Including the full environmental cost of cotton might double the price of cheap T shirts

The environmental cost of making a cotton T shirt is about £1.30 according to a study sponsored by the Danish Environment Ministry. The 16 kilos of clothing that the typical European buys each year have a full impact costed at about £50, or about £3 for every kilo. This means that environmental effect of all the UK’s clothes is probably a cost of about £2bn a year, representing about 5% of a person’s full eco-footprint. After energy use and food, clothing is the most important contributor to environmental stress. About 70% of this environmental cost comes from greenhouse gas emissions, with air and water pollution adding almost all the remainder of the footprint. Greenhouse gas emissions are heaviest for wool and silk. At an assumed cost of about £65 a tonne of CO2, virgin wool has an environmental cost of about £5 a kilo, even before the substantial extra costs from turning the fibres into a garment. Other environmental costs, such as water pollution, take this up to about £7 a kilo. Artificial fibres all have greenhouse gas emission costs of a small fraction of cotton, silk or wool.

Perhaps the most telling chart in the report is one which compares the environmental cost of generating fibres with their current market price. (This only includes the growing/manufacturing of the fibre, not the full impact of turning it into a piece of clothing). I have rounded the numbers and turned them into UK pounds

Fibre	Market price (£/kg)	Environmental cost per kg	Ratio environmental cost to market price
Cotton	£1.00	£3.00	About 3
Oil-based fibres	£1.50	£0.60	About 2/5
Synthetics (eg rayon)	£1.50	£0.60	About 2/5
Wool	£2.50	£8.00	About 3
Silk	£6	£18.00	About 3

Although cotton appears to be very cheap once the full environmental cost has been included – and in the case of this fibre this cost arises largely from water use – it is much more 'expensive' than artificial and synthetic fibres. Broadly speaking, the costs of all natural fibres should be quadrupled to reflect their true cost. Include the greater environmental impact of the later clothing manufacturing stages of wool and cotton and the differences are even starker.

If we reflected the full cost in the shop price of growing fibres and then turning them into clothing, would it change buying habits? Perhaps not in the case of wool. It might add 10% to the cost of an inexpensive woollen suit, or even less. However a quick look online suggests that I can buy T shirts for not much more than one pound. At the very least incorporating the full environmental cost would double this. Proper accounting for cotton might have substantial effect on purchase patterns, and also help to preserve scarce water resources in areas where cotton is grown.

IPCC estimate of the cost of abandoning fossil fuels

The latest report from the Intergovernmental Panel on Climate Change says that moving completely away from fossil fuels will reduce the amount of money available for household spending by about 0.06% a year over the rest of the century. This means, acccording to the IPCC, that action to stop climate change will cumulatively reduce real incomes by about 5% below what they would have been in 2010. The chart below is from a series produced by DECC. It shows what percentage of total household spending has gone on energy, including both consumption in the home and in personal cars, from 1970 to 2103.

Vehicle fuel expenditure has varied little, swinging between 2.8% and 3.5% of spending. This surprising partly because a far smaller percentage of families had cars in 1970 than today.

Household energy bills have been far more volatile. They took 5.4% of spending in 1982 before falling to a low of 2.1% twenty years later. In 2013 it was 3.3%.

Combined, all sources of energy took 9.3% of consumers’ spending in 1982. The figure in 2013 was two thirds of this number – 6.2% - a reduction of 3.1%. In addition, the cost of the embodied energy in other goods and services will have probably fallen by a similar amount. In other words, if the IPCC is right the net impact of abandoning fossil fuels (about 5% by 2100) will simply return us to where we were in 1982, with the direct costs of energy taking about 9% of household expenditure.

National Grid's Winter Outlook relies on impossible optimism about nuclear power over the next few months

  National Grid says that the country has the electricity generating capacity to meet the average maximum need over the course of the UK winter. But this calculation critically depends on the reliability of power stations as well as an accurate assessment of the true generating capacity of each plant. This article looks at National Grid’s assumptions on power station availability over the next months and casts a somewhat surprised eye on its apparent errors, particularly in calculating the likely output from nuclear stations.

These mistakes – if they are mistakes - may not matter. The Grid has introduced new payments for cutting electricity demand, meaning that the spare capacity margin is around 3.4 GW or 6% of maximum expected demand in the average year. However what I believe may be its errors over nuclear power reduce this number by at 50% at the very least. It seems strange that the business at the centre of the electricity industry in this country appears to be substantially over-optimistic in its assessment of power supply. It seems it has ignored evidence published by EdF that its nuclear power stations cannot possibly reach the output that the Grid projects over the winter months.

Last year, National Grid estimated that the average availability of electricity generators would be 79.4% of rated capacity over winter 2013/14. The figures ranged from a low 25% for wind (for obvious meteorological reasons) to 97% for pumped storage plants. For plants subject to the possibility of mechanical or other failure, such as coal power stations, the number tends to be between 80 and 90%.

This year, even in the face of strong,  repeated and growing evidence of declining mechanical performance of our ageing power stations, National Grid has increased its estimate of the reliability of the main types of power station, coal, gas and nuclear. Across all power plants, the expected availability rises from 79.4% to 81.8%. Perhaps this seems a small change. However it raises the amount of capacity the Grid expects to be ready to meet peak winter demand by about 1.7 GW. This is half the buffer that the Grid says will be available on the day of highest demand in the average winter. When margins are tight, apparently small changes really matter.

The errors in the nuclear forecast

Perhaps most strikingly, National Grid has raised its assessment of the nuclear fleet’s availability, and by more than any other major type of power station. It predicts that 90% of the UK nuclear capacity will be working at the point of maximum demand, up from 84% last year. In the face of repeated unplanned shut downs at EdF’s plants this year, I can think of absolutely no reason for this enhanced optimism. And, indeed, National Grid’s cheery forecast is not shared by Ofgem, which held its estimate at 81% availability, in its report in mid-summer. The Ofgem document actually predates the unplanned closures at Hartlepool and Heysham 1 that started a couple of months ago and I doubt Ofgem would be as optimistic today.

I looked at the performance of the UK’s nuclear fleet from early December to mid-February this year. Only for a couple of days did it actually achieve the 90% output that National Grid – based on information from operator EdF – suggested it will for 2014/2015. Average performance was 81% of potential, in line with Ofgem’s more conservative forecasts for this winter and last.

As I write this, only 3 of EdF’s nuclear generating units out of 16 (in eight power stations on seven sites) are working to their full rated capacity. A further 4 are operating at 20% below maximum power as a precaution. Sizewell (one station but two turbine units) is on a planned refuelling stop. 2 other units are suffering from mechanical faults and 4 are being inspected for a possible problem in their boiler units and will return to operation between now and the end of December, although at a lower output than previously. Another plant is returning to full power after refuelling.

The current state of the UK’s nuclear power stations as at 29^th October 2014

Station	Unit 1	Unit  2	Station output as percentage of maximum
Dungeness	Rising to full load	Out. Boiler pump failure	40%
Hartlepool	Out. Boiler inspection	Out. Boiler inspection	0%
Heysham 1	Out. Boiler inspection	Out. Boiler inspection	0%
Heysham 2	OK	OK	100+%
Hinkley Point B	OK but  20% power reduction	OK but 20% power reduction	80%
Hunsterston	OK but 20% power reduction	Out. Investigation of bearing vibration	40%
Sizewell	Out. Refuelling	Out Refuelling	0%
Torness	OK	OK	100+%
Wylfa (NOT EdF)	OK		100%?

The total nuclear output, including from Wylfa which is not owned by EdF, is currently (18.00 on October 29^th 2014) around 4.5 GW, or less than 50% of potential capacity.  Only 3 stations (and I cannot even be sure about Wylfa) are working to full capacity).  It certainly seems that National Grid is unrealistic in thinking that 90% of nuclear power will be available at the moment of peak need, which typically happens about seven weeks from today in mid-December.

In fact, we already know that 90% is actually not achievable. The total rated capacity of UK nuclear is – according to National Grid – about 9.6 Gigawatts. (Both EdF itself and Ofgem give lower figures, and National Grid surely should have noticed this, although the differences are small).  90% of the National Grid figure is slightly more than 8.6 Gigawatts. But, according to EdF’s own public statements, 8.6 GW is unattainable at any point this winter.

• Heysham 1, unit 1, is said by EdF to be out until the end of December, past the point of likely peak demand. This reduces maximum output by about 0.6 GW. (As it returns to service, the second unit at Hinkley Point B moves offline, cutting power by almost 0.5 GW. So even if peak demand occurs in January, there won’t be additional capacity to meet it).
• The other unit at Heysham and the two units at Hartlepool are subject to a 20% restriction on output when they return to service at some point during November or December. This cuts maximum output by just under 0.5 GW
• The working power stations at Hinkley Point and Hunterston are also subject to precautionary power reductions of about 20%. This reduces potential output by about 0.5 GW.

In total, EdF’s fleet can only produce a maximum of 1.6 GW less than their rated output, or about 8.0 GW. This means that the availability of UK nuclear during winter 2014/2015 can only be 85% of the maximum potential, much less than the central National Grid assumption of 90%. This is before any additional mechanical or electrical problems. The reality is that nuclear output at critical times is, if recent experience is any guide, likely to be little more than 7 Gigawatts.

This reduces the UK’s spare capacity at winter peak by about 1.6 Gigawatts, cutting the safety margin by about 50%. A more conservative view of the reliability of gas and coal power stations would have an effect similar in size. If these numbers are correct, National Grid is being too optimistic in its Winter Outlook and the true position is that a typical winter will bring the UK far closer to power cuts than the company admits. A colder than average winter will make the UK’s position worse.

National Grid hasn’t responded to my written questions on Tuesday afternoon about the overstatement of nuclear availability and other issues.

Cambridge nuclear engineer casts doubt on whether Hinkley Point EPR nuclear plant can be constructed

‘The EPR is safe, very safe’ said Tony Roulstone at a lecture in Oxford on Tuesday 21^st October. But the complexity of the design means it is extraordinarily difficult to build. This type of reactor is, he said, perhaps in an unguarded moment, ‘unconstructable’. Roulstone, who runs the Master’s programme in nuclear engineering in Cambridge, described the proposed EPR nuclear power station at Hinkley Point as similar in concept to ‘a cathedral within a cathedral’ which would stretch the ability of any business to build it. With two sets of 6 metre thick concrete walls towering 70 metres above Somerset, the building would survive a direct hit from an airliner but at a very high price in terms of construction timetable and cost.

