Saturday 26 November 2011
At Last - A Serious Comment
I missed the announcement but apparently earlier this month Chris Huhne asked Ofgem to investigate whether medium- to long-term UK gas supplies are robust enough to avoid wholesale market spikes. The key concern is the likely increase in demand for gas to fuel electricity generation as the LCPD forces coal plant off the grid and further nuclear closures occur. This is an issue that has been swirling around the industry for years so it is, in a way, gratifying to see it finally surface in a (slightly) more open fashion.
Clumsy Clumsy Thames Water
We recently had Thames Water install a water meter for us (something we should have done ages ago but a case of better late than never). Our first estimated bill arrived yesterday, for the period 27 September thu' 24 October. Some bozo in TW (or more likely some badly programmed computer) estimated out usage to be 216 cubic meters and managed to generate a bill for £388.
Needless to say I was out to the meter fairly sharpish and then on the 'phone to a TW operative who didn't seem at all phased by the stupidity of it all. Our actual take over the nearly 2 months to 25 November was a massive 8 cubic meters!
Now, I can cope with bumbling doltishness like this but to someone of slender means and a more nervous disposition receiving a bill like that could have been a major worry. How often does this happen?
Needless to say I was out to the meter fairly sharpish and then on the 'phone to a TW operative who didn't seem at all phased by the stupidity of it all. Our actual take over the nearly 2 months to 25 November was a massive 8 cubic meters!
Now, I can cope with bumbling doltishness like this but to someone of slender means and a more nervous disposition receiving a bill like that could have been a major worry. How often does this happen?
Wednesday 23 November 2011
Boardroom Pay Fuss
Some of the recent bruhaha over boardroom pay rather smacks of the politics of envy. There is no doubting that some executives are massively overpaid but that is no reason to bash all high earners and to advocate 1970s-style command and control caps on wages. There are some good suggestions floating around (simplification of remuneration packages and publication of total pay of executives for instance) but there are also some bozo ideas (publishing highest to lowest ratios - an excellent way of mucking up industrial relations; workers on remuneration committees). On the latter, let's get this straight, it is ultimately up to the owners of a business what the CEO gets paid. It's their investment that's at risk.
So, how about a few simple changes? Annual, binding shareholder approval of board pay might be one (based on remuneration committee recommendations). More accountability to shareholders of the remuneration committee. Contracts that stipulate no golden handshake for firing of underperforming CEOs. Pay more closely related to shareholder value - so that it may go down as well as up.
How's that for a starter for ten?
So, how about a few simple changes? Annual, binding shareholder approval of board pay might be one (based on remuneration committee recommendations). More accountability to shareholders of the remuneration committee. Contracts that stipulate no golden handshake for firing of underperforming CEOs. Pay more closely related to shareholder value - so that it may go down as well as up.
How's that for a starter for ten?
Monday 21 November 2011
A Cautionary Tale
Despite all the uncertainty surrounding the FITs consultation (or, perhaps partially because of it, if I'm truthful) I've been gathering quotes for a system to be installed at Bawden Towers.
Most offers have come in at around £3.8 - £4.2 per watt. However, one company (no name, no pack drill on this occasion - 'though why I'm being so coy I'm really not sure) came through with a whopping £6.7/w but with a guarantee to install by Dec 5 thereby pretty much ensuring a 43.3p-base FIT - provided I signed up within 2 days.
So I plugged this into my little project appraisal spreadsheet and guess what? The internal rate of return at 43.3p was no better than the best of the rest at 21p. Result? I declined their kind offer. That almost immediately triggered a revised proposal at £6.2/w.
Now this does represent a slightly better return (at 43.3p) than any of the rivals. But if the FIT was at 21p the IRR of my project would be somewhat below 1%. I would rather not be signing up with a company that either has no business at the lower FIT or is still making extraordinary profits. I declined again.
Well! Surprise, surprise! Another proposal came back lowering the unit cost to £5.2/w but without the guaranteed early installation date. That make a 22% lowering of cost over just a couple of days. These guys must have been making hand over fist if all their business has been at £6/w+.
