Environmental upgrade agreements are on the cards as part of the North Sydney Council’s program for reducing greenhouse gas pollution and the cost of living in apartments.
The council’s Futureproofing Apartments program puts strata communities in front of a “rainbow selection of specialists” to bring building efficiency upgrades to fruition.
Following smaller trials of the program with other councils and state governments, North Sydney Council engaged strata energy efficiency company WattBlock as part of a scale approach over four months to assist 40 apartment buildings in environmental upgrades.
This involved education, benchmarking, analysis, technical expertise, innovative financing solutions and project execution.
According to Brent Clark, chief executive officer and founder of WattBlock, educating strata communities about the benefits and possibilities of environmental upgrades is the first challenge.
He said apartments looked at renewables, such as rooftop solar, as well as hot water heat pumps, LED lighting and other upgrades.
The program also leveraged NABERS for Apartment Buildings ratings. He says this rating scheme is important to provide a benchmark to measure buildings from.
“Education is key around what you can do, NABERS gives you a tangible benchmark for showing what the impact of doing the project would be in terms of the star rating.”
For some clients, the modelling showed that by installing LED and solar the apartment building would go up by two stars.
But for strata communities that can’t afford the upfront capital cost, the next challenge is identifying attractive financing options to enable project execution.
He said a number of alternative financing models were considered but EUAs have emerged as a serious contender.
Known as environmental upgrade finance, the fixed-rate, long-term loans can cover up to 100 per cent of the capital needed for energy efficiency upgrades.
Critically, loans are repaid quarterly through council rates, meaning the chief financial beneficiary of the upgrade – the tenant – absorbs the cost of the upgrades rather than the landlord, solving the split incentive problem that’s often a barrier to these types of building upgrades.
The payback for tenants is savings on energy costs.
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Although “cash flow positive from day one”, EUAs have never really taken off in NSW. In fact, Mr Clark isn’t aware of any participating NSW council schemes that have used EUAs since 2014.
The feedback the North Sydney council has already received is that EUAs need to be simplified for a residential strata audience.
He says the other challenge with EUAs is although they can be done for loans as little as $10,000, the ideal loan size is larger than that. This is because to get a council set up and operating with EUAs, you need some volume coming through to justify the extra administrative work.
“That’s the hurdle that the council is engaging with now.”
Mr Clark says that although councils including City for Sydney and now North Sydney are embracing NABERS for Apartment Buildings, there’s still a long way to go before we see widespread environmental upgrades and energy efficiency in strata buildings.
“The biggest challenge is in the wake of the evacuations of buildings like the Opal tower and the one in Mascot, the attention is on the core structural stability of residential strata.
“But the developers that didn’t pay attention to sound structures in residential strata also likely paid no attention to solar and energy efficiency – if the buildings aren’t built to a high standard then you can’t expect them to be operating at a high standard.”