Power From the People, 7 July 2005, IEE, Savoy Place, London

This report aims to draw out the main themes and ideas from the Conference, to contribute to the consultation on the DTI’s microgeneration strategy. Further information from the Conference, including the speakers’ presentations, are available from the conference organisers.

Conclusions: Dave Sowden, Micropower Council

Dave Sowden summed up the conference as follows:

1. The Microgeneration Strategy needs to be a living document, with built-in flexibility, especially as it is such an embryonic sector and its future trajectory is unclear.
2. It is important to look in the context of the overall framework for energy policy. There is a need to stimulate investment through targets and policy commitment.
3. Policies should aim at providing a simple interface for the consumer – bearing in mind that they are not energy experts. There could be more of a role for mandatory / regulatory measures alongside incentives – changing building regulations to require condensing boilers is a good example of what is possible.
4. The question of reward for exported power must be tackled. (see discussion of this point above).
5. Heat technologies are as important as electricity generation technologies. Solar thermal in particular has huge potential.
6. All sectors – government and industry – should play a role in engaging and communicating with consumers, especially given the potential of microgeneration to engage people in energy and climate change issues more generally.
7. There is a need to work on providing a better skills base for manufacturing, installation and servicing of microgeneration equipment.

Introductory session

Alf Roberts, Chief Executive, welcomed delegates to the event.

Malcolm Wicks MP, Energy Minister

The Minister stressed that, as climate change is a global problem, it can be hard for people to see how their own actions can have an impact. Microgeneration – such as micro-wind turbines, solar panels, heat pumps, bio-energy and micro-hydro – can help individuals to make a difference. Microgeneration can contribute to all of the government’s energy policy goals:

1. Reducing carbon emissions
2. Helping security of supply by reducing the load on the distribution network and helping to avoid over-dependence on energy imports
3. Promoting competitive markets by offering the consumer a wider choice of the means to fulfil heat and electricity needs
4. Reducing fuel poverty (providing upfront costs are defrayed).

Progress on microgeneration so far includes:

1. £41 million of support for solar power projects and £12.5 million of support for household and community renewables projects through Clear Skies
2. Most microgeneration technologies benefit from a reduced VAT rate of 5%
3. The Renewables Obligation Order has been amended to make it easier for small generators to claim Renewables Obligation Certificates (ROCs)
4. Planning Policy Statement 22 (PPS 22) encourages local authorities to set targets for on-site energy generation
5. The DTI and OFGEM have been addressing technical issues such as metering and connection to the distribution network

   Despite these steps forward, microgeneration is still a niche product – only 81,000 installations prior to 2004. There is unfulfilled potential – hence the Government is developing a strategy for the promotion of microgeneration, which aims for a joined-up approach to supporting microgeneration. There are three key barriers to be overcome:

   1. The elevated price of most microgeneration products, due in part to the lack of demand, meaning that industries cannot benefit from economies of scale; and also due to high R&D expenditure
   2. Lack of information – consumers are unaware of these products and their benefits
   3. Technical constraints – such as metering arrangements and connection to the distribution network

   The Minister asked Conference participants for their involvement and help with the development of the Strategy, to try to overcome these barriers and develop a strong base for microgeneration.

   Bryan Gray, Vice President, Micropower Council

   Bryan Gray noted the progress made to date on microgeneration, such as the grant schemes, the efforts to resolve technical issues such as metering and access to ROCs, OFGEM's pilot scheme to relax the 28-day rule (the rule that says energy consumers can switch suppliers with 28 days’ notice, and so makes it difficult to provide energy services); and the VAT reductions. There is a need to promote microgeneration alongside other low-carbon technologies, energy efficiency and combined heat-and-power. Given the diversity of our housing stock, it is important to promote a diverse range of energy solutions.

