What is Energiesprong?

Deeply revealing - the depth of the window reveals indicate the thickness of insulation in warm, comfortable Energiesprong homes.  Image: Energiesprong International

 

Could this Idea from the Netherlands Crack the Toughest Challenge in Energy Efficiency?

Into the gaping hole in UK energy efficiency policy (see previous blog) left by the UK government inaction and disinterest springs Energiesprong, a concept that originates in the Netherlands and could totally revolutionise the way we approach domestic energy efficiency.

Energiesprong translates as 'Energy Leap', and in contrast to the piecemeal, step by step approach that UK government has been trying to prod us down, Energiesprong aims to do it all in one go.  An Energiesprong refurbishment must meet five simple requirements:

1. The finished house should be zero energy - over the course of each year it generates sufficient energy to heat the house, provide hot water and power household appliances.
2. The renovation work is done in only one week
3. The residents do not have to leave their property while the work is going on
4. The work is covered by a 30-year warranty covering the indoor climate and the energy performance of the house
5. The combined savings from energy bills and maintenance as a result of the renovation should finance the cost of the work

The requirements may be easy to set out, but the technical challenges they present to the construction sector are far from simple.  How to cost effectively making millions of individual and unique homes cosy, comfortable and cheap to run.  Nothing less than a new era of mass-customised construction  is required.

Insulated wall panel being craned into place at the first Energiesprong in the UK
Image: Energiesprong International

The prevailing technical approach to an Energiesprong renovation is for the house to be surveyed externally to millimetre accuracy with laser scanners.  A highly-insulated timber frame cladding system is made in a factory off-site before arriving on a lorry and being lifted into place by a crane and attached to the existing walls.  A new roof, almost always covered with solar panels is lifted on top of the existing roof (sometimes even leaving the old tiles in place).  In effect you build a whole new house around the existing one.

Windows and doors are removed and replaced, and heating systems go electric - typically either heat pump or electric panel heaters, depending on how far the insulation has driven down the space heating demand.  Solar thermal, battery energy storage and ventilation may also figure in designs.

The fourth and fifth requirements are utterly crucial to the whole thing working, as they make it 'investable' .  Residents pay an 'energy services fee' which is the same as their current energy bill, but get a better looking, warmer and more comfortable house.  The goal is for the cost savings on future planned maintenance (e.g. window replacements, roofing renewal, heating system replacement) plus the energy services charge to total up to a figure high enough to be able to give financial markets a sufficient return for financing the upfront costs.  If this can be achieved, then the scope for expansion of the scheme is effectively unlimited.  It works without government support.  It is completely scalable and social landlords can raise private sector finance to refurbish their entire stocks of housing.





Row of Energiesprong homes, Melick, Netherlands. 
Image: Energiesprong International

It is this possibility, of funded deployment at scale that has got the construction industry, social landlords and local authorities so excited about Energiesprong.

Consider the challenges, though.  At the current cost of energy, Energiesprong UK estimates that the whole refurbishment must be done for around £40,000 per house to be properly self-financing.

For this cost point to be reached, serious economies of scale need to be unlocked.

Energiesprong UK, and sister organisations in France, Netherlands and other countries aim to create these economies of scale by encouraging social landlords with large portfolios of property to bring forward volume refurbishment programmes and at the same time encourage the construction sector to develop the innovative products and techniques that will be needed to deliver these projects at low cost.  This stage could then be followed by a roll-out to owner-occupied homes and even new build properties, where the model might finance the difference between building regulations energy efficiency levels and building to zero net energy.

So far, around 2,000 Energiesprong homes have been completed in the Netherlands, of which around 60% were renovations of existing properties and 40% new builds.  The first Energiesprong homes outside of the Netherlands have recently been completed in a pilot of 10 homes in Sneinton, Nottingham by Melius Homes for Nottingham City Homes.

The pilot programmes so far undertaken have cost more than the £40k target, and so have required top-up funding, but the volumes have been relatively small, predominantly pilot programmes.

Implications for Policy and Energy Efficiency

A couple of observations on current approaches to energy efficiency and government policy arise when considering the great potential from Energiesprong.

