Zero-carbon homes may look nice but they aren’t cheap

The Lighthouse by Potton

Carbon Commentary has visited two sites to look at the costs of building houses under the new rules (not yet mandatory) established by the Code for Sustainable Homes (CSH). By 2016, all new UK homes will have to have no net carbon emissions (‘Level 6’) and the implications for construction techniques are profound. Today, most homes are built to about Level 1, or possibly 2. To get to Level 6 will require huge changes in how houses are built, heated, and ventilated. And they will need expensive renewable energy technologies built into the home as well.

At Wimpey’s 145-home development in Milton Keynes, construction costs of houses at Level 3 are running at ‘100-110%’ more than standard. The self-build company Potton is offering a Level 6 design (one of the first in the UK) for an even more expensive £180 a square foot, up from about £75 for a standard Level 3 model. This takes the construction cost of a standard 1,000 sq ft (92 sq metre) home up from £75,000 to £180,000. Much of the increment comes from the need to install large amounts of renewable electricity generation. Some of the cost premium over today’s badly insulated homes will eventually erode as builders get better at building air-tight houses. But we shouldn’t be in any doubt about the huge implications of the CSH for builders, landowners, and buyers.

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Every few weeks, Potton holds crowded seminars at its demonstration Code 6 house at the Building Research Establishment near Watford, just north of London. Potton is proud of its elegant design, shaped like a spinnaker in wind. The seminar leader talks with obvious emotion about the huge changes that are about to hit UK housebuilding.

Having lagged the rest of northern Europe for half a century, the UK will have the toughest building regulations in the world by 2016. This astonishing turnabout divides the construction industry into two. The more conservative elements in this most old-fashioned of industries are quietly and not-so-quietly saying that the rules will be impossible to meet and calling for a concerted campaign to persuade the government to relax the Code.

The rest of the industry is intrigued by the challenge, clearly hoping that the Code will finally erode the reliance on the UK’s standard brick and block construction. It will be difficult to achieve the insulation targets using old methods and, at long last, builders will be forced to erect pre-fabricated timber and steel frames houses with infinitely better standards and finish. There’s no question about which side of the fence Potton sits on. As a subsidiary of the Irish modular buildings group Kingspan, Potton is an unashamed modernist, proud of designing the first Level 6 single family home.

The Lighthouse is an extraordinary building. Elegant and graceful from the outside, it is covered in sweet chestnut cladding. Inside, it is a mixture of beauty and function. The bottom floor is small and undistinguished, with the two quite small bedrooms sharing the space with a drying area and a large wood-pellet burner.

Upstairs is hugely attractive. Light and airy rooms with high ceilings are uplifting to the spirit. This is a small house by most people’s standards but the simplicity of the design gives it grace and style. An effective heat recovery system collects the warm stale air at the top of the house and uses it to heat the incoming colder fresh air. The quality of the triple-glazed windows means that even on a dull January day one barely needs to turn the lights on.

Broadly speaking, a very well insulated and air-tight house will get the builder to Level 4 of the CSH, a level that will have to be reached within a few years. Level 6 is going to be obligatory by 2016, only eight years away. It’s important to note that the steepness of the demands the CSH places on builders increases as time goes on. Level 6 is the Everest of construction standards. It requires the builder to measure the total prospective energy use of the building, including the electricity for appliances and lighting as well as heating, and then completely offset this by renewable energy technologies installed on or near the house.

How does the Lighthouse reach net carbon neutrality and achieve Level 6? Not only does the house have to have the highest insulation and air tightness standards, but it has a huge expanse of solar photovoltaic panels on the roof

Here are the details of expected energy demand for the building:

As might be expected, the Lighthouse shows huge reductions in gas demand. The high-quality insulation reduces total heating need from 19,000 kWh to 1,700 kWh – a cut of 90%. This heating demand, and the hot water need of 3,000 kWh, are met by a wood-burning stove burning pelleted wood. In the summer, the hot water use is covered by a solar hot water system. Total heating demand will be met by not much more than half a tonne of dry wood a year – equivalent to about a full load of logs in a farmers’ pick-up van.

Because heating demand is provided by wood, there is no carbon consequence. And Potton estimate that the cost of this wood is about £30 a year (perhaps a little optimistically). This is the complete fuel bill for the house. At current prices, an average house of this size might have gas and electricity costs of about £1,000 a year.