He went on to say that Areva, the French company that owns the EPR design, is no longer actively selling power stations of this type. In those countries still looking to expand nuclear power, such as Saudi Arabia, China and Turkey, Areva is now pushing an alternative reactor. In China, where several EPRs are currently being constructed, the authorities have indicated that they will not use the design for future power plants. In other words, the Hinkley Point design is already regarded as a failure by those with most knowledge of it. In Finland and in Normandy, where the EPR is already under construction, delays of several years and enormous cost overruns are crippling the projects.

The latest estimates for the cost of Hinkley Point are still rising. The EU recently indicated it thought the total bill might be higher than £24bn, although EdF, the site owner, still says that its figure is about £16bn. Using the lower number, the cost per kilowatt of capacity is almost £5,000. Gas-fired power stations could be built for about an eighth of this price.

EdF, the most experienced operator of nuclear power stations in the world, is expecting to pay about four times as much for Hinkley Point as it did for the last nuclear power stations to be constructed in France fifteen years ago. But larger nuclear plants were supposed to be cheaper to build per unit of generating capacity. This theory, said Roulstone, underlies the political decision to support the EPR in the UK over the course of the last ten years. Actually, he went on to say, unlike any other energy technology in the world, global power station builders are seeing very little benefit from constructing larger nuclear power stations. And, crucially, the cost reductions derived from building multiple power stations of a single type (the so-called ‘learning’ effect) are turning out to be small or non-existent.

Roulstone mused on why this might be. He said that learning effects are usually observed for goods made in factories. The fact that nuclear power stations are almost entirely constructed on individual sites meant that the expertise gathered in one place are not transferred to the next construction project. Recent experience, such as at the Finnish EPR construction site, shows that management is particularly difficult when large bands of workers, sometimes speaking different languages, try to work productively together in a relatively small and cramped area. The workforce is unused to the extremely demanding construction quality requirements imposed by the safety engineers.

Interestingly, he spoke of building nuclear stations, the largest civil engineering projects in the world as requiring ‘craft’ skills that are usually associated with tiny factories. And craft learning is extremely difficult to transfer from place. The Chinese are trying to encourage this by transferring workforces from one finished nuclear power station to the next construction project. I suspect this would be much more difficult in the UK.

Much of Tony Roulstone’s lecture was about other types of reactor which thought deserved much greater investigation. Small reactors have been opposed, he suggested, because they contravene the standard wisdom that bigger is always better in nuclear. But a much larger percentage of the plant can be constructed in factories away from the site and therefore might be able to capture the benefits of much greater ‘learning’ effects. He showed that for relatively small amounts of money – at least by comparison to the big nuclear programme - the UK and other countries could see if cost reductions in small reactors, possibly using thorium, could be attained that might match or beat the price of EPRs or other giant reactors.

This is unlikely to happen. Roulstone said the central assumption of the UK government now appears to be that the country will build about 16 gigawatts of large nuclear plants (providing about 25% of UK electricity) at a cost of around £100bn. EdF will bring in Chinese investors to help finance its share of this expenditure. Chinese companies will then get much of the business constructing other plants that will built after EdF’s EPRs at Hinkley and Sizewell. And, he concludes, future plants may be constructed using alternative technologies, including variations of the Westinghouse AP1000. By their actions, Tony Roulstone wrote to me in an email this morning, Chinese companies ‘appear to have rejected EPR as a staple of their future build programme’.

Most scenarios, though not all, show the UK needing a large nuclear programme to meet its power and decarbonisation needs. But by focussing on the increasingly unpopular EPR design, the country may have saddled itself with an unmanageable and hugely expensive construction project that will sour the prospects of all other nuclear technologies for another generation. Perhaps those of us who still believe in the value of nuclear power should pray that sceptical investors refuse to commit their funds to the Hinkley project.

Apple trees crowded out by solar PV?

UK Environment Secretary Liz Truss spoke of her dislike of solar PV installations in fields. In an interview last week with the Mail on Sunday, she said ‘They are ugly, a blight on the countryside, and …. are pushing production of meat and other traditional British produce overseas.’

She went on

‘I’m not against them per se – they’re fine on commercial roofs and school roofs – but it’s a big problem if we are using land that can be used to grow crops, fruit and vegetables. We import two-thirds of our apples, and using more land for solar panels makes it harder to improve that’

As far as I know, the argument that supermarket apples come from New Zealand because of the shortage of land caused by solar PV in the UK is a new one. A quick look at the numbers doesn’t support her conclusion.

Is solar crowding out agricultural use of UK land?

• The UK now has about 5 gigawatts of solar PV
• About 40%, or around 2 gigawatts, is mounted on the ground.
• Some of these solar farms are on disused land such as old airfields or abandoned clay pits.
• No more than about 1.5 gigawatts is on agricultural land on which crops are grown or animals graze.
• These PV farms occupy a total of about 3,000 hectares, or around 2 hectares per megawatt.
• About 17.2m hectares are used for agriculture of some form in the UK
• Ground mounted panels therefore use about 0.02% of all agricultural land in the UK.

Specifically, is apple growing in decline because of solar PV?

• Orchards currently occupy about 23,000 hectares in the UK, about seven times the land used for solar PV.
• This number is the same as in 2013
• And is up about 15% from 20,000 hectares five years ago.
• So the rapid growth in solar PV has had no effect whatsoever on the land used for orchards.
• This is unsurprising. Almost all large PV farms on agricultural land are sited in areas normally used for the grazing of livestock not growing fruit.
• Two farmers I have spoken to say that PV improves the health, lamb survival and weight growth of sheep because the panels provide shelter from wind, rain, sun, snow and birds of prey while not significantly affecting grass growth.

Domestic batteries to store excess PV and reduce peak demand loads

When the UK power cuts arrive, they will hit at around 4.30pm on midweek evenings in December and January. A region of the country will be disconnected for two or three hours until demands starts to fall after the early evening peak. But, in theory, excess power from domestic PV installations that would otherwise be spilled onto the grid could be mopped up by storage batteries. Can electricity stored in these domestic battery systems make these power cuts less likely? And can householders insulate themselves from the impact of electricity outages by buying a storage system? Or are batteries too expensive to make it worthwhile? 

To make a substantial difference to the likelihood of power cuts, batteries would need to supply perhaps half a gigawatt of power for three hours. That’s about 1% of UK peak winter demand. This means batteries in 500,000 homes (2% of UK total) each delivering 1 kilowatt. We’re some years, possibly some decades, away from this. But pessimism shouldn’t be overdone; the UK already has 500,000 PV equipped houses, almost all of which were installed within the last five years. In other words, if the incentives are right, half a million homes will quickly take on a new technology. And a battery pack is a lot easier to fit than PV panels. However, at today's battery prices, we're not at the point where the financial returns obviously justify the investment.

The economics of PV storage.

Battery systems are still costly. The European market leader, German company Sonnenbatterie, markets a 4.5 kWh battery at €5,900 plus sales tax. In the UK, that would mean a price of about £1,300 per kilowatt hour of storage. The innovative UK company Moixa is just starting to sell its Maslow system for about £2,000 for 2 kWh, or about £1,000 per kilowatt hour. Does this make financial sense to buy one?

It depends. Judged as an investment that stops PV electricity from being exported and stored instead until the sun goes down, a battery system still looks a poor idea. But if you really value the security of knowing that your lights won’t go out, you may think differently. And, one day, the battery owner may be able to claim some benefit from the value to the whole electricity system of suppressing peak demand. This would improve the economics, possibly substantially.

We’ll look first at how much an owner of a Moixa system might save, or indeed the batteries produced by London start-up PowerVault. This calculation requires us to make some rough approximations based on the monthly production of a 4 kW system in a sunny part of the UK. (With many thanks indeed to Pilgrim Beart of 1248 and Gage Williams for giving me their very detailed data so that I could make these approximations).

Table 1

	Average daily  output  of 4 kW domestic PV system (kWH)	Average daily amount of electricity spilled to grid (kWh)	Estimated average amount of power that would be stored each day by a 2 kWh battery system (kWh)
Four summer months	20	12	1.8
Four shoulder  months	10	5	1.4
Four winter months	3	0.5	0.4

(Notes: why – if the average summer export is 12 kWh – would the battery typically store only 1.8 kWh and not 2? Because on a small number of days the overnight power use wouldn’t be enough to fully discharge the battery and, also on a small number of days very cloudy conditions would mean that the surplus export wouldn’t be the full 2 kWh.)

Over the course of the typical year, a 2kWh battery system in a home with 4 kW of PV will therefore store and discharge an average of about 1.2 kWh a day. It might be 1.0 or 1.4, but it’s definitely not 2, or even close.

What is 1.2 kWh a day worth? At a price of 13p a kilowatt hour, this is just less than £60 a year. If you bought the neat little Moixa system, costing about £2,000, the direct return would be 3% before thinking about the depreciation of the batteries. Unless power prices shoot up, the batteries will never pay back the investment. In southern Germany, the economics would be a bit better for the Sonnenbatterie device. Sun is more equally distributed over the year and power prices are not far off double those of the UK.

But what about the value as a spare power supply in the event of a power cut? We need to be a bit careful here. The Moixa battery pack definitely isn’t a conventional emergency power supply (or UPS in the technical language). If the grid goes down, the Moixa system will not pump an alternative source of 240 V AC current into the house’s wiring circuit. The reason is that Moixa doesn’t incorporate the expensive relay that isolates the grid from the house in the event of a power cut.