They are difintiely NOT on my preferred provider list!
Most offers have come in at around £3.8 - £4.2 per watt. However, one company (no name, no pack drill on this occasion - 'though why I'm being so coy I'm really not sure) came through with a whopping £6.7/w but with a guarantee to install by Dec 5 thereby pretty much ensuring a 43.3p-base FIT - provided I signed up within 2 days.
So I plugged this into my little project appraisal spreadsheet and guess what? The internal rate of return at 43.3p was no better than the best of the rest at 21p. Result? I declined their kind offer. That almost immediately triggered a revised proposal at £6.2/w.
Now this does represent a slightly better return (at 43.3p) than any of the rivals. But if the FIT was at 21p the IRR of my project would be somewhat below 1%. I would rather not be signing up with a company that either has no business at the lower FIT or is still making extraordinary profits. I declined again.
Well! Surprise, surprise! Another proposal came back lowering the unit cost to £5.2/w but without the guaranteed early installation date. That make a 22% lowering of cost over just a couple of days. These guys must have been making hand over fist if all their business has been at £6/w+.
They are difintiely NOT on my preferred provider list!
Wednesday 16 November 2011
Scots Govt Doesn't Like FITs Proposals
Just look at this. It seems it's not just the industry that's getting a tad hot under the collar.
Wow! Fines Galore - But Who Pays?
Hot on the heals of npower's hefty fine comes news of British Gas having to stump up £1M for misreporting under the Renewables Obligation. Of course, this is just a drop in the proverbial ocean of BG's profits but it does make one wonder who eventually pays - the customer or the shareholder?
Tuesday 15 November 2011
The FITs Debate
I've been holding off writing about the recent FITs consultation (apart from my one-liner a few days ago) but can resist the temptation no longer.
Whilst it was to be expected that FITs would come down in April - and it had been well signalled that this would be the case - DECC is in danger of shooting itself in the foot over the contents of its proposal.
Firstly, the "qualifying date". This just seems to be a rather nasty piece of proposed legislation. Now, I have to confess a personal interest here. I was planning an installation in the new year. Suddenly here is a proposed cut-off date before the end of the consultation period (thus adding to uncertainty) and suddenly imposed on an otherwise well defined timetable. This really is government acting without thinking about the reputational consequences if nothing else. But, as I said, I do have a particular beef.
Secondly, the consultation quotes a wide range of apparent installation cost reductions. It is no secret that the costs of PV have come down - but not by the upper end of DECC's range. They seem to have muddled installed cost with raw equipment cost. And there is no discussion of cheap, unproven Far East imports vs quality products. Surely they'd want to avoid people scrabbling to put up shoddy installations just to try to get an apparent reasonable return?
Which brings me to my third point. The consultation states that the proposed new FIT should provide a return of about 4.5% for homeowners installing <4kWp systems. All other bands would appear to be pitched at a 5% return. Why kick poor old Joe Public harder than anyone else? And much seems to be made in accompanying blurb about comparisons with savings accounts, cash ISAs, bonds etc. This, I believe, is an inappropriate comparison for at least 2 reasons. Firstly, the risks are different. High street savings accounts, although not risk free (FSCS not withstanding) are certainly lower risk than a PV installation (technical risk, weather risk, installation risk etc.). Furthermore there is a huge difference in liquidity. Investing in a highly liquid financial product like a cash ISA is very different to installing a piece of kit like a PV system. How could I monetise the latter? Presumably either by entering a forward contract for my output (at a lousy rate of return if current rent-a-roof schemes are anything to go by) or by selling my home! Both issues justify expectations of much better than high street returns.
