Green spending in the economic downturn

Firstly, a big thanks to those of you who responded to last call for discussion on low carbon heat and my house. Thanks to NERN members I've learned the importance of sealing skirting boards and also have a bundle of literature comparing low carbon heat technologies.

Perhaps it's a sign of the economy woes, but I'm struggling to spot any job and funding opportunities at the moment - if you have heard of anything please do let me know.

This week I've been inspired by a piece in the Guardian – "Great clean up – can economic rescue plan also save the planet " – in which the green claims of the global economy recovery plans are scrutinised. Thanks to whoever pinned that up on our notice board!

So how much do experts think we should be spending on green measures? Sir Nick Stern thinks that green measures should comprise 20% of these plans. The UN has suggests an annual target of 1% GDP.

How do the various economic recovery plans match these ambitions? I should place an important caveat here that I'm going from a HSBC table in the Guardian – I just thought I'd make it clear that these figures might not stand up to scrutiny (particularly since the article itself seems to contradict them).

Unsurprisingly, it is a rather mixed picture. South Korea is leading the way, devoting nearly 70% (3% of its GDP) to green measures in their $36bn package. China is next, pledging one third of their mighty $581bn package (I estimate 4.6% GDP) to green measures, with a focus on energy efficient (which as we see is a good thing). You'll note I haven't mentioned the UK yet – I'm getting there. What about the USA? Well, of the whopping $825bn recovery package, around 16% is pledged to green measures (which by my rough calculations is around 0.9% US GDP) – so quite reasonable. In Europe, out of an overall recovery package (announced so far) of $253bn, 14% appears to be attributed to green plans. Germany is the leading light here, pledging 19% of their package to green investments (although representing just 0.3% of their GDP). In Europe both Spain (10%) and France (8%) have pledged a greater proportion of their recovery packages to green measures compared to the UK (7%). Of the total UK recovery package, at $29.9bn (about the same in euro and dollars at current exchange rate – only joking), representing about 1% of UK GDP, only $2.1bn appears to be earmarked for green things (0.07% GDP). Bottom of the pile are Japan (2%), Italy (1%) and India (0%).

So overall the packages represent a 13% spend on green measures. Although this is lower than Sir Nick Stern's proposal for 20%, it strikes me as better result than it could have been had everyone retreated into an "economy first, green second" shell. Assuming of course I'm no being greenwashed.

For those who are interested, the Grantham Research Institute on Climate Change at LSE have released a policy briefing "An outline of the case for a 'green' stimulus ", which ranks green measures on economic factors and climate change impact. The central argument is that a 'green' fiscal stimulus "can provide an effective boost to the economy, increasing labour demand in a timely fashion, while at the same time building the foundations for sound, sustainable and strong growth in the future". The paper then goes on to score various measures against both economic and climate change criteria and produces a league table of measures. Perhaps unsurprisingly, those that score most highly are all related to energy efficiency. Some may raise an eyebrow at the fact that carbon capture and storage and advanced battery development prop up the bottom of the table. The reason is that neither offers an immediate shot in the arm for the economy; however, both are important medium- and long-term priorities so should be supported by appropriate measures.

DECC Heat and Energy Saving Strategy

Not a huge amount of interesting news this week, so I've decided to share with you some selected highlights of the DECC Heat and Energy Saving Strategy that is now open for consultation. Or to put it another way, I've had to read the whole thing and therefore I'm going to inflict it upon you.

My first impressions are that it is really quite ambitious. Its overarching aim is for emissions from all buildings to be approaching zero by 2050 (I had an immediate mental image of a motorist claiming to be approaching zero speed after removing their foot from the accelerator at 100mph – I'm too cynical!). In practice the aim is that overall emissions from buildings will be reduced by more than 80% in 2050. Greater emission cuts [than the UK 80% target] from buildings are required in order to take up the slack from other sectors that will find it tougher going (for example transport). The top level policy measures proposed are as follows:

• All lofts and cavities will be insulated where practical by 2015. This represents a significant acceleration of the current strategy. The current CERT scheme may be superseded by a new Community Energy Savings Programme (dependent on how a trial scheme performs).
• Numerous accredited home energy advisors and plentiful information on energy saving and low carbon technologies will be available to homeowners and landlords to help them save energy and money.
• Innovative financial support packages will be developed in order to encourage people to install more expensive energy saving (for example solid wall insulation) and low carbon energy generation technologies (for example heat pumps or solar thermal). This is an area that fascinates me and I'll come back to it below.
• An examination of Building Regulations to see whether energy saving measures can be installed alongside other necessary building work. A new voluntary code of practice relating to energy efficiency and energy saving will be discussed with the building trade.
• District heating and combined heat and power (CHP) will be re-examined and mechanisms to encourage uptake will be scrutinised.

My interest was piqued by the discussion of financial mechanisms to encourage the installation of low carbon technologies in buildings. The premise that installing such technologies will save energy and make homes more attractive for sale seems sound to me. The fact that the up-front costs puts people off is also true. So what is the Government proposing here?

