Microgeneration and the Energy Savings Trust’s Report

The Energy Savings Trust has published a useful analysis of the “interventions” that they see as being necessary to achieve more widespread take up of microgeneration. It is called “Generating the Future” but may be better called “Microgenerating the Future”.

The Energy Savings Trust (EST) say that microgeneration is important because it helps to reduce carbon emissions, diversifies supply reduces wasted energy and helps tackle fuel poverty.

The analysis contains a number of errors in relation to their comments about solar thermal technology and some misconceptions but it is nevertheless the most accurate and important piece of work published on microgeneration by the government or by any quango.  

At the moment in the United Kingdom there are around 100,000 microgeneration installations. Of these installations 80% (by number) are solar water heating systems which are usually the least cost option. Looking ahead forty or so years they expect to see over 53 million microgeneration installations – nearly two installations per dwelling house.  

The report says that solar thermal is cheapest “but has one of the lowest returns in term of carbon saving assuming it continues to be used primarily for water heating in gas connected homes”.

I think that this statement fails to take into account a correct view of “payback”. The models used for calculating payback are simplistic and fail to take into account some factors and take into account some costs of improvement which should not be part of the calculation.   I think that statement is a gross over simplification and is also false about carbon savings.

First, the poorest return in carbon terms is biomass. It simply does not save carbon, it saves fossil fuel. I have written about this and given my reasons elsewhere. Secondly if you use solar thermal to heat water the more water you heat (or the more you and your family wash) the better the carbon savings are; your fuel will be carbon free daylight. Thirdly, at Genersys most of our panels are installed in rural areas displacing oil or electricity, where the carbon savings are more than three times displacing gas. Fourthly, I doubt if the Energy Savings Trust’s estimated carbon savings fully take into account the inefficiencies of existing water heating systems; even in more modern installations of condensing gas boilers you have boilers that do not condense.  

It is interesting that the State of California has recently thought it worthwhile to tax natural gas by 13% with the intention to hypothecate the whole of this tax towards incentives for solar water heaters. California has only marginally fewer people that the United Kingdom.  

I did not intend to dwell on some minor inaccuracies (but I could not resist it) because the report as a whole is extremely valuable and has some very important recommendations, many of which I have wanted to see taken up by the Government for many years.

As I said, this is the first time that we are getting some clear thinking from a governmental body about microgeneration and it is important that we praise it and encourage it.  

The analysis is partly based on a survey of public opinion. Almost everyone (well 80% of those surveyed) thought that renewable energy should be subsidised and 73% thought that renewable energy should be compulsory on new homes.

The Energy Savings Trust points out that scaffolding is a high proportion of costs of install thermal solar and if the panels are fitted as a new building is put up there would be substantial savings of installation costs. Generally installation costs more than the equipment.  

The survey also revealed that the public expect the government to legislate to require renewable energy as well as subsidise it. The government is presently dithering on legislation and has made a big mess of subsidies and incentives for renewable energy. If you look at the present effect of the Low Carbon Buildings Programme, it is not encouraging take up of renewables and does not provide any real incentive.  

The Energy Savings trust identified “key barriers” to the take up of microgeneration. They say these are:- 

  • Cost – mass markets are focused on cost savings
  • Too much of the wrong sort of regulation (planning permission, difficulties with reselling legislation etc)
  • Lack of incentives in the long term for renewable heat that solar thermal brings
  • Lack of information and awareness
  • Inadequate skills base
  • Lack of a framework for positive investment (I am not quite sure what that means)
  • Lack of long term rewards and a price for carbon.

  All this may be true; however, with microgeneration you are selling something that delivers cost savings over the long term – in the case of solar thermal it may take somewhere between eight and twelve years to get your money back, and although the gas or electricity company never give you your money back not every consumer has the mindset to part with his or her hard earned cash for a future benefit.

