30 Apr 2014
"Climate change is not, in the Foreign Secretary's words, the biggest challenge of our time, it's the biggest challenge of all time."
Those were the words last night of Sir David King, erstwhile chief scientist and current Foreign Office adviser on climate change. He was speaking at the annual Chairman's Dinner for the Carbon Trust (a rather delicious vegetarian meal, since you ask, in consideration of the planet and waistlines), where King responded to a question I posited about arguably his most famous intervention in the climate change debate, namely his 2004 assertion that climate change was a bigger threat than terrorism.
Is climate change still a bigger threat than terrorism, I asked, and assuming the answer is yes, can you envisage a warning that would convince politicians to take the steps needed to tackle the threat? It was, I'll admit, a slightly unfair question, given no one has yet worked out what it will take to get our political class to deliver climate action commensurate with the scale of the threat. But it was a useful reminder to hear one of the world's leading scientific figures reassert that climate change is a threat nonpareil, an existential challenge to the global economy and our way of life.
King's chilling assessment of the scale of climate risk brought to a close an evening in which he had been remarkably upbeat about the prospects for both an international climate change treaty and an effective response to the climate threat.
He acknowledged the prospect of a "Berlin Wall" between the OECD and non-OECD countries at the ongoing climate change negotiations. But he tempered that warning by arguing that China and US were in a better position than they have been in years on climate policy, while European nations could point to the gift they have delivered the world through the feed-in tariffs that have helped slash renewables costs over the past decade.
He also welcomed the happy coincidence that will see this year's crucial UN climate summit hosted in Lima - a summit King said was in many ways more important than next year's Paris Summit as it has to deliver the groundwork for a scheduled agreement in 2015. King predicted that the progressive stance many Latin American countries have taken on climate policy could play a crucial role in bridging the divide between industrialised and developing countries that has marred all previous UN climate talks.
He was similarly optimistic about encouraging progress from clean technology developers and financial markets. He described the "carbon bubble" hypothesis as critical to shaking financiers out of their chronic short termism and hailed the emergence of low cost renewable energy and energy storage technologies as the breakthrough that makes a genuinely low carbon economy viable.
However, for all this optimism the speech was bookended by a daunting realism that rather took the gloss off the coffee and chocolates. The evening closed with King's description of climate change as "the biggest challenge of all time" and opened with him highlighting the importance of the IPCC's recent endorsement of a global carbon budget - an assessment that shows how a two per cent a year increase in emissions will mean the available budget for a 2ºC world will be burned through by 2043. Add in the risk that climate tipping points could be reached even earlier and the demographic forces that are expected to soon result in a global middle class of five billion people and you would be forgiven for thinking the scale of the climate challenge is fast becoming insurmountable.
King insists it is not yet insurmountable and he is travelling the world trying to convince others that an escape route is indeed available. "I have to feel optimistic," he says. "But the challenges of staying below 2ºC are frankly enormous."
The former chief scientist is right, of course, we have the technologies, expertise, and policies we need to tackle climate change and it can be done while improving, rather than harming, living standards. But he is equally right when he describes climate change as an unprecedented global challenge and his assessment of the scale of the risk, just like his previous comparison with the threat of terrorism, demands a response from business, and most of all, political leaders.
The key question - the question I have asked so many times over the years of politicians and business executives - is if you accept climate change is an existential threat, why is your response not commensurate to that threat? Again, it is a slightly unfair question, as like most people, the steps I take personally to respond to climate change are singularly inadequate. But then again I don't get to write national policy or decide how to invest millions of pounds, so I think the question remains valid, if a touch hypocritical.
From time to time people are honest enough to admit their response is nowhere near sufficient and they are committed to working on more ambitious measures. But the most typical answer to this question is a blustering insistence that policy A or investment B is indeed an adequate means of tackling "the biggest challenge of all time". If only that were really the case.
The reality is we cannot deal with "the biggest challenge of all time" if we continue to subsidise fossil fuels, if we chop and change clean energy policies on an annual basis, if we ease planning rules for new fossil fuel developments and impose new restrictions on green alternatives, if we neuter energy efficiency schemes, if we refuse to consider divesting from polluting assets, if we put some solar panels on the roof and think we've done enough.
