Reflections on energy and housing

reflection

Jenny Love, UCL Energy Institute

I’m going to be leaving academia in a couple of months. Aside from my colleagues being able to finally get some peace and quiet and not having their chocolate supplies taxed on regular occasions, there are some other benefits to this. One is that it has made me reflect on what I have learned whilst doing a PhD in energy and housing. Here are four reflections that you may find interesting.

1. We still don’t really understand a lot of factors behind energy use in buildings.

Much of the blame for this can be attributed to a poor evidence base for physical performance of houses. For example, not enough studies have measured energy use and linked it to real measurements of heat loss from the building. Researchers like Virginia Gori, Sofie Pelsmakers and Sam Stamp are working on these actual measurements.

If we don’t understand how energy is used in the first place, this makes knowing the effects of things like retrofit quite difficult to predict. Researchers like Ian Hamilton are using the best data we currently have to assess the effect of energy efficiency measures.

2. Social scientists and physicists/engineers must go further than just collaboration

We have an unfortunate tradition in our field of a lack of respect between physical scientists and social scientists. What I mean by saying we must go further than collaboration is not just working together and bearing with each other – but setting an example of genuine appreciation of the other’s discipline – including stopping dissing each other’s disciplines behind our mutual backs. When I started my PhD I didn’t know much about social science, and therefore used to be quite rude about it. Now I have come to see that it’s the people who bring about the physics in buildings that I like to study. For example, I described here how when houses are retrofitted, the outcome is determined by the amount by which the occupants adjust the heating. Researchers have to understand what made the occupants adjust the heating, and then the effect that this has on energy use.

The best combination of social science and physics in one project I’ve seen is the work Lai Fong Chiu and Bob Lowe‘s Retrofit Insights team are doing, here. As it happens, the two lead authors of this study are married. Now, although this happened before they wrote the study, there’s nothing to say it couldn’t happen the other way round – you never know, multidisciplinary collaboration could lead to love. In my role as Dr. Love I’m happy to point you towards eligible physical or social scientists with whom you could start a multidisciplinary collaboration.

Another person to keep your eye on is Adam Cooper of UCL STEaPP, who is doing great work in starting to develop the theoretical framework within which social science and physics can fit together in order to study energy use.

3. ‘Behaviour Change’, like religion, is (mis)used as an excuse for all kinds of wrongs

What I mean by ‘Behaviour Change’ is trying to get occupants to reduce their energy use by changing their home heating behaviour. This is only beneficial if there is actual evidence that occupants are exhibiting wasteful behaviours in the first place. In my case study sample in social housing, many of them were heating far less than average and trying to get them to turn the heating down would not only be morally wrong but also bad for the house (leading to more mould, etc).

The second problem I have with ‘Behaviour Change’ is that it is sometimes used as a pretend solution in order to avoid the real issue – the fact that our housing stock is among the least thermally efficient in Europe. We need to get on with insulating it, instead of trying to make people colder by using less heating.

I’m certainly not against occupant engagement. Quite the opposite. What I would recommend it looks like is firstly listening to the occupants about how they do use the heating, and then, only if they are up for it, deliver tailored advice which will help them meet their heating needs using less energy. Also. we should be giving advice on wider aspects of maintaining a healthy home, like how to ventilate adequately.

4. Separate energy/climate change policy from warmth policy.

A crude description of the way retrofit policies worked during the time of my PhD is that energy companies ‘offset’ their CO2 emissions by funding retrofit of social housing. There is very little measurement of whether energy or CO2 has actually been saved, but if there were, it would be seen that some occupants do not save energy but have a warmer home instead – in fact, this is what the occupants need. However, this would be counted as essentially a failed policy, even though the occupants now have a better quality of life. Maybe that’s why no one measures the actual savings.

There are two agendas going on here  – allowing people to be warm in their homes, which is very important, and mitigating climate change by reducing energy use, which is also very important but is the opposite to making people warmer. The more you do of one, the less you do of the other: in my mind, the trade-off is like this:

trade off

I think our climate change and energy demand reduction policies should not target
social housing – there are plenty of other places to focus energy demand at. This sector
needs policies measured in terms how much more comfortable the previously-cold
occupants become.

Conclusion

So, there are some thoughts. I invite you to challenge or add to any of them in the
comment section below. As always, feel free to contact me on Jennifer.love.09@ucl.ac.uk if you would like to have a more detailed discussion on anything raised above or have any questions about energy and climate change in general.

