• The payments for renewable heat, such as the home burning of wood to replace gas or rooftop solar hot water, are much higher than predicted.
• The figures for wind have risen since the autumn consultation document. This means that well-located wind turbines of the 6-15 kW size are likely to produce returns above 13% per year.
• The payments for solar PV have been increased slightly, but do not offer returns as good as wind. Importantly, the government has also signalled that it will allow PV installed at any time over the next 28 months to capture the full feed-in tariff. Previously, the tariff declined for installations made after March 2011.

An earlier article on this topic which looks in more detail on the incentives to take up the new ‘feed-in tariffs’ is here.

Renewable heat incentive
Full details are not yet on the DECC website, but the payments for heat look surprisingly large. A wood-burning boiler will attract payments of 9p per kilowatt hour generated, or almost three times the current price of mains gas. Let’s put this another way. A tonne of very dry wood generates about 5,000 kWh of heat. So the payment for burning this tonne in an efficient stove would, we assume, be £450. Since the price of wood on the ground in southern England is no more than £60 a tonne, this incentive will transform the economics of forestry. Virtually no wood is harvested across much of Britain but landlords will now find it far more attractive to manage their holdings. My recommendation – buy woodland now. Timber is going to be worth a lot more in ten years’ time.

Payments for solar hot water installations are also much higher than expected and will undoubtedly spark a rush to put up rooftop panels. Combined with the boiler scrappage scheme, the solar hot water incentive will encourage many hundreds of thousands of homes to upgrade their heating systems.

Domestic combined heat and power systems are also heavily incentivized, as are heat pumps.

Wind
A 15 kW wind turbine – the sort of size that might sit on a small hill at the back of a village – costs about £50,000 to buy and install. (Installation costs will vary substantially, depending on the proximity of the electricity network.) The draft figures suggested a payment of about 23p per kWh but the final announcement today has increased this to over 26p. My previous calculation suggested a return of about 12% per year, but these new figures take this figure to above 13%. Confusingly, the government’s announcement suggests a figure of ’5-8%’ for the financial returns under its proposals but I believe the figures for community wind are actually much higher and will kick mutual ownership of turbines into life. A turbine of 15 kW should be an easily financeable proposition across much of the UK.

Solar
The payments for PV have been increased from the earlier proposals. The solar installation industry had been sweating nervously about the possibility of a large reduction. Today’s figures suggest that a good south-facing roof location in the English south-west will achieve financial returns of above 8%. The government may correctly have felt that the likely continued decline in the cost of solar panels will gradually improve this figure over the next few years. Surprisingly, the announcement says that the solar PV feed-in rates will last for more than two years. Previously they were slated to fall gently from April 2011. This may produce a perverse incentive. The fall in the price of solar panels – as a result of improved manufacturing techniques and the entry of huge amounts of Chinese capacity – may mean that parsimonious householders wait until 2012 to put up the panels. The government wants us to invest today.

Mitsubishi Ecodan. Image source: Ecodan brochure.

(The information in this article has been updated by a more optimistic article that looks at the before and after experience of a ASHP installation in Oxford, Please go to http://www.carboncommentary.com/2010/08/03/1632)

Small heat pumps are increasingly used to provide space and water heating in UK homes. This trend is strongly encouraged by policy-makers and the government’s proposed Renewable Heat Incentive will add further financial support. The enthusiasm for this expensive technology should be moderated: for a home on the mains gas network, the savings in money will be small. Carbon benefits are probable but far from guaranteed. Moreover, air source heat pumps are unlikely to be able to heat many older homes effectively. Government, manufacturers, and installers need to be very much more cautious in encouraging the use of heat pumps and should use far more conservative payback assumptions. Heat pumps will eventually be a good investment for homeowners but probably not yet.

***

What is a heat pump?
When a gas is compressed, it heats up. When it is uncompressed, it cools. Imagine the simplest possible compressor – a bicycle pump. Hold your finger over the exit and push the pump handle. The air inside will get very hot. Lift your finger and let the hot air out, and it cools again. Imagine that the cylinder of the bicycle pump was inside your house but the exhaust air was vented through a window. When you pumped the bicycle pump, the chamber would get hot, and this heat would heat the room. As the air left the pump and was exhausted to the outside air, it would cool, tending to reduce (to a very tiny extent of course) the external temperatures.

