ECO scheme – carbon reduction or wealth redistribution?

Andrew Eastwell, BSRIA CEO

Andrew Eastwell, BSRIA CEO

The issue of retail energy prices is now THE political hot potato.  The invisible green taxes attached to household energy bills have suddenly become glaringly revealed and politicians of all hues are now looking at these supplements as serious vote losers.  But are they such a bright idea anyway?

The question really is about the use of hypothecated funds harvested from energy bills and used to create a kind of wealth redistribution in favour of energy-poor households.  Under this scenario there is a transfer of wealth from richer households to improve the lot of lower earning households by improving the energy signatures of their homes. The ECO scheme is not so much a carbon reduction scheme as a wealth redistribution tool.   The scheme does however have the twin benefits of deriving a relatively secure revenue stream and, by increasing the costs to “donor” households, acts as an  additional incentive for them to be efficient with energy too.

The problem, as always, lies in the continued confusion between issues associated with energy (and cost) and the release of carbon.  If carbon is the real enemy (as I believe it is) then this scheme is at best sub-optimal.  This is because although renovation of homes will undoubtedly improve the comfort of energy-poor households there is little compelling evidence to me that the costs involved (including the not insubstantial cost of administering the schemes) provide the biggest carbon reduction bang for the buck.  This is partly because improvements in dwelling performance are likely to be taken as comfort gains rather than energy saving.

We have just seen that it has been necessary to use Chinese money and what is widely regarded as a substantial central support mechanism in the fixing of a strike price for generated new nuclear electricity in order to stimulate the building of new nuclear (non carbon generating) capacity.  It is the very high up-front costs of building these facilities that is the problem.  Would it not be better to use the ECO funds as cash support as  low carbon generation building programme – nuclear, wind, tidal or whatever gives the best CO2 return per pound?

by thinkpanama

by thinkpanama

This then begs the question as to who should fund the improvement of poor dwellings.  Actually this is not so much a carbon issue as a social equalisation programme.  In all normal circumstances this has historically been met from general taxation in the form of grants and I can see no reason why this should not be the case in the future.   Perhaps, rather than distributing a £200 annual winter fuel allowance this might better be used in improving dwelling energy (not necessarily carbon) performance.  The private market for Green Deal products simply does not seem to have become excited at adding debt to the household for what are perceived as intangible gains.  Households understand cash and a more direct approach to funding Green Deal improvements through this means or indeed other mechanisms such as stamp duty may be a more efficient means of getting to the problem homes.

In summary:  Use hypothecated funds, such as ECO for the purpose they were intended  – getting carbon out of the system.  Use the money to support the most cost efficient means of doing this irrespective of mechanism for delivering this objective.

Don’t confuse wealth re-distribution with carbon saving – it distorts process and gets caught up with political weather cocking.

Ed Milliband – Energy Price Saviour or Misguided?

Andrew Eastwell, BSRIA CEO

Andrew Eastwell, BSRIA CEO

In announcing that a Labour government would freeze energy bills for two years, Ed Milliband has created a year of fear for potential investors in funding desperately needed new generating capacity for the UK.  Which investor is going to put up the millions needed for both renewable and conventional plant when the return on that investment has effectively been politicised and put into the hands of a new, unknown body – Ofgem II?

Ofgem I has already sounded serious warning bells about UK’s generating margin falling from about 14% to sub 4% levels around 2016.  Introducing the kind of uncertainty that his announcement implies could hardly come at a worst moment; in effect it is perfectly possible that this choice of policy, aimed as it probably was to win votes from the general public, could in fact result in a greater likelihood of brown or blackouts.  This is hardly an outcome that will increase the efficiency of industry and the generation of wealth and jobs.

Wholesale energy pricing is a little like the tide – there is no possibility of defeating the ebb and flow of the market and Mr Milliband is going to look a little like King Canute in attempting to hold back world changes in the price of energy. Should the opposition put such an important element of UK’s basic infrastructure under threat without any responsibility for the outcome?

