Green Energy Republic

How much we’re investing per customer in new sources of renewables

 

 
We are sometimes asked how much we invest in new renewables per customer we supply – a measure of greenness favoured by some energy companies.

So, we did some sums, and during 2010, we invested £455.56 per customer in our new wind farm – this works out to be around £0.70 for every £1 spent on customers’ bills. And we’ve got big plans to increase this in the future.

Good Energy also invests in new sources of renewable heat by supporting Solar Thermal generators through our award-winning HotROCs scheme (a precursor of the Renewable Heat Incentive); and investing in community biomass generation schemes on behalf of our customers on our certified electricity tariff.
In order to verify our green credentials, we’ve chosen to join the independent Green Energy Supply Certification scheme which guarantees the environmental benefit of your green electricity tariff – so our customers know it’s genuinely green.

We continue to work hard to help grow renewables in the UK, both by direct investment and by lobbying policy-makers.  In 2010, as well as investing £11.8m in our new Delabole wind farm, we supported over 1,700 smaller independent generators – a number which has tripled in just two years. One in every 20 of our customers is a generator and we are proud of our contribution to the growth of renewables in the UK. Our uncompromising commitment to green energy is reflected in our 100% renewable fuel mix which is unmatched in the industry.

Hot stuff – what to expect from the Renewable Heat Incentive

For many years Good Energy has been lobbying the government to introduce a renewable heat incentive (RHI). Around half the UK’s carbon emissions come from heating, but only 0.6% of our heating needs are generated by renewable sources and an RHI will help redress the balance. We got a bit fed up of waiting, so we launched our own version of an RHI in 2008, called HotROCs – this pays domestic solar thermal generators for their heat energy and is funded by revenues from Gas+, our gas product. We know it works – and we’re now supporting 467 renewable heat generators through the scheme.

In February the Labour government published a consultation on an RHI. The main points of this consultation were:

•    Heat should be supported at all scales; from householders to businesses to industrial-scale generators.
•    Tariff levels should be calculated to bridge the economic gap between conventional heating systems and renewables (for example, to make the cost of an air-source heat-pump comparable with that of a conventional condensing boiler);
•    There should be an additional incentive to ensure a return on investment; 12% for most technologies, 6% for solar thermal (as this technology already has significantly greater penetration within the UK market – and requires a lower initial investment for the average household).

In the run-up to the Comprehensive Spending Review in October, there was widespread concern that the RHI might be a victim of Government cuts. Fortunately it wasn’t, but the government said the RHI would be reduced in scope from the original consultation by 20% (or £105m a year), and would be paid for by the Treasury rather than through a levy on energy bills as suggested in the consultation.

There is still a lot we don’t know about the RHI, so we put our questions to Good Energy’s resident expert on RHI, Will Vooght:

When will the details of the RHI be announced?

We don’t know exactly but the government has promised it will be outlined by the end of this year.

When is the scheme likely to start?

It’s set to be operational from June 2011.

What technologies are likely to be included?

We can’t see any reason why anything would be cut from the original consultation, so there’ll be an incentive available for Solar Thermal, Biomass, Heat Pumps – air & ground – and even to encourage the injection of biomethane into the gas grid.

Do we have an indication as to what the reward levels will be and how long they will be paid for?

DECC set-out indicative tariffs in their consultation early this year, but as we’ve learned through the Feed-in Tariff consultation process, they have the potential to shift the goal posts considerably.

How will the heat be measured?

We expect that, for smaller generators such as Solar Thermal or heat pumps, it makes the most financial sense to deem the amount of energy produced – exactly how Good Energy’s HotROCs works. For larger generators, even a small change to the expected efficiency of a generator – above or below that of their expected, deemed, output could result in significant over or underpayment. In such case, despite the comparatively high cost of an accurate heat-metering arrangement (compared with electricity generators) – it’s not difficult to see the logic in installing one. So, small – deem, big – meter. What the definition of small/big is, I guess we’ll have to wait and see.

Will the tariff be guaranteed for 25 years like the feed in tariff?

