the final home and so as a retrofit coordinator, our role was to unpick all of this and find out what was right. Why did it change? And all the rest of it. But really the outcome was did the heat pump still deliver affordable comfort for that resident? Were they running at a sufficiently high efficiency of scop to allow that home to deliver comfort at an affordable price for the resident? If the flow temp is five degrees higher or not, does it matter? And that's kind of the outcome-based thing. We can get drawn into the details and we do, and we absolutely check all of this stuff because we're trying to get the quality outcome. But if it doesn't move the outcome for the resident and you know, maybe the target was £40 a month on the heating bill If it's still £40 a month on the heating bill but the scop is a fraction lower, do we mind? And if it moves it, if it's £42, objective missed, okay.

Simon: 25:46

So that's, I think we've got to get back to that clear goals at the start, as you say, and then being able to measure them at the end yeah, and I think that's another area that you're reflecting a lot of my personal views on the the built environment sector is that we're also moving into this new dynamic of monitored buildings, and that changes the framing of everything, because the previously we relied on typical buildings, in typical scenarios, minimum standards, you know the metrics that we used were largely theoretical, and so that's all how. The only way we can measure success is whether you complied with those theoretical standards or whatever they are. We're now moving into this paradigm of monitored buildings, and that changes everything, because the measurement of success is the actual outcome and that's the sword which will live and die by.

Andy: 26:42

But that is progress the availability of data, the ability to get that data back relatively cost-effectively. The challenge I think we're facing at the moment is we're all beginning to swim in this sea of vast amounts of data, applying the intelligence over that, whether that's human or AI. Ai has to get mentioned at some point, doesn't it? The compute over the top of it that allows you to spot the intelligence, rather than just the endless data streams that come through. But I do think it gives us the opportunity to move to an outcomes-based approach which opens the door to performance contracting, all those kinds of outcomes.

Andy: 27:17

But what are we trying to talk about with our homes? We're trying to talk about a healthy indoor environment. We're trying to talk about a healthy indoor environment. We're trying to talk about affordable to run and we're trying to talk about getting them to net zero carbon. So surely our objective measures of success should be something measured in kilograms of co2 and equivalent, something measured in pound signs and well, you're better qualified than me to say what the indoor air quality one would be, but something around indoor environmental quality, comfort and health, and so on.

Andy: 27:45

Yeah, no, I couldn't agree more set those and then, whatever the product variations and the proprietary solutions are, if we've got some, for the technical teams that then have to pick up those outcomes to deliver, we need a bit of technical support and we work on generic technical specifications when we make our medium-term improvement plans. But that work then feeds into okay, there'll be a number of products that can achieve that generic technical specification, but they're all ultimately being held to account on that outcome. And the outcomes are is it a good internal environment we can afford to run? That is going to be net zero and that's really what we're trying to achieve. The HLP and the HTC and the score on this and even the EPC really they're proxies because of, exactly as you say, because we had to have some kind of normalized standard, and the EPC is a great example of that. It's the average and therefore it is wrong 27 million times, but on average it might be right, you know, but who's average?

Simon: 28:47

And I use this analogy not so long ago. But if people want a vision of how that kind of works into the future, you only have to look at the, the automotive industry, that this boils right down to the component level, the, the vast amounts of data that come out and attract around cars. They start to get performance data on that particular model number of that fuel pump and they know if that fuel pump is failing early, is performing the way it should do, what its trajectory is over five years, ten years. You know that because a service light comes on and you know so. We get this kind of very simplified feedback. But all the way down the supply chain that's having impacts on what manufacturer fuel pump is going into that particular brand of car, they start to see which ones work and which ones don't. And that's the future we face with the data, the measured performance data from homes.

Simon: 29:39

I would suggest is that over time you're making these kind of assumptions that these range of products will fit that technical specification. You may be looking back in 10 years' time at the previous five years and going, yes, that's true, they all broadly met it, but these were the standout products that consistently hit the number over the last five years and that starts to inform purchasing decisions and we start to see that refinement that we haven't seen in construction yet because construction has typically been so anecdotal and there's been very little feedback loops post-occupancy. That starts to feed into the equation and that fundamentally changes everything because as a brand supplier into as a supply chain, you now have to start thinking well, those cost, cost cutting exercises or efficiency gains or slimming down of the robustness of that particular element of the product that might have consequences on people's purchasing decisions now in in five years time, because they'll just see it in the data Completely agree.

Andy: 30:44

I think we're seeing that begin to happen and I think, interestingly from our perspective. So when we produce a pathway for a home, one of the first steps quite commonly is to pick up photovoltaics and batteries, partly because it's the element that we can most clearly fund and we can bring additional finance in to support that, but also because in terms of the resident journey, when you're trying to persuade someone to go on this journey, it's relatively low disruption and it's a relatively high impact you can get. Even with a shared saving that's helping to pay back a patient finance. You can get a 20% energy bill saving for that resident on their electricity. So you're knocking on the door and you're saying we'd like to reduce your electricity bill by a fifth and we're going to get you onto the net zero journey and it's not too disruptive. So this is a good starting point to get the door open and then later on in that journey our pathway will map out that a heat pump can go in and clearly that the ventilation is being checked throughout and maybe some relatively straightforward insulation measures. In most cases there's always a case for deeper retrofit with um with with more insulation measures in some cases, but the average home is probably loft and maybe cavity wall insulation.

Andy: 31:58

But where we're where I mentioned, that is, we're looking at um, the batteries are actually the first elements that are really giving that automotive-style data. We're seeing it in the warranties. So we have a long-term relationship with our social landlord partners and ultimately with the residents that we support for them. And we're seeing the warranties on the batteries that we're working really hard to make sure we're getting the right ones, and five years ago when we started doing this, the battery warranties were quite short. The data volumes were also quite high. So we've worked on that side of things.