On the other hand, total electricity demand is slightly higher than the UK average. This is partly because the ‘air conditioning’ system – heating incoming air with the heat from the stale outgoing air – needs fans and pumps to power it. And, second, all cooking is done with electricity. (Most UK houses use gas for at least some cooking.) The heating may be carbon neutral because of the wood fire, but grid electricity has to be used. A Level 6 house has to incorporate on-site renewables to cover the complete 4,100 kWh used for appliances, lighting, fans, and pumps.

The Lighthouse uses solar photovoltaic panels to ‘offset’ the electricity need. The economics are, as might be expected, quite shocking. The makers of the Lighthouse have calculated that 4,100 kWh requires the house to have 4.7 kW of solar panels. By 4.7 kW, I am referring to the figure for the total maximum generation from the panel array at noon on a June day. Typically, we can assume that 1 kW of panels generates about 1,000 kWh a year in the English Midlands. So Lighthouse is being a bit generous with its solar panels – it might have been possible to get away with 4.1 kW, or even 3.5 kW on the English south coast. An installation that costs 4.7 kW will cost at least £25,000 (partly because the ridiculously generous German feed-in tariffs are pushing up global demand for solar panels). So using solar panels to avoid an electricity bill of £400 a year (and making the house ‘carbon neutral’) is adding £25,000 to the cost of the house. Working out the full economics of solar electricity in the home is complex but the net return on the investment of £25k is no more than about 5%.

The people attending the Lighthouse seminar liked the idea of carbon neutrality and selling electrons back to the national power network. But the cost of this is enormous – if the panels last 25 years it is may be as much as £600 per tonne of carbon dioxide. When CO2 is trading on the exchanges at about £17 per tonne, it is really unclear why the government is telling us that home generation is the best solution to climate change. Roof-mounted solar PV is, in effect, a requirement if we want to get to Level 6, but is adding 15% to the cost of a house. If, instead, the government allowed housebuilders to invest in local commercial-scale wind farms instead, carbon neutrality might cost as little as a few hundred pounds.

To summarise, let’s look again briefly at the cost of building homes under the CSH, as calculated by Potton, makers of the Lighthouse:

Wimpey Homes
At Oxley Wood on the outskirts of Milton Keynes, Wimpey Homes is developing a large estate of genuinely modern homes. These aren’t conventional houses covered with a layer of eco-bling, they use proper north European construction techniques to provide good levels of insulation and real air-tightness.

Wimpey Homes in Milton Keynes

Oxley Wood is being built with the future in mind. Managers at Wimpey are visibly worried about the cost of the houses. It’s clearly been an extraordinary surprise to see just how difficult and expensive house construction can be. These are people who knew exactly how to put up a brick and block house on a tight schedule and on budget. But today, time after time, they refer to the huge investment they are making at this site, while reassuring us that they believe that the lessons they are learning here are going to help them on future projects. ‘We could have just sat and watched,’ someone said, ‘but we decided it would be cheaper in the end if we grasped the problems posed by the demands of the Code.’

Sales are going reasonably well. 34 homes have been sold and the levels of interest are high. Some of the viewers go away hating the estate – it is totally different in appearance to a conventional new development. And Wimpey people have also found that real eco-nuts have left disappointed. ‘Call this an eco-house,’ said one disgruntled viewer, ‘it doesn’t even have composting toilets.’

Wimpey is keen to say that so far the purchasers are largely well-educated professionals. They like the modern feel and the effort Wimpey has put in to ensure that the layout has the feel of a close-knit community. The roads will look like Dutch or German ‘Homezones’ enabling pedestrians and cyclists to use the streets safely.

Some potential buyers have been worried about the resale values of the houses. Homes that look this different are difficult to value. Local mortgage companies have not been falling over themselves to offer to lend on the estate. Wimpey says it is only achieving prices in line with local conditions – about £220 per square foot – and there isn’t even a small premium to reflect the lower utility bills that the houses will have.

Here’s the crunch. Wimpey gets £220 per square foot for its Level 3 houses. The Level 6 Potton Lighthouse costs £180 per square foot to build (and the self-builder is putting in his work for free). Where is the margin for the builder, and the money to pay for the land? Unless costs change dramatically, the arrival of the Level 6 requirement is going to disrupt the balance between land prices, builder profits, and final prices. My sense is that the most vulnerable element is land values. The painful drive to Level 6 is going to oblige builders to pay less for their land. At a time when the mass market housebuilders are already quietly liquidating small portions of their land banks, the downward pressure on the price of development sites is going to continue.