The oil lamp – shining God's light on peak oil

Over the summer one of our doubling glazing units ‘failed’, the dried air has gradually leaked out of the gap between the sealed panes. The symptoms of this are that moisture appears in the gap and the glass looks dirty, but of course cleaning it has no effect. Today this unit was replaced twenty-seven years after it was put in. All this got me thinking – does doubling glazing pay for itself in monetary terms in its life time? My suspicion has always been that it wouldn’t. First a bit of background rules and comment.

Most of the double glazing was replaced twenty-seven years ago, but not all. Twenty-seven years is a long time and in that time and things change. According to the double glazing company that quoted for the job you can expect a lifetime of 30 years. We’ve had two glass doors replaced with double glazing since. Like the single glazed window they open up onto the conservatory – so not directly onto the outdoors unlike the other double glazing. One of these in particular has made the dining room warmer. However this was done more than 10 years after the initial tranche of doubling glazing.

Two smaller windows were also double glazed at a later date. One of these is in the down stairs toilet and is so small a child couldn’t get through it (thieves note despite this it still has bars on the outside). Another is above the main door and is also small.

We’ve also added a lot more insulation and in 2008 a wood-burner.

In 2018 we had a new boiler. This cut our consumption massively. This was not due to a massive gain in efficiency per se – although it is a bit more efficient – but because the old boiler heated the water when the central heating was on whether we wanted it to or not.

In 2000 we had an extension built. This was heated for a while by an electric heater on the wall but after a few years we extended the gas central heating system and put a radiator in. The unit that failed was in this room. The window was at the end of the kitchen which the extension was built onto. We moved the double glazed unit which h has failed into the new room and reused it.

I’ve taken no account of inflation which until this year has been low. In any case in my view it cuts both ways since inflation reduces the size of the original sum invested. We didn’t borrow money to do this, but paid out of our own capital.

I assumed a 10% heat loss saving on single glazed units. As far as I can gather the U value of a single pane of glass is 5.6W/m²K. This means every metre of glass transmits 5.6W of heat. This doesn’t sound much, but adds up. A double glazed unit of that era is probably half that*. It might be more in our case. The old windows were very bad fitting with lots of drafts. We only had one winter in the house pre doubling glazing, but I can remember the house being very cold and the curtains in the lounge flapping around when the wind blew.

The cost of the installation was £950 (1995 price).

I have almost all the Q1 and Q4 bills or price and gas usage data with the exception of 1995. This means the % payback is slightly too low.

All this means the calculation is a bit crude. Part two will cover the results.

* In the UK the part L of the building regulations cover energy use in England. Scotland or Wales. These are not available on-line so far back but the amendments to the 1991 building regulation act barely mention energy, which shows how much things have changed. Nor does any of the literature we have from the doubling glazing that fitted the windows company mention U values. Some people (https://great-home.co.uk/building-regulations-u-values-how-have-they-changed/) put it at 3.1 for double glazing of that era, but I’m sticking to a 10% saving partly because as I say the drafts were horrendous and partly due to the fact that most double glazing companies put the saving at that.

This is the follow-up post to my previous one a few weeks ago. The reason for the delay is that I’ve been waiting for the details on the package and that had to wait for the mourning period to finish for the Queen.

So for any of you interested in how it works in the UK this is it. A bit of background first.

In the UK the price of domestic energy is determined by a price cap. The price cap mechanism determines the maximum price that can be set by the energy suppliers. It was an idea cooked up by the labour party in opposition, rubbished by the Tories as socialism, then nicked and adapted. It was introduced after a chorus of complaints that the companies were very quick to raise prices when the wholesale price of gas (and it was gas basically) went up, but slow to lower prices when the gas price fell. Until recently this was set every six months by the regulator (OFGEM). There was still a suspicion until last winter they were soft on the energy companies and it was working against customers, but there’s no doubt since the beginning of the year (if not before) its worked in the customers favour.

