Ricardo marks Earth Day 2022

As a global sustainability leader, Ricardo is proud to celebrate Earth Day, the annual event which encourages us all to act boldly, innovate broadly and implement equitably to create a new plan of action for our planet. The Earth Day 2022 theme is invest in our planet, and to reflect this, Sujith Kollamthodi, Ricardo Energy and Environment’s Director of Strategy and Innovation shares his practical and financial insights from his personal journey cleaner domestic energy.

Back on 13 March 2017, I had a 4 kiloWatt array of solar panels installed on the roof of my house in Oxford, England, and this means I now have five years’ worth of data on the costs and benefits of domestic solar power. In the five-year period up to March 2022, my panels generated a total of 19,234 kiloWatt hours (kWh) of solar energy. The total cost of the solar panels, the inverter and installation was 6,800GBP and I have received quarterly Feed-in Tariff (FIT) payments for every kWh of solar energy generated by the panels over the last five years that partially offset the installation costs – the FIT payments add up to 1,379GBP so far. On top of that, of course I am able to make use of solar energy to power the house, displacing the use of electricity from the grid, thereby reducing ongoing energy costs (we’ll come back to this later).

Now, because I have a home battery storage system, I am able to use just over 80% of the solar energy generated by my panels to power my house, heat my water and run my electric car. What if I didn’t have the battery? Is it still worth getting solar panels on their own? Well, let’s look at the numbers.

Since March 2017, I have used a total of 17,550 kWh of electricity to power my house and charge my electric car at home. This figure is a combination of electricity from the grid and solar energy generated by the panels. And over that time period, the cost of electricity I purchased from the grid averaged 14 pence per kWh. So, without solar panels, I would have paid a grand total of 2,457GBP for five years’ worth of electricity consumption.

Now, before I got my home battery storage system installed in May 2018, I was only able to make use of 20% of the solar energy generated by my panels because most of the time no one was at home during the day when the sun was shining (the remainder was exported to the local grid to be used by neighbouring houses). Twenty per cent of the 19,234 kWh of solar energy generated is 3,847 kWh, reducing my grid electricity consumption to 13,703 kWh and giving a corresponding cost saving of 539GBP over five years. Now, of course with Covid lockdowns and homeworking over the last couple of years, the proportion of solar energy that is usable during the day has shot up and will be much higher than 20%, but for these calculations we will stick with a conservative estimate of 20% utilisation.

What’s the total cost of ownership been over the last five years? As a reminder, the installation cost was 6,800GBP and we can then subtract the FIT payments of 1,379GBP and also subtract 539GBP for reduced grid electricity consumption – this gives a total cost of ownership of 4,882GBP to date. That works out at 25 pence per kWh of solar energy generated so far. This unit cost figure will of course reduce significantly in the future as more solar energy is generated and as I receive further FIT payments. By 2027, I have calculated that the unit cost of solar energy generated by my setup will have dropped to just 5.7 pence per kWh over the tend-year period between 2017 and 2027.

When will the setup become cost neutral? Well, this depends on a number of factors including the cost of grid electricity and the proportion of solar energy generated that I use. I will keep receiving FIT payments for 15 more years and these payments increase each year in line with inflation. Up until now, my daytime grid electricity has cost 14 pence per kWh, and if the price were to remain at that level, then the total payback period for my solar array would be 15½ years. However, from 1 April 2022, the price cap for grid electricity in the UK rose to 28 pence per kWh, and it’s unlikely to reduce anytime soon. With these new prices, the total payback period drops to 13½ years. And the payback point can be brought down even further by increasing my utilisation of solar energy. If instead of only using 20% of the solar energy generated, we increase this to 40%, then the payback point drops to 10½ years.

So, if you’re considering a domestic solar array, it’s always worth crunching the numbers – think of it as buying several years’ worth of electricity in advance, so it’s only worth doing if you plan to stay in your current home for several years. I should also mention that for new solar installations in the UK, the Feed-In Tariff for solar has now been replaced by the Smart Export Guarantee, which operates in a different way.

Decarbonising domestic hot water

My house is currently equipped with a modern, conventional (non-combi) gas boiler and a hot water storage tank. This means that I don’t have instant, on-demand hot water that has become increasingly common in the UK through the use of gas combi boilers and consequently, hot water provided by the boiler then needs to be pumped to the storage tank for use later (a combi-boiler set-up has no need for a hot water storage tank, which has pros and cons as we will see later).

In addition to the gas boiler, I also have an electric immersion heater fitted to the water tank, so I can choose to heat up the water using electricity instead of gas. Now, traditionally such immersion heaters were only for ‘emergency’ use as the cost of heating water with electricity has always been significantly more expensive than heating water with gas. Some of us might remember our parents telling us when we were young not to turn on the immersion heater because it was such an expensive way of heating up water. But what if we could make use of electrical energy from solar panels to heat up water in our houses using the immersion heater, or make use of cheap-rate night-time electricity to do the same thing? Well, that’s exactly what I have been doing in my house.

Back in May 2018 I had a solar diverter system fitted to my house. Essentially, instead of excess solar power being exported back to the grid it is diverted to my immersion heater to provide hot water for free (the ‘excess’ being the solar energy generated by the panels that is more than is needed to run appliances in the house at any point in time). Once the water is sufficiently hot, then any remaining excess solar power is finally exported to the grid. Additionally, the system also allows me to schedule the immersion heater to come on at night to heat water up using cheap night-time electricity (particularly useful in winter when there is very little sun around).

