Category: Blogs

A Call to Arms.

A cynic might say that any independent school that takes climate change seriously should invest more time in training its combined cadet force than in decarbonising its estate and promoting sustainability.

Read on and I shall clarify.

These days I read as much as time permits about the science behind climate change. Partly it’s my job to be informed but I’m also keen to know the truth. Are we approaching the ‘End of Days’ as the experts say? Or is it, as some journalists claim, merely another left-wing hoax? There are plenty of people who simply do not believe that climate change is a serious threat. Or they do; but find it impossible to get a handle on it.

I beg to differ with the sceptics. The science paints a startling picture. Or rather, it should but actually it doesn’t: the science lists facts and figures and interprets them dispassionately, which is part of the problem – it seems anodyne. However, if you can find an analysis that brings it to life in practical terms, then it paints a startling picture: so much so that one could easily be overwhelmed by the doom and gloom.

Here’s one snippet. Every year, the World Meteorological Organisation (WMO) issues a Statement on the State of the Global Climate. This year’s report prompted Professor Brian Hoskins of Imperial College London to state (when COVID-19 was already with us):

“The report is a catalogue of weather in 2019 made more extreme by climate change; and the human misery that went with it. It points to a threat that is greater to our species than any known virus – we must not be diverted from the urgency of tackling it by reducing our greenhouse gas emissions to zero as soon as possible.”

By all scientific accounts (except those sponsored by the oil and gas lobby perhaps) the prognosis is pretty dire. Here’s another example. A research article published in May this year from the PNAS (Proceedings of the National Academy of Sciences USA) analyses how humans have lived within quite a narrow but stable climate niche for recorded history but now that is changing. Not by much but by enough to tip the balance of habitability around the globe. It assesses that given the current trajectory of global warming:

‘Even in the most optimistic outlook, by 2070 1.2 billion people will fall outside the comfortable ‘climate niche’ in which humans have thrived for at least 6,000 years.’

How does that end? If one sixth of the planet’s population – largely centred on the tropical zone – can’t live at home anymore, then they’ll migrate. Or they’ll perish. History tells us that when large swathes of population migrate there is always conflict. When a billion-plus people have to migrate or perish in the space of a few years there will be untold misery, confrontation and escalating conflict. Hence my slightly flippant point at the start about training up the CCFs.

However, as an ex-military person myself, I would not see this as a moment to assume all is lost, arm ourselves with pitchforks and cement-mixers and head down to Folkestone to block up the Channel Tunnel. There is still time to take a slightly more indirect and constructive approach. If we can double-down on our collective efforts to reduce carbon and other greenhouse gas emissions, we still stand a chance of halting the warming in time.

Unfortunately, we are not getting a grip of it nearly fast enough. Weekly atmospheric CO₂ counts are still rising steadily. The UK, like many nations, has resolved to act and we have committed to achieving a state of net zero-carbon by 2050. It is a worthwhile and important goal but we are way off track – in thought and deed. For example, the UK Government talks a lot about its support for decarbonisation but it’s just confirmed the end of the main financial incentive to decarbonise heat (the Renewable Heat Incentive (RHI)) from March 2022 and what it’s proposing as a follow-on effectively spells the end of the recent surge in progress, especially for rural estates and schools off the gas grid. Heat generated by burning fossil-fuels, in particular oil, is the Voldemort of the carbon emissions battle and UK policy is about to surrender to it.

And so to schools. What should schools be doing about climate change?

• One: leading the way, I’d suggest.
• Two: educating – not just the students but the staff as well.
• Three: measuring performance.

Number one is the foundation. Schools hold the future in their collective hands. After all, it is the students of today who are going to face these challenges of tomorrow. I respectfully submit to the leadership of the independent education community that independent schools – as a focus in the UK for educational excellence in its broadest sense – could, and should, be making rather more noise about it than they are.

Please do not misconstrue that statement. Many schools have achieved great things in the past few years. I’ve worked with several of them and been amazed at the resilience of the bursar community in keeping sustainability projects alive whilst juggling with an ever-increasing workload and competing demands on the budget from other, higher priority projects. But to me that very accolade illustrates the nub of the issue: sustainability and decarbonisation still isn’t mainstream stuff – it’s still more important to most school governors to build a new STEM building or theatre than it is to decarbonise the estate.

I can understand why. Schools need to be competitive and one way to retain that edge is to have palpably outstanding facilities. There is a sort of schools new-build arms race going on. A few months ago I asked a bursar why it was now so important for schools to have such an active new-build programme, because it hasn’t always been like that. “Build or die” was the answer.

Sustainability and the decarbonisation of the school estate cannot compete on the school facilities front: you don’t tend to show visiting parents the boiler rooms! Nonetheless I’d like to see a similar arms-race going on in terms of sustainability credentials. The problem is that it is not a cheap matter to render a school zero-carbon and if only a few schools dive in then they are taking a risk; but if it was seen as mainstream then nobody would be taking a risk on it and the rate of progress would shoot up.

