Memorandum submitted by the Micropower
Council
The Micropower Council is pleased to respond
to the Committee's inquiry into the Climate Change Programme 2006.
Our response to the Government's Energy Review
is attached for further information [not printed]. This provides
further, more detailed, information on the contribution micropower
can make in meeting all four of Government's Energy White paper
objectives, including reducing emissions, and the measures we
believe need to be introduced in order to ensure that micropower
technologies are able to make a real contribution to addressing
the climate change challenge.
Domestic scale micropower technologies have
a major role to play:
REDUCING EMISSIONS
1MtC of annual carbon savings can be obtained
by any of:
— 1m biomass-fired heating systems
or heat pumps (one in every 26 homes);
— 6m gas-fired microCHP (one in every
four homes);
— 7m ( approx. ) micro-wind, ( approx.
) PV or solar hot water (one in every three to four homes);
SUPPLY SECURITY
1GW new CCGT baseload power station's electricity
would be displaced by any of:
— 1m biomass-fired heating systems
or heat pumps (one in every 26 homes);
— 3m gas-fired microCHP (one in every
eight to nine homes);
— 7m ( approx. ) micro-wind, ( approx.
) PV or solar hot water (one in every three to four homes);
HOME HEATING
Fuel consumption, and therefore cost, is either
eliminated or permanently lowered, particularly when micropower
technologies are combined with energy efficiency measures;
COMPETITIVENESS
The use of micropower technologies:
— reduces both economic and energy
waste leading to greater economic competitiveness; and
— enhances competition in the energy
sector as the only real alternative to network-based, gas and
electricity supply.
Micropower Technologies capture "hearts
and minds", resulting in behavioural change that reconnects
consumers with their use of energy and results in positive behaviour
change:
"The most striking finding is the difference
in `energy intelligence' between mainstream households with no
micro-generation and those who have acquired the technologies
passively Having come from a similar starting point, these new
DIY energy generators exhibit in general a wholly new grasp of
energy issues and control over their energy use"[15].
Micropower technologies replace low efficiency
centrally produced electricity with high efficiency clean power
produced where it is needed without incurring excessive transportation
losses; micro-heat technologies displace the use of gas and other
fossil fuels for heat production in the home and local community.
The number of installations required to deliver
the equivalent of a CCGT is well below the mid to long term market
potential for most of these technologies and no allowance has
been made in the numbers quoted above for technological developments
that could lead to major performance enhancements in the future
(in particular the potential for fuel cells CHP technologies).
In addition, the total potential contribution
from decentralised generation which includes microgeneration in
larger applications and community schemes is considerably greater.
Some indication of the potential market is given
by a number of recently published studies:
— the SBGI's updated projections for
micro-chp (micro-CHP Updated projections SBGI)[16]—indicates
that this technology can take 30% share of the boiler replacement
market by 2015 and that 5.6 million homes could have microCHP
installed by 2020;
— the EST study (Potential for microgeneration
Study and analysis[17])
has been quoted as saying that and 30-40% of the UK's electricity
demand could be met by microgeneration devices by 2050; and
— in a more ambitious and environmentally
focussed scenario, the report on the 40% House (40% house project
report (Environmental Change Institute of Oxford University March
2005[18]))
suggests that there could be more than 50m low and zero carbon
technologies providing heat and hot water in the domestic market,
under the "40% House" scenario, by 2050[19].
Taken together these studies demonstrate that
the market potential for micropower is very substantial. Looking
forward there are a number of factors that will facilitate its
development in the mid to long term.
— The micropower industry is new and
very diverse. Over the next five to 45 years there is the potential
for considerable innovation and for future micropower technologies
to deliver even higher efficiencies and fuel savings than can
be delivered by current technologies.
— The industry is a long way from mass
market production/installation and significant economies of scale
are available that should move them beyond niche market application
to real alternatives to conventional technologies accessible to
everyone.
— The market itself is subject to major
changes over this period. By 2050:
— almost all gas and electricity infrastructure
will be replaced and should be better able to accommodate decentralised
power production;
— all existing power stations will
be closed (and even some yet to be built will have closed by then);
— there is the potential for major
technological innovation in related areas that further facilitate
the efficient deployment of microgeneration:
— Smart metering should be the norm aiding
customer choice and, amongst other things, allowing consumption
to better aligned with production;
— improved power flow management;
— improved small scale storage capabilities
could emerge (eg dc/battery application within homes); and
— fuel availability and price movements
will change the relative economics of different technologies over
time.
— The diversity of the industry means
that different technologies can be used in different situations
and the industry should be able to respond very flexibly to any
changes in the heat and power market.
The nature of the market with bulk sales of
small scale technologies also allows for smooth market build up
as new capability is added incrementally over time.
A mass market capability cannot be delivered
overnight; the rate at which micropower technologies are installed
and the eventual market size will be dependent on many factors
including Government market transformation policies, the removal
of barriers to the development of small scale heat and power technologies,
and future movements in fuel prices.
