INSIDE INNOVATION: Tallarna
What is your elevator pitch?
Tallarna addresses financial scalability in the building decarbonisation space. We do this by introducing something novel into the very familiar project planning process. Namely, translating retrofits’ technical risks into financial ones using software to attract capital at scale. Our USP is that we standardise the route from engineering to money.
We have an AI platform, KESTREL, that models buildings and reflects energy efficiency and generation scenarios. Our modelling uses an accredited approach that engineers are comfortable with. We took this as our starting point to then apply and analyse a range of retrofit uncertainties which influence performance. From these scenarios, we generate risk metrics which make sense to both insurance companies and capital providers.
The suite of solutions KESTREL suggests are guided by the user and create kWh savings which result in financial savings when applied to the unit price. Our A-rated insurance partner uses KESTREL to guarantee these savings; in turn, enabling us to facilitate access to efficient, ESG project finance for thousands of retrofits at a time.
If building owners can’t repay the works themselves, which is currently very much the case in the social housing sector, then the only way to finance them is through the savings on the bill. Our model uses a portion of the savings to service the finance over a 20–30-year period, with the rest left with residents from day one. Under the current price cap, social housing residents get roughly £200 off their energy bills a year, as well as a more comfortable home.
How did your start-up get to where it is today?
Our founders have deep experience in the real estate, financial services, and technology sectors. We have tried to bring these different disciplines, and others, together in our product because you need that to make emission reductions possible.
We believe standardisation and risk management in retrofits is needed to enable scalability and provide the impetus for investment. There’s no point retrofitting 50 homes if that can’t be replicated across an entire portfolio of 30,000. To do this, we’ve taken a technology-led approach – with software underpinning project identification, design, insurance, and funding.
In terms of developing our solution, we’ve found participating in accelerator programmes incredibly helpful. This has included joining SynerLeap, ABB’s corporate partnership for start-ups, which has a global remit.
What does innovation mean to you?
Innovation for me is about taking a new way of looking at an existing challenge and combining different, established solutions from different places to solve it.
The way we thought about it is that there is clearly a very tried and tested route between the building owner who needs to get stuff done and the suppliers they go to, to make that happen. However, then there is a funding gap that needs to be filled but for many reasons that ESG financial fire power cannot get to the right place or is priced too high. So far, building owners have been able to reconfigure short-term budgets to overcome this but the UK social housing sector has a £96 billion retrofit funding deficit. No amount of restructuring, let alone government grants, will cover that.
So, we decided to repurpose existing methodologies from other sectors to link retrofits to efficient, large-scale capital. Our new way of looking at the existing retrofit funding challenge finds the commonality between different stakeholders needed for project execution and plugs them all together.
How hungry is the built environment for innovation?
It depends on who you are talking to, which end market, and which stakeholder group they represent. Demand is currently strongest from those real estate owners trying to reduce operational costs for their tenants, which in turn avoids a significant discount on their stock. This is an increasing priority in the face of rising fuel poverty and strict legislative energy efficiency and decarbonisation deadlines.
But this motivation needs to be backed by a financial reality. Getting money to landlords is the part we solve. And now, we’re seeing all parties beginning to align to make large-scale emission reductions possible.
What needs to change to help encourage more innovation?
In our very specific case within the social housing arena, there are several legislative issues. We are seeing on-the-ground difficulties in getting access to homes from residents – even though retrofits result in day one bill savings for them.
Understandably, those facing the immediate reality of choosing between heating and eating can see retrofits as an unnecessary bother, as the benefits on completion don’t help their here and now. While greater public education on retrofit benefits is needed, there also needs to be a reinterpretation of the landlord-tenant relationship. Retrofits must be considered part of landlords’ duty of care, and they must be allowed reasonable access to homes to carry these out. Having a warm home is as important as solving damp or fire risks and must be treated as a priority. This would be in keeping with the government’s plans around decarbonisation, energy efficiency, and fuel poverty.
While many are keen to see retrofits happen, the scale of funding requires on-bill finance which is not easy from a structuring perspective in today’s legislative landscape. Greater collaboration needs to happen between the utility industry, landlords, and residents to facilitate this and maximise flexible repayment methods.
What are the biggest challenges you have faced as a start-up?
Having formed our value proposition, strategy, and product, the biggest challenge has been creating enough headroom to scale. Finding the right people and keeping them interested is critical. And fundraising, sales, marketing, and stakeholder management all need to happen in a way that remains consistent with your vision. While this is a difficult juggling act, it’s vital to maintaining your unique value proposition.
What’s your advice for new innovators and start-ups in the built environment?
Be incredibly focused on what your value proposition is and make sure you are testing it with the market. Innovators need to ensure they have total clarity of the end-to-end customer journey, where their product fits, and where the integration points are with partners.
In our market, an end-to-end solution is difficult to achieve as a single entity but equally, something customers want. Partnerships are a really good way to take advantage of the specialist and segmented nature of the building innovation space, giving customers an end-to-end option, while being able to focus on your strengths.
What’s next for your company?
We’re at an exciting stage of growth across all functions, from product development to sales.
In our R&D roadmap, we are looking to reflect embodied carbon. This will provide an interesting and powerful overlay to the decision-making and funding process. While reducing operational carbon needs to be the priority in the retrofit space for now, as it accounts for buildings’ ongoing impact, considering embodied carbon is a key next step for us in mitigating the climate crisis.
Commercially, we are executing on a major new retrofit project in the UK. Our plan for the medium term is to drive the execution of retrofits on several hundred thousand social homes. Part of this involves forming partnerships at the local government level where scale and attracting significant private finance is being centrally managed.
Currently, we are expanding our strategic partnerships to address other end markets in the commercial and industrial space, and engage with other geographies – like Europe and the US. We are also working with partners across the building value chain to facilitate knowledge sharing and accelerate retrofit execution.
I am personally excited to see Tallarna continue to grow from strength to strength, making a tangible difference in addressing the climate crisis.