The policy that does what it says on the tin (so long as the tin is clearly marked ‘Business as Usual for Developers’)
It all started out so well. When, in 2006, the government announced that by 2016 all homes built in the UK would have zero net carbon emissions, no one thought it would be easy, but many in the industry were eager to rise to the challenge. The idea was that we should stop building new homes that need to be upgraded to be properly energy efficient for our long term targets, and that we should stop as soon as possible. Also, building homes fit for the future would stimulate a mass-market for energy efficiency measures and renewable energy technologies and result in tradespeople and designers developing skills that could be carried over into the upgrade of our existing stock of buildings.
Well, 2016 will soon be upon use and how has the policy fared?
In the run up to this year’s Queen’s Speech, Stephen Williams, a Liberal Democrat MP and minister at the Department of Communities and Local Government (DCLG), briefed via the Lib Dem website that he’d ‘saved’ the Zero Carbon Homes (ZCH) policy. From the information in his article it’s possible to piece together the current thinking on how ZCH will work. It seems like all housing developers will have to build homes that are equivalent to the Code for Sustainable Homes (CSH) level 4, which is only a 44% improvement on the so-called regulated carbon emissions of a 2006 home.
However, even this overstates the ‘achievement’. As I have covered before on my ‘solar blogger’ blog, the definition of zero has been adjusted to include only regulated carbon emissions (those from heating and lighting). Energy used by plug-in appliances (white goods, gadgets, AV equipment) is not considered. Add back the emissions from electrical appliances and the picture is even less flattering. The original vision for Zero Carbon Homes has been diluted to such an extent that a home built in 2016 will produce fully two thirds of the carbon emissions of a home built to 2006 standards. The average energy bill for one of these ‘Zero Carbon’ homes is similarly unimpressive.
I calculated that a 3 bed semi-detached ‘Zero Carbon’ home of 85 square metres internal floor area would have a combined energy bill of £800/year whereas one built to 2006 standards would have a combined energy bill of £1080/year. The element of the Queen’s Speech that Mr Williams was using to justify his boast is the creation of legislation to enable an element of ZCH called ‘Allowable Solutions’.
This could be better called ‘Buying Carbon Offsets’ because it means that instead of improving the energy performance of the building itself from CSH level 4 to CSH level 5 (zero regulated carbon emissions), the developer can choose instead to pay into a government-managed fund.
What this fund will be used for is, right now, undefined, but it seems likely that it will be spent on upgrading existing buildings. Allowable Solutions was first proposed as a way to help more difficult properties (for example flats with limited roof area) get over the line by allowing carbon offsetting for that challenging last little bit. What was originally intended to be the after dinner mint has now become the meat and two veg, potentially accounting for 56% of the regulated carbon emissions. The circularity of this is utterly mind-bending. Instead of building energy efficient homes to start with, we instead collect a tax from the developer, leaving the house-buyer with largely unchanged energy bills and putting this loot into a pot which may (or may not) at some unspecified future time be used to improve the efficiency of existing buildings. The opportunities for double-counting the benefits are clear.
It's hard to imagine ministers ignoring the temptation to take credit for both the new homes being “zero carbon” and for the measures the fund is eventually to be spent on. Worse still, there is to be a provision for ‘small developments’ to be exempt from reaching CSH 5. It is not yet clear what small means, but Barbour ABI has estimated that if small means a development of 10 or more homes then 10% of new homes would be exempt, whereas if small was defined as developments up to 50 homes, then this figure would be closer to a third of new homes.
Stephen Williams says that ZCH “does exactly what it says on the tin” This jaw-dropping claim doesn’t even come close to passing a ‘reasonable person’ test. Someone offered a home marketed as Zero Carbon would have a reasonable expectation that the energy bills would be extremely low and carbon emissions from the home would be, well, zero. After ten years of watering down, what’s finally being presented is a policy where new homes will produce more than 70% of the carbon emissions they started off with, together with a kind of carbon-tax that might apply to only two thirds of new homes, and bills for the house-holder reduced by only 30%. This policy "does exactly what it says on the tin" only so long as the tin in question has been stamped with large letters spelling out: "Business as Usual for Property Developers" DCLG has swallowed an enticingly simple argument.
It goes as follows - a proper ZCH policy would impose higher costs on developers, slowing the rate of new build, and threatening the fragile economic recovery. What this argument ignores is that if build costs rise, then the price a property developer would be willing to pay for development land will drop. Building to higher standards simply reduces the wind-fall to the land owner. The only time the burden of building to a higher standard would cost developers’ profit margins is if they have speculated that legislation will be watered down and over-paid for their land bank. Does this “world-leading” policy even meet the woolly definition in the European Directive on the Energy Performance of Buildings that the UK must comply with by 2020? The directive requires all housing to be ‘nearly zero carbon’. A number of renewable energy trade bodies certainly think that there could be grounds to challenge the policy.
How to Fix This
The design of Allowable Solutions is not yet fixed, and may just offer us the opportunity to make ZCH mean something. The price per tonne of carbon could be set to encourage developers to make use of now common on-site measures such as higher levels of thermal insulation, heat pumps, solar water heating and solar PV. One way to encourage on-site measures while limiting the costs of the policy would be to set the price per tonne in a tiered structure, with different cost bands. The diagram shows how this could work. Code 4 is a 44% reduction in the emissions compared to a 2006 home, leaving 56% of carbon emissions to deal with under Allowable Solutions. What if the chunk from 44% to 72% was priced at £120 a tonne, and the chunk between 72% and 100% was priced at £30 a tonne? Then developers would have a strong incentive to drive efficiency up towards the 72% level (broadly equivalent to the old 'carbon compliance' level) using improvements to the building. A developer who built to business as usual (Code 4) and paid the entire carbon offset would have an average cost to bear of £75/tonne. By contrast, a developer that chose to improve insulation levels or install renewable energy on the homes to bring down emissions below 28% of 2006 levels could reduce their average cost of carbon offsets down to £30/tonne. It’s still within grasp to make the reality of Zero Carbon Homes really mean something – we hope that Stephen Williams and his colleagues will take that opportunity. Stuart Elmes is CEO of Viridian Solar and also works at the Solar Trade Association. This article is based on a blog that first appeared on Stuart’s solarblogger website.