It’s difficult to say. Within the proposals document, unlike the Feed-in Tariff’s rather uniform approach, there’s a whole range of eligibilities ranging  from 15 to 23 years for different renewable heat technologies. If anything, based on the 20% ‘efficiency’ cuts that have been enforced, I’d expect the eligibilities for different technologies to be shortened……or the actual payments reduced – it’s difficult to see exactly where else these so-called efficiencies can be achieved.

The RHI - how it could work

After much recent speculation about the fate of the Renewable Heat Incentive in the upcoming comprehensive spending review, nuggets of hope from the Conservative Party Conference yesterday. In his speech, Minister of State in the cabinet office Oliver Letwin, MP confirmed the Government’s support for an RHI: “Our incentive for renewable heat will bring forward the generation of heat from waste and other renewable sources - a crucial part of cutting carbon and maintaining energy security,” he said. As our CEO Juliet Davenport commented, "It’s great news the Government is supporting the Renewable Heat Incentive – now we need to hear the details and find out the level of payments and how it will be delivered."

Not surprisingly, we’ve got our own ideas about this.

Heat accounts for 47% of the UK’s carbon emissions, while renewable heat is currently only 1% of overall heat demand. An effective RHI is an essential step towards a low-carbon future, and could boost this to as much as 12%. Good Energy has been offering our own version of the RHI – HotRocs – since September 2008. The way this works is that our gas customers pay a small levy which creates a pot of money to spend on research and to provide our customers with solar thermal installations a payment of 4.5p/kWh of deemed heat produced. The Good Energy HotRocs initiative currently supports over 450 solar thermal users, equating to a reduction in CO2 emissions of 270 tonnes a year.

An equivalent UK-wide scheme for renewable heat based on the current FiT scheme would be simple to implement.

Here’s how it could work:

	Feed-in Tariff	Renewable Heat Incentive
Levy upon	Licensed electricity suppliers	Licensed gas suppliers
Paid by	Mandatory & voluntary FiT Suppliers (subset of above)	Mandatory & voluntary RHI Suppliers (subset of above)
Paid on	Total metered generation & deemed or metered export	Deemed heat production
Validation by	MCS	MCS
Administered by	Ofgem e-serve	Ofgem e-serve

Because of the support gas customers received from government when building the gas grid – which off-gas-grid users have not benefitted from – the levy should be solely on gas suppliers. Off-gas-grid users should be entitled to the support of the RHI without cost to compensate for the earlier financial losses. As with the FiT, off-gas-grid customers should be able to request that a mandatory RHI supplier acts as their RHI provider, even though they are not a gas customer.

Heat metering is expensive, but deeming heat production is a recognised methodology, and field trials by various organisations such as the Energy Savings Trust are improving it all the time, making the RHI simpler than the FiT.

Administering the RHI and possibly the FiT will also be more cost-effective for both Ofgem e-serve and the Utility companies if it is done by cloning the existing FiT systems. This would save costs which are ultimately borne by energy customers.

A UK-wide RHI will also be instrumental in addressing fuel poverty as, like FiT, it provides an opportunity for social and private landlords to earn an income in return for their investment in renewable technology, whilst providing free heat to their tenants.

We know it can work because we’re already doing it.

Our partners Friends of the Earth have launched a campaign calling for the government to introduce the RHI – please show your support by writing to your MP. Together we do this.

Overcoming the barriers to microgeneration

In a four-part series we've been researching the barriers to generating independent renewable energy, and here we suggest some potential solutions to the problems.

Week 4 - Access to Information & Consumer confidence

Anyone investing in microgeneration will need between £4,000 and £25,000 to get set up. This is significant expenditure for any household and the homeowner wants peace of mind that they are opting for the right technology at the right scale and the right people to install it.

Our survey confirmed our perception that people found it difficult to access detailed, informative, impartial and reliable information on microgeneration.

Homeowners find it hard to understand which technology they will benefit from most, because they don’t necessarily know how a home uses, conserves and wastes heat and power. They’re also concerned that the most detailed and useful information comes from microgeneration installers that they could not view as impartial because they were selling a product.

Good Energy, despite having a commercial interest, has tried to fill the information vacuum through our website www.generateyourown.co.uk. This recommends a stepped approach for homeowners to follow guiding them through decision making on technology, identifying installers, identifying products, accessing finance and grants and getting paid for the energy generated.