1. Many government policies are based on the prevailing concept of a long journey of many small steps.  For example the Energy Efficiency Standard for Social Housing (EESSH) in Scotland requires social landlords to lift the energy efficiency of all homes, and it is envisaged that the minimum performance will ratchet up in small steps over time. This approach is not compatible with Energiesprong, for which it would make more sense to set targets for the average efficiency of stock.  This would give social landlords the flexibility to refurbish homes to a very high level and work their way through the whole stock year by year.  To allay fuel poverty concerns for people living in the homes that get dealt with later on, perhaps all stock should reach a minimum before an average score could be used.
2. Funded schemes, such as 'rent-a-roof' solar could be a complete dead end and indeed prove an impediment to the whole-house approach.  If you want to stick a new, cosy roof over an existing one as part of an Energiesprong refurb, but someone has already signed up to a 'free solar' plan which hands over the roof for 25 years to a financier, then you may find that you cannot remove the panels without paying to get out of that contract.  Similar, funded schemes, based on the Renewable Heat Incentive (RHI), for example for biomass boilers, could also prevent progress, as the RHI payment is based on the heat provided, which would be curtailed in a more energy efficient building.



Before and After.  Energiesprong refurbishment for Lefier Housing Association in the Netherlands. 
Image: Energiesprong International

It's About the Regeneration not the Generation

The main difference between Energiesprong and previous attempts at improving energy efficiency is the potential it provides for the redevelopment of entire streets and localities.

The whole outside of the house is renewed, and as the images show, the improvement can be extraordinary.  The scope for regeneration of tired old housing estates has got social housing providers and local authorities really interested.  Suddenly we're not only talking about energy saving, we're talking about regeneration and investment in the value of housing assets, funded by energy savings.

Consequently, it is possible that even before the £40k/house cost target is reached, significant projects can go ahead by combining with funds earmarked for the redevelopment of deprived areas.

Either way, the possibility of regenerating whole areas, with funding either partially or wholly paid for from future savings on energy bills is revolutionary and well worth reaching for!

Useful Resources

Energiesprong Foundation
Gallery of International Energiesprong Projects
Energiesprong UK
Energiesprong France

A Brief History of UK Energy Efficiency Policy

The track record of UK initiatives to encourage us to make our homes more energy efficient has been patchy to say the least.

 
The schemes come and go, but the results are depressingly consistent.

ECO

A range of government schemes have required the larger energy providers to invest in energy efficiency measures such as loft and cavity wall insulation for homes. The current version is the Energy Company Obligation (ECO), but before that we had CESP and CERT and others. This bizarre concept - making a business responsible for implementing measures that reduce demand for its own products - seems like putting a fox in charge of security improvements to the chicken coop. It is perhaps unsurprising then 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 brazenly promoted as a charitable donation.  One is left wondering if the energy companies considered these fines a small price to pay rather than helping people spend less on energy.

Measures installed under this scheme crashed by more than 80% after 2012 when a panicking George Osborne announced huge cuts following a Labour proposal to cap the prices people pay for energy.

Green Deal

Greg Barker's Green Deal scheme to 'transform the energy efficiency market' was in trouble almost from the start. Having told us that he'd struggle to sleep if the number of home improvements it financed was less than 10,000 in the first year, the actual number came in at 626.

In what now looks like a rather desperate effort, Greg managed to convince the Treasury to throw in a few hundred millions to the Green Deal Home Improvement Fund (GDHIF), to give a further cash-back grant to householders who installed energy efficiency measures. Most of this stop-start funding was spent on boiler replacements (and how many of these would have happened anyway as they reached end of life is open to debate). The scheme was ignominiously withdrawn after writing only a few thousand energy efficiency loans.

The offer to consumers was complicated and unappealing. The interest rate was a hefty 7%, which compares unfavourably with mortgage finance. Only measures that met the so-called 'Golden Rule' could be fully financed - where the estimated savings on energy bills were greater or the same as the repayments collected through your energy bills. What this all added up to was - go through all the hassle of having all this work done in your house and your energy bills will be about the same as they were before.

The Green Deal Finance Company is now in private hands, but it is still unclear how the new owners will address the fundamental shortcomings of the scheme.

Feed in Tariff and Renewable Heat Incentive

These schemes pay for renewable energy - power and heat where homes and businesses install technologies such as solar PV panels, solar thermal panels, heat pumps and wood chip burning stoves in their homes or businesses. The intention was that these would provide long-lasting and stable support for renewables after a series of start-stop grant schemes that had preceded them.

