The proposed central fund in the allowable solutions consultation widens the gap between construction and energy markets
The government is currently consulting on the best way to deliver allowable solutions - the proposed mechanism by which developers can achieve the much promised policy of “zero carbon homes by 2016” (a policy re-confirmed in this year’s budget by the Coalition).
The favoured approach in the current consultation suggests the government has completely lost the plot as far as securing economic and carbon benefits from low carbon new build is concerned.
The logic behind allowable solutions is simple: zero carbon cannot be achieved economically through building fabric and on-site generation alone, so developers should be ‘allowed’ to deliver the equivalent carbon benefits by instead paying for zero carbon generation projects offsite. However, as with all things low carbon (and indeed all things construction) the devil’s in the detail.
The clearly preferred option for allowable solutions in the government’s mind at present is to establish a central “funder of funds” which would invest in low carbon energy projects nationally. Developers will not need to think too much about hitting energy and carbon targets onsite, because instead they can pay into offset funds which will invest in remote energy projects (e.g., wind farms and power stations) on their behalf.
Developers will not need to think too much about hitting energy and carbon targets onsite, because instead they can pay into offset funds which will invest in remote energy projects
The weakness of this approach is that it will act to diminish the links between construction and energy markets – giving building developers the impression that they can design and build buildings without thinking seriously about energy performance, and giving energy project developers and utilities the idea that they should focus simply on large-scale generation and not worry about how their product is used.
This division between energy and buildings is false – it flies in the face of the laws of physics and the laws of the market – i.e., what customers want – and is in the same category of regulation as Canute seeking to turn back the tide: not in the interests of either customers or the industry.
As a country we desperately need to recognise that building is not just about short-term profit and short-term jobs; it’s also about creating the long-term infrastructure of the country – in other words supporting long-term and sustainable profits and quality, competitive jobs.
The poor quality of UK buildings – particularly housing – currently shapes over half our energy use, ensuring that every householder in the country pays 15-20% more than they should for fuel. On the energy side of the picture, the focus on centralised generation leads to inefficient technical outcomes and local planning conflicts.
The approach of a central fund proposed under the current allowable solutions consultation will perpetuate industry structures in both energy and construction that are non-competitive globally, and eventually this will come back to bite us, in the same way that it did for state-run manufacturing businesses in the seventies and eighties.
A better approach would be to require any such offset funding to be given to the local authority for investment in local energy infrastructure projects – I’ll develop this case further in my next blog.
Matthew Rhodes is managing director of Encraft