A micro-generation manifesto
“green alliance...
A micro-generation manifesto
by Joanna Collins
Published by Green Alliance, September 2004, £20
Artwork and print by Calverts – www.calverts.coop
Printed on Revive matt – 75 per cent post-consumer waste.
ISBN 0 9543813 7 8
© Copyright Green Alliance 2004
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted, in any form or by any means, without the prior permission in
writing of Green Alliance. Within the UK, exceptions are allowed in respect of any fair
dealing for the purposes of private research or study, or criticism or review, as permitted
under the Copyright, Design and Patents Act, 1988, or in the case of reprographic
reproduction in accordance with the terms of the licences issued by the Copyright
Licensing Agency.
This book is sold subject to condition that it shall not, by way of trade or otherwise,
be lent, resold, hired out or otherwise circulated without the publisher’s prior consent in
any form of binding or cover other than that in which it was published and without a
similar condition including the condition being imposed on subsequent purchaser.
Front cover images, left to right: © Renewable Devices, © Solar Century, © Solar for London,
© Solar for London, © Solar Century.
Green Alliance
40 Buckingham Palace Road, London SW1W 0RE
tel: 020 7233 7433 fax: 020 7233 9033
email: [email protected]
website: www.green-alliance.org.uk
Green Alliance is a registered charity number 1045395.
Company Limited by guarantee, registered number 3037633
A micro-generation manifesto
1
The micro-generation manifesto has been developed in consultation with
members of the Energy Entrepreneurs Network. For more information on this
network, visit www.green-alliance.org.uk
Organisations supporting the manifesto include:
British Wind Energy Association
Combined Heat and Power Association
Energy 21
Renewable Power Association
Solar Century
The Micropower Council
The National Trust
Town and Country Planning Association
UK Business Council for Sustainable Energy
acknowledgements
Green Alliance wishes to thank the Ashden Trust for their generous support of
the Energy Entrepreneurs Network, and of this report.
We would also like to extend our thanks to all the organisations and individuals
who were involved in the project. Particular thanks are due to Sebastian Berry, Sarah
Butler-Sloss, Adrian Hewitt and Dave Sowden.
Green Alliance
Green Alliance is one of the UK’s foremost environmental groups. An independent
charity, its mission is to promote sustainable development by ensuring that the
environment is at the heart of decision-making. It works with senior people in
government, parliament, business and the environmental movement to encourage
new ideas, dialogue and constructive solutions.
2
contents
A micro-generation manifesto
executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
the case for micro-generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
5
6
7
8
8
behaviour change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
carbon reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
fuel poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
security of supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
economic value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
system resistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
energy markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
mindsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the way forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
new build . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
local heat and power networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
energy services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a micro-generation strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Climate Change Programme review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
consumer incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
capital grant schemes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
home energy ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
fiscal measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
export reward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
distribution charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Renewables Obligation Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winter Fuel Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
supplier incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy Efficiency Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Renewables Obligation Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
fuel poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
developer incentives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
planning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
advice and training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
annex A – micro-generation technologies . . . . . . . . . . . . . . . . . . . . . . . . .
9
9
11
12
12
15
16
17
18
19
19
19
20
21
21
21
22
23
23
24
24
24
25
25
26
27
existing technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ground source heat pumps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
micro-wind turbines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
solar thermal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
solar photovoltaics (PV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
micro-hydropower turbines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
woodfuel boilers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
emerging technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
micro combined heat and power (micro-CHP). . . . . . . . . . . . . . . . . . . . . . . .
stationary fuel cells. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
29
29
30
30
31
31
32
32
32
33
annex B – relevant policy agendas by department. . . . . . . . . . . . . . . . .
33
annex C – glossary of acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
executive summary
3
Over the last year Green Alliance has coordinated the Energy Entrepreneurs
network, which brings together a diverse coalition of planners, architects,
entrepreneurs and energy experts. We have been making the political case for microgeneration to Ministers, advisers and officials across Government. This report
presents our conclusions. We have been able to do this work thanks to generous
support from the Ashden Trust.
A micro-generation manifesto
Micro-generation is the generation of low-carbon heat and power by individuals,
small businesses and communities to meet their own needs. Bringing energy
generation closer to people in this way will forge the vital link between our concern
about climate change and our energy consumption in the home. It can help to
overcome the antagonism of a minority towards renewable energy, by bringing
every householder and business closer to the solution. Homes with microgeneration are also affordable homes, with low or zero energy costs. And by curbing
the rising demand for imported electricity, home energy generation can avert the
need for investment in large new power stations and the ageing grid network.
However, there is considerable resistance to micro-generation. Current incentives
discourage energy suppliers and grid operators from bringing energy generation to
the point of demand. Policy-makers are accustomed to an energy system based on
big, centralised projects like nuclear or gas-fired power stations. But we now have an
opportunity to start to change these mindsets and incentives, and bring
micro-generation into the mainstream.
The Government has made an important commitment in the Energy Act 2004 to
develop a micro-generation strategy by December 2005. This manifesto sets out a
broad framework of policies that Green Alliance and the Energy Entrepreneurs
Network hope will be addressed in the government strategy.
The Government already helps to promote micro-generation through capital
grant programmes. However, more decisive policy action has been postponed on the
assumption that the technologies will remain too expensive until 2020. Such
assumptions are self-fulfilling. Niche products are always expensive. Costs will come
down significantly when policies are introduced to increase demand, allowing
manufacturers to move from ‘built-to-order’ to mass production. To enable this to
happen, Green Alliance and the Energy Entrepreneurs call on the Government to:
●
Integrate micro-generation into new build by setting targets in planning
and procurement, particularly for the growth areas in the Sustainable
Communities Plan, and for the proposed new generation of
secondary school buildings. Future rises in carbon emission
standards for new build should be clearly signalled to drive
“ the Government
investment in technological innovation.
has made an
● Encourage Local Authorities to plan for community-scale grid
networks that supply locally-generated heat and power to new or
important
existing developments, bypassing the costs and inefficiencies
associated with national network use.
commitment
● Introduce incentives for energy suppliers to develop energy
to develop a
service contracts that enable existing householders to retrofit
micro-generation. These should allow the upfront costs to be paid
micro-generation
back through bills over a long period and to be offset by tariffs
strategy”
that reward exported electricity. A strong incentive would come
A micro-generation manifesto
4
from a trading scheme in demand reduction certificates, which should be
introduced at the earliest opportunity.
● Reform the fiscal framework to enable householders to see microgeneration and energy efficiency as an investment in their property value.
Stamp duty rebates for low carbon homes should be introduced to coincide
with new home energy ratings.
● Develop the simplest possible procedures for householders and small
businesses to apply for grants and grid connection. The public’s interest in
home energy generation could be fatally undermined by excessive paperwork
requirements.
Micro-generation offers an exciting opportunity to involve the public in tackling
climate change and give householders and businesses an incentive to use energy more
efficiently. The Government should embrace this opportunity and bring microgeneration into the heart of its Climate Change Programme by adopting these policies.
the case for micro-generation
The UK Energy White Paper, published in March 2003, established the need to
tackle climate change as one of the central aims of energy policy. It set out an
ambition for the UK to reduce its emissions of carbon dioxide by 60 per cent over
the next fifty years, with clear milestones in the interim. The two main routes to
carbon reduction foreseen are an increase in the use of renewable energy, and a
step-change in energy efficiency, amounting to a doubling of the historic rate of
energy efficiency improvements. These targets are certainly ambitious, and they will
not be reached without sustained action by consumers.
However, despite the evidence from opinion polls of widespread public support
for policies to tackle climate change, the signs are that in practice the majority of
consumers remain disengaged. Energy efficiency policy meets with apathy; wind
farm proposals meet with antagonism from a vocal minority. Government has yet to
confront head-on the challenge of engaging the public, both as citizens and
consumers.
It is the belief of Green Alliance that both apathy and antagonism can be
overcome through micro-generation. Micro-generation means building climate
change solutions into everyday life, and giving individuals and communities contact
with, and control over, the generation of green energy.
“ Micro-generation
means building
climate change
solutions into
everyday life”
By micro-generation we mean the generation of zero or low-carbon
heat and power by individuals, businesses and communities, at or near
the point of use. This includes renewable heat generation through:
ground source heat pumps, solar hot water systems and wood pellet
boilers, displacing gas or electric heating. It also includes on-site
generation of electricity, from solar photovoltaic (PV) panels, microwind turbines, micro-hydro systems and woodchip or gas combined
heat and power (CHP), which all displace electricity demand and can
export surplus power to the grid. Annex A gives more details on existing
and emerging technologies.
In the Energy White Paper’s official vision for ‘the energy system in 2020’ we do
find an aspiration for “much more micro-generation, for example from CHP plant,
fuel cells in buildings, or photovoltaics.”1
Micro-generation can deliver on all four of the central objectives of the
Government’s energy policy:
●
cutting greenhouse gas emissions;
securing reliable energy supplies;
● maintaining competitive energy markets in the UK and beyond; and
● ensuring that every home is adequately and affordably heated.
●
However, the current received wisdom on the prospects for micro-generation
technologies is that costs will remain prohibitively high until 2020, and this ensures
that policies to promote their further development are fragmented and weak.
Such assumptions are self-fulfilling. Niche products are always expensive – what
is needed is government leadership to create the incentives and certainties that
developers, energy suppliers and grid operators need in order to start
installing them in households and businesses on a large scale. The more “ The
ambitious the strategy, the quicker and bigger the payback.
If this and subsequent governments are serious about developing a
secure, diverse and sustainable energy economy, then micro-CHP boilers,
mini-wind turbines, solar water heating and PV arrays are destined to
become familiar household fixtures. The question is when?
The case for micro-generation has five dimensions. Micro-generation
could be a powerful driver for behaviour change, carbon reduction, fuel
poverty, security of supply and economic value.
more
ambitious the
strategy, the
quicker and
bigger the
payback”
behaviour change
Micro-generation gives an unprecedented opportunity for engaging consumers
in climate change solutions and influencing them to use energy more efficiently.
As consumers we often fail to relate our concern about climate change to our
energy use at home. Thanks to privatisation and liberalisation, UK electricity prices
have fallen by around 22 per cent since 1990 in real terms. This trend is beginning
to reverse but there is still precious little incentive for adjusting the thermostat, or
resisting the temptation to opt for standby rather than walking the few paces to the
television off-switch. Now that many bills are being taken care of by direct debit,
we lack any feedback on our level of energy use from day to day and season to
season. It is not surprising that consumers struggle to gauge, feel, or understand the
impact of home life on climate change.
As a result it is also not surprising that the Government is curbing its ambition
for carbon reductions through domestic energy saving: the Energy White Paper
forecast of 5 million tonnes of domestic carbon savings by 2010 has already slipped
to 4.2 million tonnes, only one year on.
But while it may not be surprising, it is not tenable to let us consumers off the
hook in this way. Neither is it generally effective to exhort people to action through
the medium of TV adverts or newspaper slogans.2
A large part of the answer lies in allowing energy unit prices to rise, so that
consumers have to pay more attention to their energy use to keep bills down. Better
feedback in bills can also help people compare this month’s energy use with last
year’s equivalent, or with their house type average, and cut out excessive use – if
you can persuade direct debiters to read their bills in the first place.
