The Sunday Times business writer John Collingridge has an excellent piece in last weekend’s edition article “ What my electric car nightmare taught me about net-zero”.
You can read the article here: https://www.thetimes.co.uk/article/what-my-electric-car-nightmare-taught-me-about-net-zero-nhjn7tx00
Here’s my key, practical takeaway: “If you mandate a policy that has big implications for people’s lives, then you have an obligation to help them comply with it, and ease the transition.”
his definitely applies to other news this weekend that the government was floating an idea to make the phasing out of gas boilers compulsory, The Daily Mail, amongst others including Bloomberg Green, carried the story here: https://www.dailymail.co.uk/news/article-9614409/New-boiler-ban-14-years-Gas-powered-water-heaters-face-veto-climate-change-fight.html
This prompted the usual blowback from all the likely (cynical) sources and inevitably resulted in a retreat which is being reported today by The Global Warming Policy Forum: https://www.thegwpf.com/government-backs-down-on-gas-boiler-fines/?mc_cid=9448d28a8d&mc_eid=2206e9995b
This all relates to a previous subject on this blog – making the decarbonization transition as open and transparent as possible. It involves leveling with people and also thinking through the practicalities. If you basically tell ordinary householders that their gas boilers MUST be replaced and that they are on the hook for a possibly less ‘efficient’ replacement, don’t be surprised if consumers rebel. And more to the point, this kind of legislative diktat will also blowback into the culture wars, with the right stoking up animosity to everything climate change-related.
The key for me is to think through the practical mechanisms first, finesse the process and only THEN think about communicating change. Don’t jump into the dark. I would also argue that there are lots and lots of smart workarounds and ideas that should be trialed first.
Let’s take the example of affixing solar panels to your roof. This used to benefit from a huge government bung but the private sector arguably overindulged that subsidy and pocketed the profits. To fix a sensible 4 kwh array to your roof used to cost north of £16k to £18k, but within that number was a large fixture and fittings element that gave the contractor generous profit margins.
Only this weekend a neighbour who happens to work in the solar industry popped by our house to see how much an array would cost. The changed economics are startling. A 4kwh array, with higher efficiency panels, can now be purchased for around £2500. One needs to add on about £500 (or a little more) for roof fittings and then around £500 to £700 for labour to fit plus electrician costs to wire up to the board. Once you go on the right Octopus tariff, you could then feed that back out to the grid whilst also charging your car up overnight at low marginal cost.
Our neighbour reckoned that the payback period was just 4 to 5 years – and before you all yell that he would say that, I can assure you that he is the most parsimonious and budget conscious person I’ve ever met! So, for between £3500 and £4000 one can rig up a unit that used to cost £16k with subsidy. An inverter adds another £1000 and if you want to add batteries connected to the inverter that’s probably another £2500 to £3500 (depending on batteries) to make you go ‘off grid’ if needs be.
My point in laboring this practical example is that here is one technology solution that will help which
b) Is within the price range of many and
c) Could be facilitated by the government at low cost now.
What do I mean by point (C)? Let’s assume that the marginal cost after intense market competition is that £4500, and that payback is 4 to 6 years. The government could very easily provide a homeowners interest-free loan scheme with 0% interest. This in turn is based on a green bank wholesale funding line costing said institution say 1.5% a year funded via the gilts market. Offer these loans for a seven-year period at zero percent and the monthly cost would come down to £53.59 per month, well within the budget of a great many homeowners.
The point in my example is to make sure that subsidy doesn’t distort the economies of supply. If suppliers always look for the big fat government cheque, there is no real imperative to undercut the government subsidy.
Let providers compete on price plus innovation and let the market drive down the cost of supply. On the demand side government, where the government can definitively help is by pushing down the cost of owning said green assets through cheap or even negative interest rate loans.
So, with gas boiler replacements, let the market compete like crazy with a supply led solution but then offer households a NEGATIVE interest rate of say 3.5% per annum on a replacement boiler loan. That means the loan costs the government 3.5% a year or 42% over a ten-year loan period. The householder stills picks up the other 58% cost but that would be much closer to the cost of substituting an existing gas boiler with another gas boiler.
All of these loan schemes could work through existing financial institutions – as has the existing pandemic bounce back business loan support. The bank simply has recourse back to say a new consumer state green bank which acts as wholesale funder.
I’m sure there are myriad intricacies my plan misses but my point is that rather than issuing top-down mandates, we need to think through how ordinary householders will handle the day-to-day cost of substitution and replacement. The householder also needs to be able to see the value of the new technology they are in effect acquiring.
If we don’t think this way, all these bold decarbonization initiatives will fail.