The Smart Export Guarantee Scheme (SEG)

Why is central government continually surprised that when the big energy companies are asked to ‘do the right thing’, they instead do what is right for them?

Central government seems to love handing responsibility for delivering energy reduction targets over to the big energy suppliers.  The scheme names come and go -  CESP, CERT and ECO – but the common factor has been to require energy companies to invest in energy efficiency measures such as loft insulation, and cavity wall insulation for homes.

Pause for a moment to think about it.  You’re asking a business to do things to reduce demand for its own product – energy.   How surprised should be we be that that foot-dragging, missed targets and ineffective measures have been the result?

In 2014, many of the energy suppliers were fined for failing to meet their targets to install insulation. British Gas was fined £11million, a development which their PR department brazened-out as a charitable donation.  One is left wondering if the energy companies see these fines a small price to pay instead of helping people spend less on energy.

With the government's new proposals for a Smart Export Guarantee (SEG) are we again about the make the same mistake by asking the big energy companies to decide what the ‘market price’ for electricity exported by householders and businesses with solar panels?

Why we Need a Smart Export Guarantee

Many people in the solar industry that I speak to have pretty mixed feelings about the Feed in Tariff.  They recognize the transformative effect of 19 years of subsidy on the industry, helping it to achieve scale and cost-competitiveness with fossil energy.  At the same time, they regret the reckless way that the scheme has been managed.  Successive ministers at DECC and then BEIS have inflicted real pain on many good people who had invested their time, energy and money in solar businesses an effort to be part of the solution.

As a consequence, the industry is genuinely looking forward to a future where it no longer needs ‘help’ like that from government and the technology can stand on its own feet as a significant contributor (maybe the dominant contributor worldwide) to the clean energy revolution.

It remains crucially important for the sector that householders and businesses that invest in solar are able to sell generated solar energy that they cannot use themselves.  This makes possible efficient and cost-effective solar systems that minimize the cost of energy rather than being sized to just meet demands in the building at times of peak output.

So, as the Feed in Tariff (FIT) draws to a close on March 31st, government is consulting on a new scheme, the Smart Export Guarantee (SEG) – that requires larger energy suppliers to purchase excess solar energy from small generators at a fair market price.

There is much to welcome in the proposals for SEG

• the Microgeneration Certification Scheme is thrown a life-line as the only way to qualify,
• there is to be no requirement for the building to achieve a certain energy efficiency level (EPC), a requirement in FIT that excludes many older and listed properties
• installations that occur after the FIT closes but before the SEG is available will be able to join the SEG as soon as it opens
• export will be metered and not estimated (as in the FIT), rewarding people that install larger systems
• a central database of solar installations will be maintained beyond the FITs
• the high price for bought in electricity compared to the low value of exported will encourage the deployment of battery storage and electric vehicle charging (when compared with other arrangements, for example net metering)

Concerns About the Detail

However, there are two big concerns with the proposals as they currently stand:

1. Smart metering IT systems are not up to the job at present
2. The reliance on conflicted businesses to set a market price

Smart Metering Systems

At recent Solar Trade Association meetings we were astonished to hear that the SMETS1 smart meters that have so far been installed ‘go dumb’ as soon as you change supplier.  Although second generation SMETS2 smart meters fix this problem, the IT infrastructure that collects the data is not yet ready to a point where this data can be shared between an energy supplier and a separate company that you have signed your SEG deal with.

It would be just like government to say ‘well, we’ve done our bit’ as they launch a completely theoretical SEG scheme, which nobody can use in practice because the billing arrangements are not ready.

That’s why we need something - dare I call it a ‘backstop’ - that makes the SEG work from day one and creates an incentive for energy companies to sort out the IT, rather than having a strong incentive to drag their feet and take as long as possible to prevent the SEG ever happening.

A backstop could look a lot like the export tariff part of the current Feed in Tariff:

• A fixed value, for example £0.04 /kWh
• A deemed export 50% of generation 

This would create a strong incentive for the energy companies to pull out their fingers because they are likely to be over-paying for generation where they cannot meter it.

Setting  a Market Price

Electricity costs vary during the day as supply and demand varies.  The industry would be absolutely delighted if export was paid a fair market price at the time of export – that is a price set between a willing buyer and a willing seller.

The preferred option in the SEG consultation is to simply leave it to the energy suppliers to set the price, with the only control being that the price is higher than £0.00

My concern is that the proposed mechanism will not result in a fair market price, because the companies that are being relied upon have every incentive to keep the amount of solar installed as low as possible.  They are conflicted because every time a household or business installs solar it will buy less power from the energy suppliers.  Setting a higher price for exported energy would make solar a more appealing investment and harm the business models of the energy suppliers.

