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Make going green a financial no-brainer

The fanfare that usually accompanies green policy initiatives by the government is beginning to sound a little muted. It seems that the economic realties of dealing with the deficit are eclipsing important but less politically pressing sustainability initiatives.

Two recent examples highlight this. The decision to exclude air-source heat pumps from the Renewable Heat Incentive (RHI) scheme was driven partly by constraints on public spending.

The timing of publication of research on the efficiency of air-source technology didn’t help, of course. However, it seems that policy-makers drew back from a whole-hearted commitment partly because of the current shortage of funds.

In France, people are offered attractive grants to switch from old, inefficient boilers to high-efficiency heat pumps. The result is a quiet transformation in the heating base of the country, with heat pumps now becoming a mainstream solution.

There is a further fiscal wrinkle that tilts the UK market away from electrically-driven heat pumps. Gas used for generating electricity is subject to tax, whereas gas used for direct heating is not. This means that the price of fuel for heat pumps is artificially inflated, whereas the fuel for traditional gas boilers is tax-free.

This pricing disadvantage could be resolved at a stroke by applying tax even-handedly between the competing fuels, but the current stringencies militate against any change that results in lost revenue or places extra burdens on the public.

The other factor that illustrates the limited room for manoeuvre is the recent change to feed-in tariffs. Incentives for those operating new, large-scale solar power projects have been slashed, with tariffs for larger schemes reduced from 30p to 8.5p per unit of electricity produced.

The cut has raised concerns that many community and school solar power schemes will no longer be viable.

The government says the change is needed to put the brake on planning applications for large commercial solar farms that risked overwhelming the system. Investor confidence is critical to establishing a thriving market for renewable technologies in the UK.

This is something that policy-makers appeared to have taken onboard as a more market-driven approach came to the fore in shaping the sustainability agenda.

The sudden change in the level of incentives serves to remind investors what a fickle mistress the legislature can be. If your company was about to invest in renewable technology, only made viable by incentives, the recent policy changes would give serious pause for thought.

If the UK is to achieve its ambitious cuts in carbon, we will need to transform the way we use and recover energy in homes, buildings and industry. This depends on providing the right level of investment and incentives to ensure the green option is not just nice to do, but also a no-brainer commercially.

Scott Craig is sales and marketing director for Pipe Center and Climate Center