Andy: 32:32

But we're seeing the warranties push out as they're getting the data back from how the battery is operating, how it's cycling, how it's capping and flooring. That's feeding them actually to give them the confidence to push the warranties out to 10, 15. I think 15 is the longest I can remember years on these. So the replacement rates are getting longer because they're learning how this is scaling and I think we'll see that with the heat pump sector increasingly as they're getting the data back, and with the home itself. As you say, with monitoring, the right kind of level of monitoring of the home performance you'll start to see how the various components come through, and I have no doubt ventilation will be doing the same, especially with Internet of Things type IoT connectivity. Those will all be streaming back and we'll start to get to this position where that product actually just not quite got the longevity.

Simon: 33:20

It might be cost effective or have a good ROI, but actually over the 10-year plan that we've got to manage this on, we're not seeing it's that quantity survey as cost versus value.

Andy: 33:30

You know, making cost cuttings is one thing, but finding value engineering means the price can go up. That's the old adage, isn't it? Value engineering doesn't mean cost cutting, prices can go up. And from our perspective at CERO, we form a long-term relationship with that social landlord. We are likely to be billing their residents for decades to come. We need their residents to trust us. We need to understand them. We need to be able to help them when they've got a problem, saying why is that light on on my battery? What's happening here?

Andy: 34:00

We can field a lot of those questions, but to be able to do that that, we've got to have data to understand what the home's doing and we've got to be able to ensure that we're getting the best outcome, because we're in it for the long haul.

Andy: 34:11

And that means that if it's a fit and forget which is really where the construction sector has been historically this development model of go in, go away and never go back again, you know, once you've got your final certificate, you're out there, moving to a model where you actually have a long-term relationship with that property and the people that live in it and the owner of that property and ensuring that you're providing best value over the long term.

Andy: 34:35

That, ideally, is economic value upfront, but ultimately the overall value is really what you should be looking at and that means data. That means maybe the fan's a bit more expensive, but you know that it's got a great product record. It's delivering, it can ramp up to 125, 150% when it needs to. Whatever it may be, that kind of longevity and getting the data means okay, we know that maybe it's the ventilation system and we have specced it so that it can scale according to moisture load in the building. But we can evidence, over 10 years of that data coming back, that that's reduced the maintenance demand on the property or that residents in those homes, when you look at it at macro scale, have got lower instances of asthma occurrence or less health calls.

Simon: 35:20

You start to build it from that data set and it drives very deep relationships with the supply chain and the deliveries of efficiencies and all of that stuff that comes with as-a-service models. And as is always the way with those, those models are only ever possible if you've got the feedback loops and the data to refine those models over time. And I think we're only just moving into a phase now where housing has the potential for data feedback, where as-a-service models have the potential data feedback, where as a service models have the potential. Had a really interesting guy on from india from a company called clerco who does air quality as a service into buildings in india and he he's at the the large building end of the scale so they've not been able to bring it down to housing in india but at the large kind of shopping mall, big industrial complex type buildings they can start to provide those kind of services as a model because they've got the data. They can put air quality monitors in, manage the he vac systems and the filters and over a period of 10 years guarantee a certain outcome. So it's fascinating to see the industry moving in that way. One of the things that I picked up on what you said there was about the value of something like PV because it's a high impact measure.

Simon: 36:55

In these kind of longer term plans where we're trying to break these cycles, one of the big challenges has always been ripping all the low-hanging fruit off of a tree and then being left with the more difficult, less impactful measures that are as important holistically to a building's journey but become more difficult to justify over time. If you've already done the easy stuff, you know we saw that with loft insulation and cylinder lagging and all of these kind of things. And I remember even it must be nearly 20 years ago all that with loft insulation and cylinder lagging and all of these kind of things. And I remember even must be nearly 20 years ago visiting the cstb in france and they were developing software for renovation it was the first kind of ideas of renovation passports and they were locking in low impact measures with high impact measures. You couldn't do a high impact measure without having at least two or three low impact measures tied into impact measures. You couldn't do a high impact measure without having at least two or three low impact measures tied into it because they were recognizing even back then.

Simon: 37:51

If we just allow the industry to go off and make all its money on the high impact measures, we're never going to get them back in to do the little things because you just won't. You just won't be able to create an roi that's attractive enough for anybody to do. Is that something you're confident, cognizant of when you're developing these plans? That, yeah, look, I can put pv on the roof, but unless I pack that in and ventilation would be the classic example of that, right, if I'm doing stuff to a building and I don't take this opportunity to do this, then by the time I come around to replace the windows and improve the air tightness, I haven't taken the opportunity in the first place to fix something like ventilation. That puts me in a good place for that.

Andy: 38:42

Is that something you kind of think of a home that we've had come through of the thousands that hasn't had ventilation in the first step, because it's so fundamental to healthy existence in a home. So I think that is a check and correct, pretty much a step one for the journey, and it has to be about how far do you push the home. It's one of the reasons that we set Sarah up when James and I were talking about this in the early days, the challenge back in when I was with the BRA and back when I was in practice building Code 6 homes and all this kind of stuff decades ago, we looked at the housing problem and the construction sector looked at the built environment as its own entity and, to use the site plan metaphor, there was a red line around the sector and that's what we did and we had to solve it. And I think the thing that we, when we founded CERA, we thought about was very much that actually it's not an island on its own, it is integral and a major part of the energy networks and so when you think of it from that context, buildings are historically they've been sort of the screaming babies. They've demanded power. When they demand power and the grid just has to handle it. And that's how the grid was built and it was all a one-way supply network that had to cope with whatever got plugged onto it.

