Posts Tagged ‘feed in tariff’

An Introduction to Feed-in Tariffs

You might already be familiar with the concept of Feed-in Tariffs (FiTs) from the UK FiT programme which was introduced in 2010, or other FiT programmes which have popped up all over the world in the past few years.  The basic purpose of FiT is to provide incentives for national investment in renewable energy technology.  To do this FiT schemes allow and encourage smaller providers (single to double digit kilowatts), including households, to generate electricity from renewable energy for feed-in to the grid.  These small-scale producers are paid a fixed price per kWh produced that is over the market price for electricity and is guaranteed for a long term (16-21 years in Malaysia, depending on the energy source). This premium price makes it worthwhile for them to invest in the initial outlay costs for installing the energy generation technology.

The rates that small-scale providers are offered differ depending on the form of renewable energy used: typically solar rates are higher and hydropower rates are lower, to reflect the efficiency of the technology – for example currently small hydropower generates electricity at a lower cost compared to solar photovoltaic (solar-PV) and is therefore more efficient.  This evens out the playing field for the different technologies so that non-mature technologies (such as solar-PV) will continue to receive investment, instead of investors opting for mature technologies that provide a higher return for cost without subsidy.  In Malaysia, rates can also be added to when the technology used achieves some ideal goals, such as being locally manufactured or assembled, or by using certain technology (see ‘bonus rates’ on the ‘FiT dashboard’ on the SEDA website).

The rates offered are also depreciated annually to reflect that over time as technology progresses, renewable electricity should get cheaper to produce.  So for instance an installation of solar-PV in 2014 will receive a higher annual rate than an installation of hydropower in 2014, but a lower annual rate than an installation of solar-PV in 2013, as it is thought that the solar-PV installation in 2014 would use better, more efficient technology to create a higher electricity to cost ratio.  In the Malaysian FiT programme, the annual rate for hydropower doesn’t depreciate over time, as it assumes that the technology for hydropower is mature and is unlikely to become much more efficient.

The Malaysian difference

The Malaysian FiT programme follows the basic FiT structure described above but differs significantly from other programmes in that it introduces an annual quota.  The quota caps the amount of electricity generation from each source of renewable energy available for the FiT scheme each year and is based on the amount of money collected from the 1% electricity bill charge (see my previous post) from the previous year.

The quota has two main purposes: the first is to ensure there is a maximum amount of money that the government pays out annually for the scheme, and the second is to control what renewable energy technologies are invested in that year, with the purpose of focusing the growth of renewable energy on proven and mature technologies in the short-term, and, once the mature technologies have reached capacity, on technologies that are currently still developing (such as solar-PV) in the long-term.  This means that Malaysia won’t be installing the bulk of the renewable energy technologies that are still developing until later, when they are more developed, which allows them to take advantage of research that the rest of the world have done.

The renewable energy technology available for the FiT scheme in Malaysia are: biomass; biogas; mini-hydro (not exceeding 30 MW), and Solar-PV.  SEDA, the Sustainable Energy Development Authority (SEDA) who is responsible for the management of the FiT believes that Malaysia is not well suited for wind power.

SEDA renewable energy

The National Renewable Energy Installed Capacity by source goals, from SEDA

To combat allegations of corruption, the allocation of the quota is based on a first come first serve basis. Applications are made by the SEDA website and the companies and individuals awarded are accessible on the website.

The obvious downside to the quota is that once the quota has been reached it is likely to disincentivise renewable energy installations.  It is easy to imagine a situation where, once the quota is reached, interested parties decide to wait until the next year to implement.  Once that year rolls around, the quota disappears like Glastonbury tickets but, like Glastonbury, hundreds or thousands are left without quota.  It is hard to say how likely this scenario could be, however the 2013 quota for 20MW Solar-PV disappeared within an hour of it being available[1].

On the flip side, no one can blame Malaysia for being eager to avoid the problems other nations have experienced with an unprecedented large take-up of FiT (see Limu’s take on the UK experience).  It could even be argued that the UK and Spanish FiT programmes had implicit quotas which, once breached, or with the threat of being breached, caused the FiT rate to be lowered (UK) or for the programme to be frozen (Spain).  Given this argument, it is unlikely that the quotas will ever disappear completely, however given time, experience and public support it is possible that the quota could rise to a level where it becomes more of a safeguard to government funds than a limit to the installation of renewable energy.

