Sarah Butler Drees & Sommer
Commentary

Decarbonising local government: what’s the return?

There is still some hesitation from the public sector to greenlight the essential decarbonisation and retrofit schemes required to meet the quickly approaching net zero deadline, writes Sarah Butler of Drees & Sommer UK.

As specialists that work with clients across the public, commercial, and residential sectors, we have seen firsthand how an inability to demonstrate full return on investment has caused projects to be challenged or halted.

If the main driver of a scheme is to achieve net zero emissions as soon as possible, it’s unlikely that you can also demonstrate full payback – in many cases this is a policy decision, not an investment-led one.

You can’t have both… Or can you?

For many organisations, being able to truthfully understand the payback on their decarbonisation programmes is the missing piece.

The benefit of having interdisciplinary experts that work across many sectors is the ability to provide clarity when we talk ROI. Viewing wider and traditionally hard-to-quantify metrics through a ROI mindset allows for the showcasing of the real potential that programmes can have on communities and local economies.

An example of this is a scheme based in the North West that Drees & Sommer UK recently worked on in partnership with EQUANS, the incumbent facilities management provider. At the heart of this piece of work was collaborating with the local authority to develop a realistic decarbonisation programme for their residential and corporate estate.

The estate totalled some 72 corporate facilities across the city and more than 12,000 residential properties. With a realistic approach backed by data, the outcome ensured the most effective use of resources in meeting net zero targets, while still maintaining and improving the community focus and meeting the expectations of residents. Flexibility is key; with energy pricing creeping up throughout the exercise, any proposed programme had to include limiting energy bills for residents wherever possible.

For this project, we estimated it would cost up to £600m to decarbonise just the residential estate by 2038. Yet in comparison, it’s estimated that there will be less than £100m saved through reduced energy costs. Whilst the energy savings would run in perpetuity, and some of the estimated £600m would have been already spent on ongoing maintenance or capital replacement of heating systems, windows, and other elements of the buildings, it is still some way from achieving payback.

We can’t escape the fact that decarbonisation is rooted in policy, but, if we want to increase the chances of securing investment and these programmes to become a reality we need a mechanism to economically assess the wider impact of decarbonisation beyond just energy cost savings.

By quantifying impacts through a holistic lens, we can demonstrate ROI from a wider economic, health and place perspective. At this level, the numbers start to stack up.

Here are examples of benefits directly delivered through decarbonisation that can also be integrated into quantifiable ROI calculations:

  • Reduced fuel poverty – increased disposable income with reduction in energy bills as a result of reduced emissions; supporting the economy and improving GDP is key for the bigger picture as this money is spent locally in many instances
  • Improved health – reduction in air pollution quantified as a reduction of air quality damage and the resultant societal benefits including improved productivity and human health, plus a potential reduction in NHS costs
  • Socio-economic benefits from expenditure in the local economy to install new technology – it is expected that we will have an increase in employment opportunities in order to facilitate the transition to a green economy, with around 60% of incremental jobs globally having what is deemed an ‘easy to close’ skills gap. The opportunity to close the skills gap is dependent on local context, investment in complementary assets and technologies.

Taking additional elements into account when calculating ROI means that the estimated savings increase significantly.

At Drees & Sommer UK, we specialise in finding innovative ways for LAs and the wider public sector to save energy, carbon, and money that consider more than just the obvious benefits. For over a decade, our team have been championing the move towards low carbon alternatives, prioritising demand reduction and efficiency.

 

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