A micro-generation manifesto
5
A micro-generation manifesto
6
But a crucial piece of the puzzle – giving consumers a clearer sight of the bigger
picture – is micro-generation. There’s nothing like generating clean, green energy
in-house to help close the gap in people’s minds between the origins and impacts of
energy, and the way they use it at home.
Micro-generation will make the public co-producers of climate change solutions
rather than passive consumers of energy, helping to combat the “what can I do?”
apathy that undermines so many well-meaning public education campaigns.
Crucially, micro-generation technologies are visible components of the climate
change solution. The innovative new micro-CHP boiler, the solar panels on the roof,
the micro-wind turbine in the garden, are visible acquisitions through which people
can proudly demonstrate their self-sufficiency and their commitment to climate
action. Unlike hidden cavity wall insulation, they can get people talking, and act as
daily reminders to keep the energy use down. The bottom line is that, as visible
purchases, they have far more feel-good factor and commodity value than lagging.
This is not to downplay the importance of getting the walls insulated and the
windows double-glazed. Micro-generation acts as a catalyst for people to do the
energy efficiency bit first, to cut the size and cost of the micro-generation system
that they need to cover a good proportion of their energy demand.
“ generating your
own energy
gives you an
immediate
incentive to keep
an eye on how
you use it”
Finally, generating your own energy gives you an immediate
incentive to keep an eye on how you use it. Once the potential is there
to keep bills down to a minimum, people will try harder to match their
use to their own generation capacity as closely as possible.
But our definition of micro-generation is not restricted to its use in
individual households. Neither is its communication potential. Biomass
heat networks for new residential developments; solar hot water and
solar PV panels on new school buildings; micro-wind turbines lining
local council buildings – all these initiatives bring climate change
solutions into people’s everyday lives, and help them think through the
origins of the energy they use.
carbon reduction
Micro-generation will not only make a significant direct contribution to carbon
reduction targets, it will also trigger a multiplier effect, by engaging hearts and
minds, and catalysing more efficient use of energy by householders.
In combination with stringent energy efficiency standards in new homes, one or
two renewable micro-generation technologies in combination can achieve zero
carbon buildings (see BOX F). In existing stock, renewable heat technologies can
reduce gas use or, more importantly, replace carbon-intensive electric or oil-based
heating systems in the 4.6 million UK homes off the gas network.
Renewable power and gas-fired micro-CHP miss out all the energy loss
associated with inefficient central generation of electricity in large power plant, with
transmission from one end of the country to another, and with distribution around
an ageing set of wires. New Combined Cycle Gas Turbine power stations are on
average only 45 per cent efficient, compared to over 90 per cent efficiency for
micro-CHP.
7
1.3 million gas boilers are replaced annually in the UK. If just one quarter of these up
to 2020 were micro-CHP, this alone would deliver half the Energy White Paper’s 2010 –
2020 domestic sector carbon reductions, and provide 5.5GW of highly diversified
generating capacity – the equivalent of 40 per cent of today’s nuclear capacity.3
Building 5 per cent of the new homes under the Sustainable Communities Plan to zero
fossil fuel energy specification – generating their low heat and power requirements on site
through renewable energy – would save 0.7 million tonnes of carbon per year more than
meeting the ‘Eco Homes Very Good’ standard.This would nearly double the anticipated
carbon reduction from new build under the 2005 revision to Building Regulations.
Economies of scale means these homes could cost no more than standard homes.4
Installing just six panels of solar PV on a typical new three-bedroom house built to
2002 Building Regulations standards would reduce that household’s carbon emissions
by over 20 per cent. If this were repeated on every house to be built between now and
2020, the UK would have 4GW of new solar PV capacity, making us a clear world
leader in this technology in line with the Prime Minister’s stated ambition.5
fuel poverty
The Government has a target to eradicate fuel poverty in the UK by 2016-18,
and to eradicate fuel poverty for vulnerable households in England by 2010,
meaning that no household should have to pay more than 10 per cent of its income
on fuel. Affordable housing is not just about house prices, it is also about living
costs, and it is often the poorest sectors of the population that are burdened with
draughty homes and expensive electric heating.
The Government currently spends over £1.85 billion a year on Winter Fuel
Payments to subsidise fuel for the elderly. Without accompanying investment in
equipping buildings to need less fuel, the annual burden on the taxpayer will only
rise as the elderly population grows and building condition deteriorates. Paying now
to install energy efficiency measures and micro-generation would be an investment
for the medium term, and give vulnerable households low or zero energy bills over
the lifetime of the technologies.
Equipping new homes with micro-generation should be another dimension of
the drive for affordable homes. Where new buildings are off the gas network,
ground source heat pumps linked to under-floor heating become a cost-effective
investment, yielding high comfort and fuel savings.
Micro-generation is also particularly well suited to retrofitting in hard-to-heat
homes. Of an estimated 23 million homes in the UK, 6 million have solid walls,
which puts cost-effective cavity wall insulation off limits. 4.5 million
households are off the gas network, often reliant on the discomfort and
“ equipping new
expense of electric heating, or oil-fired boilers. The fuel bill savings and
ease of installation of micro-generation become attractive.
homes with
The DTI’s Design and Demonstration Unit is developing ideas for pilot
projects to assess the practicality of renewable forms of energy in tackling
fuel poverty. This is a useful step forward, but the lessons need to be applied
swiftly because, as the 2010 fuel poverty target approaches, the Warm
Homes and Decent Homes Programmes continue to commit substantial
sums which could be more effectively spent.
Despite its potential application in tackling fuel poverty, it is important
that the aspirational status of micro-generation technologies is retained for
micro-generation
should be another
dimension of
the drive for
affordable homes”
A micro-generation manifesto
BOX A: the power to cut carbon
A micro-generation manifesto
8
all social classes. Government policy should avoid branding them as exclusively
aimed at low-income groups and the fuel poor.
BOX B: ground source heat pumps for social housing
Ground source heat pumps developed by Earth Energy Engineering and produced by
Powergen are being installed in hundreds of social housing projects around the UK.
Housing associations are taking an interest, because the heat pumps can reduce heating
bills for tenants, and are cost-competitive with oil-fired systems for new rural properties
off the gas network. Metropolitan Housing Trust installed ten Powergen HeatPlant systems
in March 2004, in new bungalows in Nottingham, in partnership with Westleigh
Developments Ltd.The system has now been successfully installed in 60 of the Trust’s
properties. Powergen aim to supply at least 1000 heat pumps for installation in the social
housing sector across the UK, as part of its Energy Efficiency Commitment (EEC).
Economies of scale have reduced the average cost of the systems in this scheme by £1000.6
security of supply
As indigenous energy supplies dwindle, the UK is shifting from being a net
exporter to a net importer of gas and oil. This makes us potentially increasingly
vulnerable to supply interruptions, due to regulatory failure, political instability,
conflict and price fluctuations. Micro-generation is, of course, far less vulnerable to
disruption (or terrorist attack) than large power stations or gas pipelines. But its
value also lies in its diversity: a diversity of sources and suppliers of energy is the
best way to maintain supply reliability.
In the case of power generation, security of supply is not just about plant
vulnerability, but also the availability of power to meet peak demand. The diversified
profile of power generation by micro-generators, both in terms of location and
timing, should insulate networks from the impact of intermittency or one-off plant
failures. The most significant gains for security of supply occur where home power
generation coincides with peak demand times, as is particularly the case with
micro-CHP. Micro-generators can then help to reduce demand at these times, or
indeed export power to help meet it, reducing the likelihood of power cuts, and
removing the need to bring marginal coal power stations on line.
economic value
Micro-generation technologies can create economic value in a number of ways.
They offer consumers the chance to reduce or even remove ongoing energy costs
and, for power generation technologies like solar PV and micro-wind
turbines, to benefit from the value of exported electricity.
“ micro-generation
is far less
vulnerable to
disruption (or
terrorist attack)
than large
power stations”
They offer energy suppliers the prospect of an added value service to
be marketed to consumers, to enhance per-customer income as well as
improving customer retention. In a competitive market, the value of
brand differentiators and value-added services like micro-generation, as
a strategy for increasing market share, should not be underestimated.
This value can be further enhanced if customers are generating their
energy at times of peak demand, which saves suppliers the cost of
supplying them with electricity when wholesale prices are highest.
By curbing the rising demand for imported electricity, microgeneration can also defer or avoid completely the need for two types of
Micro-renewable energy systems are already often the least-cost option for offgrid applications like parking meters, bus shelters and CCTV.8 Unless you are within
a few tens of metres of the low-voltage distribution network, it is not worth
installing a new mains electricity connection for small levels of power demand. The
smaller the power demand, the more likely it is that a new mains connection will
not be the most cost-effective solution.
There are also significant opportunities for UK industry in export markets for
micro-generation technologies.9
BOX C: Rural Energy Trust
The Rural Energy Trust won the 2004 UK Ashden Award for Sustainable Energy, for
developing supply and demand chains for woodfuel in Leicestershire. In the early
1990s, Richard Harvey and the co-founders of this project identified the potential for
wood waste as an efficient and cost effective renewable heating fuel – and also its
potential to create rural jobs and help wildlife habitat management. In the last 12
months, 11 heating systems have been added, along with wood chip and wood pellet
supply chains. Rural Energy Trust will be developing woodchip supply for a 2.5MW
district heating plant in Leicester City. With the serious recession in the farming sector
(job losses are running at 15 per cent a year), a locally based sustainable woodfuel
industry provides an urgently needed alternative to food production to create a
thriving, sustainable rural economy.
“Rural Energy Trust has been fantastic! The school now has a woodfuel central heating system and a solar
thermal hot water system. Rural Energy helped us obtain grants, installed the equipment and worked with
members of the student Energy Team.We could have achieved none of this without their help.”
Maxine Adams, Business Manager, Newbridge High School.
system resistance
The resistance to micro-generation should not be underestimated. The main
sources of this resistance lie in energy markets, where current incentives discourage
energy suppliers and grid operators from promoting micro-generation; and in the
mindsets of policy-makers long accustomed to big, centralised power projects, and a
model of consumer protection that prioritises low energy prices.
energy markets
As Catherine Mitchell of Warwick Business School argues, large technical systems
like the energy system build up technological momentum, whereby established incentives
9
A micro-generation manifesto
investment: first, investment by energy companies to build large new power
stations, and second, investment by transmission and distribution network operators
in strengthening an ageing network to carry rising power loads. The construction of
traditional central power generation infrastructure requires large long-term
investments. These investments are becoming increasingly risky, due to a fastchanging regulatory environment, increasing competition and the reluctance of
investors to commit to long investment time horizons for large infrastructure
projects. Grid reinforcement also involves significant costs. Estimates in Europe
indicate that the full process of building new high voltage transmission lines takes
approximately eleven years and costs as much as $10,000 per kW per mile. This
translates to $10 million to ship 1MW of power for 1mile.7
A micro-generation manifesto
10
lock in institutions, companies and individuals to the status quo technologies. Such
momentum is difficult to break. Despite the potential value that can be created by
micro-generation for grid network operators and energy companies, there is
currently no generalised business case for them to facilitate its uptake. The incentives
acting on these organisations are not geared up to realising the efficiencies from
bringing energy generation to the point of demand.