   There are five steps that the Micropower Council believes are needed, in the context of the Microgeneration Strategy:

   1. Targets: There is a need for a clear and quantified vision, set through a target, to enable production to be scaled up quickly. There are targets for CHP, energy efficiency and renewables – there needs to be a target for microgeneration too.
   2. Planning constraints: It costs £265 to apply for planning permission, and causes delays. This is a considerable barrier to microgeneration. Some local authorities allow ‘permitted development order’ (PDO) status for certain microgeneration technologies, others do not – it is a postcode lottery. There is a need for PDOs across the board.
   3. Access to existing benefits: the claim systems for Renewables Obligation Certificates needs reform, as it is unworkable for microgenerators.
   4. Reward for power export: Energy suppliers do not currently see a commercial advantage to buying back power from microgenerators. The Micropower Council would like to see an obligation to suppliers to offer terms to customers who want to export power. In other words, all energy suppliers will have to offer to buy back power (but the price at which they buy will be set by the supplier).
   5. Commitment to solar photovoltaics: The government promised a ten-year commitment to support for solar PV. There is a danger that the Low Carbon Buildings Programme will focus on lowest-cost microgeneration. There is a need to support solar PV specifically.

   Questions and panel discussion

   The following issues were raised in discussion:

   1. Communication: What will be done to help market microgeneration, and win hearts and minds? The Minister agreed that there was a need for this, and stressed the opportunities of microgeneration in schools, as a visual indication to the community, a way of teaching science and citizenship together. He stressed the need for industry to play its part in marketing, too, noting that as a private individual, he had not received any information about such technologies. Bryan Gray mentioned the new solar clad building in Manchester, and its communications impact. But he also stressed the need to remove market barriers so that demand can be met.
   2. Ceramic Fuel Cells: A delegate asked for consideration of ceramic fuel cells, in the context of micro CHP.
   3. Involving ODPM: The Minister was asked what efforts were being made to include ODPM in the strategy, given their involvement in housing, planning and building regulations. He replied that dialogue was ongoing, but stressed the need to remember the context of affordability of housing. Alf Roberts mentioned the need to look at designing building regs to support microgeneration.
   4. Planning: There were a number of questions raised about planning policy, and the need to make sure that it supports microgeneration – including in conservation areas.
   5. Linking to energy efficiency and fuel poverty: A delegate said that there was a need to include microgeneration in efforts to improve energy efficiency and alleviate fuel poverty – taking a ‘whole-house’ approach to domestic energy. The Minister said that the DTI is working with Defra on this, .
   6. Targets: Several delegates asked the Minister to set targets for microgeneration, as Bryan Gray outlined in his speech. The Minister said that he was not convinced at this stage about the wisdom of setting targets, but that the consultation was an opportunity for people to put the case.
   7. Funding: The Minister was asked how much money would be put aside for microgeneration through the Low Carbon Buildings Programme. He said that negotiations with HM Treasury were taking place at the moment.
   8. Solar PV: A delegate stressed that the PV industry was facing an uncertain future, in the gap between the Major Demonstration Programme and the new Low Carbon Buildings Programme. Other countries, such as Germany and Japan, set specific targets for PV.
   9. Payment for export: The issue of payment for export of electricity was raised. This is being looked at as part of the consultation. The Minister said that he supported changes to metering to allow this to happen.

   Developers’ Update

   Domestic Wind Power: David Gordon, Windsave

   David Gordon gave an overview of the WindSave turbine, a ‘plug and save’ system which can save up to one third of household energy bills. He said that installing these turbines on 10% of the UK’s 23 million homes would save 1mtC. Manufacturing has now begun, for an autumn rollout. The company has joined forces with British Gas, so that British Gas engineers install and maintain the system through an annual contract. This provides a ‘one-stop shop’. The turbine is likely to cost around £1500. Discussions are in progress with a High Street bank, to provide finance for turbines through linking to mortgages. Whilst the industry has benefited from grants and reduced VAT, there is also a need for:

   1. Permitted Development status in planning – given that the turbines are no bigger than a TV aerial.
   2. Clear, precise objectives, expressed through planning policy, ROCs and targets – to allow enough certainty to scale up production. It is not money that is needed from government, but clarity and vision.
   3. Support for the two Private Members’ Bills currently going through Parliament which promote microgeneration.