I know that in each of these cases there are complex and compelling reasons why compromises need to be struck between the need to decarbonise and other considerations. I also know that it will only be possible to build a sustainable economy if it is deemed affordable and attractive by the public.
But King's latest warning offers a timely reminder that the success or failure of any given climate change policy, technology, or initiative has to be measured against its ability to help tackle the biggest challenge humanity has ever faced. We're not messing around here; we are talking about the viability of the global economy and the health and prosperity of this and future generations. That may sound terrifying, perhaps even more terrifying than terrorism, and as such it is vital that we don't lose sight of the huge opportunities that tackling this problem offers.
But, as King explains, climate change is not just a bigger threat than terrorism, it is the biggest threat we have ever faced. Political and corporate leaders need to stop trying to pretend otherwise and prove they are up to the challenge.
What are the Tories thinking? I ask not as an incredulous environmental campaigner or green investor, even if the angry rhetorical questions being asked as to how the Conservatives can countenance blocking one of the UK's cheapest forms of domestic clean energy at a time when an increasingly hostile foreign power is using energy supplies as a weapon are entirely justified. No, my question is not rhetorical. What are the Tories thinking? Or, more specifically, what is the Conservative strategy for decarbonisation post-2015?
Last week's announcement by Energy Minister Michael Fallon that a Conservative government would end subsidies for new wind farms and further tighten planning rules for turbines may be deeply frustrating for environmentalists and energy investors. It may also be taken as conclusive evidence of our Prime Minister's political hypocrisy and lack of defining values. But the proposal for an effective moratorium on new onshore wind farm development, the alleged talk of 'green crap' within Number 10, and the conversion of cabinet ministers into lobbyists for the shale gas industry is simply democracy in action.
It may represent a contradiction of much of what the Conservatives stood for going into the last election, but the rise of UKIP means the electoral plates have shifted and as such the party is perfectly entitled to go into next year's election promising to renounce its recent past, bring the curtain down on UK onshore wind farm development, and generally dilute green policies.
We can argue about whether issues of long-term import to national security and prosperity really should be decided by what electoral strategists think will play best with the couple of hundred thousand swing voters in marginal seats. But constitutional reform is once again off the political agenda and hoping for political leaders who are willing to put the national interest ahead of their electoral concerns is like hoping for a patient football club chairman - a nice idea, but it is never going to happen.
We can also argue about whether a vote for the Conservatives at the next election really is a vote against onshore wind, given polling shows strong support for renewables across supporters of all parties. But our electoral system does not allow for referenda on every issue and as such anyone wanting to vote Tory because they support the party's "long term economic plan" or promised EU referendum will also have to vote against the expansion of one of the most cost effective forms of renewables, even if they are privately in favour of wind farms.
However, the fact remains the Tories have evidently done the electoral maths and decided a strategy of all out attack towards onshore wind farms accompanied by barely concealed hostility towards other green issues could prove a winner. It is now up to voters to prove whether these calculations are accurate or not (encouragingly the response by Labour and the Lib Dem's to the latest Tory attack on wind farms suggests they are equally convinced there are votes in publicly supporting renewable energy).
However, if the Tories are perfectly entitled to embrace an anti-wind farm strategy, what is harder to justify to either voters or businesses is a failure to explain how this new energy policy fits into a wider decarbonisation strategy.
UKIP's anti-renewables stance at least has the benefit of being consistent with a scientifically illiterate dismissal of climate change risks, but the Conservative's have no such luxury. Barring a full blown takeover by the party's "Tea Party tendency", the Conservatives are unlikely to go into the next election promising to repeal the Climate Change Act, just as David Cameron will find it hard to campaign by disowning his recent assessment of climate change as one of the biggest threats facing the UK. To do so would condemn one of the UK's great political parties to previously unexplored Faragian levels of cynicism and hypocrisy.
As a result, if the Tories want to make a virtual moratorium on new onshore wind farms and the creation of a giant shale gas industry the central planks of their energy strategy then they also need to explain how this approach fits into a long term decarbonisation strategy for the rest of this decade and beyond.
