Demand Aggregation Finance (DAF) is an innovative solution to help address the UK’s national retrofitting challenge. DAF uses an online platform to leverage economies of scale and connect households with attractive financial products that can bring down the upfront cost of energy efficiency and clean heat measures for consumers. Typically sponsored by local authorities, DAF schemes allow local residents to register interest in particular retrofit technologies, such as solar PV or heat pumps, to form a group with sufficient purchasing power to bulk order and mass install low carbon technologies.
Demand Aggregation Finance can directly tackle many of the major financial and non-financial barriers for property owners on a retrofit journey. In creating a mutually beneficial environment for manufacturers, installers, local authorities and constituents to cooperate, a DAF scheme can promote supportive place-based partnerships.
There are benefits to all stakeholders involved in Demand Aggregation Finance.
Within a supportive community network, consumers are able to access cheaper products and financing with a clearer, easier process.
A Demand Aggregation Finance scheme creates guaranteed and sustained demand for products and installation. Sustained demand creates a clear skills pipeline in a local area, which can help boost confidence in retrofit career pathways.
Decarbonisation of heating is critical to achieving the net zero targets that many councils have set. A guided and supportive route to help constituents on their retrofitting journey can be a valuable tool for councils.
For financial institutions, aggregating demand for finance in one location can simplify the process and, much like for manufacturers and installers, create a pool of guaranteed demand that finance providers can benefit from.
To accelerate Demand Aggregation Finance in the UK and embed DAF as an integral part of the UK’s toolkit for home decarbonisation, the Green Finance Institute is collaborating with the finance, manufacturer, retrofit, and legal sectors, along with local authorities. To achieve this goal, we are collaboratively developing a ‘playbook’ for councils seeking to launch a DAF scheme in their area, while also fostering partnerships with councils to pilot DAF schemes in their local area.