Keynote Speech

Lord Taylor of Goss MoorNational Housing Federation

Ground Source Heat Pump Solutions for Social Landlords

Chris DavisCommercial Director, Kensa Heat Pumps

• Client: Trent & Dove Housing

• Project: Installation of ground source heat pump systems, replacing electric heating

• Supplier: Kensa Heat Pumps

• Installed by: Kensa Contracting, GeoDrill, J. Tomlinson

• Number of properties: 133 bungalows

• Funding: Non Domestic RHI and Energy Company Obligation

• ECO supplier: EdF Energy

Ground source heat pumps in action

Ground source heat pumps: great idea, but….

Typical social landlord reaction to ground source heat pumps:

“Like the technology in theory, but….”

• Cost is a barrier

• Complex, high risk, difficult

• Poor experiences with other technologies

• Don’t have enough information to

influence others

All can be an issue, but not if…

• The scheme is well thought through and planned;

• You work with specialists with a track record in the social sector;

• The right properties in the right locations are selected;

• You take advantage of ALL the funding options available;

• You consider ALL the benefits

Ground source heat pumps: great idea, but….

A different approach for social landlords

• A different approach for social landlords

• Turnkey delivery

• Innovative approach to the RHI

• Support with up front capital contribution

• Longer term income stream

• Fundable

• Retrofit and new build

About Kensa

• UK manufacturer

• Single technology solution provider

• Established 1999

• Based in Truro, Cornwall

• Industry accredited

• Over 4000 installations

• Social housing specialists

• UK market leader

• Recently established delivery arm – Kensa Contracting

Ground Source Heat Pump Technology

• Highly energy efficient space and water heating solution

• Electrically driven appliance

• Moves solar energy from the ground into the property

• Utilises “collector” pipework buried in the ground

• Typically one unit of electricity produces between 3 and 4 units of heat

Borehole

Hot water cylinder

Radiator system

Heat Pump

Ground Source Benefits

• Tenant Benefits

• Lowest possible tenant heating and hot water energy costs

• Highest efficiency; unaffected by outside weather conditions

• Typical savings of around 50% vs night storage heaters and 30% vs oil

• No bulk fuel purchases

• Lower standard rate electricity charges than split tariffs

• Reduces cost of other household electrical consumption

• Improved comfort, health, well-being, quality of life

0

2

4

6

8

10

12

14

16

Gasboiler,70%

efficient

LPGboiler,70%

efficient

Oil boiler,70%

efficient

Nightstorage,

100%efficient

Biomasspelletboiler,85%

efficient

HP, 250%efficient

HP, 300%efficient

Heating System Running Cost p/kWh

Fuel cost p/kWh Fuel cost p/useful kWh

Ground Source Benefits

For a typical social home:• 8,000kWh heating/hot water per year

Electrically heated:• £784 per year running cost

• + “supplementary” heating costs

Ground source heat pump heated:• £355 per year running cost

SAVING: £429 per year!

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2

4

6

8

10

12

14

16

Gasboiler,70%

efficient

LPGboiler,70%

efficient

Oil boiler,70%

efficient

Nightstorage,

100%efficient

Biomasspelletboiler,85%

efficient

HP, 250%efficient

HP, 300%efficient

Heating System Running Cost p/kWh

Fuel cost p/kWh Fuel cost p/useful kWh

Ground Source Benefits

• Planning exempt (no noise issues)

• Lower CO2 emissions, improved SAP ratings

• Other building maintenance costs reduced

• E.g. less damp due to under heating

Landlord Benefits

• Minimal service & maintenance costs

• No mandatory annual safety inspection

• Minimal preventative maintenance

• Extremely low lifetime ownership costs

• 20 – 25 year heat pump unit life expectancy

• >100 year borehole life expectancy

Renewable Heat Incentive

• Designed to support 2020 Renewable Energy targets • 15% of energy from renewable sources

• Tariff based payment

• Aimed at covering additional costs of a renewable heat technology

• Two streams• Domestic

• Non domestic

• including residential district heating

Non Domestic RHI

• Opportunity for social housing (both new build and retro fit) to benefit from adopting district systems supported by the Non Domestic RHI and ECO

Domestic Non Domestic

Coverage Individual domestic properties Residential district, commercial

Includes retro fit Yes Yes

Includes new build No Yes

Tariff payment 7 years 20 years

Measurement Deemed Metered

Paid on “Renewable” heat only All heat

Tariff rates Modest – requires fuel cost saving to produce payback

Attractive – GSHP rates recently doubled

Can be used in conjunction with ECO* No Yes

• Individual Kensa Shoebox heat pump in each home

“Micro District” ground source heating

• Shared ground array, serving 2 or more properties

• Designed, delivered and installed by Kensa

• Eligible as “district heating” for ECO and RHI purposes

• Scalable and versatile

• Each home has own radiators, hot water cylinder and controls

• No heat loss through district pipework

• No need to apportion energy bills

• New build or retrofit

• No need for a plant room

Energy Company Obligation (ECO)