The energy companies do not meet the requirement of being a ‘willing buyer’ for the power and a fair market price will not result. There is a market failure and government cannot leave pricing the invisible hand of the market – except that it can, it just needs another way.

The ‘market’ already sets a price for electricity – and one that is free from the conflicts set above.  For example market exchange Nordpool publishes day ahead pricing for wholesale electricity on an hourly basis.  These prices could be better taken as the ‘market price’ for electricity between a willing buyer and a willing seller.  Energy companies should be required to purchase from microgenerators at the wholesale market price.

The Grand Challenge Mission for Buildings

It Can be Done - but not Without Solar

In a speech at Jodrell Bank, Prime Minister Theresa May outlined her government's  Industrial Strategy and set out a range of so-called Grand Challenge Missions .

These missions include:

• Using Artificial Intelligence in the Diagnosis and Treatment of Chronic Diseases
• Meeting the needs of an ageing society
• Reducing Energy Use in Buildings, and
• Zero Emissions Vehicles

The missions aim to bring together government, businesses and organisations across the to develop 'industries of the future'.

According to the government website, for buildings the mission is to :

At least halve the energy use of new buildings by 2030

Heating and powering buildings accounts for 40% of our total energy usage in the UK. By making our buildings more energy efficient and embracing smart technologies, we can cut household energy bills, reduce demand for energy, and boost economic growth while meeting our targets for carbon reduction.

For homes this will mean halving the total use of energy compared to today’s standards for new build. This will include a building’s use of energy for heating and cooling and appliances, but not transport.

The mission also includes a target to reduce the cost of low energy retrofits of existing stock (for example Energiesprong approaches I've already written about), but in this article I'll be taking a look at what it means for new buildings.

Unpacking What The Buildings Mission Means

There's some key phrases in the above announcement, with far-reaching implications.

1. 'use of energy'

Up until now, the energy performance of new homes for Building Regulations has been assessed in terms of carbon dioxide emissions rather than energy. The argument for this has been persuasive - that there are UK carbon budgets to aim for and policies should be directly targeted towards achieving this.

However, as grid electricity has decarbonised rapidly, it has created a significant challenge for this approach. With very low carbon electricity, it would be possible to meet regulations for low carbon emissions in buildings simply by heating electrically and doing the bare minimum on energy efficiency. Clearly, adding many new buildings of low energy efficiency this would make the task of maintaining a low carbon grid that much more difficult.

Secondly, and increasingly, the time of day that you take off electricity from the grid affects the carbon intensity (and price) of your energy. Smart technologies are available that control energy use that has flexibility in its timing (technologies such as heating, running a washing machine, cycling a fridge freezer, charging an electric vehicle or discharging a domestic battery). Though consumers are likely to favour technologies that lower their energy costs, periods of low wholesale energy prices tend to coincide with periods of low demand and therefore a high proportion of renewable energy input.  So these technologies will reduce carbon emissions and bills. 

Regulations will struggle to keep up with the complexity and innovation as this sector develops. Using an average grid carbon intensity will fail to incentivise or account for these valuable approaches.

As an 'energy consuming product' it makes far more sense for regulations for buildings to move to energy consumption rather than carbon emissions . Of course, the lower the energy consumption, the less energy is needed and the easier it will be to lower carbon emissions in the electricity supply.

Yet to be determined is what measure of energy we're talking about. If it is straightforward energy use, then one kilowatt hour (kWh) of gas burned to heat the house will count the same as a kWh of electricity taken from the grid. If, instead, it is Primary Energy (which takes into account conversion efficiencies from the original fuel), then electricity use will count more highly than gas.


2.'compared to today's standards'

Progress on carbon emissions is often measured against 1990 levels - the base year for Annex I parties to the Kyoto Protocol, the countries that signed up in 1997. The UK Zero Carbon Homes policy was enacted in 2007, and progress on energy efficiency standards for buildings has been measured relative to a building constructed to 2006 building regulations.

Improvements in energy efficiency of new build homes has been less than impressive. In the 12 years since 2006, the regulated carbon emissions from a new home built in England is only 29% lower than a house built in 2006. Scotland has pushed further forward, homes built here achieve carbon emissions levels 45% better than 2006.

Significantly, the comparison will be relative to today's performance levels. Progress to date will not count towards the mission.


3. 'include a building's use of energy for heating and cooling and appliances'

Until now, Building Regulations have only including 'regulated' energy - that used for heating, hot water, pumps fans and fixed lighting. In homes the regulations ignore energy used for cooking, fridges, freezers, washing machines, dishwashers, clothes dryers, audio visual equipment, IT equipment, plug in lighting and charging battery powered devices.