Currently, the energy market will reward neither exported electricity (i.e. excess
power not used on-site) nor the value of reducing costly peak demand, and without
policy interventions it is unlikely to do so until the number of micro-generators
crosses a threshold that is currently a distant prospect.
Distribution network operators (DNOs), which are in some cases also licensed
suppliers such as EDF Energy, Scottish Power, and Scottish and Southern Energy,
manage the low voltage grid to which micro-power generators can connect to
export electricity.
Research by Mott-Macdonald for the DTI on the System Impacts of Additional
Micro-generation (SIAM)has concluded that micro-generation overwhelmingly
drives network costs down.10 Some one-off expenditure by DNOs on optimising
network management will be required, but this is far outweighed by the avoided
costs of energy losses from centralised plant, and of reinforcing the network to
carry increasing power loads to meet demand.
Despite this, DNOs currently have no incentive to help get micro-generators
connected to the network. Distribution networks have in the past been developed as
essentially passive systems, a one-way flow of electricity down the wires to passive
consumers. This needs to change. If the Government’s 2010 targets are to be met, up
to 14 GW of new renewable energy and CHP capacity may need to be connected to
distribution networks. DNOs will need to manage their networks actively, like
transmission networks, to accommodate two-way power flows and variable
generator infeeds. While Ofgem is introducing new incentives for connecting large
new renewable generation, it is not clear that DNOs yet have a clear incentive to
facilitate the development of micro-generation. DNOs are still remunerated
according to how much electricity flows down the wires to consumers, rather than
for reducing energy losses and improving security of supply via a strategic approach
to connecting micro-generation.
Both licensed energy suppliers and DNOs currently receive high-value exported
energy from micro-generation without any obligation to return some of this value
to the generator. It is high-value energy because it is produced close to the point of
demand and will not be subject to standard energy losses in transmission and
distribution; it is also high-value if it is generated at times of peak demand when
much energy supplied must come from marginally economic coal-fired power
stations, as is most clearly the case with micro-CHP. Much of this
power
exported power currently spills onto the network un-metered, so that
supplier cannot take credit for it, and micro-generators go unrewarded.
“ excess
generated spills
into the power
supply of
neighbouring
homes or
businesses”
Excess power generated in fact spills into the power supply of
neighbouring homes or businesses. This electricity registers on their
import meters. The neighbours pay their respective suppliers for all their
electricity, including the part generated next door, but the supplier does
not have to recompense the micro-generator for their contribution.
Hence the widespread call for net metering. In net metering, the net
of the electricity units consumed and generated is calculated and the
customer is billed for the remainder at the usual price. This means the
Generally, it is not currently in suppliers’ interests to volunteer such a policy,
except for purposes of ‘green’ branding, and to promote customer loyalty. Some
suppliers, like Npower and Ecotricity, are offering payment for the energy cost
component of exported power (BOX E). The new electricity trading arrangements
(NETA) also discourage export payments, because suppliers can only trade the
exported units of power in bulk. Until over 100,000 micro-generators are exporting
power simultaneously, the value of the exported power will have to be returned to
micro-generators via public policy interventions.
The Renewables Obligation on suppliers is one such intervention. Electricity
suppliers are required to produce evidence of their compliance with the Renewables
Obligation, which requires suppliers to source a rising proportion of their electricity
mix from renewable energy, up to a level of 15.4 per cent by 2015. They can do this
using Renewables Obligation Certificates (ROCs), which are issued for each
megawatt generated. Alternatively, a supplier can discharge its obligation by paying
the ‘buy-out’ price. The level at which this buy-out price has been set, and the
requirement for a minimum daily output, has tended to prevent the Obligation
from driving investment in micro-renewable power. However, following a 2003
technical revision to the Obligation, micro-renewable generators can, in theory, get
some return by selling ROCs to suppliers if their total annual output is at least 0.5
megawatt hours. A generator providing between half and one megawatt hour of
electricity in the course of a year will qualify for one ROC, currently worth £49 (see
supplier recommendations).
Good Energy, the new brand of UnitE, has developed a business model to
support micro-generation on the basis of ROC values. The supplier’s ‘home
generation scheme’ offers to pay roughly 4 pence per kilowatt-hour to gridconnected micro-generators for all power generated, whether it is exported or used
on-site. The company can reclaim this investment through selling ROCs.
mindsets
It is not just institutional arrangements and business models that lock us into the
status quo in energy markets. It is also mindsets. Policy-makers are accustomed to an
energy system based on big, centralised projects like nuclear or gas-fired
power stations. Despite the environmental and economic inefficiencies of
“ policy-makers
large power stations and long distance transmission and distribution, there
are accustomed
are perceived institutional efficiencies in hands-on management of a
limited number of large generators. Micro-power generation on every
to an energy
rooftop turns this model on its head. The boundary between consumer and
generator becomes blurred, and the traditionally separate fiscal treatment of
system based on
producers and consumers becomes problematic. Currently, producers are
big, centralised
companies, who can benefit from the system of government incentives for
investment. If consumers become producers, will they be eligible for the
projects like
same incentives, such as tax relief on loans, depreciation allowances and so
forth? The introduction of micro-generation will require a general
nuclear power
reassessment of fiscal and regulatory regimes, to ensure that householders
stations”
are encouraged to produce their own power, not penalised.
11
A micro-generation manifesto
customer receives the domestic purchase price for his electricity rather than the
much lower retail price.11 Net metering may yet prove to be the most effective and
simple way of delivering a policy of increased micro-generation. However, net
metering may impose some unfair costs on the supplier, where they are not also the
distribution network operator (DNO).12
Policy-makers and regulators are also accustomed to a model of ‘consumer
protection’ that prioritises commodity consumption at least cost. In this model
electricity and gas are products, which the ‘fuel poor’ must be able to purchase
affordably. Thus Ofgem, the gas and energy markets regulator, still perceives its
primary duty to be mitigation of any upward pressure on energy prices. But the
average consumer is not going to worry about the price of a unit of energy in pence
per kilowatt-hour. If they bother to worry at all about the cost of energy, currently at
a record low, it is the bill that concerns them: and the bill is as much affected by
their energy demand as by the energy price. Demand reduction via energy efficiency
and micro-generation will only be driven by higher energy prices, but can still
deliver affordable (or even zero) energy bills in conditions of enhanced comfort.
Energy markets need to shift away from selling and regulating electricity or gas as a
product, to understanding what a customer wants from energy, namely comfort and
convenience at least cost, and climate protection.
A micro-generation manifesto
12
“
Ofgem should also be taking a longer-term perspective when they seek to lower
costs for consumers. Innovation is needed in new micro-generation technologies
that will be cheaper and more efficient than current models. Ofgem should have a
clear remit to promote innovation, and remove any regulatory barriers to emerging
technologies as a matter of priority. This could also involve requiring
utilities to conduct demonstrations of new technologies that have the
suppliers should potential to lower costs and improve performance, as part of their
license to operate. The risk of such demonstrations could be shared so
be competing on that the company would not be penalised in cases of poor performance.
ability to reduce
customers’ bills
by providing
energy services”
There is a need to reconfigure the relationship between the regulator
and supplier. This should be based on working together to remove the
supply company’s incentive to increase low-price electricity sales.
Instead, suppliers should be competing on ability to reduce customers’
bills by providing energy services, and investing in innovative
technology, to run homes and businesses efficiently and at least cost.
the way forward
The common assumption that micro-generation will remain prohibitively
expensive until beyond 2020 is a self-fulfilling one. Decisive policies are needed to
bring micro-generation out of its niche market.
Three areas of policy development, in particular, would help bring microgeneration into the mainstream. The first is the use of planning and procurement
policies to get micro-generation designed into new build, bringing costs down
through scale economies. The second is the development of local heat and power
networks to capture the real economic and environmental efficiencies of local
generation. The third is energy services, which would enable existing householders
to pay back the upfront cost of micro-generation at an affordable rate through
their bills.
new build
The potential to cut micro-generation costs is not restricted to ‘wait-and-see’
technological innovation. The capital and installation costs of micro-generation
technologies are artificially high due to the small scale of the current market. There
New homes and buildings can be designed to integrate micro-generation from
the start, avoiding all the laboured adjustments and compromises of retrofit. And
with the increased level of insulation to be required by new building regulations, or
encouraged by the proposed Code for Sustainable Buildings, the systems needed to
meet energy demand can be smaller, and cheaper.
So the obvious place to start to mainstream micro-generation is with
new buildings. The scale of proposed government investment in new
homes and public buildings is substantial. The Government’s £38 billion
Sustainable Communities Plan will deliver 30,000 extra dwellings a year,
bringing the total number of new homes each year to 180,000. The
anticipated carbon emissions associated with these new homes by 2016
will be 4.2 million tonnes of carbon per annum.13 If the recommendations
of the recent Barker review, into housing supply and affordability, are taken
up, the house-building programme will double to 4.5 million by 2016,
with carbon emissions up by 7.8 million tonnes in 2016.
“ the obvious
place to start to
mainstream
micro-generation
is with new
buildings”
Meanwhile the Department for Education and Skills has set in motion a
programme designed to rebuild or refurbish every secondary school in the country
in the next 10 to 15 years. Ninety-six new acute hospitals are also in the pipeline, to
be funded through the Private Finance Initiative (PFI). Every development where
micro-generation or community heating is not assessed is an opportunity lost for
saving carbon emissions.
If all new publicly procured buildings were designed to generate a proportion of
their own energy needs, micro-generation technologies could be produced on a
scale that would bring costs down substantially. The same supply chains could then
make the technologies available to householders for retrofit, at greatly reduced
prices. A crucial opportunity to deliver this vision lies in the new Code for
Sustainable Buildings, as recommended by the Sustainable Buildings Task Force,
which the Government plans to develop and roll out by early 2006. This will be a
voluntary standard to benchmark best practice, but the Government can use the
procurement and planning systems to ensure that its standards are widely met.
Achievement of high scores within the Code’s framework should require a
significant proportion of on-site renewable energy generation and CHP.
BOX D: zero energy developments
Prototype zero carbon developments, such as Beddington Zero Energy Development
(BedZED) achieve about one third of their carbon reduction through micro-generation.
