The Cost of Retrofit

My mother who grew up in rural Ireland, in a different generation, has a repertoire of phrases, 'turns of phrase' as one might say, to cover almost every eventuality or situation which one could find oneself in. Apart from being part of the oral history of the country, which actually we don't hear too much about these days, some of the phrases were very funny and others would just cut you in half in a heartbeat. One which I recall being used on regular occasions, typically in a negative context, was 'that fella, he knows the cost of everything and the value of nothing!'.

It was always used to describe a person who was tight with the money and the sub current was that he did not really see the bigger picture (presumably the wider value, although my mother would not have used this word, it's a fancy one!). It was, and is, a great put down, something us Irish are famous for.  

Well, the same phrase could be used for retrofitting, although I would like to qualify this statement a little. When I am using it in this context, I am not suggesting people are 'tight' that would be absolutely tone deaf and bely a complete lack of understanding of the real-world situation, the cost-of-living crisis, inflation levels and the raft of other costs and expenses hard pressed families have to contend with.  Rather, I am saying the focus is strongly on cost right now, but there are also a range of wider benefits to retrofitting which we are not talking enough about - 'the value' piece.

Retrofitting often falls foul of this issue, with media in particular focussing on the high costs, interpreting it as a fundamental failure of retrofitting policy. At the same time, they often omit to talk about the multiple benefits for the homeowner. So it does cost money but that does not mean we should not do it.

Since the Minister launched the new residential retrofit programme in February 2022, including the One Stop Shops and significantly enhanced grant levels, the team in the SEAI have received both public and private comments on the cost of retrofitting.

Mostly these have followed a similar pattern, which entails a prospective customer receiving a quotation for the energy upgrade of their home. Being somewhat shocked with the price and then using various forms of social and public media to decry the cost of retrofitting. To be fair to the team in the SEAI, they have followed as many of these threads as possible to the end, to understand exactly what happened. It is important to do so for the integrity of the retrofit schemes and also so as we understand what exactly is happening in the marketplace.

Shop Around

The first piece of advice we give people who contact us in such situations is always to shop around. It might seem obvious, but has to be said. All of the consumer advocates are regularly telling us across all media platforms to do this, from switching utility provider to getting better rates on your savings and mortgage, the advice is the same, shop around. Retrofitting is no different in this regard. But we Irish people, seem to suffer from a form of collective inertia when it comes to shopping around. Is it any wonder that the banks invest so much time and energy in capturing students during their first weeks in college, there they typically get customers for life. Although with online websites such as Bonkers.ie and Switcher.ie we are becoming a little better at this. However, we do see some common patterns pertaining to cost, which I will highlight now.

Clear Communication to bridge the Knowledge Gap

The first of these is a lack of clear communication between the homeowner and the contractors on the end Building Energy Rating (BER) to be achieved, and importantly the cost of these works. The homeowner in many cases does not have a clear understanding of where the optimal end point for the energy upgrade works on their homes is. For their part the contractor does not do a good enough job of explaining it, but merely quotes for exactly what the customer asks.

Homeowners generally understand the BER rating system and the importance of improving their homes energy performance, but what they're not so clear on is what measures would be required, and how difficult they are to implement and typically how much they should cost.

In this regard retrofitting is no different to many other walks of life where it is 'last yards which are the hardest'. Thus, to get a home from a BER B2 to a BER A1 could cost significantly more than going from say, a BER C3 to a B2. It would require more invasive works, such as underfloor insulation. So, the prospective customer asks for their home to be brought to an BER A1 rating, the contractor provides the quotes, which then appears extremely high in the customers mind, leading to the upset.

In this situation the contractor should really be doing a bit of a deeper dive and highlighting to the homeowner the additional costs and benefit of going from a perfectly good BER B2 to a 'perfect' BER A1 and what this will mean in terms of energy performance gains and critically, price.