What does this mean in terms of cost savings? Well, in my own house if I heat up water using the gas boiler, this requires around 4.5 kWh of energy per day (my boiler is rated at 18 kW and for hot water I would set it to run for 30 minutes every other day to get lots of piping hot water). Until 1 April this year, the Ofgem price cap in the UK for gas was 4.07 pence per kWh, so over the course of a year hot water from the gas boiler would cost roughly 67GBP. But as we know, the price cap for domestic energy in the UK increased on 1 April 2022 and for gas it will increase to 7.37 pence per kWh – that’s an 81% increase! So, at these prices, the cost of providing hot water in my house from the gas boiler would increase to around 121GBP per year. Now, in reality this is an underestimate as I am not accounting for the electricity required to pump the water from the boiler to the storage tank, but you get the picture. There are only two people in my house, so of course annual costs will be higher for those with more people at home.

How does this compare with using the solar diverter and the immersion heater? Well, the diverter equipment cost 840GBP to install in 2018 and since then I have found that I can use ‘free’ solar power to heat my water for around eight months of the year. So, for the remaining four months I can either use the gas boiler, or since August 2021 when I had a smart meter fitted, I can make use of cheap-rate night-time electricity. Using gas for the remaining four months would cost 40GBP since the gas price increase on 1 April 2022.

What about using the immersion heater? Currently, my day-time electricity is billed at 15.6 pence per kWh and night-time electricity (00:30hrs to 04.30hrs) is billed at 5 pence per kWh. The immersion heater is rated at 3 kW and I tend to run it for 1.5 hours per day to provide sufficient hot water (giving a total energy demand of 4.5 kWh). So, for the four months of the year when there is limited sunshine, getting hot water from the immersion heater would cost 85GBP using day-time electricity (super-expensive!) but only 27GBP using night-time power. So, obviously there’s no benefit in using day-time electricity but night-time immersion heater use is only slightly more expensive than using gas right now and, since the price increases on 1 April, it is significantly cheaper than gas (my night-time electricity tariff lasts until at least August).

In summary, from 1 April my annual costs for heating water only using the gas boiler will be 121GBP per year, whereas using a combination of solar and night-time electricity via the immersion heater will cost just 27GBP per year. Based on these costs, the payback time for installing the 840GBP solar immersion diverter is just under nine years, but of course if energy prices continue to increase, then the payback time will decrease.

And what about carbon emissions? Well, if I heat my water using only gas then this will generate 300 kg of CO₂e per year. If instead I use the combination of solar and grid electricity described above then this will generate just 116 kgCO₂e per year. However, we need to remember that the electricity grid is getting cleaner every year and so the greenhouse gas emissions from using the immersion heater will reduce in future years. So, for those considering solar panels, do have a think about a solar immersion diverter as well, but remember that this only makes sense if you already have a hot water storage tank.

Domestic space heating

Heating our homes is typically a very carbon-intensive business because most houses in the UK have central heating systems with radiators heated by a central gas boiler. According to the English Housing Survey, in 2019 86% of dwellings in England were equipped with gas boiler; the Scottish Household Survey has similar figures for Scotland, with 87% of households using a gas or oil-fired boiler in 2019. So, there’s a long way to go to reduce our reliance on gas.

It won’t be easy, however, as the UK’s housing stock is very old and poorly insulated (23% of private housing in England was built before 1919). Obviously, if you do have cavity walls and a loft/attic, then applying insultation to both of these spaces is the first step as this is a very cost-effective way to improve energy efficiency.

Unfortunately, while my own house has a loft/attic and I have applied thick insultation, it was built in the early 1930s and doesn’t have cavity walls – something that didn’t become common until later that decade. This means if I want to insulate the fabric of the building, I will need to get solid wall insulation fitted. Now, I have received a quote for doing this and it’s not cheap – well over 12,000GBP!

So what else can people do? The UK Government has introduced a new Boiler Upgrade Scheme (more information here) to support the decarbonisation of domestic buildings. The scheme provides grants to give 5,000GBP of the cost of installing an air source heat pump or a biomass boiler and 6,000GBP off the cost of installing a ground source heat pump.

Heat pumps are regularly touted as the main way for decarbonising home heating, but will they work for everyone? As an air source heat pump operates at a lower temperature than a typical boiler, a really good standard of insulation is required for these systems to work effectively and provide sufficient heat. Sometimes when these systems are retrofitted to older houses, new, bigger radiators are required to compensate for the lower operating temperatures – adding more cost.

Where heat pumps do work very effectively is in newer, well-insulated properties, working in combination with underfloor heating (underfloor systems have a much bigger heat emitting area than a radiator, so again, the lower operating temperature of the heat pump isn’t a problem). Installation costs vary significantly depending on the specifics of your house, but typically an air source heat pump can cost from 8,000GBP to 15,000GBP to install (before the new grant has been applied).

Are there other ways of moving away from gas boilers? Well, yes there are quite a few options: biomass boilers, which burn wood pellets, wood chips or logs are also an option and are covered by the Boiler Upgrade Scheme and are suited to buildings which are difficult to insulate. Electrically powered boilers are also more common now, but running costs tend to be very high, given how much more expensive day-time electricity is than gas.

There are also heat battery systems, such as those developed by the company Tepeo (more info here), which can store cheap night-time electricity as heat and then later pump this around your central heating system when you need to heat your home. Essentially, the heat battery directly replaces the gas boiler in your existing wet central heating system.

And what do I plan to do? Well, I am planning to install far infra-red heating panels in each room of my house (more information here).