Land bank scams are back in the spotlight. Land banking is nothing new: it was a feature of the selfbuild scene when I first got involved around 20 years ago, and despite our best efforts, it's still very much around.
This is how it works. Unscrupulous people buy fields which never have a hope in hell of being built on and then flog off little chunks of these fields as building plots. They pay maybe £20k for the field, they then charge £10k for a dozen plots, and they pocket the difference.
The poor saps who are persuaded to buy the plots are left with a meaningless subdivision of a field which they don't even have access to, let alone any hope of building anything on it. It's a scam, pure and simple, but it's hard to outlaw because there is nothing illegal about subdividing a field and selling it off in parcels: the fraud relies on exaggerating the hope value placed on the plots and that can be difficult to prove, especially as the land bankers don't use conventional marketing channels, instead mostly relying on high-pressure sales techniques. They will hold out the prospect of a fat profit, but only if you move quickly. Oh, and you don't need to bother with a conveyancing solicitor — you don't need one to buy a car, do you? And this is less than a new car!
Anyway, despite lots of media exposure, and parliamentary questions and such, land banking scams are still with us and may in fact be getting worse. Such has been the publicity surrounding Grant Shapps's "selfbuild revolution" that there is now a whole new cohort of potential suckers out there who know nothing about the perils of land banking.
But whilst the land bankers might trouser the odd £10k from the unsuspecting public, there is a a much bigger scam going on down at the town hall and this is one that the Financial Services Authority will not be investigating. We are talking impact fees, or development contributions, and these mothers are big.
For decades, big housebuilders and developers have had to make infrastructure contributions in return for getting planning permissions. It was par for the course. "You wanna build 100 new homes here? Make 30 of them affordable, and give us a couple of million so we can build you a nice access road with its own roundabout. And some swings for the kiddies. There's a good boy."
But times change and this sort of conversation is no longer for the big guns. It's filtered down to individual selfbuilds and it may even be on its way towards people adding extensions. "You wanna add an extra bedroom? That'll be another desk in the primary skule and that costs us £20k." Long gone are the days when the rates would cover local expenditure: too much local government money comes from central funding, so it's hardly surprising that local government looks at innovative ways of raising extra cash. That won't lose any votes. The squeeze is on.
Trouble is this just may to stop building dead in its tracks. In the past few days, stories of selfbuilders being asked for a £50k contribution have hit my screen, and in one case, mentioned in a Jason Orme blog, £187k. Call it S106 payments, Affordable Housing Contributions, Community Infrastructure Levy, it all amounts to much the same thing - a stealth tax on development.
Now, arguably, if this is all done and dusted before the selfbuilder ever gets hold of the land, and the extra expense is made clear at the outset, it's no bad thing, as in theory, the fees will be deducted from the uplift in value from the granting of planning permission. But this isn't always the case, and lots of would-be selfbuilds in back gardens will be rendered unviable by the introduction of fees. It all begins to make the land bankers look like amateurs.
Behind all this is the very odd way in which land tenure is handled. You can nominally own a piece of land or a house but if you want to do something different with it, the decision rests with others, namely the council. This used to be an entirely political matter — you simply had to convince the planners and your neighbours. But, in these straightened times, it looks like it's going to have a financial element attached to it now, over and above the mere cost of applying for planning permission. In effect, planning permissions will be sold for whatever the market will bear and any uplift in value as a result of that permission will mainly accrue to the council.
So you can see that the two issues — land bank scams and council contributions — are in fact closely linked and reflect two sides of the same coin. Namely, that planning permission is worth far more than land itself, and that this represents a type of public ownership of land by stealth. Granting planning permission on agricultural land is very similar to printing money because it creates value: it's hardly surprising that the ones granting the permission — the councils — are now trying to get their hands on the spoils.
The message is that potential plot purchasers now have two sharks out there to watch out for. The first is to avoid buying a piece of land with no hope of ever getting planning permission: the second is to make sure that if the land does stand a chance of getting planning, that you will be able to afford to pay for it when the permission is granted.
16 Aug 2012
11 Jul 2012
To plan, or not to plan
Here's an interesting local story with national implications. Cambridge MP, LibDem Julian Huppert (pictured), won a ballot to introduce a private member's bill in the House of Commons and he elected to ask his constituents for some ideas. Top of the poll was the suggestion that we should stop converting disused pubs into flats. But there was a second leg to the bill as well which would stop existing premises being turned into supermarkets.
Now these issues have resonance in Cambridge because we have lost 20 pubs in recent years - all having made way for flats. And we have gained dozens of supermarkets, Tesco Expresses in particular, which have done for lots of independent shops. It's a process that is going on all over the land but in Cambridge it seems to be on steroids. The issue is, of course, the clone town, which everybody and their aunt hates, but which planning has no issue with.