Simply stating, as Michael Fallon did last week, that the UK has enough renewables in the pipeline to meet its 2020 targets is not good enough. Such an approach ignores the central message of the IPCC report - namely that early action to cut emissions is more cost effective than delayed action - and will only push up energy bills by increasing the UK's reliance on more costly forms of low carbon energy.
There has been vague talk in Conservative circles of solar and offshore wind energy playing a bigger role in the UK's energy mix during the second half of the decade to compensate for less onshore wind energy coming online. There has been vague talk from the Prime Minister of carbon capture and storage playing a crucial role in cutting emissions through the 2020s. There has also been vague talk of an increase focus on energy efficiency, even if it is contradicted by Number 10's disgraceful decision to water down existing energy efficiency policies in pursuit of a short term and marginal reduction in bills. However, none of these mooted ideas could seriously be described as a comprehensive decarbonisation strategy, let alone a means of compensating for the emissions that would result from ending onshore wind farm development and ramping up fracking activity.
The Conservative's have form in this area. Last year, they attacked Labour's decision to support the early adoption of a decarbonisation target for the power sector for 2030, using deeply suspect calculations from Conservative HQ to argue that the decarbonisation target Labour voted for would push bills up £125 by 2030. But the Tories then failed to explain how they would decarbonise and meet the requirements of the Climate Change Act at a lower cost. For what it is worth, the independent Committee on Climate Change maintained, and still maintains, that a decarbonisation target for the power sector represents the most cost effective way for the UK to meet its carbon targets throughout the 2020s.
Fallon and co can propose an end to new onshore wind farms if they want to, but if they want to be taken seriously on energy policy, if they want to avoid charges of rank hypocrisy on green issues, and if they want to be regarded as responsible leaders on climate change, then they need to clearly explain what their alternative decarbonisation and climate change strategy looks like. We expect manifestos and policy commitments to be budgeted from a financial perspective, but in an age of climate change they need to be budgeted from a carbon perspective too. If a party wants to weaken efforts to cut emissions in one area they need to clearly explain how they will strengthen efforts in another area.
As such, the Conservatives need to explain why they want to effectively end development of new onshore wind farms and why aesthetic considerations trump all else. They need to explain what other forms of clean energy they will increasingly rely on from 2015 onwards and what the cost implications are of shifting the focus towards more expensive energy sources (if Labour has any sense it is doing the maths right now and preparing an attack ad pointing out how much Tory opposition to wind farms will add to consumer bills). They need to explain how they plan to improve UK energy efficiency and live up to the Prime Minister's pledge to make the UK one of the most efficient countries in Europe, even after the self-same Prime Minister was the main driver behind weakening existing efficiency policies. They need to explain how shale gas and CCS fit into a modern low carbon economy, and they need to explain what role they see for nuclear power. They need to explain how they plan to increase spending on climate adaptation in an era of ongoing public sector spending cuts. And, thanks to the confusing and contradictory messages coming from senior Conservative politicians, they need to publicly confirm whether they really do remain committed to decarbonisation.
Failure to do so would leave voters, business leaders, and investors with no choice but to conclude the Prime Minister was not being serious when he said he was serious about tackling climate change and leading the greenest government ever, just as they will also have to conclude that he cares more about pandering to the right wing of his party than acting in the long term interests of the country. You expect this kind of inconsistent policy confusion from UKIP - an apparently non-racist party that repeatedly puts forward racist candidates, while espousing environmental policies that appear to be sourced from internet trolls - but a party of government is held to higher standards.
So what is it going to be? Are we going to see the unveiling of a credible alternative Conservative decarbonisation strategy? Or are we going to see the torching of Tory green credentials and an election fought on anti-environmental spin that undermines investment, increases energy costs, and damages national security? The election may still be a year away, but we need to know what the Tories are thinking.
22 Apr 2014
The lobbyists certainly earned their fees. The case for easing energy costs for UK manufacturers was made so effectively ahead of last month's budget that Chancellor George Osborne froze a tax he had introduced just two years before, seemingly forgot the tax was a replacement source of revenue to compensate for corporation tax cuts he had previously handed industry, and found yet more cash to round his energy cost compensation package up to £7bn. Add the windfall those industrial firms that have been hording EU emissions allowances will now enjoy as the carbon price continues its modest recovery and it has been a pretty fantastic few months for UK manufacturers - just so long as they are willing to turn a blind eye to the negative impact Osborne's reforms are likely to have on the decarbonisation efforts they are, for the most part, signed up to.
