Energy Performance Contracts

EPC

Where now for domestic energy efficiency policy?

While the UK Government concentrates policy effort on developing new, more flexible energy sources, there is an increasing realisation that there is another side to the equation. Perhaps the single most significant measure we could adopt to secure our energy future and to reduce carbon emissions is to make more efficient use of energy by reducing demand and wasting less.

The UK unnecessarily throws away almost a third of the energy it uses. This represents a major cost to consumers and the environment. Implementing further energy efficiency measures would reduce carbon emissions, create jobs and ultimately save more money than it costs. However, at the household level, policy and schemes that have been tried so far have made little impression on the opportunity.

The Government’s Green Deal scheme was scrapped in 2015 after a disappointing take up. While more than 300,000 assessments were undertaken, less than 2,000 resulted in active projects, a conversion rate of less than 1%. The Green Deal was a ‘pay-as-you-save’ scheme with loans made available to pay for energy efficiency measures. These were to be repaid over a period of up to 25 years through electricity bills from the financial savings that resulted. However, the 7% to 10% APR interest rate charged to home owners proved unattractive, unsurprisingly perhaps given that it was several percentage points higher than ordinary bank loans available at the time. 

So where will Government policy guide us next? High cost loans have not worked. While many householders have implemented low cost energy efficiency measures, it seems that incentives may be necessary to persuade them to go further. The goal must be to encourage them down the route of implementing more effective measures such as insulation, renewables and energy efficient heating, but policy tools are needed to deal with the high capital costs and often long return periods.

Maybe there is a clue towards the future direction of policy travel in a glimmer of hope in the public sector, where there is an increasing interest in Energy Performance Contracts (another ‘EPC’).  These formal partnerships between a public body and its energy services company (ESCO) were introduced by The Energy Efficiency (Encouragement, Assessment and Information) Regulations 2014. The contract covers the design and provision of specific energy-saving measures and on-going monitoring. It guarantees that the measures will generate sufficient savings to pay for the project, ensuring a secured financial saving over the period of the agreement. Any savings beyond the end of the contract go to the customer.

While it is early days, one EPC between E.ON and Leeds City Council is tackling energy efficiency in nine public buildings, including schools, leisure centres and data centres. The seven-year contract is projected to achieve a 26% saving in energy costs through a range of measures, such as new lighting, boiler and voltage optimisation, and upgraded building management systems. E.ON is responsible for the up-front investment, and has guaranteed that the savings over the seven years will cover all equipment and installation costs. In addition to being able to fund the repayments from the savings made, Leeds City Council will see reductions in energy costs over the long-term, improved building performance and the project is helping it meet its own environmental aspirations and obligations as a public sector body.

Book an EPC to find out how you can make your home more energy efficient.

Energy Storage – What’s in Store for Out Electricity Supply

Energy Storage

What exactly is in store for our electricity supply?

Despite the drive to make our homes more energy efficient, the demand for electricity remains strong.  As the traditional generating stations come to the end of their lives and we strive for a lower carbon economy, there is an ever-increasing reliance on renewable sources of power. The costs are coming down, but wind is unpredictable and intermittent and we cannot rely on the sun to provide us with the electricity we demand at the flick of a switch, especially at night.

It looks as though energy storage will need to become an essential part of our electricity supply system if we are to achieve our green goals and keep the lights on. Electricity storage technology can overcome the issues associated with the intermittency of renewables and help to meet the morning and the evening peaks in demand, whether at a domestic, community or national scale.

At present, energy storage capacity in the UK represents a tiny part of our electricity consumption and depends heavily on a few pumped storage hydroelectric facilities. We are otherwise reliant on switching generating stations on and off, or on importing renewable hydropower from Norway to deal with the fluctuations.

Research into battery technology has really taken off. The Government’s January 2017 Industrial Strategy Green Paper (here) states:

Given the UK’s underlying strengths in science and energy technology, we want to be a global leader in battery technology…’

The Government went on to launch a £9 million competition to find ways of reducing the cost of energy storage technologies, including the Faraday Challenge – a £246m commitment up to 2021 on battery development for transport, home and industrial applications.

The costs of storage are reducing as this research progresses.  In its 2016 report to the Renewable Energy Association, The development of decentralised energy and storage systems in the UK, KPMG predicts that there will be a ‘steady cost decline of 12% per annum through to 2020…’ (available here).

At the moment, most of the interest is in lithium-ion batteries and this technology accounted for 83% of installed global storage capacity in 2016 (excluding pumped hydro). The costs continue to fall with close to a 20% reduction in 2016.  Some issues remain with the relatively short life of the batteries and a deterioration in their efficiency as they are cycled through charging and discharging.  The focus could change in the medium term to developments in hydrogen and heat storage that are creating some excitement.

Products are already appearing for domestic use. They are arguably led by Tesla which is building a ‘Gigafactory’ in the US to produce batteries for its vehicles and for other domestic and commercial uses. Once complete, Tesla expects the Gigafactory to be the biggest building in the world, and it will be entirely powered by renewable energy sources. The factory brings an economy of scale that should make batteries more efficient and affordable.

Tesla is already marketing its solar roof tiles and ‘Powerwall’ domestic energy storage systems. These harvest and store electricity produced during the day for use when household demand is greater in the morning, evening and at night.