The architect of BedZed, Bill Dunster, has calculated that, while the premium for 100
zero energy dwellings is 30 per cent, at 1000 units it is only 15 per cent, and at 5000
units supply chain efficiencies have cancelled out the premium. It follows that the
greater the number of ZED specification planning briefs, the lower the planning gain
that would need to be offered to cover the premium.14
Private Finance Initiative (PFI) contracts for new hospitals and schools are
typically 25-30 years long, and embrace the design, construction and running of
the building. In theory such long-term contracts should give contractors an
incentive to invest upfront in micro-generation technology to reduce ongoing
13
A micro-generation manifesto
are also big costs associated with sizing systems to meet the heat and power
demands of draughty old homes – even after a little pre-emptive loft insulation and
double-glazing – and with tacking them on to roofs or plumbing systems designed
in previous centuries.
energy costs. In practice, however, private finance is averse to taking on the ‘lifecycle
risk’ of new, innovative technologies even when these are widely proven. The
‘completion risk’ borne by contractors – to ensure they build on time and to budget
– also means that the costs of finance for the design and construction phase are
higher than the costs of finance for on-going operating costs. Any savings on
operating costs thus have to be proportionately higher to justify increased capital
costs, which the contractor will try to keep as low as possible. If new schools and
hospitals are to be flagships for sustainable development, then procuring
departments and authorities will have to be more active in specifying the need for
on-site micro-generation.15
A micro-generation manifesto
14
Private sector house-builders are also notoriously conservative, but not beyond
the reach of carrot-and-stick regulation by central and local government in the
public interest. Both Building Regulations and positive planning policies have an
important role to play in encouraging use of micro-generation in new homes and
development.
Positive planning policies enable regions and localities that are best placed to invest
in micro-generation at this stage to lead the way, and help realise economies of scale
that will enable regulations to set more demanding minimum standards in future.
The Greater London Authority has introduced a statutory policy that “the Mayor
will, and boroughs should, require major developments to show how the development
would generate a proportion of the site’s electricity or heat needs from renewables,
wherever feasible”.16 Merton Borough Council has adopted a precedent-setting
policy in its local plan, which sets an expectation that any new non-residential
development over 1000 square metres should generate ten per cent of its energy
requirements through on-site renewable energy. At least forty authorities, including
Edinburgh and Liverpool, are currently considering the inclusion of similar policies
in their local plans, in many cases extended to CHP. The clear support given to such
policies in the August 2004 Planning Policy Guidance on Renewable Energy (see
developer incentives) will give these authorities new confidence to go ahead.
“
One option would be for local authorities to set micro-generation targets in local
plans that are proportionate to land value. This would mean that areas that could
most easily afford the upfront capital costs would bear more responsibility for
delivering national targets (and helping to drive costs down) than more
marginal areas with lower residual land values. Where the Government
building
is a significant landowner, as in the Thames Gateway, site planning briefs
can mitigate any ‘burden’ on developers by offering increased build
regulations
density or reduced land cost in direct proportion to increased costs
incurred by higher targets for micro-generation and energy efficiency.
have an
important role
to play in driving
investment in
technological
innovation”
Building Regulations have an important role to play in driving
investment in technological innovation, to bring forward a new
generation of more efficient micro-generation technologies. This will
only happen if the Government clearly signals future rising standards for
carbon emissions, beyond what can be met by existing technologies. The
ODPM ‘forward look’ papers have begun to address this, and the new
voluntary Code for Sustainable Buildings could play an important role in
anticipating future minimum standards.
Micro-generation does not have to be confined to the scale of the individual
household. Energy service companies or local authorities can manage communityscale networks to supply locally generated heat and power to new or existing
developments with maximum economic and resource efficiency.
Given the mass transmission and distribution networks for electricity and gas
already in place, such community networks can seem like an unnecessarily
expensive choice. But developers generally bear the cost of extending pipelines and
strengthening wires to new developments. National Grid Transco and the DNOs are
having to invest ever greater sums to reinforce wires and pipelines to meet rising
energy demand. These ongoing costs are passed through to consumers and any
power generators that want to feed into the network. The high energy losses
associated with long distance transmission and distribution of electricity also
impose costs, both in terms of economic and energy efficiency. District combined
heat and power, fuelled by gas or biomass, offers an opportunity to capture waste
heat from local power generation and circulate this in heat networks.
Community heat or power networks are one model for making local
generation more affordable and environmentally efficient, by leaving out
the costs and inefficiencies associated with national network use. Woking
Borough Council has pioneered private wire networks in the UK. The use
of private wires enables green electricity to be sold directly to the customer,
rather than exporting the electricity to the national grid and incurring ‘use
of systems’ and losses charges. Woking has set up an energy services
company (ESCO), Thameswey Energy, which manages the generation of
heat, chilled water and power from a fuel cell CHP plant, solar PV array and
absorption cooling technology. As a small generator/supplier the ESCO is
able to sell the electricity, heat and chilled water directly to customers on
the private wire and heat networks, rather than to a licenced supplier.
“ community heat
or power networks
are one model for
making local
generation more
affordable and
environmentally
efficient”
There are over 600 community heating schemes in the UK, some of
which already utilise CHP. Community heating provides a significant
opportunity for biomass heating. Biomass energy is most economically viable when
the heat potential is exploited. This is most effectively achieved by locating heat and
CHP plants so that they can be linked at reasonable cost to heat-distribution
networks. In Scandinavia heat distribution networks can extend economically for
tens of kilometres and reach tens of thousands of homes and other premises.
BOX E: Bracknell town centre redevelopment
Bracknell Forest Borough Council has formed a partnership with Thames Valley
Energy, Waitrose, SEEDA, Slough Heat and Power and the University of Reading, to
develop a state-of-the-art district heating, cooling and power system to serve the town
centre, run on woodfuel. Waste wood thinnings from local forests and woodland will
help power the energy plant in the short term, with new short rotation coppice planted
to provide fuel in the medium to long term. The proposal has received a CONCERTO
grant from the EU.
New-build residential areas, hospitals and industrial complexes are the most
likely applications for heat distribution networks but, for existing schemes,
replacing fossil fuel boilers with biomass heating boilers is a relatively simple and
economically-viable option.
A micro-generation manifesto
15
local heat and power networks
16
energy services
A micro-generation manifesto
Incorporation of micro-generation into a proportion of the 180,000 new homes
built each year will help transform the market, but it is important to remember that
the existing stock of homes numbers around 24 million.
If micro-generation is to be taken up by existing householders for retrofit, new
forms of energy contracts, or energy service packages must be developed. These
could allow the upfront cost of the technology and installation to be paid back
through bills over a longer period, and to be offset by tariffs that reward electricity
generated and/or exported, especially at times of peak demand.
“
Energy suppliers could lease micro-generation equipment to consumers,
businesses or housing associations, providing an ongoing source of revenue to the
supplier and a more attractive form of payment for customers. The technology
would be rented to consumers through a package including electricity
energy suppliers supply and purchase of electricity exports (and possibly gas supply in
the case of micro-CHP). With equipment leasing linked to supply in one
contract, there is also less risk that micro-generators are not properly
could lease
rewarded for electricity they export.
micro-generation
equipment to
consumers”
Such leasing contracts would also ensure increased levels of control
and service of the technology, by energy suppliers and the associated
micro-generation industry, thereby avoiding potential loss of customer
confidence from poor quality installation or lack of local servicing skills.
An alternative form of leasing contract would be heat and power leasing, in
which a company installs micro-generation on domestic premises but retains
ownership of the equipment, and probably acts as electricity supplier to the
householder (and heat provider in the case of micro-CHP). The customer pays for
the amount of energy/heat taken, and capital cost for the equipment is paid
through a charge on the heat units delivered.
The advantage of delivering micro-generation through energy services is that
energy efficiency and micro-generation investment can be optimized in one holistic
package. Visible micro-generation technologies are more marketable commodities
than cavity wall insulation or lagging. But suppliers can advise customers to
optimize their micro-generation investment through an energy audit and baseline
energy efficiency measures.
Consumer protection policy has in the past acted as a barrier to energy service
packages, by suppressing energy unit prices and regulating against long term fixed
contracts that would prevent customers switching suppliers at short notice: the socalled ‘28-day rule’.17 Theoretically, suppliers can offer long term contracts on
‘goods and services’ like micro-generation, but they still face the risk that the supply
part of the contract could be switched away to another supplier, and this has
reduced the attractiveness of this option.
Ofgem is piloting a limited relaxation of the 28-day rule to assess how great an
obstacle to energy services this is in practice. It is not yet clear that suppliers
perceive a sufficient business case in diversifying away from competition around
least cost supply.
A contract involving micro-generation could have a wide range of potential value
streams for a licensed supplier, including lease-finance, electricity supply, electricity
export, gas supply (for micro-CHP), maintenance and insurance. But the transaction
costs involved in energy services are higher, and the potential to improve customer
share and retention is as yet unproven.
Equipment or heat and power leasing is not the only way to overcome the
upfront cost barrier on micro-generation. Suppliers and finance companies are also
expressing an active interest in developing new financial products, such as
preferential loan rates on micro-generation investments or even new financial
packages linked to home mortgages or insurance products.
Energy suppliers are unlikely to be the only players in any emerging
energy services market. Familiar household names without any previous
involvement in the energy industry are already lending their marketing
weight to established energy suppliers. With their vast customer base and
reputations, food retailers such as Sainsburys and Tesco could team up with
suppliers, or form their own energy service divisions, to extend credit in
support of innovative energy service offers. Engaging a range of trusted
brands in energy service marketing could help increase customer
confidence in energy audits and subsequent recommendations.
“ energy suppliers
are unlikely to be
the only players
in any emerging
energy services
market”
a micro-generation strategy
The Government has made an important commitment in the Energy Act 2004
to develop a micro-generation strategy. This section sets out a broad framework of
policies that Green Alliance and the Energy Entrepreneurs Network hope will be
addressed in the government strategy.
The Energy Act broadly defines micro-generation as the use for the generation
of electricity or the production of heat of any plant which has a capacity below
50KW electricity or 45KW thermal, and relies wholly or mainly on biomass,
biofuels, fuel cells, photovoltaics, water (including waves and tides), wind, solar
power, geothermal sources, or a combined heat and power system.
In preparing this strategy, the Secretary of State has committed to considering
“the contribution that is capable of being made by microgeneration to
(a) cutting emissions of greenhouse gases in Great Britain;
(b) reducing the number of people living in fuel poverty in Great Britain;
(c) reducing the demands on transmission systems and distribution systems
situated in Great Britain;
(d) reducing the need for those systems to be modified;
(e) enhancing the availability of electricity and heat for consumers in Great
Britain.”18
The Government has already shown commitment to promoting some forms
of micro-generation through capital grants programmes and improved access to
the grid network. However, micro-generation is still confined to a niche market,
and needs to break through with economies of scale before it becomes accessible to
the majority. A wide range of policies is needed to address
the market failures that prevent the value of micro-generation benefits being
returned to micro-generators.
17
A micro-generation manifesto
If energy services are to be given a fair trial it will take more than relaxation of
the 28-day rule. Creative public policy intervention is needed to create clear
incentives for suppliers to market energy services, and to compensate for low
energy prices by giving consumers tax benefits from whole house improvement via
energy efficiency and micro-generation.
A micro-generation manifesto
18
The strategy should aim to join up policy between ODPM, HM Treasury, the DTI
and Defra, to reward the benefits of micro-generation, realise its communication
potential, and help accelerate the economies of scale needed to bring down the
upfront costs.
The strategy must be published within 18 months of the Energy Act entering into
law, ie by December 2005.The DTI currently proposes to consult on a proposed strategy
early in 2005, with a view to publishing the final strategy by the end of 2005.