Housebuilders argue that they shouldn’t be held responsible for the electrical equipment that people use in the homes they build, and the government has up until now accepted that argument.

But why stop there?  Surely housebuilders cannot be held responsible for how often people choose to take a shower, or the fact that they don't want to wear thermals and down jackets while they're watching TV. The precedent of taking an average for domestic hot water use and internal temperature is well accepted, so there's no reason why we shouldn’t regulate based on an average electricity use for appliances and gadgets too.

Still to be clarified is how appliances will be defined – what will be included in electricity use. SAP includes Appendix L with a methodology to calculate the energy use for lighting and electrical appliances and cooking, but it is not clear what range of electrical equipment is included in this estimate and what is not, or indeed whether this estimate of energy for appliances will be used for the Mission

Achieving the Mission

The Solar Trade Association has commissioned analysis by Think Three Consultancy on the future direction for building regulations in a world of low-carbon electricity. The report used SAP 9.92 with new SAP 10 carbon emissions factors to model the energy use a number of house types with a variety of combinations of heating technologies and fabric performance. The 3-bedroom, 94m2 end terrace house modelled in the report, has been used to assess potential approaches towards reducing energy by 50% from today’s performance.

For a home like this built to current regulations in England, space heating and hot water are the dominant energy uses. However, the total of regulated and unregulated electricity use for appliances, lighting, pumps and fans represents 41% of energy use.

Increasing the fabric specification of the building significantly (to Passivhaus levels) greatly reduces the demand for space heating, but leaves all the other energy demands unaffected. A solar PV system of 3.9kWp (12 panels based on high performance panels available today) would be easily accommodated on a house of this size and would bridge the gap from this specification to the mission target.

Improved fabric in combination with a heat pump reduces the space heating and hot water energy by the coefficient of performance of the heat pump (assumed to be 2.5 for heating and 2.0 for hot water). A solar PV system of only 1.2kWp (around 4 panels) would enable this design to meet the Mission target.  

Clearly designers will look for the most cost effective combinations, which as the cost of solar energy declines could involve more solar than this analysis suggests, but given the inclusion of appliance energy use, there seems to be no way to get to 50% reduction that doesn't need solar electricity generation on the building.

Conclusions

1. The Mission can be achieved without the development of fundamental new technological approaches.  Single self-build homes and small developments of social housing are routinely being built to Passivhaus levels of fabric efficiency today. Heat pumps and solar PV are available today. The challenge is more around helping the construction industry deliver high specification fabric efficiencies at volume.

2. The inclusion of energy use by appliances means that the target simply cannot be achieved without some element of renewable electricity generation on the building.

3. The requirement for on-site renewable generation will be even more the case for buildings with form factors that give lower heat losses such as terrace homes and apartments – here there are less gains to be made by improved building fabric and more efficient heating systems.

4. Gas heating currently has Primary Energy Factor (PEF) of 1.222 whereas electricity has PEF 1.738 (SAP10 figures). Unless the PEF for grid electricity falls over the period, a move to electric heating technologies from gas heating will have smaller benefits if the metric is Primary Energy. The more renewable generation on buildings, the more contributions these can make to reducing the PEF of grid electricity.

5. In recognition of the above, forthcoming updates to building regulations should be framed in a way that encourages the use of solar PV on new buildings. 

The MCS Pricing Mess and How to Fix it

New homes often have smaller solar installations.  Image: Viridian Solar

A government sponsored monopoly raises its fees by 233% .  Cue outrage from the industry, not only from the fact of the raise itself - most people accept that the Microgeneration Certification Scheme (MCS) must live within its means - but mostly from the way it was implemented.  There was no consultation, all was decided by the small, self-elected group who run the scheme.  Little thought had apparently been given to how the change would affect the diverse businesses that rely on certifying their installations to the MCS, and have nowhere else to go for this service.  The transition arrangements were wholly inappropriate.

It's not like they didn't know this was coming.  The consultation to slash the Feed in Tariff was announced in August 2015, at which point it was obvious to everyone that the MCS was facing an existential threat to its income streams, 90% of which derive from solar PV.  This could have been implemented with a lead-in time if the managers of the scheme had acted sooner.

