Cost of carbon savings

I have been criticised in the past for describing energy saving measures in terms of payback time so in this post I present costs of a range of different measures in terms of £/carbon saved. The measures include: a community wind turbine, PV on your roof (with or without battery), cavity wall insulation, solid wall insulation, new condensing boiler, more efficient freezer. Also I have included a one-off saving: travel to Berlin by train instead of plane.

Renewables

The following table compares two options - a community wind turbine (in which you can invest by buying shares) with PV at home. Both wind and PV without storage bring a net profit. The wind turbine is only slightly better value for money but it is also lower risk. In any case, there are other reasons why wind is preferable to PV (see Does the UK need solar electricity).

For both systems I have assumed a lifetime of 20 years and the carbon savings are based on the renewable energy replacing power from a gas power station (400g/kWh). All carbon savings are measured in tC - tonnes of CO2. Lifetime and payback time are in years. Net cost is inital outlay plus any other costs minus total savings or revenues. I have ignored inflation. Blue figures are in profit.

Measure	Initial outlay	Payback time;	Lifetime carbon savings (tC)	Initial outlay £/tC	Net cost £/tC
Community wind turbine (Wester Derry)	£800,000	16.9	3,176.0	252	-45
Rooftop PV without battery (33% self consumption)	£7,600	17.6	25.6	297	-40*
Rooftop PV with battery (75% self consumption)	£12,600	20.6	25.6	492	14*

Wester Derry data based on the share offer (2014). The PV figures are based on a 4 kWp domestic array yielding 3200 kWh/year. The costs are from the latest government data for March 2016 [3] and the Feed in Tariff rates are current [4].

* Net costs for PV are strongly dependent on the rate of self consumption and the retail price of electricity

Wind turbine - revenues are from the Feed in Tariffs.

The Wester Derry wind turbine is one I have invested in myself. This was back in 2014 so it is a bit out of date - the costs have probably come down since then but the revenues will have too. This is a small wind turbine (250kW) and the main revenues come from the Feed in Tariffs.

PV revenues include bill savings - which are hard to predict.
For PV, the revenues come partly from Feed in Tariffs and partly from reduced bills, however the latter depends a great deal on how much power you use during the day when the sun is shining. The 33% figure for self consumption is probably about average but if you are out during the day it will be lower - at 25% self consumption the net return £/tonne goes down to £13.

Adding a battery reduces risk but adds to costs without increasing carbon emissions.
Adding in a battery should reduce this risk and increase your self consumption rate but adds to the cost. I have assumed the battery costs £5000 extra, which is about right for the Tesla Power Wall and using this your self consumption rate increases to 75% - plausible though maybe a bit optimistic. The carbon savings do not change in this simple model, though in practice, integrating battery with your PV does help the grid be more efficient because it smooths out some of the variation in demand.

Larger installations are cheaper.
For larger wind turbines and large PV farms the costs are proportionally lower. Looking at large onshore wind (> 5 MW), the cost predicted by BEIS for 2020 including lifetime maintenance as well as construction comes to £152/tonne carbon saved - about 40% down from Wester Derry. The prediction for PV systems is similar - at £168/tonne this is 40% down from domestic PV costs but still not quite as good an investment as wind [2].

Home heating: insulation and new boiler

The only insulation measure that makes a profit is cavity wall insulation. However, the new boiler is zero cost if you wait until the old one breaks down and you have to have a new one anyway! In practice the savings from these measures vary greatly from one house to another and you could do much better than this - or worse.

Measure	Lifetime	Initial outlay	Payback time	Lifetime carbon savings (tC)	Initial outlay £/tC	Net cost £/tC
Cavity wall insulation	25	£500	13	5.1	99	-90
External wall insulation	25	£10,000	142	9.3	1073	884
Internal wall insulation	25	£6,000	85	9.3	644	455
New condensing gas boiler	15	£1,500	40	3.0	501	312

The cost of insulation is from the Energy Savings Trust, and new boiler cost from comparing various sites. Initial gas use is 13,000 kWh/year to start with, which is average; gas price is 3.5p/kWh which is about what I am paying at the moment.

These savings include comfort taking and are likely to be underestimates.
The savings from each measure are the median from the National Energy Efficiency Database: 8.3% for the new boiler, 8.4% for the cavity wall insulation and 15.5% for solid wall insulation [5]. NEED compares actual bills for comparable homes with and without the measure so comfort taking is included: after insulation you are invariably warmer than before and your bill savings are less than simple theory predicts (see Insulating your home makes you warmer). I suspect NEED may underestimate savings in an average house because most of the installations it compares are from subsidy schemes that are targeted at households in fuel poverty. They are likely to have higher comfort taking than average and hence lower savings. In my house, insulation plus a new boiler and a few other measures have halved the gas bills. However, even at 50% savings the cost is still £143/tonne carbon saved.