The Feed in Tariff (FIT) is due to close in 2019 after a tumultuous few years in which government struggled to keep up with rapid reductions in the cost of solar PV panels. As a result of the payments being fixed while the costs fell sharply, the financial returns from the scheme rose rapidly. Returns of 15-20% were not uncommon, payback periods as short as four or five years reported. As more and more people joined the party the budget ballooned. Cue panic in Whitehall, an over-correction on the tariff rates and a return to the boom-bust market from which the scheme was supposed to mark a departure.

The Renewable Heat Incentive (RHI) for heat generating renewables came in after the first FIT crisis, and as a result was designed with many more controls to stop a runaway deployment if the tariffs were set too high (with the notable exception of Northern Ireland where the executive for some reason removed the controls and blew the budget - the whole Northern Ireland budget!). In consequence, the RHI suffers from a paucity of ambition and has only resulted in a few tens of thousands of households replacing their heating systems with a low carbon technology (33,500 new domestic installations of solar thermal, heat pump and biomass boiler from April 2014 to November 2017)

MEES 

The Minimum Energy Efficiency Standard (MEES) applies in England and Wales and requires private landlords of both domestic and non-domestic properties to ensure that their properties meet a minimum level of energy efficiency.  Buildings that do not cannot be re-let after April 2018 and cannot be let at all after April 2020.

Unfortunately, as I revealed in an earlier blog, a landlord can apply for an exemption if they cannot do the required improvements without upfront costs, which relied on the Green Deal being available.  But this has now gone, leaving a loop-hole in the legislation so large you could drive an un-insulated house with broken windows through it.  Similar legislation being consulted upon in Scotland only deals with domestic properties, but sensibly places a limit on the maximum cost for a landlord.  So far, there's no apparent interest in fixing this mess at Westminster.

EESSH

The Energy Efficiency Standard for Social Housing (EESSH) is legislation in Scotland that requires social housing providers to ensure that their housing stock is all above a minimum energy efficiency level by the end of December 2020, with an intention to gradually ramp up the required levels over time.

EESSH looks like its already producing some significant investments in Scottish social housing.  It really does look like the one to watch, at least of all the schemes listed.

Is There Another Way?

What all these schemes have in common is that they deal piecemeal with the challenge of making our buildings more energy efficient. They imagine that the 'journey' to having an energy efficient home fit for the future is taken one small step after another. First insulate your cavity walls and loft. Then change your boiler to an efficient new one. Have some solar panels on that roof. Now replace your whole radiator system take out your efficient new boiler and fit a heat pump.

Many also rely on government spending, a fickle foundation upon which to base investments in housing stocks or to build long-term business plans (as those of us in the solar industry will attest).

With the demise of the Green Deal, and no sign of anything to replace it, there's a huge hole in the government's policy to meet forthcoming carbon budgets. This is not something that has gone unnoticed by the government's own Committee on Climate Change (CCC), which in its 2017 report gave government policy for residential energy efficiency a red light for able to pay households and an amber light for low income households.

It is into this gaping hole left by the UK government inaction and disinterest springs Energiesprong.  This is a concept that originates in the Netherlands that could totally revolutionise the way we approach domestic energy efficiency and it is the subject of my next blog.

Battery Storage Blues?

Evaporation ponds concentrate Lithium salts for extraction

Could a Shortage of Lithium Hold Back the Market for Renewables?

Energy storage is increasingly seen as critical to the decarbonisation of transportation and the means to propel the integration of clean renewable energy into the energy supply system.  In this vision of our low carbon future, we all drive in electric cars and store energy from our rooftop solar PV panels in batteries for use at home in the evening. 

The scale of the demand for batteries could be immense.

The registration of electric vehicles is growing rapidly from a very small base.  Silicon valley start up Tesla is currently going through 'production hell' trying to scale up and deliver on its ambitions (and the demand it has stimulated for its electric vehicles -EVs).  Incumbent car manufacturers are falling over one another to announce their own development plans for EVs.  In 2017 we saw announcements from Volvo that all their vehicles would be electric by 2019,    Volkswagen announced that every model would be available with an electric powertrain by 2030, and Mercedes-Benz revealed plans for their own 'gigafactory' to rival that of Tesla.

Politicians and governments have  shown similar enthusiasm for electric vehicles.  The UK government announced that it will mandate that no new cars will run on petrol or diesel by 2040.  France has announced the same goal.

