IS THIS WHAT THEY MEANT TO HAPPEN?

Politicians have grand objectives and set policy in train to deliver on them. Then so often unfold the unintended consequences.

The privatisation of the electricity supply industry in 1979 offered one delicious example. The then Chief Executive of the state-owned Central Electricity Generating Board John Baker had announced in 1988 that the board would be building one nuclear power station a year for the next ten years – an extraordinary and incredible ambition, derived from nothing more than institutional hubris.

Ten years later, Margaret Thatcher had come to power determined that nationalised industries should be privatised. Needless to say, not a single nuclear power station had been built in the previous decade. But the proposed new commercial electricity supply industry could be relied upon to deliver the goods…..

Privatisation means going to the City to arrange the sale of said nationalised industries. Establish their value, enumerate the risks, set the price. But when it came to the nuclear power stations, the bankers raised their hands in horror. The capital cost! The back-end liabilities! It was out of the question for the private sector to take on such a burden.

So it was Margaret Thatcher who inadvertently exposed both the high initial cost of nuclear power, and the role of the state in shouldering the enormous costs of decommissioning and dealing with the nuclear waste. And the electricity black hole was filled by a generation of gas-fired power stations built in record time by the private energy companies.

Now fast forward to 2007. Vincent de Rivaz, chief executive of EDF’s UK arm, made the now-infamous promise that by Christmas 2017 we would be cooking our turkeys using energy generated at Hinkley C nuclear power station. Ho hum. Is this another example of institutional hubris? EDF – 85% owned by the French state – has multiple problems with its nuclear reactors at home which are suffering a type-fault. EDF has also been instructed by the French government to take over Areva which has been responsible for the building of a new nuclear power station in Finland. It was started in 2005, and is now billions of euros over budget and with no end in sight.

As a result, EDF is seriously strapped for cash. In January EDF announced a 68% drop in net profits and a cut in its dividend, with Chief Executive Levy reporting that the company is still looking at the “financial equation” for funding its own two-thirds stake in Hinkley. He admitted: “We have a number of constraints.” In early March, the rating agencies are suggesting that, if EDF were to commit the billions needed to build Hinkley C, its rating would be downgraded to reflect the financial risks to the company that it would entail.

One of the unions representing EDF employees, has also raised concerns over pending legal cases being brought by the Austrian and Luxembourg governments and by a consortium of European renewable energy generators over whether loan guarantees offered by the UK government constitute illegal state support.

And then at the end of February, the UK’s biggest energy lobbying group, Energy UK (of which EDF is a member), announced a major shift in strategy.  This will see it campaigning for renewables, reductions in energy demand, and regulatory changes to support electricity storage projects that help balance the peaks and troughs associated with wind and solar generation.

Are we seeing a new set of unintended consequences unfold? Another Tory government commits itself to a major nuclear power programme (the Chinese government is EDF’s partner to deliver Hinkley C and other plants on the east coast). The financial burden of that programme is revealed once again as being far too high even for a power company backed by the French and Chinese governments. The delays are such that the black hole will have to be filled by plant that are fast to build and deliver low carbon electricity at a price that will not bankrupt state industries.

Is this what will create the space of new renewables on a large scale, requiring the Conservative government to reintroduce the market subsidies that it has spent the last twelve months dismantling? Now that would be a delicious unintended consequence, wouldn’t it?

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My new book: How Much Energy Does Your Building Use?

Book cover from How Much Energy Does Your Building Use?Why do award-winning ‘green’ buildings so often have higher energy bills than ordinary buildings? Why do expensive refurbishments deliver outcomes that are far from the promises of improved sustainability? Why does your building have high running costs and still the occupants complain about being too cold or too hot and are otherwise dissatisfied?

We all know that old buildings were not built with energy efficiency in mind and will usually need retrofitting to reach an acceptable standard, but what is not widely understood is that even modern buildings designed to energy-efficient specifications often do not perform as they should.

Although it may seem extraordinary, there will be few people or organisations that can answer the question posed by this book’s title. This book has therefore been written to help people take control of energy use in non-domestic buildings.

Achieving low-energy buildings does not involve learning rocket science: just some basic building physics, a clear language for talking meaningfully about energy-efficient outcomes with all those in the buildings cycle, and an outlook that casts a new low energy perspective on old problems.