The reason manufacturers' lobbying proved so effective was that they had a genuinely compelling case to present. The UK may not be the only country in Europe with relatively high energy costs, but the upward trajectory of the carbon price floor would have led to escalating competitiveness issues over the course of the decade. Moreover, Germany provides a model for how compensation packages for manufacturers can address competitiveness concerns without necessarily undermining decarbonisation policies, even if it means more of the short term costs have to be shouldered by consumers.
However, the key question for Osborne should not have been 'how do I compensate manufacturers', but 'how do I tackle competitiveness concerns while continuing to accelerate decarbonisation?'
I've already argued the £7bn compensation package should have been accompanied by a comprehensive green industrial strategy backed by the kind of serious R&D spend required to deliver the next generation technologies we need to decarbonise heavy industry. But there is another step Osborne could and should still take that would actually help cut emissions, improve manufacturers' competitiveness, and drive investment. He should make the government's significant compensatory largesse dependent on manufacturers taking proactive steps to invest in energy efficiency and cut their emissions. If the government is providing a £7bn package on top of corporation tax cuts, and if there is now talk amongst manufacturers about the UK being so competitive re-shoring is a distinct possibility (which it is), then where is the quid pro quo?
There are actually some schemes, such as the Climate Change Agreements, that seek to incentivise emission reduction measures using the carrot of lower taxes, even if they are widely criticised for not demanding particularly ambitious decarbonisation measures of the companies that qualify for tax breaks. Meanwhile, Osborne actually took a modest additional step towards this approach in the Budget, making an exemption from the carbon price floor available to manufacturers operating ultra-efficient combined heat and power plants. But the fact is he could have been much more ambitious in linking compensation payments to carbon efficiency improvements.
The suggestion that financial support should be made dependent on action to enhance efficiency has been knocking around for some time, but it has been quietly opposed by much of the manufacturing lobby on two grounds - that it would be too bureaucratic to administer and it would be unnecessary on the grounds that high energy costs already provide manufacturers with every incentive they need to embrace efficiency.
However, do either of these objections really stack up?
For good or ill there is already a lot of bureaucracy (or progressive legislation, depending on your point of view) governing manufacturers' carbon emissions and energy use. It should not be beyond the wit of government minister to take the information obtained from the climate change levy, emissions reporting rules, or health and safety inspections and attach a clause to all compensation measures that allows the government to claw back some of the money at a later date if companies either fail to reduce their carbon intensity or fail to demonstrate that they have deployed energy efficiency measures.
The second objection, that manufacturers are already optimised from an energy efficiency perspective, should have more validity - and for some best in class firms it no doubt does. But is it really the case that every manufacturer benefitting from the new compensation package has LED lighting throughout their facility, electric cars on site, comprehensive insulation, and processes in place for checking compressed air systems are leak free? I'm guessing not.
If the Treasury was really committed to decarbonisation and manufacturers were really committed to optimising their long term competitiveness neither would have any problem with a sliding scale of compensation that rewards those who invest some of the money they receive in cutting their emissions.
The counter to this argument is that manufacturers can't afford it. Despite the often relatively rapid returns on investment offered by energy efficiency measures, many companies are unwilling or unable to find the capital they need to install LED lights or roll out the latest automated, optimised production line.
But this problem is just further evidence of a separate market and policy failure - namely the inability of the finance community to provide the targeted loans that would overcome the barriers to investment in energy efficiency measures. The banking sector had taken a well-deserved kicking over the last seven years, but to its litany of scandals must be added the utter failure to harness the power of responsible finance to drive mass investment in relatively low risk energy efficiency measures. Lord Adair Turner was right when he said much of banking had become "socially useless" - green finance should be the route to rediscovering the sector's social purpose.