Andy: 40:04

And we obviously have the challenges of of the uh, of the scale up of the grid on that side of things where I think, as we move to a more renewable based grid with maybe a base load of nuclear coming through, we have a more nuanced need to how we, the, the sector has to stop being a screaming baby and maybe move to maybe we don't make adulthood but at least a truculent teenager, so that we have to have a little bit of give and take. We have to be able to understand what we're drawing from the grid, when we're drawing it from the grid and how we can actually help the electricity grid cope with the peaks and troughs. You know solar azimuth noon. Cope with the peaks and troughs, you know solar azimuth noon. Lots of solar generation. Wind in the North Sea, wind off North Wales, lots of wind generation. Those things we can start to say, okay, well, let's find a heat pump early, let's put that power in a battery, whether it's a grid size battery or an individual home battery, or even preloading the car once you've plugged it in. So those kinds of steps are really important and they will help the grid to not have to go as far to the kind of worst case scenario of six times more generation because we've just left the built environment as a screaming baby.

Andy: 41:18

But if we can move it to that kind of model and I think when you look at it in that context, how far you push the expensive measures becomes a question about where do you want to spend your money. So we can either and in a perfect world, if we'd have started doing this when we probably should have in the 80s, we would have reduced energy demand. We'd have built this into our systems for the built environment, for our homes, we'd have got these plans and pathways, these plans and pathways, and everyone over the last 40 years would have been quietly upgrading the fabric of their properties and the ventilation of their properties so that the energy demand of that home was as absolutely low as it could be. And in a perfect world, that is undoubtedly the right way. Drive down the energy demand and I say energy demand, it's electricity demand, because electricity is the way that we will decarbonize. So driving that down as low as possible and that means that we would have to do less grid infrastructure upgrade and things. But we still have to do vast amounts of grid infrastructure upgrade because we're electrifying transport. So in that context you then sit there as a national question and you say, well, we have to do all this grid upgrade anyway. Some of the expensive measures that we haven't done and we should have done.

Andy: 42:27

From where we are now, is the best spend of our taxpayer money on lots and lots of measures which are expensive to drive down the energy demand in our housing sector and our built environment. Or is the way to do it actually to increase the capacity of the grid to meet that slightly higher demand? And I think that's where we're sort of. It's that balance between where do you spend it? Perfect world, you'd reduce demand as far as you possibly can.

Andy: 42:55

I think we're not in a perfect world. We need to be reducing demand where it's sensible and cost economic. Looking at how we balance and the good old-fashioned hot water tank is a huge part of that Batteries are a more techie version of the same thing. They're storage, short term storage and then on site renewables where we can. They're all in. Reduce, balance, generate was the mantra we used to talk about. Quite a lot that fits in, and then it's a case of well, where do we spend this money? Are we spending it on grid upgrades, or are we spending it on deep renovation of properties? That balance is the one that we're kind of, as a nation, feeling our way through, I think.

Simon: 43:35

I'll have you back to the podcast in just a moment. I just wanted to very briefly tell you about Farmwood. Farmwood is one of the most successful SME ventilation companies in the UK, multi-award winning for their work in ventilation compliance and health and safety. Farmwood has spent 23 years becoming the go-to we live and work in are healthier and safer for everyone. Ethan Wood is a fellow campaigner of mine and someone I respect deeply. He is the chairman of World Ventilate Day and was previously the indoor air quality chairman at Beezer. He's now leading the charge for competence and compliance across the ventilation sector in the UK. Farmwood are also really big advocates for apprenticeships, helping to develop the next generation of Hevec engineers who are going to keep our buildings breathing. They're a company that genuinely cares about buildings and people. You'll find more details in the show notes and at farmwoodcouk. Back to the podcast.

Simon: 45:00

Yeah, and I suppose that where that balance, all those tipping points, are very tightly tied to how much you see us being in a climate emergency or not. You know, if you see us running out of time, then you start to take the measures that are going to be the most impactful as fast as you possibly can, because you see this as a climate emergency? You possibly can, because you see this as a climate emergency. If you're a slightly different political persuasion or a different belief of where we are on that trajectory or what's going to come in to save us, you might take a longer term view. So like that. They're very big decisions ultimately, aren't you?

Simon: 45:36

And what you incentivize and drive it will depend, I imagine, on your world view of how much of a crisis did you see this being? Is this just get everything electrified and decarbonized as quickly as humanly possible and we'll worry about the deeper, longer-term measures later? Or do you take a more pragmatic view and say, well, look, we need to incorporate some of these longer-term measures now, because if we don't, we're going to make it very difficult later on for the next generation to try and achieve those harder. And we see that all the way through all of the scope emission reductions, don't we? Do you do the easy stuff now and leave it to the next generation to mop up the mess? Right and based on human nature, that's probably the most likely scenario. Or do you try and do some of the hard miles now as part of the easy miles, so we're not leaving a complete mess for the next generation to mop up.