It seems highly likely that we will miss the
2010 target for carbon reduction; missing that target will make
it even more difficult to achieve the 2020 objective of making
"substantial progress" towards a 60% reduction in carbon
reduction by 2050. It is therefore, essential that measures are
implemented now to ensure that we can get back on track as soon
as possible. This must include actions that ensure that micropower
can fulfil its potential to deliver real carbon savings beyond
the 2010 time horizon and make its contribution to meeting the
longer term environmental challenge.
THE EAC'S
QUESTIONS
Our response to the specific questions posed
by the Committee follows.
The Prime Minister continues to identify climate
change as "probably the greatest long-term challenge facing
the human race". Does the 2006 Climate Change Programme represent
a realistic strategy to prepare the UK to meet this challenge?
1. We believe that the Objectives set out
in the 2003 Energy White paper provide an appropriate framework
for managing the issues facing the UK's energy market. Meeting
the Climate Change challenge is probably the most complex and
difficult of these. Given this, we consider it essential that
a long term vision is developed and implemented to meet challenging
milestones for carbon reduction to 2010 and beyond.
Does the Government need to do more, and if so
what, to try to ensure that it meets the 20% reduction in carbon
dioxide emissions by 2010?
2. It seems highly likely that we will miss
the 2010 target. Missing that target will make it even more difficult
to achieve the 2020 objective of making "substantial progress"
towards a 60% reduction in carbon reduction by 2050. As we note
above, the mass market transformation of the micropower industry
cannot happen overnight and its contribution to meeting the 2010
target is likely to be relatively small, but actions should be
taken now to ensure it can make a substantial contribution to
meeting the 2020 objective and subsequent targets. Government
must do more NOW to ensure we can get back on track as soon as
possible.
A summary of the measures we believe will enable
micropower (and other distributed energy sources) to optimise
its contribution are summarised below and set out in further detail
in pages 13-24 of our response to the Energy Review [not printed].
To what extent, if at all, will the outcome of
the Energy Review affect the implementation of the Climate Change
Programme?
3. We believe that a key output from the
Energy Review must be to set the Climate Change Programme in a
long term sustainable context. It is also essential that the focus
is on ALL forms of energy including electricity, heat, and transport
and addresses both demand and supply side measures.
SUMMARY OF
ACTIONS NEEDED
TO ALLOW
THE MICROPOWER
SECTOR TO
FULFILL ITS
POTENTIAL IN
MEETING ENERGY
POLICY GOALS
We believe that the following actions, some
of which are foreshadowed in the Microgeneration Strategy, need
to be taken if the Micropower Industry is to play its full role
in meeting energy policy and environmental goals.
— The Government should undertake an
urgent and thorough review of the Gas and Electricity Markets
Authority's duties; this MUST include extending the protection
of customers to include customers installing micropower devices.
— The Government should commit NOW
to establishing targets for microgeneration by 2008 and should
commission the necessary research to support the setting of these
targets.
— The Government should undertake a
review of the fiscal regime and the differences between the tax
and VAT treatment of investment in microgeneration by domestic
customers and businesses to remove current inequalities.
— Government should ensure that the
planning regime is used to optimise the installation on micropower
technologies. This includes removing barriers to installation
and the promotion and deployment of positive planning policies.
— The current situation where renewable
electricity and fuels are protected by an obligation and there
is no equivalent for renewable heat must be addressed. Government
must act quickly to level the playing field for renewable heat
and introduce a market funded support mechanism.
— Government should ensure that the
regulatory framework for infrastructure development (for gas,
electricity and biofuels) properly reflects the future growth
in decentralised heat and power production. Specifically, Ofgem
should undertake a root and branch review of the incentive properties
of the combined Distribution Price Control and Distribution Use
of System Charging regime.
— Government should require the regulator
to ensure that, in line with good economic practice, transaction
costs for participation in the energy and ROC market does not
consume all the value of the product. Transaction costs must be
reduced for the smallest participants.
— All measures should be incorporated
within a long term policy framework for the future evolution of
the industry. To benefit from the full range of micropower technologies,
the policy framework should encourage all forms of microgeneration
not just those that are near to market. Incentives and regulations
should also encourage the development of successive generations,
and be designed in a way that encourages cost reductions, particularly
for well established technologies.[20]
The Government should review its own activities
and responsibilities to determine how and where it can act to
promote micropower in a cost effective and efficient way through,
for example the deployment of micropower technologies in government
buildings, measures to promote consumer confidence, and overseeing
measures such as the development of an accreditation scheme to
help build consumer confidence.
May 2006
15 Sustainable Consumption Roundtable seeing the light:
the impact of microgeneration on the way we use energy. October
2005. Available at: http://www.ncc.org.uk/responsibleconsumption/seeing-light.pdf Back
16
http://www.sbgi.org.uk/index.php?fuseaction=sbgi.viewFile&id=8013060 Back
17
http://www.dti.gov.uk/energy/consultations/pdfs/microgeneration-est-report.pdf Back
18
http://www.eci.ox.ac.uk/lowercf/40house.html£report Back
19
Table 7.2. Back
20
How quickly this happens will depend on how quickly an appropriate
regulatory framework and correct investment incentives for monopoly
infrastructure providers are put in place. Back
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