The lithium ion battery is without dispute the technology of choice for applications that are both stationary (home energy storage) and mobile (electric cars and trucks), and for good reason.  Lithium ion batteries have an exceptionally high specific energy (kWh/kg) and energy density (kWh/m3) compared to other battery chemistries, which are both useful attributes for mobile applications.  The technology also scores well for lifetime - the number of times it can be charged and discharged before the capacity falls away, and power output - how fast you can get the energy out of the battery.

So in discussing the emergence of the lower cost, mass produced batteries that will be needed to usher in this new age, one question comes up again and again.  Will the world have enough lithium for all these batteries?

Lithium ion is currently the battery technology to beat

How Much Lithium Do We Need?

The good news is that it turns out that lithium ion batteries are deceptively named. 

It's called a lithium ion battery because lithium ions are the charge carriers that migrate from the cathode to the anode as current is drawn from the battery.  In fact, lithium is the smallest component of a lithium ion battery chemistry.  One of the most common formats is called the NCA lithium ion battery and contains lithium oxide in combination with nickel, cobalt and aluminium in the cathode together with a graphite anode.  Typical proportions for the cathode are:

Li(Ni 0.85, Co 0.1, Al 0.05)O2

Because lithium is such a light element (atomic weight 7), it works out to be only 7% of the cathode weight, so let's estimate around 2% of the weight of the entire cell, including the anode, electrolyte and packaging.

The Tesla Model S uses 18650 format cells assembled into 5.3kWh packs of 444 cells (see this 'teardown video'), making each cell 12Wh.  With 18650 format cells weighing in at around 45g each an 80kWh battery pack for a car would require 6,666 cells weighing a total of 300kg.  2% of 300kg is 15kg of lithium per vehicle.

With annual car sales at around 80m per year, a transition to a future where every single new car was fully electric would require 1.2 million tonnes of lithium each year.


At the rate of 80m new cars a year, it would take 11 years to replace the entire world fleet of cars, which is estimated to comprise around 900 million vehicles.  Lithium can be recovered from used batteries and recycled to make new ones, so in theory once the whole fleet is replaced then no more would need to be extracted.  So the total lithium requirement to move to fully electric cars would be 13.2 million tonnes.

Is there Enough Lithium?

Lithium is the 25th most abundant element in the Earth's crust and is also present in seawater.  It has been estimated that there is 230 billion tonnes of Lithium in the oceans.  The challenge is that it tends to be found in low concentrations. 

Lithium is found in highest concentrations in underwater reservoirs of brine, and in hard granitic rocks.  In Chile, brine is pumped up from the underground pools into vast  ponds (see image at top) where the water evaporates until the water is rich in Lithium Chloride, which can be precipitated out by reaction with sodium carbonate to create insoluble Lithium Carbonate. 

In Australia the mineral Spodumene is mined for Lithium.  The rock is crushed and heated in a kiln, then mixed with sulphuric acid and roasted again to produce Lithium Sulphate.

Pure Lithium is then extracted by the salts by electrolysis.

Lithium is available from many sources

The United States Geological Survey (USGS) estimates the world proven reserves as 14 million tonnes of lithium, distributed as shown in the chart.  While this figure is similar in scale to the requirement for electrification of vehicles, which leaves little extra for stationary applications and consumer electronics, there's good reason to believe that we have enough lithium:

• Reserves represent only those resources that have been discovered so far, and that are judged to be capable of economic extraction with current approaches.  The easily extracted crude oil was the first to be exploited, but as demand increased, reserves were discovered in more and more places and technologies capable of their economic extraction from difficult locations (such as under the the North Sea) were developed. It is likely that the same will occur as demand for lithium rises.  USGS currently estimates total resources at 35 million tonnes. 

• Lithium is already found in numerous locations around the globe (see chart), including many countries that could be judged to be politically stable.

• As the commercial importance of energy storage increases and the scale of the financial opportunity from battery storage becomes evident to investors, funding will pour in and this will accelerate the development of new battery chemistries that use other materials.   For example, Gridential, a company that claims to have given old lead-acid battery technology a revamp with silicon wafer technology adapted from the solar industry, recently received $11m in two financing rounds.

However, having enough Lithium in the ground is not the same as being able to get it out fast enough to keep up with demand.

USGS estimates that world production rate for lithium at 36,000 tonnes per year.  It takes around seven years to bring new brine extraction capacity on stream and three to four for extraction from hard deposits.  It is highly conceivable that there will be capacity crunches along the way and a scramble by automobile manufacturers to secure supplies, but in answer to the question of whether there is enough lithium for the electrification of transport - it looks like yes, there is.