A note on Solar-PV

Despite the current limited quota for Solar-PV, SEDA seemed to be very excited about the potential for solar.  Malaysia receives a great deal more sun than the UK, from an annual average value of 1,470 kWh/m2 to 1,785 kWh/m2 of solar irradiance in Malaysian cities[2] (compare this to the UK annual average of 950 kWh[3]).  As well as the large electricity generating potential, SEDA were also excited about the ability of solar-PV to ‘democratize energy’, as Solar-PV technology gives all homeowners the chance to generate their own electricity.  This means that if/when electricity prices rise, homeowners do not become hostage to energy companies (although there is only one in Malaysia) and they can also decide to reduce their useage to sell their electricity on for a higher price.  In short, the householder becomes a ‘prosumer’ – both a producer and consumer to/from the grid.  Perhaps SEDA are especially keen on this idea because the pre-FiT programme to promote investment in renewable energy was shelved as (so they tell us) the single Malaysian electricity company refused to offer fair prices to potential producers.

I’m signing off now from sunny Malaysia, but I would be interested in hearing what you think of the Malaysian FiT quota?  Should DECC have established an explicit quota rather than disappoint investors when it prematurely lowered the tariff rate for solar?  How do you think it will affect the growth of renewable energy technology in Malaysia?

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You might have noticed my absence from the blog recently; I have been adventuring around far-flung pastures learning about environmental policies in foreign lands.  As part of this I’ve been attending a few events, including the Malaysian launch of the Sustainable Development Solutions Network (SDSN), led by Jeffrey Sachs himself.  I had a few words to say to them at the end about a certain discipline they failed to utilise.  But never mind about that right now, I wanted to talk about something else…

On Sunday morning I tagged along with the good folks of MESYM (a Malaysian environmental networking platform) to attend a Bloggers workshop hosted by the Malaysian Sustainable Energy Development Authority (SEDA) about Renewable Energy Feed-in Tariffs (RE FiT) in Malaysia.  I’ll write in more detail about the contents of the workshop in my next post, but for this post I wanted to talk about the actual workshop, which I thought was a really interesting idea.

We were all paid RM100 (about £20) in supermarket/department store vouchers each to go to the workshop.  Now considering the workshop was on Feed-in Tariffs in Malaysia (and provided a 5 star hotel buffet lunch) I would have happily gone along without being paid anyway, despite the 9am start time on a Sunday morning.

Our goodybag! Lots and lots of literature, notebooks, badges, a lunchbox (?!) and vouchers!

But we also got this goodybag! Lots and lots of literature, notebooks, badges, a lunchbox (?!) and vouchers!

However it quickly became clear that my fellow blogger attendees might not have felt the same way.  Casual questioning of various individuals on the day about what they mainly blogged about yielded answers such as “Usually myself.  Also Koreans (pop stars), I love my Koreans!” and “Mostly about myself.  And also about the kids I work with” and “The KL Stock Exchange”.  So, an interesting group of bloggers to invite to a workshop on Feed-in Tariffs.  I suspected that my friend and I, with existing environmental interests, were flukes.  This was quickly confirmed when we had a quick introduction to climate change followed by some questions, where we learnt that only about half the room had ever heard of renewable energy, and only 3 people, including me and my friend, had heard of Fukushima.

But this made the whole workshop a far more interesting strategy from SEDA.  We originally thought they were reaching out to the political, environmental, and social bloggers (and their readers) who were probably already thinking about these issues, to try and convince them of the validity of the FiT.  However by reaching out to these other bloggers, who had wide readerships but ones who generally didn’t read the newspaper and probably had not thought much on the issue, they were reaching an entirely new audience and, hopefully, getting them to think about renewable energy and the FiT and to view these issues from angles they probably would not have been exposed to if not for the workshop.