Andy: 46:32

Yeah, and I think the answer to that is actually not as politically. I think there's some layering on how the politicians will talk it through. So, whether we talk about energy security or whether we talk about net zero, what we're really talking about is a generation of electricity sufficient to meet our needs in the UK and getting ourselves onto energy security. We may find ourselves talking about that far more than we talk about decarbonisation in the coming years, but the goal is still the same, I think. For me, the retrofit is part of that very long term journey. So we need to get homes demand reduction reasonably. We need to look at how they can balance, we need to look at if they can generate. Those are all fairly quick and fairly straightforward steps on the whole technical, of course, but possible. That I think when you look at it from a policy level, the construction sector hasn't got a fantastic record of getting into homes, getting the quality right, getting the delivery and the outcomes right. We have got quite a long history of scandals of some form or other about something not being done right in a property or a retrofit and it leading to tragedy or leading to deaths of people. And on the other hand, from a macro policy level, we have got an electricity grid which has quietly, over the last quarter century, not 80 odd percent of the carbon out of its generation. So, from a policy level, which one do you back to do the job? Is it demand reduction with a history of tragedies, or is it the grid that's quietly gone on with it and really pulled the carbon out of the electricity generation? And I think from that perspective you go well.

Andy: 48:09

Okay, if this is energy security or decarbonization, our existing stock is difficult, challenging and we've not got a great track record. We have to get better there. Don't don't get me wrong, but the grid is working very hard to get the carbon out of the electricity and it is likely to succeed most hours of the day. In the next decade or so. We'll get to a grid which is zero carbon for quite a lot of the time.

Andy: 48:36

And I think for me that's where I talk about the very long term view because, were I to have the magic wand, it's the new build element. We do replace our building stock commercial buildings much quicker than we replace our housing Housing maybe 125 years average life but if our new build is being built with really good, low energy demand capability, the ability to smartly connect and draw power when power is available and cheap and low carbon or, very shortly, zero carbon then those new buildings should be the way that we're really driving it through. Don't let them be a missed opportunity because, much like the products we talked about at end of life zoom out. Our housing stock is recycled over a long, long timeframe. But ultimately that's where we should be saying let's not build future problems. You know, in the 1700s, the 1800s, the 1900s we didn't know about this problem.

Andy: 49:30

We have to do what we can to reduce the energy demand from those homes, but we do have problems when we do that, especially the deeper measures.

Andy: 49:38

They're done well, of course they can work, but they're quite often not done well and we have a largely self-regulated industry that doesn't necessarily it's not necessarily conducive to getting them done well.

Andy: 49:50

So the independence of check and measurement is important to try and do that bit. But zooming out, let's just ensure that the new stock that comes through is super low energy demand, is able to connect smartly to the grid and do all the things that we've talked about, and that's how we can cycle through. And if we do that, office buildings in the next 50 years will all be super low demand and super able to balance, and that because that's, the life cycle for offices and schools might be a bit longer. Homes might take 100 years, but over that lifetime the average home will go to be very low energy demand and that's how I think we can get there In the gap which is my entirety of my lifetime. But in that gap, what are we doing to get on the journey? Not necessarily to try and push the existing stock that wasn't designed for it to get to the levels that we know we have to get to with our new stock.

Simon: 50:40

So let's talk quality and skills, because with these measures that we know, we have to get to with our new stock. So let's talk quality and skills, because with these measures that we we implement, regardless of what they are, whether we're talking about solo or grid or whatever it is I, I think you largely agree with me that we've, that we've got the knowledge of how to do good retrofit like. Technically. We've been doing this long enough. Now that we know how to do retrofit well, there's not really any excuses that. We pretty much retrofitted at every level, most types of building types in most parts of the country, enough times that out there there is a knowledge base to do retrofit well. Is that a fair assumption in your view that technically there are few questions to answer at this stage? It's not a technical problem anymore, right?

Simon: 51:37

So every time we look at this at scale, we find poor outcomes generally. Every time we look at this at scale, we find poor outcomes generally. So this is a skills and accountability problem, isn't it? Largely poor outcomes is not a lack of knowledge, it's the application of that knowledge and whether we're incentivized to apply that knowledge well enough and we're held accountable effectively enough when we don't. That's a hard one, isn't it? Because it's a big industry, there's a lot of buildings, the knowledge may be there, but it's locked in, often within a fairly small amount of people and knowledge bases, and somehow we've got to expand that out and again, again. That's very reflective of ventilation as well. How do you see that? How do you see us unlocking that potential of knowledge into skills and quality and outcomes? Because this is a practical challenge, isn't it?

Andy: 52:33

yeah, absolutely, and it's a challenge we have to get on with and crack. So I I agree, but I think I'd probably frame it as this is a communication and an economic challenge, which is agreeing with you, but using different words. So I think the clarity of communication and this is back to that point we've talked about on outcomes ensuring that you are very clear about what outcome you want and you're not using a proxy or, to your example, the outcome previously may have been is the fan fitted? That's a proxy for, is it getting the extraction rate that we needed it to have? Just reframe the communication to be right. The outcome we are achieving is an extraction rate of this or a whole home air change rate of that, and then the economics, I think, are around you pay for the outcome and I think if we can start to reframe towards clear measures of success and economics, finance payments being tied to those measures of success, then you start to give a very clear, communicated message to the supply chain that the demand and I'm a firm believer that supply chain and skills are very, very few.

Andy: 53:45

People go to work to do a bad job, so they're not deliberately doing this. There's always an outlier, but generally speaking, most people in the industry don't go to work to do a bad job Now. They go to work to deliver what they were told to do or they were asked to do or what they worked out they should do themselves, and to get paid for doing that at a reasonable rate. Return for the business. All the rest of it, pay you Y for that. We can start to communicate that to the skills and the supply chain in the sector to say this is what good looks like and you will be paid for that and you will make your returns and the sensible levels of profit for the business or for yourself.