However what Moixa can do is continue to operate a separate DC circuit that powers, for example, lights, computers and phones. The company told me of one installation in an office that suffers frequent power cuts and has but a simple new wiring circuit in place that allows employees to continue working when the electricity is off. I suspect that in these circumstance the batteries have a value that easily exceeds their cost. Homeowners worried about general power cuts could also see a huge value in knowing that the lights would stay on in their home.[1]

The sharp decline in battery prices, and the development of several new battery chemistries, such as Zinc/Air, will mean that the price of storage packs for homes and business will fall sharply over the next few years. Moixa targets a retail price of £1,000 for its 2 kWh battery by the end of 2017, based on a battery price of around $150 a kilowatt hour by that date. (Tesla, and possibly many other battery manufacturers, will be delivering at about this cost or less).

The German Sonnenbatterie will be in an even better position because of the higher local power prices. This company has already sold 3,000 systems across Europe and is now pushing into the US where backup power is more valuable because of the growing unreliability of many local grids. In addition, of course, in hot countries peak electricity use coincides well with peak PV output, unlike in the UK. So more electricity will typically be stored and discharged each day in California than it would be in Britain with the same battery system.

Sonnenbatterie is a much more sophisticated device than the Moixa pack. It can cut the house off from the grid and appears to be able to offer AC power to the home when mains power is off. This means, for example, that heating systems will continue to work as well as lights and communications. But it is much bigger than Moixa’s product meaning it would work less well in crowded UK homes. In addition, it would only store and discharge slightly more than a Moixa over the course of a year because of the relatively low nighttime summer use of electricity. A Sonnenbatterie that had been filled during a July day wouldn’t be fully utilised in the ten hours before starting to charge again. Pilgrim Beart from telemetry company 1248.io estimates that the financially rational UK householder should buy a battery of no more than 2-3 kWh because of this problem.

What about the value to the wider electricity system of domestic battery supplies?

If large numbers of households had fully charged battery packs that could discharge in to the grid when needed, it would help avoid power cuts. You could view Moixa or Sonnebatterie installations as part of the ‘capacity market’. Participants in the capacity market agree to keep their generating plant ready to operate at times of high demand and are paid for making this commitment. Prices aren’t clear yet but it looks like about £60 per kilowatt per year.

DECC is also offering a pilot scheme that pays businesses to reduce their demand at times of highest demand and so ‘shaving the peak’ of electricity need. A battery is a peak demand reduction device and could claim DECC’s fees for this trial. These early experiments are going to be paid more, possibly up to £300 a kilowatt of reduced electricity use. This makes a battery potentially much more lucrative if it could be reliably offered.

The problem is this: if the battery’s function is to store PV power for evening use, its output is likely to be very low indeed in those winter months when outages are likely. The table above suggests that actual storage in UK conditions is likely to be below 0.5 kWh in deepest winter. Even if a clever system aggregated thousands of batteries together, domestic batteries aren’t really able to make much difference in December.

Unless, that is, they become much more sophisticated and can predict the weather and soak up surplus power the previous night if the sun isn’t going to fill them during the day. A domestic battery in dark mid-winter that bought power at 4am and then used it at 5pm the following afternoon would have substantial value to the grid when hundreds of thousands were aggregated. This isn’t something that is going to happen soon.

However it might make financial sense for a business that pays fees for its peak electricity use. Suppliers add an amount to commercial bills that depends on usage in the half hours of maximum demand. It’s a penalty for requiring the local operator and the electricity generators to have this peak amount of electricity available to provide for the businesses’ need. The earliest users of batteries may well be businesses that want to reduce what are called ‘triad’ payments at peak demand times of the year as well as storing electricity from PV over the summer.

Sonnenbatterie in Germany is now raising its next round of about €7m of capital from investors. Even this company, one of the most highly regarded European cleantech companies, has to trawl round investor conferences to make its pitch. (Contrast this with the frankly ephemeral social media companies that are valued at billions and are besieged by those wanting to buy their shares).

Domestic batteries placed at the edge of the electricity grid probably are a vital part of the energy future but the economics are still far from overwhelmingly attractive. Another reason to hope that Tesla’s investment in enormous battery factories or EOS’s exciting zinc/air cells will bring the price of storage down to the totemic $100 per kilowatt hour at large scale. Then we'll all be buying batteries to use our spare electricity.

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[1] The Moixa pack can only deliver about 400 watts so it is only lower power devices that can be put on a separate DC circuit. You can buy DC fridges but you probably wouldn’t want to use one because your lights would go out.

Wind power exceeds nuclear output (for a few minutes)

It only has symbolic significance, but at half past nine this morning wind was supplying more electricity to the national grid than nuclear.(1) For a few minutes, the gusts over the western side of the United Kingdom supplied more than 6 gigawatts and a temporary slight dip in nuclear output meant that wind was more important for electricity supply than the UK's ageing nuclear fleet. The new record came a few hours after news stories about new cracks in the graphite blocks of one of the reactor at EdF's Hunsterston plant. We'll see more and more days when wind power beats the geriatric nuclear fleet. A couple of other features of electricity supply over the past 24 hours are worth mention. At 4am this morning, the price of power (as indicated by the sell price in the 'balancing market' that keeps electricity supply and demand in balance) fell to a low of just over £1 per megawatt hour. They were basically giving the stuff away. Even at this time of the morning electricity generally sells for thirty times this amount. The high volumes of wind-generated electricity caused substantial disruption to the working of the power market for a few hours.

At almost the same time, we saw the interconnector between France and England change the direction of flow. Normally France pumps almost two gigawatts into the UK. For a few hours the UK exported power instead and the interconnector took 2 gigawatts to France. It's difficult for outsiders to be sure of this but the National Grid appeared to also curtail (shut down) a large fraction of UK wind supply.

These related events matter more than the symbolic event that happened at half past nine. They show just how challenging the future of electricity supply is going to be and how urgently action is needed. Yes, the France interconnector took the temporary surplus off to the European grid early this morning for an hour or so. But the operators of the Grid needed to use almost the full capacity of the interconnector. As wind power grows, Atlantic storms risk becoming much more difficult to manage.

We need more interconnectors, more storage and, please, a way of converting surplus electricity into other usable fuels such as gas. Otherwise all that wind power investment is going to be largely wasted in the winter months.

(This article was published on The Guardian web site on Monday 6th October)

(1) Before counting the power from smaller wind farms attached to the networks of district operators)

Few things matter as much for renewables as the cost of capital

A solar farm with a contract to sell electricity is almost the lowest risk investment a pension fund can make. Only index-linked government bonds beat its reliability. As long as electricity prices are contractually secure, PV resembles nothing so much as an annuity, a guaranteed flow of money that arrives every month for 25 years. Gradually, the financial markets are realising what a superb asset PV can be, particularly for pension funds needing to match long streams of liabilities. As a result, the cost of capital for solar farms is falling. It needs to fall much further. It cannot be stressed enough how important this is. This week’s IEA report, which finally ended the Agency’s long-standing contempt for PV and large scale solar thermal technologies, put it bluntly. At today’s prices and construction costs, PV produces electricity in good global locations at around 6 US cents per kilowatt hour if interest on the capital is assumed to be 0%. Assume the cost of capital is 9% per year and the cost more than doubles to over 12 cents. At this level, interest payments are more than half the cost of solar PV.

In a sunny Cornish field you could add 15% to these costs. There, PV will generate at about 7 cents at 0% cost of capital and 14 cents at 9%. The implications of this are striking. Push the cost of financing solar down close to zero and PV is already competitive with grid electricity in the UK. (7 cents is not much over 4 pence per kilowatt hour). At 9% you still need heavy subsidy to match fossil fuels.

What is the return on capital that investors demand today for PV? DECC’s latest estimate is 5.3% in real terms, or 7.3% nominal if inflation of 2% is added. This is the figure also used by other government bodies such as the Committee on Climate Change. It’s worth pointing out that this is higher than regulators assume for electricity generation using fossil fuels. Ofgem says the cost of capital for the Big Six generators is around 6% real. The difference is inexplicable. Ask yourself which investment you would rather own. A £100 share in a fossil fuel operator facing unknown carbon taxes, fluctuating fuel costs, sharply varying electricity prices and divestment campaigns growing in strength by the day, or £100 in a PV farm guaranteed a stable price for its output?

At the current interest assumed by DECC, the IEA’s figures suggest a Cornish cost for PV electricity of around 9 pence per kilowatt hour for the raw cost of power pumped into the local grid. Transmission charges will add to this figure, meaning the full cost is probably around 10.5 pence, about double the wholesale price of electricity. [1]

Travel from Cornwall to central Germany, which gets about the same amount of sun, and things are very different. There, says the Fraunhofer Institute, the cost of capital (expressed in real terms) is 2.8%, or 4.8% with inflation added in. Nothing else has changed but solar electricity immediately costs about 20% less in Germany than it does in the UK.

Why should this be? Very long dated government bonds (gilts) do yield about 1.2% more in the UK than Germany. So investors deciding whether to put pension fund money into gilts or PV will demand that PV gives them more than in Germany. Nevertheless there’s still a striking gap between the negative (i.e less than zero 0%) yields on inflation-protected government bond yields in the UK and the 5.3% real cost of capital assumed by DECC for solar PV.

I guess that the 5.3% estimate is actually too high. The small number of publicised sales of stakes in solar farms do suggest a lower figure. Lancashire County Council pension fund put £12m into the bonds of Westmill Solar Farm at a real interest rate of 3.5% in 2013. Just launched today,, Oxford’s latest £1.5m fund-raising effort to put PV on all its local schools opened for subscription offering 5% nominal returns, over 2% less than the government estimate.

It needs to go further, and not just for the sake of emissions reduction. The UK and other countries are facing increasing problems from the impact of low interest rates on pension liabilities. This week the UK universities pension fund, the largest in the UK, announced a strike ballot over plans to cut entitlements. The principal cause of its deficit is low or negative real interest rates. It has many billions of pounds now looking for a safe home that yields slightly more than the negative returns available on inflation protected gilts.

Solar PV, done at the large scale pioneered in Germany, could provide exactly the right form of asset for this fund. A sensible industrial strategy would be putting 5 gigawatts of PV on to brownfield land in the south west and funding it with pension fund money at 2 or 3% real return. I know that this won’t happen but it really is a much better idea than fracking most of Sussex and Lancashire.

(Boffins wanting to experiment with numbers on the importance of the cost of capital to renewable technologies may like to play with the US government online calculator at http://www.nrel.gov/analysis/tech_lcoe.html . Remember that you can use your own currency and don’t need to convert into dollars since the calculator is using percentages rather than absolute amounts).