   MicroCHP: Ian Stares, Baxi Technologies

   Ian Stares stressed that increased awareness of climate change had the potential to create a market for his industry. He outlined how mCHP could help contribute to the Energy White Paper’s four goals (climate change, security of supply, competitive markets, fuel poverty). The amending of building regulations to mandate HE (condensing) boilers is seen as an important step. Small-scale CHP has an important role to play, and can fit different situations and needs, from 1kWe applications in households to 10kWe boilers in guest houses. In a domestic setting, a £100 p.a. energy saving is possible, helping to offset capital costs. Replicated across the whole economy, mCHP would mean less demand on the national grid and centralised power stations, and reductions in CO2 emissions – perhaps in the order of 3-4 mTC by 2020, if 5 million homes have mCHP.

   However, mCHP market penetration is highly dependent on government policy. The SBGI forecast that, by 2010, there would be 160,000 installations as a ‘base case’, double this number with the (now-agreed) VAT reductions, and up to 1.2million installations if mCHP was included in the Energy Efficiency Commitment and Enhanced Capital Allowances scheme.

   PV: Jeremy Leggett, Solar Century

   Jeremy Leggett emphasised the crucial role that PV could play in deep emissions cuts, quoting a Government press release stating that “solar energy alone could meet world energy demand using less than 1% of land now under crops and pasture”. But he said that PV was still a pitifully small industry, with only 1GW of power globally. Government backing for the industry is rhetorically strong – in 2003, at the Better Buildings summit, Patricia Hewitt, then Secretary of State at the DTI, said “we are going to make microgeneration the norm, not the exception”, and Margaret Beckett said “Business-as-usual is not an option”. However support has been very patchy in practice. The Major Demonstration Programme funding scheme only lasted three years, and did not help to provide the industry with long-term certainty. It is uncertain how the new Low Carbon Buildings Programme will work, and whether ‘technology-blind’ will in practice mean ‘lowest cost’, without regard for the potential for greater innovation and cost reduction in in industries like the PV industry.

   Ground Source Heat Pumps and Solar Thermal: Neil Schofield, Bosch Group

   Neil Schofield provided an overview of Ground Source Heat Pumps (GSHP) and solar thermal technology. He quoted the prediction from Brenda Boardman, of the University of Oxford’s Environmental Change Institute, that 60% of houses in the UK will have solar thermal by 2050. Figures from BSRIA show that solar thermal could increase from 7000 installations in 2004 to 16000 in 2008. He gave examples of its application, by housing associations and private developers.

   There is a need to counter the prevailing myths about solar technologies – that the sun doesn’t shine enough in the UK. In fact, the UK received 65% of the annual radiation of Spain, and solar energy can be harnessed both through direct radiation, and diffuse radiation (when it is cloudy).

   GSHPs could be a good technology for hard-to-heat homes, and the fuel poor. For single elderly persons’ properties, the running costs are less than the winter fuel allowance. The self-build market is an important one for GSHPs, especially as some are off-grid.

   Neil cited the example of condensing boilers – which are now 80% of the market following the change to building regulations – shows what can be achieved. GSHPs are installed in most new houses in Sweden. In the UK there are around 1000 fitted at present – this could rise to 6000 by the end of the decade.

   Fuels Cells: Peter Gray, Johnson Matthey

   Peter Gray reported steady progress with the commercialisation fuel-cell technology. Focussing on PEM (polymer electrolyte membrane) fuel cells, he said that the EU and US were currently undertaking demonstrations and field trials, whilst in Japan, they had been commercialised, with Tokyo Gas, who are leasing 1kW units to customers, and plan to move to outright sales as the technology develops.

   Fuel cells are well-suited to low carbon buildings installation, particularly in urban areas where conventional CHP may not possible. Consumer benefits include low noise and pollution (SOx / NOx particulates), and low energy cost. They are not complex to install, as they do not need a bespoke flue, and are easy to connect to the existing low carbon fuel network. Fuel cell technology is scalable – from 1kW to 500 kW, suiting a wide range of buildings. The smallest scales are most difficult to finance, so larger installations will help to drive the market and move down the cost curve.

   PEM technology is currently limited by costs and durability, when compared with incumbent technologies. However, improvements in fuel cell systems are coming about through experience in real applications.