The Energy Saving Trust has also recently expanded its resources on microgeneration to help homeowners with their decision making.

As companies in this industry establish their brands and certifying bodies such as the Microgeneration Certification Scheme become more recognisable, the information they provide should be more trusted by homeowners.  

Keep an eye out around June as Good Energy will be launching an online forum giving people an opportunity to share knowledge and experience in this field.

Consumer Confidence

Closely linked to the access of information about microgeneration is the confidence - or lack of confidence - consumers have in microgeneration in relation to the products and the installers. Our  awareness of this lack of confidence was a motivator for providing a service in the market. Good Energy’s customers were expressing an interest in microgeneration but also a concern that it was difficult for a homeowner to identify which installers in the market had the skill and experience to provide excellent service. Good Energy undertook independent research to evaluate a number of installers and, through the www.generateyourown.co.uk website, recommends a shortlist.

Accreditation of products and installation companies is essential and is being delivered through the Microgeneration Certification Scheme (MCS).  While the value of this accreditation process is understood and appreciated within the industry, it will take time for consumers to develop the requisite trust and understanding for the MCS to deliver widespread consumer confidence in microgeneration.

A concern that Good Energy has noted several times is the cost of the accreditation process for both installers and products. These costs present obstacles for start-up companies and some homeowners believe the cost of accreditation is reflected in the price they pay. This is causing some consumers to opt for non-accredited products and installers. This directly contravenes what the MCS should be achieving and is pushing some homeowners away instead of towards accredited products and services. This may result in some homeowners paying for bad products, badly installed.

This is not what we want to see.

While it is likely that the MCS will help to safeguard most homeowners, the costs of accreditation must be kept to a minimum to ensure fairness for new microgeneration market entrants and affordability for homeowners.

Conclusion

Over the last four weeks we have looked at the barriers to independent renewable energy generation and made some suggestions for how they can be resolved. Please let us know what you think too. If you’re interested in generating your own energy the best place to start is www.generateyourown.co.uk

 

Overcoming the obstacles to microgeneration

In a four-part series we've been researching the barriers to generating independent renewable energy, and here we suggest some potential solutions to the problems.

Week 2 - Finance

People are motivated to install microgeneration systems for environmental, self-sufficiency and - with the arrival of the Feed-in Tariff - economic reasons, but a major barrier for many is the initial capital outlay. Microgeneration installations can cost between £4,000 and £25,000. Access to sums of capital of this size is not realistic for the majority of UK homeowners.

So how do we get around this?

Grant funding
Grant funding through phase 1 of the Low Carbon Buildings Programme (LCBP) used to provide a valuable means for accessing capital for microgenerators. However, our experience was that many microgeneration installation companies found the grant system difficult to work with. Grants tend to create a ‘synthetic’ and unstable market and, while a business can grow when it offers a product that can be heavily subsidised, once that subsidy is removed it jeopardises the security and further growth of these companies. The LCBP grants are now being phased out.

It is not only at the sub 50kW microgeneration level where access to capital is a challenge. Projects that require an investment of up to £20 million, such as 10 -20MW wind farms powering 10-15,000 homes, are finding it hard to attract the investment they need.

Financing is a critical obstacle but there are existing lending models that can be adapted and offered to installers of microgeneration. Here are some of our suggestions:

Government Interest-Free loans
Under the terms of the Feed-in Tariff, the accredited generator can nominate who is to receive the Feed-in Tariff payments. The government could provide interest-free loans to microgenerators much as it does to UK students to fund their education. The lending body (similar to the Student Loans Company) could be nominated as the recipient of the Feed-in Tariff payment which would deliver security to the lender as the payments would be made regularly by the energy supplier that was delivering the Feed-in Tariff service.

There would be an option to assign the loan to the property or to the homeowner, depending on the intentions of the homeowner and how long they anticipated they would live in the house. This might alter the risk profile of the loan application but could be adapted accordingly.

Top-up grants
Many local authorities across the UK offer top-up grants for residents installing microgeneration. These can be as much as £1000 and can be counted towards a local authority’s carbon reduction targets. While it was stated above that grants do not help to stabilise a young market, Good Energy believes that sums below £1000 will help incentivise residents but are small enough that they do not challenge the stability of installation companies.

