Memorandum by Genersys plc
1. The Select Committee on Economic Affairs
of the House of Lords has called for evidence about the economics
of renewable energy, aiming to set out the costs and benefits
of renewable energy and seeing how they compare with other sources
of energy, and examining the Government's policy towards renewable
energy.
2. It is traditional, I suppose, to preface
a response by saying how welcome the inquiry is, but frankly,
this call for evidence is simply one more call for evidence, inquiry-come-consultation
about renewable energy in a long line of endless calls, consultations
and inquiries. I hope that it will not be as large a waste of
time as all the others, which as far as I can see have been started
with pre conceived and pre determined ends or are conducted without
power or the political will to enforce any necessary changes.
3. The United Kingdom must lead the way
among nations in inquiries, consultations and calls for evidence
by quite a margin. Unfortunately it falls behind every other country
in renewable energy with which I do business by a similarly long
margin.
4. I note that from the questions set out
in the call for evidence that the Committee appears to be mainly
concerned with electrical energy. The Committee's call for evidence's
preamble that "Electricity generation, as opposed to heating
and transport, is widely thought to have the most potential for
greater use of renewable sources" indicates an over emphasis
on electricity at the expense of doing any thinking at all about
heat. It is actually wrong; the greatest scope for renewables
lies with heat generation.
5. The UK's energy policy as a whole is
really an electricity policy and not an energy policy; the Committee
asks four and a half questions specifically concerned with electricity
but only a quarter of a question about heat. This might be justified
if heat was such a small proportion of our overall energy use
or if there was not renewable heat providing technology.
6. I have spent many years studying renewable
energy and the result of that study led to me establishing a thermal
solar business, Genersys. I have written "the Energy Age"
which has sold around 10,000 copies and write a daily web log
"ideas for the environment" at http://robertkyriakides.wordpress,com
which has over 200 posts and over twenty thousand views in the
past six months.
7. My company, Genersys plc is the largest
supplier of thermal solar panels in the United Kingdom. I am its
Chief Executive. It has (through its shareholders) part ownership
of ThermoSolar AG, which is one of Europe's largest flat plate
manufacturers and Genersys distributes their panels throughout
the English speaking world and Latin America.
8. Genersys also has exclusive distributorship
of thermal solar panels from Dimas SA of Greece, another leading
European manufacturer. Genersys has thermal solar businesses (where
I serve on the board of directors) in Costa Mesa California, Johannesburg
South Africa, Townsville Australia, and Mexico City Mexico and
we are working to establish in Amman Jordan and in Colombia. This
gives me some insight into renewable strategies being pursued
in these jurisdictions.
9. I am limiting my evidence to that about
solar thermal energy. The Select Committee will receive plenty
of evidence from the electricity industry. If the UK manages to
get 15% of its energy consumed from renewables by 2020 and most
of this comes from electricity, the UK will have missed a significant
opportunity and will have made a costly (both in environmental
and financial terms) mistake.
10. I have said that in my view the Committee's
concentration on electrical energy is wrong minded. The storage
of electrical energy is very hard, expensive and in many cases
unfeasible, the grid network is massive and requires huge changes;
electrical energy is provided by huge multinational companies
whose interests do not always coincide with that of the state
and which are difficult to control, and renewable electricity
also suffers from the fault of intermittency. Electricity is a
big problem and it will take more than a select committee to come
up with any meaningful solutions.
11. On the other hand, although less "sexy"
heat is an easier problem to solve in renewable energy terms.
The technology and techniques have been developed; the technology
can be used in the UK for water heating or as a supplement to
space heating and/or for industrial processes and/or for pool
heating and/or for air conditioning.
12. Renewable heat energy can be safely
and easily stored, unlike electricity, and there is no conflict
caused with energy suppliers because solar thermal heat is a form
of microgeneration so it does not involve digging up roads or
spoiling the countryside.
13. Heat energy accounts for about half
the UK's total energy. In households it accounts for two thirds
of the energy spend with about 24% (the figure varies from year
to year according to weather) of their energy being used by households
for water heating. A good solar thermal system can provide around
50-70% of a dwellings hot water demand and with more panels around
30% of its space heat demand, (more if underfloor heating is employed).
14. Every jurisdiction in which Genersys
operates except one—(England & Wales) solar thermal
energy is regarded as a starting point for emission reduction,
security of supply and renewable energy.
15. In addition, all of these other jurisdictions
feel it right and economic to establish some kind of incentive
scheme for solar thermal technology to enable it to be taken up
more readily and economically. There are established incentive
schemes in most states in the United States, an overall Federal
Tax Credit, as well as grants in Australia; South Africa is developing
an incentive scheme combining a one of grant to householders with
a carbon incentive for the electricity company installing solar
thermal systems. Mexico has instituted a "green mortgage"
to enable householders to take up the technology as well as investing
in solar thermal technology for state swimming pools and government
buildings. Virtually every government building in Seoul, in South
Korea has a solar thermal system.
