Tuesday, 28 November 2006

The economics of sustainable energy and climate change; and UK renewable energy grants for householders

There seems rightly to be more focus now on the problems of global warming, climate change and environmental issues, following the publication on 30 October 2006 of the Stern review on the economics of climate change (press release, executive summary).

For those interested in the economics of alternative energy sources, I just thought I'd mention a summary of a roundtable discussion on the economics of sustainable energy at the Centre for the Study of Financial Innovation (the CSFI is a right-ish independent think tank).

It was with economist Dr. Horst Feuerstein, a visiting fellow at the German Institute of Economic Research (DiW) in Berlin, who's working on the potentials and economics of renewable energy on secondment from the European Investment Bank (where he was, until 2005, Director of Operations Evaluation). From the mid-80s to mid-90s, he was in charge of the EIB’s energy division, and before that he worked at the World Bank in Washington. So, a pretty authoritative figure.

He feels that "the solution, whether one is looking to find a new energy source or seeking to tackle climate change, is renewable energy... Sadly the West has failed both to pursue a rational use of energy and to make progress in achieving energy savings among consumers, households and the transport industry."

In his view the key weather/geological-based sources are wind and photovoltaic power (solar power) i.e. wind turbines and solar panels; and biomass (making energy out of products such as wood fibres or oil) also has great potential, e.g. biofuels such as ethanol. I am certainly one of those who finds the clean lines of wind turbines aesthetically pleasing, and I'd rather have a row of wind turbines near my home than a nuclear power station any day!

He concluded that the world could not afford to do nothing about the lack of alternative energy sources. He said there was an optimal combination of market forces, regulatory frameworks and government support systems that was needed to maximise the potential.

The trick, of course, is to find that optimal combination... Cutting government grants for householders installing environmentally-friendly energy sources in the UK didn't exactly help, although the DTI did at least replace it with a low carbon buildings programme (LBCP) with grants available (if you and your building qualify) for certain microgeneration technology products from accredited installers: solar thermal, wind turbines and inverters, ground source heat pumps, small scale hydro-turbines, wood fuelled boilers, photovoltaics (solar panels) and pellet stoves. (The Energy Saving Trust or EST site is also worth a look.)

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