• Provides an upfront capital subsidy

• Typically 20-25% of the total cost

• Supports district heating schemes

• District heating now confirmed as a primary measure

• Rural areas attractive

• Grant level dependent on CO2 savings

• Displacement of electric heating is preferable

• Ofgem recently confirmed 40 year lifetime for district ground source heat pump systems

• EdF Energy has provided Kensa customers with over £1m in ECO funding for GSHP projects

The Unique Kensa Shoebox Heat Pump

• Designed to be installed inside the property;

• Small, compact dimensions – fits in a standard airing cupboard;

• 6kW model ideal for social housing retro fits;

• Ultra-quiet, using twin, low output compressors;

• Up to 65°C flow temperature (R134a refrigerant), so able to cope with domestic hot water with no need for back up;

• Designed for use with standard heating controls.

Feasibility & Design

Delivery

Compliance & Support

Kensa’s process

• Feasibility study

• Clear cost and return analysis

• Property survey and EPC

• Geotechnical survey

• Full system design (incl MCS, borehole array, mechanical)

• Tenant liaison

• On site project management

• Drilling contractors

• Heating system contractors

• Commission and hand over

• Access ECO funding

• RHI compliance and application

• Comprehensive system warranty

• Remote access meter readings

• Ongoing technical support

• Responsive maintenance

GSHP System Costs and Returns

Typical 2 bedroom bungalow, 8000kWh/yr

Budget NSH replacement,

£3,500

Additional landlord

contribution, £7,000

ECO, £3,000

INSTALLED COST:

£13,500 Budget NSH replacement cost, £3,500

Additional cost (before ECO

subsidy), £10,000

ECO subsidy, £3,000

RHI over 20 years, £16,500

£0

£5,000

£10,000

£15,000

£20,000

£25,000

Investment costs Income streams

Investment costs vs income streams

TOTAL RHI INCOME OVER 20 YEARS: £16,500

Kensa funding

• Options for “micro-district” or individual properties

• Kensa finance packages typically cover the borehole and ground source heat pump installation

• RHI income offsets cost of finance

• Landlord may need to provide some contribution towards the internal heating system

• Up to the value of a NSH replacement system

• Dependent on energy demand/house size, fully funded schemes are possible

New build

• Non Domestic RHI model also applies in new build

• Not possible with Domestic RHI

• Ofgem has confirmed RHI payments are allowable even if in receipt of an HCA grant (although some conditions apply)

• Allows social housing new build to benefit from:

• 20 year RHI income stream

• Cost effective

• Lowest possible tenant running costs

• Lowest lifetime ownership costs – long service lifetime and no mandatory annual servicing requirement

Example: New Linx Housing

• 53 unit development

• Micro district ground source heat pump system

• Accesses funding through HCA and RHI

Conclusions

• Changes to the Non Domestic RHI tariffs have created opportunities in the social housing sector for district ground source heat pump systems

• Such systems are technically robust and can be delivered at lower capital cost (when compared to “stand alone” single property installations)

• ECO funding can provide upfront capital subsidy, to circa 25% of the project cost

• Long term financial returns can be compelling

• GSHP-based systems deliver the lowest running costs to the tenant and the lowest lifetime ownership costs for the landlord

• Both retrofit and new build projects will benefit from the RHI income

Trent & Dove Housing’s Ground Source Heat Pump Project

Steve GrocockProperty Services Director, Trent & Dove Housing

Introduction

• Trent & Dove Housing (TDH): LSVT in 2001 from ESBC

• 5,700 units in Burton and Uttoxeter

• £25 million turnover

• Looking at expanding into surrounding areas

• Celebrated building our 1,000th property in early 2015

• Short, medium and long-term strategy to deal with all of our dwellings

APE

1) High Valued

Properties (86)

2) Visit worst

energy performing properties

(525) 3) Investigate all

Excessive deaths in voids and

compare with deaths in

total stock

4) Check low/no Housing Demand

5) Negative NPV

Properties (319)

6) Bedsits (168)

7) Lifespan (RR&V, Planned Maint.,

Component Renewal)

8) Sycamore Court (24)

9) Install GSHP (133)

10) Investigate all off-gas properties

(415)

11) Assess all 2bed

flats (1,066)