A fourth problem is the possible linkage with EPC rating. A couple of options are proposed but neither really takes into account the fact that EPCs are primarily about space and water heating whereas heat from electricity use is often secondary. OK there will be spill from one's washing machine, tumble dryer or whatever but that's hardly a big contributor to space heating. Furthermore, much of the power generated will not be used in the host premises anyway. And there is an important trade-off to be considered for hard-to-treat homes. Many householders in solid-walled properties will not contemplate the enormous hassle that is likely to be involved with insulation measures whereas they just might be willing to put up with a bit of scaffolding and mucking about on the roof and in the loft. Is the trade-off not a price worth paying for just a little bit more greening of the UK's electricity supply?
There - gripes off chest at last.
Whilst it was to be expected that FITs would come down in April - and it had been well signalled that this would be the case - DECC is in danger of shooting itself in the foot over the contents of its proposal.
Firstly, the "qualifying date". This just seems to be a rather nasty piece of proposed legislation. Now, I have to confess a personal interest here. I was planning an installation in the new year. Suddenly here is a proposed cut-off date before the end of the consultation period (thus adding to uncertainty) and suddenly imposed on an otherwise well defined timetable. This really is government acting without thinking about the reputational consequences if nothing else. But, as I said, I do have a particular beef.
Secondly, the consultation quotes a wide range of apparent installation cost reductions. It is no secret that the costs of PV have come down - but not by the upper end of DECC's range. They seem to have muddled installed cost with raw equipment cost. And there is no discussion of cheap, unproven Far East imports vs quality products. Surely they'd want to avoid people scrabbling to put up shoddy installations just to try to get an apparent reasonable return?
Which brings me to my third point. The consultation states that the proposed new FIT should provide a return of about 4.5% for homeowners installing <4kWp systems. All other bands would appear to be pitched at a 5% return. Why kick poor old Joe Public harder than anyone else? And much seems to be made in accompanying blurb about comparisons with savings accounts, cash ISAs, bonds etc. This, I believe, is an inappropriate comparison for at least 2 reasons. Firstly, the risks are different. High street savings accounts, although not risk free (FSCS not withstanding) are certainly lower risk than a PV installation (technical risk, weather risk, installation risk etc.). Furthermore there is a huge difference in liquidity. Investing in a highly liquid financial product like a cash ISA is very different to installing a piece of kit like a PV system. How could I monetise the latter? Presumably either by entering a forward contract for my output (at a lousy rate of return if current rent-a-roof schemes are anything to go by) or by selling my home! Both issues justify expectations of much better than high street returns.
A fourth problem is the possible linkage with EPC rating. A couple of options are proposed but neither really takes into account the fact that EPCs are primarily about space and water heating whereas heat from electricity use is often secondary. OK there will be spill from one's washing machine, tumble dryer or whatever but that's hardly a big contributor to space heating. Furthermore, much of the power generated will not be used in the host premises anyway. And there is an important trade-off to be considered for hard-to-treat homes. Many householders in solid-walled properties will not contemplate the enormous hassle that is likely to be involved with insulation measures whereas they just might be willing to put up with a bit of scaffolding and mucking about on the roof and in the loft. Is the trade-off not a price worth paying for just a little bit more greening of the UK's electricity supply?
There - gripes off chest at last.
Wide Variation in Solar Hot Water Performance
EST has finally published its report into solar hot water field trials (the work was going on before I left the Trust 18 months ago). It makes fascinating reading. Perhaps a few headlines are worth noting:
Some systems deliver up to 60% of the required hot water load.
The worst performing system provided only 9%.
Median performance was 39%.
What comes through very clearly is that user behaviour is all important. This is not surprising but is something that is often missing from advice from installers and, indeed, is not necessarily adequately covered by independent advisors either. It make common sense to time your hot water usage and back-up firing of the boiler to maximise the potential for harnessing solar energy but how many users have (a) been advised about this or (b) thought it through for themselves?
The same is true for those with PV installations.
So often in all things energy saving the technolgy is only part of the story - behaviour makes a huge difference.
Some systems deliver up to 60% of the required hot water load.
The worst performing system provided only 9%.
Median performance was 39%.