By SEDA’s own admission during the morning presentation it quickly became clear what the main issue was, for the general public which SEDA were obviously trying to reach.  Malaysia has an artificially low fixed electricity price (thanks to subsidies to the tune of RM20 billion, or £4 billion) from the government.  The Feed-in Tariff scheme is funded by a 1% renewable energy charge on every householder’s bill above 300 Kwh (RM77 at the current rate), and this was set to rise to 2% earlier this year, but elections happened later than usual and this has been postponed.  Added to this, the national electricity provider is hiking up the price by another 1%, so all in all householders are seeing an electricity price increase of 3%, of which 2/3rds are thanks to SEDA.

Given the UK’s own electricity price woes this might seem a laughable thing to get upset about, however Malaysians have taken their cheap fixed price electricity as a given and are very much unhappy about this price increase.  Added to this are the recent petrol subsidy cut, and a healthy suspicion of the government (Malaysia ranks as 54/176 on the government corruption perceptions index), leading the public to wonder whether the SEDA 2% is really just going to line the pockets of government official.  The workshop organisers showed us some newspaper articles and screen captures from Facebook to demonstrate some of the public displeasure.

A slide of complaints. Copyright SEDA Malaysia

A slide of complaints. Copyright SEDA Malaysia

So it’s no wonder SEDA are trying to get the ordinary public on their side through ordinary bloggers.  But for this, a large education effort had to happen, in order to get these untrained bloggers to understand what the FiT was and why it was needed.  For a 4 hour workshop the scope was huge: a quick introduction to climate change, an explanation of renewable energy and how they fit into Malaysia’s commitment to cutting GHGs (40% by 2020 from 2005 levels), an explanation of the Feed-in Tariff with some background context and how the 1% (soon to become 2%) electricity price levy fits in, a quick foray into solar-PV and how together with FiT it ‘democratizes energy’ (more in a later post!), energy efficiency, break-off sessions to go into more detail about various renewable energy technologies and energy efficiency and finally a question and answer session with the SEDA Chief Executive Officer and Chief Corporate Officer.

The workshop setup. Copyri

The workshop setup. Copyright: SEDA Malaysia

Energy efficiency break-out session: the cost of non energy efficient lightbulbs vs energy efficient ligthbulbs

From the energy efficiency break-out session: the cost of non energy efficient lightbulbs vs energy efficient ligthbulbs

We were also told, to make sure their massive effort was not wasted, that we would be paid for each blog post we wrote on the topic, up to 5 a month.  I thought about revealing the price here but I sympathise with SEDA and don’t want it to get picked up that this is what their 1% is getting spent on.  But I would say that the payment per blog post is not an insignificant amount, and with 5 blog posts a month this should be enough for a Malaysian to get by without any extra work, including renting a modest room.  Or it would be, if it was paid in cash, which I’m not too clear about as yet.  5 blog posts on one topic a month sounds like a lot though, and eventually one might run out of things to say.  However, the workshop organisers promised that further workshops would be run including a chance to go out and see a biogas plant, giving more fodder for more blog posts.

At first glance it might seem like a lot to spend on an untested strategy, however SEDA remarked that they had originally used television advertising, but their advertisements were run in the middle of the night when everyone was asleep, so this might be a more cost-effective strategy.  Bloggers are also uniquely able to tailor their posts to their readership and, crucially, answer comments from them.  We were also encouraged to “write whatever you want”, which makes me less wary of the thought that we might be part of a SEDA astroturfing operation.  I mean to indicate whenever I write a ‘sponsored’ blog, and there didn’t seem to be any efforts to ask bloggers to hide this.

After the event, during our delicious lunch, I spoke to a few of my blogger attendees to gauge their reaction to the workshop and the payments.  Everyone I asked said they would definitely write about it, but a few were still uncertain about convincing their readership about the 1%.  They told me that they had been to similar events for the entertainment industry, but never one for government policy.  I took a few blog URLs down and will be checking them to see what they write and how this strategy pans out.  I thought the event was well run given the scope and time, and I understood all that was spoken about, however I am well aware that I was one of the very few with previous interest, let alone education and experience in this field.  So it would be very interesting to see how much other bloggers took in and what kind of angle they will approach this from.