We think Local Authorities should be encouraged to offer top-up grants and their availability should be communicated clearly to the region’s residents.

Commercial loans
At both microgeneration scale and small commercial scale up to 20MW, the nationalised high street banks should be instructed to offer debt finance. The Royal Bank of Scotland and Lloyds TSB have accessed funds through the European Investment Bank (EIB) and been instructed to make investment funds available for large-scale renewables but this does not provide for entrepreneurial landowners or independent developers.

An amount of EIB funds should be ring fenced for generators of 5MW or less which are eligible for the Feed-in Tariff. These loans can operate on similar principles to the government interest-free loans: the lending body could be nominated as the recipient of the Feed-in Tariff payment which would deliver security to the lender as the payments would be made regularly by the energy supplier that was delivering the Feed-in Tariff service.

These loans can be offered at a commercial rate, generating secure income for the banks.

Local Credit Unions
Credit unions are financial co-operatives owned and controlled by their members. They offer savings and low interest loans to local borrowers. They are primarily a social enterprise and are not solely focused on commercial return. Microgeneration projects can offer secure investment opportunities for credit unions and credit unions can offer suitable access to finance for homeowners wanting to install microgeneration.

Involving credit unions with microgenerators should be relatively simple to encourage. Principally, the challenge is to improve communication and educate homeowners interested in microgeneration about the existence of credit unions and make credit unions aware of the safe investment opportunities presented by microgeneration projects.

As Local Authorities are often linked with credit unions, they could communicate the opportunities to homeowners.
  
Tax Efficient Investments
Access to debt financing for small commercial scale renewable energy projects can be challenging to obtain, as can access to equity investment. There is a need to stimulate the creation of more tax efficient investment opportunities, such as a Venture Capital Trust (VCT) that will deliver more equity investment into viable renewable energy projects.

To encourage the introduction of new VCTs that focus strongly on renewable energy investments, we recommend that HM Revenue and Customs review the terms for companies qualifying, and adapt the criteria to make investment in Renewable Energy Developments increasingly attractive.

____________________________________

Next week we will look at planning renewable energy projects…

YouGen: Renewable Heat Incentive: A homeowners guide

 
A guest blog by our good friends YouGen

Heat is the biggest use of energy in the UK. Just under half of the UK's CO2 emissions and 60% of domestic energy bills are used on heating space and water. Heat in the UK is currently supplied predominantly by fossil fuels - less than 1% comes from renewable sources. The proposed renewable heat incentive (RHI - also known as clean energy cashback) aims to change that. Its ambitious goal is that 12% of heat is generated renewably by 2020. The Government is currently consulting on the proposals, which (if it survives the election), will be the first such scheme in Europe. It should give a stable framework for the industry to expand and develop.The aim is to introduce the scheme from April 2011.

This article concentrates on the aspects of the scheme that apply to the domestic market (and also smaller businesses). It looks at the proposals, what they will mean for homeowners, and issues you might want to consider if you feel moved to respond to the consultation.

How much will I be paid for heat I generate?
Proposed tariff levels for small installations (up to 45kW, except solar thermal which is up to 20kW):

• Solid biomass, 9p per kWh for 15 years
• Biodiesel, 6.5p per kWh for 15 years
• Biogas on-site combustion, 5.5p per kWh for 10 years
• Ground source heat pumps, 7p per kWh for 23 years
• Air source heat pumps, 7.5p per kWh for 18 years
• Solar thermal, 18p per kWh for 20 years

Which technologies are included in the scheme?
Air, ground and water heat pumps, solar hot water panels and biomass boilers are the main technologies that will be used in the domestic market. The government proposes omitting wood burning stoves, air heaters and open fires from the heat incentive, as they are generally used as optional secondary heating, and because it's difficult to monitor to what extent they are used with non-renewable fuel such as coal. We would argue that they should consider including wood pellet stoves with and wood burners with back boilers where this is the main method of heating water; and wood pellet stoves used for space heating more than just one room.