   Session 3: Microgeneration Strategy Workshop

   Government’s current thinking: Rachel Crisp, Assistant Director, Energy Strategy Unit, DTI

   Rachel Crisp outlined the reasons for drawing up a microgeneration strategy, saying that potential benefits are not yet being realised, and that microgeneration has not achieved mainstream status. There is a need for co-ordinated effort to kick-start both demand and supply. The Strategy will be a roadmap – plotting a path for the future, and clarifying the role of microgeneration in overall energy policy. It will be a cross-government document. The consultation seeks views on the following issues:

   1. Product development and deployment
   2. Communications
   3. Economics
   4. Installation
   5. Low Carbon Buildings Programme
   6. Physical Infrastructure

   The Low Carbon Buildings Programme, which is being developed alongside the microgeneration strategy, aims to provide a holistic approach to reducing carbon emissions from buildings, through providing capital grants for installation of renewable energy technologies. It will provide support for demonstration projects, focussing on larger projects, and aiming at cost reduction in technologies over the lifetime of the programme. It will also raise awareness, through skills development and project replication. It will run for six years, with two streams of funding – one for small-scale and community projects, and one for larger scale developments. There will be dedicated technical advisers for the programme. Full details will be developed as a result of the consultation process, and the DTI are seeking views, particularly on the following issues:

   The impact of a ‘technology-blind’ approach; what technologies might be missing; and what alternative support mechanisms could be available.

   The Regulator’s Perspective: Virginia Graham, Director – Environmental Programmes, OFGEM

   Virginia Graham said that Ofgem had been working to encourage microgeneration – since 2001, they have been working with the DTI to look at regulatory barriers to its uptake, and since 2003, have been looking at how the Renewables Obligation could incentivise microgeneration. There is currently a consultation on regulatory issues (closed 15 July). Ofgem’s principal objective is to protect the interests of consumers, though it must also consider its secondary duties, including environmental and social duties, ensuring that its policies do not have unintended consequences. It has no remit to promote individual technologies.

   The growth in generation at the local and distribution level has been recognised in recent changes to the regulatory framework for distribution, including Renewable Power Zones and the Innovation Funding Incentive. Studies suggest that the initial impact of microgeneration on networks will be minimal, though heavy concentration in small areas could be an issue.

   Domestic suppliers are already incentivised to promote dCHP through EEC, and the RO review will make access to ROCs easier for generators and suppliers. Ofgem does not, however, favour suppliers being obliged to purchase power exports at a given rate.

   Turning to metering, Ofgem supports appropriate measurement at least cost, and would not obstruct the installation of cheap Half Hourly Meters with microgeneration units. However, existing meters which run backwards during export could present problems for meter certification.

   Ofgem will continue to be closely involved and engage in dialogue with DTI, Defra and stakeholders.

   Workshop A: Future-proofing the Strategy

   Rapporteur: Adrian Hewitt, Merton Borough Council

   This session aimed to identify unforeseen issues that might impact on strategy, and steps that could be taken to ‘future-proof’ it against these. The group stressed the complexities involved in drawing up a strategy, and considering the environmental, commercial and industrial / infrastructure influences on it. The group identified a number of issues. There is a need:

   1. to consider wider economic scenarios that may impact the strategy significantly. Energy supply and demand is determined by existing financial and commercial regulation, and this needs to be carefully considered and linked to microgeneration.
   2. to maintain the distribution structure and respond to peaks in demand.T he balance between microgeneration and existing generators is primarily determined by financial and commercial regulations.
   3. for clarity and direction, to make it easier for consumers to engage in microgeneration, and for businesses and financial backers to plan investment.T
   4. to evaluate accurately the power output and user-friendliness of micro-generation technologies.
   5. to be pragmatic, progressing existing technologies and learning-by-doing rather than waiting for a silver bullet. We need to recognise that getting this right is vital and will cost something – like almost any change process. The debate is who pays – customers, industry, government?
   6. The whole group agreed that there is a lack of installation skills and manufacturing capacity in the UK for almost any energy scenario, from nuclear to microgeneration – not enough trained people. This must be addressed.
   7. The strategy would be strengthened through the inclusion of targets, based on information from industry and planners, to make sure that they are realistic and achievable. They could be updated on an ongoing basis.
   8. There are concerns about a move to mass advanced metering – this needs to be very carefully thought through to avoid introducing new (technical) constraints on the whole system that introduce bias in favour of specific technologies. At the same time, the existing metering system is unsatisfactory because it is an obstacle to an open market for microgeneration.
   9. The fact that OFGEM do not support measures to reward excess generation is a real barrier, and a sore point with the industry and other organisations involved.