Clearly as outlined in the last blog there were a number of options as far as limiting prices were concerned. The one that the government has chosen is to cap the prices that can be charged (sort of). So the cap has been raised by about 25%. However we’re getting a £400 payment this winter which limits the rise with the £50 loan we got (to be paid through future bills) it just about fixes the cap for this winter to the last cap from the spring (£1972). The money to do all this (£89 billion) is being borrowed. Those on low incomes get additional support.

The plus points;

• Its simple since its not targeted. You just get credit on your bill.
• It limits prices.
• There is a price signal since the unit prices have risen by about 25% (gas), slightly less for electricity, which should aid saving and energy efficiency measures.
• The green levy is being paid by the taxpayer.
• VAT is still paid on energy at 5%.

The problems;

• The cap doesn’t account for the price rise in the spring. This was 30%.
• The cap lasts two years for domestic users but six months for business users (this includes charities and community groups). This has a number of implications. First; what happens to get us off the government subsidising bills? The problem is other countries have found withdrawing subsidy in these situations is not so easy. The second big problem is what happens if the gas price soars? It’ll cost more. So the taxpayer will end up with more debt. Every time the price drops Putin blows something up and even if the war ends its unlikely he’ll turn the taps on.
• What happens for businesses at the end of the end of the six months? At the moment this is unclear. It should be noted that the energy consumption of businesses is about the same as households.
• Another problem is what if you choose to, or have to use lots of energy? Remember how this works is the government is paying the difference between the cap and the real price of energy (a considerable sum). My calculations suggest that particularly for gas £400 is not going to go very far – especially if this is a cold winter. This has two paradoxical implications. If you are rich and don’t care then you’ll be bumping up the national debt. If you are poor or have an underlying health condition you’ll also have to use loads, but then find £400 is not that much, with gas at 10.3p/unit and increase the national debt.
• A whole series of scams are taking place. The credit will be added to your bill automatically you do not need to send your bank details to anyone.

In my view this scheme is only viable for the next two years if things go well (i.e. gas prices drop quite a long way). It would be better to have a more targeted scheme where people who can afford it take the hit and everyone else gets help of some type.

At the moment most if not all Western countries are facing an energy crisis. (The exception seems to be the US which is big enough to have its isolated market and Russia, who is largely but not totally responsible for it in the first place.)

Certainly in Europe governments and companies are scrabbling around desperately trying to find some answers before the heating season hits in a few weeks time. To give three examples. In Germany they’ve made the mistake of being over reliant on Russian gas. In France they’ve capped price increases across the energy board to 4%, but technical problems with large numbers of their reactors plus warm water and low water levels in rivers have meant they’ve had to shut down their nuclear and rely on imported electricity. There is talk of rises in prices and power cuts this winter. In the UK as we’ve almost stopped using coal, closed nuclear, massively increased our wind power and solar capacity we’ve become more dependent on gas. The graph below shows the issue. Most of our (leaky) homes are also heated by it. Prices of electricity and gas are going to increase by another 80% after 50% this spring. Along with huge increases in food prices and general inflation, millions of people won’t be able to afford to heat and eat. Perhaps 44 million people will technically be in fuel poverty in the UK (defined as paying more than 10% of your income on energy). At the moment with a leadership race to become prime minister no decisions are being taken and they need to be – fast. This blog will cover some of the solutions suggested in the UK to the energy crisis – although many of them are relevant and touted in other countries.

1) Tradeable energy quotas – the so called carbon ration. If the last labour government had introduced these we’d be in a very much better place. They thought about it (a bit) and chickened out. However whilst I mention this as a solution as a matter of principle, we literally have weeks to put something in place so sadly this is not going to happen. I’ve written about how this works before.

Pros – pretty fair and simple in principle, ticks lots of boxes and sorts out lots of problems. Cons – difficult to set up.