 Cobalt, another essential ingredient of lithium ion batteries, on the other hand, that's a completely different story...and one for another blog.

The Carbon Intensity of UK Grid Electricity

What it Means for Low Carbon Buildings

Take a look at this chart. It's nothing short of astonishing. Up to 2012 the amount of carbon dioxide emissions associated with the delivery of one unit (kilowatt hour, or kWh) of electricity in the UK was hovering around 500gCO2/kWh. Since then, the amount of carbon dioxide that is emitted for each unit of electricity has plummeted. In 2016 the average was 269gCO2/kWh, a fall of nearly half in only four years. This change has far-reaching implications for regulators, not least those involved in ensuring the low carbon transition of the UK building stock, both newly constructed buildings and the improvement of the existing stock.

So what's behind the fall?

The first factor is the retreat of coal-fired power stations. In 2012, the government's Digest of UK Energy Statistics (DUKES) has coal fired power stations producing 44% of our electricity nuclear plants were suffering from outages and gas prices had risen, so coal use was at a high. By 2016 the corresponding figure for coal was only 9%. In the same period, gas fired power stations rose from 24% to 42% of UK power generation. This matters for two reasons. First of all, because coal is made up of long-chain hydrocarbons, with a higher ratio of carbon atoms to hydrogen atoms it produces about 60% more carbon dioxide than natural gas for each unit of heat energy produced in burning. Second, gas is more often burnt in a Combined Cycle Gas Turbine (CCGT) power plants with conversion efficiencies of up to 60%, compared to 40% for conventional steam turbines.

The second factor is the increasing contribution from renewables in the electricity supply. Enormous amounts of wind energy, biofuel fired generation and solar energy have come online. In 2012 renewables and 'other' represented 11% of UK electricity supply. In 2016, this had risen to 27.8%.

As a result the average carbon intensity of electricity in 2016 at 269 gCO2/kWh was only just higher than that for gas (216 gCO2/kWh). When you add in an efficiency for a gas boiler at (say) 80%, the gap disappears.

This is huge.

For years electricity has been the bad boy in low carbon building design. People fretted as a series of reports from the Energy Savings Trust showed that heat pump installations in the UK were operating nowhere near their advertised efficiencies and were consequently underperforming gas boilers for carbon emissions. Simple resistive electrical heating by panel heaters or immersion heaters for hot water were to be avoided at all costs.

Four short years later and all this is is turned on its head.

And we're only just getting started with renewables. In September, Dong Energy announced that it would move forward with the world's largest offshore wind farm, Hornsea 2 off the Yorkshire coast, with development costs that had fallen by half compared to previous offshore farms. A couple of week later, and not to be outdone, the UK's first subsidy-free solar farm was announced. It's still a bit of an outlier combining solar with battery energy storage and using pre-existing grid connections from with an earlier development, but it's a clear sign of the direction of travel. The carbon intensity of grid electricity is heading only in one direction.

But there's another wrinkle to consider. The carbon intensity of the grid is not a static value. It varies constantly as the mix of generators fluctuate to meet different levels of electricity demand and in response to changes in wind and sunlight. On 11th June this year, it was windy and sunny at the same time. Records tumbled. The carbon intensity of grid electricity in the middle of the day on was below 80gCO2/kWh.

So now the moment when you choose to take power from the grid is a strong determinant of the actual instantaneous carbon emissions your electricity use is creating.

Some uses of electricity - for example for preparing domestic hot water, or to some extent space heating buildings could be relatively time independent.  If I'd known ahead of time that carbon emissions would be so low on 11th July, I'd have been able to set a timer for my immersion heater to heat water for me at midday and got my tank of hot water at fully one third of the carbon emissions of using gas heating.

And the technology to do this is just around the corner.  This awesome new grid carbon intensity forcasting service has been recently launched by the National Grid the Met Office and WWF, with an API that software developers could use to do just this kind of thing.

 

So where does this leave low carbon building?

The current building regulations in England and Wales were last reviewed in 2012 and set minimum carbon emissions rates that developers must design to. The carbon intensity of electricity in the approved calculation (the Standard Assessment Procedure or SAP) is currently 519gCO2/kWh, which was accurate at the time. Now it is woefully behind the curve.

