Optimised Retrofit Programme 3: guidance 2022 to 2025

The following guidance is produced to assist applicants submitting bids for funding under the Optimised Retrofit Programme (ORP). It has been developed to help inform the applicants about the type of retrofitting the programme aims to financially support now and in the future.

ORP 3 is for the period of 2022-2025, the main theme of the programme is Affordable Warmth & Decarbonisation achieved through the best path for each individual home.

Registered Social Landlords and Local Authorities have received a funding allocation from Welsh Government, that allocation is only an approved budget once an approved business plan is in place (see proforma). Landlords have also received an indicative funding value for the following two years (2023/34 and 2024/25). The funding allocation has been generated on a formula approach of stock numbers based on the figures from our 2020 data/census.

Recipient organisations will be required to complete the proforma and to conform to the outlined format of the proforma. Submitted proformas will be considered by Welsh Government and any areas of clarification will be raised with the recipient organisation. When the Welsh Government are content the proforma is completed and meets the requirements set out below, a grant offer letter outlining funding and grant terms and conditions will be sent to the recipient organisation.

Successful projects will be monitored and evaluated, with recipient organisations required to adopt an open book approach as a condition of accepting the funding. For example requests for prime documents such as evidence of defrayment, updated actual to forecast models, and project outputs could be requested by Welsh Government throughout the length of the programme.

In 2019, The Better Homes, Better Wales, Better World report was commissioned by Welsh Ministers to examine how homes in Wales could be decarbonised. The recommendations were accepted by Ministers including a commitment to pursue a residential decarbonisation programme.

In response to the recommendations, it was agreed that an ‘Optimised Retrofitting’ approach would be adopted here in Wales.

From this commitment and approach the Optimised Retrofit Programme (ORP) was established in 2020. Over the past two years a range of projects across the social housing sector have been supported and c £70m of funding invested. The ORP 3 phase of funding seeks to build on this excellent base but extend its reach to ensure that all social landlords in Wales engage with ORP over the next 3 years.

In taking forward the decarbonising of existing homes we acknowledge that retrofitting existing homes is a complex and iterative process, and homes are likely to need to go through several stages of retrofit work to reduce their carbon incrementally, embracing innovation and experimentation over time.

It has always been our intent that our Optimised Retrofit Programme takes a staged approach, using the social housing sector, and investment in it, to lead and inform retrofit for other tenures of homes. ORP is intended to act as proof of concept for approaches to both fabric and technology retrofit and establish a firm evidence base on which to develop our longer term retrofit strategy.

Our focus for ORP 3 will continue to be on optimising the thermal and energy efficiency of Welsh social homes. In deploying our optimised retrofit programme, we will maximise air tightness, eliminate thermal bridging, optimise insulation, solar gain and natural ventilation so reducing heat loss and making homes ‘fabric ready’.
Individual homes will be assessed with building passports setting out their journey to zero carbon and will be retrofitted in a bespoke way to lower carbon emissions. We will incrementally extend our optimised retrofit approach beyond social homes, to the private rented sector and eventually owner-occupied homes as ORP 3 progresses.

Key to ORP are the following overarching principles:

• Deliver the programme in ways that align the design and delivery of affordable housing with the seven goals of the Well-being of Future Generations (Wales) Act (WFGA)
• Deliver improved social, economic and wellbeing outcomes for tenants and communities
• Demonstrate benefits associated with new ways of retrofitting, with a view to encouraging wider uptake
• Harness opportunities to deliver jobs, skills training, and develop local industry, embracing foundational economy principles. Supporting wider regeneration and economic development of indigenous Welsh supply chains and the use of materials and resources, where possible and within the current procurement regulations and rules
• Contribute to Welsh Government policy objectives around reduction in waste and circular economy, and
• Support public involvement by disseminating key findings and maximise learning.

Further details regarding ORP and contextual information on wider developments can be found on the Welsh Government website

Optimised RetroFit Programme | GOV.WALES
Welsh housing quality standard | GOV.WALES
Welsh Housing Quality Standard 2023 | GOV.WALES
Net Zero Wales | GOV.WALES
Climate change | Sub-topic | GOV.WALES

The following key dates for ORP Year 3 2022-23 should be noted:

The objectives of Optimised Retrofit Programme are as follows:

1. 1. To support social landlords to align with the ‘Affordable Warmth and Decarbonisation’, elements of Welsh Housing Quality Standard 2023 as the Welsh Government and social landlords work towards establishing a new standard.
2. To support social landlords to approach the decarbonisation of homes enabling underpinning factors to be addressed such as skills, procurement, finance models and material selections.
3. To support social landlords to embrace a test and learn approach to decarbonising homes, adopting a risk appetite which matches the innovative and entrepreneurial activity required to decarbonise effectively and efficiently.
4. To support the development of appropriate approaches to decarbonising the private rented and owner occupier sectors.
5. To support social landlords to improve affordable warmth by providing homes which are more energy efficient and cheaper to run.

1. Social landlords are required to undertake retrofit measures to homes using PAS 2035 (PAS 2035:2019 Specification for the energy retrofit of domestic buildings).
    