How Much Energy Does Your Building Use? provides that common language. It outlines a path towards understanding what makes for a good quality low-energy building, the stakeholders that need to be engaged, and encourages new ways of thinking about how to reduce energy use and costs.

Read an extract from the book ›

Written together with Kerry Mashford, CEO of the National Energy Foundation, this book is for everyone in the buildings cycle, from CEOs of major construction companies to Sustainability, Energy, Environment, Facilities and Utilities managers in any company that aims to reduce energy use in a non-domestic building.

“I enjoyed reading this book – its style made a technical topic easy to relate to and covered building performance issues in a really accessible way.” Dr Judit Kimpian, Architect, AHR, project manager, CarbonBuzz

The book has been published as part of the DōShorts Sustainable Business Collection, and is available in print for £35 or as an ebook for £30.

Purchase your copy at www.dosustainability.com ›

The myth of ‘low energy’ buildings

Why do award-winning ‘green’ buildings so often have much higher energy bills than ordinary buildings?

Easy. Tick the boxes, install the sexy technologies, and make the claims for predicted energy performance.  Whatever you do, don’t go back and monitor how much energy the building actually uses and whether occupants are happy with what they’ve been given.

In truth, the UK’s failure to produce low energy, low running cost buildings that are warm in winter, cool in summer with good indoor air quality is a national scandal.

Building Regulations have included energy elements since the mid 1980s. Yet the culture of the UK buildings industry is all wrong. Few people, even those in the sector, are aware of the gap between predicted and actual energy performance. We don’t have a language for talking about it – and anyway, building user expectations are low.

The Retrofit for the Future (RfF) and Building Performance Evaluation (BPE) Government-funded programmes run by the Technology Strategy Board illustrate how dire the situation is. Preliminary analysis of 89 whole house retrofits – generously funded to deliver very low energy, low carbon homes – shows only a small proportion has reached agreed the targets they were given.  Over half the properties still leak heat, some of them very badly; a few are leakier after the refurbishment than before.  Many are using almost as much energy  ordinary homes that have not been refurbished.

Analysis of the performance of a range of new buildings – homes, schools, offices and health centres – gives an even more depressing picture. Most buildings surveyed had one or more of specification, design, installation and commissioning flaws. Measurement of actual energy used was wholly inconsistent. Evaluation teams are shaking their heads at the scale of the problem.

It’s Time For Action

With energy prices rising inexorably, the time has come to take the energy performance of buildings seriously.  We need to monitor and measure energy use and carbon emissions to find out what works and what doesn’t and to share this with the property industry and its customers. In short, we should create a Buildings Knowledge Hub.

The Hub would gather, analyse and disseminate good quality buildings’ energy data and develop benchmarks for different building types in order to evaluate performance. It would also coordinate information and education activities and ensure energy efficiency is judged by an agreed standard. The era of box ticking must end.

There is some good news. The government’s Green Construction Board is making some real progress. It has commissioned work aimed at establishing monitoring and measurement protocols and to agree a common language for talking about energy and carbon performance. It has reviewed the need for an existing buildings hub, and is exploring how it can place data of consistent quality at the heart of a knowledge hub for both new and existing buildings.  The Department for Communities and Local Government is funding a project to close the performance gap in new homes.  Establishing its success will also depend on good quality monitoring and measurement.

The government recently launched the Green Deal for refurbishing residential and non-residential buildings. But given the gap between theory and reality on energy performance, this flagship policy is in danger of being discredited.

A Buildings Knowledge Hub should be set up without delay. The mistakes of the last decades must not be repeated. Green buildings must be for real – it’s the only way to tackle those soaring energy bills.

“Higher prices mean cheaper electricity for everyone”

My favourite ever Private Eye cover shows Cecil Parkinson, as Secretary of State for Energy in March 1988, waving papers claiming that raising electricity prices as part of the industry restructuring process would really be to the customers’ benefit.  The argument went that initially prices would have to rise to make future revenue streams attractive to the private purchasers of the state-owned electricity industry.  The ensuing competition  in the privatised electricity market would reduce prices.

Only a decade earlier Nigel Lawson had announced that the Central Electricity Generating Board (CEGB) was about to embark on a programme of building ten new nuclear power stations at the rate of one a year.  Another saving for the consumer – if you were still taken with the idea that “nuclear power was too cheap to meter”.