We’ve heard of astroturfing before, but, given what I saw and experienced, I think it would be unfair to put that label on this strategy.  I feel like SEDA were genuinely trying to educate blogger attendees and equip them with the background knowledge in order to write about FiT in their own words, rather than to sway them to their side of the issue.  I wonder if a similar kind of strategy could be used by the UK government, or indeed whether it has been done before.  Perhaps there might be outrage at the thought of paying bloggers for social media exposure but I can’t help but feel that it can’t hurt to get people who have shown their ability to hold a large readership to write commentary on policies and bring these to the masses who would otherwise have no knowledge or opinion.

In my next post I’ll actually talk about the Malaysian Feed-in Tariff, but in the meantime I’d love to hear any thoughts you might have on this blogging workshop.

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– experiences of fitting household solar energy – Getting FITS XV is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

Its Easter now and its been a very sunny March – great for solar panels. I’ve also had our first electricity bill with the panels operating. Our bill for 3 months in the autumn was £120. You’d expect this to increase for the 3 months of winter due to longer hours of darkness. However, our bill fell to £70! Saving more than £50 – the first bit of payback on our investment.

The next payback will be our first FITS payment. I’ve received confusing information on this from our electricity supplier SSE. The letter confirming we had registered for FITS said they would need the first reading from the 31st of March. However, a recent letter said it should be for the 31st May.

The company who installed our panels has given some useful advice. I need to take reading for the 31st March as the FITS payment rates go up from the 1st April with inflation. Therefore, I need to take a further reading on 31st May, and then send in both the March and May readings by 5th June. So I am now getting 45.4p per kwh generated according to this DECC document (which didn’t get checked for plain English).

On 31st March the generation meter read 572kw. To repay the loans and investment as planned we’ll need to have generated around 2670kwh by November. That might seem like a long way to go, but the next few months offer much greater generation potential due to the longer daylight hours. Certainly a few more months like March and I think we will reach that target.

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– experiences of fitting household solar energy – Getting FITS XIV is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

As the days start to lengthen we can watch the meter go higher each sunny midday peak. The system now runs at about 50% capacity on bright sunny days. Longer daylight hours, the sun higher in the sky and warmer air temperature will all increase generation over the next few months. The generation meter shows we have made over £50 through FITS payments so far.

The controversy about this subsidy continues to rumble on, which means continuing uncertainty in the sector. Friends of the Earth are at loggerheads with the Government. Their disagreement is really about the way policy has been carried out. Most people involved seem to accept that the current subsidies for the energy sector as a whole are all the country can afford, and so reducing the FITS rate seems sensible – too generous a rate leads to inefficient investment.

The Government could still have approached it in a less calamitous way for business confidence. For which high court wrangling is just about the worst process – DECC are now asking the Supreme Court to overrule their unsuccessful High Court appeal about the December 12th deadline to cut the FITS rate.

Regardless of that process a new policy deadline of 3rd March has been announced for the FITS rate to be cut. If the Government’s appeal is unsuccessful, this will create a second rush to install (as the 12th December deadline did). We are still getting flyers in the letter box advertising solar PV installation, and I can see a house over the road having them fitted – maybe the rush has started already?

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– experiences of fitting household solar energy – Getting FITS XIII is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

The new PV system had one bit of teething trouble in the first few weeks, as the fuse tripped a couple of times. The installer were quick to come an sort the problem, and on the second time they replaced the relevant part. The smart meter they provided was useful as it showing’0’ was what alerted us to the problem.

This meter runs from a sensor clipped over the wires bringing the electricity generated into the main house electricity system. This transmits wirelessly to a neat white box I’ve put in the hallway, which shows what is being generated.

The system is running smoothly now, with the smart meter ticking over at low levels during the day. Oddly, the system shows a very low level of generation (6 watts) at night, which is apparently due to the electricity flowing into the system to operate the inverter and other kit. I’m looking forward to seeing the generation levels rise through the spring.

We are adjusting to having a different kind of electricity supply. The main change is to try and run large appliances like the washing machine and dishwasher during the day, to take advantage of the free electricity. On the best sunny day in December when two of us are working at home our two computers seemed to be powered mainly by solar energy during the day.