People who have oil-based heating systems will be eligible for the renewable heat incentive if they convert their boiler to run on a blended fuel that is part renewable oil/part heating oil. Bioliquids (ie oils made from arable crops such as rapeseed) will not generally eligible, apart from this special case. The blended fuel will have to be certified to be eligible.

What return on investment will I get?
The payments are intended to give a 12% rate of return. This is a better return than under the feed-in tariff because the government sees renewable heat as a priority area for growth; and also because it thinks the hassle factor involved in the installation of technologies such as ground source heat pumps will mean people need more incentive to do it. The rates have been set so that they cover the higher cost of installing and running new technologies.

How will it work?
To qualify for the RHI payments, you will have to use an accredited installer and product. The main accreditation scheme is the Microgeneration Certification Scheme (MCS), and equivalent European schemes will also apply. Once a system is in place, your installer will issue a certificate that will enable you to register the installation with Ofgem. Once it has accredited the installation it will pay the incentive - this is likely to be an annual payment into your bank account.

How is the payment calculated?
The payments will be 'deemed' rather than metered. Although it is possible to meter heat the technology is in the early stages of development. The final methodology for how it will be done is yet to be decided. It is likely to be based on a table of average energy needs for space heating broken down by property type and size. For example, a 2-bedroom flat, with 61m2 of floor space, and cavity wall construction may be deemed to need 4,441kWh/year for space heating. A 3-bedroom semi, with solid wall construction may be expected to need 16,390kWh/year. The useful energy requirement for hot water will be assumed constant across property types and sizes at 3,742 kWh/year. This is based on an average occupancy of 2.9 people.

Are there any energy efficiency requirements?
You will need at least 125mm of loft insulation and cavity wall insulation, where appropriate, to qualify for the heat incentive. DECC does not propose to make more stringent requirements, as a deemed tariff system will encourage people to make their home as energy efficient as possible. The more efficient it is, the less energy will be needed for heating, so energy bills are lower, and more of the incentive payment is available to be saved or spent on other things.

Who can receive the payment?
The 'owner' of the heat installation is the only person who can receive the payment under the Energy Act 2008. This will usually be the person who bought and paid for the installation of the equipment. However, where there has been a hire purchase or similar agreement to fund the purchase, the payment can be made to the person who has taken out the loan even if they are not the legal owner. There may also be times when the person who owns the equipment is not the person who benefits from the heat it produces - ie if a landlord installs it in a rented property. In this case the landlord can receive the payment.

To receive the payment the owner may be asked to sign a declaration that they agree to keep the equipment working and well maintained to qualify for ongoing payments. Ofgem may want evidence of ongoing maintenance and repair by an approved person.

What installations are covered?
People who installed their heat generating equipment after 15 July 2009 are eligible for the renewable heat incentive. Only the installation of new equipment is eligible - refurbishment , repair or conversion will not be. There is considerable weight of feeling that existing microgenerators (who installed prior to the cut off date) should also be included in the scheme, as installers are being asked to rip out kit that works well, and install new, so people can claim. There is also strong feeling that a lot of education is needed for the RHI to really work, and that pioneer users with good stories to tell are vital to that education process.

What about fuel?
To qualify for the RHI payment, fuel needs to come from an approved sustainable source. It's not clear yet whether people with their own source of wood (or other biomass) will be able to use that in a biomass boiler - or whether they have to buy from an accredited source. This is something that we will be chasing up on in our response to the consultation

What if I live in rented accommodation?
Private landlords will be able to claim the RHI payments on renewable heat equipment that they install in their properties, with the aim that it is a logical financial decision to install it.

What about people in fuel poverty and social housing?
There is no requirement for social landlords to adopt renewable technologies, but the government thinks that the incentive will offer them a strong business case to offer this choice to their tenants. It is developing guidance to enable them increase the energy performance of their housing stock. The government is also consulting on ways to help low income households in fuel poverty to take advantage of the scheme. A lot of people in fuel poverty live off the gas grid, where switching to renewable technologies can make the most difference. The RHI includes provision for district heating systems, to encourage larger scale installations, for example in large blocks of flats, where that makes sense.