ISBA has indeed started taking a lead on this and I applaud its endeavours. Regular updates on government policy and other relevant topics feature in the ISBA bulletins. Sustainability now features as a regular session during the annual conference. And ISBA has recently lent its support to a new PR campaign to get the UK Government to pause and think again about its post-RHI plans. But there is a long way to go. I’d like to see climate change mitigation in schools featuring as a mainstream topic at independent education sector conferences including at the annual HMC and other association annual conferences. I’d like to hear heads and chairs of governors clamouring for action, rather than shying away from it as too many still do. I’d also like to see the sector badgering the government to put its money where its mouth is. Baroness Hayman, speaking in the House of Lords recently about the government’s proposed Green Recovery – one of the five planks of the COVID-19 economic recovery programme – said that schools could lead the way. I agree with you, Baroness.

Number two: education. If you want to know how to achieve something, you have to study it. Students and staff need to learn about the science and the options for mitigation. This is a new topic in the wider scheme of things but it’s now urgent. I don’t think I’m being unfair in stating that there is still widespread ignorance of the detail amongst the upper echelons of the leadership. Most heads would probably like their schools to be more sustainable but they don’t know what it requires in practice. To be fair, why would they have known until now? It wasn’t important. All of a sudden it is.

One of the ironies of this is that with a greater understanding of the detail would come a realisation that climate change mitigation is not actually such a monster after all. There seems to be an underlying sense in some quarters that somehow energy is bad and we’ve got to stop using it. Energy is not bad. We just need to stop wasting it; and use the right energy. It’s the greenhouse gas emissions that are going to kill us – not energy usage per se. There is such a thing as clean energy.

Number three: measuring performance. Schools are subject to academic league tables but they are still not subject to sustainability league tables. They should be. You can’t tell how well you are doing if you don’t measure your performance and compare it with others. I’d like to see a school’s carbon status as one of the measures of quality. I accept that it’s easily said and would require care in the application, in order to provide an authentic outcome. However, I’d submit that it would be easier to grade schools fairly on sustainability and decarbonisation than it is to grade a nation’s worth of GCSE English Literature papers: but we all accept the latter because we’re used to it and we have faith in the rigour.

Writing this has made me think that it’s just a matter of priorities, after all. A zero-carbon school is an achievable goal. There is nothing that needs to be done that cannot be done. We all just need to agree to go for it.

 

This bulletin gives an update on policy developments during April 2020. It gives more definitive guidance about the UK Budget and steps being taken to protect projects during Covid-19 constraints.

UK Government Announcement: 28^th April

The Government has been reviewing ways to assist organisations, including schools, to maintain momentum with low-carbon heat projects in the light of the impact of Covid-19 on operating budgets and working capacity.

On 28^th April the Government confirmed:

• Beyond the RHI it is going to use regulation to require premises off the gas grid to phase out their high-carbon fossil fuel heating, as opposed to the current financial incentive of the RHI.
• It will permit a qualified extension to the non-domestic RHI entry deadline until 31^st March 2022.
• The one-year extension is dependent on having first secured a tariff guarantee. This is being called Tariff Guarantee 3 (TG3).
• Other than this dispensation the non-domestic RHI will close for new entrants as forecast on 31^st March 2021.
• The domestic RHI entry deadline will also be extended to 31^st March 2022.

It is the non-domestic RHI that is intended to cover the large projects such as conversion of main buildings, boarding houses, sports halls, etc. The domestic RHI is only useful for smaller projects for domestic premises on school estates.

Comment: This RHI closure is of particular significance for oil burning schools, because if conversions to low-carbon alternatives have not been done by March 2022 then they are may need to be done later in the decade without any major financial support from the Government. Given the high capital cost of these conversion projects this could hit school budgets very hard indeed.

What does this mean in practice?

Any school wishing to start or complete a project that relies on the non-domestic RHI should secure a Tariff Guarantee for the project before 31^st March next year. That would earn the school one extra year – until 31^st March 2022 – in which to get the installation work completed.

Schools that use oil for heating should note that the RHI represents their best chance to get this done with any substantial government financial support.

Schools should allow about 6 months to get the necessary preparatory work done before applying to Ofgem for the Tariff Guarantee. This preparatory work includes:

• Completion of the required technical risk reduction and project definition.
• Confirmation of the design concept.
• Securing planning permission from the local planning authority.
• Ensuring financial cover is in place for the project. Note that the RHI is a subsidy, not a grant, therefore capital for the project has to come from somewhere else; but the subsidy in most cases will be large enough to repay the capital over the life of the project.