But underlying this is a wider issue which rarely gets an airing and that is the right of an owner to do what they wish with their property. If their pub doesn't stack up financially, why shouldn't the landlord be able to sell it to a developer? If a shop or warehouse is losing money, surely the owner should be able to sell it on to the highest bidder? If Huppert's bill was to become law — apparently this is most unlikely — then it would become the thin end of the wedge and the next thing would be neighbours demanding a veto over who you can sell your house to.
Strip it away still further and you can see the essential dilemma that underlies all issues to do with planning permission. What does "ownership of property" really entail? Or, to put it another way, how much control should your neighbours have over what you can or cannot do with your own land or property?
I would say that our attitudes are now thoroughly inconsistent. Everybody pays lip service to doing away with red tape and making planning permission easier, quicker and simpler to obtain — it's easy to back such notions when they have no direct effect on you. But nobody likes it when a much loved neighbourhood changes, when a once loved pub turns into yet more student accommodation or a little used snooker hall is scheduled to transform into a chain supermarket. Or a neighbour builds a sodding great extension blocking out the light. Or a village is scheduled to become home to a windfarm. Yes, in instances like this, we are nearly all NIMBYs, we sign petitions, we lobby MPs. Which is how Julian Huppert no doubt got the idea of introducing this bill.
But has he thought it through at a philosophical level? His bill may be democratic, but it's hardly liberal.
19 Jun 2012
Is Thorium a Super Fuel?
Yesterday, I pitched up at Cambridge University's Engineering Dept to hear thorium evangelist Rick Martin talking about his new book, Super Fuel, subtitled Thorium, the Green Energy Source for the Future.
For those of you not familiar with the buzz about thorium, it's an alternative to using uranium as a fuel for nuclear reactors. It's abundant, it's much easier to manage and the waste and proliferation issues are greatly reduced (though not eliminated). I could go on, but you'd do better to look at the book.
What's just as interesting to me is that thorium has evangelists. Evangelists like Apple used to have evangelists? Yes, not so very different. But why would anyone evangelise nuclear power? Well, just as Apple was once a David pitching itself against Microsoft's Goliath, so thorium is very much a minnow when pitched against mainstream nuclear power. It's not just the fuel, it's how you use it and the buzz is all around liquid fluoride thorium reactors, known in thorium circles as Lifters, which don't need pressurising and have in-built passive protection against meltdowns.
This is not new technology. A Lifter was built and run for a while at the Oak Ridge Labs in the USA in the 1970s by Alvin Weinberg, the godfather of the thorium brigade. It worked fine but it got closed down because the USA decided that uranium reactors suited them better (at least in part because they could be used to produce enriched uranium for bombs). Since then very little has happened until very recently; the Chinese are now building a couple of lifters, and India is also starting to use thorium though as a solid fuel, not a liquid.
In the West, it's mostly down to the evangelists, notably Kirk Sorensen in the USA - you can watch his TED talk here:it's only 10 minutes and, boy, does he sound like Steve Jobs. Rick Martin seems to be his John the Baptist, not as technical but just as keen. Sorenson's and Martin's enthusiasm is infectious because, due to them, we know have our very own British evangelist, Bryony Worthington, who just happens to have a seat in the House of Lords. Worthington started out as an anti-nuclear campaigner at Friends of the Earth but re-assessed her views after coming into contact with Kirk Sorensen and finding out about thorium. There is also a Weinberg Foundation dedicated to spreading the thorium message.
I'm afraid I'm a sucker for all this. I don't know enough about nuclear physics to judge whether thorium is quite as wonderful as the evangelists make out, but there is such a buzz about it that it's hard not to get excited about the possibilities, especially as I feel so bleak about so many of the other options facing us. Hell, thorium even has its own skeptic, Arjun Makhjani, who makes nit-picking points about why it might not be such a great idea. You can hear him debate with Rick Martin here. Somehow, having a tame skeptic makes it all the more believable.
Martin made the telling point that nuclear R&D pretty much ground to a halt after Weinberg was sacked from his job by Nixon in 1973. Then, after the Three Mile Island accident in 1979, it all just froze up. Nuclear power went right out of fashion and no young grad student worth their salt ever considered dedicating their life to nuclear research. Renewables were just so much more fashionable. But now it's changed. Martin said the current situation reminds him of Silicon Valley c 1980 when there was IBM who were everything in computing and all these little start-ups with very different visions of what might happen.
This tacitly acknowledges that thorium lifters are not the only nuclear game changers in town and that there are other vision of where we could go with nuclear slowly gathering momentum, notably the travelling wave reactors which are being backed by Bill Gates. There are other designs too - known generically as 4th Generation Reactors. And let's not ignore the €10 billion being spent on the experimental Iter fusion reactor in France.