There are a number of public and private energy efficiency financing options available for manufacturers, but a Treasury that was committed, in George Osborne's words, to becoming "a green ally, not a foe" would be looking to expand these offerings significantly, ideally by allowing the Green Investment Bank to borrow at ultra-low rates. It could then make energy cost compensation commensurate on energy efficiency improvements that would cost manufacturers nothing up front and would deliver net financial savings over time. Those who had already genuinely embraced green best practices should be allowed to pocket their compensation, and perhaps encouraged to start thinking about whether investment in renewable energy and decarbonisation R&D makes sense.
This corporate tribute to the Green Deal and pole-axed consequential improvements rule would cut manufacturers' energy costs, enhance their efficiency, and cut carbon emissions. Those manufacturers who continue to complain about energy costs should be politely but firmly told to come back when they have installed LEDs. Only those that have done precisely that should be rewarded with access to the Treasury's full compensation package.
14 Apr 2014
It is always gratifying to have your assumptions confirmed, particularly when confirmation comes via one of the most comprehensive and in-depth academic exercises in history.
Yesterday's publication of the latest Intergovernmental Panel on Climate Change (IPCC) report on climate mitigation measures takes the microscope to virtually every assumption that supporters of the green economy hold dear - we can still keep climate change below 2ºC, clean technologies are plummeting in cost, decarbonisation can be delivered without damaging living standards, major technological transformations are needed across energy, industry, agriculture, transport and buildings, we risk stoking up a "carbon bubble" by continuing to invest in high carbon assets - and finds that not one of them is wanting. This satisfaction must be what climate sceptics feel like when they scour IPCC reports and find the one line in thousands that appears to agree with their flawed analysis, except in this case virtually every line agrees with new environmentalists' central assertion: a low carbon economy is feasible, affordable, and desirable.
What the latest IPCC report does so effectively is take the disgracefully under-reported clean tech revolution of the past decade and attempt to tell the world what has really happened.
A decade ago green business leaders and campaigners had to make their case using vague reassurances that a decarbonised global economy could be built through the mass deployment of clean technologies, which at that stage were often expensive and unreliable. But now, as the IPCC report demonstrates, we know that the cost of renewables has fallen drastically and that well-located wind and solar power can compete with fossil fuels, even when you pull the intellectually dishonest trick of not making fossil fuel energy pay for its climate impact. We know that zero emission vehicles are technically feasible and financially attractive. We know (as we always knew) that energy efficiency improvements to buildings deliver substantial savings over their lifetime. We know that making wider use of existing best practices and technologies can cut industrial emissions by a quarter. We know that nuclear and carbon capture and storage technologies can deliver utility scale energy capacity, even if some concerns remain about costs. We know gas can cut emissions by replacing coal, just as we also know that it is a short term fix at best and that a long term switch from coal to gas would be like a dieter switching from doughnuts to chocolate.
The IPCC captures these facts and confirms what we have also always known: the revolutionary improvements in clean technologies in recent years mean decarbonisation can be delivered at negligible cost to the economy.
In fact, the report even attempts to put a value on that negligible cost and comes up with 0.06 of a percentage point annually throughout the rest of the century. The cost is minute, barely a rounding error - but a penny lost in economic growth will be too much for some fossil fuel apologists who wrap themselves in the cloak of anti-poverty campaigning to defend their own financial self-interest. As such it is vital to note that the report's economic analysis does not include many of the benefits associated with decarbonisation. Add in the enormous, but difficult to quantify, benefits associated with clean technologies, such as improved air quality and energy security, and the ability of decarbonisation to deliver an economic boost alongside much-needed risk mitigation becomes obvious.
The report is basically the academic equivalent of that famous cartoon that lists the numerous upsides associated with a green economy and asks "What if climate change is a big hoax and we build a whole better world for nothing?" Except, as the preceding IPCC reports made plain, climate change is anything but a big hoax.
Critics of the green economy have argued the previous two IPCC reports' confirmation of spiralling carbon emissions and worsening climate risks proves the current approach to climate change is not working - an analysis that they then bizarrely use to argue for an end to any meaningful effort to tackle emissions. They are sadly right that climate policies have failed in their primary goal of cutting global emissions. But the IPCC's report and all the recent trends in clean tech deployment indicate that they have helped make renewables and other clean technologies technically and economically feasible. We need clean tech cost curves to continue to fall and we need to correct those areas of climate policy that remain flawed, but the potential is clearly there for green policies to still deliver on their ultimate goal of avoiding dangerous levels of climate change.
