The role of micro -generation

technologies in alleviating fuel poverty

In a bid to ease the burden of fuel poverty, social housing providers are increasingly turning to micro-generation technologies to help reduce fuel costs. However, with many different types of micro-generation

technologies on the market, designers need to know which technologies offer the best chance of alleviating fuel poverty

The aim of the study was to determine the The three different types of micro-generation impact of micro-renewable energy technologies technologies were evaluated across three in alleviating fuel poverty. In particular, it sought different case study schemes in South to establish which micro-renewable energy Yorkshire and the West Midlands. Evaluation technologies offered the most cost-effective of the technologies involved monitoring their means of alleviating fuel poverty; and the factors performance, interviewing residents, collecting that influenced the cost-effectiveness of such longitudinal household energy consumption technologies. In doing so we focused on three data and modelling the financial payback of types of technology: ground source heat pumps the systems. (GSHPs); solar thermal hot water (STHW) systems; and solar photovoltaic (PV) systems. Key findings

Solar thermal hot water systems The study was conducted by Fin O'Flaherty of STHW systems are not a cost-effective the Centre for Infrastructure Management and measure for alleviating fuel poverty, based on James Pinder, Visiting Fellow, Sheffield Hallam University. the data from our case studies. Although they are relatively cheap to purchase and install (at Background around £3,500 each), the net financial savings This report is based on the findings of a two generated from STHW systems are relatively year study into the role that micro-generation small (approximately £50 per year in this technologies can play in alleviating fuel study), particularly for under-performing poverty in the UK. The term ‘fuel poverty’ is systems. Even a STHW system performing to used to describe the situation where a its design specification will have a payback household has to spend ten percent or more of period in excess of 60 years. its income on energy to maintain a warm home. The most recent available government STHW systems will become more cost- figures suggest that 5.5 million UK households effective under the government’s proposed – one in five households - were fuel poor in Renewable Heat Incentive (RHI) scheme, 2009 - an increase of 1 million from 2008. which will provide guaranteed payments for heat generated from renewable sources.

STHW system, which in turn will depend on providing residents with appropriate guidance and advice on how to derive maximum benefit from the systems.

Other factors that can impact on the cost - effectiveness of STHW systems include the cost of the energy being displaced by the STHW system, the type of washing machine that is used by residents, the type of shower installed in the property (cold fee d washing machines and electric showers reduce hot water demand) and the specification of the STHW system (some of the systems in our Under the RHI, STHW systems performing to case studies appeared to be under -sized). their design specification will have an These factors should be taken into account estimated payback period of 16 years. when installing STHW systems in new a nd However, even under the RHI, the net financial existing properties. benefits for residents are likely to remain small, since social housing providers are likely Solar photovoltaic systems to use RHI payments to fund the capital cost of Solar PV systems are a more effective installing STHW systems. measure for helping to alleviate fuel poverty, in that systems performing to their design There was a wide variation in the performance specifications can generate estimated savings of the STHW systems monitored in this study, of between £340 and £420 per year (through even when taking account of differences in avoided electricity costs and income from system design and hours of operation. System exported electricity). However, solar PV under-performance can have a significant systems can only have an indirect impact on impact on the financial benefits received by fuel poverty – generally they do not contribute residents (and hen ce the impact that the to space heating, but they will help to reduce systems have on fuel poverty) and the cost - the proportion of ho usehold income spent on effectiveness of the systems. Based on our energy costs and help protect residents analysis, every 10 percent decrease in STHW against future rises in energy prices. system performance resulted in a 9 year increase in the estimated payback period. Solar PV systems have only become cost -

effective since the introduction of feed -in tariffs The performance of STHW systems is highly (FiTs) , which guarantee payments for dependent on household hot water demand electricity generated fr om renewable sources. and consumption patterns. Low levels of hot Based on 2011 tariff rates (43.3p/kWh), t he water demand will result in less cost -effective estimated payback period for FiT eligible PV STHW systems. The cost-effectiveness of systems (that are performing t o their design STHW systems will also depend on residents specification) range from 15 -17 years, adjusting their wa ter consumption patterns and depending on the proportion of PV generated water heating regimes in order to take electricity that is used on -site by residents. advantage of the energy generated from their

will only occur if residents are provided with appropriate guidance and advice on how to work with the s ystems (many residents in our case study said that the information provided to them was difficult to understand) and ensuring that residents can monitor the performance of the systems in real -time (the display units provided were not very intuitive or user friendly).

