Time to pay for energy security
The price of electricity is set to rocket over the next decade because the Government is rigging the market — which, more than anything else, will drive progress towards low-carbon buildings, argues David Frise.
The Secretary of State for Energy Chris Huhne has, at a single stroke, achieved what no amount of regulation or grant funding has managed in the past 20 years. By rigging electricity prices, he has created the necessary market conditions for a low-carbon built environment.
Pushing up prices has never been a vote winner, which is why successive Governments have shied away from the necessary bold decisions over energy bills. But Mr Huhne has been clever — very clever. He has placed the responsibility squarely on the shoulders of energy generators by creating a system biased towards energy from low- and zero-carbon sources. Suppliers will now be able to charge higher prices for the power they produce from nuclear and renewable sources.
Over the coming 10 years we will see electricity prices steadily creep up to reward the giant energy firms who will be building our nuclear reactors, wind farms, biomass and anaerobic-digestion plants to replace coal- and gas-fired power stations. It is estimated that average household energy bills could rise by 30% to match the increased investment required to deliver a National Grid that is less carbon intensive.
National newspapers are, of course, already predicting far higher price rises, but the reality is that we have a more pressing problem than carbon. The dithering and delay of successive energy ministers has meant we could start running out of power by around 2017, perhaps earlier. So, Mr Huhne can now take brutal decisions based on the premise that he has to keep the lights on.
As one official has said: ‘The price of energy security is nothing like the price of energy insecurity.’
A quarter of our current capacity for generating electricity is due to be decommissioned in the next 10 years, and we are well behind in our programme to produce 30% of future power from renewables by 2020; we are currently sitting around the 7% mark. So, politically, Mr Huhne is in a powerful position. Whatever option the power companies go for, and it is almost certain to be primarily nuclear, they now have the price structure they wanted to get on with it.
Domestic and commercial building owners will, therefore, feel the pain. As the Grid gets more de-carbonised, they can expect to see their bills soar to pay for it. Consumer groups are already sharpening their knives, but they shouldn’t bother. What is the alternative? We can moan and complain, but this simply has to happen, so best to insulate ourselves (literally) from the worst economic effects. And that means making our buildings as energy efficient as possible.
This is starting to look like ‘joined-up government’ as the Green Deal will also be in place from next year, offering loans for energy-efficiency refurbishments repayable from energy savings; as the price of energy rises, those loans will make even more sense.
This financial trajectory is far more likely to deliver a reduced-carbon building stock than the step changes set by the Building Regulations, which are so poorly enforced.
However, this can only be a gradual process. We currently replace less than 2% of our building stock every year, so if we are serious about reducing energy waste and carbon emissions we should be concentrating on existing buildings through a systematic process of low-carbon refurbishment. The Government’s chief construction adviser Paul Morrell has advised the industry that we need to refurbish 2000 homes a day between now and 2050 in a £250 billion programme; rising energy costs will create the necessary impetus to get this gigantic task underway.
The key is making the best of what is already installed and working to improve the performance of ‘traditional’ building-services technologies. It is not sustainable to rip out and replace on a grand scale. The Feed-in Tariff system is in real danger of distorting the market by incentivising people to invest in an expensive renewable solution that might not be appropriate for their building when a far better use of the money would be to improve what is already installed.
Building owners need to understand the principle of the energy hierarchy where you first tackle basic improvements, such as improving insulation, upgrading windows, adding controls to existing energy-consuming appliances, adopting solar shading to reduce overheating in Summer and, perhaps, looking to make better use of passive systems such as daylighting and natural ventilation to reduce energy demand. Only then should you consider additional technological changes to further reduce energy costs and carbon emissions.
Green Deal loans could finance thousands of the basic energy-efficiency upgrades that deliver major savings — both in terms of bills and carbon. As fuel costs rise, these investments will look even more attractive.
David Frise is head of sustainability at the Heating & Ventilating Contractors’ Association.