After decades in a semi-moribund state, nuclear research has once again come alive, promising solutions to many of the age-old issues that have dogged the industry. But to date it's only thorium and its lifters that seems to get evangelists excited. It's hard to know quite why this is but I feel that in large part it's because of the back story of how the initial research was shelved and forgotten and how it's been unearthed by an unlikely, non-establishment hero. There is a touch of the fairy tale here, a touch of magic. Nuclear power badly needed re-branding and Kirk Sorensen may just be the man to do it.
For those of you not familiar with the buzz about thorium, it's an alternative to using uranium as a fuel for nuclear reactors. It's abundant, it's much easier to manage and the waste and proliferation issues are greatly reduced (though not eliminated). I could go on, but you'd do better to look at the book.
What's just as interesting to me is that thorium has evangelists. Evangelists like Apple used to have evangelists? Yes, not so very different. But why would anyone evangelise nuclear power? Well, just as Apple was once a David pitching itself against Microsoft's Goliath, so thorium is very much a minnow when pitched against mainstream nuclear power. It's not just the fuel, it's how you use it and the buzz is all around liquid fluoride thorium reactors, known in thorium circles as Lifters, which don't need pressurising and have in-built passive protection against meltdowns.
This is not new technology. A Lifter was built and run for a while at the Oak Ridge Labs in the USA in the 1970s by Alvin Weinberg, the godfather of the thorium brigade. It worked fine but it got closed down because the USA decided that uranium reactors suited them better (at least in part because they could be used to produce enriched uranium for bombs). Since then very little has happened until very recently; the Chinese are now building a couple of lifters, and India is also starting to use thorium though as a solid fuel, not a liquid.
In the West, it's mostly down to the evangelists, notably Kirk Sorensen in the USA - you can watch his TED talk here:it's only 10 minutes and, boy, does he sound like Steve Jobs. Rick Martin seems to be his John the Baptist, not as technical but just as keen. Sorenson's and Martin's enthusiasm is infectious because, due to them, we know have our very own British evangelist, Bryony Worthington, who just happens to have a seat in the House of Lords. Worthington started out as an anti-nuclear campaigner at Friends of the Earth but re-assessed her views after coming into contact with Kirk Sorensen and finding out about thorium. There is also a Weinberg Foundation dedicated to spreading the thorium message.
I'm afraid I'm a sucker for all this. I don't know enough about nuclear physics to judge whether thorium is quite as wonderful as the evangelists make out, but there is such a buzz about it that it's hard not to get excited about the possibilities, especially as I feel so bleak about so many of the other options facing us. Hell, thorium even has its own skeptic, Arjun Makhjani, who makes nit-picking points about why it might not be such a great idea. You can hear him debate with Rick Martin here. Somehow, having a tame skeptic makes it all the more believable.
Martin made the telling point that nuclear R&D pretty much ground to a halt after Weinberg was sacked from his job by Nixon in 1973. Then, after the Three Mile Island accident in 1979, it all just froze up. Nuclear power went right out of fashion and no young grad student worth their salt ever considered dedicating their life to nuclear research. Renewables were just so much more fashionable. But now it's changed. Martin said the current situation reminds him of Silicon Valley c 1980 when there was IBM who were everything in computing and all these little start-ups with very different visions of what might happen.
This tacitly acknowledges that thorium lifters are not the only nuclear game changers in town and that there are other vision of where we could go with nuclear slowly gathering momentum, notably the travelling wave reactors which are being backed by Bill Gates. There are other designs too - known generically as 4th Generation Reactors. And let's not ignore the €10 billion being spent on the experimental Iter fusion reactor in France.
After decades in a semi-moribund state, nuclear research has once again come alive, promising solutions to many of the age-old issues that have dogged the industry. But to date it's only thorium and its lifters that seems to get evangelists excited. It's hard to know quite why this is but I feel that in large part it's because of the back story of how the initial research was shelved and forgotten and how it's been unearthed by an unlikely, non-establishment hero. There is a touch of the fairy tale here, a touch of magic. Nuclear power badly needed re-branding and Kirk Sorensen may just be the man to do it.
13 Jun 2012
Is there anything good in the Green Deal?
Yesterday, I went to a meeting in London put on by SPAB (Society for the Protection of Ancient Buildings) called to update people about their research into energy efficiency measures used in older properties. SPAB have become remarkably active in this field recently and there were nine presentations, each on different projects.
At the very heart of this research is a central fear that adding piles of insulation into old buildings (or indeed new ones) may cause havoc with the moisture levels in the fabric and may end up causing more harm than good. All across the country, researchers are beavering away measuring temperatures, U values, airtightness, relative humidity levels, rainfall, trying to work out what happens to homes both before and after treatment. What emerged was how little we really know about the behaviour of buildings, and how little research has been done.
