Sharon Johnson:
We have a lot of businesses in this sector who are small, who haven't been able to grow because of the nature of the sector. And what we really need is for those businesses to have more confidence to invest.
Ellen Fraser:
Hello and welcome to Baringa's Energy Innovators Podcast, where we help you make sense of the energy transition's greatest challenges and its opportunities. I'm Ellen Fraser, a partner in our energy and resources team.
Rebecca Teasdale:
And I'm Rebecca Teasdale, one of Baringa's decarbonization experts. In this podcast series, we speak with leading industry experts to understand their innovation, ideas, and trends in the energy transition.
Ellen Fraser:
And today we're joined in a slightly bustling office by Sharon Johnson of AgilityEco, a mission-led B Corp company providing specialist turnkey retrofit programmes nationwide to help our partners meet their obligations with shared goals of reducing carbon emissions.
Rebecca Teasdale:
Sharon, to kick us off, can you give us a bit of an overview of AgilityEco?
Sharon Johnson:
Yeah. Morning both. Sharon Johnson, AgilityEco MD. AgilityEco is a business that is a specialist in domestic home retrofit. So we have been working since 2013 in the market upgrading consumers homes, making them warmer and more affordable. And we also have a part of our business that provides energy advice to consumers and helps them understand how to reduce their costs at a really difficult time for them.
We're a mission-led business, so last year we helped 50,000 households to reduce their energy costs. We work with 173 different businesses because we're a largely networked business and we abated 172,000 tonnes of carbon. So we're really, really proud of our impact that we have. And we've been in the market for a while, so we've got a fairly strong view that this is a market that is going to grow and that's got a lot of untapped potential.
Ellen Fraser:
That's amazing. And it's so lovely to hear that real kind of commitment to a purpose and a cause in that, Sharon. You mentioned trends just in terms of you seeing the market growing. What else is happening in the market for you more broadly around AgilityEco and the space that you operate in?
Sharon Johnson:
I think that the two big themes remain the same, actually. Affordability is as big or an even growing challenge. You've still got many households, in fact, most households haven't got money to spare on their energy bills. So last year we saved about 800,000 pounds off lifetime bill savings for customers that we supported. But also the impact of that on healthcare. So for example, a cold home causes healthcare impacts. So there's about 15 million pounds of impact that AgilityEco was able to have, the knock-on effect of making homes warmer and people being just better.
And our second big theme obviously is net-zero. The challenge is not getting any smaller. We've got 16 million households in GB that are below EPC Band C and need to have an upgrade. So there's a huge amount of work to be done and actually the sector is still subscale to achieve that outcome.
Rebecca Teasdale:
I mean, as you say, there's a lot to be done here. What do you see as the key challenges facing that warm homes transition?
Sharon Johnson:
So I think there are a couple of challenges that we should talk about. The first is on the demand side. So obviously it's a challenge to get consumers to engage in their energy reduction. And it's not just as simple actually as the one-off cost of doing an upgrade, it's about making this market more accessible for them.
One of our clients, Oxfordshire Council, has done some amazing work packaging up a home retrofit, helping consumers to understand what measures would be suitable for them and where they can go to get them done, which is obviously a big question for them sometimes. And also the savings and the financing to make that all come true.
So I know it is an issue for consumers to find some big lump sums of money to upgrade their home. I think that's more important perhaps than a holiday. But actually there's something about how they engage and having somewhere to go. Because at the moment, most of this market is work that's done with government funding to help those who are most in need. What we really need to see happen is for consumers at large to start to establish a bit more pull for this market.
But the demand side is one issue, but actually the supply side, the capacity, as I said just now, we are still below scale in this sector to meet demand. So as it starts to calm, we have to make sure that there are businesses in this market that have got the right capability and skills, the right attention to detail and quality to meet that demand and start to establish a virtuous circle of the demand and supply. So I think that's the challenge.
Ellen Fraser:
Yeah, thanks so much, Sharon. And I guess there's so much dependence between the two, aren't there? So the demand effectively then breeds the supply chain and gives that the certainty to grow around ongoing demand. So I can see absolutely why that virtuous circle is so key.
Sharon Johnson:
Yeah. And we have a lot of businesses in this sector who are small, who haven't been able to grow because of the nature of the sector. And what we really need is for those businesses to have more confidence to invest.
Ellen Fraser:
Which brings us on beautifully to the report which was commissioned. So Turbocharging the Benefits of Great Britain's Home Energy Efficiency Sector report. Can you talk us through the purpose of that report? And obviously you did it with Baringa and what were the goals of doing that piece of work?