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Explaining the Green Deal to the Public

Jenny Love and Peter Warren, UCL Energy Institute

With help from Martin Evans, the Simplification Centre http://www.simplificationcentre.org.uk/

This October the government is planning to launch a scheme called the Green Deal whose aim is to incentivise householders to make their homes more energy efficient. The Green Deal has come under much criticism for a number of reasons– we feel that the main problem is that it is difficult to simply and/or convincingly explain to people who are not environmentally driven or do not have a technical background. However, we do not feel that it is helpful to lament about the problems, so after explaining what might go wrong, with the help of Martin Evans from the Simplification Centre we will start off a discussion of possible solutions. Please do contribute your thoughts at the end!

1. What is the Green Deal?

Reduced to arguably its simplest terms, it is a scheme whereby householders take out a loan to buy energy efficiency measures. That is, they pay nothing up-front, get measures installed, and repay the loan as they save money on their energy bills. “Under a ‘golden rule’ the repayments must be less than the savings on the energy bill” (taken from Which)

A member of the public presented with the above paragraph would quite likely think, “I don’t really understand whether this is a good deal or not”, or “I don’t know whether this would make me richer, poorer or do nothing?” This article aims to explore how to make the Green Deal clearer.

2. What needs to be sorted out if the Green Deal is going to work?

Broadly speaking, there are three things to work out:

a) The measures need to work. That is, if a consumer wants some external wall insulation there needs be some available, and the quality of the installation needs to be good.

b) The finance needs to work. The loan should be available at the rate and or payback period promised to the consumer. If the consumer defaults, there need to be mechanisms in place to deal with that.

c) The consumer engagement needs to work. ‘Consumer engagement’ means that householders need to understand what it going on, agree that it is a good thing, and thus go through with it.

Now, having heard a variety of speakers and done some research on the above, we feel that issues a) and b) are smaller than issue c). That is, the supply chain should sort itself out and there should be skilled people to install the measures. Equally, the financial model should hopefully sort itself out even if at first it is a bit shaky. We are therefore going to focus from now on issue c), that of the householder…

3. What is the evidence that consumer engagement needs improving before the Green Deal is launched?

The motivation for writing this article came from attending a talk describing Green Deal trials carried out by npower, where, on the whole, consumers did not understand what was being proposed to them. This was not the first trial of this kind – the official pilot project of the Department of Energy and Climate Change (DECC), named  ‘Pay as you save’ (PAYS), was carried out a couple of years ago by the Energy Saving Trust (the full report can be found here:  http://www.decc.gov.uk/assets/decc/11/meeting-energy-demand/microgeneration/2670-home-energy-pay-as-you-save-pilot-review.pdf)

Below are a few key lessons from PAYS, but also areas in which it did not reflect the forthcoming Green Deal, thus implying that some aspects of the latter are untested:

Firstly, the sample was self-selecting in that recruitment was through online or telephone responses to various advertisements. Afterwards it was inferred through questionnaires that the level of environmental awareness of PAYS participants was much above that of the UK population. Therefore, we do not have a lot of evidence of ‘normal people’ taking it up of their own accord.

Secondly, the PAYS scheme was simpler in mathematical terms and more attractive from a customer point of view than the Green Deal will be – since the PAYS loan was zero-interest as opposed to the Green Deal (GD) figure of around 5.8%. We are sure that this will make quite a big difference to uptake. An interest rate of 0% is a good deal as long as the measures save more money on energy bills than the cost of the loan repayment, per instalment. An interest rate above zero is only a good deal if the measures save more money than the loan repayment + interest, per period, per instalment. The zero interest rate was shown to be a key motivation of customer uptake.

Drop-out was closely monitored throughout the trial, yielding some interesting findings. Although households dropped out at many stages of the pilot, most opted to cease their participation after an energy assessor had been to their house, performed an energy assessment, and given them “detailed information concerning actual savings and repayments specific to their property”. That is, they had opted in to the Deal, but when some specific numbers were given to them it didn’t seem like such a good deal. And this was with a 0% interest loan.

Given the above, how should the Green Deal be explained? Here are a few suggestions…

4. Suggestions for explaining the Green Deal to Normal People

a) General principles

– Find what the customer actually cares about.  We think that it is, ‘How much will I save?’, and when we had a think about what unit the customer thinks in, we refined that to ‘How much will I save per bill?’. In consultation with the Simplification Centre, it has been suggested that a model bill is shown to the customer. In this way, the customer can see that this is what their bill will look like, and be taken through it by a human being before making a decision as to whether it is a good deal or not.

–  Address risks perceived by the customer. ‘Perceived’ is emphasised here as it is incredibly important. The Green Deal could either be seen as taking on a risk (by taking out a loan), or as lowering a risk (protecting oneself against future rises in energy prices). Frame the Deal so that the customer feels that he/she is minimising risk.