12) High Turnover/ Properties

13) Low Performing

non-financial

properties

Asset Performance

Evaluation Modelling

National Excess Winter Deaths

106,400

44,950

82,670 67,560

29,080

41,060

89,600

49,510

25,990

70,260 67,790

34,110

46,270

58,100

34,590

48,490 42,380

47,380

21,160

47,200

37,940

25,650

47,690

22,900

48,440

23,450

31,640

25,270

36,450

24,000

31,526

-

20,000

40,000

60,000

80,000

100,000

120,000

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Excess Winter Deaths and Average Winter Temperature, England and Wales, 1999/2000 – 2012/2013

48,440

24,840

27,230

23,970

23,450

31,640

25,270

23,740

24,690

36,450

25,810

26,080

24,000

31,526

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10,000

20,000

30,000

40,000

50,000

60,000

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mb

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f ex

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win

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dea

ths

Tenancy Deaths Over a Five Year Period, 2010/11 - 2014/15

925 44

59

6988

103124

131140 149

157 170175

188206

225 242247

269273

282 294300

311320

334 341353

389

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500

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term

inat

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s b

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pas

sin

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Over the five-year period there were 389 terminations (voids) caused by tenants dying

Trent & Dove Excess Winter Deaths Over Five Years

2

-10

4

2

13

-15

-10

-5

0

5

10

15

2010/11 2011/12 2012/13 2013/14 2014/15

Considerations for the GSHP project

• Cost £1.8m (mid-year)

• Income estimated at £2.1m (index-linked)

• Underwriting of income

• Procurement / financial regulations

• VAT

• Specialist support

• Construction design & management

Cost

• £1.8m (£13,500 per dwelling)

• Benchmarked against 7 other RP’s

• Spoken to previous clients

• Spoken to/visited tenants that have had GSHP installed by Kensa

Income

• ECO funded £350k

• RHI (index-linked over 20 years) £1.9m

• Total Income £2.250m

• T&D will make approximately £450k

VAT

• Wet System and borehole at 5%

• Approximately £90k in VAT (5%)

• Instead of £360k (20%)

Saving of £270k in VAT costs

Procurement

• Could have tendered this, but would not have got this deal

• T&D financial regulations allows ‘special circumstances’ clause to be used

• Fast track programme – start mid-January 2015, complete mid-May 2015 (4 months)

• Use Partnering Gas/CH Contractor (based at T&D’s Offices)

• OJEU rates – they will maintain the system for the foreseeable future

Specialist Assistance

• Kensa calculates and designs each wet system and borehole

• Encraft checks all calculations and signs off each dwelling/bore hole

• Encraft ensures the system is installed to each specification

• Each system signed off by Encraft after it has been fitted

Management

• Appoint internal project manager and surveyor (remember 18 separate sites)

• Appoint internal TLO

• Early appointment of a CDM Co-ordinator (internal) – gave advice on organisation & planning for each site & ensured health & safety and welfare arrangements were adequate.

• 10 tenants declined (7 %)

• Drill borehole so when tenant moves out a wet system can be installed

T&D Issues

Consider:

• Off-gas properties (450);

• Excess winter deaths;

• Electrically heated properties;

• Elderly and vulnerable tenants;

• Eliminate/reduce cold-weather illness, and;

• Save a few polar bears in the process too!

Off Gas Properties

• 450no. (8% of total stock)

• 133 semi-detached bungalows

• Mainly rural areas

• 18 separate sites

• No TDH plan to do anything with these bungalows

T&D Energy Bills

• Identify the worst performing stock (250no.) (highest energy bills)

• Identify the elderly / vulnerable tenants (supported housing / extra care) bungalows with the highest energy bills (250no.)

• Identify properties with excess winter deaths over the past 5 years (50no.)

• Programme the 550no. and make appointments for an Energy Auditor to visit

• Currently T&D have visited 130 properties, saving each household an average of £248 per annum

Conclusion

• Fantastic contractor

• First rate sub-contractor (drillers, trencher, wet system installer)

• On budget

• On time

• Outstanding tenant feedback

• £750 p.a. on average saving per household (reduced from £1,500 per annum)

• We aren’t too bad either!

Advice

What are you waiting for…?

Panel Q&A

Chris Davis Steve Grocock

Project in Practice

David BroomTechnical Sales Manager, Kensa Heat Pumps

Project In Practice

• Design• Heat Loss

• Borehole: geology & layout

• Mechanical: headers pipe size & layout

• Borehole Drilling• Borehole rig equipment &welfare

• H&S safe access & egress

• Trenching & manifolds

• Internal heating system installation• Radiator sizing & location

• Heat pump installation

• Domestic hot water

• Tenant liaison

• Tenant feedback

Project Summary

• 133 properties

• 1 & 2 bed bungalows

• 2 x semi-detached Houses

• Start: 2nd February 2015

• Complete: 1st May 2015

• 4 drilling rigs

• 2 trenching teams

• 8 heating teams

• 2 project managers

• 10km of drilling

• 32km of pipe work

• 20 installation per week at peak

• Heat pump installed every 4 hours

• Over 600 storage heaters removed

• Potential tenant running cost reduction: £62,000 per year

Design

• Detailed design is KEY to successful project delivery

• Design comprises three main elements

1. Heat loss calculation & EPC’s

2. Geology report & borehole design

3. Mechanical design

Design

• Mechanical Design

• RHI Applications

Borehole Installation

• Mobilisation & site establishment• Generator / ’Mudpuppy’