However, it is important that the Government should seek early dialogue with
the micro-generation industry, local and regional planning authorities, energy
suppliers and the construction industry to ensure that there is appropriate ambition
in policy proposals.
The strategy should aim to generate sufficient demand for micro-generation
technologies to enable significant scale economies in production. Without these
scale economies, unnecessary costs will be imposed on householders,
developers and energy suppliers.
“ excessive
paperwork
requirements
could fatally
undermine
public interest
in home energy
generation”
However, policies to drive demand should be phased, according to a
clear timetable, to enable the micro-generation industry, installers and
developers to plan for additional capacity and training to meet this rising
demand efficiently. The Government should ensure that only quality,
accredited suppliers can benefit from grants, fiscal incentives or planning
requirements for micro-generation. It is also vital that the Government
develops simple and clear procedures for householders and small
businesses to benefit from grants and other policies to encourage microgeneration and export to the grid.
Excessive paperwork requirements, or slow response and poor service
by micro-generation companies, could fatally undermine public interest
and confidence in home energy generation.
Climate Change Programme review
In the latter half of 2004, the Government will review their climate change
policies to assess whether they are on track to deliver the UK’s 20 per cent carbon
reduction target by 2010. This review represents an ideal opportunity to take a
fundamental look at the scope for micro-generation to engage consumers in climate
change policy.
Defra is planning a climate change communications project in recognition of the
fact that awareness of the serious implications of climate change is low, and that
where it exists it often fails to translate into responsible energy use in the home. The
domestic energy efficiency target for 2010 has already slipped by nearly a million
tonnes of carbon as a result.
Instead of scaling back ambition in this sphere, the review should make
consumer engagement its key aim. It should as a priority give clear political support
to micro-generation as a means of engaging consumers in climate change policy,
and catalysing more responsible energy use.
recommendation:
The Climate Change Programme review should give clear political support to
micro-generation as a means of engaging consumers in climate change policy.
progress so far:
●
●
●
●
●
●
New provisions for simple import/export metering and simple connection.
Clear Skies and Major Demonstration Programme grant schemes.
Community Renewables Initiative and proposals for Sustainable Energy Centres
(see advice and training).
VAT reductions on ground source heat pumps and micro CHP.
Carbon Trust sponsored micro CHP field trials.
Fuel Poverty Strategy: 6000 micro CHP units to be trialled in fuel poor homes.
Public policy should reward all forms of micro-generation that displace the
carbon embodied in imported electricity and gas, and lost in generation and
transmission from centralised power plant. However, specific policies are also
needed to ensure that power-exporting generators are rewarded in line with the
value of the exported power.
capital grant schemes
There are currently three capital grants programmes with application to microgeneration: the Major Demonstration Programme (MDP) for solar PV; the Clear
Skies programme for micro-renewables; and the Community Energy scheme for
CHP and local heat networks.
The Government has committed in two White Papers to a 2002-2012 ten year
solar PV Major Demonstration Programme (MDP) in line with the UK’s major
competitors. The first phase of the MDP has been highly successful in bringing
down costs, leveraging private sector investment and in attracting many new players
to the UK solar PV market. Phase Two of the ten year programme is currently on
hold, due to the Government’s decision to introduce a new capital grant programme
for all building-integrated renewables and energy efficiency technologies, as
recommended by the 2004 Renewables Innovation Review. However, the start date,
funding and departmental sponsor of this new scheme are as yet uncertain, while
the Major Photovoltaics Demonstration Programme and Clear Skies programme are
both due to end in March 2005. The resulting uncertainty for the micro-renewables
industry is already impeding future investment, job retention and
development planning. The Government should therefore confirm a oneyear extension to both the Major Photovoltaics Demonstration Programme “ grants alone
and Clear Skies at the earliest possible date. This would ensure continuity of
cannot make
support and allow the necessary time to develop and implement the
proposed new funding scheme in 2005/6.
these
Grant schemes are currently invaluable in building a market for microgeneration. However, they will not be sufficient to transform that market. It
takes an enthusiast to seek out these grants and shoulder the remaining
upfront costs. Grants alone cannot make these technologies become an
accepted norm for householders and businesses.
technologies
become an
accepted norm”
home energy ratings
From 2007, all houses for sale will need an energy label or rating in their ‘home
information packs’. This requirement has been transposed from the EU Energy
Performance in Buildings Directive into the Housing Bill. Energy labelling represents
a good opportunity to get 1.2 million home sellers each year interested in installing
micro-generation technologies to increase their property value. Defra is still
A micro-generation manifesto
19
consumer incentives
A micro-generation manifesto
20
deciding how the ratings should calibrate to energy performance. Ratings should be
designed to reward micro-generation as well as conventional energy efficiency
measures like loft insulation.
If A-rated houses, for home information packs, had to generate a specified
proportion of their energy requirements on-site this would help to consolidate the
aspirational status of micro-generation technologies. Another approach would be to
require A-rated homes to be net exporters of electricity to the grid. This could be an
even more effective way of engaging consumers, as an A-rated home would
represent an income-generating opportunity. However, this would promote
technologies that generate electricity, like micro-CHP, over those that provide
renewable heat, such as wood pellet boilers.
fiscal measures
If energy services are to be successful it will take creative marketing by energy
suppliers and clear incentives for uptake by consumers. There is an urgent need to
establish a coherent set of fiscal incentives for energy ‘demand reduction’, applicable
across both energy efficiency and micro-generation technologies.
VAT reduction across micro-generation technologies is important, to remove the
perverse VAT differential between energy use, at 5 per cent and demand reduction
measures, at 17.5 per cent. Solar technologies already qualify for VAT reduction, and
this was extended to ground source heat pumps and micro-CHP in Budget 2004.
Woodfuel boilers are still subject to the higher rate. Consistent application of
enhanced capital allowances (ECAs), refused in the 2004 Budget to solar PV, is also
needed to stimulate business investment in both energy efficiency and microgeneration. Given the likely importance of equipment-leasing models for microgeneration uptake, ECAs should be available for leasing payments as well as capital
cost. Such measures would help reduce costs in the short term and increase the
likelihood of micro-generation technologies being taken up in energy service offers
or building regulations compliance.
However, where there is no inherent market for micro-generation such
incremental cost adjustments may not be sufficient to drive consumer interest.
Measures are needed that will encourage a ‘whole-house’ or ‘significant home
improvement’ approach to carbon reduction in the home. In other words, fiscal
incentives need to be used to encourage homeowners and landlords to assess the
carbon footprint of their property, and to make the necessary changes
across the board, in order to increase their property value.
“ measures are
needed that
will encourage
a ‘whole-house’
or ‘significant
home
improvement’
approach
to carbon
reduction”
The introduction of energy ratings in home information packs in 2007
is an ideal opportunity to introduce a decisive fiscal incentive to motivate
homeowners to invest in micro-generation and energy efficiency. Rebates
from stamp duty or council tax for homes with a good energy rating
would give a clear incentive. Tax avoidance is a powerful motivator.
Surcharges for poorly-rated homes could help keep the policy revenueneutral, but low interest credit schemes are needed to make capital
available for such investment among lower income groups. A welldeveloped market in energy service provision by suppliers would
overcome this barrier (see supplier incentives).
The 2003 HM Treasury consultation on economic instruments to
promote energy efficiency dismissed personal tax rebates or stamp duty
rebates on the grounds that they “would be administratively complex and
would also give weak signals”.19 However, no evidence was provided for
this statement. The refusal to consider such ‘whole house’ approaches was
export reward
Since 1991 Germany has rewarded export of renewable power to the grid with a
guaranteed premium price or feed-in tariff. The tariffs are set for each individual
technology, based on its actual generation cost. Until 2002 this premium price had
to be paid by the utilities, but this obligation has now passed to the grid operators.
Similar models have been adopted in Spain, France, Austria, the Netherlands,
Luxembourg, Greece and Portugal. The feed-in tariff model should be considered as
one approach to overcoming some of the market failures that, in the UK, currently
prevent the value of exported power being returned to the micro-generators. To
make this model cost-reflective, the tariff could be set according to the standard
generation and export profile of each technology.
Metering is the obvious basis for accurately measuring and rewarding export of
surplus power by micro-generators. However, where electricity exports are small,
some metering solutions may not be cost-effective. Net metering would secure the
best deal for micro-generators but, as discussed above, is not strictly cost-reflective,
and by measuring only the net export or import may make trading of exported
electricity by suppliers unviable.
Currently half hourly meters are required to measure the exported electricity for
systems larger than 15 KW. At a cost of £800-1000, such meters cost more than any
feasible return from settlement or ROC payments, and as such are a big barrier to
grid connection. The threshold for half-hourly metering should be raised to more
than 50KW and, for very small generators, settlement for electricity exports by way
of export profiles may be the way forward. In the case of micro-CHP, such profiling
will depend for accuracy on effective monitoring of technology performance
through field trials. In the case of micro-wind turbines, simple export metering is
required to reflect the variation in output profiles according to wind speed.
distribution charges
A new electricity distribution charging system will be finalised by January 2005,
for implementation by DNOs in April 2005. Despite recent research for the DTI that
demonstrates that additional micro-generation will overwhelmingly drive down
costs for DNOs,20 it is currently proposed that micro-generators should pay an
additional capacity charge to DNOs in common with all distributed generation. This
would be counter to the principle of cost-reflectivity, which requires that
distribution charges should directly reflect network costs. Therefore microgeneration should be exempt from any additional capacity charge for distributed
generation.
Renewables Obligation Certificates
Following a technical revision to the Renewables Obligation, micro-renewable
generators can now, in theory, sell Renewabes Obligation Certificates (ROCs) to
suppliers if they generate at least 0.5 megawatt-hours in a year. The average
householder in Npower's pilot 'solar account' scheme, for instance, will generate
sufficient electricity to be eligible for one or two ROCs each year, which would
currently bring in £49 each. However, to apply for ROCs the micro-generator
currently needs to complete a 25-page application document and supply regular
meter readings to Ofgem. The average householder will struggle to fill out a
25-page application scheme for ROCs. Ofgem needs to make it feasible for suppliers
21
A micro-generation manifesto
widely seen as a significant weakness in the consultation and current government
position. Pilot trials of variable council tax are urgently needed to deliver an
evidence base for their wider application.
to apply for ROCs on their customers' behalf. However, the cost of Ofgem-approved
meters for each micro-generator may cancel out the value of the ROCs for suppliers.
The DTI should take further legislative steps to ensure that the metering
requirements for micro-generators to apply for ROCs are not prohibitive, and to
support supplier buy-back schemes.
A micro-generation manifesto
22
“
Winter Fuel Payments
Currently, £1.85 billion is spent on winter fuel payments (WFPs)
annually.
The system of WFPs could be used more effectively to encourage
£1.85 billion
elderly homeowners not eligible for free installations under the Energy
is spent on
Efficiency Commitment or Warm Front to reduce their fuel needs. As an
alternative to the standard WFP the Government should offer installation of
winter fuel
cavity wall insulation and/or micro-generation to achieve annual bill
reductions greater than the value of the standard payment, as well as
payments
enhanced comfort. The standard payment should be reduced to crossannually”
subsidise this programme and encourage the elderly to opt for home
improvement.
recommendations for consumer incentives:
●
●
●
●
●
●
●
●
●
●
●
●
The Government should confirm a one-year extension to both the Major
Photovoltaics Demonstration Programme and Clear Skies, until March 2006, at
the earliest possible date.