Andy: 54:32

I think if we can get to that point, then we're very clear about the supply chain and the need for the skills to go okay. Now I understand more clearly what we're doing. I can now okay, I know I've got to do that. I know this bit matters or that bit matters, and I think they can then start to go out and pick up where there's a slight misunderstanding. They can. Okay, I always did it like this, but now I understand that that doesn't help the outcome we're trying to achieve, so I'll change my ways. It's not because they intentionally sabotaged it. It's because they were not necessarily picking up that information. But I think the clarity of communicating this is the outcome we're achieving, and then the clarity of saying well, we're paying for outcomes.

Simon: 55:15

And accountability, absolutely, and I think that's critical. I have a lot of confidence in construction because it's and the process of construction because it's demonstrated time and time again when presented with a change, that it doesn't have a choice over old way never existed. It's. It's quite phenomenal, haven't it? We've seen it with scaffolding, safety and ppe, and you know, even, to a large degree, air tightness in buildings. You know, like we've just like, from the technical to the safety, to the practical, it's a, it's a process driven space, and anybody that attends site meetings knows that politics are very rarely involved. Nobody's sitting there obfuscating.

Simon: 56:09

Often in a site meeting you're presented with an obstacle and everybody's job is to figure out how you get around that obstacle. Like it's. That's just the way construction has worked. And because it's quite hierarchical as well, if that's a diktat coming from above everybody, that nobody has a choice. You just have to get on and do it. Um, so in that sense, I have a lot of faith if you can present them with a new way and say, like this is, this, is the very this is the very clear expectation of what we expect, and we're going to measure that expectation at the end of it and hold you accountable for it. It's quite amazing how quickly the supply chain falls in line complete, completely agree.

Andy: 56:51

I think prior to that moment there's inevitably a whole amount of gnashing of teeth and wailing, um, but I completely agree. Once you've got to that point of this, is it? Then there's a oh, oh, you really mean it. Oh, okay, well, we better get on with it then. And, as you, construction is brilliant and problem solving and collaborating. And I think once there's a clarity of oh, you mean it, it becomes a right, well, we, we better figure this out then.

Simon: 57:18

And I find that. I find that infuriating in equal measure, because you can spend a decade of your life fighting for a change and everybody's wailing and hollering that it's a horrible thing that you're imposing on them. And finally it happens and all of a sudden they just get on with it and you're like going what? Yeah, you know, like hello.

Andy: 57:41

Yeah, I completely agree, like hello. Yeah, I, I completely agree, and I think we see this with, to some extent, with heat pumps, and I'm the supply and demand point. I'm I'm a really big fan of encouraging, especially social handles, big portfolio holders to publish their long-term plans. And I know there'll be some um, some conflicts or some challenges with grant funding and the uncertainty of that, and that's where the private finance we can help support pension patient finance coming in to help smooth out that long-term plan. But if you're publishing a 10-year plan for retrofit or a plan out to 2050, as a number of the biggest social analysts have done then you're effectively demonstrating to the marketplace your demand. And I'd encourage all you know to think about how we can illustrate demand.

Andy: 58:25

Um, heat pumps is a good example. If you are a property owner of 80 100 000 homes and you know that 79 000 of those homes are going to have heat pumps in over the next 15 years, publish that to the sector and say, right, this is, this is what is happening, then the supply chain and the skills next work can start to say, okay, that's the direction of demand If there's clarity over the actual outcomes that they're trying to achieve in that long-term plan that starts to generate the supply. You know supply never, never successfully comes before demand. You know you can run off and set up as much training courses as you want, you can set up as many of those things, but human beings are relatively smart on the whole and they're not going to go and train up for something that they don't think leads to an outcome for them of better work, more work, longer term personal security for their economics or whatever it may be or fits their motivations. You have to show them that there's an outcome for them and then they will sign up.

Andy: 59:24

So we had this with um, the blip of hydrogen in homes, when everyone we had the uncertainty with heating engineers. We got this from some of the teams we're working with on site. They are, yeah, I'm not going to bother trying on heat pumps because you know hydrogen will come along. It's like it really won't. But because there was that lack of clarity of decarbonisation is electrification, which I think we're mostly over now for homes that they were. Oh well, I don't know which way my demand is going, so I don't know which way my skills and supply chain needs to go. I think if we can get to that clarity of right, this is where we're going.

Simon: 1:00:13

This is going to happen. As you say, the sector will very much just go. Right now, we know what that is, we'll get on with it. So a lot of the talk is around local authorities and social housing providers and how we deliver retrofit of scale, deal with damp and mould, deal with housing shortages. There's a very wide and varied dialogue going on here and it's reflective of the challenge that we face in replacement of materials and products in the built environment, retrofit and so on, and that's the challenge. When you talk to housing providers, they're not just dealing with retrofit. They're dealing with retrofit. They're dealing with damp and mold. They're dealing with the reactive maintenance. They're dealing with capital replacement programs. They're dealing with new builds, voids you know the lit and you know the list just goes on and on and on. And the hard reality is that nobody has the capacity to micromanage all of that. It's just impossible value for money, that you do get what you paid for because at some point this comes down to a consumer protection problem that, um, you, you're not getting what you paid for and if you're never going to be in a position to micromanage and handhold every single project, how, what do you do and that, and my belief is that bookend of a process, being absolutely clear about what your intention is and having a way of checking that you've got what you paid for. If the supply chain bit can sort itself out in the middle, that that that's largely administrative, actually, that bit you just. You know, I always joke with people that you know the poor guy that replaces the bathroom fan in the bathroom you're like congratulations, you are now the designer. And as the designer, there are certain expectations that we require from you. In a document, you know, and he's like well, I only ever, I only came into trade change the bathroom fan. I said well, you know, you've made a choice of what to put in there. That choice comes with an element of design and therefore these are the things that we expect. And if you don't feel you're in a position to make that choice, then you'll need to find somebody that is prepared to stand over that choice for you, because we need on file that somebody's stood there and gone. This is the right. This is the appropriate measure for this particular scenario, rather than just replacing the thing that didn't work with another thing that's not going to work. You know, which is the kind of cycle we're trying to break, the.