   Workshop B: Engaging the Public

   Rapporteur: Becky Willis

   This session looked at how demand for microgeneration can be created and sustained; and how consumers will pay for, and access the technologies. The group concluded that:

   1. Opportunities for direct marketing and engagement with the public are currently limited. Microgeneration is not normally something that people have come across, or thought about, so we are starting from a low base. It is the responsibility of government policy and communications to help the industry to drive demand.
   2. There were different views on whether ‘green’ is a selling point. Some reported premium prices paid for houses with solar panels; others pointed to developers who had shelved plans for microgeneration as consumers had not been willing to pay more.
   3. Energy services were seen as a good route to incentivising customers – because it provides a means of financing the upfront investment; and because it provides a way of navigating the system. Under an energy services package, a customer would sign up with a supplier who would install microgeneration, implement energy efficiency measures and buy back any excess power. They would recoup their investment through reduced energy requirements over time.
   4. Similarly, there could be ways of marketing microgeneration through linking to financial services – an ‘energy mortgage’ whereby the additional cost of microgeneration would be added to a mortgage.
   5. Smart metering has potential to educate consumers – if they see how much money or carbon they are saving. However, an Australian study showed, contrary to expectations, that if people realise how cheap electricity is, they use more of it.
   6. Marketing mCHP or other boiler technologies is harder, because boilers are a distress purchase – they are generally bought only when the existing boiler breaks down. This means that consumers are over-reliant on the views and expertise of installers, who are unlikely to promote microgeneration options.
   7. Because of these difficulties, there is a real need for government to regulate proactively, to drive the market, as it did with condensing boilers. Variable council tax and domestic tradeable quotas / household carbon allowances were put forward as ways to do this.
   8. There is a need for consistent communications by government – every opportunity to promote microgeneration needs to be found, including the Olympics, PFI projects, procurement, schools and so on.

   Workshop C: Gaps in the Strategy

   Rapporteur: Jim Watson

   This group looked at what areas had been missed in the strategy consultation document. They identified the following:

   1. The need for demonstration and field trials to accompany investment in R&D – thereby taking products through to the consumer stage. This should include trials of smart metering and payment for export.
   2. The strategy should consider more regulatory measures – following the example of condensing boilers, which are now mandatory in building regulations, which has brought about a transformation of the market.
   3. There are few ways of engaging building developers at the moment. The strategy should set targets to make a microgeneration mandatory for new build, following the example of Merton Borough Council, which requires commercial developments over a certain size to generate a proportion of their own energy needs.
   4. Net metering could be introduced, maybe on a time-limited basis, until more sophisticated IT-based systems are introduced. DTI and OFGEM should reconsider their opposition to net metering.
   5. A mini-ROC could be introduced, which would be a pared-down system designed for small-scale systems, lessening transaction costs for microgenerators.
   6. Transaction costs are important – investments of time and effort need to be included, alongside financial investments.
   7. There should be clear links to energy efficiency measures, which should be done first as they are likely to be cost-effective.
   8. There is a need to set carbon limits at a household level. This could be done through changing council tax banding to reflect carbon emissions, or through Domestic Tradeable Quotas (carbon allowances for individuals).
   9. The strategy should consider heat as well as electricity. The 28 day rule should be ended, to allow energy suppliers to lease microgeneration equipment. Regulations should allow ‘islanding’ for microgeneration. Islanding means that a microgeneration unit will continue operating event when disconnected from the grid, when the grid has a fault, for example.
   10. The Low Carbon Buildings Programme should include support for micro CHP. The Government should lead by example, including, for example, central and local government, then NHS and the MoD.
   11. More emphasis should be placed on the security of supply benefits of microgeneration.