VAT reductions and ECAs should be applied consistently across all microgeneration technologies, to ensure their fiscal treatment is equivalent to that of
energy units.
ECAs should be available on revenue payments for leased equipment, in
recognition of the likely importance of equipment-leasing models.
Stamp duty rebates for low carbon homes should be introduced to coincide
with new home energy ratings in 2007.
Pilot trials should be held to assess the impact of revenue-neutral council tax
banding, based on Standard Assessment Procedure (SAP) ratings, on consumer
uptake of energy efficiency and micro-generation, and quantify the likely
administrative costs.
Energy performance rating A in new home information packs should require a
specified proportion of on-site energy generation.
The threshold size for micro-generation systems subject to the costly half-hourly
metering requirement on grid connection should be raised to more than 50KW.
For very small generators, export and import profiles should be developed as a
basis for settlement for electricity exports.
The feed-in tariff model, which gives a premium price for exported electricity,
should be considered as one approach to returning the value of exported power
to micro-generators. To make this model cost-reflective, the tariff could be set
according to the standard generation and export profile of each technology.
Micro-generators should be exempt from the proposed additional capacity
charge by DNOs for distributed generation, to reflect their network benefits.
The DTI should take further legislative steps to ensure that the metering and
paperwork requirements for micro-generators to apply for Renewables
Obligation Certificates are not prohibitive.
Government should offer installation of energy efficiency measures and/or
micro-generation as an alternative to Winter Fuel Payments. The standard WFP
should be reduced to cross-subsidise this programme.
progress so far:
●
●
28 day rule relaxation pilot scheme.
2003 technical revision to the Renewables Obligation, enabling micro-renewable
generators to sell ROCs to suppliers on basis of annual output.
Energy Efficiency Commitment
The Energy Efficiency Commitment (EEC) is currently the major policy
mechanism for improving the energy efficiency of existing homes. Each supplier has
an energy saving target, which they can meet by encouraging householders to install
energy saving measures. The Government has proposed an expansion of EEC to run
from 2005 to 2012, at roughly twice its current level of activity in the second phase,
to deliver carbon savings of around 1 million tonnes of carbon by 2010.
The Energy White Paper acknowledges that this level of obligation will require
energy suppliers to take up a substantial proportion of the potential for higher
energy efficiency in homes, but the easiest approaches have been made under the
current EEC programme. Currently, suppliers perceive EEC as a burden, and seek to
comply at least cost. As the Energy White Paper acknowledges, “While energy
suppliers are selling energy saving measures under EEC, few have sought to develop
new markets in energy services”.21
The forthcoming EU Directive on Energy End-Use Efficiency and Energy Services
will require member states to provide credible incentives for energy suppliers to
offer energy services and energy efficiency measures. If EEC is to be effective,
householders have to take advantage of suppliers’ energy efficiency offers, and this is
a challenge. The forthcoming trial suspension of the 28-day rule, which has been
introduced as an incentive for the development of energy services, offers an
opportunity to evaluate the commercial potential for new innovative approaches.
Energy suppliers need an incentive to market offers creatively, and to harness
consumer interest by combining energy efficiency with micro-generation.
Suppliers and NGOs agree that there is an urgent need for more creative options
to be proposed giving an incentive for suppliers to move beyond least-cost
compliance, and permitting third party implementation of household or SME
demand reduction projects. Micro-generation technologies offer more attractive
marketing propositions for suppliers, and could act as a hook for broader energy
efficiency investment by consumers.
But unlike the Renewables Obligation, there is currently no incentive for
suppliers to compete with each other to offer the best energy services packages,
because there are no certificates to be traded if they exceed the commitment.
Trading schemes, based on ‘white certificates’ for energy efficiency, are already
being developed in France, the International Energy Agency is studying the potential
of this model at an international level, and a number of other countries are actively
considering the issue. Tradeable demand reduction certificates would give energy
suppliers an incentive to apply their marketing expertise to promoting all means of
reducing the carbon footprint of energy demand, micro-generation included.
The Government has indicated that it is willing to consider more market-based
approaches for the third phase of EEC, for which a target will be set in 2008. In the
meantime, the second phase of EEC from 2005-2008 can help support micro-
23
A micro-generation manifesto
supplier incentives
24
generation technologies through ‘uplifts’, meaning that suppliers would score extra
points towards their target by installing micro-generation.
A micro-generation manifesto
Renewables Obligation Certificates
A customer acquiring one ROC alone will find it difficult to sell this to the
market. However through a buy-back arrangement suppliers can consolidate ROCs
and sell these to the market bundled together. This will give suppliers an incentive
to pay householders for any renewable electricity generated, whether it is exported
or used on-site. However, the commercial value of this kind of package depends on
the cost of approved meters for obtaining ROCs. The incentive for suppliers and
micro-generators will not exist until Ofgem approves affordable metering solutions
or profile-based data for ROC applications.
fuel poverty
If a credible incentive mechanism is to be developed in the UK, there is also a need
to evaluate the effectiveness of current approaches that merge fuel poverty and energy
efficiency objectives. Fuel poverty obligations may constrain the cost-effectiveness of
market mechanisms to deliver energy efficiency, and there is a need to explore how
fuel poverty might be addressed alongside such instruments. The fuel rich may prove
to be more responsive targets for suppliers marketing micro-generation.
recommendations for energy supplier incentives:
●
●
●
●
●
Government should develop proposals for a market-based trading mechanism in
demand reduction certificates to succeed the existing EEC scheme in 2008.
Uplifts should be given to micro-generation technologies under EEC2 to support
their role in energy service packages.
The DTI should take further legislative steps to ensure that the metering
requirements for micro-generators to apply for Renewables Obligation
Certificates will not involve prohibitive cost, and to support supplier buy-back
schemes.
The potential to de-merge fuel poverty and energy efficiency policies should be
explored, in order that the fuel rich might be cost-effectively targeted,
particularly with micro-generation.
Ofgem should have a clear remit to promote innovation, and remove any
regulatory barriers to emerging micro-generation technologies as a matter of
priority.
developer incentives
progress so far:
●
●
Clear support in PPS22 for local authorities requiring on-site renewable energy
generation in large new developments.
Draft Part L Building Regulations introducing ten per cent carbon reduction
through micro-generation as an alternative to further energy efficiency measures
for commercial buildings.
In PFI contracts micro-generation paybacks become more affordable thanks to
the bundling of capital and operating costs in a unitary payment. However,
contractors are reluctant to propose it in one-off bids, due to risk aversion and
uncertainty about its acceptability to procuring authorities. Government
departments should therefore specify a proportion of on-site generation from
renewable energy or CHP as a target for a group of deals, or ‘programme’. Microgeneration is particularly appropriate to the Building Schools for the Future
programme, as such visible climate change solutions are a valuable educational aid
for teaching science, citizenship and sustainable development. The Exemplar Designs
developed for this programme are good on energy efficiency but make scarce use of
visible micro-generation. The Design Quality Indicators, which will be the basis of
the departmental approvals process for projects, should remedy this.22
Another opportunity lies in the Government’s Decent Homes
programme. Whether through PFI or conventional procurement, £7 billion
investment is earmarked to bring council housing up to the decent homes
standard by 2010. One million homes are still to be refurbished. In its
evaluation of this programme, HM Treasury should emphasise the role that
micro-generation can play in meeting the standard and reducing energy
bills for tenants, especially in hard-to-heat homes with solid walls, or those
off the gas network.
“ another
opportunity
lies in the
Government’s
Decent Homes
programme”
Government procurement also has a vital role to play in helping to
bridge the gap between demonstration and commercialisation for emerging
micro-generation technologies. Public bodies (or regulated energy companies)
could make a forward commitment to purchase a significant volume of a new
technology, at a defined price, if a demonstration project meets a previously agreed
standard. This would attract private funding for the demonstration and, critically,
allow pioneering companies to engage with their supply chains on the basis of a
definite future order.
planning
The Government made a welcome commitment in the Energy White Paper to
examine “how to bring consideration of the use of renewables and energy efficiency
in developments more within the scope of the planning system, in the context of
the review of PPG22 and the Government’s wider planning reforms, and in a way
that does not impose undue burdens on developers”.23
A very important step has been taken towards this goal in the new Planning
Policy Statement on Renewable Energy (PPS22), published in August 2004. This
confirms that “Local planning authorities may include policies in local development
documents that require a percentage of the energy to be used in new residential,
commercial or industrial developments to come from on-site renewable energy
25
A micro-generation manifesto
procurement
The Government has accepted the recommendation by the Sustainable Buildings
Task Force for a new Code for Sustainable Buildings, to benchmark performance
above building regulations minimum standards. The Code will enable a consistent
best practice standard to be developed, building on the BRE’s BREEAM methodology,
but setting minimum standards on energy (as well as waste, water efficiency and
materials use). A project group and senior steering group are developing the Code,
with a view to a national rollout by early 2006. The Code framework should be
developed so that achieving a high score requires a significant proportion of on-site
generation of renewable energy or CHP. The Government should specify this high
score as the minimum requirement for all publicly procured buildings.
A micro-generation manifesto
26
developments”. It also states that local planning authorities should specifically
encourage renewable energy schemes in all new developments through positively
expressed policies in local development documents.
Merton and Woking Borough Councils and the Greater London Authority have
already introduced local planning policies requiring on-site renewable energy
generation in large new developments, and over forty councils, including Edinburgh,
Bristol, Belfast and Liverpool, are now planning to take a similar approach.
“ the Sustainable
Communities
Plan should be
seized as an
opportunity to
set targets for
micro-generation”
Local development policies promoting on-site renewable energy
generation should also give support to community and domestic gas-fired
CHP, which can achieve significant carbon savings and share the advantages
of renewable generation as a means of engaging businesses and
householders in co-production of energy. In line with the recommendations
of the Royal Commission on Environmental Pollution’s recent report on
biomass,24 we recommend that the ODPM encourage councils to require
new developments to include biomass district heating and CHP wherever it
is feasible.
The Sustainable Communities Plan should be seized as an opportunity to
set targets for micro-generation that will enable a dedicated supply chain to
reduce technology costs across the board, through economies of scale.
Where the Government is the landowner, as is the case for a significant
proportion of the Thames Gateway growth area, there is clear potential for offering
developers reduced land costs and/or increased build density to offset the increased
capital costs of more on-site generation. This strategy is consistent with affordable
homes targets, in that homes with micro-generation are insulated from the social
impact of future energy price rises.
Building Regulations
By helping bring prices down through economies of scale, pioneering planning
authorities can help pave the way for building regulations to progressively raise
national minimum standards on micro-generation.