The worst affected are  those that do a large number of low value installations, they are hit disproportionately hard by the £20 increase per certificate.  Businesses providing solar installations to house builders are right at the sharp end.  Solar installations can be as modest at one or two panels - representing only a few hundred pounds' worth of business per house - and when you're in the business of doing hundreds of these each month, those extra £20 sure add up.  To compound their situation, they are installing based on quotations accepted and ordered many months ago, and the contract may be expected to run for many months more.  One business owner estimates that this change has taken more than £100k a year from his bottom line.  Oh, and if you were about to suggest that they should just ask for more money from their housebuilding clients - forget it - that is not how it works in construction.

The other reason for the outrage is that the increase throws into stark relief the many ways that the scheme has failed the industry it purports to be there to benefit.  The purpose of the scheme was to  increase consumer confidence in the new clean heating and electricity generating technologies.  Time and again the scheme has shown itself to be incapable of tackling abuses by the small number of bad apples that have the potential to drag down the reputation of the industry.  People would be more supportive if the scheme had ever bared its teeth and kicked a few companies off the list.

So how to fix this?

If you accept that the MCS needs more income, then you have to accept that prices must rise.  But why must they be the same for every single installation?  The scheme covers 'micro generation' which means systems right up to 50kW in size.

A £35 certificate is a vanishingly small cost for a 50kWp solar installation, which might have a contract value of £50,000.  0.07% to be precise.  On the other hand £35 is a much, much larger proportion of the cost of a small 0.5kWp system on a new home.

To those that say "but the certificate costs the same for the large and the small installation" I say "so what?"

Does my seat on a plane cost the airline the same as my neighbours?  You bet!  Did I pay the same price as they did?  Almost certainly not - especially if I bought mine in a big rush last night and they are more organised and planned ahead.  Does a Gucci handbag cost 1,000 times more to make than an unbranded one.  No chance.  I could go on.

Businesses left cost-plus pricing behind years ago - you price your product at the value someone attaches to it.

A fairer way to apportion the cost of running the scheme is to charge a different amount for a certificate based on the size of the system that is being certified.  By way of example, I'm going to propose how it could work for solar PV - similar approaches could be applied to the other technologies covered by the scheme.  I don't have access to the MCS figures on installation size and number, so I'll use the Feed in Tariff (FIT) statistics to illustrate the concept.

The table shows the number of installations registered with the Feed in Tariff in the 12 months to July 2017, and the number of MWp installed, split by the FIT tariff bands.  If the MCS had been charging £35 per installation, it would have netted £1.25m of income from the 35,815 installations.

If, instead, a certificate had cost £10 per kWp installed, the scheme would have netted £1.315m - a very similar number.

I've just used a straight £10/kWp formula - as I'm working with average values.  A formula that had a minimum of say £20, for installations below 2kWp would collect more from the smaller installations, meaning that the increase for the large scale installations could be kept smaller.

Could something like this work better for industry?  What do you think?

How to Save the MCS from Irrelevance

Too Many Cooks at the Microgeneration Certification Scheme

In 1964 a 28 year old woman called Kitty Genovese was brutally attacked in front of her apartment building as she returned from work.  According to accounts in newspapers, the attack lasted at least half an hour and, despite her repeated cries for help, 38 people who either heard or saw the attack did not intervene or even call the police until after the attacker had fled and Genovese was dead.

Why?

Although it later emerged that the number of witnesses was exaggerated in the newspaper reports, psychologists have now proven that the more people who are around, the less likely it is that someone will act to stop something bad happening.  They call it the ‘Bystander Effect'.

For example in a classic experiment by Latane and Darley, subjects were placed in a waiting room either on their own or with others present.  As they sat there, the researchers had organised for the room to start filling with smoke.

When the subjects were on their own in the room, 75% reported the smoke to the organiser.  When there was three subjects in the room, the smoke was reported only 38% of the time.

One of the explanations for the Bystander Effect is termed “Dilution of Responsibility”.  The more people there are around, the more likely you are to leave it to someone else to do the right thing.  Obviously if everyone thinks the same, then no one does anything.

Which brings me on to the Microgeneration Certification Scheme

As the recent Feed in Tariff review unfolded, I heard many people wonder what the purpose of MCS would be in a post-subsidy world.  “If there’s not a Feed in Tariff, why would anyone ever bother with MCS?” was a typical sentiment.

This completely sums up the failings of the scheme.  If it’s just seen a tick-box exercise, a gateway to government handouts then absent the subsidies and the scheme is worthless.  As a consumer protection scheme it’s hard to find anyone in the industry that believes it works.

The irony of this is that the MCS was created by the industry itself.  If you think the management of the scheme is bureaucratic to the point of paralysis, or that its police have no incentive to drive out poor practice (or even look for it) in the companies they audit.  If you think the installer audit focuses more on the accuracy of paperwork rather than the quality of the outcome for the consumers; or the way you have to demonstrate you meet the “competence” requirements are baffling and incomprehensible; then apparently you only have yourself to blame.

