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Energy policies fall victim to the law of unintended consequences



Jo Butlin, managing director of energy consultancy Utilyx, discusses the fall-out from the recent announcements from DECC relating to the shake-up of support for the renewable energy sector.

Economists often talk of the law of unintended consequences: when the actions of people and especially of government have effects that are unanticipated or unintended. Never has this law been so true when it comes to energy than in the last couple of weeks.

The Chancellor created shockwaves around the industry by announcing in his Summer Budget that  exemptions from the Climate Change Levy (CCL) were being abolished from the start of August.

The CCL is a tax which is charged on the business use of energy. To date, renewable energy sources have been exempt from the tax and renewable power generators were issues with Levy Exemption Certificates (LECs). These LECs could then be traded to business end users who wanted to reduce the amount of tax they paid by buying green energy.

Whilst some of the consequences of this policy may have been foreseen I suspect they have already gone far beyond what was intended.

The first impact was felt by energy generators. Drax saw a 28% fall in their share price, as investors realised that the price the company could earn from their biomass generators had been significantly reduced. Drax, who said the policy change could cost them £30 million this year alone, are now calling on the government to delay its implementation.

What didn’t make the headlines was that the same impact was felt by all renewable generators who saw proportionate values knocked off their future earnings. Investor confidence, already fragile, took another potentially fatal blow.

Just a week after the budget announcement, energy was in the headlines again when National Grid published its routine ‘winter energy outlook’.

This annual report gives the market supply and demand forecasts for the coming winter. The media headlines focused on the worst case scenario which suggested that the lights could actually go out. The outlook showed that the capacity margin – that is how much more energy could be generated than consumed – had reduced to 1.2%, from 5.1% in the previous year, and approximately 15% a few years previously.

National Grid were quick to smooth the waters, highlighting the demand reduction measures that are in place to mitigate any real danger of the lights going out. However the stark fact remains that whilst the risk is still low, it is significantly higher than any time in living memory and now a real possibility.

The next, potentially unforeseen, consequence of the policy change was the now inevitable increase on large customers’ bills. In the last few years, suppliers have used their ability to discount the price of LECs as a key competitive lever in supplying power to the large industrial and commercial market. More than half of Utilyx’s customers took advantage of these discounts but they may now have to pay the full CCL on all of their energy consumption.

No one knows quite how this impact will play out with existing contracts, but what is certain is that many large consumers will see their bills increase significantly. For example, one of our large retail customers will now see an unplanned increase to their energy costs of almost £1m a year – inevitably putting increased strain on their already tight margins.

It is clear that investors, generators and consumers need stable regulatory frameworks in order to plan for the future and build the new generation infrastructure which the UK desperately needs.

We’ve seen that shock policy announcements undermine stability creating a hugely disruptive impact on the whole renewable energy market – across both generators and business users. Whilst policy change may help balance the books for UK plc, it may also seriously undermine our ability to provide secure and affordable energy over the next five years.

That is surely the most damaging and unintended consequence of them all.


7 New Technologies That Could Radically Change Our Energy Consumption



Energy Consumption
Shutterstock Licensed Photo - By Syda Productions |

Most of our focus on technological development to lessen our environmental impact has been focused on cleaner, more efficient methods of generating electricity. The cost of solar energy production, for example, is slated to fall more than 75 percent between 2010 and 2020.

This is a massive step forward, and it’s good that engineers and researchers are working for even more advancements in this area. But what about technologies that reduce the amount of energy we demand in the first place?

Though it doesn’t get as much attention in the press, we’re making tremendous progress in this area, too.

New Technologies to Watch

These are some of the top emerging technologies that have the power to reduce our energy demands:

  1. Self-driving cars. Self-driving cars are still in development, but they’re already being hailed as potential ways to eliminate a number of problems on the road, including the epidemic of distracted driving ironically driven by other new technologies. However, even autonomous vehicle proponents often miss the tremendous energy savings that self-driving cars could have on the world. With a fleet of autonomous vehicles at our beck and call, consumers will spend less time driving themselves and more time carpooling, dramatically reducing overall fuel consumption once it’s fully adopted.
  2. Magnetocaloric tech. The magnetocaloric effect isn’t exactly new—it was actually discovered in 1881—but it’s only recently being studied and applied to commercial appliances. Essentially, this technology relies on changing magnetic fields to produce a cooling effect, which could be used in refrigerators and air conditioners to significantly reduce the amount of electricity required.
  3. New types of insulation. Insulation is the best asset we have to keep our homes thermoregulated; they keep cold or warm air in (depending on the season) and keep warm or cold air out (again, depending on the season). New insulation technology has the power to improve this efficiency many times over, decreasing our need for heating and cooling entirely. For example, some new automated sealing technologies can seal gaps between 0.5 inches wide and the width of a human hair.
  4. Better lights. Fluorescent bulbs were a dramatic improvement over incandescent bulbs, and LEDs were a dramatic improvement over fluorescent bulbs—but the improvements may not end there. Scientists are currently researching even better types of light bulbs, and more efficient applications of LEDs while they’re at it.
  5. Better heat pumps. Heat pumps are built to transfer heat from one location to another, and can be used to efficiently manage temperatures—keeping homes warm while requiring less energy expenditure. For example, some heat pumps are built for residential heating and cooling, while others are being used to make more efficient appliances, like dryers.
  6. The internet of things. The internet of things and “smart” devices is another development that can significantly reduce our energy demands. For example, “smart” windows may be able to respond dynamically to changing light conditions to heat or cool the house more efficiently, and “smart” refrigerators may be able to respond dynamically to new conditions. There are several reasons for this improvement. First, smart devices automate things, so it’s easier to control your energy consumption. Second, they track your consumption patterns, so it’s easier to conceptualize your impact. Third, they’re often designed with efficiency in mind from the beginning, reducing energy demands, even without the high-tech interfaces.
  7. Machine learning. Machine learning and artificial intelligence (AI) technologies have the power to improve almost every other item on this list. By studying consumer patterns and recommending new strategies, or automatically controlling certain features, machine learning algorithms have the power to fundamentally change how we use energy in our homes and businesses.

Making the Investment

All technologies need time, money, and consumer acceptance to be developed. Fortunately, a growing number of consumers are becoming enthusiastic about finding new ways to reduce their energy consumption and overall environmental impact. As long as we keep making the investment, our tools to create cleaner energy and demand less energy in the first place should have a massive positive effect on our environment—and even our daily lives.

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Responsible Energy Investments Could Solve Retirement Funding Crisis




Energy Investments
Shutterstock / By Sergey Nivens |

Retiring baby-boomers are facing a retirement cliff, at the same time as mother nature unleashes her fury with devastating storms tied to the impact of global warming. There could be a unique solution to the challenges associated with climate change – investments in clean energy from retirement funds.

Financial savings play a very important role in everyone’s life and one must start planning for it as soon as possible. It’s shocking how quickly seniors can burn through their nest egg – leaving many wondering, “How long your retirement savings will last?

Let’s take a closer look at how seniors can take baby steps on the path to retiring with dignity, while helping to clean up our environment.

Tip #1: Focus & Determination

Like in other work, it is very important to focus and be determined. If retirement is around the corner, then make sure to start putting some money away for retirement. No one can ever achieve anything without dedication and focus – whether it’s saving the planet, or saving for retirement.

Tip #2: Minimize Spending

One of the most important things that you need to do is to minimize your expenditures. Reducing consumption is good for the planet too!

Tip #3: Visualize Your Goal

You can achieve more if you have a clearly defined goal in life. This about how your money can be used to better the planet – imagine cleaner air, water and a healthier environment to leave to your grandchildren.

Investing in Clean Energy

One of the hottest and most popular industries for investment today is the energy market – the trading of energy commodities. Clean energy commodities are traded alongside dirty energy supplies. You might be surprised to learn that clean energy is becoming much more competitive.

With green biz becoming more popular, it is quickly becoming a powerful tool for diversified retirement investing.

The Future of Green Biz

As far as the future is concerned, energy businesses are going to continue getting bigger and better. There are many leading energy companies in the market that already have very high stock prices, yet people are continuing to investing in them.

Green initiatives are impacting every industry. Go Green campaigns are a PR staple of every modern brand. For the energy-sector in the US, solar energy investments are considered to be the most accessible form of clean energy investment. Though investing in any energy business comes with some risks, the demand for energy isn’t going anywhere.

In conclusion, if you want to start saving for your retirement, then clean energy stocks and commodity trading are some of the best options for wallets and the planet. Investing in clean energy products, like solar power, is a more long-term investment. It’s quite stable and comes with a significant profit margin. And it’s amazing for the planet!

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