Buildings are normally intended to be long-lasting. If we allow ourselves to imagine a future where digital technologies, the smart distribution of electricity, demand response, energy storage and renewables combine in a so-called 'Smart Grid' then a number of significant observations about low carbon building emerge:

• Even based on the current carbon intensity, never mind the future direction of travel over the life of a building, it is utterly beyond me that any new build or significant refurbishment should include gas heating.

• The current enthusiasm among UK policy makers and local authorities for district heating (for example this recent consultation by Scottish government) could also be a troubling dead end. District heating itself is neither intrinsically clean nor green - it all depends what heat source you put at the other end of the pipes you're going to dig up all the streets to install. Gas fired combined heat and power may be seen as low carbon at the moment, but how long will it look so appealing if electricity continues on its current path?

• Building codes are currently focused on regulating carbon emissions. In a world of low carbon electricity you can meet a carbon target with a draughty garden shed full of electric fan heaters. It's time to move to energy targets (kWh/m2) to create buildings that sip energy and liberate power for the demands created by the electrification of transportation.

If I was building my own Grand Design right now, my future-proof forever home based on these observations here's what I'd go for:

• High levels of insulation and air tightness to drive down space heating demand to a practical minimum

• Eliminate the wet heating system - I'd go underfloor electric coupled to a high thermal mass floor to allow price and carbon responsive electricity purchase to heat the slab at times of excess renewable generation

• Direct electric hot water cylinder - again allowing price-responsive purchase of electricity as well as diversion of excess generation from...

• the inevitable....beautiful solar panels on the roof - as many as possible!

Could this be the future direction energy efficient buildings? What do you think?

The Future of Grid Charges, Solar and Battery Storage

OFGEM, the regulator of the UK energy markets, has seen the future and it's worried. The era of solar powered homes, offices and factories generating their own energy and storing it in low cost batteries, will apparently create havoc in the way we pay for the running, maintenance and upgrade of the electricity grid (network costs).  So OFGEM has launched a consultation about how might be the fairest way to apply network charges to energy bills in future.  Here's their latest update on their thinking.

The current model is that the network costs are spread across every unit of energy delivered to an end user. OFGEM estimates the average network charges to be in the region of £120 for domestic electricity customers, or around a quarter of a typical domestic electricity bill.

A house that installs solar energy needs less electricity units from the grid each year. The problem is that as more and more households and businesses install solar energy, the network costs get spread across an ever-smaller number of delivered units of electricity.

The costs of the network don't get smaller though, because the solar homes still need to draw electricity from the grid at certain times. Even when you combine solar with battery storage, there will still be parts of some days when the house pulls from the grid. All that infrastructure still needs to be there and it still needs to be maintained.

 So the network costs charged against each unit of electricity used need to rise and OFGEM is fretting that this is unfair to people who don't have solar panels as they pay more of the increase due to their higher consumption.

But how big a problem is this really? What do these extra costs that are borne by the non-solar homes and how would they change as the level of solar penetration rises? The solarblogger has done the sums so you don't need to.

Here's a spreadsheet.

Assuming an average system size of (say) 3kWp with a yield of 2550kWh/year and self-consumption of solar electricity at 35%, the network charges avoided by one million solar homes works out at £39.16 for each house each year (they pay £80.84 of network costs in their bill). This means that the twenty six million other homes that don't have solar have to pay £1.51 more towards network costs than they would have if no one had solar (£121.51 for network costs).

Hardly reason for panic at OFGEM.

What about the argument that as more and more households go solar, that the problem of network costs being unfairly and disproportionately recovered from non-solar homes? What if more and more are coupled with battery storage and self consumption of solar generated electricity rises?

If we project that half of UK homes have solar and half do not, then the network costs per unit of electricity rises from 4.6pence per unit of electricity to 5.4 pence. Solar homes would then be paying £95.88 of network costs in their annual bill compared to £144.11 for non-solar homes.

Add in battery storage of electricity at this level of solar deployment and taking the self-consumption of solar generated electricity to 70% - the figures become 6.8 pence per unit of electricity as network charges. Solar/battery homes pay £59.63 per year towards network costs and non-solar homes pay £180.37. Even at this extreme scenario, the increase for non-solar homes is a modest £60.37 a year on network costs.

Of course, once everyone has solar the 'problem' goes away and the extra network costs provide a good incentive to install solar or find other ways to reduce your electricity consumption. OFGEM should go and find a real problem to worry about - they've got plenty to choose from!
 

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?