The Government proposals for the 2005 amendment of Building Regulations
Part L, which deals with energy performance, represent a useful step forward. The
Energy Performance in Buildings Directive requires that Member States take the
feasibility of renewable energy systems and CHP into account at the design stage of
large new developments (over 1000 square metres). The Government has elected
not to prescribe the incorporation of micro-generation. However, in the case of
commercial buildings of any size, it is proposed that developers should deliver ten
per cent carbon reductions over and above what might be achieved by a ‘typical
package of conventional energy efficiency measures’, through either microgeneration or further energy efficiency investment.
There is no reason why this non-prescriptive policy should not also be applied
to residential developments over 1000 square metres. The impact of this approach
will depend on the stringency of the overall carbon emissions target, by floor area,
that is set. The Government has indicated that the notional contribution from microgeneration will rise to 20 to 30 per cent at the next revision. The proportion should
be set at a level at which it is impossible to achieve the overall emissions target
without some contribution from on-site renewable energy, rather than further
energy efficiency measures.
The Government is beginning to use Building Regulation reviews more
effectively to help unblock the innovation chain for emerging technologies such as
recommendations for developer incentives:
●
●
●
●
●
●
●
The Code for Sustainable Buildings should be developed so that a high score
requires a significant proportion of on-site generation of renewable energy or
CHP. Government should specify this high score as the minimum requirement
for all publicly procured buildings.
The Department for Education and Skills should specify a proportion of visible
on-site micro-generation as a Design Quality Indicator for all contracts under
the Building Schools for the Future programme, to give contractors certainty
across a large number of bids.
Public bodies should help drive innovation, by making a forward commitment
to purchase a significant volume of a new technology, at a defined price, if a
demonstration project meets a previously agreed standard.
The Government should set targets for on-site generation for growth areas
within the Sustainable Communities Plan to enable a dedicated supply chain to
reduce technology costs across the board through economies of scale.
Where the Government is the landowner, as is the case for a significant
proportion of the Thames Gateway growth area, developers should be offered
reduced land costs and/or increased build density to offset the increased capital
costs of higher targets for on-site generation.
The 2005 Part L Building Regulations review should extend the option for
compliance through micro-generation to residential developments larger than
1000 square metres. Future revisions should set carbon emissions targets such that
it is impossible to meet them without some on-site renewable energy generation.
The Government should give clear signals of the minimum anticipated rise in
carbon emissions standards over subsequent reviews of Part L, to help unblock
the innovation chain for higher performing buildings and technologies. This can
be achieved via the Code for Sustainable Buildings and the ODPM ‘forward-look
papers’.
advice and training
A number of agencies and networks have been established with the aim of
enthusing and advising the public about sustainable energy.
The Community Renewables Initiative is coordinated by the Countryside Agency,
and operates via a network of ten local support teams, which are partnerships
between local councils and energy experts (Annex B). The teams aim to raise
awareness in communities of the possibilities of small-scale renewable energy, and
to help steer interested groups through the complexities of feasibility assessment,
funding, technology issues and planning consent. The role that these teams can play
in getting communities enthused about micro-generation is crucial in the battle
against public apathy and antagonism over renewable energy. This scheme should be
expanded to cover the whole of England and Wales, and to include urban
27
A micro-generation manifesto
fuel cells. The clearest possible signal is needed of the likely minimum reduction in
carbon emissions required over subsequent reviews of Part L, to give a clear
indication to developers, investors and the renewable energy industry that there will
be a future market for higher performing buildings and technologies. The ODPM
has indicated that future reviews will be conducted at least every five years, and that
at each the ‘likely’ level of performance improvement sought will be in the order of
20 to 30 per cent. Further certainty could be given by clarifying the minimum
subsequent performance increase. The new Code for Sustainable Buildings could also
be a useful tool in signalling future mandatory standards.
28
communities, where the role for micro-generation in fostering increased climate
change awareness and social cohesion is just as important.
A micro-generation manifesto
When it comes to advice provision to individual householders, however, it is
important that renewable energy advice is not a stand-alone service, but is delivered
with energy efficiency advice in an integrated way. This will help harness all the
‘home improvement’ synergies between energy efficiency and renewable energy
that micro-generation can foster.
The Energy Saving Trust is proposing to transform the existing network of 52
Energy Efficiency Advice Centres and five pilot Renewable Energy Advice Centres
into new Sustainable Energy Centres (SECs). This more integrated approach will help
ensure that advisers can combine the excitement factor of micro-generation with
recommendations on basic cost-effective efficiency measures. SECs can play the role
of honest broker and support people through the sometimes-demanding
process of feasibility assessment, grant application, installation and
operation.
“ advisers can
combine
the excitement
factor of
micro-generation
with
recommendations
on basic
cost-effective
efficiency
measures”
An important role for SECs will also lie in providing advice and support
to local planning authorities in negotiating with developers on microgeneration requirements for new build. While local plans promoting
micro-generation are still few and far between, pioneering authorities will
need technical advice on negotiating and monitoring compliance.
There is also an urgent need for SECs to educate and advise local planning
authorities, to ensure a consistently supportive approach to roof-mounted
micro-generation. Outside conservation areas and AONBs, solar thermal and
PV panels have ‘permitted development’ status – meaning that no prior
planning permission is required – but this is conditional on the panels not
protruding ‘significantly beyond the existing roofline.’ In practice this
judgement is at the discretion of local planning officers, and eight-week
approval procedures can be imposed at random. In the case of micro-wind
turbines the complexity of securing planning permission is also highly
variable at present, depending on the experience and attitude of local
planners.
recommendations for advice and training:
●
●
The Community Renewables Initiative should be expanded to cover the whole
of England and Wales, with additional funding.
SECs should have the capacity to provide advice and support to local planning
authorities, both in negotiating with developers on micro-generation
requirements for new build, and in dealing with planning permission for roofmounted renewables.
existing technologies
ground source heat pumps
Ground source heat pumps (GSHP) are in widespread use across the rural United
States but until recently have had a very low profile in the UK.They operate by
extracting the solar energy that is stored in the ground a few metres down at a constant
temperature of 11-12ºC, and pumping this heat into the home for space heating and
hot water. A chilled water/antifreeze mix circulates in a coil of pipe – the ‘ground loop’
– absorbing the ground heat.The heat pump operates like a reverse refrigerator, using
the evaporation and condensing of a refrigerant to move this heat from the ground
loop into the hot water tank. Electricity input is required, but for every unit of
electricity used to pump the heat, three to four units of heat are produced. Heat from
ground source heat pumps can therefore be said to be 75 per cent renewably sourced,
and 25 per cent electrically driven. So far, 200 to 300 domestic systems have been
installed in the UK, and there are 100 commerical installations of various sizes.The
most significant roll-out scheme is managed by Powergen, as one route to fulfilling
their EEC target. Housing associations are the main clients.
They are currently most suited to new-build schemes, for two reasons. Digging a
trench or drilling a vertical borehole for the ground loop can be messy and
disruptive, more suited to a building site than a garden. They also operate at highest
efficiencies with underfloor space heating, because water can circulate in these
systems at lower temperatures. However, new models such as the Powergen heat
plant can operate through radiators. They can also raise hot water temperature to
60°C, although at lower efficiency.
GSHPs are ideal for homes off the gas network because, based on current fuel
prices, a GSHP can be a cheaper form of space heating than oil, LPG and electric
storage heaters. It is, however, more expensive than mains gas. Given new
regulations on the siting of oil tanks, the upfront cost of heat pump
“ ground source
installation is now comparable to oil-fired boilers. 4.5 million households
in the UK have no gas supply, and at least 1 million of these are fuel poor.
heat pumps
Retrofit schemes are being piloted, notably by Penwith Housing
Association, and research is being directed at means to minimise the
are ideal for
disruption of installation.
As average summer temperatures rise, GSHPs will have another attribute:
they can be reversed to deliver space cooling, from the same equipment,
avoiding the need for a separate air conditioning unit.
homes off the
gas network”
cost dynamics:
Economies of scale in production already mean that Powergen can supply their
heat plants significantly cheaper than on the open market. Half the cost of a GSHP is
the installation of the ground loop: these costs already come down if a number of
boreholes are being drilled on the same site, and are predicted to halve in future
once installers become more familiar with the technology and if builders can be
persuaded to plan ahead to minimise disruption.
skills needs:
Installation of heat pumps is similar to fitting a conventional boiler and can be
undertaken by plumbers, although there is resistance to fitting new technologies in
A micro-generation manifesto
29
annex A – micro-generation technologies
A micro-generation manifesto
30
the industry. The chilled water technology involved in ground loop pipes may
require some additional training for plumbers, and is currently undertaken by a
small network of specialist installers. Vertical boreholes for the ground loops are
necessary for high density social housing, and need specialist drillers: however,
family well drilling businesses are still to be found in most towns around the UK,
so there is a latent installation network.
micro-wind turbines
Micro-wind turbines make use of aerodynamic blades that harness the wind to
turn a shaft inside a generator, and generate electricity for domestic use and/or export.
Current models available in the UK, manufactured by Proven Energy, Iskra Wind
and Marlec, are raised on free-standing poles at a distance from the house, and
due to the constraints of wind speed are predominantly for rural application, or
on the edge of towns. However, two near-commercial models exist which will be
roof-mounted: the Swift roof-mounted turbine by Renewable Devices, and the
Windsave model.
The UK industry is already a recognised world leader in micro-turbines for
battery charging applications at off-grid sites.
cost dynamics:
Currently the low level of demand means that micro-wind turbines are generally
built to order, rather than mass-produced. Even before a volume threshold for mass
production is crossed, costs will fall with increased demand due to supply chain
efficiencies. Housing associations and local councils are expressing increasing
interest in installations of several turbines in series, on one site, which would
reduce the costs associated with installation.
skills needs:
The basic skills required for micro-wind turbine installation are transferable.
These skills are predominantly electrical, but basic mechanical skill is required for
raising the pole, in the case of free standing models, and fitting the turbine head.
Electrical contractors are already used as distributors.
solar thermal
Solar thermal systems are used to convert solar energy into hot water. Collectors
fitted to the roof absorb heat from sunlight, and use it to heat liquid, which releases
its heat into a hot water cylinder for household use, before returning to the
collector panels.
42-50,000 homes currently have solar thermal systems installed, delivering 50
MW thermal output.
The solar collector should be as close as possible to the hot water cylinder for
maximum efficiency, so solar thermal systems are suited to terraced, semi-detached
or detached houses rather than blocks of flats. Sixty per cent of boilers are currently
‘combi’ systems, with no separate hot water cylinder: this makes solar thermal
installation more problematic, so roughly 40 per cent of homes are suitable.
Solar thermal systems, on average, supply 90-100 per cent of hot water demand
in summer, 50 per cent in spring and autumn, and 10 per cent in winter, but this
will vary according to patterns of hot water usage.
skills needs:
Specialist installers currently dominate solar thermal installation. Although the
plumbing skills required are no different from conventional boiler installation, most
plumbers are unfamiliar with the technology and reluctant to undertake the roof
mounting. Plumbers could help drive demand and facilitate installation by raising
the option of solar thermal systems when called in to replace a boiler.
solar photovoltaics (PV)
The solar photovoltaic process converts solar energy directly into electricity.
Photovoltaic cells consist of two or more thin layers of semi-conducting material,
most commonly silicon. When the silicon is exposed to light, electrical charges are
generated and this can be conducted away by metal contacts as direct current (DC).