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[1] DECC says UK PV costs around 12 pence per kilowatt hour at a real discount rate of 5.3%. I believe it uses figures for construction cost of large scale solar farms that are too high, explaining the difference between my numbers and the Department’s.

DECC cuts 2019 fossil fuel price projections by over 20%

Much of the UK government's case for backing renewables comes from the view that it will save money in the longer term as fossil fuels become more expensive. The arguments for increasing prices for gas, oil and coal have become frayed in recent months. Coal demand has stabilised as China begins its long awaited move to use smaller volumes of imported fuel and to switch to less polluting forms of power generation. The need for oil has been compressed by falling world economic growth and gas is being undermined by increased supplies. Governments tend to be reluctant to adjust price forecasts. It might undermine investment incentive. To react too soon to market trends can suggest insecure feelings about the quality of the forecasts.

DECC bought out new numbers today. Understandably, given the scale of the change, there was no accompanying text. Just a small Excel worksheet giving the forecasts for the three main fuels. A quick look at the table doesn't suggest much has changed. The numbers for 2035 are similar to the figures produced a year ago.

It's five years out that the real differences appear. Coal prices in 2019 are expected to be 23% lower than they were forecast this time last year. Gas and oil are both 21% down. Given that DECC issued 17 press releases today, the lack of media attention isn't surprising. Nevertheless, these are really substantial changes in the medium term outlook. And they add yet another dimension of uncertainty for investors in renewable technologies.

Quarry Battery, a new pumped storage plant for North Wales

Electricity is expensive to store in large quantities. The largest battery pack in North America has just opened this week at a cost of about $50m for 32 MWh of lithium-ion cells. That’s over $1,500 a kilowatt hour, several times the cost of batteries in electric cars. (I presume the reason for the high cost must be the sophisticated electronics necessary to tie the DC battery system to the local grid). The new plant is sited at one of the substations serving the huge Tehachapi wind farms in Southern California. 600,000 individual batteries wired together in a 500 square metre warehouse are helping to stabilise the output of the five thousand turbines in this important wind province.

The UK’s largest storage battery is being built in Leighton Buzzard, north of London, and is due for completion by the end of 2014. This 10 MWh plant is costing about £20m, partly paid by Ofgem and partly by the local operator UK Power Networks. The cost is over twice the price per kilowatt hour of the Californian battery.

Adding the gigawatts/gigawatt hours of short term storage that we need is going to cost huge sums. Batteries will get cheaper, of course, particularly if Tesla continues to invest in enormous factories in the US. But even at $250 per kilowatt hour of storage capacity – one estimate of the likely cost of Tesla batteries within a few years - a gigawatt hour will require expenditure of $250m. That buys the capacity to store about a minutes worth of UK peak electricity need.

One alternative to lithium-ion batteries is an expansion of pumped hydro. Two water reservoirs at different heights are linked and reversible turbines are installed. When electricity is cheap, water is pumped uphill to the top reservoir. At times of high power demand the water flows back downhill, turning the turbines and producing electricity. The UK has had a large pumped hydro plant at Dinorwig in Snowdonia for thirty years.

A new company, Quarry Battery, has just raised another round of seed money to push its own Snowdonia project forward. £3m will enable the company to carry out engineering costings and other preparatory tasks for its scheme to turn two disused deep slate quarries into the upper and lower reservoirs of a pumped hydro plant.

Quarry Battery has planning permission for its two sites at Glyn Rhonwy near Llanberis. It will eventually need to raise about £135m to construct the system and will gain a capacity of about 600 MWh of electricity storage. The maximum rate of generation is intended to be about 50 MW, or the equivalent of a 25 turbine wind farm working at full speed. This means that when full the top reservoir can discharge for 12 hours.

The figures for the projected cost show the relatively attractive position of the best pumped hydro sites compared to lithium ion batteries. At less than £250 per kilowatt hour of storage capacity, Quarry Battery will deliver power at about a quarter the capital cost of Tehachapi. Quarry Battery is keen to emphasise that the costs for the Glyn Rhonwy are low because the two quarries are already fully excavated but no longer used. Most other potential sites will be far more expensive to develop.

Does Glyn Rhonwy make good financial sense? Modelling the economics is difficult and I’m not sure what the answer is. We can get one idea by looking at the daily price differences in the UK electricity market  know that one simple trading tactic is to pump water uphill when power is cheap and letting it out when prices are better.

On Sunday and Monday 28/29^th September, the UK’s pumped storage stations, including Dinorwig, were using power from about 10.30 pm at night to about 7pm on Monday morning to pump water uphill. The rest of the time the water stored in the upper reservoir was being used to generate electricity by letting it flow downhill. If Glyn Rhonwy copied this, it will probably be buying electricity at around £30 per MWh and selling at about £60. The company claims the overall efficiency of the round-trip is around 80%.

So if Glyn Rhonwy did nothing else but fill and empty 600 MWh worth of water every day it would earn

600 MWh * (£60-(£30/0.8) * 365 days a year = c. £4.9m a year.

But other services are potentially much  more valuable. Holding Quarry Battery ready so that it can respond to major price variations may be a better strategy. German power prices now often move below zero at times of high wind or solar output and this pattern is likely to be repeated here.  Waiting opportunistically to be paid to fill up the upper reservoir may be a good tactic.

Or it may make sense to keep the top reservoir full to meet emergency power needs. One observer recently told me that as conventional coal and gas plants are turned on and off more frequently to complement varying wind (and increasingly solar) power, they are becoming less reliable and sometimes fail to start up properly. Quarry Battery could earn good money from standing ready at 8am as power demand rises waiting to respond to the very high prices that are available when the plants that were expected to provide power fail to do so.

The company is understandably coy about revealing its own detailed estimates of income but did say that it expected the sources of annual income in the following table. About half its revenue, it said, will come from the Balancing Mechanism and half from the other sources.

Type of income	Explanation
‘Balancing mechanism’	Income from responding to urgent requests to take power or to provide it in order to balance the Grid
Arbitrage income	Buying when power is cheap and selling it  when it is expensive
‘Triad’ payments	Payments from the local network operator (Scottish Power) for reducing  the peak power needs for North Wales from the National Grid
‘Capacity mechanism’	Payments for being ready to provide power at short notice. (Not to be confused with actually providing power).

As the UK grid becomes more stressed in the decades to come, Quarry Battery’s services will become increasingly valuable. The company projects that it will earn a financial payback in about 15 to 25 years. Glyn Rhonwy will last many decades, so the relatively slow returns will not necessarily impede its financing.

Dave Holmes, the Managing Director of the company, stresses that Quarry Battery looked across the entire country for the best locations for a pumped storage plant. Glyn Rhonwy was chosen because of the favourable conditions in the old slate-producing area.  ‘We are lucky on this site', he said, 'as the civil (engineering costs) are vastly reduced by the suitable geology, topography and existing cavernous disused quarries’.

The UK needs fifty or a hundred times as much as storage capacity as Glyn Rhonwy can provide. The worrying thing is that if this excellent site needs at least 15 years to pay its investors back very few other places will meet the conditions for commercial funding. And if Leighton Buzzard is any guide, lithium-ion batteries don’t offer much help either.

Time to start phasing out halogen bulbs

At 5.30 in the late afternoon the average UK house is using about 130 watts of electricity to power lights. In the winter months this number rises sharply, probably to around 200 watts. 27 million households are consuming over 5 gigawatts of electricity just for lighting in the early evening of the darkest month. The maximum need for electricity last year occurred just after 5pm on November 4^th when the major generators delivered almost 53 gigawatts. At the moment of highest electricity need, domestic lighting was therefore using about 10% of the country’s power production. The easiest way of cutting this is by banning halogen bulb sales and obliging consumers to replace them with equivalent LEDs.

As conventional power stations close, the gap between the total generating capacity in the UK and peak winter demand is narrowing sharply. A ban on halogen lamps will dramatically improve the UK chances of ‘keeping the lights on’ in winter by shaving the top of the daily winter peak of power demand.

Halogens are not quite as inefficient as the old fashioned incandescent bulb but they use far more electricity than LED equivalents. A 35 watt bulb can be replaced by 5 watt LED of almost identical light quality. Many kitchens and living areas contain several hundred watts of halogen bulbs and all this lighting could be replaced by equally effective LEDs.

Cutting domestic lighting demand is the simplest way of reducing the maximum need for electricity. And it would reduce consumer bills and make a substantial dent in the need for electricity users to pay (indirectly via the so-called ‘capacity mechanism’) for fossil fuel power plants to stand waiting just in case the other generators couldn’t supply enough power. In addition, the reduction of peak demand would cut the need for extremely expensive grid upgrades. There is real social value in moving the country off halogen bulbs as fast as possible.

Domestic electricity demand

DECC has been quietly investigating ‘Time of Use Tariffs’ for some time. The idea is that by making electricity more expensive between 4pm and 8pm it can cut the peak demand for electricity from households. Research work published over the summer showed how power needs varied for a sample of households over the course of the day. During the working day electricity consumption is about 500 watts. This rises sharply from about 4pm as people return home and turn on TVs, washing machines, heaters and other appliances. By 5pm, average household need is almost 750 watts. The chart below estimates average use across the year. In the winter, the early evenings would see a much larger increase in domestic electricity use.

Lighting, cooking and TV use are largely responsible for the rise in demand after 4pm, as the chart below shows. I don’t think we can force people to buy smaller or more efficient TVs or cook with gas, nor do I think that increasing prices sharply on winter evenings would work. But I do think we can rapidly accelerate the move to LEDs instead of halogen bulbs. It’s mildly illiberal but then so was banning lead in petrol or smoking in enclosed spaces.

National electricity use

The rise in domestic use of electricity is occurring while offices and factories are still using large amounts of power. So the overall peak in winter demand occurs in the late afternoon. After a period of almost flat national electricity consumption on last winter’s peak day of around 46 gigawatts, the additional household demand after 4pm added most of the 7 gigawatts rise to almost 53 gigawatts at about 5pm. The chart below shows the pattern of national demand on 4^th December 2013 when last winter’s peak usage occurred.