Vale of Tiers

The Use and Abuse of the Tier 1 Solar Panel Classification

Marketeers have latched on to this designation as a way of shifting more solar panels, but what does it actually mean?  Is a solar panel from a so-called "Tier 1 manufacturer" of higher quality?

What is a Tier 1 Solar Panel Manufacturer?

Bloomberg New Energy Finance (BNEF) is a research consultancy that provides financial information and analysis to investors in the Clean Energy sector.  BNEF tracks large-scale solar farm development projects, their value, the solar panels used and what kind of finance has funded the development.

Banks that finance solar farms can do so with either 'recourse' or 'non-recourse' finance.    Non-recourse finance means that the bank has no charges over the assets of developer that builds the solar farm, so it will want to be confident that if there's a problem once the farm is handed over it can all be sorted out under the warranty of the solar manufacturer. Consequently banks have a 'whitelist' of solar panel manufacturers that they will accept on projects financed on a non-recourse basis.   BNEF realised that its knowledge of development projects allowed it to infer which manufacturers were whitelisted by banks.  It developed a classification to create a list of 'major' or  'bankable' solar panel manufacturers and subscribers to its services can access this list to help inform investment decisions.


Under the BNEF scheme, a tier 1 manufacturer is defined as one that has sold its own-brand, own-manufacture panels to six projects larger than 1.5MWp (around 6,000 panels) in the past 2 years, where the financing of those projects was by six different banks and the finance was 'non-recourse' finance.

To complicate matters further, there are other, competing businesses also offering reports listing tier 1 solar manufacturers based on their own methodologies, for example Navigant Research has released lists in the past.

A few observations immediately arise:

• The list is dynamic - companies are leaving and entering the list the whole time.
• The list is backward-looking - if banks decided not to use panels from a certain manufacturer any more, it could take 2 years before that manufacturer lost its tier 1 status based on the way BNEF monitors the market
• The criteria is a financial one, some would argue that it is an indirectly measure of the quality of the product - but the banks arguably care most about the continuing ability of the manufacturer to rectify problems  
• The list is not publicly available - which makes it difficult to check claims
• There is more than one company providing lists - some manufacturers will appear on one list but not others

Just Add Marketing Stardust

People trying to shift solar panels to consumers and businesses have latched on to this tier 1 categorisation with predictable results.  Here are a few promotional claims harvested from different company websites (not naming any names)

• "We have chosen the solar panels we offer based on quality, efficiency and value we only use Tier 1 solar panels."  
• "We use the very best performance-guaranteed, tier 1 products" 
• "the performance of tier 1 products will always outweigh the quality of their competitors" 
• "we believe in only using the best, which are the Tier 1 solar panels." 

A deliberate confusion of panel quality with the tier 1 list has created the impression that 'tier 1 panels' are better.  Are they?

Is a Tier 1 Solar Panel a Better Solar Panel?

BNEF itself is clear that being on the list is not a direct measure of the quality of the product or even financial stability of the company that made it:

"We strongly recommend that module purchasers and banks do not use this list as a measure of quality, but instead consult a technical due diligence firm....the classification is purely a measure of industry acceptance.  There have been many examples of quality issues or bankruptcy of Tier 1 manufacturers".

So, lets turn to a technical due diligence firm for advice.  Fortunately one such company, DNV.GL  produces an annual report of its findings and recently published this years - the PV Module Reliability Scorecard Report 2017   .  In this document, the accreditation and testing laboratory reports the reliability test results for more than 50 commercially available PV  solar panel models, which, according to the company, makes it the most complete publicly-available comparison of PV module reliability.  They claim that it covers most of the leading manufacturers active in the market today.

The tests are similar to those used in EN61215 type approval testing, comprising thermal cycling, dynamic mechanical load, damp heat, humidity freeze and PID (potential induced degradation).

Power loss after accelerated lifetime testing - products from large manufacturers are shown in orange and are found among the best and the worst performing panels

Critically DNV.GL "do not see a direct correlation between the size of the manufacturers and the performance in accelerated testing".  The graph above shows the power loss after panels had endured artificial aging through thermal cycling.  The results coloured with the orange bars are products from the top-10 global manufacturers by volume.  Some small manufacturers obtained very good results, while some large manufacturers produced panels with poorer performance in this test.


So the take home is– Tier 1 is not what it sounds like, and it’s certainly not the guarantee of quality that sales people from some solar companies are presenting to customers.

Buyer Beware.