As the generation increases, we can try to transfer more energy use to the middle of the day during the summer. Maybe roasts will have to be at lunchtime and showers taken in the morning rather than late evening. As we watch our smart meters and understand more about our energy use, I’m sure we’ll discover more options.


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– experiences of fitting household solar energy – Getting FITS XII is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

The process of registering for FITS payment has gone smoothly, my energy company seems to have had its administration system well-organised. I’ve received confirmation that my solar PV system is registered and now am making arrangements to receive the FITS payments quarterly.

For those thinking of installing PV in the future, the process was fairly straightforward because my installer was in regular and clear communication. Following installation they provided the FIT application form and other paperwork (receipt which is proof of ownership, and MCS form – see FITS VIII), which I sent recorded delivery to the energy company (and phoned to check it had arrived).

It’s a relief to have met the 12th December deadline, which caused plenty of controversy that may not be over yet. The High Court ruled in December that the Government’s plans to cut the solar Feed-in Tariff (FiT) were unlawful, but Energy Minister Greg Barker has since said the Government will appeal this decision: http://www.greenwisebusiness.co.uk/news/minister-to-appeal-solar-fit-high-court-ruling-2917.aspx .

The future design of FITS payments is being reviewed by Government, with one option being to lower the per KW tariff as systems get larger. This would spread the subsidy available over more households, but could be less efficient in terms of maximising the renewable capacity supported per pound. Another plan is to build in adjustments in the subsidy level to take into account the costs of panels, which is the major variable in the costs of installation (with labour and scaffolding costs more stable).

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The panels are now installed on our roof, just as the gloom of winter has set in and sunshine seems a distant prospect. It wasn’t a straightforward process. One of the dimensions of the roof hadn’t been taken correctly, which means that the planned arrangement of panels didn’t fit.

This meant a rapid re-arrangement of the instalment plans. Instead of 17 230W Innotech panels, we have 13 230W Siliken panels that are smaller but generate more per area. So the panels we have are 3.25kw instead of 3.91kw. The price has been reduced by the installer accordingly, leaving me with the same rate of return – they agreed to this as it was their error in specifying the system initially. In fact, the price I’ve paid is nearly the same as the quote another company gave me for a 2.25kw system, so it’s possible I’ve got a bargain.

Whether that is actually the case will depend on the quality of panels over their lifetime. An industry magazine, PHOTON, undertake annual independent tests in Germany of 16 manufacturers’ panels under controlled conditions. In 2010, Siliken panels produced the highest power output (as a ratio of installed power), coming top of the test. I hope their longevity is equally top-class.

I had wanted to use the Innotech panels because of their production through re-using components (see FITS III). I’ve lost out on this due to the need to adjust the fit of the system to the actual measurements of the roof. But overall, I’m happy that a PV system has been installed successfully and on time. Now I have to register for the FITS payments before December 12th.

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– experiences of fitting household solar energy – Getting FITS X is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

It’s happening now. Scaffolding has gone up and the chimney has been lowered. A few of the bricks from the chimney are now propping up a new playhouse in the garden (thanks to my brother in law for his help putting that up). Awaiting installation of the panels next week. I’m on course to beat the cut in subsidy, which has brought plenty of reaction from the sector.

I’m not entirely immune to the policy change. Approval for connecting my system is needed from the electricity company for it to operate at full capacity. This hasn’t been received yet, so the system installed will be adjusted slightly with the use of a different inverter that reduces the maximum generated output slightly – by around 5%. The system will operate at 95% capacity or more rarely (only under ideal conditions of sunlight and temperature). So the total electricity generated will reduce by much less than this, and the payback of the system will only change fractionally.

This issue reveals the core of the objection to the sudden change in FITS – that it is implemented on a timescale that is shorter that those over which relevant work is undertaken. This is why industry feels Government is riding over it roughshod, with few concerns for the consequences.

Installation next week!

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– experiences of fitting household solar energy – Getting FITS IX is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

A date has been set to install our solar PV panels! The scaffolding will go up next week, and after lowering a chimney to remove its shading (see FITS II), the panels will go on the following week.

