Energy Institute End of Year Book submitted 16 December 2005

Against a background of climate change and energy security issues, one of the greatest challenges faced by the UK is the task of securing sustainable, non-polluting energy for the future. To put the current situation into context, the Prime Minister recently announced that by around 2020, 30% of today’s electricity supply will have been lost due to decommissioned coal and nuclear plants, which in his mind can only partly be replaced by renewables. The shape of the UK’s gas supply, which accounts for over 41% of total energy consumption, is also in transition, from self-sufficiency to near dependency upon imported supplies.

Tackling climate change is a priority for the government in its leadership of the G8, but although the UK is on track to meet its Kyoto protocol commitments, much still needs to be done to meet its more ambitious target of a 20% reduction in our carbon emissions (CO2) by 2010, as set out in its Climate Change Programme of 2000. The Energy White Paper contains a longer-term goal of reducing CO2 by 60% by 2050, as well as setting out four main energy policy objectives: reductions in C02 emissions, reliability of supply, fuel poverty relief and maintaining competitiveness. A policy statement on the energy review, due to be published in summer next year, will identify decisions made on how the UK will meet energy demand and specifically on whether or not new nuclear energy will be developed. Microgeneration, so far a largely underestimated sector in the energy generation field, is fast gaining deserved recognition and attention, backed by government plans to publish its microgeneration strategy next year.

Microgeneration comes in various forms, for either heat or electricity generation, and in some cases both. Solar panels have been available for a number of years from a variety of suppliers and can either provide heating and hot water, or electricity. Micro-wind turbines for wall or roof mounting on houses have recently emerged, alongside the more established type of wind turbine typically mounted into the ground. Heat pumps that use the ground for storage have been in use overseas for some years now and are just beginning to gain a foothold in the UK market. Micro-combined heat and power (micro-CHP) units that look and perform similarly to gas boilers but also generate electricity, are starting to become available and a major energy utility, Powergen, has already launched a micro-CHP unit known as Whispergen into selected areas of England. Further ahead, there are at least three further microCHP products under development and aimed at the mass market, and a number of companies are working on hydrogen-powered fuel cells for domestic heat, hot water and power generation.

These various types of microgenerators offer consumers the chance to compete for part of their energy supply, whilst directly contributing to combating climate change by reducing C02 emissions. Most microgenerators emit no carbon at all as they are powered by renewable sources, whilst those which do use other fuels, such as microCHP units that run off gas, do so highly efficiently, actually generating electricity as well as heat from the single fuel source. Generating energy at the point of use, which uses at least 90% of the fuel productively, is extremely efficient when compared to power stations that typically waste over 60% of the total energy released by burning fossil fuels in heat loss, and a further 10% in transmission and distribution losses. A report on decentralising power, published earlier this year by Greenpeace, outlines that the two-thirds of primary energy inputs currently wasted in centralised power production is equivalent to the entire water and space heating demands of all buildings in the UK – industrial, domestic, public and commercial. The report supports a decentralised energy system as an alternative solution, where buildings would become “micro-power stations” instead of passive consumers of energy.

When compared to large-scale power production in unit cost terms, microgeneration also performs well, with numerous comparative studies indicating that microgeneration is competitive. Furthermore, generating at the point of use avoids the usual grid-based costs such as supply costs, transmission and distribution costs. Although microgeneration dictates a different infrastructure to that of the current centralised system, it starts to make economic sense in the long run when compared to the associated costs of modernising and replacing transmission and distribution networks of the existing system.