We really do want to reduce this peak. If we ever actually run out of power, it will be because of the sharp bump in demand for a few hours in the period between November and February. A large number of very clever people are spending a lot of hours working out how the UK is going to cope with unexpectedly high demand on particularly cold or still days when the wind turbines aren’t turning. All sorts of expensive technologies are being investigated and National Grid is offering increasingly large sums to persuade businesses to turn off their machines at times of highest demand.

Last year, the National Grid said it restrained peak winter evening demand by about 2 gigawatts on the coldest day. Let’s compare this with the possible impact of banning halogen bulbs. There are about 27 million homes in the UK. If the average home reduced its need for lighting by 100 watts on winter evenings, peak demand would be cut by 5%, or well over the 2 gigawatts that has been very expensively achieved by other means by the Grid. This 5% cut would be achieved by simply replacing an average of fewer than four 35 watts halogens with 5 watt LEDs. The quality of LEDs is now almost the same as halogens with ‘warm white’ bulbs delivering light of identical colour. 5 watt halogen replacements are on sale for around £10-12, meaning that the total cost of replacement will be less than £50 for the average household.

The savings in domestic bills alone will be £20 or more a year. Payback will be in two years or so and the ten year lives of LEDs will mean that far fewer replacement bulbs will be needed after that point. The National Grid will need to spend far less on keeping generating capacity mothballed in case it is needed. Carbon emissions will fall disproportionately because this standby plant will be the most polluting power stations in the country. Grid stability will be enhanced because some of the sharp ramp up in power production from 3.30pm onwards will be avoided. Air pollution on cold, still December days from burning coal will be avoided.

Over the last few years the EU has seemed to back away from a ban on sales of halogen. As LED quality improves, and costs fall this policy needs to be re-examined both in Brussels and London.

(This post was re-published in The Ecologist on October 7th 2014)

Synthetic biology makes sustainable biofuels possible

Scarred by the failure of first generation biofuels and by the increasingly bitter controversy over the burning of imported biomass at Drax and elsewhere, the UK has backed away from research into using biological materials for energy conversion or storage. This behaviour is mirrored across Europe. Outside the US, research into using natural materials has almost ceased as concerns over the diversion of land from food production and low carbon savings have overwhelmed the case for increased renewable energy.

This is a mistake, and possibly a tragic one. In sunny parts of the globe, solar PV may provide the cheapest source of electricity. But PV doesn’t provide either reliable 24 hour power or a source of liquid fuel for transport. Since electricity is typically provides less than 40% of total energy demand, the world needs to find inexpensive low carbon sources to meet other needs. Biological sources of energy are vital, not least because they can both store power (thus complementing intermittent sources such as PV) and can be converted to high density liquid fuels suitable for transport. A piece of wood is a semi-permanent store of solar energy and can be converted - albeit expensively at present - to a liquid hydrocarbon. Algae are similar. But work on even relatively simple technical problems such as improving the slowness of the breakdown of cellulose molecules in anaerobic digesters simply isn’t taking place in the UK.

By contrast, this note looks at Joule Unlimited, a seven year old US company that is making ethanol and other fuels from CO2, sunshine and water. Like many other US bioenergy companies, Joule has raised what to European eyes look like prodigious amounts of capital. But the $160m of investors’ money has bought what seems like exciting intellectual property. If Joule can do as it promises and produce transport fuels for less than $50 a barrel of oil equivalent, it can undermine the conventional supply of oil, a market currently worth about $8bn a day. 

Why has commercialising bioenergy proved so difficult? The problems are this. First, biology isn’t very good at turning photons into usable energy. Only in unusual circumstances can much more than 2% of the energy hitting a square metre be converted into chemical energy through photosynthesis. A modern solar farm manages about 5%. (The collection efficiency of an individual panel is of course higher than this but panels don’t occupy all of the land in a solar farm).

The second problem is that biological materials generally only contain a small percentage of usable molecules, reducing energy production by unit area still further. Ethanol made from US corn averages is the typical example, producing only about 2.8 kWh of liquid fuel a year per square metre of cropland, equivalent  to about a quarter a litre of petrol. A solar farm generates about 20 times as much energy. Third, most processes that convert the latent energy (I’m using this term in a non-technical sense) into usable fuels are extremely expensive and often inefficient.

These unattractive features stop European finance flowing into biological energy. Not so in the US. There hundreds of venture capital financed businesses search for a way of generating useful carbon-based molecules from metabolic processes at prices that will make fuels competitive with petrol. Many of these companies, such as Cool Planet, are looking for cheap ways of breaking down the lignin in trees or the cellulose in plants into useful liquids or gases. By contrast, Joule is using synthetic biology to engineer bacteria to express carbon-based molecules such as ethanol that can be used as transport fuels. Joule Unlimited’s ‘refinery’ produces ethanol, or other liquid stores of energy including a diesel substitute, directly from the bacteria, requiring no further processing.

If what Joule says is right, its bacteria can turn about 14% of the energy in sunlight into fuel, perhaps six or seven times as much as plants. Let’s about clear about this: if true, this is staggering, almost magical, achievement. It means that the amount of energy captured by the bacteria and converted to liquid fuel could be greater than PV panels with a similar areal footprint.

Ambitious claims from biofuels companies aren’t in short supply and I’m not qualified to assess the plausibility of Joule’s synthetic biology. Headline forecasts include a cost of production for ethanol of about $1.20 a US gallon, or less than 6 cents/about 3.5 pence/kWh.[1] This is less than the price of refined petrol (prior to taxes) of around 5 pence per kWh.

How does the Joule process work? A genetically engineered strain of cyanobacteria mixed with (non-potable) water is introduced into clear tubes running horizontally. A source of carbon dioxide is added, perhaps the waste gas from an industrial process. The CO2 is forced through the tubes, shaking the bacteria and ensuring even exposure to sunlight. Conventional bacteria use the energy from light to grow and reproduce but Joule’s bacteria employ it to produce a useful hydrocarbon instead. Joule’s cyanobacteria have been genetically engineered to produce specific fuels, such as simple ethanol. The ethanol ‘excreted’ from the bacteria is distilled from the circulating water, ready to be used in a car’s engine.

Joule talks of building cyanobacteria plants across 400 hectares or more to get maximum economies of scale. It claims that it can produce almost 100,000 litres of ethanol a year from each hectare of land, compared to less than 5,000 litres of ethanol refined from corn and grown on prime food production land, a twenty fold improvement.

As importantly, its refineries can be sited on otherwise unusable land and can use water that is too salty or otherwise impure for drinking or for irrigation. These advantages hugely add to the appeal of its technology. Joule can claim that its production plants do not reduce food production or add to water scarcity. In a recent announcement it also improved its claim to carbon neutrality by suggesting it would provide all the electricity it needs to run its plants by installing adjacent PV farms.

The Joule process needs a source of CO2. Many industrial processes, such as cement manufacture, may produce carbon dioxide in sufficient volumes to act as a feedstock. The problem may be that relatively few sources of large amounts of CO2 exist close to the non-agricultural land that it intends to use for fuel production. Nevertheless, the company claims to have identified at least 1,000 worldwide sites. To produce all the worlds’ oils from the Joule process, we’d need approximately 25 million hectares, the area of the whole United Kingdom but less than 2% of world’s area of farmed land.

This is a large acreage. But contrast this with what we would need for ethanol made from corn. At current productivity, biofuels would need over two thirds of the world’s total arable land area to replace conventional oil. This would reduce food production catastrophically, but if Joule achieves what it plans, all its refineries would be on land that is unusable for food production.

Europe’s aversion to using technology to make energy carriers from biological processes is entirely understandable. Devoting increasing acreages to growing corn or wheat for ethanol makes little financial or environmental sense. But this shouldn’t imply that we reject all forms of bioenergy as we appear to be doing at the moment. Joule’s pilot plant in New Mexico is one of the scores of US bioenergy experiments that will eventually create the world’s supplies of non-fossil liquid fuels. If Europe and other parts of the world continue with blanket opposition to all forms of biological power, we run the risk of being unable to decarbonise anywhere near as fast or as comprehensively as the world needs.

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[1] One US gallon is about 3.8 litres and a litre of ethanol contains about 5.9 kilowatt hours.

Greater wind speed variability adds to the problems of accommodating renewables on the grid

A wind entrepreneur wrote to me last week pointing to the increased variability of wind speeds over the UK. Until recently, he wrote, average monthly wind speeds only very infrequently departed more than 30% from the norm from the month. In the last year, however, he said that we’ve had two months of very high speeds (more than 30% greater than the monthly average) and one very low speed period (30% less than the average for the month). This matters; greater variability of output from wind turbines means more need for backup resources. Does the data match the entrepreneur’s instinct that variability is increasing? A quick look at average wind speeds since the beginning of 2001 argues it does. The average month now varies about 13% from the norm, up from 9.5% in 2001. This isn’t a large amount, and the data doesn’t suggest a very clear trend, but if variability is increasing it will add to future problems balancing UK electricity supply. And higher winter wind speeds will cause more destruction, as they did over many parts of the UK in February of this year.

Wind speeds

The yearly average wind speed across the UK is about 9 knots, or nautical miles per hour. It doesn’t vary greatly from year to year, and there’s certainly no sign of increasing speeds even though more extreme weather is often said to be a consequence of a hotter atmosphere. If anything, the last few years have been below the long-run average.

Over the course of the year, speeds vary fairly predictably from month to month. Winter is windier than summer. The differences don’t look huge with winter speeds typically about 10 knots and summer averaging 8. But because the energy in the wind is the cube of the speed, a typical winter’s day will generate twice as much electricity as a day in the summer.

From the point of view of the people running the electricity grid, really high speeds aren’t necessarily much use. Above a certain speed, turbines don’t actually generate any more power, and will switch themselves off in the strongest gales. Very high wind power output also tends to produce marked instability in the wholesale price of power. The high winds of early August produced negative power prices for several hours. We can see the enormous impact of varying wind speeds most easily in Germany where wholesale prices are now frequently pushed down close to zero.

Variability

DECC produces a monthly summary of average wind speeds.