Inevitably, the report is not all (energy generating) sunshine and zephyrs. The shadow of the terrifying IPCC reports on climate science and adaptation loom large, particularly when the report notes that emissions have continued to climb rapidly over the past decade. The scale of a clean tech revolution that requires steep cuts in fossil fuel investments and drastic increases in clean energy spending is as daunting as ever.
Worst of all is the extent to which so much of the analysis does not reckon with the political, social, ideological, and financial inertia that characterises all economic interactions. Our continued failure to deliver proven cost-saving energy efficiency measures demonstrates that our economies are not set up to deliver perfectly rationale outcomes, even when certain clean technologies and business models are demonstrably better than their alternatives.
This inertia is evident in virtually every challenge the green economy faces, be it in the reports suggesting certain governments wanted sections of the IPCC report on the inefficiency of fossil fuel subsidies scratched out or the dismissive stance fossil fuel incumbents have struck towards the clean technologies that threaten their very existence (against this backdrop it was fascinating that the "carbon bubble" hypothesis and its warning that fossil fuel assets could very quickly become overvalued as the low carbon transition gathers pace, made it into the report). It is only through the continued development of ever more competitive clean technologies and the use of effective policies that recognise the huge risks inherent with the carbon intensive status quo that this inertia can be overcome.
However, while the challenge remains as daunting as ever, the report is shot through with compelling evidence that the world has already begun an historic transition towards a cleaner and more sustainable economy. This evidence is clear, not just throughout the latest IPCC report, but also throughout the expanding library of academic and investment research on the green economy. It takes a particular type of short-sighted, self-interested, small c conservatism to look at the latest IPCC report, look at the falling cost curves for renewable energy, look at the technical feasibility of nuclear and CCS, look at the projected increases in green investment that run to hundreds of billions of dollars, and not think that something exciting and significant is afoot.
It is utterly bemusing that certain newspapers can read the IPCC report and conclude that the big story is that there could be some role for gas as a "bridging fuel". It is akin to reporting on Neil Armstrong's moon walk by leading on the details of one of the rocket fuels that was considered - it's interesting, but it is hardly the main event. Equally, it is bemusing that certain multinationals and investors can continue to nonchalantly fund high carbon infrastructure without even acknowledging the technological transformations and shifting risk profiles that are obvious to anyone willing to look. It is not a new point, but they look ever more like typewriter manufacturers circa 1979.
At the very least governments and businesses looking at the implications from the IPCC report should be hedging their bets and reducing their exposure to fossil fuels while increasing their interest in clean technologies. However, entrepreneurs and true business leaders never settle for the very least, and as such they are already looking at the clean tech transition that is under way and working out how to seize the immense opportunities it offers.
The implications of the IPCC report for green business leaders are clear: a low carbon economy is feasible, affordable, and desirable, and that means it will also be investible, marketable, and profitable for those businesses willing to lead the clean tech revolution. After two reports of unremitting and justified climate doom and gloom, that is the good news.
09 Apr 2014
There are few more effective ways to get someone to glaze over than to strike up a conversation about boilers. Although, in fairness, a discussion about insulation or double glazing may run it close. But the inherent challenge faced by those seeking to drive consumer demand for the various domestic energy efficiency measures now on offer need to be overcome, not least because some exciting developments are underway in the world of boilers.
Today has seen the long-awaited launch of the domestic element of the Renewable Heat Incentive (RHI) scheme, which will now offer households the opportunity to secure quarterly payments based on how much renewable heat they generate. There has been plenty of grumbling about the lengthy gestation for the scheme, while concerns remain about how effective the initiative will prove at ferreting out any rogue traders who seek to take advantage of increased demand for renewable heat systems. Others have highlighted the relatively high cost of carbon savings delivered by renewable heat systems compared to alternative technologies. But despite these reservations the scheme represents a significant boost to the green economy and could deliver a major breakthrough for the emerging green home market.