The establishment view is summarised by two standards, BR 443 which deals with heat loss and sits behind the SAP calculations and BS 5250 which deals with condensation risk. In theory, if your wall assembly (or roof or floor) meets BR 443 and passes the BS 5250 test, then all is hunky dory. But in real life, most of the researchers were saying that neither standard really cuts the mustard and that the moisture modelling suggested by BS5250 is so simplistic that it's a veritable danger.
Which begs the question, what should replace it? Much was made of the more complex, dynamic WUFI model, though some pointed out that not everyone agrees that WUFI is the answer. Surely the Germans would know the answer? Maybe, but Neil May made the interesting point that he had reviewed much of the German language literature and wasn't convinced that their understanding was much better than ours. It seems that moisture behaviour in wall and roof assemblies remains poorly understood and therefore unpredictable.
So what's this all got to do with the Green Deal? Actually, it's pretty central because here we have a government policy which is designed to bounce us into both internal and external wall insulation in older properties, precisely the sort of measures which SPAB are highlighting may cause future problems. The Green Deal wasn't the purpose of this meeting, which was arranged months ago, but nevertheless the Green Deal did rather dominate proceedings and several interesting things came to light. To their credit, DECC (the government department behind the Green Deal) provided two spokepoeple, Nicola O'Connor and Steven Daniels, who explained some of the logic behind the recent publications, but they shot off pretty soon after their presentation and weren't around to hear the deluge of disquiet that followed.
One issue that kept emerging was the initial survey. There are, apparently, 45 measures which might be eligible for Green Deal finance, but which of these are suitable in any given household depend on the survey assessment by a professional who, it emerged, is going to be paid the princely sum of around £30 for undertaking this work. How much time is that going to buy? 10 minutes, if you are lucky. And will the advice be any good? More likely, it will be sales advice with commission for any number of supposedly Clean Tech businesses. "Will the survey be independent?" rang out the question from the floor. "We can't insist on this, but it will be impartial," replied DECC. "Hmmm", went the audience. A good independent survey, it was pointed out, like the ones Parity Projects undertake, is more likely to cost around £300-£500. Are "ordinary people" going to be happy to fork out an amount like this for a proper survey which might tell them to do nothing?
Then there is the warranty/guarantee. Apparently, there is to be some such scheme in place for Green Deal work, but exactly how it might work is hard to fathom. 25 years was mentioned, but can any building work be guaranteed for 25 years? This seems fanciful. And the loan is to be attached to the utility bills of the house, rather than the person who negotiated it, so if the house is subsequently sold, the loan goes with it.
Can you imagine what a sales boost this will be? "Oh, by the way, you have to pay £500 a year extra on your fuel bills until 2030 for all that insulation we stuck on the bedroom walls, and that air source heat pump which is in the garage but which we don't use very much."
More to the point, can you imagine big finance houses wanting to lend money on these terms? Combine the risk of an-as-yet unknown borrower with a warranty for work undertaken by others and just what would the interest rate be? That's a key point, and one that remains to be addressed. But if it can't beat a bank loan, or peer-to-peer lender Zopa, then what's the point bothering?
All in all, not a good word was to be heard for the Green Deal. I was almost beginning to feel sorry for it by the end of the day. Almost, but not quite.
At the very heart of this research is a central fear that adding piles of insulation into old buildings (or indeed new ones) may cause havoc with the moisture levels in the fabric and may end up causing more harm than good. All across the country, researchers are beavering away measuring temperatures, U values, airtightness, relative humidity levels, rainfall, trying to work out what happens to homes both before and after treatment. What emerged was how little we really know about the behaviour of buildings, and how little research has been done.
The establishment view is summarised by two standards, BR 443 which deals with heat loss and sits behind the SAP calculations and BS 5250 which deals with condensation risk. In theory, if your wall assembly (or roof or floor) meets BR 443 and passes the BS 5250 test, then all is hunky dory. But in real life, most of the researchers were saying that neither standard really cuts the mustard and that the moisture modelling suggested by BS5250 is so simplistic that it's a veritable danger.
Which begs the question, what should replace it? Much was made of the more complex, dynamic WUFI model, though some pointed out that not everyone agrees that WUFI is the answer. Surely the Germans would know the answer? Maybe, but Neil May made the interesting point that he had reviewed much of the German language literature and wasn't convinced that their understanding was much better than ours. It seems that moisture behaviour in wall and roof assemblies remains poorly understood and therefore unpredictable.
So what's this all got to do with the Green Deal? Actually, it's pretty central because here we have a government policy which is designed to bounce us into both internal and external wall insulation in older properties, precisely the sort of measures which SPAB are highlighting may cause future problems. The Green Deal wasn't the purpose of this meeting, which was arranged months ago, but nevertheless the Green Deal did rather dominate proceedings and several interesting things came to light. To their credit, DECC (the government department behind the Green Deal) provided two spokepoeple, Nicola O'Connor and Steven Daniels, who explained some of the logic behind the recent publications, but they shot off pretty soon after their presentation and weren't around to hear the deluge of disquiet that followed.