I plotted the variabililty of the monthly wind speed from the beginning of 2001.  I did this by expressing individual months as a percentage of the monthly average (2002-2011). If a month had an average speed of 12 knots, and the month’s typical figure is 10 knots, then I wrote this down as a 20% variation. A speed of 8 knots would also be a 20% variation from the average. (Note: all variations are therefore expressed as positive numbers).

A simple trend line plotted across the 163 months of data suggests that the average variability at the beginning of the period was 9.5%. That is, the average month departed  - positively or negatively  -about 9.5% from the month’s norm. This figure rose to about 13% in 2014. The correlation isn’t strong. In fact it is lamentably weak and this result has no statistical validity whatsoever. Nevertheless, anyone looking at the numbers will notice that only a third of months varied by more than 10% from the monthly average in the first six years of the series but this number rose to over a half in the second six years. The strong winds of August 2014, which aren’t plotted yet, will have added to the increasing apparent variability.

A very quick analysis of rainfall data shows the same pattern. Monthly rainfall figures typically diverged about 27% from the ten year average for that month in 2001 but this rose to around 32% by 2013. Once again, the data really isn’t robust but the trend is nevertheless quite sharp.

Average wind speeds and rainfall volumes are typical climate data. The ‘noise’ in the figures is an order of magnitude greater than the ‘signal’. As a result, it will be many years before we can be statistically sure monthly average wind speeds are becoming less predictable.  This is one of the problems with other impacts of climate change. By the time statisticians have sufficient proof, the impacts will be blindingly obvious.

Pressure on incomes is not the reason for declining UK travel

The amount of travel carried out by people in the UK continues to fall. Whether measured by the number of trips or the distance travelled, people are moving around less. The latest National Travel Survey (NTS) says UK adults made fewer trips in 2013 than they did in 1973. After rising until the early years of the last decade, the average distance travelled has also fallen. The possible explanations are fairly obvious. The internet has reduced the need for High Street shopping. Working from home is now more common than a generation ago. We tend to meet friends in local restaurants or pubs rather than visiting far-flung relations.

One other potential reason is that people’s real incomes have been dropping in the last few years. And as driving tends to get more expensive, we might expect individuals to drive less if they can. These two arguments sound plausible explanations. But examination of some of the detailed numbers in the NTS shows that they are probably wrong. Surprisingly, the richest 20% have cut their travel miles more than the least well-off 20%. And this reduction is driven mostly by decreased car travel. It’s those who can most afford to drive who have reduced their mileage the most. They still drive far more than poorer people but the difference has dipped sharply. This is additional support for the view that energy use will not rise sharply if incomes rise.

One other striking finding: more young women aged 17-20 now have driving licences than young men in the same age range. This is the first time any age cohort of women has ever had a higher percentage of drivers than men.

The data

The NTS chart below shows the recent fall in travel clearly. The number of trips taken in 2013 was 12% lower than in 2002 (and is now 3% below the 1973 figure). Time taken travelling has also been quite stable. Distance travelled rose in the nineties - principally as more people acquired cars -  but has decreased 8% since 2002.

We see the phenomenon of ‘peak travel’ in most developed countries around the world. Many commentators find it counter-intuitive but I think it is easy to explain. Most travel is tedious and time-wasting. We might actively to choose to travel to a safari in a glamorous country but our day-to-day lives are dominated by commuting or driving to do the shopping. Given a free choice, we’d rather not take most trips that we currently are obliged to do.

If this idea is right, we’d expect the most well-off to reduce their travel the fastest. They are more likely to have the economic freedom to do cut the number of unattractive car and public transport journeys they take. And the evidence is that they are indeed reducing their trips and the distance they travel. The chart below shows that the top 20% (quintile) of the household income distribution have reduced the number of trips by 15% since 2002. The bottom quintile has only cut the number by 5%. As a result the least well off now take 80% as many trips as the richest quintile, compared to 71% in 2002.

Most of the reduction in trips across all five income groups comes from reduced car use. (Trips in cars are about 65% of all travel miles). The richest 20% take only 80% of the trips by car that they did in 2002. Less well-off groups saw a much smaller cut.

The same pattern can be seen when looking at distances travelled in cars. The top quintile cut the miles they drove as driver or passenger by 16% between 2002 and 2013, compared to 6% for the bottom 20% of the income distribution. The most well-off group travelled a typical 7,800 miles by car in 2013, down from 9,300 in 2002.  Richer people still drive a lot more miles than poorer households, largely because they are much more likely to have access to a car, but the differences are declining sharply.

The decline in real incomes in the UK over the last decade does not appear to be a good explanation for the fall in UK travel. The reason lies in technology, psychology or sociology, not simple economics.

Walking can be more carbon-intensive than driving

Another group of scientists has estimated the environmental burden of beef. The researchers suggest that meat from cows contributes 10 kilos of greenhouse gases (expressed as CO2 equivalents) for every 1000 calories of food. Put in a less scientific way, a Big Mac® a day will represent more than a tonne of global warming emissions a year, using up your entire carbon budget by the middle years of the century.

Seven years ago I wrote an article (covered in the New York Times blog here) that suggested that walking to the shops and then eating beef to replace the calories used would generate more greenhouse gases than driving a car to make the purchases. This little piece of ad hoc research was cruelly dismissed as utter nonsense by all right-thinking people. Well, if you believe the figures published today, I’ve finally got my revenge. Beef turns out to be twice as carbon intensive as driving.

The policy implications are, of course, completely non-existent. Most of us don’t exercise enough, and if we do walk to the shops we usually don’t need to replace the calories. In fact, we are probably walking because we want to lose weight. Nevertheless, it still seems interesting to me that a (quite inefficient) fossil fuel engine moving the best part of a tonne of metal is less greenhouse gas intensive than the docile bovines grazing in the field next to my office.

This is the form of the calculation. (A longer and more complicated version can be found in my book How to Live a Low Carbon Life).

Walking

1)      Assume that the individual is in calorie balance. That is, she doesn’t want to lose weight and therefore any calories used in exercise will be replaced by new food calories.

2)      She walks to the shops. The distance is 1.5 miles and she walks at 3 miles per hour. Therefore the round trip takes an hour. If she’d been sitting watching TV, she’d use about 60 calories an hour (approximately the ‘basal metabolic rate’ for a 60 kg woman).

3)      A person of this weight walking at 3 miles per hour uses about 220 calories in an hour’s walk.

4)      So the incremental effect of walking to the shops and back is about 160 calories.

5)      The global warming footprint of beef is 10 kilos per thousand calories, says the new paper. So 160 calories of beef represents 1.6 kilos of CO2 equivalent emissions.

To walk to the shops 1.5 miles away, come back, and replace the calories lost with beef would add 1.6 kilos to global warming emissions.

Driving

1)      A reasonably new mid-sized car generates about 130 grams of emissions per kilometre or roughly 200 grams per mile.

2)      To drive to the shops and back is 3 miles. So the CO2 emissions would be about 600 grams.

3)      Add a little to reflect the lower engine efficiency of driving a short  distance and increase the figure by 33%

To drive to the shops would add about 800 grams to global warming emissions, half the figure from walking and then replacing calories with beef.

Beef is about 5 times as bad as pork or dairy products. So my assertion only works for meat from cows. Nevertheless after all the scorn of seven years ago, I’m really pleased to have some academic justification for my piece of research.

And I should really stop crowing about  being a vegetarian - dairy products may be much better than beef but they're actually worse than poultry per calorie.

The CMA energy inquiry: how to make it better than all the other endless government investigations

Last month the headlines excitedly stated that Ofgem had asked the Competition and Markets Authority (CMA) to look at the energy market. Actually, this was a huge exaggeration. Ofgem’s request was for the CMA to examine about 5% of the business: retailing gas and electricity to domestic consumers and very small companies. Sales to large organisations are excluded, accounting for over half the market, as are the upstream activities of energy generation (50% of consumer bills), the transport of energy over wires and pipes (about 20% of the domestic bill) and taxation and social and environmental levies (15%). Market participants nevertheless genuinely seem to hope that the CMA investigation will change the way the whole energy market works, freeing up investment in generation and improvements in networks as well as stabilising prices. This note looks at how participants, particularly including the new generation of smaller retailers, might choose to respond to the investigation if they want to influence its outcome. (Full disclosure: I was member of the Competition Commission, a predecessor of the CMA, for seven years and a tribunal member on the specialist panel at the Commission dealing with the – very rare – appeals against Ofgem decisions).

The central point I want to make is that smaller energy companies and consumer bodies should understand that a market investigation by the CMA is a mammoth, many-headed process. The CMA is hugely thorough and data-driven and the demands it places on companies are often almost overwhelming. Inquiries can last for up to 24 months, not the 18 months specified in recent press releases.

To be effective, and to get arguments taken seriously by the CMA, participants need to devote resources to the process, almost certainly in a joint undertaking with groups of similar views. Occasional letters to the CMA will not work when the Big Six will be spending tens of millions of pounds on lawyers.

The scope of the inquiry

Government, regulators and the big energy companies have cooperated to launch this inquiry in order to ‘clear the air’ on the issue of domestic energy prices. This is a telling phrase, used time and again by Ofgem in recent months. ‘Clearing the air’ doesn’t mean instituting radical reform or making major changes. It implies a close examination of an industry but one that is expected to conclude that nothing much is wrong. In this respect, a CMA inquiry is all too similar to the increasing number of quasi-judicial investigations of problems that are actively embarrassing to government.

But sometimes the CMA does surprise us. It is full of genuinely independent people, but generally not with a radical turn of mind. It does occasionally propose major changes in market structures, such as the breakup of the London airport monopoly, but mostly its recommendations are marginal and not particularly effective. These means that those energy industry participants and consumer bodies who want real change will need to make their case forcefully, insistently and in a quantified and rigorous form.

What the CMA does

The CMA is an amalgamation of the Office of Fair Trading and the Competition Commission. Until a few months ago Ofgem would have gone directly to the Competition Commission. Now the CMA passed Ofgem’s request directly to the part of the Authority that conducts investigations of this sort. The people on the energy market inquiry are all old Competition Commission hands and it’s a fair guess that they’ll work as they would have done at the predecessor body.