Simon: 1:02:57

The thing I wanted to talk to you about was on this scaling issue, because if we can get the quality right and, as you say, if we can get the, the supply is not going to come before demand. It's just not the way economics work. I get the distinct impression, looking at a global viewer, particularly the retrofit market, that we're just shuffling cards and we're permanently at the glass ceiling of supply. And I don't see how that question gets answered, because now it's solar panels and batteries. Two years ago it was heat pumps, before that it was deep retrofit measures and so on.

Simon: 1:03:49

We permanently seem to be hitting the glass ceiling of skills and labour in the workforce and grants are coming and going and we've got this stop-start thing. But it's very hard for us to make progress and scale if we just can't find the people, because the moment you you struggle with supply, costs go up, because there's also market dynamics in supply and demand and when we're hitting these glass ceilings of labor, that throttles back or chokes delivery on the demand that's there. That's that's a very real challenge that you face as a practitioner on the ground. Isn't it like you're looking at these big programs and, like you're the first result of that big housing providers and we just don't have the skills internally to do that. We need somebody like you. So you go, yes, we can fill that demand, and then you go out to the market, go, well, I need the contractors and subcontractors to deliver this.

Simon: 1:04:48

And imagine, in some areas it's like it's like watching the old um bushes rolling down the street. You know, you're like, oh well, where is everybody? Yeah, I mean it's, it's, it's acute, and isn't it that labour shortage on the ground and that's reflected globally in engineering shortages, skills shortages, trade shortages. How do we solve that? How do we get over that? And, in the short term, how do you deliver on that building of the demand to get the supply to start coming in?

Andy: 1:05:20

I mean, you're right, those tumbleweed moments when you go anybody here you know absolutely, um, I think so. I think the funding cycle retrofit has been sort of a societal edge of the desk exercise. We need to probably stop calling it retrofit. Um, just talk about home improvement. Um, and the home improvement market is huge and has been around for many decades longer. We need to talk about how that home improvement is slightly better planned and thought about. So we're not just talking about I want a nice marble worktop in the kitchen or whatever it might be, or a new high-flow shower, low-flow shower in your bathroom, and whatever people owner-occupiers and landlords' preferences are, but we have to talk about the home improvement, including the decarbonisation of the home.

Simon: 1:06:15

So part of that building the scale, some of that comes from the fact of how we reframe what and where retrofit is happening, that we've kind of seen this through the lens of specialist retrofit contractors. But actually as part of that, more of that kind of more grown-up nuanced view of it, actually there's a whole body of a workforce out there already delivering elements of retrofit. It's just not called retrofit, it's called planned maintenance or damper mold work or something else.

Andy: 1:06:45

Yeah, my, my. So my home is a 1929 relatively small mid-terrace. It's got the legacy of two energy sources. So I've still got the vestiges of the chimneys they're sealed up appropriately and all the rest of it. But that was the original heating system. We then had gas come into that property and that's got the legacy of gas in it now and um, and it will move. It hasn't yet, to my shame, move to a heat pump. It's all almost ready with all the heating system changes, um, but that's we.

Andy: 1:07:16

At no point in the hundred years or so of my home's history did anyone say, oh, we're retrofitting the home. It also moved from sash windows to aluminium frame windows. That was not the best move to, uh, to timber frame windows, high performance timber, um, that again. And nowhere in that journey did someone oh, I'm retrofitting that. It was just home improvement. It was just making the home cheaper to run on more and more comfortable internal environment. Um, I think we've created this thing that's seen as a separate and it is actually just improving our home, realigning it with the energy network. Originally mine was on coal, then it's on gas, it's on electric and will increasingly solely be on electric. That journey is just the journey that every building in the world goes on From when it's built it gets maintained until the point that someone decides in the world goes on from when it's built it gets maintained until the point that someone decides it's no longer economic to maintain and they take it apart hopefully a whole life the materials and put something else in its place. Retrofit is part of that journey. The funding needs to move into business as usual, and that's not to say that that's grant funding. Moving into business as usual, that is the normal funding, the normal economics of the built environment, what you're expecting from your property, what you are expecting to pay for your energy bills. Business as usual is where we need to end up. The grant funding is undoubtedly helpful to help try and drive this a bit faster than it might otherwise happen. But you know, asset maintenance, as landlords would call it, or just maintaining your own property if you're an owner occupier, is normal and we just need to get that little bit more thought into the normal around.

Andy: 1:08:58

When I'm doing this, what am I thinking about? A good example around when I'm doing this? What am I thinking about? A good example relevant for indoor air quality is you've seen, with the DIY sector. 10 years ago people probably 10 years ago people were whacking on paints which was incredibly high VOC levels and people have become aware that actually that's really not great and so now it's much easier to buy paints which are low or very low VOCs because the market has recognized and the demand has gone. Actually, I've heard this is bad for me. I'd like to buy something that's less bad for me and I'm going to paint my skirting on the walls and use that and I think, if that's actually happened, quite market-led. I'd love to know more about how that change drove through um, but if you think about that upvc is another example it became a market expectation. You bought a house if it didn't have double glazing. You got double glazing. Now, the energy payback was never talked about in that journey.

