Anyway, I got an update from the Zero Carbon Hub about carbon compliance levels and was intrigued to read that they’re recommending that buildings should have to achieve a “built” performance standard rather than the current “design standard”. This stems from the revelation that, while they meet standards on paper,  most new homes don’t meet Part L in practice.

This is nestled within the other recommendation from ZCH that to achieve Zero Carbon, carbon compliance levels for flats should be frozen at the Code 4 level of 44% reduction in emissions relative to ADL1 2006. For detached homes this is 60% and for everything else, 56%.

If you keep in mind that these reductions are in the context of regulated emissions only, this starts to look pretty paltry. Looking at total emissions, those figures become 27.5%, 35%, and 37.5% (when once we were aiming for 100%!)

So the question is this: does a requirement to build right (i.e. “built performance”) excuse lower targets?

HCA - “Retain and substantially reform – smaller enabling and investment body working for local communities. Intend to devolve London functions to Mayor of London. Taking on regulation of social housing.”

Renewables Advisory Board – abolished

Sustainable Development Commission- under consideration

Committee on Climate Change – retained

Where the heck is is Energy Saving Trust?

As a result it’s likely that emissions from grid electricity will stay high for quite some time. In fact the official line is that the carbon intensity of the grid will remain roughly steady until 2015, when it will plummet towards near-zero carbon in 2040. (As an aside, is it a coincidence that the dropoff comes in 2015, given that it’s the latest possible date for the next general election?) It will be interesting to see how that drop off moves in coming years.

The announcement strongly reinforces the message from DECC that decarbonisation of heat will not be achieved through electrification. In other words, heat pumps are not the answer to decarbonising heat at the national scale.

Source is table 1 from the recently published DECC stats.

Job title: Energy consultant / project engineer

Timescale: Immediate start

Job specification

• Work alongside our director in the London office to drive forward our ESCO, consultancy, and containerised plant room businesses
• Carry out options appraisals; provide strategic energy advice to clients
• Carry out technical modelling of distributed energy systems; refining and owning the spreadsheet tools required
• Provide input into financial modelling, quickly learning business aspects of energy systems
• Carry out or oversee mechanical design of energy centres, district heating, and other elements, working alongside our UK team as well as our Danish partners and adopting best practice
• Help manage the procurement and installation of low carbon plant and infrastructure

Fontenergy is a work environment where everyone does everything. That’s great because you get exposure to all the ingredients required to make distributed energy work – engineers have to understand basic finance, finance people have to get energy markets, energy traders have to understand the Code for Sustainable Homes, etc. Admittedly this can be a little daunting at first, but everybody’s pretty nice and happy to help each other out.

In addition to getting exposure to new areas, you also get as much responsibility as you’re willing to accept. This means you have the chance to go much farther much faster than you might in other companies. As we’ve recently entered a period of significant growth, this is a perfect time to start.

Description of successful candidate

• Mechanical engineering background with 4+ years of experience
• Experience of gas CHP and communal heating systems, familiar with renewable systems especially biomass and PV
• Has served as lead designer and led the equipment procurement process. Has participated at commissioning.
• Has done energy and carbon consulting on new build projects
• Probably a trained SAP assessor; working knowledge of Code for Sustainable Homes
• Excellent spreadsheet skills, including formulas and ideally some macros
• Has excellent business writing and presentation skills
• Able to lead client presentations
• Has dealt with or is very familiar with ESCOs, their benefits and associated issues
• Has a strong desire and ability to pick up new skills and knowledge

Nice to haves:

• Electrical engineering design experience
• Languages – particularly Italian or French
• Business background including basic financial analysis

Salary

• Will vary depending on experience

About Fontenergy

Fontenergy is rapidly growing, agile, and extremely capable low carbon consultancy and ESCO. We focus on all aspects of low carbon energy for the built environment, helping private companies and community organisations deliver distributed energy systems that meet financial and sustainability goals.

Fontenergy was founded in 2006 by bringing together key people from three core disciplines: commercial strategy, energy markets management, and engineering. Our people have spent their careers designing and building low carbon energy systems, dealing with energy markets, and helping to build profitable businesses.

