NegaWatts: Carbon Trading ROC’s for energy including heating

[Mark Siddall]

I apologise for the length of this one, though I hope it’s worth reading. In the end I plumped for the General Notice board so that other non-members, hopefully moving in the right circles, could read the idea, criticise it, and it possibly make it more robust (or kill it off if it sucks). Anyway here goes: –

The Premise:
Carbon trading on an international scale will in the future become a very lucrative business. Successful countries will harness this to enhance their GDP. In order to maximise the potential of carbon trading the value of the activity must occur at grass roots level, not just between nations.

How can we get carbon trading to occur at the grass roots?
Currently, if you have photovoltaics, wind turbines, biomass CHP, installed on your house you can become an electricity producer. In order to provide this, or any, product it has to be quantifiable and measured, it is only then that it can have value.

At the moment electrical energy from renewable sources has a high capital value due to the fact that electricity companies are obliged to increase the energy mix in such a way as to increase the proportion of electricity generated from renewable. If they fail to hit the target they either pay a fine or are obliged to purchase renewable electricity from another source e.g. the domestic home generation market. Why? To create a carbon offset.

The purchase of the energy is via the ROC and it is at this point that trading in renewable energy gets interesting (well kind of….)

In order to purchase this energy the Renewable Obligation Certificate (ROC) was introduced and it acts as the proof of energy generation, which is passed onto the purchaser i.e. the energy company. Due to the fact that electrical energy companies are obliged to meet a renewable quota ROC’s can be bought and sold for a greater value than the electricity that is generated (provided that there is not an over supply of ROCs….and if there is an over supply of ROCs I believe that the Government should simply move the target one step closer to zero emissions).

It occurred to me that this whole arrangement is effectively the managed displacement of electrical energy generated by fossil fuels. Then, as I am reading Factor 4 by Lovins et al, I began to wonder if this works for electricity why not the other major UK energy sources; such as those used for heating?

Energy Consumption for Heating
About 170 kWh/m2 of space heating energy is delivered energy each year and a further 65 kWh/m2 is delivered for the purposes of water heating. Just like electricity these kWh have value. In the UK the majority of this heat energy derived from gas, though a proportion of this is also gained from other sources including electricity, oil and the like.

We desire, and arguably have a right to, thermal comfort within the home. As a consequence in order to live in comfort we will always need the same quantity of energy (regardless of the energy source). The technical issue then is where we get than energy from.

It was on the back of this I began to wonder if there is another way to tap into the energy market, one that would create a more holistic approach to placing value on energy. So far the UK has figured out that renewable energy sources have a large part to play in reducing fossil fueled energy consumption, and these also gain a vast amount of media attention, but do they all have to be active technologies? Provided that the appropriate comfort conditions are achieved then the answer is no. On this basis an alternative solution is energy efficiency and with regards to heating this includes insulation, high performance glazing etc. By upgrading the thermal performance of a property you negate the need to consume fossil fuels. Does this passive approach apply to other goods within the home? Yes, more efficient washing machines, dishwashers, cookers, freezers, TV’s the list goes on.

The Commercial Incentive of the ROC
Currently the ROC only provides a commercial incentive for a given individual to generate renewable electricity, however there is currently no incentive to upgrade thermal energy performance and there is certainly no incentive to improve energy performance beyond the national requirement of the building regs. But how about if value was attached to improving energy performance far beyond the national average? Why, as a form of energy /carbon trading, couldn’t people sell negawatts (energy saved) of energy to energy companies as well?

How do you tap into a market for Negawatts?
Every house could be given proscribed an energy quota which would reflect the national average energy consumption in kWh/m2/annum say about 275 kWh/m2/annum (based upon AECB data). Given that any new build only has to comply with Building Regs any improvement upon this line in the sand has value. If your property has an energy requirement that is less than the B Regs norm, or should I say significantly less that the 275kWh datum, doesn’t this displacement of energy consumption have an ecological value? In this day and age it certainly does (or should do.) What if this reduction in consumption/ increase in ecological value is given a tradable market value? To tap into a negawatt market you would have to prove that your property uses, say, 70% or 95% less energy than the national average. (A target that is a stretch but an achievable one.)

This is where the ROC comes in again
From what I understand energy requirements fluctuate relatively little on an annual basis rather it is the price that fluctuates due to supply and demand of the fuel source. What is the value of a kilowatt saved?

How can we get energy companies to find value in improving energy efficiency?
All energy companies (not just electrical) should be obliged to meet a renewables quota (which would be based upon a percentage of the 275kWh notional allowance per home). If the energy company can't meet this target then it would have to pay a fine, however it would have a way out, in order to avoid these fines a tradable commodity would be desirable, something like the ROC for example. The ROC would act as mechanism to assist the company to increase the apparent renewable energy (more precisely the energy/carbon offset) produced relative to the existing building stock quota of 275 kWh/m2/annum.

It is on this basis that the ROC for passive energy systems i.e. thermal performance/energy efficiently has value (the lesser of two evils). The fix is that the longer the energy company leaves the implimentation of radically improved carbon neutral technologies the smaller its market will get (as the insulation reduces their market year upon year.) It is on this basis that in the long term energy companies will be encouraged to introduce new energy technologies more quickly (such as appropriate bio-fuels, CHP and hydrogen etc.)

So how could this be implemented in such a way that the energy companies are guaranteed to be buying negawatts?
1) They could simply compare energy bills between a notional UK national average property and the energy actually consumed. Sadly this concept fails as if it were the means of implemented it would mean that a small in efficient house would be prized just as much as a low energy house. (The same could be said if a building regs notional house were to be used.)
2) What is required is a Post Occupancy Evaluation that audits energy performance to ensure that the building performs at or beyond the agreed energy reduction target (be it 70% or 95% of the national average). The data from the POE then can be included within “Negawatts” ROC and the energy generated/saved can be sold to the energy suppliers.

Hmmm, now let me think, do any AECB members know of any good voluntary low energy standards, that also require POE so as to certify their performance, that could be used in this scenario? 😉

Comment:
If you think that this idea has any merit perhaps with could be used in lobbying groups. If not give your reasons below and we can try and thrash out the theory.

Mark

P.S. This concept could be particularly efficient at improving and increasing the rate at which refurbishment is undertaken and making commercial developers seek to develop low-energy developments (a house that generates saleable negawatts could use the revenue generated to effectively eliminate is fuel bills. House without fuel bills would sell like hot cakes.)

[Mark Siddall]

Jane,
I can see where you are going with the double counting issue and the distortion of the renewables. It should be an either or scenario, ROCs or sell to via metering supply to the grid not both.

Mark

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