One issue that kept emerging was the initial survey. There are, apparently, 45 measures which might be eligible for Green Deal finance, but which of these are suitable in any given household depend on the survey assessment by a professional who, it emerged, is going to be paid the princely sum of around £30 for undertaking this work. How much time is that going to buy? 10 minutes, if you are lucky. And will the advice be any good? More likely, it will be sales advice with commission for any number of supposedly Clean Tech businesses. "Will the survey be independent?" rang out the question from the floor. "We can't insist on this, but it will be impartial," replied DECC. "Hmmm", went the audience. A good independent survey, it was pointed out, like the ones Parity Projects undertake, is more likely to cost around £300-£500. Are "ordinary people" going to be happy to fork out an amount like this for a proper survey which might tell them to do nothing?
Then there is the warranty/guarantee. Apparently, there is to be some such scheme in place for Green Deal work, but exactly how it might work is hard to fathom. 25 years was mentioned, but can any building work be guaranteed for 25 years? This seems fanciful. And the loan is to be attached to the utility bills of the house, rather than the person who negotiated it, so if the house is subsequently sold, the loan goes with it.
Can you imagine what a sales boost this will be? "Oh, by the way, you have to pay £500 a year extra on your fuel bills until 2030 for all that insulation we stuck on the bedroom walls, and that air source heat pump which is in the garage but which we don't use very much."
More to the point, can you imagine big finance houses wanting to lend money on these terms? Combine the risk of an-as-yet unknown borrower with a warranty for work undertaken by others and just what would the interest rate be? That's a key point, and one that remains to be addressed. But if it can't beat a bank loan, or peer-to-peer lender Zopa, then what's the point bothering?
All in all, not a good word was to be heard for the Green Deal. I was almost beginning to feel sorry for it by the end of the day. Almost, but not quite.
18 May 2012
Should we re-nationalise the utility companies?
I've done the conservatory tax to death. On its own, it's perhaps not the biggest of stories and doesn't rate more than a footnote in the annals of the political machinations of the Coalition. But the problem is that it's not on its own. It's symptomatic of a whole raft of fudged decisions and misunderstanding which are beginning to taste of a deep rooted crisis in our energy policies.
On the plus side, we have in force a Climate Change Act which commits us to an 80% reduction in carbon emissions by 2050. We are, apparently, just about the only country to have done this. But as far as the plus side goes, that's just about it. I quite fail to see exactly who will be held responsible for us failing to meet this "legally binding target." But, despite this conundrum, it does at least show that the government of the day understands the nature of the problem facing us with climate change and carbon emissions.
But the big problem is how do we get from A to Z. How do we bring about an 80% reduction in carbon emissions by 2050? This is where the roadmaps come in. They offer the opportunity to map out a strategy to power society in a less carbon-intensive way.
Now you can take two approaches to energy roadmaps. You can meticulously map out scenarios for every form of energy use you can think of from cooking to commuting, pointing out just where improvements can and cannot be made. Or you can take a broad brush approach and just reduce the amounts of carbon we are allowed to burn each year and let society organise itself as best it can. Having been studying several of the micro-management roadmaps over the past year or so, I have come to the conclusion that the latter approach is preferable. The basic problem that cannot be addressed by the white-box, micro-approach is that we have no idea how much energy we will have in 2050, nor what price it will be, and without this information we can't begin to make sense of what we should be doing in the lead up to 2050.
A good example of this is the issue of the Green Deal and the retrofitting of insulation to our existing housing stock. Technically, we can do it to any standard, from simply filling up existing cavities, to undertaking radical Passivhaus-style retrofits. The difference in cost is maybe a few hundred pounds per house for the former, or a sum equivalent to rebuilding the entire house from scratch for the latter. Or, indeed, we could head somewhere in between these two extremes. But without knowing the cost of low-carbon energy in 2050, we can't make an informed decision about which way to go.
So we end up with a miasma of polices that sound like they are pointing generally in the right direction, but which in reality no one has a clue about. The Green Deal is a perfect example of this. Under it, you'll be able to borrow money for home energy improvements and you will be able to pay them off by adding the repayments onto your future energy bills. The idea — the Golden Rule, no less — is that your future fuel savings will more than compensate for the cost of the repayments added onto your fuel bills.
But there will be no guarantees about the cost of energy in the future, nor about whether the work carried out on your house will actually deliver the savings promised. The Green Deal pretends to be a hard-headed business decision, but it's no such thing, because the outcome is so tenuous.
Or take nuclear power. It's future is also in doubt and the underlying issue is surprisingly similar. Whilst businesses can calculate how much it will cost to bring a new power station on stream, they can't count on there being a sensible return because no one will guarantee them a price for the electricity they will produce. To do so is said to be anti-competitive, to be rigging the market or, as some green groups claim, to represent a subsidy. So the one form of baseload low carbon power that we know is technically feasible is unable to make any progress in the current environment, not because of people's dread fear of there being another Fukushima but because governments won't provide any guarantee that the product will be sellable.