Multiple cells are connected together to form a module or ‘panel’. The PV module is
the principle building block of a PV system and any number of modules can be
connected together to give the desired electrical output.
The total PV capacity installed by the end of 2003 is 5.9 MWp., 1.8MWp of
which was installed in 2002 under the first phase of the Government’s Major
Demonstration Programme (MDP) for solar PV. Although rapidly growing, the UK is
still far behind the installed capacity of many other countries. For instance, Germany
installed 150 MWp in 2003 alone and is on course for another 200 MWp this year.
Japan’s 2010 target is 4.8 GW of installed PV capacity.
cost dynamics:
According to the industry, the most significant short-term cost reductions will
come from standardisation, building industry capability and scale up of production.
Prices in Germany are already significantly cheaper than current UK prices. PV
building products such as roof tiles and glazing are starting to be available in the UK,
and have the advantage of replacing conventional cladding materials, which can
represent a significant cost. Systems integrated into new build should be cheaper than
standard modules, but many of the new building-integrated products are currently
more expensive because of aesthetic design and the small volume of production.
skills needs:
Most of the necessary skills are available within the building industry, amongst
electricians, cladding installers and roof tilers. However, awareness of the technology
and its potential applications is low.
micro-hydropower turbines
Micro-hydro schemes use the force of river currents to drive a small turbine to
generate electricity. Micro-hydro systems are usually defined as those smaller than
1.25 MW. There is over 11MW of micro-hydro generating capacity already in the
UK. There are tens of thousands of former mill sites, with the estimated potential
for a combined generating capacity of 500MW to 2,000MW.
31
A micro-generation manifesto
cost dynamics:
Solar thermal technology is mature in design, but volume efficiencies could
deliver cost reductions of up to 20-30 per cent. At least half the costs are
attributable to scaffolding for roof mounting, and system installation. Costs will be
significantly reduced if installation can coincide with re-roofing or be integrated
with new build, avoiding the additional cost of scaffolding. Costs will vary
according to the ease of roof access and how close the hot water cylinder is located
to the solar collector.
A micro-generation manifesto
32
skills needs:
The skills needed for installing micro-hydropower are basic mechanical and
electrical engineering skills, for assembly, and basic civil engineering skills for the
buildings and water conduit work.
woodfuel boilers
Modern wood fuel boilers are self-feed systems, which burn high-density wood
pellets or woodchip. The process is carbon neutral, only releasing the carbon that
the tree has absorbed in its lifetime. Woodfuel supply creates an incentive for
coppicing of under-managed woodlands, or planting new farm energy crops, such
as short rotation willow coppice, with benefits for biodiversity and rural economies.
The main challenge is currently fuel supply. Customers are reluctant to purchase
woodfuel boilers when they are not confident of the supply chain. 3G Energi and
other UK companies currently import pellets from the continent and sell them at a
loss to maintain the market. However, the Forestry Commission estimates that the
quantity of park and garden waste arising in towns and cities could total 492,000
oven-dried tonnes per year, if the resource were exploited fully. The government
should offer rewards to local authorities that process their wood waste into pellets.
In the short term a central bulk purchase of pellets would help all the companies
involved in the supply and installation of woodfuel boilers. However, the carbon
emissions and costs associated with transport of woodfuel must be taken into
account, so policies should be directed at encouraging local and regional supply.
The Clean Air Act still prevents installation of woodfuel boilers in large urban
areas. This should be revised to reflect the fact that woodfuel burns cleanly in
efficient new boilers and stoves.
emerging technologies
micro combined heat and power (micro-CHP)
There are currently two near-commercial models for micro combined heat and
power units: BG Microgen’s wall-mounted Microgen unit, and the PowergenWhispertech floor-standing Whispergen unit. Market launch dates for both are
scheduled for 2005 to 2007. Pilots of the Whispergen unit have been carried out in
50 UK homes over the past three years, and 400 units have been available to buy in
the UK in 2004. Carbon Trust-sponsored field trials are currently being undertaken
on both units.
The output of the micro-CHP units is thermally driven, i.e. it is timed to meet
the demand for hot water and heating rather than power. However, peak heating and
electricity demand are closely aligned, so the power generated will be displacing
peak power demand whether used on-site or exported. As such the power units
generated will be of high economic and environmental value, as they will help
displace the need for the expensive, carbon-intensive, coal-fired power plant that is
brought on line to meet peak demand.
The different seasonal and daily profiles of solar PV and micro-CHP power
generation can be combined to form an effective package. Over the longer term, it
is also possible that micro-CHP units will be based on fuel cells. A fuel cell microCHP system is being tested by the Carbon Trust field trials. If fuel cells are
successfully incorporated into micro-CHP units, then it is likely that this will raise
the conversion efficiency of the technology and expand the market rapidly.
The US and Japan are developing systems that convert gas to hydrogen for the
fuel cell to produce electricity, and use the waste heat for heating. Other possibilities
include reversible fuel cells that can store the power generated by wind or
photovoltaics, by converting it to stored hydrogen by electrolysis, and back to
electricity when it is needed. Again the waste heat from this process would be
harnessed in a combined heat and power mode.
Current and planned fuel cell CHP systems include the established Woking Park
250kW system, a 4.4kW alkaline fuel cell CHP system at the Black Country Housing
Group in the West Midlands installed in March 2004, and a small system for
Berwickshire Housing Association which will power a new eco-house.
Moving beyond demonstration projects, commercialisation of small-scale fuel
cell CHP is anticipated by 2008, with MW-scale stationary power developing
towards 2010.25 Several firms that are developing fuel cell CHP systems for
domestic application already have trials in the UK and the rest of Europe, or are
planning trials imminently. Vaillant plans to launch its model to the market in 2008.
annex B – relevant policy agendas by department
DTI & Ofgem
Progress so far:
● 28 day rule relaxation pilot scheme.
● Simple import/export metering and simple connection.
● Clear Skies and Major Demonstration Programme grant programmes.
Needed:
● Simplification of procedures for micro-generators to access ROCs.
● Distribution Charges Review: fair reflection of micro-generation benefits in
charging structure.
● Reward mechanisms for power export.
ODPM
Progress so far:
● Part L Building Regulations compliance option to support micro-generation.
● PPS22 – clarity that local authorities can, and are encouraged to, require onsite generation in large new developments.
Needed:
● Sustainable Communities Plan: micro-generation targets for growth areas.
● Code for Sustainable Buildings: high score to require proportion of on-site
renewable energy generation or CHP.
● Permitted development status for roof-mounted micro-renewables.
33
A micro-generation manifesto
stationary fuel cells
Stationary fuel cells could be applied in many ways to increase the efficiency of
micro-generation as well as the capacity for power storage. They will be able to
provide power and heat at scales ranging from local networks to micro-grids and
individual buildings.
A micro-generation manifesto
34
Defra
Progress so far:
● Carbon Trust sponsored micro-CHP field trials.
● Community Energy grant programme.
● Fuel Poverty Strategy – 6000 micro-CHP units to be trialled in fuel poor
homes.
Needed:
● Climate Change Programme review: look at the scope for micro-generation to
engage consumers in climate change policy.
● More ambitious domestic energy efficiency aim – now 4.2MtC by 2010,
compared to 5MtC in the Energy White Paper.
● Enhancements in EEC2 to provide temporary kick-starts for micro-generation.
● EEC3 from 2008 – trading in demand reduction certificates.
● New Sustainable Energy Centres should have the capacity to provide advice
and support to local planning authorities on micro-generation.
● Community Renewables Initiative should be extended.
HM Treasury/ Customs and Excise
Progress so far:
● VAT reductions on solar technologies, ground source heat pumps and
micro-CHP.
Needed:
● VAT reduction extended to all micro-generation technologies.
● Stamp duty and council tax rebates to drive consumer investment in microgeneration and energy efficiency.
● High score in Code for Sustainable Buildings to be required for all PFI
building contracts.
annex C – glossary of acronyms
CHP
DNOs
EEACs
EEC
GSHPs
GW
KW
MW
MDP
PFI
PPS22
PV
REACs
ROCs
SECs
WFPs
combined heat and power
Distribution Network Operators
Energy Efficiency Advice Centres
Energy Efficiency Commitment
ground source heat pumps
Gigawatts
Kilowatts
Megawatts
Major Demonstration Programme for solar photovoltaics
Private Finance Initiative
Planning Policy Statement on Renewable Energy
photovoltaics
Renewable Energy Advice Centres
Renewable Obligation Certificates
Sustainable Energy Centres
Winter Fuel Payments
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Our energy future: creating a low carbon economy, 2003, Defra, DTI, p.18.
Carrots, Sticks and Sermons, 2003, Demos/Green Alliance.
Submission to Corporation Tax Reform consultation, August 2003, BG Microgen.
From A to ZED: Realising Zero (fossil) Energy Developments, 2003, Bill Dunster architects.
Source: RPA, 2004, based on independent research carried out for the ODPM
Part L review zero carbon working party.
Source: Earth Energy Engineering, www.oxfordsciencepark.co.uk/
downloads/geothermalheatpump.pdf
A fuel cell vision for the UK, Fuel Cells UK, 2003, p15
www.fuelcellsuk.org/team/Library/Visionwithcovers100903.pdf
Renewable Energy for Professional Applications: a guide to implementing off-grid power supplies in
the UK, September 2002, IT Power.
Innovation and Growth Team Report into the Environmental Goods and Services Sector, 2003, DTI.
System Impacts of Additional Micro-generation, Mott-Macdonald/ BPI, for the DTI,
forthcoming.
In the UK, the domestic purchase price is roughly 6.5p/KWh, as opposed to
the retail price of 2.5p/KWh.
This is because the price of all electricity has two main components: the cost of
energy and the cost of delivery (which is paid to the DNO). Net metering
obliges the supplier to pay both the micro-generator and the DNO for the
delivery cost component of exported power.
Study into the environmental impacts of increasing the supply of housing in the UK, report for
Defra, May 2004.
From A to ZED: Realising Zero (fossil) Energy Developments, 2003, Bill Dunster architects.
PFI: meeting the sustainability challenge, August 2004, Green Alliance.
The London Plan, policy 4A.9, February 2004, Greater London Authority.
Consumers have the right to switch supplier at 28 days notice.
Energy Act 2004, Clause 129.
Economic instruments to promote domestic energy efficiency, 2003, HM Treasury.
System Impacts of Additional Micro-generation, Mott-Macdonald, BPI, 2004,
forthcoming.
Our energy future: creating a low carbon economy, 2003, Defra, DTI, p39.
PFI: meeting the sustainability challenge, August 2004, Green Alliance.
Our energy future: creating a low carbon economy, 2003, Defra, DTI, p51.
Biomass as a Renewable Energy Source, 2004, RCEP.
A Fuel Cell Vision for the UK, 2003, Fuel Cells UK.
35
A micro-generation manifesto
notes
Green Alliance
40 Buckingham Palace Road, London SW1W 0RE
tel: 020 7233 7433 fax: 020 7233 9033
email: [email protected]
website: www.green-alliance.org.uk