Cavity wall insulation is cheap but there are not many left to do. External wall insulation is expensive.
Cavity wall insulation is extremely good value in carbon saving and 13 million homes already have it - there are probably only 4 million easy cases left to do. Solid wall insulation is the most expensive measure so it is not surprising only 0.7 million have been done so far. This leaves 8 million left to do[1]. External wall insulation is more expensive but it is generally the better choice because internal wall insulation is more risky in terms of damp problems (see Does insulation cause damp).

If we decarbonise by switching to heat pumps we still need to insulate first.
The high costs of insulation are daunting but delaying is unlikely to reduce the price because the material technologies are already mature. However, home heating has to be tackled as it is the largest use of energy in the home. Most people use gas but there are few sources of renewable methane gas and it is quite impractical to fit carbon capture technology to domestic gas boilers! The most likely solution is to replace gas boilers with heat pumps that use electricity but that is impractical in homes that have a high heat demand so they must be insulated first.

Maybe we can inject decarbonised hydrogen into the grid instead.
Fans of the hydrogen grid will point out that hydrogen can be generated from methane or biomass while capturing the carbon. Also it is technically possible to convert the gas grid to use hydrogen instead of methane - though this will require adjustments to equipment that uses the gas. A recent study reckons this is practical for Leeds (H21 Leeds City Gate). I can't comment as I have not checked this out yet.

Other measures - replacing appliances and travel options

It is a bit of a shame that the more efficient freezer does not save money overall but it is still much more cost effective than solid wall insulation or a new boiler!

Measure	Lifetime	Initial outlay	Lifetime carbon savings (tC)	Initial outlay £/tC	Net cost £/tc
A++ freezer instead of A+	15	£210	0.5	412	27
Travel by train instead of flying London to Berlin		£35	0.3	£115	115

Freezer case based on data from John Lewis, comparing an A++ upright freezer (Samsung) costing £899 with of a very similar product that is A+ at £689. The A++ freezer costs £210 more but uses 97 kWh/year less.
Flight case based on direct flight from Stansted to Berlin Schoenefeld (£60), plus train from London to Stansted (£20) and Shuttle bus from the airport to the city centre (£6). The train case is based on Eurostar to Brussels (£60) and then on to Berlin via Cologne (£60). Carbon factors are from [6].

Travel costs are very variable. Flying is 4 hours quicker.
The cost of travel either by plane or train is very variable depending on how flexible you can be about when you go. My estimates are based on the cheapest options I could find at the time and are probably special offers. There is also a cost in time - the flight itself is 2 hours, but with check-in time and transfers it is probably nearer 6 hours. The fastest train option is 9 hours, but you would need to add check-in time so say 10 hours.

You travel more often than you buy a new freezer.
The travel scenario I have given here is a one-off thing, whereas the freezer saves carbon over 20 years. You probably travel to Europe a lot more often than you buy a new freezer and you need to make this sort of choice many times.

General comments

Comparisons using £/carbon saved can be applied to any carbon saving measure.
Not surprisingly, the measures with low payback times are more profitable too, so using this new measure hasn't made much difference to the ordering of which is most cost effective. However, this method allows you to compare measures that don't have lifetimes, like the travel case.

For reference, the carbon floor price is currently £18/tonne. This paid by UK industry and power generators. At this level it wouldn't justify a new freezer but it has helped to elbow out inefficient coal power stations.

Cost comparisons only make sense when we have a choice.
Ultimately it only makes sense to compare the cost of carbon savings where we have a choice. We can choose between wind and PV for energy source, or between external or internal wall insulation. However we need both carbon free energy and carbon free heating. It doesn't make sense to delay the expensive carbon savings unless delaying makes them cheaper, or if we expect to have more cash to spend in the future.

[1] Household Energy Efficiency National Statistics (www.gov.uk)
[2] Electricity Generation Costs (www.gov.uk) November 2016
[3] Solar PV cost data (www.gov.uk)
[4] Feed in Tariff rates (OFGEM)
[5] National Energy Efficiency Data-Framework (www.gov.uk)
[6] Government emission conversion factors for greenhouse gas company reporting