This is the principle of a heat pump. The heat from the compressed gas is used to increase temperatures in one place; whereas the reverse – heat loss from the decompression – decreases temperatures in another place. Think of this as taking a block of air and separating it into a hot gas and cold gas in two separate places. When temperatures are high, you can reverse the pump, putting the cold air into the house and the hot air outside. Most heat pumps transfer the heat or cold into water that is then circulated round the house. So a domestic heat pump can, under certain circumstances, use a house’s existing network of hot water pipes and radiators. Similarly, a heat pump can provide the hot water for domestic baths and showers.

How much energy do heat pumps save?
Heat pumps look like a free source of energy and good ones are indeed very efficient. But they do need compressors and other electrically powered devices to work. (Or, in the case of the bicycle pump, the compression is provided by the person pumping. He or she will be using energy to work the pump.) So heat from heat pumps is not free. The ratio of energy used to power the pump and the useful heat output is called the Coefficient of Performance, usually abbreviated to CoP. This figure is critically important when you are assessing how much money or carbon you will save. The CoP will vary according to the air temperature and the demands placed on the pump. Broadly speaking, the greater the temperature difference between the interior of the house or the hot water supply and the outside temperature, the lower the CoP of the heat pump. A poor CoP means that you will use a lot of electricity for each unit of useful heat.

Today, attention is focused on heat pumps that use the outside air for their energy. These are called air source heat pumps (ASHPs) and are relatively easy to install in domestic houses. The unit can be attached to the wall or sit on the ground, taking relatively little space. The best ones, such as Mitsubishi’s Ecodan have a CoP of about 3-3.3 in average British conditions. For every unit of electricity used, the home gets up to 3.3 units of heating, but I’ve used the average figure of 3.15 in the calculations that follow. As heat pumps improve, this number will rise, but please don’t use the manufacturers’ figures when you are assessing them. Look for real-world examples.

Ground source heat pumps can achieve better CoP figures than their air source equivalents. But they are more expensive to install and get their ‘fuel’ from small pipes that run underneath the garden, collecting and dispersing heat energy. The garden has to be dug up to install these pipes.

Radiators versus underfloor heating
Hot water from the heat pump can be circulated using a house’s existing pipework and radiators. Unfortunately, some householders will see substantial problems. The water coming out of heat pumps is usually far cooler than from conventional gas or oil boilers. Typically, the water is at 45 degrees compared to perhaps 75 degrees from an ordinary boiler. As you might imagine, this means that radiators do not get really hot, and the amount of heat that they transfer into a room is much less. The solution is either to replace all the radiators with much larger ones with a far greater surface area, or to install a dense network of hot water pipes under the floors. In a new house with a heat pump it is almost certainly best to avoid radiators and use underfloor pipes throughout the house.

Heat pumps also heat water for showers. This water needs to be hotter, which adversely affects the efficiency (the CoP) of the heat pump. Modern air source pumps take the water up to 55 or 60 degrees, which is hot enough to bathe in.

How much do heat pumps cost?
Unsurprisingly, the cost varies enormously according to the complexity of the installation and the size of the pump. In an average-sized new house, the extra cost compared to a conventional boiler is probably between £2,000 and £3,000. To replace an existing boiler in a house already standing will add slightly more, particularly if any radiators need to be replaced. One system I have recently seen cost about £6,000 compared to perhaps £2,000 for a good condensing boiler. The government is currently offering a grant of £900, which makes a real difference but still doesn’t create an overwhelming incentive.

What does this mean for the householder?
The typical UK house on the mains gas network uses about 15,000 kWh for room heating, and much smaller amounts for water heating and cooking. If an air source heat pump has a CoP of 3.3, this means that replacing a gas boiler should significantly reduce the amount of energy used to heat the home. Here are the figures:

Energy savings from using an air source heat pump

In the example above, the electricity needed to heat the house is less than a third of a gas boiler. But electricity is far more expensive than gas for each kilowatt hour. In June 2009, the cheapest tariff on the British Gas website offers a price of just over 3p a kilowatt hour for gas and slightly less than 10p for electricity.[1] Using these rates, I calculate that an air source heat pump will save the average customer on the gas network about £50 a year. This is not a good return on the investment of several thousand pounds.