– One problem not mentioned above is that the loan repayment will be added to the customer’s electricity bill, whereas energy savings are likely to show up more on the gas bill. As much as we like to think that a customer meticulously calculates and optimises everything in their life, he/she doesn’t, and this setup will mean it is an effort to see the overall effect of the Deal on his/her wealth. We therefore propose that energy billing should be done using one single bill. For those whose gas and electricity are provided by different suppliers, we propose a 3rd party to manage the billing. However, this will add administrative complexity.  Nevertheless, we feel that the issue of disconnection between gas and electricity bill must be solved.

– Behavioural economics has reminded us again and again that when making comparisons, the point of reference is very influential to the outcome. Consider the issue of ‘payback’ – the amount of time it takes for a measure to pay for itself by the energy saving it makes. Consumers are often presented with a report including measures ranked by payback period – and they can be above 60 years for some measures. Given this, the customer will say, ‘no thank you’. But compare to something like getting a new kitchen which gives the customer zero financial payback – he/she still purchases it, for reasons other than getting the money back. Our point here is that customers should not be presented with a comparison of measures in terms of payback periods, they should be presented with a comparison of having the Green Deal or not having the Green Deal, and payback should not be presented as the point of reference.

– In terms of marketing the Green Deal, DECC is currently anticipating industry to take care of it, whereas we believe that the role of central and/or local government is crucial. This is because it could fail if no one knows about it, and might have more impact coming from a central body than sporadically from different private sector sources. At the minimum ministers should promote the central message to get base level interest.

– Thinking long-term, sustained feedback is important (as recognised by the latest DECC document replying to the consulation responses, available here: http://www.decc.gov.uk/assets/decc/11/consultation/green-deal/5521-the-green-deal-and-energy-company-obligation-cons.pdf) . Comparisons to previous years, in the form of a simple graphical document, may help point out unconscious increases in energy use through comfort-taking or other reasons.

b)          Different methods of communication to the consumer

The following is a non-exhaustive list and contains, we feel, some bad ones and some better ones – please give your own suggestions.

1. The ‘standard graph’: something like

(http://www.bartlett.ucl.ac.uk/energy/docs/R_Smith_Parity_Projects_UCL_030412__Is_The_Green_Deal_a_Red_Herring.pdf)

Variations of this are seen all around. But is it appropriate to show the customer? We think that this particular example is clear, but Martin Evans points out that it could look to the customer like a big loan repayment has been shoved on top of their bill, which is perhaps not a great way to market it!

2. A diagram showing where the money ends up:

In this diagram, the financial flows between the householder and the green deal provider are shown.  Although only indicative figures are given, it shows how both parties benefit in monetary terms:

3. Explanation in terms of a mortgage or a normal loan. Looking at the documentation that goes with a loan, maybe not….e.g. http://www.lloydstsb.com/media/lloydstsb2004/pdfs/PlatinumonlinTsCs.pdf

The Green Deal is a bit more complicated than a normal loan. Perhaps a picture is a better way of showing the similarity and differences…

A LOAN:

THE GREEN DEAL:

4. Picture from the point of view of the customer

5. A short film/youtube video: DECC made one and you can watch it here: http://www.youtube.com/watch?v=R1oBCPj81Bw&list=UUULvYGk41IsFKZ21TZgiOpg&index=8&feature=plcp    Do you think it gets the message across?

6. The no-brainer argument: the consumer would have the same wealth with or without the GD but have a warmer house with. (Modification pointed out by a helpful commenter: the government have not guaranteed that savings will exceed repayments in each invididual case – only for an average energy user for certain archtypes of dwelling and efficiency measures – and so this argument will not always be true.)

Conclusion

We hope you found this article thought-provoking. Do have a think about, as a customer, the format and framing in which you would best understand the Green Deal, and tell us. We very much wish the Green Deal to succeed and want to encourage discussion to maximise its successful uptake.

Appendix: how is the loan paid back?

We are not sure if the current proposal is for a flexible or a fixed-term loan.

–          Flexible:  the loan repayment is a percentalge of the energy savings; that is, the more energy  used by the consumer, the longer it takes to repay the loan. However, there is still an end date the consumer cannot exceed – so if more energy is used at the start and thus not much of the loan is paid back, the rest will have to be paid back in a short space of time.

–          Fixed: a set amount of money per month (i.e. not thinking about energy [and consequent carbon] savings, just thinking about paying back the loan).

There is a trade-off here: customers would like to know how much will be coming out of their bank account each month for the repayment contract, but on the other hand the carbon objectives of the Green Deal are best satisfied by a flexible timeframe as it encourages people to make more savings.