The process is as follows.

a)      Get the request from a regulator, such as Ofgem, to carry out a market investigation

b)      Appoint a team of senior people to act as the panel of judges on the investigation and allocate the staff members to actually do the investigative work and produce drafts of the report. (This particular case has been loaded with very senior and experienced panel members).

c)       Request the main participants in the industry, and consumer bodies that might represent the public interest, to say what they think are the main problems that the CMA should look at.

d)      Take a few weeks to produce what is known as an ‘issues statement’. This public document lays out the major issues which the CMA thinks it is investigating and possible hypotheses about these questions. It will specify some aspects of the work that it will carry out to assess whether perceived problems are real and what actions it might take to remedy defects in the operation of the market. The issues statement develops one or more ‘theories of harm’ that suggest how uncompetitive features of an industry may cause detriment to customers.

e)      Market participants respond to this letter and attend hearings at the CMA at which the panel quizzes them on their opinions and the data that backs them up.

f)       The Authority will publish a series of working papers that collate the data it has generated on the main issues it believes need to be addressed.

g)      Participants can, and should, respond to the working papers.

h)      We’re now ten months or so into the inquiry and then, after a period of intense work, the CMA will produce its ‘provisional’ findings about this time next year. Companies and consumer bodies will respond. If the experience from other investigations at the Competition Commission is any guide, any conclusions that the major firms in the energy industry do not like will be given fierce and determined rebuttals. A lot will be at stake.

i)        The initial deadline is to produce the final report by Christmas 2015, but many market studies overrun and have to ask for a six month extension. The number and complexity of the interchanges between the biggest firms in the marketplace and the Authority tends to make a delay inevitable. I would be amazed if the same thing didn’t happen with the energy market investigation.

The important thing to note is that market investigations like this one have substantial inertia. Once set on a course, it is difficult for smaller participants to deflect the work into areas that seem to be important but ignored. There’s strong reasons to get arguments and data in early, backed up with as much supporting evidence as can be gathered over the next few months. This means making a lot of noise before the first ‘issues statement’ comes out.

The other things that companies in this market need to remember

a)      The process that the CMA will go through will be almost unbelievably demanding on the companies involved in the study. Believe me, this is no exaggeration. The requests from the CMA for data, analysis and opinion will numerous, wide-ranging and overwhelming. Even the very biggest companies fade under the pressure of a market inquiry such as this. I remember people from Tesco complaining of utter exhaustion during the Competition Commission inquiry into food retailing. Small companies simply tend to back away and try to avoid getting dragged in.

What this means for smaller participants: Either decide not to participate or combine with others to actively drive a shared view of what the CMA should do.

b)      Despite what it might publicly say, the CMA tends to prefer to deal with intermediaries, rather than directly with participants. Intermediaries, such as law firms and economic advisory boutiques, know the way the Authority operates. They understand the formats that the CMA uses and the underlying meaning of its requests. The CMA trusts intermediaries to present data and such things as market research results in a consistent and rigorous form. The CMA’s preference for working through experienced third parties enables law firms, in particular, to play central roles in the whole market investigation process.

What this means for smaller participants: If you do want to actively engage with the CMA inquiry – something which needs to be very, very carefully considered before a decision is made – it makes good sense to use an intermediary with at least some experience of CMA processes. Central London law firms will expect fees of millions. It may make sense to look elsewhere to find people to develop, organise and present your case and, as importantly, to act as the point of contact for the CMA and its voracious, unending requests for data.

c)       The CMA is entirely concerned with examining the features of markets that may restrict or distort competition. This is much tighter focus than most people assume.

What this means for smaller participants: There are probably many features of Big Six behaviour you find frustrating and/or impossible to deal with. But in this inquiry, focus entirely on the features of the marketplace, such as the lack of wholesale price transparency and illiquid market, that restrict genuine competition.

The CMA’s character

All institutions have an ideology, or at least a shared set of reasonably coherent views. Regulators are no exception.

In the case of the CMA the core beliefs are

a)      Businesses, particularly big businesses, are good for society

b)      Competition for consumer’s expenditure is almost always the best way of getting lower prices and more innovation from companies. Regulation, or any other form of intervention, is very much a second best.

c)       Enforcing a structural change to the marketplace, such as obliging full legal separation for the generating, network operation and retailing arms of the Big Six in this particular inquiry, is a radical move that will usually be a disproportionate response to competition problems.

d)      Smaller participants may also benefit from understanding that competition authorities tend to see major advantages to consumers from the vertical integration of suppliers. Any attempt to argue to the CMA that the generating and retailing arms of energy companies should be split faces a strong ideological headwind.

e)      But, on the other hand, the CMA will think that where possible, prices and volumes traded in markets should be transparent. So in the case of the energy market, I think it is much more likely that the CMA will require a rule that all electricity that is generated will have to be traded through a public exchange, rather than instituting a requirement that the Big Six separate their generation and retailing arms. (In their submissions to the Ofgem consultations, the Big Six stressed that they engage in large amounts of trading already. The smaller players strongly complained that prices and volumes were largely invisible to them and that the energy market is still illiquid, particular for trades a long time in the future).

f)       Very importantly, the CMA will have no working presumption that the energy market cannot work effectively with just six big suppliers. Many important marketplaces, such as mobile phones, work reasonably well with four or even fewer participants. It will be a waste of time for smaller participants to argue that the largest companies need to be broken up to achieve greater competition.

g)      Some of the submissions to the Ofgem consultations prior to the reference to the CMA made the point that many previous interventions by the regulator in the energy market had tended to result in lower levels of competition. Implicitly, these submissions were of the view that if there is a competition problem it is a result of well-meaning but counter-productive rule-making by Ofgem.

The most frequently quoted example was the regulator’s ban on doorstep selling. According to the Big Six, the effect of this had been to substantially reduce the total amount of customer switching and therefore cut the pressure on retailers to remain strongly competitive. Another example was Ofgem’s resistance to the big retailers offering lower rates outside their old incumbency regions. Once again, this had muted the competitive intensity of the whole market, claimed the major retailers. A third case was the long-standing Ofgem drive towards standardisation of the form of electricity tariffs into fixed charge and variable elements.

From my experience, these arguments will get a very sympathetic hearing from the CMA because of its deeply held view that many, if not most, market interventions by regulators will have the effect of flattening tactical approaches by different participants. Expect the Authority to suggest that Ofgem lightens its touch on regulation of many aspects of energy retailing.

h)      There will be no assumption at the CMA that energy markets need to have large numbers of small competitors to be truly competitive. The CMA will note that all the large retailers today are old incumbent gas or electricity suppliers and that no new company has arisen to really challenge this dominance. But it won’t try to sponsor smaller competitors in any way or give them an advantage.

To get a low-carbon economy, we need properly functioning and innovative energy marketplaces. It seems to me that there are problems across the whole spectrum from investment in new generation to the hugely important installation of smart meters in homes. The CMA has been given a small fraction of these problems to look at. It may, or may not, be worth consumer bodies and small suppliers actively participating in the inquiry. But if they do engage, they must focus on two or three well-defined areas rather than trying to keep up with the entire process.

Tresoc - a new type of community renewables company

Totnes Renewable Energy Society (Tresoc) in Devon is trying to raise up to £1.5m to fund a portfolio of six PV and hydro projects near the town.  What makes Tresoc unusual – and perhaps unique in the UK – is that is both financing current projects and developing a wide variety of new ventures, including an innovative waste-to-energy plant and biomass scheme for future investment.

This is an ambitious scheme to create a genuinely local energy company that might eventually hope to directly supply its electricity and heat to investors, rather than selling to a big power company. One day, this may make it an exciting form of new energy enterprise. But therein lies in the problem. Tresoc is asking for investors to back what is, in effect, a renewables development company.

This isn’t a standard community financing  in which a Community Benefit Society offers 5% annual return on the basis of a virtually risk free photovoltaic installation in local fields. It is more complex venture that can only offer lower returns on the hydro and solar assets it has permits for but which hopes to be able to generate better income on the larger projects it has in the early stages of development.

If Tresoc only raises £0.5m of its £1.5m target it only intends to pay a return of 1.25%, rising to 4% if get the full amount. These aren't high figures for community energy - Abundance, for example, offers more on its already constructed assets  - and Tresoc investors may partly be putting their money in with a hope that the company will be able to successfully develop new ideas. (I should stress that investors should only invest on the basis of the schemes specified in the prospectus and the directors of the company are making no commitment to developing any of the projects they have on the drawing board.)

In other words, this looks much more like a standard risky new business than a typical community energy funding raising. As might therefore be expected, investor money is coming in relatively slowly. The company’s effort to raise the cash it needs is further impeded by the overhang of antagonism between local residents over Tresoc’s failed attempt to get planning permission for two commercial wind turbines a couple of years ago.

Tresoc is a business that should be funded. Some of its PV and hydro projects are already operational, with records of output and costs. Totnes is not far from the edge of Dartmoor, with good access to the steep streams and large flows off the moor so there will be no shortage of new hydro schemes with good year-round supplies of water.  The woodland in the local area is mostly completely unexploited for any purpose. Biomass heating or electricity production from waste wood is likely to be as economic here as it is anywhere else in England. Solar radiation is excellent for the UK. Able people are giving huge amounts of voluntary time to make Tresoc work and to build a diverse portfolio of low-carbon energy producers.

In the longer run, Tresoc may enable Totnes to become one of the first towns to operate its own independent generation and energy retailing company supplying local homes and businesses with ‘local’ electricity under the ‘Licence Lite’ scheme. [1] ‘Licence Lite’ rules were established by Ofgem to allow small generators to sell directly to a defined group of customers, such as the investors in a renewables company. Progress has been slow and only the Greater London Authority has used the provisions to generate power in one location and sell it directly to another GLA building in a different part of the capital without going through an intermediary. But, at least  in theory, Licence Lite allows a community renewables company to be the retailer of electricity to a local consumers of power.

