Is Lord Turner Pissing in the Wind?

I went to the Campaign against Climate Change (CCC) conference on Saturday. My impression is that everything is turning a bit red-green – there was a heavy presence of the alphabet soup of revolutionary socialist groups. Perhaps the CCC event is typical of what’s happening to the climate change movement.

The headline on the front page of the Guardian today was: “£15,000 the cost of a green home – watchdog“.

The watchdog in question is the Climate Change Committee (henceforth this, not the Campaign against Climate Change will be known as the CCC!), headed by Lord Turner. It seems to me that the Committee’s brief should be to advise the best things to do, not everything that comes into their heads. And I should imagine most people would understand cost-effective to be one of the main criteria determining what is “best”.

Have they run the numbers?

Maybe we should before we spend £300bn (20 million houses at £15,000 each).

David MacKay reports that he was able to reduce his gas consumption by 27kWh/d, a staggering 67%. David was lucky in that he had cavity walls that are more cheaply insulated than the solid variety. I expect he was also highly motivated to maximise savings (and his savings include some thermostat manipulation), and not everyone would achieve such a good result. Let’s assume, though, that David’s 27kWh/d is the sort of energy saving we get for spending £15,000 on the average house.

There are about 20 million houses in the UK and 60 million people. The cost to save 27kWh/d/p is therefore around £5,000 per person by home improvements, or £5,000/27 = £185 per kWh/d/p.

How does this compare with other options?

MacKay lists costs of energy generation options in his Table 28.3. He doesn’t give the cost per kWh/d/p, but we can easily work it out:
– onshore wind provides 4.2kWh/d/p for £450/p, so £450/4.2 = ~£107 per kWh/d/p.
– offshore wind provides 3.5kWh/d/p for £650/p, so £650/3.5 = ~£188 per kWh/d/p.
I mention wind in particular because there will be a good correlation between wind availability and the need for domestic heating, since the wind cools the houses down. (Many homes have gas central-heating, of course. Electricity will displace gas burned in power-stations if it is not used to heat homes directly).

It’s clearly significantly better to build onshore wind than insulate homes at £15,000 a pop. It’s a toss-up between offshore wind and insulation.

Installing heat-pumps would, according to MacKay, cost £1000/person (implying £3,000/house) but save 12kWh/d/p, at ~£83 per kWh/d/p. People should definitely buy these. But Lord Turner doesn’t mention heat-pumps at all:

“Britain was running out of ‘easy things’ to do in the home[, Turner explained]. ‘After home insulation and more efficient boilers, we now need more intrusive things – double glazing, cavity wall insulation, solid wall insulation.’ ”

And I hate to say it, but according to David MacKay, nuclear power is cheaper still at £1000/person for 16kWh/d/p, i.e. £62.50 per kWh/d/p.

But. There’s always a but. This one is that I simply don’t believe you get as much saving for every £ of that £15,000. By the 80:20 rule, most of the energy will be saved by the first 20%. Here’s what I reckon: it’s a better deal to spend considerably less than £15,000 on each home – let’s say £3,000 – and instead invest in as much wind energy as we can possibly produce.

But. There’s always another but. The cost should be paid by home-owners. I think what I object to most is the statist approach. Apparently:

“The CCC believes that the cost of the scheme would be paid for by a combination of government subsidy and higher electricity bills.”

It’s not clear who pays through their electricity bills. Maybe the idea is you take out what is in effect a loan. But home-owners are generally fairly credit-worthy, so should take out a bank loan (or remortgage), if necessary, to make cost-effective home improvements. What’s proposed, though, is that at least some of the cost of the home improvements is to be spread amongst around – in particular, some, it appears, is to be borne by the taxpayer. This is just wrong. Why should those who don’t qualify for the subsidy pay to increase the value of other peoples’ homes? In ways that might not even be cost-effective.

In fact, if home-owners don’t take financial responsibility for the exercise it will certainly not be cost-effective. Consumption needs to be monitored to ensure the expected savings are made. And what’s more, home-owners need to manage their houses to ensure that energy consumption doesn’t bounce back up, that is, not simply turn the heating up or keep a few more windows open.

Simply handing out money is a good way of wasting most of it.

Instead, we should let the cost of energy be what it’s going to be, using the most cost-effective forms of low-carbon energy.

And then, sure, we should provide advice to home-owners – public information ads detailing how they might save money, and all that.

But people should then make their own informed decisions as to whether to save money or not. If necessary, the price of carbon should be allowed to rise until enough people do save energy or switch to renewable forms.