The CEGB’s announcement illustrated  the industry’s continuing ability to delude itself on the subject of nuclear power.  First, obtaining planning permission would probably take years before any plant could be built.  Second, it implied that buying ten nuclear power stations was something that the nation could afford.  The lengthy build delays and cost over-runs of the earlier nuclear power station programme belied that. And thirdly, the industry persistently ignored the cost of reprocessing the spent fuel and storing nuclear waste, which is a liability on the taxpayer rather than electricity consumers.

The privatisation programme put paid to that.  Because no amount of proposed increased prices made the purchase of nuclear power stations – with their back-end liabilities – attractive to the private sector.  So Thatcher pulled nuclear power from the sale – some might consider it one of the most positive aspects of her time in power!

Yet here we are, come full circle…..  Twenty years on the true costs of nuclear power continue to haunt the government’s energy policy.  The cost of cleaning up the Sellafield nuclear waste site has reached £67.5bn with no sign of when the cost will stop rising, according to a report from the Public Accounts Committee published in February 2013.

And now, having insisted that there would be no public subsidy for new nuclear power, government appears to be succumbing to arguments from EdF, that funding two new 1.6 GW reactors at Hinckley Point in Somerset will have to be underwritten with a Contract for Difference set at 10p/kWh  – a cost of between £150bn and £250bn over 30 or 40 years.  And who will pay for this high cost electricity?  Electricity consumers, but not all of them.  Industrial customers will be excluded from paying the subsidy, making the burden on households higher.

Compare these costs to those of the Energy Company Obligation which is designed to subsidise elements of carbon saving and energy efficiency works in hard-to-heat homes, and through the Green Deal.  £1.3 bn a year for three years – a minuscule proportion of what will be spent on energy generation.

Imagine the Treasury agreeing to spending nuclear-sized subsidy on measures to reduce electricity consumption.   Rather than expensive private sector money to fund the Green Deal at interest rates of 8%, low-cost public sector funding.  A training programme for the buildings industry on how to improve whole building energy performance – when doing energy retrofits but also when building extensions or installing kitchen and bathroom improvements.  A significant investment in building performance evaluation and benchmarking so that we can establish how little energy buildings could use if they are designed, built and operated well.  The introduction of minimum performance of all types of consumer product. And a public education programme to make us an energy and carbon-literate nation.

Outgoing energy regulator Alistair Buchanan warned this week that we are entering a period of unprecedented potential energy shortages and high prices.  “The big unknown is over the demand side”, said Mr Buchanan.  “It has a direct benefit on security of supply.  Can the Government get a revolution going on consumer habits to force through energy efficiency?  Can they do it in three years?”

If they could, perhaps it might finally prove real that higher prices would mean cheaper electricity for all.

 

Why do we have to pay people to do what is in their own interest?

Conventional economic theory tells us that we are rational beings making rational decisions.  But experience and examples are surely teaching us something different.

The endless queues to buy  luxury global brands at prices way above their cost belie the ‘fundamental’ notion that high prices place a value on scarcity. And psychologist Daniel Kahneman, who won the Nobel prize for Economics, has demonstrated beyond a doubt that many of our decisions are made on the basis of unconscious biases and flawed understanding.

Could this be why the government is now asking whether it should provide incentives to households and businesses to save energy? The Electricity Demand Reduction consultation published at the end of November 2012 by the Department of Energy and Climate Change is seeking views on a proposal to create a Feed-In Tariff similar to that for renewable energy generation payable to those who can demonstrate that they are using less electricity.

Hmmmm… Which? says that rising energy prices is the hot topic amongst its members.  So if people are worried about high bills, why are they not taking the much-publicised opportunities to save energy available to all of us? Simple things like wearing a jumper.  Or switching off unused lights.  Save energy and save money.  There’s a direct correlation.

Perhaps we simply don’t know just how much that Skybox is putting on electricity bills, or how little we could be paying to heat our homes if we managed them properly. Or perhaps we simply take energy for granted as a basic human right, and see it as someone else’s responsibility to get our bills down.

Whatever the reason, the chances are that we will all be paying more on our electricity bills to pay ourselves an incentive to reduce our electricity bills.  Most definitely, this is not rational!