In terms of energy policy, microgeneration can deliver on four of the White Paper energy policy objectives. For example, a micro-CHP unit, similar in size, appearance and functionality to a high efficiency central heating boiler, will deliver the same comfort levels as a modern boiler, whilst reducing the emissions of a typical house by 1.5 tonnes (around 25%) of CO2 per year. This can help relieve fuel poverty, supply 1 - 5kW of peak electricity generating capacity - and provide the major utilities with some competition. All of the other types of microgeneration technologies deliver on two or more of the energy policy objectives, i.e. a small wind turbine or solar panels, which supply part of a households demand, will cut energy bills by up to £100 per year whilst reducing the household’s carbon footprint. The various characteristics of energy generation and fuel sources mean that microgenerators offer solutions to all types of properties. They are particularly well suited to those hard to heat homes where conventional insulation measures are either impractical or prohibitively expensive, and also for properties off the grid or gas network where other options are oil, solid fuel or infrastructure investment. Microgeneration offers unprecedented diversity of generation sources, avoiding the risks associated with possible terrorist attack on large, single point power station sources, and often providing a back-up supply of energy in the situation of a ‘black-out’.

There are also wider benefits of microgeneration which are now starting to gain deserved recognition. A recent study by the Sustainable Consumption Roundtable shows that microgeneration actually acts as a catalyst for cultural changes in consumer attitude, and provides evidence of the important impact that microgeneration has on attitudinal and behavioural shifts towards energy use. Therefore, microgeneration is not only a serious form of clean energy supply contribution, but also a solution in bridging the gap between energy efficiency and consumer behaviour and responsibility.

The full potential offered by microgeneration has been arguable until recently. A study carried out by the EST for the DTI, shows that microgeneration could contribute an astonishing 40% of electricity demand by 2050, with subsequent cuts to greenhouse gas emissions by 15% per annum up to 2050. Another recent study performed by the Society of British Gas Industries indicates that potential levels of power generation from domestic scale microCHP could realistically be equivalent to more than half or all of today’s nuclear capacity.

It is clear that mass market microgeneration has potential to significantly contribute to energy demand, especially in the short term. So what has been preventing it from reaching mass market level? The rules surrounding energy trading, grid connection, planning and subsidies were developed for much bigger applications than microgeneration. Therefore, the regulatory framework for the energy market and procedures for network connection present serious barriers for microgeneration. Many customers are required to obtain permission from the network operator, and in many cases actually pay an extra charge for the connection of a microgenerator, despite studies showing that microgenerators typically create cost reductions on the network. There have been some changes favouring microgeneration in recent years including: simplifying the rules for connecting microgeneration technologies and the relaxing of severely restrictive requirements for metering, although much work is needed to allow a straight-forward network connection for microgenerators.

The key to microgenerating technologies reaching maximum impact lies within the price to the consumer falling to competitive levels. A number of regulatory and policy changes are required to allow this to happen, in particular the government must set binding national targets in order to create the necessary investor confidence for developers to fund mass production manufacturing capacity. There are a number of individual policy measures that would also assist the expansion of the microgeneration sector including: granting permitted development status for some approved microgenerators, detailed consideration of the export reward mechanism that allows payment for surplus electricity that spills on to the grid, inclusion of microgeneration within the Building Regulations and the Sustainable Buildings Code, simplifying access to ‘green energy certificates’, and the introduction of new policies for microgenerators producing heat.

The good news for microgeneration is of the growing support within parliament, particularly with the wide support shown for Labour MPs Mark Lazarowicz’s and Alan Whitehead’s Private Members Bills which promote microgeneration. With Mark’s Climate Change and Sustainable Energy Bill given its Second Reading, and hopefully becoming law, together with the forthcoming Microgeneration Strategy there is the potential for the microgeneration industry to take off and even change the face of the UK’s energy production and consumption trends. As the representative body for the micropower industry, the Micropower Council wants to see an ambitious set of new policies introduced in the Government’s Microgeneration Strategy and hope they will help microgeneration to achieve the potential identified by the EST report.

Microgeneration allows householders to gain some independence and security over their energy supply, whilst saving on utility bills and personally contributing to mitigating climate change. Given the opportunity, microgeneration could make significant contributions to meeting the UK’s energy demand and reductions in C02 emissions whilst satisfying the necessity of diversifying and securing our energy supply through millions of dispersed, low or carbon free generators. .