Tresoc has the enormous advantage, were it ever to exploit the Licence Lite rules, of having the potential diversity in its portfolio to allow it to match the profile of consumer demand (high in the morning, high in the evening, low at other times) with the output from its generating plant. Solar PV is, of course, likely to produce most power around midday but Tresoc’s other assets, such as future waste-to-energy plants, can be cranked up and down to match customer demand patterns. This freedom to follow the electricity demand of customers is completely critical for a successful Licence Lite venture. Otherwise the generating company will have to buy and sell at unpredictable times, and perhaps at very short notice, in a possibly highly illiquid electricity market.

Tresoc will probably need to add other flexible low-carbon sources, such as anaerobic digestion assets, to the range of generating plant available to it. However Totnes’ wide range of agricultural enterprises make this perfectly possible. And it has the powerful benefit of able directors operating within a local community that is both knowledgeable about renewable energy and – as the first Transition Town – very committed to the move away from fossil fuels.

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[1] This is my statement of one of the opportunities open to Tresoc in the future. No details of such a scheme are in the fund-raising prospectus and I haven’t even talked about it with the directors of the company. So in no sense is it part of the current Tresoc share offering.

30% improvement in resource use efficiency since 2000

In the last post I looked at the evidence of the decreasing use of resources in the UK. The Environmental Accounts have just provided a new measure of material use, called Raw Material Consumption, which gives us a better estimate than previous series. The new index includes a figure for the resources used elsewhere in the world to make things that are then imported into the UK. If we divide Raw Material Consumption, expressed in millions of tonnes, by GDP we get a figure for the weight of physical resources the UK uses to generate a £ sterling of income. The figure has fallen from about 513 grams in 2000 to around 358 in 2012. The average reduction is just under 13 grams a year for each £ sterling of GDP. This is equivalent to a 30% reduction since 2000. (All these figures exclude fossil fuel consumption, which isn’t included in the statistics. However we do know that energy consumption is also falling fairly consistently each year).

Grams per £ sterling of GDP is an important measure and should be targeted. As we move haltingly to an economy that productively recycles everything for ever, we will reduce the volumes of materials harvested or mined. And moving to low carbon sources of energy, whether PV or nuclear also reduces the weight of resources we need to extract, as well as reducing CO2 emissions.

'Peak Stuff' again

In late 2011 I wrote a paper which suggested that the UK’s consumption of material goods had peaked. I pointed to the evidence from a variety of different statistical sources that the weight of the things we use to sustain a modern economy was tending to fall. This included products such as fertiliser, water, steel, concrete and food. I saw this as very good news; increasing prosperity would not necessarily imply increasing use of natural resources. Recent data support the 'Peak Stuff' hypothesis and suggest that economic growth in advanced countries doesn’t increase the use of material extracted from the soil or earth’s crust. I think the ‘dematerialisation’ idea has real strength to it. At the time many people questioned the conclusions of the paper. They said that I hadn’t properly accounted for the UK’s imports of processed goods from overseas. This would depress the apparent UK use of materials. And the critics commented that I had chosen an unrepresentative sample of fifteen or so indices to make my point.

Others worried that the implication that economic growth might possibly be good for the environment was dangerous. George Monbiot wrote in the Guardian

 ‘I won’t deny it: my first reaction on seeing the results of Chris Goodall’s research into our use of resources was “I don’t want this to be true.” Obviously, I’d like to see our environmental impacts reduced, as swiftly and painlessly as possible. But if his hypothesis is right – that economic growth has been accompanied by a reduction in our consumption of stuff and might even have driven it – this would put me in the wrong. I’m among those who have argued that a decline in our use of resources requires less economic activity, or at least a transition to a steady-state economy.’

Three years on, how is the conclusion that advanced economies are on the brink of dematerialisation faring? Is Monbiot right or wrong? Broadly speaking, I think it is fair to say that new data strongly supports the hypothesis that material use is tending to fall as energy use stabilises or falls and material goods get lighter and (usually) more durable. In this note, I’ll focus on today’s Environmental Accounts for 2012 which show a new measure called Raw Material Consumption that tries to include the full resource use of goods imported into the UK.

The background

Advanced human societies requires just three things: biomass, minerals from the earth’s crust, and energy, usually from fossil fuels. If we can measure the weight of these things and compare it over time, we have a measure of the sustainability of the global economy. A population that is cutting its use of materials is better equipped to be durable.

History strongly suggests that the early stages of economic growth see very rapid increases in the use of natural materials. Iron ore and stone is extracted to make steel and concrete. Fossil fuel is mined to provide energy for manufacturing, transport and for comfort in the form of heat, light and cooling. But the ‘Peak Stuff’ hypothesis suggests that there is a limit. We now, for example, generally consume much less food per person than we did. Machines do almost all our labour and we need far less energy from our meals. (The UK eats far fewer calories per person than in the 1950s). And once we have built our roads and buildings, our need to for steel tends to fall. Stronger materials and rapid digitalisation of our societies are cutting the weight of things we buy. Downloads replace DVDs. Plastic replaces metal.

The Environmental Accounts for 2012

The UK tries to measure its resource use. It can compute with reasonable accuracy how much is extracted or harvested across the country. And it can estimate the weight of imports and exports. The Office for National Statistics (ONS) has provided a figure for what is called Domestic Material Consumption for over a decade. This number adds the weight of imports and deducts the weight of exports from the national extraction and harvesting of fuels, biomass and minerals. (The UK doesn’t really mine metal ores).

This is the pattern it has found.

The decline in material use had continued, even as the UK emerged from recession after 2010. The UK uses about 600 million tonnes of materials per year, or between 9 and 10 tonnes per person, a very low figure by European standards. This includes fossil fuels.

What is more difficult is working out the weight of resources that went into imports. Take a tonne of steel for example. To make the metal, a much larger volume of ore needs to be mined and a large amount of coal is needed to melt the iron out of that ore. Fossil fuels are also needed to transport the finished goods to the port and then on the ship to the UK.

This year ONS has published what it calls an experimental statistical series, estimating how much material weight goes into the finished imports (such as meat, iPhones and steel girders). Raw Material Consumption excludes fossil fuels so the numbers are actually lower than Domestic Material Consumption. But the trend is the same.

Raw Material Consumption peaked in the early part of the last decade at over 600 million tonnes and then fell, including a very sharp fall of 100 million tonnes between 2007 and 2009. The beginnings of economic recovery saw a small increase to 2011 but 2012 saw a slight fall, even as growth began to pick up.

Energy use went up slightly in 2012, largely as a result of a cold winter. However, the long run trend in consumption of fossil fuels is also strongly downward.

Low carbon heat programme ropes in just 79 households in the first two months

Heating buildings is the single most important use of fossil fuels in high latitude countries such as the UK. In the average British home gas use is almost five times as much as electricity consumption. The Green Deal is a part of the approach to cutting heating demands but ‘the Renewable Heat Incentive (RHI) is the main scheme of the heat strategy’, according to DECC. The RHI for domestic homes was finally launched at the beginning of April after a gestation period of about five years. According to the most recent data, just 79 homes signed up for the RHI in the first two months. Although the RHI subsidy scheme offers some tempting payments, the signs so far are that this scheme will fail in the same way as the Green Deal has done.

The domestic RHI makes a guaranteed payment per kilowatt hour of ‘renewable’ heat produced by air and ground source heat pumps, rooftop solar hot water and wood burning boilers. These subsidies persist for the first seven years after installation. Regular readers of the comments on this blog will know that many air source heat pump installations have turned out to be horrible disasters for homeowners. Except in unusually well insulated houses, the RHI provides nowhere near enough subsidy to cover the increased cost of the electricity needed to operate the pump.

Solar hot water systems are paid over 19 pence per kilowatt hour for each unit of heat that is produced. This might produce a subsidy payment of £400 a year for homeowners spending perhaps £4,000 to put solar collectors on their roofs. Unfortunately, those of us foolish enough to have installed solar collectors ten years ago know that the cost of the annual maintenance for the system tend to outweigh the likely savings.

More pertinently, it is almost impossible for anybody reading the DECC manuals on the RHI to work out exactly how much their solar hot water payments will be. The subsidy is geared to the size of the house and the number of the occupants but I have to confess that I am completely unclear as to how to calculate the amount of heat that is deemed to be produced, and therefore the subsidy payments that are due each year. I cannot  even find the document that specifies the formula to be used. (Can anybody help??)

One solar hot water installer told me recently that he had decided to give up installing systems. It isn’t worthwhile to pay the cost of maintaining his authorisation.

This leaves biomass boilers. In certain circumstances, such as in a new house, the finances of biomass look really attractive. The payments for a medium sized home with a heating need of 15,000 kilowatt hours (about the UK average) will be almost £2,000 a year for seven years. This is certainly enough to cover the cost of the system in most circumstances. In addition, if the home is off the gas grid it will be replacing oil or LPG (perhaps 6p per kWh) with wood pellets costing about 5p per kWh. So there is actually a saving on fuel bills as well as the subsidy.

But whether the owner of an existing home heated by LPG or oil would think it worthwhile to put a pellet or wood chip boiler in the house to replace the existing apparatus is much less certain. The dislocation is likely to be very painful.

So perhaps we shouldn’t be surprised that even after the extraordinary amount of work that DECC put into designing the domestic RHI scheme it looks like failing to capture the enthusiasm of installers or homeowners. The number of new systems is deeply depressing.

Tariff band	Applications		Accreditations
	Number	% of total	Number	% of total
Air source heat pump	59	29%	19	24%
Ground source heat pump	17	8%	7	9%
Biomass	87	43%	38	48%
Solar thermal	40	20%	15	19%
Total	203		79

In the first two months of the scheme – which had been heavily pushed for almost a year in advance – the total number of RHI installations was 79 spread across the four different technologies. This equates to about 500 homes a year.

Of course things may improve as the scheme gets better known. But I‘ve seen very little sign of any increase in interest. If the RHI is indeed ‘main scheme in the heat strategy’, we’re not going  to see any observable impact on carbon emissions  from any government policy. The Green Deal continues to underperform with a total of just 1,372 plans signed over the first 16 months. In addition, the retreat from the Energy Company Obligation means that free insulation rates have fallen sharply in the last few months, with the April installation rate (about 33,000 individual measures) lower than any other month since June 2013. It’s difficult not to conclude that policymakers have completely lost interest in decarbonising domestic heat.