No wonder all the energy companies are having second thoughts about new nukes. It's a bit like building a new hospital or school under a PFI scheme but without any forward contract indicating that the government would ever pay for it. Energy is seen differently: it's not a social good, like health or education, but a marketable product which we have to buy.
Or at least until people can no longer afford to pay for it. In fact, we have a new category of distress, fuel poverty, as if this is different to food poverty or clothing poverty, or just plain poverty.
And here we stumble upon the very crux of the problem. Much of the ongoing discussion about the Green Deal (and all the other energy subsidies that are flying around at the moment) centres on whether they are regressive, in effect transfers of money from the poor to the rich. It tends to be the rich that do things like do up houses and fit solar panels and to date much of this work has been paid for by hidden taxes loaded onto our fuel bills. Actually, there isn't much of a discussion to be had here because the answer is clear cut — yes, they are regressive, at least in the way they have been formulated to date.
Somehow the idea has taken root that the changes to our energy-burning habits must be funded from our existing energy consumption (i.e. our utility bills), a prime example of a hypothecated tax, and a prime example of why hypothecated taxes are not such a good idea. No one insists that the money raised from motoring taxes should all be spent on roads, or even that National Insurance should all be spent on pensions. So just why has the idea taken root that subsidies for low carbon energy or energy efficiency measures must come from our burning of high carbon energy? If these goals are socially desirable (which they are), then it's plain wrong to load them onto utility bills at a time when utility bills are already very high. People can see the connection, and the hoped-for improvements very quickly become unpopular.
In essence, energy policy is now trapped somewhere between the old Thatcherite dream of it being a privatised commodity and the new reality of it becoming a social good, like the NHS or the education system. Left to the market, it will continue to burn oil and gas, and exploit shale gas and tar sands and whatever else is around to keep the fires burning. But it will simultaneously be pumping CO2 into the atmosphere at an alarming rate, as if there is no tomorrow. Capital intensive projects like nukes and offshore windfarms and housing retrofits will be be ignored because the financial outcomes are too unpredictable, and just raising taxes on fossil fuels to pay for capital intensive low-carbon projects is becoming self-defeating.
Which begs the question, is it time to remove the utility companies from the market and make them, temporarily at least, more like the NHS? It seems politically completely off the radar, but it would enable the big infrastructure decisions to be made with long term planning in mind. If coupled with a guarantee to keep people warm through the winter (isn't that a social good to rank alongside the work of the NHS?) and to engineer a switchover to low-carbon power by 2050 at a price which wouldn't cripple the economy, then it makes sense. At least it makes more sense than allowing the current market failure to continue unabated.
After 2050, the utility companies could once again be sold off with a proviso that they could never again make money by burning fossil fuels. We did it for the banks. Arguably, this is more important.
On the plus side, we have in force a Climate Change Act which commits us to an 80% reduction in carbon emissions by 2050. We are, apparently, just about the only country to have done this. But as far as the plus side goes, that's just about it. I quite fail to see exactly who will be held responsible for us failing to meet this "legally binding target." But, despite this conundrum, it does at least show that the government of the day understands the nature of the problem facing us with climate change and carbon emissions.
But the big problem is how do we get from A to Z. How do we bring about an 80% reduction in carbon emissions by 2050? This is where the roadmaps come in. They offer the opportunity to map out a strategy to power society in a less carbon-intensive way.
Now you can take two approaches to energy roadmaps. You can meticulously map out scenarios for every form of energy use you can think of from cooking to commuting, pointing out just where improvements can and cannot be made. Or you can take a broad brush approach and just reduce the amounts of carbon we are allowed to burn each year and let society organise itself as best it can. Having been studying several of the micro-management roadmaps over the past year or so, I have come to the conclusion that the latter approach is preferable. The basic problem that cannot be addressed by the white-box, micro-approach is that we have no idea how much energy we will have in 2050, nor what price it will be, and without this information we can't begin to make sense of what we should be doing in the lead up to 2050.
A good example of this is the issue of the Green Deal and the retrofitting of insulation to our existing housing stock. Technically, we can do it to any standard, from simply filling up existing cavities, to undertaking radical Passivhaus-style retrofits. The difference in cost is maybe a few hundred pounds per house for the former, or a sum equivalent to rebuilding the entire house from scratch for the latter. Or, indeed, we could head somewhere in between these two extremes. But without knowing the cost of low-carbon energy in 2050, we can't make an informed decision about which way to go.