After all, the people running it are the representatives of trade associations, certifying bodies, training providers and government bodies that make up the steering group, and you can see who they are by looking here.  There are no less than thirty two bodies represented.   Thirty two bums on seats at meetings.  Thirty two people to have a say on any decision.  Can you imagine how those meetings must go?

And thirty two is plenty enough people to produce the dilution of responsibility for no one to act to put things right.  Our industry representatives have allowed the MCS to become what it is due to the Bystander Effect, and it’s time for industry to demand that our representatives start representing us at the MCS.

This time last year, the Solar Trade Association produced a manifesto for change at the MCS.  It called for improvements to its governance, rigorous enforcement (and expulsion of substandard companies), measurement and reporting of the quality of installations (and therefore the success of the scheme), and spending some of the vast accumulated reserves promoting the industry and accredited installers to the public.

The solarblogger has heard that against the reluctance of the‘Interim CEO and Chairman’ a small group of members of the Steering Group were able to push for changes based on the ideas in this manifesto.  A 100-day plan to enact the changes was agreed, but a year later and little has changed, the actions bogged down in a sticky morass of procedure and delay.  Instead of hearing that these urgently needed changes have been made, we’ve had the scheme sending out communications about moving to a new legal structure to become a charity.  It’s spent the year rearranging the deckchairs.

The MCS has been given a stay of execution.  The outcome of the Feed in Tariff review has given it a short window where people will still want to use it to access government support.  The industry wants a scheme that is responsive to its needs, cost-effective and delivers effective consumer protection, something MCS is not providing at present.  The team appointed to run the scheme in its new charitable status need to get on with making the changes necessary for MCS to become useful in a world without subsidies and our industry representatives should stand up and help make it happen.

What Has the MCS Ever Done for Us?

How to fix the Microgeneration Certification Scheme (MCS)

You pay your registration fees each year. You research each and every change to the regulations and make sure to adjust your paperwork, your working practices and the products you offer to keep in line with the rules. You engage with the annual audit of your work and put right anything the auditor finds. You go further and make changes to your processes to ensure these issues never recur. 

You are, in short, an ideal MCS installation company. The kind that the folks sitting in London running the scheme like to think that they have produced. 

The problem is that there's another installation company across town. They also have an MCS accreditation, after all it's needed for customers to access government incentive schemes. Their workmanship is shoddy, they don’t seem to be in it for the long haul and cut corners to make a quicker buck. They have accumulated a string of non-conformances on their paperwork from the annual MCS inspections but nothing ever happens, so they don't waste their time making changes. The inspector comes once a year, takes a cursory look at an installation of the company's own choosing (inspecting the roof work from the ground). So long as the company has one half-decent installation to show the inspector, they're good for another year.  This company can undercut its more diligent neighbour because it doesn't have the expense of bothering with the requirements of the MCS scheme or spending the time and care to put in the "high quality installations" the scheme claims to ensure. 

Back among the glass towers of London where industry representatives meet to oversee the MCS this company simply doesn't exist, or is at worst a 'bad apple', an isolated case. 

Unfortunately, the second company and their like are a very real in the minds of people who work for companies like the first and have to compete with them every single day of the year.  I have heard numerous stories from colleagues in the industry about companies "getting away with it", about complaints to MCS not adequately investigated and annual audits of installations that amount to little more than checking there really is a solar installation on the roof.  

This, in short, is the crisis of confidence that the MCS must recognise and urgently work to fix.  If scheme officials knows that there isn't a problem, that it really is just a very few bad apples then they should publish the evidence that has led them to reach this conclusion thereby reassuring an increasingly sceptical industry. 

Many people believe that way the scheme is managed has had the perverse effect of creating ’Natural Selection’ for the least desirable traits in registered companies.  Without meaningful audits of installations and a credible threat of expulsion from the scheme, the scheme penalises the diligent by imposing higher costs, handing a competitive advantage to those that join the scheme but don't bother trying to meet the standards. 

It is a great frustration for those of us who have worked  in the MCS technology Working Groups to hear such views.  If the enforcement really is this poor, why bother writing rules?  If the only companies that are applying the standards are those that would have worked to a good standard anyway then what’s the point of all those hours donated free of charge to the scheme.

Unless MCS changes

As I revealed in an earlier blog, the MCS is sitting on a cash pile of £6.6m, growing at the rate of £1.3m last year. That kind of money would pay for a lot of surprise audits. Perhaps industry would even be willing to pay slightly higher fees and put up with more intrusive audits if proper enforcement levelled the playing field and drove the bad apples out of the industry.

