Memorandum 57
Updated submission from the Energy Saving
Trust
1. Unless the energy that we use is cleaner,
Britain will be hard-pressed to hit its aggressive CO2
reduction targets, even with a massive increase in our efforts
to reduce energy demand. "Macro" renewable projects
for electricity generation—like wind farms and tidal schemes—are
on the up, thanks to the "Renewables Obligation". But
despite this, only 4.6% of the UK's electricity came from renewable
sources in 2006. There is still a long way to go. However, electricity-generation
is only a small part of the problem: three-quarters of the energy
we use at home is for heating and there is currently no way of
creating a large-scale, carbon-neutral solution for home heating.
2. Producing energy at a domestic level
has huge potential for CO2 reduction. It could create
a more diverse energy supply, in an age when energy security is
a major worry. It creates none of the waste that happens when
energy is transported long distances (centralised power stations
lose over 60% of their "primary" energy as waste heat
and in transmission losses). And microgeneration can help to tackle
fuel poverty, particularly in "hard to treat" properties.
3. But, how do you get consumers to invest
in technologies whose full benefits they find difficult to appreciate
or realise, whilst others find it difficult to afford them? For
most people, microgeneration is a lifestyle choice rather than
a hard-headed commercial decision.
4. This submission builds on our previous
submission to the Science and Technology committee. Since that
submission, we have completed further modelling work. In this
recent work, reported in "Generating the Future"
(document can be found at http://www.energysavingtrust.org.uk/download.cfm?p=4&pid=1199)
we find that a judicious blend of policies and incentives could
deliver huge carbon savings for a fraction of the 1% of GDP that
the Stern review suggests is needed.
WHERE IS
MICROGENERATION NOW?
5. Grant systems like the Low Carbon Buildings
programme are helping microgeneration to grow—but at a painfully
slow pace. Despite rising interest in solar PV and thermal, micro-
wind and ground source heat pumps, there are currently only 100,000
installations out of potential millions.
6. Consumers are positive about renewable
energy. A survey of over 6,000 individuals revealed that two-thirds
favoured renewable electricity, 44% opting for "macro"
and 24% for microgeneration—and with wind and solar the
preferred sources. Most respondents to this survey thought that
government was responsible for ensuring energy sustainability
and should subsidise renewable energy.
7. However, the barriers to microgeneration
ensure that this public enthusiasm does not translate into action.
Most technologies are expensive; many are hemmed in by red tape,
like the planning laws and the complexities of selling electricity
back to the grid. Consumer understanding of the technologies is
low. And developers and suppliers have few incentives to invest
and commit.
8. The detailed modelling that underpins
"Generating the Future" shows that no single
policy will encourage the kind of mass adoption of microgeneration
that is needed to get results. However our research shows that
a combination of different policies, providing incentives to both
consumers and providers, could drive massive carbon savings from
microgeneration.
9. A successful policy scenario:
— Mandate for one heating microgeneration
technology to be installed (instead of a conventional boiler)
at time of replacement.
— Make wind, solar or PV compulsory
on new builds.
— Offer a 30% grant to retrofit renewable
technology into existing buildings.
— Provide 10-year, low-interest loans
on all microgeneration technologies.
— Make sure that electricity from renewable
sources can be sold back at the same price consumers pay for grid
electricity.
— Apply a carbon tax of £20 for
each tonne of CO2.
10. When this combination of policies is
applied, micro-CHP (combined heat and power), currently an emerging
technology, becomes the heating system of choice by 2050. Air-and
ground-source heat pump would be installed in large numbers, along
with biomass boilers and solar thermal, wind and PV. All of which
would add up to national CO2 savings of around 60%.
11. A direct subsidy cost of £200 million
and a total annual cost of around £3 billion (excluding all
benefits) by 2020 is a small price to pay compared to the £13
billion cost implied by Stern's recommendation that 1% of GDP
is needed to mitigate climate change.
POLICIES REQUIRED
TO MAKE
MICROGENERATION SUCCEED
12. Regulation is required to take the least
efficient heating products off the market and make low-carbon
replacements compulsory. Our research suggests that regulation
has huge potential to encourage microgeneration. It is the only
policy that would work on its own and the most effective way to
apply it is at specific points in the life of a building, such
as boiler replacement. In the longer term, more radical measures
mandating installation at sale or re-roofing should be applied.
13. Price carbon at least £20/tonne
of CO2. A carbon price that reflects its social cost would not
work in isolation but would help microgeneration as part of a
package of measures.
14. Change consumer decision-making—provide
"soft loan" purchasing options that offer real savings
to consumers. These could apply to equipment bought directly or
via energy supply companies.
15. Raise awareness and change attitudes—run
an awareness programme that motivates consumers to include environmental
factors when making investment decisions. "Forward-looking"
consumers who currently buy microgeneration are prepared to invest
out of concern for the environment and accept long payback times.
16. Provide information and advice—set
up an independent advice service on microgeneration. The subject
is fraught with technical and regulatory complexity, which frightens
off potential adopters. Practical, usable guidance is needed.
17. Help householders to understand the
Energy Performance Certificate (EPC) process. The value of a house
will one day reflect its energy performance, encouraging home-owners
to take action. Raising awareness of EPCs will help his process
along.
18. Increase the value of subsidies, particularly
in the early years. Subsidies need to be at considerably higher
levels than presently planned (post current grant support) to
encourage mass-market take-up of microgeneration.
19. Heat measures—give heat- microgeneration
technologies an "uplift" under the Carbon Emissions
Reduction Targets (CERT). A subsidy of 30% is required for substantial
carbon savings.
20. Electricity measures—provide a
guaranteed "feed-in" tariff; or create a "Microgeneration
Obligation". The former gives an attractive price for microgenerators
to sell at and the latter will help to incentivise technology
developers and suppliers, in the same way that the "Renewables
Obligation" has boosted "macro" renewable schemes
such as wind farms.
21. Use the Environmental Transformation
Fund to support household generation; and support early commercialisation
measures such as field trials. Grant support is all very well,
but it tends to support the lowest-cost technology rather then
helping others to develop. Field trials are essential to refine
microgeneration technologies before they are released to a wider
market.
22. Provide a clear framework—set
out plans that encourage companies to invest. Without certainty
of the direction government policy will take, businesses will
be reluctant to commit to microgeneration technologies.
23. Invest in peripheral technology issues—using
existing technologies more carbon- efficiently, exploring energy
storage and looking at ways of rewarding peak demand reduction:
Investment in these areas, perhaps through the Environmental Transformation
Fund, will help to support microgeneration too.
24. Link into grid de-carbonisation—create
a unified policy for domestic microgeneration. Linking together
the grid, community scale solutions and microgeneration will ensure
that CO2 savings are achieved at lowest cost.
IN CONCLUSION
25. Microgeneration holds out huge potential
for revolutionising the way the UK produces energy and for carbon
savings. But without a carefully considered policy approach, we
could miss the important—and extremely cost- effective—way
of hitting the UK's CO2 obligations.
January 2008
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