Sharon Johnson:
So it was actually a little bit of a change for AgilityEco because we're traditionally focused very much on the fuel poverty sector where we serve. We were thinking about, well, one of the insights from the report is how much private sector investment is required in order to match public sector investment to make this sector really go big. And actually, AgilityEco has been through a sale process in October '23 and we got thinking about, well, what has to be true in order for those investments to come, for those businesses to grow and to start to feel that they can get bigger?
If you're an investor, some things about this sector are great. So the runway of 16 million homes to go after is hugely attractive. But you also want to see that there is going to be the demand in the near term and there is a consistent demand for it to be met. And at the moment, as I said, mainly this is driven by government policy that's been applied to net-zero or to affordability challenges. So the way the government behaves and the funding that's available and the smoothness or not of the work being done is going to be a consideration for any investor looking at the market. And that certainly could be quite off-putting.
So what we were interested in is how do we go from where we are today with interesting but not stellar amounts of work being done into the future where we are really getting through those 16 million homes and delivering all the benefits, which I know Becky is going to talk about? And how do we make that jump in the capacity side? And what we've seen for Agility is immediate benefits.
So M Group bought us in December '23 and it's really helped us to turbocharge our internal delivery. We've got more technology, we've been able to recruit and train more workers, which obviously is more jobs. We've done an acquisition and we've invested in the quality of the work we do and the geography that we're able to support people in.
And I probably shouldn't be saying I want more competition, but I do want more competition. I think we need investment to really turbocharge the sector, which is what the report was really focusing on is how do we do that?
Ellen Fraser:
Yeah, wonderful. Super. Thank you. And somebody asking for more competition, as you say is quite curious, but I can absolutely see why there's a benefit to that in the market.
Sharon Johnson:
Yeah.
Ellen Fraser:
So yeah, absolutely. And Becky, help me understand how did Baringa approach our part of that report?
Rebecca Teasdale:
So there's a lot of negativity in this market around energy efficiency and home upgrades, and we really wanted to change the narrative on this. And so the focus of this report was very much around drawing out those huge, significantly large societal and economic benefits, and just framing the narrative in a different way to how it is today.
So we really draw on the fact that actually there's 140 billion pounds benefit case to be had here if we upgrade all suitable homes to EPC C and above. I mean that's a pretty significant number. So the benefit to GB PLC is one that we shouldn't be walking past and ignoring that with 16 billion pounds of public funding, that can unlock 49 billion pounds of benefits in the next five years.
So again, these are some really significant numbers, but to do that it really needs that political stability. And so we drew on some analysis already in the markets, some of the great work we've done previously with systems advice in this space. And then we spoke to investors, to Sharon's point, to really understand their perspectives, what are they looking for? What is putting them off investing in this market? And that political stability was coming through really strongly.
We need to de-risk that to ensure that long-term investments. And some of the analysis that we did shows that if you track the energy company obligations spend over the last few years and you look at when a government made an announcement that perhaps they were unsure about the policy or there was a change in how it was going to be run, the impact that had to the instal numbers. And so how closely aligned it is, if there's a change there, you will see that resulting impact on the market. And that was really interesting just to see actually how important that political stability and the long-term policy framework really is there.
But for me, some of the really important benefits that we can't walk past, I mean I'm going share some figures with you now, but it's difficult to put a price on these. But 670 childhood asthma cases could be avoided if we upgraded these homes, 570,000 child and adult mental health cases. That impact to the NHS could save them 600 million annually there through these homes being upgraded and a 5% cut to carbon emissions as well. So you're talking some really big numbers here and some real impactful stuff. And that for us was really important as part of the report to draw out and really get people thinking in a different way and changing the conversation.
Ellen Fraser:
Yeah, it's really interesting because it's not just then about the financial outcomes, but the health and wellbeing benefits. And the cascade that that has through the rest of society is obviously pretty significant. Wonderful that you would hope for stability from government, but the one thing that government probably can't guarantee is stability. So in the absence of that, I guess what commitments would you look for from government to make sure that everything possible is done to really get behind these initiatives? The 16 billion to 49 billion pound equation sounds really compelling, but there's so many other draws on that 16 billion, it's hard for them to make that priority call, right? So I guess, Becky, coming to you first, what would you ask for? And then Sharon, I'll come to you as well.
Rebecca Teasdale:
I guess what it means in terms of jobs, in terms of the impact to uplift around income and VAT, to the NHS. We often look at this as a problem for energy people and energy people only and it's so much bigger than that. And my ask is that they need to frame this in a different way and actually starting from a benefits-first position rather than a cost or all that kind of negativity that we often see. I think it will be easier then, to make some of those bigger calls that they are holding back on today.
