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In an ideal world every occupied building in Ireland would be energy upgraded to the highest standard, tapping into numerous benefits for the building occupant, the construction industry and society as a whole. Construct Ireland is calling for the introduction of pay as you save, a repayment model which offers the potential of making significant energy upgrade investments achievable in the vast majority of Irish buildings, as Jeff Colley reveals.
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Paul A Cillo and Harlan Lachman of Vermont’s Energy Efficiency Institute, the originators of PAYS
Construct Ireland proposes that the government should encourage or even mandate state-owned energy utilities and private energy suppliers to offer their new and existing customers PAYS tariffs. The cost of the work would be assigned to the energy bills of the customer, and repaid over an agreed period of, typically, from five to twenty years or so. The actual amount and term is determined by the cost, savings potential and expected lifespan of the measures, and to what both the customer and energy company are prepared to accept. In all cases, the reductions in estimated energy costs are greater than the repayment costs on the upgrade work. In the case of homes, this might typically involve installing measures ranging from costs of a few thousand euro up to twenty thousand euro or so, with larger investments justified in buildings with higher energy consumption. Any energy saving measure, including a vast range of materials and technologies could be included within a PAYS tariff, if it can be proven that the measure will save sufficient energy over its expected lifespan to prove cost-effective within the terms of the tariff. This could include anything from CFLs, to various forms of insulation, to heating system replacement to microgeneration of electricity. Customers could even use such a tariff to make incremental improvements over time. For instance, initially the tariff could include a repayment for CFLs over, say one year, along with cavity and attic insulation over, say, three to five years. Perhaps after feeling the benefit of the insulation over a couple of years, the customer might like to add a boiler replacement and solar thermal to the tariff over five to eight years or so. Ten years down the line they may wish to use a PAYS tariff to help make their house carbon neutral. PAYS therefore offers the prospect of creating a continuous demand for innovative technologies to meet customers needs in a changing energy (and climate) landscape.
Are there any precedents for this?
There are. In the aftermath of the 1979 oil crisis, ESB and Moy Insulation teamed up to offer attic insulation to customers, requiring no upfront capital investment, but instead adding the cost to the energy bills of the participating customers. Roughly 30,000 attics were insulated on this basis, and the scheme was commercially successful. Similarly, the rural electrification of Ireland led to ESB opening shops over time and offering hire purchase on a broad range of appliances. Often this was a last resort for credit for many people, as their likelihood of defaulting was cut by their need for continuing energy supply.
The Energy Efficiency Institute developed PAYS in the late 1990s. Programmes based on PAYS have been successfully implemented by six utilities in Kansas, Hawaii and New Hampshire – no mean feat given that this was achieved during the Bush administration years in a country with umpteen different utility regulators. Hundreds of customers at New Hampshire Electric Cooperative paid full cost for compact fluorescent light bulbs and several customers weatherised their homes and businesses, including the installation of improved heating, ventilation and air handling equipment. Municipal customers at the Public Service of New Hampshire implemented hundreds of efficiency projects, especially lighting and street lighting retrofits. More than 200 customers in Hawaii Electric Company’s subsidiaries installed solar water heating systems, including many who had previously rejected offers. Midwest Energy has had 150 customers use its PAYS tariff to install insulation, new windows, and efficient heating systems.
More recently, PAYS is being considered in Japan and the UK. Both the Labour government and the Conservative party `have recently backed PAYS as a proposed financing mechanism for low carbon refurbishment in the household sector, with the UK Department of Energy and Climate Change’s recently announced Low Carbon Transition Plan including a commitment to the piloting of PAYS. Central to the UK version is the idea of spreading the cost of refurbishment for a property over a substantial period of time, and across different owners. A UK Green Building Council task group (2) has just published a proposal on overcoming the barriers to practical implementation of PAYS on its website.
Interestingly, the Department of Communications, Energy and Natural Resources has just gone out to consultation on a programme that could encourage the energy supply sector to adapt their business models to incorporate PAYS. The department is proposing that the programme, to be called the Energy Demand Reduction Target (EDRT), may involve passing a law forcing the energy supply sector to substantially reduce the amount of energy consumed in Ireland, with a particular focus on stimulating end-use efficiency. (3)
The state should use the EDRT to set a mandatory energy and carbon reduction target for the energy sector to achieve, whilst encouraging energy suppliers to come up with solutions which prioritise end use efficiency. It could even help their decision by facilitating cost-effective finance for energy efficiency work through issuing green bonds, for instance. Energy suppliers would be faced with two different approaches:
1) Invest in replacing inefficient power generation at their own risk, and pass the cost on to all of their customers through higher energy bills. Their customers may resent the cost increases, especially if they live or work in particularly inefficient buildings – they may feel that efficient generation is of little use to them if their building is too energy inefficient to hold on to heat. One very obvious drawback here is that substantial gains would only be possible in the electricity sector, where efficiency gains could be made through investing in new generation and to a lesser extent transmission technology. There’s little that can be done to improve the primary energy factor for gas, oil or solid fuels, on a system wide basis, as the conversion of the fuel into heat or electricity(4) occurs in the customer’s building rather than a central power station.
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Issue 1, Vol 5 Out Now
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