Everything that the modern consumer is taught, on television and radio programmes, in newspapers and magazines, is buy things for the least possible cost. Never mind the quality, or the long term position, or the harm that is done, always get stuff as cheap as possible. That is why from time to time clothing suppliers are surprised to have it pointed out to them that a factory in the third world making their goods is employing what is tantamount to slave labour. We don’t really car becasue the goods are cheap.

The exception to this rule that you get things as cheaply as you can lies in the purchase of really luxurious goods. A luxury watch will be sold at a huge profit margin, and will not tell the time as accurately as a cheap quartz watch, so the consumers make exceptions for “luxury” or “lifestyle” items.  

The EST concludes that microgeneration is a “lifestyle” choice at the moment, because of its high cost people who want to live a “green” lifestyle adopt it. Well, this is news to me. According to this, Genersys is selling a lifestyle product like a Rolex watch.

Renewable heat, whether for water or space heating, is a commodity technology and that is how it should be regarded. Energy will become so scarce, so precious that renewable heat will be the only way to get heat in the future. We are on a step by step journey to that future.  There are some valuable suggestions in the Energy Savings’ Trust’s report. I am pleased that they are examining most of the suggestions of the renewable microgeneration industry including many that I have made.

I hope that the Government has the strength to make the hard decisions to require, for example, the installation of solar panels on new homes, their installation when a home is re-roofed, their installation when a boiler has to be changed and many of the other suggestions in the report.  Making those hard decisions would bring the government up against vested interest groups – house builders, utility companies and also into conflict with some voters who would question why the government was forcing them to spend what they regard as extra money. This is a harder decision than permitting soem nuclear power stations. I fear that this will be a hard decision that the government will not make, becasue it is a far harder decision tan permitting soem nuclear power stations where the cost to the public is not immediate or apparent.

The report states that it is probably too early to impose compulsion on the householder, in the way suggested. I fear that it may be too late.  

The Energy Savings Trust’s report has done some really valuable work on estimating the level of support or incentives that would lead to high take up of microgeneration and according better energy security lower pollution and lower carbon dioxide emissions. A 30 per cent grant encourages both solar thermal and wind by 2020.  

 “With a £200m cap, over 180,000 units of solar and almost 120,000 units of wind would be installed by 2020. A much higher cap of £1 billion is not used up, because the limiting factor is the number of consumers willing to buy at that price. EEC grant levels do encourage some uptake, particularly of solar thermal.”  

We should put those figures into context; £200 million is just a bit more than Members of Parliament spend on their expenses each year. £1 billion would keep the BBC working for about ten weeks.  

The EST also looked at my favoured ways of providing incentives – tax breaks. They conclude that annual subsidies in the form of a council or income tax reduction are an effective mechanism. Quite modest tax breaks – not more than £200 per annum, are enough to stimulate uptake very significantly. Their own research shows that tax incentives are more popular with the public than direct grants. The EST recommends that Council Tax savings be introduced for those who install microgeneration.  

There are some very valuable recommendations about renewable heat. Renewable electricity gets several subsidies through the renewable obligation and renewable credits. Heat does not have these benefits. The report suggests and recommends a way to put renewable heat on a more equal footing with renewable electricity. This would reduce the price of solar thermal systems by around 30%, according to the Energy Savings trusts’ calculations.  

They also suggest that a new Microgeneration Obligation should be put in place to allow fossil fuel energy suppliers to claim the value of Renewable Credits that their customers install. This type of scheme works well in many parts of the United States, where the incentives provided are significant, and where they apply to both renewable heat and renewable electricity.  

I must say that I am rather impressed with the Energy Saving Trust’s work. It is research based, provides some excellent recommendations and we now seem to be in a place where the Energy Savings Trust and I are singing off the same Hymn sheet. It makes me have hope for the future and I have to hope that the Government will start implementing their recommendations without delay. You can read the report at http://www.energysavingtrust.org.uk/uploads/documents/aboutest/MICRO.pdf