Prior to the introduction of FiT s, the payback Ground source heat pumps period for the same PV systems would have GSHPs are a more effective measure for been over 60 years. alleviating fuel poverty, based on the data in our case study. The properties in our case There was a wide variation in the performance study were not connected to the gas network of the solar PV systems monitored in this and had previously been fitted with coal -fired study, even when taking acc ount of differences central heating systems. The net annual in the size of the systems, shading and roof financial saving for one of these properties (in pitch. System under-performance can have a the 12 months since the GSHP was installed) significant impact on the financial benefits was approximately £800, even accounting for received by residents (and hence the impact a rise in electricity consumption over that that the systems have on fuel poverty) and the period (due to the electricity re quired to cost-effecti veness of the systems. Based on operate the GSHP). our analysis, every 10 percent decrease in solar PV system performance resulted in a 7.5 Although the GSHPs in our case study were year increase in the estimated payback period. generating financial savings, the systems did not appear to be functioning correctly (for The impact and cost-effectiveness of solar PV reasons that have yet to be established). The systems are both very sensitive to the elderly residents of the case study properties pr oportion of PV generated electricity used on - reported that their homes had felt cold during a site by residents. The more electricity used on- cold spell and that they had had to resort to site, the greater the financial savings that will adopting coping mechanisms, such as wearing be achieved and the greater the cost - warmer clothes or using their electric fires a s effectiveness of the systems. However, the an additional heating source. proportion of PV generated electr icity used on- site will depend on electricity consumption Previous research suggests that GSHPs can patterns, which means that residents may provide comfortable indoor temperatures and need to change their household routines in satisfy a high proportion of household space order to maximise benefit from the systems. heating and hot water requirements. However, it also suggests that the coefficient of It is important that residents understand how to performance can vary significantly between benefit from solar P V systems, for instance by systems, due to differences in the quality of using high-demand and long-cycle electrical installation, the specification of the GSHP and appliances when the PV systems are the way in which residents use the systems. operating at their peak output. However, this This latter issue underlines the importance of

micro-generation technologies, which has resulted in under-performing systems and diminished financial savings for residents. Such an approach is not sustainable and is a symptom of the way that schemes have been funded in the past – often through grant funding – and which means that there has been no provision for ongoing performance monitoring and system maintenance.

The use of feed-in tariffs and the RHI scheme to fund the installati on of micro -generation technologies will give social housing providers providing residents with appropriate guidance a financial incentive to adopt a more long -term and support. attitude toward their schemes and ensure that they are performing to their design GSHPs will become even more cost -effective specifications. Under-performing and under the forthcoming RHI scheme. This will malfunctioning micro-generation technologies make it easier for social housing providers to will result in a reduction in income for social fund the installation of GSHPs, which are still housing providers and undermine the relatively expensive to purchase and install. economics of schemes. Our data suggests that GSHPs are already a cost-effectiv e alternative to solid fuel heating Micro-generation technologies are most systems, but the introduction of the RHI, effective when deployed in conjunction with together with rising domestic gas prices, will other energy efficiency measures and sh ould mean that GSHPs may become an not be used in isolation. Even when benefiting increasingly viable alternative to gas -fired from feed-in tariffs and the RHI scheme, the central heating systems. payback period for micro -generation technologies still exceed those of other energy Other findings efficiency measures, such as cavity wall Micro-generatio n technologies often have a insulation and draught-proofing. R educing range of non-financial impacts that can be demand for energy should, therefore, be seen difficult to quantify. For instance, many as a prerequisite to using micro -generation residents claimed that their solar panels had technologies to alleviate fuel poverty. made them more conscious of how they use energy and water, and raised their awareness Further information of other is sues, such as waste recycling. Some The full report can be downloaded from the residents suggested that it had made them eaga Charitable Trust website think more carefully about which appliances to (www.eagacharitabletrust.org ). buy. If enduring, such attitudes and behaviours are likely to give rise to a reduction in energy For more information, please contact Fin demand. O'Flaherty at the Centre for Infrastructure Management at Sheffield Hallam University on Social housing providers have often adopted a [email protected] . ‘fit and forget’ approach to the installation of