And I think that those continued steps around actually maybe a long-term policy framework is difficult. I know the industry's calling for 10 years for an energy company obligation and I can definitely see the benefits of that. But actually even if that can't be done, being more timely in coming out with the consultations on the ECO5 that we're hopefully expecting after this current obligation, which ends in March. Not holding back on those aspects, giving a bit of certainty, updates to the market, letting them know where they're at and what they're thinking, I think can help people make better investment decisions.
Ellen Fraser:
Yeah, super helpful. So certainty piece and that real clarity around messaging and holistic messaging, not just about hard numbers if you like.
Rebecca Teasdale:
Yes.
Ellen Fraser:
Yeah, perfect. Thanks. Sharon, anything to build on that from your perspective?
Sharon Johnson:
Yeah, I agree with Becky and I think it's really great that this government is thinking about the energy sector in terms of jobs and the economy as well as all of the other reasons that we have to have a thriving energy sector. And I think we could apply the approach that's been taken to generation, which is this is an amazing opportunity to create new jobs and to improve the economy, just need to think about it in the same way. So there's the benefits of energy efficiencies, the benefits of net-zero and affordability, but actually think about it as a way to drive our economy.
And when you get down into the detail, I think that the Warm Homes Plan that government's published is fantastic, really great, love the intent there. I love the way the minister is showing up and really showing some conviction. What we need to see now is for that to translate into the next level of detail. So the funding has been earmarked and confirmed to do the work. What we need is for it to actually be put on the ground, the detail of how it's going to work, the detail of the eco scheme that needs to mobilise now very quickly, more money to be put into warm homes, local grant. And local authorities are really now getting behind their schemes to help their residents. It would be fantastic to see more money come in this first year because all of these big projects we know are all about developing momentum.
And most importantly is the conviction and the consistency of the money coming. So I think we do need a 10-year runway. We need to give that certainty to businesses because otherwise you're in the stage where I know that certain businesses are at the moment who are very dependent on eco and have a lot of workforce, they're thinking about, well, what am I going to do with that labour in the next quarter?
Ellen Fraser:
Does that drive more of a contract market because people aren't prepared to take permanent staff on, for example?
Sharon Johnson:
Yeah, I think you do end up with more subbed labour for sure, and with that comes a more difficult challenge to make sure the quality is correct. So if you can have a world where businesses are investing, they're recruiting themselves, they know the work is there and they're going to be able to build momentum and keep it, then we'll see a completely different sector. So I think that's the big ask is can we now follow through the great intent that's been set and with the conviction and with the funding? And I'm sure we will see businesses like Agility and others really invest to grow and hopefully new entrants as well into the market.
Ellen Fraser:
Yeah, wonderful. And my next question was all about looking ahead and to some extent you've looked ahead already, which is wonderful and it's very clear on the asks that you would have for government. Have you seen progress since that report was published? Have things moved since then? Did you see a difference off the back of it?
Sharon Johnson:
Yeah, I think that the spending review has now been navigated and the money has been now firmly allocated. So that is great news. We are slightly, as we record this podcast, in a little bit of a holding pattern and it might be that in the next few weeks we'll see some white smoke and the clarity will come. And I really hope it does because we're certainly geared up and very enthusiastic about the next stage.
Ellen Fraser:
Yeah, wonderful. Super. Thanks so much. And overall, Sharon, thanks so much for sharing your views with you. Really, really positive to hear what's been going on a bit more about the market, what it's there to achieve and your asks of government as well. So yeah, Becky, any closing reflections?
Rebecca Teasdale:
I think you've brought up some really great points today, Sharon. And for me, I particularly draw upon that importance around driving the economy. That consistency and momentum, it's really needed to see this market move forward. I think as well, you touched on the partners and the role of the local authority. I think that's so important. And we run at Baringa, three times a year, a green building and transport forum, and we got together and we talked about this report at the last one. And I think with the right environment and framework, we heard from Oxfordshire Council, one of AgilityEco's partners actually, that this can work, this can be done and brought it to life.
And I think just carrying on with that great work that you're doing, I think is really helpful. And continuing to collaborate and bring people together I think is going to be really important. So I'm really glad that you pulled those points out. Thank you.
Ellen Fraser:
Amazing. Super. Thanks very much for joining us. To our viewers and listeners, if you enjoyed this episode, please do subscribe to the overall series and keep an eye out for more conversations like this on new innovations within the energy space. Until next time, thank you so much for listening and please do watch the online version of the Innovators Podcast as well. Thank you.