What comes through very clearly is that user behaviour is all important. This is not surprising but is something that is often missing from advice from installers and, indeed, is not necessarily adequately covered by independent advisors either. It make common sense to time your hot water usage and back-up firing of the boiler to maximise the potential for harnessing solar energy but how many users have (a) been advised about this or (b) thought it through for themselves?
The same is true for those with PV installations.
So often in all things energy saving the technolgy is only part of the story - behaviour makes a huge difference.
Drop Off in Insulation Post CERT?
A recent analysis by Knauf suggests that there could be a marked drop-off in insulation retrofit measures once CERT comes to an end. Of course, one response is to comment "Well they would say that, wouldn't they?" However, my gut feeling is that there is some truth in the matter. I just can't see uptake through the Green Deal being anything like CERT uptake. As for hard-to-treat properties..................
Energy Saving Week - Where?
I used to work at the Energy Saving Trust and recall an awful lot of effort and excitment going into the annual Energy Saving Week (almost always timed to coincide with the end of BST). This is the second year when I have been "out of the loop" and I happened to be particularly busy during the week so I wasn't actively looking for adverts/blogs/offers/advice etc. However, I still think I should have been sensitised to anything that did cross my radar, so it is particularly upsetting to say that hardly anything did - and certainly not anything impactful. EST is loosing its grant funding from DECC so there has to be a big question about how energy saving and green energy production is promoted in the future. EST may not have been particularly visible a couple of weeks ago but DECC's performance hardly inspires confidence:
Act on CO2? Damp squid
RHI? Debacle
FITs? Another shot in the foot
Green Deal? Don't hold your breath.
All rather worrying.
Act on CO2? Damp squid
RHI? Debacle
FITs? Another shot in the foot
Green Deal? Don't hold your breath.
All rather worrying.
Wednesday 9 November 2011
Tighter Electricity Margins This Winter?
National Grid has suggested that the German nuclear moratorium could result in tighter power margins in the UK this winter if there's a cold snap. They also suggest that forward prices are indicating that coal rather than gas could be the "fuel of choice" (whatever that means) this winter. Not good for CO2 emissions then.
Peak Oil Delayed?
Just spotted a review of a book by Daniel Yergin suggesting that peak oil may be further off than many think. It's an understandable stance - scarcity (perceived or otherwise) can lead to higher prices which means that more reserves are economically recoverable. Some day, though.........
Prosperity Index
I've spent an interesting half hour viewing the Legatum Institute's Prosperity Index for 2011. Overall the UK maintains its 13th position as per 2009 and 2010. Some of the constituent rankings make interesting reading though.
On the Economy, for instance, the UK is ranked at 21, although its 2011 score is above that for 2009 and, especially, 2010. Downsides are the high rate of unemployment (rank 58) and low savings rate (one of the lowest 30 gross domestic savings rates). On the upside it is 12th for affordability of food and shelter and in the top 15 for individuals' satisfaction with their standard of living.
Interestingly on Entrepreneurship and Opportunity the UK comes in 4th. This is despite Britons perceiving the entrepreneurial environment to be below average.
Education at 19th and Health at 17th could be better.
It's fascinating stuff. One might not agree with the methodology but it's worth a little time perusing the data. And be thankful if you don't live in one of the countries at the bottom end of the scale (CAR, Zimbabwe, Ethiopia).
On the Economy, for instance, the UK is ranked at 21, although its 2011 score is above that for 2009 and, especially, 2010. Downsides are the high rate of unemployment (rank 58) and low savings rate (one of the lowest 30 gross domestic savings rates). On the upside it is 12th for affordability of food and shelter and in the top 15 for individuals' satisfaction with their standard of living.
Interestingly on Entrepreneurship and Opportunity the UK comes in 4th. This is despite Britons perceiving the entrepreneurial environment to be below average.
Education at 19th and Health at 17th could be better.
It's fascinating stuff. One might not agree with the methodology but it's worth a little time perusing the data. And be thankful if you don't live in one of the countries at the bottom end of the scale (CAR, Zimbabwe, Ethiopia).
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