The government’s Energy Saving Trust suggests typical savings of £300 for a home with gas, but this seems unreasonably optimistic.[2] It is probably a mistake for government bodies to exaggerate the benefits of new technologies in an effort to persuade the public to adopt them.

But if you use electricity to heat your house, the savings could more impressive. Many of the five million homes off the gas network employ night storage radiators that take advantage of low overnight electricity rates. The radiators heat up at night and then give off their heat during the day. However there are two problems. First, the householder will have to put new radiators in the property, adding to the cost and disruption. Second, heat pumps usually work all the time, and not just at night. So if a householder puts in a new heat pump, she will be using both low price night electricity and very expensive daytime power. Personally, I doubt whether the savings will be much greater than £200 or £300 a year, not the £870 estimated by the Energy Saving Trust.

The CO2 savings
The CO2 savings also tend to be exaggerated. A heat pump uses electricity (largely generated from burning gas or coal) to replace a boiler that typically burns gas. The CO2 saving therefore depends on the relative efficiency of heat pumps and large scale power stations.

The amount of carbon dioxide produced by a power station depends on the fuel it burns and the quality of its generating equipment. An old coal-fired station produces a kilogramme of CO2 for each kilowatt hour. A new gas plant has carbon dioxide output of well under half this figure. The UK average varies from year to year depending on which power stations are working. As of June 2009, the most recently published figure by the Carbon Trust suggested an average figure of 0.54 kg of CO2 per kilowatt hour. This figure is derived from a five-year average of power stations supplying the National Grid, mixing coal generation with gas, nuclear, and wind.

We can easily work out the CO2 savings from running a heat pump to heat a typical house:

Carbon dioxide savings from heat pump use in the average home

This is a more substantial reduction than the financial saving, cutting emissions from heating by about a fifth. Since home heating is often the single most important source of emissions, a heat pump may be worthwhile. But the cost of the pump for every tonne of CO2 saved is very high.

Cost of a heat pump per tonne of CO2 saved

The issues with heat pumps
In some countries – such as Switzerland and Sweden – heat pumps are very common. In these places, insulation standards have been high and heat pumps can heat houses even in very cold weather. In countries with low-carbon electricity supplies, like Switzerland, which has large amounts of hydro electricity, there is a strong reason to move to using electric power rather than gas or oil for heating. For the UK, this is not the case. In recent years, we’ve actually seen a slight increase in the carbon dioxide produced in electricity generation as the nuclear power stations have become increasingly unreliable and large amounts of coal have been burnt rather than cleaner gas.

So the climate argument for using heat pumps in the Britain does rather depend on whether we do successfully develop new and low-carbon sources of electricity. The attractiveness of using heat pumps will rise as we switch to wind energy, biomass, and other low-carbon sources of power. However, I think it probably makes sense to wait for this to happen rather than buying a heat pump now.

There are some other issues. Experience from the first ASHPs suggests that some do not heat the house effectively in winter. A gas boiler has enough power to pump huge amounts of heat into a house in a short time. You can turn it on at five o’clock in the morning and the house will be warm for when people get up. Heat pumps aren’t like this. They are kept on constantly, but deliver heat at lower levels. This is fine if your house is well insulated because the heat will remain. But in a draughty older house the heat will leak away and the lack of warmth may be a problem, particularly when outdoor temperatures have fallen rapidly. One householder intending to install a heat pump responded to this point by saying to me that his home would also have electric immersion heaters to increase the temperature in the central heating system when necessary. This is an unusual configuration but it may work – although at the price of higher electricity bills and reduced carbon savings.

It should be stressed much more prominently in the literature advertising air source heat pumps that they are not suitable for many houses built more than ten years ago. Before this time, insulation standards were simply too low for heat pumps to maintain reasonable temperatures in the coldest weather.

As we mentioned above, in many houses the installer should also think about replacing small radiators for much larger ones with greater surface area. This would help spread the heat effectively, but because it would be costly and disruptive, most companies selling ASHPs don’t push this option. Ideally, householders should replace radiators entirely with underfloor piping.

Another disadvantage may become evident when the heat pump is heating hot water for bathing. Heating enough water for two baths will take almost an hour with a standard 8.5 kW pump. During this time, the heat flowing into the central heating system will inevitably be much colder because all the energy from the pump will be going into the bathing water. In a well insulated house, having the central heating off for an hour shouldn’t matter very much, but in older homes the impact will occasionally be unpleasantly noticeable.