   Workshop D: Practical Problems

   Rapporteur: Stephen Andrews, ILEX consulting

   This group looked at technical issues and problems. Their findings were as follows:

   1. Customers need confidence in the quality of microgeneration equipment and installations. There needs to be a kitemark, or accepted norms (as with the CORGI standards for heating etc).
   2. Each house is different, and there needs to be good advice available to allow for customised solutions.
   3. Consideration needs to be given to the speed at which people need to make purchasing decisions – boilers, in particular, are a distress purchase.
   4. There are safety considerations associated with microgeneration – such as regulations governing wiring; and ways in which distributed networks could be isolated if necessary, to allow work to take place. DIY installation – plug-in units -– should only be allowed if appropriate standards are conformed to. Or should microgeneration only be installed through accredited suppliers? How can cowboy installers be prevented? A clear system of accreditation is needed.
   5. There may be different routes to market – such as lease deals by suppliers; or DIY purchases.
   6. There is a need to capture the value chain, in terms of carbon benefits as well as financial benefits. To whom do these benefits accrue – the consumer, the supplier or the DNO?
   7. Metering – this is too complex at present. There needs to be a simple system for metering and access to ROCs – whereby consumers could own their own export meter and send the information on a postcard to gain credits. Metering for mCHP export is confusing, with too many agencies involved. The cost of meters (£50 a year) are a barrier to paying for export.
   8. There may be issues about building structure and loading as a result of microgeneration installations such as micro-wind. Will buildings insurance provide cover?
   9. There is a need to be realistic about what the industry can deliver, and avoid overoptimism.

   Workshop E: Building scale renewables

   Rapporteur: Philip Wolfe

   This workshop focussed on the development of the Low Carbon Buildings Programme (LCBP). Its conclusions – and questions to DTI - were as follows:

   The objectives need to be made clearer. Does the LCBP aim to:

   1. Develop a mixed portfolio of technologies?
   2. Reduce CO2?
   3. Encourage technological innovation?
   4. Sustain a viable microgeneration industry?
   5. Act as a means of pathfinding new standards for buildings. Priorities need to be specified.
   1. There needs to be an early announcement of the level of funding available, and an understanding that too small a programme could be a waste of time.
   2. There is a danger of creating silos. The relationship of the LCBP to other schemes including the Energy Efficiency Commitment, the Renewables Obligation and so on needs to be clarified.
   3. The LCBP should be open to all the micro-renewables technologies listed in the consultation document and should have the flexibility to add others in the future. Once the interface with the EEC is defined, the LCBP should also be cohesive with support of energy efficiency technologies and micro-CHP. ‘
   4. Technology-blind’ must not be interpreted merely as focussing on today’s lowest-cost technologies. There should be a method for levelling the playing-field – allowing for technologies at different stages of development, some of which may be more expensive.
   5. How will the programme link with energy efficiency objectives? Will only the most energy-efficient buildings be eligible? If so that would narrow the scope of the programme.
   6. The term ‘building’ needs definition. For example, would a PV development on motorway sound barriers qualify for support?

   The group also had several suggestions beyond the remit for their workshop session, in particular:

   1. Microgeneration should be mandated through building regulations.
   2. Significantly higher energy prices may be necessary to incentivise microgeneration.

   Summary and Conclusions

   Following the speaker presentations and reports from workshops, there was a discussion of the findings, focussing on:

   Developing capacity: a grant programme (such as the LCBP) may be necessary in order to sustain the industry, so that there is enough capacity to allow local councils to set microgeneration targets, following the example of Merton Borough Council.

   Export Reward: OFGEM are opposed to fixed payment for export, as this would skew the market. The DTI emphasised that they would not support such a move, but may consider requiring suppliers to offer terms to microgenerators. The Micropower Council emphasised that the balancing and settlement code would need to be changed to help microgenerators sell electricity at competitive rates, and that obtaining these changes requires the involvement of energy suppliers. Infrastructure improvements that allowed time-of-day pricing would also help. Despite Ofgem’s current view, delegates felt that net metering may be a pragmatic solution in the formative years while the industry addresses some of the substantial issues around a proper export reward mechanism.

   The role of the market: There was a discussion about whether policies to promote microgeneration would interfere with the workings of the market. Some argued that the energy market is in no sense a ‘free market’, as it is defined by regulation and intervention, is based on large-scale centralised generation sources