One option is for Government to provide a bigger subsidy for the technologies – perhaps 50% or more (or less) of installation costs.

Option B, crudely put, is that you will take out a loan to pay the up-front costs of technology installation (for example solar thermal can cost £2-3K to install) and you will then pay back the loan plus interest, over an extended period of time (think mortgage lengths), out of the money you save. The key thing is that the loan repayments are less than the total money that you save, so, in other words, you will be paying less on energy monthly after you install the technology. So what happens if you chose to move house? On average we move house about every 9 years in the UK (I am way above average!) – what happens to the shiny new technology and of course your loan? So far it's not quite clear, and in fact the Government is looking for innovative ideas (ask the banks how they are feeling about innovative financial ideas right now). One possibility is the loan will be passed onto the new owners through an as yet undefined mechanism. Who will be giving the loan? Energy companies and mortgage companies are possibilities as both are used to long term customer relationships. What happens if you want to switch to a better deal for energy or mortgage? This is yet to be worked through, hence why they are consulting.

Option C is to apply an Energy Services Company (ESCo) model. Here companies would install the low carbon energy generation equipment, at no up-front cost, and charge consumers for the use of the services over a contract period. The ESCo would also maintain the equipment. How does the customer save money and the ESCo make a profit? The ESCo would receive any subsidies such as the feed-in tariff (or ROCs) and Renewable Heat Incentive and use these to offset the charge paid by the householder. If the householder moves then in theory the contract could be passed to the new home inhabitant. What if they don't want the service? I guess some technologies (but all) could simply be removed and installed elsewhere.

I've just used the EST tool to self-assess my house (a 1985 mid-terraced house) for its energy efficiency and achieved a B rating. I've pretty much exhausted the energy efficiency measures that I can easily install (double glazing, cavity wall insulation, condensing boiler, thermostatic control and low energy bulbs) and my energy usage has been significantly reduced. I'm now seriously considering adding a low carbon heat technology (probably solar thermal or air source heat pump) to my house; this is why, in addition to the day job, that I'm interested in the incentives and mechanisms proposed. Of the three options I'm probably more attracted by A and C. Option C is would potentially be the least effort on my behalf but I have sneaking suspicion that I'd be able to save more money with A (and I'm a very stingy Northerner). I'd love to hear your thoughts on the mechanisms (especially if I've totally misinterpreted them) and also the technology choices. I know the NERN newsletter isn't supposed to be a "help Jeff make decisions" forum but if I don't get to abuse my position now and again then I feel I would be missing out.

I promise to write about energy news next week.

Happy eco-valentine's day

Its official, energy consultation season 2009 is now open. I'm aware of three that are currently circulating the policy world, the DECC Heat and Energy Saving Strategy (HES), the Ofgem one on introduction of charging arrangements associated with Offshore Transmission Networks and the Energy and Climate Change Committee inquiry into the future of Britain's electricity networks. I'm almost certain that I've missed one or two as well. Is suspect UKERC will be responding the DECC heat and energy saving consultation.

From a personal perspective, as someone interested in fitting low carbon heat technologies at home, I was pleased to see in the DECC consultation mention of loans to cover the system costs (probably). I was slightly disappointed to when I realised that it's unlikely that any such system will be in place before 2011 though. On the home front, the Scottish Government's budget was passed after some last minute adjustments. Now included is a £30M commitment to energy efficiency in Scottish homes.

In European policy, MEPs have backed a proposal for an 80% cut in EU emissions by 2050. The proposal is outlined in the Laperouze report on the Second Strategic Energy Review. Other measures suggested include, making the 20% 2020 energy saving target a legally binding one and increasing this to 35% in 2050, and generating 60% of EU energy from renewables in 2050. There are also a number of interesting proposals relating to the EU grid.

In the news this week there are some clever ideas for adding energy generation to existing structures. The first is to converting the kinetic energy of cars passing over sleeping policemen (that's speed bumps for the non-UK readers) into electrical energy. It sounds like a good idea, although when I tried it out on a friend (the idea, not driving a car over him) he did express concerns over digging up the UK's roads and the price of copper wire (always interesting to take a natural reaction to new ideas).

The other idea is to fit wave energy generation technologies to offshore wind turbines to increase the output from a single installation. The proposal, by Green Ocean Energy, could generate an additional 500kW per wind turbine. I wonder if it is a step too far to consider the possibility of fixing a tidal stream turbine to the platform somehow?

Finally, the Guardian newspaper has suggested some eco-friendly Valentine's Day options for those who will be celebrating tomorrow – yes even love has a carbon footprint (albeit a soft and furry one I'd imagine). In a situation reminiscent of a myriad of low budget horror movies, I'll actually be braving a Valentine's celebration tonight on Friday 13th! If you don't hear from me next week, assume the worst…