Letters / Expensive green elephant
Further to my recent letter (Expensive white elephant; SN 8/10/12), another of Secretary of State for Energy and Climate Change Ed Davey’s pet projects is “The Green Deal” under which customers will be offered a free assessment and quote for energy efficiency improvements and an upfront loan of up to £10,000 to pay for the installation which must subsequently be repaid with interest via a charge on your electricity bill.
You’re “guaranteed” to pay back less than you save, but don’t imagine you can’t lose.
Naturally you’d expect such a mass participation scheme to be simple, straightforward and transparent, however the Department of Energy and Climate Change (DECC) flowchart describing the process at http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/green-deal/4350-green-deal-domestic-endtoend-process-map.pdf quickly dispels any such notions.
It’s a complex, convoluted process and there are fundamental problems.
It’s easy to see people being mis-sold packages that are far more expensive than they need by aggressive sales practices and then paying back large charges for ever and a day.
Loans and charges are linked to the property not the customer so you may find yourself buying a house where mis-selling has taken place, in which case you will then be liable for the payments unless and until you sell the house.
To inspire confidence the scheme must be transparent and we first need to know the amount of energy we will save and the cost, as well as the cost of the energy savings measures we are to install.
Will the improvements ever pay for themselves and will the improvements beat other measures for cost-effectiveness in terms of “carbon payback”?
Let’s start with how much energy will be saved.
DECC scientists have calculated energy performance ratings (EPRs) for various types of buildings, with and without insulation, which will be used by assessors from Green Deal suppliers to estimate how much energy and hence money customers will save by adopting the measures they recommend.
Alas, the trouble starts right there for a recent study by University of Cambridge architects casts serious doubt on the economic viability of such schemes.
In Germany, world champion of all things green, the government is planning to tighten regulations to ensure even more insulation is put on new buildings, however the Cambridge study suggests returns will be much less than predicted and looks at phenomena known as the “rebound effect” and the “pre-bound effect”.
The “rebound effect” occurs in well-insulated “low energy” buildings in which users surprisingly use more heating energy than expected, whereas the “pre-bound” effect occurs in poorly-insulated buildings where consumers use much less energy for heating than predicted using the theoretical energy performance ratings.
The researchers found four related tendencies which occur similarly in the Netherlands, Belgium, France and the UK:
* There is a wide range of energy consumption for buildings with identical EPRs.
* The measured consumption is on average 30% less than predicted.
* The discrepancy between actual and predicted consumption increases for more poorly insulated buildings and can be up to 60%.
* In well-insulated buildings consumers use more energy than predicted.
Other studies have found that insulating building walls can lead to greater (!) heating energy consumption than with no insulation due to the loss of inward radiation from walls which are warmed by the sun and hold the heat for many hours, a result which surprisingly holds in winter.
The Fraunhofer Building Physics Institute study used average outside temperatures of minus 4C – see “Die Welte” article at http://www.thegwpf.org/another-green-fail-home-insulation-can-drive-up-heating-costs/ or original at http://www.welt.de/finanzen/immobilien/article109699115/Waermedaemmung-kann-Heizkosten-in-Hoehe-treiben.html.
The Cambridge researchers conclude: “Firstly, using a dwelling’s energy rating to predict fuel and CO2 savings through retrofits tends to overestimate savings, underestimate the payback time and possibly discourage cost-effective, incremental improvements.
“Secondly, the potential fuel and CO2 savings through non-technical measures such as occupant behaviour may well be far larger than is generally assumed in policies so policy-makers need a better understanding of what drives or inhibits occupants’ decisions.”
Co-author Minna Sunnika-Blank adds: “This challenges the prevailing view that large cuts in energy consumption can be achieved by focusing purely on technical solutions, such as retro-fitting homes. In some cases doing so will bring only half the expected savings, perhaps less.”
So people will install insulation and repay their loan at a monthly rate guaranteed to be less than they “save”, i.e. the amount DECC say they will save, which may be twice or more what they actually save, which means the insulation cost plus interest will be greater than the money you will ever save, so you can and likely will, lose!
Keep your eye on the pea while Mr Davey and DECC move the cups, for on top of potential for deliberate mis-selling, there is vast potential for inadvertent mis-selling by bona fide Green Deal suppliers using, in good faith, the flawed analytical tools provided by DECC.
More than likely, the Green Deal will be a fiasco – an expensive “green elephant” – and the cost will end up on our electricity bills along with all the other renewable energy subsidies and taxes.
A summary is available at http://www.cam.ac.uk/research/news/the-prebound-effect/ and the full paper is free at http://www.tandfonline.com/doi/pdf/10.1080/09613218.2012.690952
John Tulloch
Lyndon
Arrochar
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