Energy upgrades as part of larger renovation

The second common thread is that the energy related works are only one part of a wider building programme such as an extension or renovation of the home. In many of these situations the line between energy works and other building works is often not very clear, in particular when only one contractor is involved doing all of the works.

This situation can also be exacerbated if supporting works have to be done first to enable elements of the energy upgrade works to take place. For example, on a solar PV installation where the electrical system in the home has to be upgraded prior to being able to install solar panels. Whether this cost part of the energy works or not, is often a hard question to answer.

Ambiguous or incomplete quotes

And the final thread which we have seen is that the quote received by the homeowner is inexplicably high. In many cases it will be the 'extras' such as scaffolding, skip hire and building costs associated with the retrofit which bring the final tally up which were possibly not anticipated at the outset. Where we have received details of such quotations, and where possible, we have followed up to 'understand them more', and when appropriate have had 'conversations' with contractors.

SEAI cannot regulate market prices, nor do we want to. All contractors are free to set their own prices and like any market there will be a range. What SEAI can do is encourage more and more contractors to participate which creates competition and better prices for homeowners.

Some homes do fall into the 'difficult' to treat category and they do require more intervention which drives up cost, and many contractors do a good job of explaining why this is. But for homeowners the advice is the same, shop around, and when you do get a quote make sure you understand what the various elements of it mean and cost, and you can see where your money is going.

In early September SEAI published the first definitive cost analysis for the first 300 private homes completed through One Stop Shops and we can report the 1. the average cost of works for four of the most common house types (semi-detached / end of terrace home, mid terrace home, detached home, apartment) 2. the grant amount and the individual measures delivered and 3. the improvement in performance. What this means is that homeowners can now look and see 'a house like mine' and see what the typical cost should be, the measures included and the energy uplift. So, when they progress their own energy upgrade journey, they have a real sense of what's involved in terms of cost.

This is invaluable information and a key part of informing and educating the market and homeowners on retrofitting measures and cost. To deliver at the scale envisaged in the Governments retrofitting plan, homeowners will need a lot more information on the cost of retrofitting and what's involved. SEAI plan to publish this report quarterly, keeping costs updated and expanding to different home archetypes when we have the information available.

So, what of the suggestions of €120,000 or more for a deep retrofit. The averages tell us that these are outliers, for any number of reasons, but outliers nonetheless. And, importantly, there will also be outliers considerably below the average costs cited above.

I envisage a time not too far away overhearing a conversation in a coffee shop about the average cost of external wall insulation per metre squared. This might be a little optimistic or probably naïve, although perhaps not. Not that long ago when we were in the teeth of recession and one Ajai Chopra from the International Monetary Fund (IMF) was in Ireland to discuss a bailout for Ireland, we, the population of Ireland, became veritable experts on bonds, debt, third party subordinate debt, the pros and cons of a default. Remember those days? Some of you reading this blog will. Well, I have faith that the Irish people can, if needed, become experts on anything, and it is my fervent hope that retrofitting is the next national topic de jour. And of course, if you're not convinced that we can become experts on a subject overnight, all I have to do is write the word, Saipan, to prove the point.

4 key takeaways to finish

I can't finish this blog without mentioning the wide range of benefits associated with an energy upgrade. Too often we focus on cost, and I get that, cost is hugely important and at the end of the day, people can only do what they can afford. But talk to someone who has been through the process, who is now living in a warm, comfortable, healthy environment. Any pain or frustrations will pass, whereas the benefits are everlasting. I am dedicating my next blog to 'the value' piece! But for now, I will leave you with four key takeaways for starting an energy upgrade:

1. Be clear on what you want from the start. What are your expectations? How far do you want to go? What is your budget?
2. Shop around. Get multiple quotes. Talk to friends, family or colleagues who got similar work done.
3. When you get a quote, make sure you understand what the various elements mean and cost so you can see where your money is going.
4. Ask the contractor to explain the works and exactly what you should expect. You are spending a lot of money; you deserve absolute clarity.