Simon: 1:10:02

It just became a oh well, actually it was security and acoustics that tended to drive and that goes back to something you said at the beginning as well, which really resonated with me is that you know, if we're when we're doing big retrofits, often we're actually replacing products before their end of life and we now have to think in terms of whole life carbon emissions and actually replacing things before they're due to be replaced. We're just replacing primary energy with the big c consumerism where we're introducing new embodied carbon into a building before it's necessary to do it and we don't have the carbon budgets for that. That's probably one of the bigger impacts we can have is you know there is a. There is a balance to be had. I mean, the boil is the classic one, because you know that that's an obvious one, but it extends to everything from windows to to air tightness, membranes, to insulation and so on.

Simon: 1:10:54

You know that there is a. There is a complex and nuanced question to be asked at some point, a bit like my car do I get a more energy efficient car or do I stick with the embodied carbon with the vehicle that I have? And how do I work out at what point is the balance point between replacing a my diesel car versus the energy efficiency of that engine or the carbon emissions of that engine? Those kind of questions we should be asking of every product in our home, because we simply don't have the carbon budgets to just keep keep making shit and sticking it in buildings just because it has a lower primary energy. You know, there's a more complex question to be asked than that.

Andy: 1:11:42

Yeah, I think, although I do think the construction sector can often find complexity and that what we really need to be finding is simplicity. So I do completely agree. But I think to slightly reframe that from component replacement, end of life is almost certainly the right approach, given we do still have a little bit of time to really accelerate this. Still have a little bit of time to really accelerate this. And if we are swapping out windows towards end of life, put in windows that align with an overall pathway to zero, that that you know will fit with that, with that plan of 2050. The boiler is perhaps a slightly more nuanced because it is pumping out co2 and knocks, so actually before end of life is a viable point, but I do think we also get trapped that's the same with the car as well.

Simon: 1:12:29

Yeah, but it isn't a fixed line. You know that it will depend on the efficiency and the mileage and what you do in that vehicle, and it'd be the same with the boiler, but the other, more fixed materials in a building it's probably.

Andy: 1:12:40

Yeah, I think it's an easier line and I do think the sector we get into a kind of a hand-wringing around. Oh. But what about embodied? And I think I'm a little bit clearer over the number of decades of worrying about this myself as a sector, and if you look at the climate change committees, you know sectoral responsibilities.

Andy: 1:12:59

Manufacturing and transport all have their own net zero journeys and they have to get to that point. So we need the product suppliers to get their products and their manufacturing solutions to net zero journeys and they have to get to that point. So we need the product suppliers to get their products and their manufacturing solutions to net zero. The best thing as a construction sector we can be doing for those is ensuring that the demand is for the products that are going that way.

Andy: 1:13:19

So if you're a specifier, specify an environmental performance declarations is the is the best proxy we've got but specify the epd as being the lowest 25 of that product type.

Andy: 1:13:34

So if you're specifying windows, ensure that your requirement is that, that that it's the one of the lowest quartile emissions products applied, and then, as that manufacturing sector sees the demand for low carbon versions of that product, they start to all chase the low carbon version of that product and the 25% gets closer and closer to zero. And I think that's where we as a sector in construction specification can start to help, because we show the demand worry, we taking on board the embodied and we should clearly be thinking about to your point. But we can make the problem so complicated by saying we've got to have this problem, we've got to have that problem, we've got, it's all our problems. Actually, if we are intelligently specifying get the lowest quartile of emissions, get the lowest quartile of construction processes, transport emissions you're generating a demand for the right behaviour and you're giving the stimulus to that sector to say right the demand is there.

Simon: 1:14:34

You're giving the signals, the right signals, to the market. Yeah, it's really interesting For somebody that doesn't know who CERO is or what it does. How do you describe CERO, what is its kind of philosophy and dna as an organization? Because it has kind of morphed and changed with time, hasn't it? And particularly with how the markets evolved as well?

Andy: 1:14:56

yeah, we, we have. So sero um started out trying to do all of the things develop homes and deliver a zero carbon lifestyle for healthy, affordable homes. We've tweaked and changed that as we've always wanted to achieve scale. I mean, my personal history is 20 odd years, 25 years of one-off exemplars of retrofits and new builds and you look back at that and you go well, actually, in a global sense, that's naff all impact on carbon. I've just proved it can be technically done.

Simon: 1:15:24

As we said earlier, this isn't a technical problem but that has value because that those, those, those technical benchmarks were the foundation for the, for the skill sets that we need, so like it wouldn't devalue that equally as well, you needed those exemplars like.

Andy: 1:15:40

But we need now to get to scale, and so the goal for sero is very much how we can scale this um. And so we want to get homes to net zero carbon comfortably and affordably and in many ways it's the comfortably and affordably. That's the bit that we really need to focus on. Net zero is a technical underpinning for how we can do that. We know it's electrification, we know it's demand reduction, we know it's balancing, we know it's generation. These things are technical things that we can do. What we really need to do is get our housing stock to get them to understand clear measures of success, really something that can be measured at the end. Try and get that locked in at the start. Or then work with them across their portfolio to be able to say, right, here's your whole stock, but realistically, they're not going to do all of them at the same time. How do we identify early opportunities to go forward? We can bring in private finance. We can work through that with them to understand how they can get the best bang for their buck. We'll then offer retrofit services. So that's where we pick up retrofit, coordination, design if needed and other services to help them get what they paid for and really that's what that's about Risk reduction through past 2035, but ensuring that those measures of success are being hard baked into the contract that goes through for their installers and then being validated independently by us at that point of did you get what you paid for? And then the last element, to recover the finance if we put it in and that could be grant finance. So this is entirely eligible.

