Could an Energiesprong approach to off-site manufacturing transform the domestic retrofit market?
Author: Saad Hasan Date: 15/06/2015
At a time when it’s estimated that a national, domestic low-carbon refurbishment programme would need an investment of £14.3 billion per year between now and 2025, our Intern, Dr Saad Hasan, looks at whether the Dutch Energiesprong model could be used to transform the construction industry and help the UK hit its emissions targets over the next 10 years?
The domestic repair and maintenance market in the UK alone involves around 150,000 businesses and accounts for a £27 billion per annum spend, and it’s estimated that the delivery of a national, domestic low-carbon refurbishment programme would require a further £14.3 billion per year between now and 2025. What’s more, under its Construction 2025 Strategy, the Government has clearly defined aspirations that, by that same year, the construction industry should reduce carbon dioxide emissions by 50%; lower costs by 33%; and reduce delivery time by 50% - whilst also reducing the export-import trade gap by 50%.
Achieving these targets within the 10-year timeframe using only the traditional approach to refurbishment will be a very tall order. However, a major contribution could be made by a new domestic refurbishment industry, replacing the current piecemeal measure-by-measure approach with deep, low-energy renovation with a model based on mass-customisation and off-site manufacturing.
The Dutch experience - Energiesprong
Energiesprong is a Dutch Government-supported programme designed to facilitate ambitious energy reduction projects in the Netherlands. To date, the programme has brokered a deal between housing associations and builders to refurbish 111,000 houses to zero energy bill level. The refurbished houses come with long, 30-year warrantees and have insurance-backed performance guarantees. Manufacturing is done off-site with each refurbishment then completed within about a week. The projects are also affordable with their costs being covered in the long term by the guaranteed energy savings.
What is the Energiesprong process?
Take a look at this short video (3:31min) which takes you through an Energiesprong refurbishment day by day.
Possible industry transformation
By their very nature, renovation projects are bespoke, short-term and heavily influenced by the client. However, such requirements mean that the clients have to rely on various service providers for the maintenance and improvement of their houses and, during the renovation process, they often experience poor quality service (Consumer Direct receives more complaints relating to domestic contractors per year than any other sector). An alternative future model for the refurbishment industry could involve longer-term collaboration, with the entire work being viewed as a product that is assembled and manufactured off-site, with the service provider (construction contractor) entering into a contractual agreement - including lengthy maintenance and performance warrantees - with the client.
An analogy can be made here with the automobile industry where an Original Equipment Manufacturer (OEM), such as an automotive manufacturing company, provides warranties of various lengths for various parts of the product (the car) and, in addition, the end buyer has service guarantees. In the not too distant future, refurbishment projects might be viewed in much the same way, with the ‘product’ delivered by a refurbishment OEM, which is a fully integrated part of the supply chain and based on industrial production methods rather than custom, project-based craftsmanship - as illustrated below.
Future industrialisation of the construction refurbishment sector
As a result, the construction industry could develop into a modular production network similar to the electronics industry, for example, where a large pool of competing highly skilled sub-contractors and component suppliers are utilised by the OEM firms.
Such a production model would mean greater coordination between the various service providers, component suppliers and the contractor responsible for off-site manufacturing. In addition, increased coordination and efficiencies would lead to the development and aggregation of appropriate skills, assured quality and increased scale of delivery, as well as cost performance competences of the different players in the supply chain.
In such an environment, the overall value and synergy in the supply chain would also improve as a result of the complementary competences among its participants. Most of the sub-contractors and component suppliers would provide services and value using generic assets, hence the chances of asset specificity or equity-related issues would be very low. Benefitting from enhanced competence, knowledge, quality standards, understanding of the process parameters and market information, those involved in the supply chain would be able to attract other main contractors specialising in off-site refurbishment.
The potential for huge market growth, combined with the notion of a complete transformation of the refurbishment supply chain based on OEM led off-site manufacturing, presents exciting opportunities for everybody involved in both refurbishment and the construction industry as a whole. The new business model in such a scenario would require collaboration at both a strategic and tactical level among the various firms in the supply chain. They would need to:
- Develop strategies on how to link with, and integrate into, such supply networks.
- Define what their likely position would be in the changed scenario.
- Implement a continuous process of change based on learning, re-evaluating and readjusting.
The first requirement for firms would be to learn about the new business environment and the changing landscape. This would be followed by an evaluation of their existing business processes and tasks, and the implementation of any changes based on their findings.
I suggest that in order to be part of such a new model, businesses would need to focus on:
- Process and business function alignment.
- Trust and confidence building.
- Information and knowledge exchange.
- Governance in collaboration.