16. In the European Union, Germany has an
established grant mechanism which is simple to operate and which
is well funded. As a result it installs around 100 times more
square metres of thermal solar panels each year than the United
Kingdom. New laws in Spain and Portugal requiring solar thermal
systems on all new build homes and on all homes in the course
of construction have led to massive uptake, not just in new build
but also in retrofit. France with incentives is experiencing double
digit solar thermal growth, as is Italy and Ireland.
17. By contrast England and Wales have two
tiny solar thermal grant schemes.
18. The first relates to householders and
offers £400 under Phase 1 Low Carbon Buildings Programme
provided the applicant can fulfil conditions that do not relate
in any way to water heating. These include low energy light bulbs
and cavity wall and loft insulation. The conditions make about
as much sense as a condition requiring the applicant to use a
bicycle. The importance of this is twofold; £400 does not
make a buying decision for a system costing £4,000, but it
unmakes that buying decision if the grant is found to be too complex
or too costly to take up. The cost of the measures required by
the grant often exceeds the value of the grant. As a result take
up of grants has slowed to a trickle and take up of solar thermal
systems in England and Wales has declined.
19. The second scheme is Phase 2 of the
Low Carbon Building Programme. This offers up to 50% grants for
not for profit organisations but they have to purchase from a
list of four framework suppliers, appointed after an underpublicised
tendering process resulting in old fashioned solar collectors
being available under the scheme. There seems some evidence of
higher prices being charged by framework suppliers under the scheme
(taking advantage of their virtual monopoly) as well as higher
margins being added by various scheme framework partners to cover
their elements of risk, so the scheme offers poor value for money
for the taxpayer. This being a closed market makes competition
in terms of value and in terms of quality, non existent. In addition
the scheme is targeted at schools. When the solar thermal systems
are at their most productive—in the school's summer holidays—the
demand will be lowest.
20. Neither grant scheme, for all their
respective complexity, provides any differentiation to enable
renewable technology to be used where it provides the most financial
and carbon benefits—off the gas grid network.
21. I have dwelt on the grants, subsidies
and incentives because all renewable technologies, not just solar
thermal, require a capital investment that is much greater than
a fossil fuel energy source. Because having a renewable energy
system is optional—there are no laws requiring one—the
technology is always viewed in terms of "payback" or
return on investment and neither concept applies to a source of
heat energy produced by fossil fuel.
22. It is a disgrace that the Energy Savings
Trust—concerned with saving energy but also advising people,
suggests that the savings from a solar thermal is around £40
per annum, using illogical methodology and drawing comparisons
with the cheapest form of gas, low hot water use and assuming
incredible boiler efficiencies that do not exist in the real world.
23. In fact the savings vary quite considerably
depending on use, fuel displaced and future rate of fuel price
growth. It is hard enough to persuade people to invest in a solar
system which will save them somewhere between £200 and £500
a year because they have to part with a large capital sum, without
the EST providing misleading information.
24. The cost of a solar thermal system for
heating water that is supplied by one of Genersys's installers
is around £4,000. Around 30% of the cost is equipment and
45% installation. The remaining costs are made up of non solar
related equipment and margin for the installer to cover selling
and marketing costs. Of the installation cost, a large proportion
is made up of scaffolding.
25. Working with various local authorities
around the country, and also working in Scotland where the grants
are higher, we find that against a price of £4,000, a grant
or subsidy of £1,000 significantly increases take up.
26. We also know that requiring solar thermal
on new build (when scaffolding is up and tradesmen can work in
empty properties) significantly reduces installation costs.
27. If solar thermal was required in new
build homes and the builders did not seek to impose excessive
margins on it, it would be cheaper for a home buyer to have a
solar system and pay for it by a small addition to his or her
mortgage than it would be for the home buyer not to have a solar
system.
28. In other words, solar thermal is relatively
expensive under the present circumstances for various reasons
but with the right conditions and the right policies solar thermal
renewable heat created from benign sunlight would be economical
and thus used more than it is now, for the greater benefit of
society with fewer emissions and much lower pollution.
29. In effect fossil fuel is subsidised
because the users of fossil fuel do not pay for the damage done
by burning fossil fuel. A true price which reflected the damage
caused by pollution and climate change of burning fuel would provide
renewables with a level fairer playing field. As it would be politically
unacceptable to tax fossil fuel more than it is already taxed,
it must be right to incentivise renewables, particularly microgeneration
renewables like solar thermal systems.
30. Finally I hope that the work of the
committee will not be in vain; it seems to me that the UK seems
to have recently lost its much stated commitment to a lower carbon
economy and to emission reduction by renewable energy means in
the light of recent statements by the Chancellor of the Exchequer
and the Prime Minister about prioritising increased oil production.
Such a policy makes nonsense of any enquiry about the economics
of renewable energy.
Robert Kyriakides
Chief Executive
15 May 2008
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