Andy: 1:17:30

With Wave 3 for England and other funding schemes like Optimise Retrofit in Wales, we can share the saving with the resident. So the historic model for home upgrades for social landlords is the disparity between the landlord pays all the capital cost and the resident gets all the operational benefit. Now again, in a perfect world, why wouldn't we do that? These are social tenants. They need the support where we can give it to them and historically, prepayments and terrible tariffs for social tenants they have been incredibly inequitably and poorly thought of. If we could get to the position where they didn't have to share the saving, why wouldn't we? But we can't. That's the perfect scenario.

Andy: 1:18:16

The real scenario is we haven't got the money. So what we do in that operational stage is we'll form that long-term relationship with the landlord and the residents and we'll share the benefits. So the residents probably get somewhere towards 20% reduction on their bills electricity initially, and as we move into heat. In our phase two that will come through with heat pump replacements and getting them onto some form of heat as a service that allows them to have cheaper, comfortable, affordable living. But that money then goes back to the funding source. So if the social landlord's self-funded, they're getting an income stream shared ethically with their tenants to help them do more homes and allowing them, or if it's to a private finance, then they're getting their rate of return and their investment and everybody's pension fund is investing in things which are actually helping us go forward.

Andy: 1:19:03

I think the end vision for us is very much that as a social landlord, whether you acknowledge it or not, you are building a power station as you transform your housing stock to electrification and that power station is able to provide generation to the grid or to shift where the generation from the grid is stored and balanced, or to reduce its demand at various points to help support the grid's renewable generation.

Andy: 1:19:31

So the only real question for social landlords and private landlords is you're building a power station, do you want a managed power station or an unmanaged power station I think I know which I'd rather have, and I think the end of that scenario is social landlords could be providing energy tariffs to their residents that are lower than typical market rate, which is a huge benefit. At the moment, social tenants often pay more than market rate because of prepayments and all the disparities in there. We could have a system whereby their power station is working to help their tenants, their residents, get better rates, more affordable energy and then helping also support the grid, and I think that's where we sort of started with CERA on this journey. Actually, that's the future of it. We can get better outcomes for those most in need and help the grid.

Simon: 1:20:23

We just have to be a bit clever about how we get there and it can help stabilize that demand growth, as you're talking about, and decouple that kind of cyclical boom bust process and also I'm guessing from a landlord's perspective decouple them from their own investment costs into trying to scale. You know, because you know it doesn't matter what size of landlord you are, the biggest challenge to doing the right thing for your tenants is this is just one of many battles they've got to fight and they don't have the resources, either financial or human capital, to do it. You know, and that must be a huge relief to them, that this can be scaled in a decoupled fashion from their internal challenges.

Andy: 1:21:10

Yeah, we certainly see it like that and I think we've got an increasing number of social landlords that see it. I mean, I have huge sympathy, I suppose, for social landlords as a business model. They have an incredible amount of regulation and requirements across a very wide spectrum. They're looking after typically the most vulnerable in society and somebody else is setting their sales price. As a business model, would you ever let somebody else set your?

Simon: 1:21:35

point of sale and a small and it's a very small margin or business of you know not-for-profit type setup so it's a.

Andy: 1:21:42

So recovering where you are getting grant or where you are get your own asset management spend, being able to recover some of that and put it back into the system as effectively a. If you think of rent as the first income line and service charges perhaps as the second, then this can be a third income line around how that virtual power plant is working to support you and your residents and generating the ability to do more and do faster and do it more equitably. Because one of the challenges I think social landlords face more than owner occupiers is as owner occupiers and I'm lucky enough to be an owner occupier the orientation of my roof is my problem. I picked the house if I didn't think about it at the time. That's on me right, and the benefit of me buying PB and battery for my home is mine because I bought it the red line around the site.

Andy: 1:22:29

With a social landlord, the residents don't necessarily get to pick the property they're in. So how do you give? Who gets the south-facing roof, who gets the north-facing apartment? How do you make that fair in the south-facing roof, fair in the? You know the south facing roof, the as a nation. The right outcome for that is to put some pv on that roof where it's aesthetically and appropriate, but do they get the benefit? How do you share that if we can get to a position where actually all of that gets in effect aggregated and then all of the residents of that social landlord, maybe even all social landlords collectively, get a reduced benefit, because that is all feeding in, being shared ethically and going back as a benefit to them, and I think that's where that's the opportunity we've got and generating that income stream through that journey to help drive it forward are interested in your approach and and how you see the vision of this model.

Simon: 1:23:30

Is there material that they can go and see I mean because we can share it in the show notes and stuff. Is there stuff that they can go and look at that you're going to be releasing soon or have or case studies that they can see about how this is being done at scale?

Andy: 1:23:42

yeah, I mean we we'd love to share. We've got sort of uh summaries of what we the energy service model which is not the catchiest of titles, but ultimately that's what it is and our retrofit services. We've got some support on that. Energy as a service is relatively complex under the hood, but the simplicity is actually just share the saving with your residents. Residents give them a reduction, give them the ability to have a lower than market rates tariff for their kilowatt hours and generate an income stream back in a fair and ethical way.

Simon: 1:24:13

Brilliant andy, look, thanks so much for coming to see this morning I know it's been a long week and we've still got today as well of the show in manchester. I think it's been a brilliant show here this year, been lots of really interesting people coming through the exhibition, so I'll let you get back to it and your team. So, look, thanks a million. I really appreciate you taking the time out of your day to talk to me. Absolute pleasure. Thank you, simon Cheers. Andy, thanks a million. Thanks for listening.

Simon: 1:24:42

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