Response to the Chancellor’s Spending Review

The Chancellor’s statement yesterday was well trailed beforehand so there were few surprises. It seems that the “greenest government ever” is in fact true blue in tooth and claw with a continuing policy of reducing leadership in central government (by decreasing funding of staff) and increasing the expectation of self-reliance by industry.

Buried in the lengthy statement that dwelt very largely on the “back to work” theme was the commissioning of HST1, the prospect of a new North South Crossrail and additional funds for flood defences. All good news for the concrete farmers.

As far as greenness was concerned, there was little said but it is clear that the message concerning the long term availability of secure energy is now well embedded. A number of key issues were put forward:

  • Firstly there was the promise of a strike price for electricity that may bring the construction of new nuclear a little nearer. Without this underpinning of future revenues the private sector is always going to be shy of the massive investments needed with very long term recovery periods.
  • Secondly there was the promise of additional investment incentive for shale gas exploration. Shale gas has the potential to fill a difficult hole in energy supply whilst the nuclear builds take place. Hardly green but a pragmatic response badly needed.

One of the difficult issues our industry is going to face is the additional loss of leadership/sponsorship and infrastructure that civil servants have given us through departments such as DCLG, BIS and DECC. As their resources have been pared to the bone, it is unsurprising that delays associated with regulation, planning reform, energy reduction programmes (Green Deal for example) are becoming ever more visible. The question is do we have the energy will and resource to fill that void? The Chancellor specifically identified other industries as the future – “synthetic biology to grapheme” but did not repeat his earlier commitment to a zero carbon built environment.

In a nutshell my take-away from this statement is one of the need for self-reliance and the need to build better “regulation” from within our community rather than expect government to lead. Either that or don a cowboy hat.

Look at carbon, not energy

We urgently need a clear strategy for decarbonising the grid…and here’s why.

by thinkpanama, creative commons, flickr

The world is still awash with energy.

Peak oil may have passed but peak coal has not. Nor has peak gas, and nuclear and renewables are now a rising trend.  In other words, the problem is not a shortage of energy it is too much carbon.

The trouble is, at the moment it’s hard to find a quick and easy way of taking carbon out of the primary fuel mix. So, the focus is on reducing loads, getting more out of each unit of carbon fuel, and using so-called renewables to substitute for fossil fuel.

We’re too used to having energy on tap, generated and piped from a distance. Community scale services challenge this view of life (we’ll be debating this at our briefing). Low-carbon communities attempt to use waste in order to distribute relatively low-grade heat rather than high-grade energy.

This heat is ‘free’ insofar as it recovers energy from electrical generation, household waste, or from geothermal sources. Of course, nothing is actually free. Pipe work, pumping, capital costs and so forth means that fixed costs can exceed the notional cost of the primary fuel burned to generate distributed heat.

Because of high capital costs and the long lifetime of systems (like water mains), financial planning for low-carbon communities needs to take the long view.

We  don’t know what the carbon advantage of such systems will be in the future. If there is a significant and quick (economically speaking) rise in zero carbon wind and marine generation, and carbon sequestration in coal fired plants becomes the norm, then the carbon intensity of the grid will reduce to the point where the advantage of community based systems is lost.  In short the carbon arguments for community heating systems depend crucially on the speed of decarbonisation of the grid.

This is a community-scale heating dilemma. We should have invested in CHP/DH a couple of decades ago when we had access to North sea gas – instead we face the prospect of digging up the roads yet again and forcing householders to abandon their cherished boilers. But, without a guaranteed connected load and the effective displacement of high carbon intensity grid supply it will be difficult to make community scale heating financially attractive to a commercial investor.

So, we should focus on decarbonising the grid or develop heat-sharing technologies through low-carbon communities?  These are mega questions and need a national strategy where government must lead the way. What will be the role of the building services engineer and construction teams in planning and delivery whole-community solutions?

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