My colleague at the Solar Trade Association (STA), Chris Roberts has written a draft White Paper: 'Is the MCS Fulfilling its Potential?' to stimulate debate and comment from STA members on the MCS. Having collectively contributed more than 90% of the scheme income the views of the solar industry deserves to be heard, and I urge everyone in the industry to join the debate by reading the paper and feeding in your ideas and evidence to Chris. 

Merton Rule Lives on

Housing Standards Review Steps Back from Brink

Image: Viridian Solar

The Department for Communities and Local Government (DCLG) has concluded its Housing Standards Review and contrary to expectations the so-called Merton Rule, whereby Local Authorities can specify that new homes generate a certain portion of their energy use from renewable sources is retained.

 Part of the government's 'Red Tape Challenge', the Housing Standards Review (HSR) was wide-ranging and covered issues from wheelchair access in new homes, their consumption of water and use of energy.  The starting point of the review was that there has been a proliferation of different standards and that this is costly for both housing developers comply with and for Local Authorities to police.  DCLG proposed a number of ways in which it might simplify matters.

The consultation published in the autumn contained a serious threat to the deployment of renewable energy in new homes.   (See my earlier blog and infographic). 

After a series of changes in which the energy efficiency of new homes improved rapidly, progress has completely stalled since the coalition government came into power.  As a result, current building regulations can easily be met without renewables.  The only driver to encourage developers to use renewables in new homes is that many Local Authorities require it as a planning condition (often called the ‘Merton Rule’ after the first Authority to pilot the idea).  They can do this because they were granted the power in the Planning and Energy Act 2008.

Many Local Authorities have adopted planning policies like this as part of their Local Plans with the goal of creating local skills and supply chains, mainstreaming renewables and encouraging their wider adoption.

The HSR consultation document proposed to remove this power, potentially leaving renewable energy in new homes out in the cold until the building regulations reach 'Zero Carbon' and this feeds through into actual projects – potentially as late as 2022.

The Impact Assessment that accompanied the HSR consultation gave a clear indication of what was influencing DCLG’s thinking.  The anticipated ‘savings to industry’ only counted the reduction in the costs of housing developers.  The business lost by the renewable energy industry was not considered, and nor were the savings on energy bills for the householders. 

 Housing developers were offering a narrative that was both simple and attractive to the politicians:

 "Free us from these unnecessary costs and we'll build a way out of this recession."

It was very clear who was in the driving seat.

As the civil servants at DCLG worked their way through the responses to the consultation and pondered their conclusions the country was gripped first by a debate on the affordability of energy bills and then by endless rain, flooding in Somerset and politicians in wellington boots trying to outdo one other on how serious they consider the threat of climate change.

Was it these events that influenced the outcome – the idea that DCLG could find itself ordering underwater Local Authorities in Somerset to tear up their climate change policies? 

Or perhaps the rash of record profit growth announcements by house-building companies undermined the argument that costs had to be cut to get Britain building again?

Or maybe it was the work done by the Solar Trade Association and Renewable Energy Association to present the arguments for including renewable energy as houses are built?  (Step forward Mike Landy and Leonie Greene).

 Who knows what the decisive factors were, but on Thursday 13th March, the decision was announced and the Merton Rule lives to fight another day.

Untangling the Announcement

The way the decision was announced has caused some confusion, especially because the Written Ministerial Statement said that there would be no optional additional local standards:

This caused a number of sources to wrongly report that the Merton Rule had gone.  A bit of digging shows that the opposite is true.  The new rules are to be enacted through the Deregulation Bill.  Here's the relevant section:

To understand the impact of the changes, you need to read it with the Planning and Energy Act 2008, shown below:

So it can be seen that the change only affects Section 1(1)(c), and prevents Local Authorities in England (only) from requiring energy efficiency standards higher than building regulations for houses (only).  Crucially for renewable energy sections (a) and (b) are left intact and Local Authorities can continue with planning conditions that require a proportion of energy from renewables providing a critical bridge to Zero Carbon Homes.

Attention now turns to the definition of Zero Carbon Homes, encouraging DCLG to deliver it on time and how much of the standard can be 'bought-in' rather than 'built in' through a process called 'Allowable Solutions'.



Infographic - Slow Progress on Low Energy Housing in UK

Heat and Power

Early signs of a rebalancing of the renewables market

The Microgeneration Certification Scheme (MCS) November newsletter was recently released, and a graph caught the eye of the solarblogger.  It is reproduced below.