Consultation
The full consultation document can be downloaded from the DECC website. The closing date for responses is 26 April 2010.  Email responses are preferred to rfi@decc.gsi.gov.uk.

For more articles like this one visit YouGen's site. There are lots of high quality posts and easy to access information on renewable energy.

Note from Good Energy - If you already generate heat with renewables and can't wait for the RHI. take a look at our HotRocs scheme. http://www.goodenergygeneration.co.uk/sell-your-energy/hotrocs.aspx 

Good Energy's Hot Roc scheme

Good Energy are leading the way in the renewable heat industry – get paid for your solar thermal power.

For many years there has been a government support mechanism in place for renewable electricity – called the Renewable Obligation – that increases the rate of return for renewable electricity generators. At the moment, there is no such obligation in place for renewable ‘heat’ generators. As a result, this market is massively underrepresented; only 0.6% of final ‘heat’ demand in the UK comes from renewable sources, tiny considering the potential is so huge.

And this is a real problem. Heat, in all its forms, currently accounts for 49% of the UK’s final energy demand and 47% of our carbon emissions. If the UK is to reduce its emissions, we must re address the way we heat our homes – burning Gas is simply not sustainable. But for some reason, this topic has remained elusive on the climate agenda. We thought we’d better kick start it.

This year, the government has consulted on their intention to bring a support mechanism in for renewable heat generators – they think that it’ll be 2010 before anything of substance is in place – and one of the major sticking points is, quite simply, how to do it. Metering small heat generators isn’t easy, and it’s generally not very cost effective. The fact that metering isn’t really done at a domestic-scale means that very little has happened in this area.

We believe that we may have come up with a method around this. The approach is called ‘deeming’; a number of known factors (including solar radiation, site/situation of the panels, panel type, etc) are used to estimate the generators’ annual output.

We want to lead the way for the industry, while demonstrating to the government exactly how we believe a Renewable Heat Incentive could, and should, work. We are hoping to lead the way out of stagnation on this issue, and show the government how to roll this out across the UK.

We will be paying our generators 4.5p for every kWh we expect to be generated by their solar thermal installations (we are starting off with solar thermal, and hope to expand to heat pumps and biogas heating once we’ve achieved successful results).

Nothing like this has been done in the UK before – and as far as we can tell – the EU too. We’re very excited about the scheme.

If you are thinking about buying a solar thermal installation, we hope this will seal the deal. If you already have an installation and would like to get paid for the heat you are generating, that’s great!

We’ll ask that you become a Good Energy electricity and gas customer (if you are not already). Take a look at the electricity  and Gas supply terns here . Fill out the contract  and send it to

Good Energy
Monkton Reach
Monkton Hill
Chippenham
Wiltshire
SN15 1EE

If you have any further questions that are not addressed here please feel free to call us on 01249 766090.

We welcome any comments and feedback you have.

The Good Energy team

Renewable Heat?

Tackling the Heat

By Chris Welby, Good Energy’s Commercial Director

So the Committee for Climate Change has told the government we need to reduce our carbon output by 80% by 2050.  So now we know what, we need to decide how.

The case for electricity is kind of clear.  We need more renewable generation.  Maybe Nuclear.  Getting to 80% of electricity generation from zero carbon sources is challenging, but achievable.  However, 47% of the UK carbon emissions come from heating our homes and businesses, predominantly by burning gas.

We cannot achieve the target unless we tackle the heat question.  Energy efficiency has a role to play, but can we really reduce our carbon footprint without tackling how we heat our homes?  As a country, the majority of us heat our homes and businesses automatically by burning gas or oil as the timer kicks in.  Do we have an alternative?

Renewable forms of heat are available.  25,000 people in the UK use solar thermal panels on their roofs to provide them with hot water, and sometimes space heating.  However, 25,000 homes out of 30 million are hardly denting the foot print.  If we are to meet the targets, how are we going to encourage the uptake of renewable heat?  What are we going to do about those properties not suited to renewable heat solutions?

Should we reward those people who make the switch, or punish those who do not?  Does renewable heat have an answer to fuel poverty?  If so, who should pay?

Good Energy would like to hear your views on the blog, so we can shape our approach to campaigning on this issue.

Green Energy Republic