Can market transformation approaches apply to service markets? An investigation of innovation, learning, risk and reward in the case of low-carbon housing refurbishment in the UK

Panel: 5. Saving energy in buildings: The time to act is now

This is a peer-reviewed paper.

Author:
Gavin Killip, ECI-CREDS, University of Oxford - Environmental Change Institute, United Kingdom

Abstract

Market Transformation (MT) has a long history in product markets, improving the energy efficiency of stocks of energy-using appliances through research, minimum standards, energy labels, incentives, procurement, competitions and stakeholder networks. Attempts to apply MT to buildings have failed to fully take account of the difference in nature between appliance markets and buildings, most noticeably in relation to the refurbishment of existing buildings, which is inherently labour-intensive and bespoke. Products and materials are used in transforming buildings, but the tasks involved and the resulting energy performance are related to service quality at least as much as to product quality. Disappointing results from compliance checks confirm that quality of service delivery remains too low.

Case studies of low-carbon housing refurbishment in the UK reveal important processes that need to be understood and accommodated in policy design if MT approaches in this service market are to succeed. These include the sources of innovation in project-based industries; methods and reasons for acquiring new skills and knowledge; technical risks associated with doing low-carbon refurbishment work; and the role of policy in simultaneously stimulating supply and demand. Much closer alignment is needed between training, standard-setting and compliance checks to bring design and observed performance closer together. No institutional infrastructure exists for such an enterprise.

In theory, MT principles can be applied to buildings, but each principle needs to be re-interpreted to take account of the markets in question. This is a significant challenge for the capacity of policy-making institutions, just as it is a challenge to established industry practices to achieve the necessary quality of workmanship.