• Skips for disposal

• Welfare unit

• Health & Safety

• Ground inspection

Borehole Installation

Borehole Installation

Borehole Installation

Borehole Installation

1 Day After Borehole 1 Week After Trenching 4 Weeks After Trenching

Project in Practice

Anna MycoeContracts Manager, J. Tomlinson

Internal Installation

• Mechanical• Ground side risers & manifold

• Traditional wet system installation

• Pipework drops & radiator location

• Heat pump installation

• Fill & purge

• Health & safety

Internal Installation

• Electrical

• Controls

• Meters

• Comms Box

Internal Installation

• Domestic Hot Water• Vented replaced like-for-like

• High Temperature Kensa Heat Pump

• Hot water priority

• Internal installation overview

Project in Practice

Sarah Blois-Brooke Senior Consultant, Encraft

Technical assurance in renewable retrofits

Big project + tight timescales = inevitable technical issues and human errors

• Technical assurance:• Specialist clerk of works for renewable energy

• Design and installation quality and compliance

• Identification and resolution of issues early on

• Avoid potential long-term & costly implications

• Mitigation of risks of non-conformance

• Protect financial viability of the scheme

Technical assurance delivery

Project task Key Checks Sample checked

Site surveys Dimensions, building fabric, construction date 1 per site

Heat loss calculation Factors and inputs, calculations, MCS compliance 100%

Schematics Radiator sizing, hot water demand, system design 100%

Ground loop design Design inputs used in calculation of borehole depth 100%

Loop collector and header installation

Installed to design and best practice e.g. MCS, GSHPA First 30 + 20% sample

Commissioning Installed to design and best practice e.g. MCS, GSHPA First 30 + 20% sample

Tenant Experience

Gary Hill & David BroomTrent & Dove Housing and Kensa Heat Pumps

Tenant Liaison

• Communication• Letters

• Visits

• External Works

• Internal Works

• Program updates & timing• Project management

• Handover

• Refusals

Tenant Benefit

• Control

• Whole house heating

• Reduced condensation and mould issues

• Health benefits

• Running cost reduction – ability to afford comfortable heat

Running Costs Example

• Estimated Existing Cost

• 8843kWh/Year heating and hot water

• 8843kWh/y x 9.2p/kWh = £816

• Assumes E7

• 17p/kWh On Peak

• 8p/kWh Off Peak

• 90% off peak use

• Estimated Heat Pump Cost

• 7386kWh/Year heating and hot Water

• 7386kWh/Year x 4.3p/kWh = £319

• Assumes Flat Rate 14.2p/kWh

• 340% heat pump efficiency

• 60% running cost saving

Running costs

• Trent and Dove resident, Hollow Lane

• Previously spending £20 - £30 per week on electricity

• Has been monitoring electricity usage since the GSHP was installed

• Now spending less than £10 per week (with the heating on), including use of a tumble drier

• “Over the moon” with this and glad Trent and Dove installed the ground source heating system for her.

Tenant Referrals

Mr and Mrs Carter Lived in their home for 11 years

“There is no comparison to this system and the night storage heaters – this is 1000 times better. It is absolutely wonderful. The house actually feels cleaner. The temperature is terrific. You can control it. It’s brilliant, absolutely brilliant!”

Tenant Referrals

“The old night storage heaters were difficult to control – you couldn’t get the heat when you wanted it.

The installation was brilliant, 100%. I’ve never seen such good, clean workers. They did three houses in a week – brilliant, that’s work!”

Mrs BallLived in her home for 9 years

Tenant Referrals

Mr Rowe Lived in his home for 4 years.

He suffers from motor neurone disease, and as a consequence struggles with controls and mobility.

“I didn’t think it would be as good as it is, but it’s absolutely amazing. I’d recommend it to anybody.”

Working in Partnership

• Resource dedicated by Trent & Dove to facilitate project

• Tenant liaison: joint visits

• Commitment by all partners to deliver the scheme on time and on budget

Applications

• Trent & Dove project focused on sheltered bungalows

• General needs housing

• Low / mid rise flats

Panel Q&A

Any questions?

Closing Comments

Lord Taylor of Goss MoorNational Housing Federation