2. Social landlords are required to install Environmental Sensors compliant with, ‘Optimised Retrofit Programme (ORP) 3 Environmental Sensors & Intelligent Energy System (IES) Performance Specification, Version 3.0’ (annex 1)
    
3. Social landlords are required use existing information and focussed survey data to develop a Whole Stock Assessment for their homes. The assessment should set out current rating for affordable warmth and carbon emissions across their whole stock.
   
   A whole stock assessment will output modelled current affordable warmth rating and carbon emissions for whole stock.
   
   Social landlords should produce a Target Energy Pathway for each home undertaking retrofit measures in ORP, setting out how that home will ultimately achieve targeted levels of affordable warmth and decarbonisation.
   
   To note – further guidance will be sent on what is required for both the Whole Stock Assessment and the Target Energy Pathway in due course.
    
4. Social landlords are required to report on number of premises receiving retrofit measures and type of intervention used by LA
    
5. Social landlords are required to give evidence of your commitment in supporting your supply chain and the skills required for the decarbonisation of homes. An aspect of this being current skills as well as future needs for the decarbonisation of homes and the draft skills matrix that outlines current Welsh Government skills funding. To therefore report to Welsh Government on the experiences in procuring products and services.
    
6. Social landlords are required to report on additional funding streams that are applied for that relate to retrofit activities which includes own contribution and other financial streams.

1. All Social Housing landlords and LSVT’s applications should be able to provide a signed works contract by 3rd March 2023 containing a start on site date no later than 30 April 2023.
    
2. All Local Authorities must be able to demonstrate defrayment and/or activity taken place for the financial year it is incurred to be able to claim the funding within that financial year and the submission should reflect this (as per correspondence email sent 09/09/22) If the Local Authority cannot fully defray the 2022/23 expenditure within year you are required to inform us on how much more funding would be able to be utilised in 2022/23 via displacement.
    
3. Welsh Government reserve the right to amend scheme acceptability dates and requirements. These will be discussed directly with successful scheme applicants at an appropriate time.
    
4. To support social landlords to fund works that are in addition to their current ‘Repair, Maintain and Improve’ (RMI) programmes and includes not bringing forward from RMI from futures years to use with the grant Typically, these programmes are currently aligned around existing WHQS 2008 standard. For example, only enhancements to windows and doors beyond WHQS standard can qualify as an eligible cost.
    
5. Eligible capital costs are costs that can be directly linked to the programme such as insulation, heat pumps and other interventions. Eligible revenue costs are costs that can also be directly linked to the programme such as direct labour cost.
    
6. Indirect staffing costs can also be eligible if shown to be associated with the programme and under the total grant threshold of 10%. In addition, programme management fees are also eligible under the total grant threshold of 10%. This can be used either “in house” or for third party assistance.
    
7. Monitoring systems, IES’s and survey fees are also eligible costs as there will be no specific third-party intervention under this programme.
    
8. VAT (Value Added Tax) applied on expenditure incurred will only be considered as eligible expenditure if you are unable to recover the VAT within your own taxation rules.

Welsh Government intends to build an evidence base of what works and what doesn’t, to inform future policy and investment decisions.

Basic evaluation requirements for projects are set out in the OBC and will confirmed in the Grant Offer Letter awarded for successful projects. All successful projects will be required to participate in evaluation exercises as a condition of grant. Specific additional evaluation may be commissioned in order to investigate an individual scheme’s innovation focus, and the nature of this evaluation will be discussed and agreed on a scheme specific basis. Timely provision of data is also a condition of the funding. After initial analysis the data collected will be publicly available, to note this will be published on the ORP webpage and will anonymised. We may also require and support the development of case studies.

8.1 Submitting applications

Applications should be sent electronically to: OptimisedRetroFitProgramme@gov.wales

8.2 Compliance assessment (this is an estate wide application so no need for multiple submissions)

Applicants should note the following:

• A fully completed application form and any necessary attachments
• Applicants have committed to meet all criteria set out on the application form
• Applicants have committed to participate in the monitoring and evaluation of funded projects.
• Applications must meet State Aid eligibility requirements. This will be verified by Welsh Government.

Welsh Government will request further details, additional information or/and clarification questions as necessary to assess and approve the OBC and applicants are expected to respond to these requests in a prompt fashion.

The proposals will be assessed against how they align with the general aims and objectives of the optimised retrofit approach and the requirements set out above.

Applicants may be asked to provide additional information or/and clarify submissions as outlined above. Applicants will be notified by Welsh Government officials of successful proposals and/or caveated proposals prior to grant offer and award.

9.1 ORP grant offer

A grant letter will be made following the successful completion of all the checks and processes referred to above. A proposed payment profile must be submitted with the submission

Welsh Government support on all publicity, press releases and marketing material produced in relation to the project, as well as on site during development must be acknowledged. This includes site hoardings. Such acknowledgement must be in a form approved by Welsh Government and must comply with the Welsh Government’s branding1 guidelines.

If you would like further advice or information about the ORP, please email Optimised RetroFit Prog: OptimisedRetroFitProgramme@gov.wales