2) Increase supply of gas from the North Sea and fracking. Whilst not at all compatible with net zero of course, this is being talked about and some action on the North Sea is taking place. About 40% of our gas is produced here (exact percentages quoted varies slightly). Whilst we’re a lot less dependent than Germany on imported gas, the price here is still driven by international market prices. This would apply to fracked prices too. Fracking was very unpopular in the areas where it was trialed and most Tory MP’s don’t want it back. There’s talk of giving people near it reduced gas prices, but the cut-off point geographically would cause issues even if overcame objections.

Pros – not many. Cons – Neither of these solutions will make any difference this winter. Most people think even if fracking could be made to work here there, there would be little if any gas for 10 years. Small increases in supply will trade at whatever the going rate is internationally. Its also like giving an addict more drugs, we need to kick the gas habit, not add to it. So what other solutions are there?

3) A cap on prices. Labour/Liberal democrats/SNP suggest simply not allowing the increase on the 1^st of October. This is basically what the French have done. The problem is, even if your energy companies are nationalised (the French government is trying to fully nationalise EDF), it still has to be paid for. Labour suggests a windfall tax on the energy producers who are making huge profits (unlike the supply companies – loads of whom went bust last winter (30!)) and using the cut in inflation that would result as an accounting trick, since it would result in lower government borrowing. This is great politics, but terrible practically. The energy crisis looks set to last years and the sums even for 6 months like eye watering. There are other objections covered below in 4).

Pros – covers everyone at a stroke and easy to administer. Would cut inflation or at least stop it rising. Cons – see 4)

4) A variation on 3) but this time the energy suppliers borrow the money and we pay it back over 10 – 20 years either in higher bills or through general taxation. The government would guarantee the loans. This has been done in a very small way for part of the April increase. To me this idea raises a number of objections. The main drawback is its licence to pollute. We need to cut consumption especially as we might actually be facing power cuts this winter. The higher prices make energy efficiency and micro-renewables very cost effective. It also raises issues of moral hazard. I’ve no objection to borrowing for Covid or wars, but this to me feels different. In 20 years time I may be dead. Plenty of other people certainly will be. Is the debt on a supply basis? Or a personal basis? How much you owe depends on how much you use, or does it? I’ve no objection to covering the usage debts of those whose who have to heat their houses for health or other valid reasons – but what about those who just waste energy?

Pros – as 3) above. Cons – The more I think about this the more complicated it seems. Both and 3 and 4 would allow people to waste energy. Another big drawback of 3/4) is the prices are likely to rise further anyway next year. Then what? Will cost £100 billion at the moment – how much then? Government would be desperate to keep it off the books. Can this be done? Also time would be need to get it set up. I have fundamental concern about the government subsiding peoples energy costs.

5) Social tariffs. Allow those on low incomes to pay less. Those who can afford to pay more. This exists in other countries such as Belgium and is easier to administer than you’d think. This was a suggestion floating around a month or so ago. The advantages are its targeted on those those need it most. The problem is this could be quite a lot of people including much of the middle class. There was talk of two rates – a low income rate and a middle class rate, then a top rate. This starts to get very complicated. Pro’s – potentially targets those who need it most. Cons – means the government has to share some social security information with the energy companies and may not meet all needs. Could mean people on middle incomes, or even above are in trouble still. Allows those on low incomes to waste energy in theory, though most probably won’t because of other cost of living pressures.

6) Another variant on 5) floated by one energy supplier recently. You get (an as yet unspecified number of units) for a low cost (also unspecified) then you pay more (also unspecified). This idea has some merit. It does incentivise consumers to save and invest in modest energy efficiency measures. It would need more though. People at the bottom of the income literally can’t afford to put anything on at all. Quite a good idea in the long term though, as is the social tariff,

Pros – very simple to set up to administer and quick (which we need). Cons – not enough on its own.