All these arrangements are just in time, as the Government has announced earlier this month that the subsidy for solar PV installation will be slashed in half on 12th December (Link) . Although not an unexpected change, the timing of this policy development is a shock. The subsidies available are now generous (partly because solar panel costs have fallen), and so a cut in the subsidy rate was widely expected. The timing of this was expected to be at the end of the financial year – in the Spring 2012 budget.

The policy change has been brought forward to save money, pushed through on a ‘fast-track’ process, which allows Government to by-pass the usual rules of public consultation. This may seem fair enough if the subsidy is not cost-effective spending, but the short notice given brings problems. Firstly, it undermines a new industry in solar PV installation, which has been generating employment. A period of months rather than weeks would allow the businesses involved in the industry more time to adjust to the changes.

Secondly, and more importantly, such rapid changes to a market-driving subsidy undermines confidence in the Government’s green agenda. Efficient policy solutions to many environmental problems involve correcting externalities by establishing markets for them. These markets (like the EU’s carbon emissions trading scheme) are heavily dependent on the quality of the Government policies on which they are based. If Government is inclined to make surprise short-term changes to those policies, then this can only undermine confidence in all environmental markets.

Therefore, the rapid alteration to FITS policy is not just damaging to the solar PV market, but undermines and contradicts the intention in the Natural Environment White Paper to encourage environmental markets.

Finally, the short-notice of the change may leave some households stranded in the middle of the process to install panels. My process should be complete well-before 12th December. Others earlier in the process may face an awkward choice, and may question whether a company they employ will still exist under the new subsidy regime. Reassuringly my system comes with a 10 year CPA (consumer protection association) backed insurance.

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– experiences of fitting household solar energy – Getting FITS VIII is part of a series of blog posts by Limu on the attempt to install solar power at home with the help of the UK Feed in Tariff.

I have now chosen a company to install solar panels! Once I was happy with their credentials – Micro-generation Certification Schemes (MSC) accredited, they have an office address (virtual companies have a higher risk of being cowboys) – the decision came down to the panels they sourced, which being re-conditioned, are both more environmentally friendly and cheaper (see FITS VI).

I had thought earlier about installing both solar PV and solar thermal (water heating). None of the companies seemed to be particularly clued-up about doing this, saying that they had other contractors they work with, but not presenting a particularly integrated service.

This is understandable in some ways, as the products (electricians for PV, plumbing for thermal) are different, and the additional cost of doing both means a lower profitability. However, a large part of the costs of installing each of them is scaffolding/roofing work and installing both could be a good way of managing energy price risks. With systems designed to last 25 years and hopefully longer, the financial attraction is not just the lower energy costs now, but the protection against much higher grid-electricity and gas costs in future.

Installing both solar thermal and PV would give some protection against each of these, and so while giving lower returns, gives greater protection against future risks. Whether the risk-reduction justifies the lower returns is down to the risk-aversion of the individual, but it was something I would have looked into further if a more integrated service had been on offer.

Of course, future energy prices are unpredictable, and most discussion recently is of how far and fast they can rise. However, recent discoveries have suggested UK Shale Gas is set to upset the status quo in the gas market. The UK is said to have discovered vast reserves in Lancashire [1]. Shale Gas will have environmental consequences, so these should be factored into its exploitation through appropriate taxation. Some might argue that cheap energy is what the UK economy needs to kick-start it right now. Its true that the economy needs a boost, but an unsustainable one isn’t in our best interests.

Extracting new fossil fuel supplies as cheaply as possible will encourage less-efficient exploitation of them, meaning that the UK economy doesn’t gain the greatest value from them. For example, if gas prices are suppressed then including solar-thermal in the design of new buildings will become less attractive. However, we should expect these buildings to last a century, over which time gas is unlikely to remain abundant, necessitating expensive retro-fitting. I’m assessing investments in my house over a shorter timescale (the 20 or so years I expect to live there), so new gas supplies that stop prices rising too fast over the coming decades would be good news for me, and mean the decision not to install solar thermal isn’t one I regret.

[1] BBC News – Shale gas firm finds ‘vast’ gas resources in Lancashire

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