So we end up with a miasma of polices that sound like they are pointing generally in the right direction, but which in reality no one has a clue about. The Green Deal is a perfect example of this. Under it, you'll be able to borrow money for home energy improvements and you will be able to pay them off by adding the repayments onto your future energy bills. The idea — the Golden Rule, no less — is that your future fuel savings will more than compensate for the cost of the repayments added onto your fuel bills.
But there will be no guarantees about the cost of energy in the future, nor about whether the work carried out on your house will actually deliver the savings promised. The Green Deal pretends to be a hard-headed business decision, but it's no such thing, because the outcome is so tenuous.
Or take nuclear power. It's future is also in doubt and the underlying issue is surprisingly similar. Whilst businesses can calculate how much it will cost to bring a new power station on stream, they can't count on there being a sensible return because no one will guarantee them a price for the electricity they will produce. To do so is said to be anti-competitive, to be rigging the market or, as some green groups claim, to represent a subsidy. So the one form of baseload low carbon power that we know is technically feasible is unable to make any progress in the current environment, not because of people's dread fear of there being another Fukushima but because governments won't provide any guarantee that the product will be sellable.
No wonder all the energy companies are having second thoughts about new nukes. It's a bit like building a new hospital or school under a PFI scheme but without any forward contract indicating that the government would ever pay for it. Energy is seen differently: it's not a social good, like health or education, but a marketable product which we have to buy.
Or at least until people can no longer afford to pay for it. In fact, we have a new category of distress, fuel poverty, as if this is different to food poverty or clothing poverty, or just plain poverty.
And here we stumble upon the very crux of the problem. Much of the ongoing discussion about the Green Deal (and all the other energy subsidies that are flying around at the moment) centres on whether they are regressive, in effect transfers of money from the poor to the rich. It tends to be the rich that do things like do up houses and fit solar panels and to date much of this work has been paid for by hidden taxes loaded onto our fuel bills. Actually, there isn't much of a discussion to be had here because the answer is clear cut — yes, they are regressive, at least in the way they have been formulated to date.
Somehow the idea has taken root that the changes to our energy-burning habits must be funded from our existing energy consumption (i.e. our utility bills), a prime example of a hypothecated tax, and a prime example of why hypothecated taxes are not such a good idea. No one insists that the money raised from motoring taxes should all be spent on roads, or even that National Insurance should all be spent on pensions. So just why has the idea taken root that subsidies for low carbon energy or energy efficiency measures must come from our burning of high carbon energy? If these goals are socially desirable (which they are), then it's plain wrong to load them onto utility bills at a time when utility bills are already very high. People can see the connection, and the hoped-for improvements very quickly become unpopular.
In essence, energy policy is now trapped somewhere between the old Thatcherite dream of it being a privatised commodity and the new reality of it becoming a social good, like the NHS or the education system. Left to the market, it will continue to burn oil and gas, and exploit shale gas and tar sands and whatever else is around to keep the fires burning. But it will simultaneously be pumping CO2 into the atmosphere at an alarming rate, as if there is no tomorrow. Capital intensive projects like nukes and offshore windfarms and housing retrofits will be be ignored because the financial outcomes are too unpredictable, and just raising taxes on fossil fuels to pay for capital intensive low-carbon projects is becoming self-defeating.
Which begs the question, is it time to remove the utility companies from the market and make them, temporarily at least, more like the NHS? It seems politically completely off the radar, but it would enable the big infrastructure decisions to be made with long term planning in mind. If coupled with a guarantee to keep people warm through the winter (isn't that a social good to rank alongside the work of the NHS?) and to engineer a switchover to low-carbon power by 2050 at a price which wouldn't cripple the economy, then it makes sense. At least it makes more sense than allowing the current market failure to continue unabated.
After 2050, the utility companies could once again be sold off with a proviso that they could never again make money by burning fossil fuels. We did it for the banks. Arguably, this is more important.
20 Apr 2012
Conservatory Tax: what happens next?
The press story about the Conservatory Tax seems to have died down. It was perhaps a ten day wonder and it appears to be game set and match to the Daily Mail. There may be a few further rumbles along the way, but the way press fever works in this country there is a good chance that none of the Sunday's will run with it and by this time next week everyone will have forgotten about it and will be focussing on something new.
But just before we all forget it, I'd like to make a few further comments, and add a few pointers.
• The heart of the issue was to do with a consultation exercise on Part L of the building regs, essentially whether or not to include a requirement for consequential improvements (CI) for those improving and/or extending their homes.
• It had precious little to do with conservatories (which are rarely classed as extensions), nor was it to do with tax, but the Mail chose to christen the whole episode the Green Conservatory Tax. The name has stuck, which adds to the irony if nothing else.
• It was also only indirectly related to the Green Deal, which is essentially a financing option for those wanting to undertake green improvements. But not many people understood the differences between Part L's CI and the Green Deal. As far as Mail readers were concerned, they were both green and therefore both bound to be expensive.