A proponent of air source heat pump responds
I rang Ice Energy, one of the largest installers of domestic heat pumps, to discuss some of these concerns. Andrew Sheldon gave me his company’s response:

• Small savings: At current gas and electricity prices, this may be the case. But, Andrew argued, gas prices are likely to rise relative to electricity prices. I think this is possible, but it is equally likely that the reverse will be true as the government forces the development of higher cost sources of electricity such as offshore wind. Andrew also said that the Renewable Heat Incentive, to be introduced in 2010 or 2011, would probably enable heat pump owners to claim money. He mentioned 10 or 12p for each kilowatt hour of heat generated, implying a payment of over £1,000 a year for an average-sized house. Even 2p would make the financing of heat pumps look more attractive.
• Limited carbon savings: The UK is on track to decarbonise its electricity supply by 2030. Once this has happened, carbon savings will be very substantial.
• Worries over heating on cold days: A well insulated house should not suffer from low temperatures. Newly built houses with underfloor piping should see large financial savings and high levels of comfort.
• The high price of heat pumps: Andrew said we should take into account the longer life of heat pumps, which will last more than 20 years. They will also need lower levels of routine yearly maintenance.

He also stressed the greater safety of heat pumps. The radiators and bathing water temperatures are never dangerously hot, minimising the risk to the elderly and young children. The constant heat in the winter also means better indoor air quality because the high temperatures and powerful convection currents close to radiators in today’s homes tend to result in high levels of dust in many rooms, particularly in older houses.

When the UK has built an infrastructure of low-carbon electricity generation, we will need to find ways of reducing the carbon dioxide emitted from heating buildings. For domestic homes, heating is much more important as a source of CO2 than electricity use, so the savings could be very important. Heat pumps and domestic fuel cells (such as those in testing from Ceramic Fuel Cells) may be the most important ways of cutting emissions from houses. But at the moment, the economics of heat pumps are not overwhelming attractive. Householders in existing properties, particularly those living in older homes, should be very wary of installing an ASHP.

(This article will form part of the 2nd edition of How to Live a Low-Carbon Life to be published by Earthscan in February 2010.)

Footnotes
[1] These prices are ‘Tier 2’ rates which apply to all consumption of gas and electricity above a certain minimum level. They exclude some small discounts because I couldn’t understand how these reductions worked.
[2] Energy Saving Trust figures downloaded from http://www.energysavingtrust.org.uk/Generate-your-own-energy/Air-source-heat-pumps on 10 June 2009.

Copyright: Michalis Palis – Fotolia.com

Government officials are searching for policies that will meet the twin aims of providing jobs and meeting the UK’s climate change targets. It is proving a difficult task. The easiest ways of reducing fossil fuel use will probably not create many new jobs in the UK. All large wind turbines are built abroad and although the construction work on a nuclear power station will generate a few thousand jobs, most of the key components will need to come from Europe and Japan. So where are the opportunities? I think two major areas stand out as excellent ways of generating jobs quickly without also dragging in expensive imports or sharply raising prices.

***

One opportunity is well understood. The UK’s houses are the worst insulated in northern Europe and the scope for improvement is clear. The other idea is newer. I think that massively increasing the availability and use of wood for fuel can generate large numbers of jobs both in forestry and in business such as horticulture that can productively use the cheap heat from small wood-burning power stations.

Housing
Initially government seems to have hoped that the clear need for improved heat retention means that the insulation industry could be used as a way of generating large numbers of jobs as an army of installers laid thick wads of cladding in UK lofts. But once the Department of Energy and Climate Change had worked out the numbers, it looked as though the potential for extra employment was limited.

I think that the department was far too pessimistic when it looked at the opportunity. Although it is true that almost all UK houses now have loft insulation, remarkably few have a thick enough layer. Most commentators say that increasing the thickness to at least 25cm (10 inches) will save more in central heating bills than it costs. My estimate is that at least 15 million homes could profitably increase their loft insulation to this level. A large-scale programme of installation would reduce UK gas consumption and provide tens of thousands of jobs for several years.