7) Increase benefits. This was the original solution touted over the summer. Most of his it proponents now think its not enough. Plus we have a government that doesn’t like them.

Pros – would target those most in need. Cons – but not those who don’t get them. The computer systems believe it or not, would have needed adjusting months ago.

8) Tax cuts. Liz Trusses solution (to everything). Most people who really need help don’t pay tax and for those on middle incomes the cuts would have to be significant. Cutting VAT on energy bills would help a bit. The treasuries said not to be keen since they don’t think it would ever go back on. Cutting green levies would only knock £150 off and would be a disaster if not paid for out of general taxation. These pay for all sorts of things – such as help those on low income pay their bills, energy efficiency measures and the Feed in Tariff. This last one is interesting. Is she really going to upset 3% of UK households plus a whole heap of business’s, farmers etc. with PV/microwind/micro-hydro by cutting this?

Pros – can’t think of any. Cons – to many to mention. Best summed up as it doesn’t add up to much help except for the very rich.

9) Decouple the energy market from gas. At the moment the electricity market is set by the price of gas. Renewables (even offshore wind) have been cheaper than gas for years. With high prices renewable generators on the old renewable obligation certificate (ROC) system are coining it in. If you could diminish the effect of gas on the system you’d lower prices. Its more complicated than that though. First gas still accounts for rather too much of our electricity generation as I I’ve said, so how much effect can you have? Second you’d have to bail out the gas generators since in an open market the suppliers would choose renewables and nuclear. Lastly the contracts are multi-layered and would take time to prise apart. There is also mention of a wind-fall tax on the ROC generators. To be fair as someone who was in receipt of ROC’s they weren’t very generous and some of these systems will have taken a long time to pay for themselves. All the recent stuff has gone in under ‘contract for difference’ so we’re not talking about the majority of capacity here – about 40%. In my view this would not harm the renewable sector in the long term since renewables are the cheapest energy source and is worth considering as a reform.

Pros. Could cut between £150 -£600 off bills. The higher figure does require everyone being forced into contract for difference. Cons -complicated and not a short term fix.

To conclude a very long post (but its a very large problem we face). There is no catch all solution. There are losers all round. One last point all the above is focused on households, not businesses. To bail them out (and charities which have business rates of energy pricing) we are taking a very large amount of money indeed. The figure bandied around is £280 billion for 2 years, but could well be more.

Who’s having a good time during the shutdown so far?  Unfortunately I’m tempted to say the virus, which is far from under control almost anywhere.  Even in China and other parts of Asia we need to be cautious as controls are relaxed.  Maintain your distance from other people and wash your hands.

Winners and losers include.

Winners – experts.  Largely banished during the recent surge in populism and nationalism, they are now in high demand and for the most part of it having a good shutdown.  Just maybe they’ll be listened to over climate change after all this is over.

Winners – health services.  Under funded and under prepared in so many places, it’ll be a brave government that underfunds them in the medium term future.

Winner – the environment.  From a lack of traffic to hearing birdsong, millions of people have turned to nature.  Supposedly dolphins have been swimming in Venice’s canals.  What is certainly true is that the water in them is clear.  People who live under flight paths of airports will have a sense of peace.  Air pollution in cities has plunged.  In fact whilst its terrible to say so covid has saved thousands of lives in China over all as the shutdown there cut pollution drastically.  Here’s hoping this leads to change.

Loser – the economy.  The shutdown will lead to a huge worldwide slump.  We’ve only just about got over the 2008 crash and this looks like being worse.  How governments behave afterwards will be critical to peoples health and well being, but its almost certain that future generations will be paying for our mistakes.

Loser – mental health and general well being.  There is a danger that people will die from other conditions as health services naturally concentrate on covid.

Loser – the fossil fuel industry.  The oil price has collapsed to such an extent its actually cheaper to lead it in the ground.  Lets hope it stays this way.  It also shows though how dependent we are on oil.  Keep healthy.

Neil.