• The case for CI stands on its own. It doesn't need the Green Deal to help pay for it, anymore than complying with any other aspect of building regs requires special financing. But the consultation muddies the water by suggesting that CI might be paid for by using the Green Deal. This, to my mind, was a mistake, because it is ceding the high ground of building reg compliance and intimating that CI was too bitter a pill to swallow without some sugar coating.
• It also ties CI to the Green Deal. What if the Green Deal ends? That would lead to us having an unenforceable building reg. By the way, lovely summary of Green Deal here on Casey's blog.
• The CI triggers were muddy. Having to undertake CI when your boiler has just blown up and needs replacing is not a good policy. It gets up my nose, so can't fault the Daily Mail for highlighting it. An own goal. There should be some simple to understand, justifiable CI trigger. I would suggest that if you are increasing the heated are of the house, then you have to undertake CI. A stricter one would be that the overall heat loss performance of the house shouldn't be any different before and after your extension is built. Now that would be hard sell.
• The element of compulsion in CI remains thorny, although it's not quite as novel as people initially imagine. There are lots of examples of the building regs compelling people to undertake work they might not care to do, and sometimes this goes on inside the existing house rather than being confined to new works (think loft conversions meeting fire regs).
• One possible alternative might be to offer trade-offs. For instance: you can build your extension to 2016 standards (might cost you are extra £2,000, with much wider walls) or you can build it to 2010 standards and spend £2,000 on CI inside the existing house.
• Another option might be to make greater use of Energy Performance Certificates and say that, if you want to extend, you must upgrade the overall energy performance of the house, say from E to C. EPCs are in theory a great tool to use to upgrade the housing stock, but they are hardly being used at all: in fact they are widely derided for being pointless.
• Finally, it's worth saying that all these policy instruments (and that includes Part L in its entirety, Green Deal, EPCs, FITs, RHI, you name it) are substitutes for a simple effective carbon tax. As long as we embrace piecemeal solutions to the fundamental problem of weaning ourselves off fossil fuels, we are likely to end up with flawed policy levers which get people very excited (both for and against) but are never going to achieve their goals.
But just before we all forget it, I'd like to make a few further comments, and add a few pointers.
• The heart of the issue was to do with a consultation exercise on Part L of the building regs, essentially whether or not to include a requirement for consequential improvements (CI) for those improving and/or extending their homes.
• It had precious little to do with conservatories (which are rarely classed as extensions), nor was it to do with tax, but the Mail chose to christen the whole episode the Green Conservatory Tax. The name has stuck, which adds to the irony if nothing else.
• It was also only indirectly related to the Green Deal, which is essentially a financing option for those wanting to undertake green improvements. But not many people understood the differences between Part L's CI and the Green Deal. As far as Mail readers were concerned, they were both green and therefore both bound to be expensive.
• The case for CI stands on its own. It doesn't need the Green Deal to help pay for it, anymore than complying with any other aspect of building regs requires special financing. But the consultation muddies the water by suggesting that CI might be paid for by using the Green Deal. This, to my mind, was a mistake, because it is ceding the high ground of building reg compliance and intimating that CI was too bitter a pill to swallow without some sugar coating.
• It also ties CI to the Green Deal. What if the Green Deal ends? That would lead to us having an unenforceable building reg. By the way, lovely summary of Green Deal here on Casey's blog.
• The CI triggers were muddy. Having to undertake CI when your boiler has just blown up and needs replacing is not a good policy. It gets up my nose, so can't fault the Daily Mail for highlighting it. An own goal. There should be some simple to understand, justifiable CI trigger. I would suggest that if you are increasing the heated are of the house, then you have to undertake CI. A stricter one would be that the overall heat loss performance of the house shouldn't be any different before and after your extension is built. Now that would be hard sell.
• The element of compulsion in CI remains thorny, although it's not quite as novel as people initially imagine. There are lots of examples of the building regs compelling people to undertake work they might not care to do, and sometimes this goes on inside the existing house rather than being confined to new works (think loft conversions meeting fire regs).
• One possible alternative might be to offer trade-offs. For instance: you can build your extension to 2016 standards (might cost you are extra £2,000, with much wider walls) or you can build it to 2010 standards and spend £2,000 on CI inside the existing house.
• Another option might be to make greater use of Energy Performance Certificates and say that, if you want to extend, you must upgrade the overall energy performance of the house, say from E to C. EPCs are in theory a great tool to use to upgrade the housing stock, but they are hardly being used at all: in fact they are widely derided for being pointless.
• Finally, it's worth saying that all these policy instruments (and that includes Part L in its entirety, Green Deal, EPCs, FITs, RHI, you name it) are substitutes for a simple effective carbon tax. As long as we embrace piecemeal solutions to the fundamental problem of weaning ourselves off fossil fuels, we are likely to end up with flawed policy levers which get people very excited (both for and against) but are never going to achieve their goals.
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