However, lofts should not be the biggest focus of the green new deal. They are responsible for less than 10% of the heating losses of a typical house. Far more heat leaves through walls, windows, and floors. Surprisingly, almost as much energy is lost through doors as through the roof. Losses from draughts are also far more important than the loft. A sustained national programme to improve the heat retention characteristics of our housing would be hugely beneficial. It would reduce fuel bills, cut the UK’s use of insecure supplies of Russian gas, and provide the prospect of employment for hundreds of thousands of people in manufacturing and installation industries. We should be installing cavity wall insulation in millions of homes, replacing leaky single-glazed windows, carefully repairing draughty floors and walls, and hanging properly insulated well-fitting doors. All simple and straightforward measures that can be taken using British-made goods and newly trained people. More complicated schemes such as re-cladding blocks of flats make even more sense financially, but will require us to import some skills and products from Europe. For the average house, a saving of 30% of the heating bill is easily achievable.

How would we finance this programme? We can copy the successful features of the German eco-renovation policies which are now systematically reducing energy use in several hundred thousand homes each year. Through soft loans, grants for achieving energy reduction targets, and other measures, householders and landlords have been incentivised to take measures that sometimes cut domestic heat need by 80% or more. The German government claims that the cost per tonne of carbon saved is impressively low and trumpets that household emissions of greenhouse gases have fallen by a third since 1990. This finding chimes with what we already know: house insulation makes financial sense and people just need the right incentives and advice. The Energy and Climate Change people should look again at the scope of generating jobs and reducing emissions.

Woodland
The UK is one of the least forested countries in the temperate world. Only about 11% of the land area is covered by trees. Simply planting more trees would have value: they will soak up CO2, reduce the risk of catastrophic flooding in times of intense storms, and possibly help reduce summer peak temperatures. Of course people would be employed planting and looking after the trees. But the even more important objective is to reduce fossil fuel use by replacing coal and gas. In other northern countries, wood fuel provides a substantial fraction of total heat needs through district heating systems that burn the wood in central plants and then distribute hot water to local homes. This replaces the need to use gas or oil. Increasingly, these wood-fuelled heating plants are also generating electricity as well using turbines. The UK could aim to install thousands of small-scale wood-burning (or, more likely, wood gasification) plants dotted around forested areas.

There’s little competition from other users for wood in many areas of the country. Even in woodlands close to major cities, such as the Chilterns, prime wood is increasingly left unused. Beautiful wooded areas won’t stay that way if we don’t manage them properly. Creating a market for wood by encouraging the growth of small-scale local electricity generators is an excellent way of incentivising proper care of our woodlands.

How much difference could a major reforestation plan make? Moving the UK from 11 to 12% forest cover would add 250,000 hectares of woodland. Fast-growing species might produce a yearly yield of up to 10 tonnes per hectare, with enough energy to replace over 5% of our electricity need for ever, as well as huge amounts of useful heat. The reduction in UK emissions is potentially worth tens of millions of tonnes a year. But is it a feasible target to increase woodlands by 250,000 hectares? Think of it this way: China has reforested 4 million hectares every year for the last two decades. So of course it is possible and, moreover, much of the employment would be in areas of low incomes and poor job prospects. Planting and nurturing young trees is a skilled job, and these skills have atrophied in the UK in recent years. But given the right incentives, traditional farmers could hire and train the people needed to plant large areas of fast-growing coppices.

The best use for the heat from wood-using power plants would be in homes and other buildings such as offices and schools. But we should also use spare heat for a new generation of horticultural greenhouses. The fall in the value of the pound has made imported fruit and vegetables expensive. We could grow much more food in the UK using cheap heat and some electricity from small wood power stations for glasshouses. The great advantage of this is that horticulture is highly labour intensive and so it can revive areas of limited prosperity such as Cornwall. Replacing Dutch and Spanish fruit and vegetables with home-produced products in greenhouses heated by local wood could transform the economic prospects of parts of the UK. The percentage of the Dutch labour force working in agriculture is almost three times the level here and widely available cheap heat could pull the UK back up towards the Dutch employment level.

Is such a plan financially possible? I think that at current prices for advanced small-scale electricity plants wood is probably just about economic as a source of heat and electricity. As with other low-carbon technologies, we need to reduce further the cost of the plant and equipment. This will happen as more small wood power stations are installed and manufacturing costs are reduced. With some sensible government support, a plan to reforest 1 or 2% of the UK clearly makes economic sense, not least because of its potential employment impact and for its effect on carbon reduction.