Red tape is 'blocking' green micro-generation

The government's plans to encourage millions of UK households to generate their own electricity must be backed up with effective policy, energy experts said today.

New research released today by a group of academics shows that consumers wishing to generate their own energy face a number of cost-prohibitive obstacles.

In a response to a government consultation, the researchers, from the University of Southampton, the University of Sussex and Imperial College, say that switching to household power generation - known as micro-generation - will only be attractive if the cost to consumers is reduced significantly.

Micro-generation is the production of heat and/or electricity on a small scale from a low carbon source, such as solar panels, rooftop wind turbines and micro-CHP units (generators that produced heat and power in a single process). The contribution this technology could make to cutting the environmental impacts of energy use was acknowledged in the government's 2003 energy white paper but as yet, the researchers say, specific measures to expand its use have been slow to materialise.

The leader of the team, Jim Watson, from the University of Sussex, said micro-generation technologies held great promise, but were "fighting on an uneven playing field".

"Our research shows that some basic changes in regulations could make a significant difference. People should be given the sort of help that energy companies receive through tax breaks when they invest in new power stations."

Some financial incentives already exist. There is a significantly reduced (5%) VAT rate for most micro-generation technologies which was extended in this year's budget to cover air source heat pumps and micro-CHP units.

Under EU rules, gas and electricity suppliers required to meet targets for improving household energy efficiency can gain 'innovation points' and meet their targets quicker by offering micro-CHP.

And the Green Landlord scheme, announced in the 2004 budget, aims to explore how tax deductions and reliefs might be developed to encourage and reward landlords who improve the energy efficiency of their building.

Dr Watson said that recent rises in energy prices were helping to make micro-generation more attractive, but "not enough for a significant breakthrough".

Consumers who wanted to replace their central heating boiler with a new micro-CHP unit could expect to take up to 10 years to pay off the additional costs, he said.

"Currently, the major benefit for those investing in micro-generation is a reduced electricity bill. But the government could shorten payback times by ensuring that consumers get paid a fair price for electricity they export to the grid. This electricity is particularly valuable at peak times when national demand is high.

"But the systems that pay the big electricity generators these fair rates don't apply to households. Electricity companies say that there are not enough micro-generators to do this. This is a classic 'chicken and egg' problem that needs some government intervention and up-front investment to achieve a breakthrough."

Dr Watson's research team is halfway through a two-year project funded by the Economic and Social Research Council's sustainable technologies programme, Unlocking the Power House, which examines the economics of micro-generation and its barriers to implementation.

This research also forms the team's response to the government's consultation on its micro-generation strategy and low carbon buildings programme, which was launched in June and calls for more businesses and homes to be supplied with low carbon small-scale generating technology. Today was the last day for responses.

The Renewable Power Association (RPA), the green energy generators' trade body, said it welcomed the research, but warned it was important not to overestimate the short-term impact of these regulatory changes. Sebastian Berry, the RPA's micro-renewables policy manager, said: "What's needed in the UK is more than simple net-metering, paying householders a few pence per unit for their exported electricity.

"The success of the European feed-in tariff model which pays individual householders guaranteed premium prices for their electricity is by contrast a proven mechanism leading to very significant increases in micro-generation.

"It's also important to remember that the potential market for micro-renewables in the UK is far larger than individual householders wishing to retrofit a system on their property. For commercial and housing developers for example, the really important medium and long-term drivers for integrating these technologies into new housing estates and office blocks are going to be positive planning policies for renewables and building regulations."

In June the RPA also criticised the government for the government's gap between rhetoric and reality on renewable energy in Britain.

"The 2003 energy white paper set out clearly the rationale for adopting renewables. But the white paper and the Energy Act which followed it were devoid of policy measures to make it happen," said the RPA's chief executive, Philip Wolfe.