The merits of the scheme are two-fold. Firstly, as a world-first mechanism for driving adoption of renewable heat technologies it provides a boost to a much neglected clean tech area that will need to expand rapidly if the UK and other industrialised economies are to meet their long term carbon targets. Over 80 per cent of UK heating is provided by fossil fuels and in 2009 around 32 per cent of all greenhouse gas (GHG) emissions in the UK resulted from heat related activities. We already know how to decarbonise electricity supplies and the technologies required to do so are falling in price all the time. But there has been less progress in the development and adoption of renewable heat technologies, making the emergence of lower cost renewable heat systems a national priority.
The introduction of the RHI for both businesses and households promises to drive the market for heat pumps, biomass boilers, and solar thermal systems, fuelling technology innovation and driving down costs through economies of scale. The resulting emissions savings may be initially costly, but there is the potential for the UK to build a world-leading, potentially export-led, new clean tech market.
Secondly, the Domestic RHI forms the final piece in the puzzle, the final piece of lagging in the loft if you will, of the government's wider green homes strategy. Again, Ministers have faced plenty of justified criticism about the various delays and technical difficulties this strategy has endured through the controversial changes to the microgeneration feed-in tariff scheme, the cuts to the Energy Company Obligation (ECO) efficiency scheme, the watering down of green building standards, and the decidedly lukewarm reception for the Green Deal energy efficiency financing scheme. But the fact that each of these policies could and should be improved does not detract from the fact the UK now has a comprehensive and attractive package of measures to drive the transition towards greener and warmer homes.
The RHI means it makes financial sense for virtually everyone operating off-grid oil-fuelled heating to switch to renewable alternatives. The feed-in tariff and Domestic RHI means it makes financial sense for virtually everyone with south facing roofs or suitably located gardens to install solar PV, solar thermal, or micro-wind systems. The ECO and Green Deal means it makes sense for everyone to assess the energy efficiency of their home and undertake upgrades where appropriate. All of the policies means that it makes sense for anyone worried about rising energy costs or carbon emissions to see if their home is suitable for onsite power or heat generation.
There are valid questions about whether these schemes will disproportionately benefit the wealthy and middle class given the money and time needed to undertake such improvements. But the combination of grant funding and clever financing promises to deliver upgrades at no upfront cost across all social classes. Moreover, the scaling up of the green home market will benefit everyone in the long term as it cuts emissions, enhances energy security, and helps to bring down the costs of clean technologies to the point at which they come as standard in every home.
However, if the long-running travails of an insulation and energy efficiency sector that has always offered a product that makes financial sense are anything to go by, it is clear that being on the right side of return on investment calculations does not on its own create a market. The onus has to now be on the thousands of green businesses that provide Green Deal upgrades, heat pumps, solar panels, and biomass boilers to get out there and drive demand for the exciting technologies and services they offer. The introduction of the coalition government's last major green home policy means there is no longer any excuse.
To drive this market the clean tech sector needs to take a leaf out of the playbook of those industries that have created mass market demand for high value products - the auto sector, the IT and home entertainment industries, even the travel industry. They need to make their products attractive, effective, and, if possible, desirable. They need to target the early adopters and influencers who can create the initial market and force it into the mainstream (in short, and I know this may seem self-serving, they need to target the BusinessGreen audience). They need to use intelligent and proven advertising and marketing techniques to reach their target market. And then they need to deliver an exemplary product and service that quickly rides any cowboys out of the town and creates strong word of mouth demand.
Can this be done with energy efficient boilers and triple glazed windows? It is fair to say that even Don Draper would struggle to make them appear sexy. But as with any new product successful marketing is all about positioning. A modern, high tech, sustainable and warm home is better than a dated, functional, unsustainable and cold home. The studies showing how "contagious" solar panels spread through a neighbourhood prove there is huge pent up demand for clean technologies - clean technologies that polling reveals huge public support for. Even the dullest clean technology can be made exciting with the right messaging.
The UK's green businesses have an array of attractive, effective and desirable green products to offer, and the introduction of the RHI, feed-in tariff, and Green Deal means that in many cases they are now just as financially viable as they are technically viable. The green economy continues to face far more challenges and uncertainties than it should, and Ministers should be doing much more to drive the investment and business models we urgently need. But for the green home and office sector the policies are in place, the technologies are in place, the demand is there to be created - it is time to engage the consumer and start selling.
ABOUT JAMES' BLOG
Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray