The argument has focused on solar photovoltaic panels installed on domestic roofs. This note tries to quantify some of the costs and benefits of the new scheme. I’ll take one of  the simplest possible examples: an installation of 12 panels on the roof of a medium-sized house in the south west of England, where solar radiation levels are relatively high for the UK. Does solar energy make sense in this country?

Before considering interest costs

a)      The installation will generate a maximum of about 2 kilowatts in full sun on a south facing roof at midsummer.

b)      Over the course of a year, we can expect the panels to produce about 1800 kilowatt hours.

c)      The value of this output would be about £70 in today’s UK wholesale market.

d)      The system will typically cost about £10,000. The price of the solar panels is tending to fall but the associated electronics are in very short supply worldwide. The most important component is the ‘inverter’, the device that takes the DC low voltage current from the roof and turns it into an 240V AC current that is precisely aligned to the frequency of the AC on the local electricity grid.

e)      A system will probably last about 25-30 years, although there will be some fall in power generated as the solar panels age.

f)        If we assume the system lasts thirty years – and make no deduction for the decreasing production at the end of its life – the full cost of the installation is about £330 per annum. This is without considering any interest costs, maintenance or the probable need to replace the expensive inverter at least once during the 30 year life.

g)      The absolute minimum annual cost of the installation is therefore at least four and a half times the wholesale value of the electricity generated. (£330/£70).

h)      We might choose to compare the cost of the system with the full retail price of the electricity produced. If the homeowner is paying 12.5 per kilowatt hour, the annual value of the electricity produced is £225 (1800 kWh times 12.5p).

i)        Without the huge subsidy provided by the feed-in tariff, the annual electricity output comes nowhere close to covering the costs of the installation over its thirty year life. At current electricity prices, the system will produce electricity worth £7,750 compared to an installation cost of £10,000. In conventional terms, this is an extremely bad investment for society as a whole. Because the feed-in tariff rewards homeowner with over three times the current retail price for electricity, it may nevertheless be good for homeowners that invest in solar. The people who pay for this generosity are all the other homeowners using electricity in the UK who don’t install panels on their roofs. This is the crucial point: a subsidy system that may be good for recipients may be damaging for the rest of society.

After interest costs

j)        If I have £10,000, I could put some solar panels or I could invest my money in 30 year government bonds. Today, these bonds will pay me about £450 a year before tax. If I pay tax at 40%, this falls to £270.

k)      When assessing whether solar panels are a good investment, the rational householder will consider the prospective disadvantage of not getting this income of £270 a year, as well as the cost of the initial purchase. He or she will factor this loss into their thinking on solar panels.

l)        Adding £270 a year to the annual cost of £330 produces a total figure of £600 a year as the full financial impact of putting up solar panels.

m)    This is almost three times the full retail of the electricity produced. Without large subsidy or huge increases in the future prices of electricity, solar panels are a terrible investment.

The proponents of feed-in tariffs seem to accept this broad logic. But they respond by saying that the scheme will assist in the development of a new industry and drive down prices. There may be something in this argument. However the cost of solar installations is largely determined by the world market for PV panels, of which the UK will always be a tiny part. We cannot make much of a difference to global prices. In fact, it can be argued that the new UK subsidies are likely to divert scarce inverters to the UK where they will typically produce about half the maximum output of an inverter in a sunny country. So the UK feed-in tariffs, at least as applied to solar PV, might be said to be actually decreasing the total amount of renewable energy produced around the world.

Does this analysis apply to wind power? No, not completely. A moderately sized wind turbine suitable for a farm – such as the Aeolus Power 50 kW model in a good location – will produce 100 times the electricity of a 2kw solar installation for about 25 times the cost. In other words, the productivity of the capital employed is about four times as great. This means that small scale wind power is almost economic. If, for whatever reason, we choose to subsidise small scale renewable energy in the UK we need to focus our money on wind energy. This argument applies even if electricity prices double or treble in the next decades. Wind we have in abundance, sunshine we are short of. By any standards, focusing on solar PV doesn’t make sense and will add to the energy costs* of householders not benefiting from the feed-in tariffs.

* Assume one million households (about 4% of the UK) install PV panels producing an average of 1800 kWh a year. The annual subsidy will be approximately £700m, all of which is paid for by other electricity users. If all this cost is eventually paid for by householders, the cost will be about £35-£30 a year, or perhaps 5% of current bills. (Only about one third of  UK electricity demand comes from homes but householders will eventually pay the whole subsidy cost because of higher prices for goods and services because of the increased price of electricity).

Simple DIY
First things first: a variety of simple and inexpensive measures can substantially cut the need for heating in most homes. It’s not glamorous or exciting but the single most cost-effective measure is probably to go round the house searching for leaks and draughts. Filling the gaps in external doors, checking for leaks around window frames and blocking any holes in the brickwork will deliver demonstrable savings for less than £100. (The new Black & Decker thermal leak detector is a wonderful gadget with a light that changes colour when its senses cold spots in a room – available now from US websites). Then think about putting reflective panels behind your radiators. This will send more of the heat back into the room. Radflek has just launched a range of easy-to-fit aluminium membranes that sit invisibly between the wall and radiator. It’ll only save about 5% of your heating bill, but the cost for a whole house will usually be less than £40.

Cavity wall insulation
Government ministers have been giving speeches for decades about the need to get all external cavity walls insulated. Nevertheless, many millions of homes still don’t have this most basic form of insulation. Many people are not even certain about whether their house has a cavity that can be filled but almost all houses built since 1930 can benefit from insulation in the walls. For a few hundred pounds, householders get professionally installed foam or other insulating materials pumped into the gap between the outer and the inner brickwork. Households living on low incomes and pensioners will usually have the work done for free. Savings vary depending on the size of the house but for a detached home, open to the cold air on all four sides, the financial returns will be very attractive. One home I audited saved about 25% of the heating bill and also benefited from a more even temperature around the house.

New fridges
New appliances tend to be considerably more energy-efficient than older models. The EU’s energy efficiency labels have undoubtedly pushed manufacturers into developing new products that use far less electricity. The biggest improvement has probably come in fridges and fridge-freezers as insulation has improved and motors have got less greedy in their use of power. Any fridge-freezer over about 12 years old may well be worth replacing with a new A++ model – although the financial payback will not be rapid. Look for appliances that provide over 300 litres of cold storage that use less than about 300 kilowatt hours of electricity a year (saving perhaps £35-40 compared to an old fridge-freezer) and which are on sale for about £300. Other domestic appliances will generally offer smaller savings unless the machine is very old and inefficient.

External doors
Although much more heat is typically lost through windows, it may be worth looking first at replacing external doors. The lovely stripped pine doors of a Victorian terraced house may be responsible for one-tenth of the total heating bill. Although it might be painful to replace an attractive old front door, the savings will be substantial. For perhaps £500, you can expect to get well-insulated and durable doors that banish draughts and keep the hall warm. Most homes have some double-glazed windows but relatively few are completely refurbished and the cost will usually run to many thousands of pounds. Upgrading to double glazing throughout the house will usually offer a less satisfactory financial return than simply installing robust external doors.

A new boiler or better central heating controls
A 20-year-old central heating boiler will waste up to one-third of the gas that it burns. The figure for today’s equivalents is less than 10% if the boiler is the appropriate size for the home. Although a new condensing boiler will usually cost at least £1,500, the savings can be several hundred pounds a year in a big house. For those unable to spend this amount of money, a much smaller investment in better heating controls will offer a reasonable payback. Thermostatic valves on all the radiators and a new central heating programmer, such as the Dataterm programmable controller from WarmWorld, will offer the careful householder real savings in return for an investment in the low hundreds of pounds.

• The second and fully revised edition of Chris Goodall’s book, How to Live a Low-Carbon Life, will be published next month by Earthscan.

The technology may be good and the product reliable. The claims at the press conference were for a technology that will eventually revolutionize power production. Solid oxide fuel cells (SOFCs) are indeed an extremely interesting way of generating small quantities of electricity for homes and offices at attractive running costs and low carbon emissions. Other developers, such as Ceres Power in the UK and Ceramic Fuel Cells in Australia/Germany, have products close to market launch and – so far – it is completely unclear whether Bloom’s product is better or likely to be more attractively priced or more long-lasting.

SOFCs take a hydrocarbon fuel and split it at very high temperature (perhaps 600 degrees C) into hydrogen and carbon. The carbon combines with oxygen to make CO2 and the hydrogen reacts with oxygen from air to make water. This later process causes electrons to flow through the ceramic electrolyte and generate a usable current. The crucial problem is making the cell robust, cheap, and durable at the high temperatures experienced in the cell.

Ceramic Fuel Cells has numerous partnerships with large utilities around the world interested in taking its products into local markets. Its product turns about 60% of the energy value of natural gas (largely methane in the UK and Europe) into electricity, making it more efficient than all but the best combined cycle power stations. The remaining energy – residual heat – can be used to provide domestic hot water or, in theory could be used to offer space heating or energy conversion to air conditioning in summer. The carbon dioxide savings are substantial, even if grid natural gas is used. Ceramic Fuel Cells, and probably Bloom, can also use synthesis gas (’syngas’) from super-heating wood in the absence of air or can even split liquid ethanol made from agricultural wastes. In theory, a SOFC can use low or zero-carbon fuel and offer huge greenhouse gas savings on fossil fuel combustion. SOFCs can also be used for grid balancing. When demand is high, the grid operator will have the ability to increase power output of domestic fuel cells remotely and turn it down when the wind turbines on the hilltops are spinning fast. Ceramic Fuel Cells has successfully demonstrated this feature of its technology.

The problems with SOFCs, probably including the Bloom Box, are well known. The fuel cells burn out and have to be replaced by professional engineers. Ceramic Fuel Cells talks of the units needed to be switched every two years though the company hopes this will improve to once every four years. The cost of the units is high. Ceramic Fuel Cells has mentioned a figure of about £2,000 ($3,000+) for a machine that can continuously develop 2 kilowatts of electric power but I think this number is highly optimistic and the true figure is likely to be several times this level for some years to come.

In most circumstances, the Ceramic Fuel Cells device will also need to be supplemented by a conventional domestic heating boiler. These machines are so efficient that they do not generate enough heat to keep even a well-insulated house warm. The average UK house uses a running average of about 4 kilowatts of heat during the six-month heating season while the Ceramic box only provides about 0.5 kilowatts.

The UK government’s new feed-in tariffs provide a substantial incentive for householders to install SOFCs in domestic homes. Ceramic Fuel Cells has made great play of the attractiveness of this new subsidy. Provided its power plants work at even approximately the price suggested Ceramic Fuel Cells will find a ready market in the UK. The Bloom Boxes, which appear to be aimed at office buildings and go up to 100 kilowatts, will not benefit from this subsidy.

Does the Bloom Box represent a substantial technical advance over Ceramic Fuel Cells? On the information provided so far, I could see no obvious technical innovation that puts Bloom ahead of the Ceramic Fuel Cells machines. But Ceramic Fuel Cells works from Melbourne, not Silicon Valley, and can’t get the California Governor and Colin Powell to come to its product launches. We’ll soon see whether the unflashy Australians have just lost their market to Bloom or whether Ceramic Fuel Cells’ long and painful development has just been validated by Bloom’s hyperbolic endorsement of the potential of the SOFC.



This article was also published on the Guardian Environment Network on Thursday 25 February 2010.