The total number of MCS registered installers has been falling for some time.  Companies registered to install photovoltaic (PV) solar technologies dominate the numbers, and since the painful tariff adjustments of 2011, the number of registered companies has been steadily falling.  In the last 12 months the number of solar PV installers has fallen from around 4,300 to around 3,000.

Two features of the scheme may mean that even these figures are an over-statement of the number of active PV installation businesses.

First, since businesses renew annually with the scheme, a company decision to exit a market can take some time to feed through into the figures.  Falling registration figures will trail by an average of six months.

Second, renewal is significantly less expensive than a new registration with the scheme.  This asymmetry causes business to retain their MCS registration even when they are not actively working in the market “just in case things pick up.” 

Industry colleagues estimate that around 10-25% of MCS registered PV installers are not actively selling solar PV.

But none of this is news.

The thing that really jumped off the page for the solarblogger was that while the registered PV installer numbers have continued to fall, the total has actually risen since August 2013. 

There has been an increase in the number of businesses registering to install heating technologies such as biomass, heat pumps and solar thermal. 

Details of the domestic Renewable Heat Incentive (RHI) were announced in July 2013.  This scheme pays households that install heat-generating renewable technology and will go some way towards rebalancing the UK government’s lopsided support for renewables.  A successful domestic RHI alongside a stable Feed in Tariff could deliver long term growth for both renewable heat and electricity.

It seems like industry might just be starting to believe in the RHI.

A Million Missing Low Energy Homes

The "Housing Standards Review" is set to eliminate a crucially important driver for renewable energy uptake in the UK and the way the government has gone about it is an absolute disgrace.

Solar panels on new homes - soon to be a thing of the past?

In a recently launched consultation, the Department for Communities and Local Government (DCLG) has revealed its intention to halt a practice where local authorities can require property developers to build to an energy efficiency standard higher than the current building regulations or insist on renewable energy (the so-called Merton Rule).

The background to the Housing Standards Review is that there has been a proliferation of overlapping (and sometimes conflicting) technical standards created in recent years, and local authorities are imposing a variety of these on developers, creating an unnecessary regulatory burden.  

DCLG convened a series of working groups covering eight thematic areas, one of which was energy.  The Energy Working Group concluded that the government should scrap rules that allow local decisions on the energy efficiency of new construction and rely solely on the national Building Regulations to drive future improvements in new build housing.

The justification for this change is that the Building Regulations are ‘moving towards Zero Carbon Homes’ by 2016 so there’s no need to have these alternative requirements – you can’t get better than zero carbon, right? 

While this argument is superficially persuasive, as soon as you scratch the surface you quickly find otherwise – let's take a look at what’s been happening at DCLG since the ‘Greenest Government Ever’ came into power:

• New Social housing was intended to be at zero carbon by 2013, paving the way for the commercial developers to follow.  This was scrapped and social housing is now built to the same energy performance as commercial housing.
• The definition of a ‘Zero Carbon Home’ has been diluted so that electricity use from plug-in appliances is misleadingly not included, making it more like ‘30% Carbon Home’
• The 2013 building regulations are late and will not be implemented until well into 2014, allowing at least 100,000 homes to be built to a lower energy efficiency.
• These new regulations represent only a tiny (6%) improvement on the previous ones for energy efficiency, when a 50% improvement was required to have any realistic chance of delivering 30% Carbon Homes by 2016.
• The ‘Allowable Solutions’ consultation may allow developers to pay a tax instead of building genuinely low energy properties.

(See my earlier blog on progress towards Zero Carbon Homes here)

If you had a suspicious mind, you might suspect that DCLG held back on the spectacularly unambitious 2013 building regulations to allow the Housing Standards Review to reach its conclusions based on a belief in government intentions to actually deliver Zero Carbon Homes in 2016, a belief that would have been difficult to continue to hold once the 2013 regulations were revealed.

If you were also of a cynical disposition, you might predict that DCLG is going to announce that it will put back Zero Carbon Homes to 2019 (just keeping within the 2020 deadline in the EU Energy Performance of Buildings Directive), but only after leaving the 2016 target in place long enough to use it to justify killing off local rules for higher energy performance and renewable energy.

Houses are not built to new regulations immediately; it takes many years until granted planning permissions turn into completed homes.  If Zero Carbon Homes is delayed until 2019, it will be 2022 before large numbers of homes are built to this level of performance.  DCLG will have created a ‘Lost Decade’ and a million homes built with unnecessarily low energy efficiency.

Economics not your Strongest Suit?

The ‘Impact Assessment’ for the changes proposed in the consultation claims a net benefit to the economy of more than £0.5bn.  It is claimed that £93m would be saved over the next 10 years by abolishing the Code for Sustainable Homes and £195m from abolishing local targets for renewable energy.