We have provided consulting services on some of the largest ESCO projects in the UK including the 5000 home scheme at Elephant and Castle and the 12,000 home redevelopment of Greenwich Peninsula. We also have first hand experience of ESCO planning, negotiation, and operation through our own projects including the 730-home Green Man Lane project in Ealing and the UK’s first Energy Performance Contract scheme with Places for People in Preston Lancashire. We are also very active in the photovoltaic sector, particularly in Italy where we finance, install, and operate industrial scale building mounted PV systems.

Anyway, as part of all this, we’ve moved to new offices. And not just to any old offices, to probably the best offices on planet earth – on Stoney Street in the heart of Borough Market. Most importantly, above the finest coffee in London (Monmouth).

We moved only a few weeks back and already the guts of my piggy bank have been deeply eroded by flat whites, ostrich burgers, veggie fajitas, fish curry, and dark chocolate from the Rabot Estate shop. This could be a costly lifestyle choice on our part.

Give us a buzz at number 10 the next time you’re in the Market.

These are the IRRs assuming no bank financing. I included the reference prices for Sainsbury and Tesco in the context of a previous post.

Using the Tesco installed price of £5k/kWp for small retrofit, an IRR of 5.5% from your investment might not seem too bad at the moment, given current interest rates. Sure, it might not set the world alight (and certainly won’t attract much in the way of private finance) but it’s not too abysmal.

However even this 5.5% is provisional: the IRR is very sensitive to how much of the electricity generated by the PV is used on site. This is because the “on site” value of the electricity is the same as the price of the grid electricity that you’re offsetting. In other words, if you pay 14p/kWh of grid electricity but instead you generate and use a kWh on site, this has a value of 14p in addition to the FiT payment.

On the other hand if the electricity from your PV panels is surplus to on site requirements at any given moment, the electricity will be exported… and attract a measly 3p/kWh. So it’s clear that consuming electricity on site is worth a heck of a lot more to exporting to the grid. For a small retrofit at £5k/kWp, here’s how the on site proportion affects the IRR:

The 50% on site figure comes from DECC, but lots of people (though obviously, not people in the PV industry) feel it’s overcooked. My own doubts were strongly reinforced recently when I put an energy display unit in my house. I was genuinely surprised by how spiky our electricity load is.

Typically during the day, our load is a steady 80W or so, occasionally punctuated with spikes of between 2 and 5kW for a minute or two while the kettle and microwave do their thing. Not a good match if you’re looking to use all your PV electricity on site. I reckon for our house it would be around 10 – 15% for a 2kW array. Suddenly my 5.5% has become 4.3%. Then again, everyone is different and the loads in another house might be a tighter fit. Just the same 50% feels way too high.

So what’s the headline verdict on the IRR from the PV FiT? Giving DECC the benefit of the doubt on the 50% figure, capital cost for small domestic retrofit needs to drop well below £4k before an ESCO would be able to come along and take the cost away. And even then they wouldn’t be offering much in the way of rent or value share.

For small new build and medium installations, you’d need to be nearer £3k/kWp to attract private finance. For larger installations you need to be well under £3k.

In some cases it’s probably doable… in a very mature market like Germany or Italy. But if part of the point behind the FiT is to hurry the development of our immature PV market (we’re talking about supply chain and installers rather than PV manufacture), we appear to be demanding that our industry run before it can walk. It’s not clear yet what the effect of this will be over the next couple of years. But I’d expect to hear a lot more hype from salespeople while ESCO offers remain thin on the ground (and watch that small print!).

Here are the assumptions behind the graphs above:

I’ll be in the kitchen drinking sherry and crying if anybody needs me.

I have to admit that I love PV. As soon as I got to know PV properly through some projects we’re doing in Italy, I fell in love.  PV is the business and I have absolutely no doubt that it’s a key solution to our long term energy needs.

But you’ve got to be realistic about costs and output. The UK isn’t Italy. As a result of years of domination by very few players, the UK PV market remains immature and install costs are high. In addition, (obviously) there’s less solar radiation so outputs are lower.

So what sort of IRR is realistic? I’ll go do some graphs now.