So that’s around £30m a year.

To put this saving in context, have a look a the turnover and profit of just the top three commercial housebuilders in the UK:

 

Source: Barratt Homes plc, Taylor Wimpey plc, Persimmon Homes plc

The Impact Assessment claims that this £30m/year is the ‘net benefit to business’, but what it actually presents is the net benefit to property developers, who no longer have to pay for environmental technologies or renewable energy. 

An Impact Assessment should assess the benefit to the economy, not one favoured sector. 

The businesses that would have supplied environmental technologies to help these new homes outperform the Building Regulations will be adversely affected, but the Impact Assessment takes no account of this.  Nor does it attempt to estimate the cost of improving these low efficiency homes later on. 

The Impact Assessment in support of the proposal is flawed and should be repeated taking into account the net effect of the changes on the whole economy.

Not Helping Anyone…. Except Rich Landowners

If building regulations are clearly signalled in advance and consistently applied, then developers can decide how much to pay for land with certainty about their build costs.  So the only thing building to a higher environmental standard will do is slightly reduce the massive windfall that landowners get when they convince a local authority to allow them to sell to property developers.

Conversely, if building costs are reduced then developers, in a competitive market for building plots, will bid up the value of land to a point where their profit margins are maintained. 

I’ve already written about this, often overlooked issue here: 'Who Pays for Greener Homes?'

Surely this isn’t the government’s intention?  To hamper the development of a clean energy industry and land the country with extra costs for upgrading homes that could have been built to a higher standard of energy efficiency – all so that a few rich landowners get a bit richer.  Not this government, surely?

Whatever Joined up Government Looks Like, it Ain't This

At the same time that DCLG is busy paving the way for a million low-efficiency homes, another government department has to shell out taxpayers’ hard-earned money to financially support people in improving the energy efficiency of existing homes.

The Department of Energy and Climate Change (DECC) is spending your money trying to convince people to upgrade the energy performance of their homes.

And boy is it hard work.

It is simply much easier and cheaper to install energy efficiency into a new home as it’s built rather than doing it later once someone is living in it.  It’s ‘common sense’ isn’t it?  It’s so much simpler to do it properly the first time than have to come back and do it all again later.

Compare the cost of putting thicker insulation into the wall as its built with the cost of fixing more insulation to the outside of a building, rendering it, and re-setting all the windows.

Or the hassle of getting a rig into your garden to drill a bore hole for a ground source heat pump – knocking down walls, tearing up your beautiful lawn – compared to doing it when it’s already a building site.

Or the cost of replacing all your radiators, - suitable for a gas boiler, but not big enough for an air source heat pump - compared to installing suitable ones in the first place.

Consider the cost savings from installing solar panels in the roof at the same time as the scaffolding is there for the roofers to tile the roof.

You get the idea.

DECCs incentives such as the Feed in Tariff, Renewable Heat Incentive, and Green Deal need to be set at an even higher level than simply supporting the extra costs to overcome people’s aversion to turning their house upside down to do the improvements.  (So called barrier costs).

The lack of progress in driving up standards in new homes is going to cost the country more in the long run.

How to Fix This

A situation where each and every local authority makes up its own environmental targets is an unnecessary burden on developers.  In my own business, we’ve helped many house builders discharge local authority renewable energy requirements in all parts of the country, and while they are all similar they are also all ever-so slightly different.  There is definitely a case for simplification.

However, the Building Regulations are not providing a pace of improvement that is sufficient.  Nor is the Zero Carbon Homes ‘end point’ adequate – the definition is too weak and proposals to allow property developers to ‘buy’ their way to Zero Carbon will result in homes that are little improved over today's.

The Building Regulations are not some 'gold standard' for energy efficiency that it is impossible to improve upon, they are nothing more than a minimum standard, a lowest common denominator.  Local authorities should be encouraged to exceed this minimum standard  where is is viable, and the assessment of viability should be a local decision in keeping with the DCLG's own Localism Act.

The route to simplification is not for central government to impose a one-size fits all, lowest common denominator standard, but instead to provide a limited menu from which local people can choose.  Fortunately the hard work has already been done because this is a description of the system in Scotland.  Here the building regulations have a special section with a limited number of alternatives to the minimum standard (Bronze) so providing local choice and simplification of regulatory burden for developers at the same time.

See my earlier blog on what we can learn from sustainable construction in Scotland here.

Why not adopt or adapt this sensible Scottish idea for the rest of the UK?

UPDATE
How to make your views known to DCLG, with template email can be found here