This preparatory work will require expert assistance: there are technical and procedural Pooh-traps to be avoided.

Covid-19 Restrictions. All of the work required to secure a Tariff Guarantee is feasible under current Covid-19 constraints.

Comment:

• The conversion of school heating systems to low-carbon technologies is a key step on the route to achieving zero-carbon status. This one-year extension of the RHI, using the Tariff Guarantee 3 route, is therefore a most useful opportunity for schools that have just had to defer projects because of Covid-19; or have only recently started to focus on becoming low/zero-carbon.
• Renewable heat technology is developing all the time, but the site-specific technical and design work will remain useful for several years, even if it is not used immediately.

The RHI subsidy, combined with a net reduction in operating costs from the installed low-carbon heat technology, will usually achieve a significant net saving for schools on oil and just about achieve break-even for schools on gas. The main advantage will be that the converted buildings will have a much-reduced carbon footprint: it is the generation of heat using fossil fuels that is the main source of carbon and other greenhouse gas emissions on a school estate.

Schools wanting to get conversions done but now unable to find the capital may want to consider the energy purchase route. Energy purchase agreements are often referred to as heat or power purchase agreements, depending on the technology to be installed; or ESCOs, which stands for Energy Services Company (the ESCO is the company that is providing the energy as a service).

The concept of an energy purchase agreement is that a 3rd-party pays for and owns the installation and then sells the energy generated – whether it be heat or power – back to the school at a price which is low enough to be attractive to the school but high enough to cover the provider’s own costs and also generate a return on investment for the provider.

The advantages are that it negates the need for the school to find any capital or take any loan repayment risk; and the agreement is usually structured to offer a degree of immediate savings in operating costs for the school. The quid pro quo is that the school commits to purchasing a level of energy annually which is similar to that currently used, over a 20 or 25-year period.

The disadvantage is that over the 20 or 25-year term the school will not save as much money as it would through self-financing or via a bank loan. Contractually this is also a more difficult financing methodology to set up and manage successfully and careful consideration needs to be given to exactly what buildings are in scope for the agreement and what tasks and services it covers. Nonetheless this route does at least enable a school to achieve a sustainability target when it might not otherwise be feasible, which has become a more common situation thanks to Covid-19. It also offers a lifeline to schools that currently use oil for heating that are unable to finance a low-carbon heat conversion project before the forthcoming RHI entry deadline.

EPAs usually offer a buy-out option during the term of the agreement, or at its end, such that the school can take over ownership. Heat purchase agreements invariably rely on the inclusion of the RHI, without which they are unlikely to prove cost-effective for either party.

Mayor Trump has called a meeting in the market place. He is looking quite angry today.

‘Ahem. Some people here, bad people, have posted a petition on the front door of the Town Hall. They say they want more action on climate change. Bad. Very bad. In particular they want me to close down the Town Hall’s oil-fired boiler and put in a new district heating system to serve the whole town on a heat network.’

‘Yes,’ said Mr Troop, the Town Clerk. ‘That would save everybody money; and make the air fresher; and the Government will help with subsidies. I’ve already done the business case.’

‘You’re fired,’ said Mayor Trump.

‘It’s true,’ said Chippy Minton, the carpenter. ‘I read it on the BEIS website. Subsidies are index-linked to the CPI and guaranteed: the more heat we use, the more the subsidy. It’s a great idea. It could save us all lots of money compared to the oil we’re on.’

‘Fake news,’ said Mayor Trump. ‘Bad. Very bad. They don’t know. You can’t trust what governments say.’ He was starting to turn rather orange now.

‘I read a report by the United Nations Intergovernmental Panel on Climate Change,’ said Mrs Cobbitt the flower seller. ‘It said that we need to get carbon emissions down to net zero by 2050 if we are to prevent irreversible damage to the environment, such as the destruction of all coral reefs, loads more hurricanes and large forest fires, and tens of millions of people being made homeless due to rising sea levels.’

‘I bet my shop would be one of the first to get washed away,’ said Mr Clamp the greengrocer. ‘It’s only stuck down with glue and was a last-minute rush job when the producer wanted more buildings on the set.’

‘I don’t believe it,’ said Mayor Trump, getting more orange than ever before. Secretly he was quite worried, because he had a house by the sea, but he wasn’t going to let on.

‘It was a last-minute job,’ said Mr Clamp. ‘It’s rubbish. You go inside and it hasn’t got any proper rooms at all.’

‘No – the UN report, I meant.’

At that moment Nibs Minton the apprentice and Miss Lovelace the hatmaker (who had a bit of a thing going on) started up a chant. ‘We want action and we want it now.’

Others started to join in.

Mayor Trump grew even more orange and his hair started to smoulder. But at that moment Mr Wilkins the plumber came running in to report that a fire had started spontaneously in Mr Clamp’s premises.

‘B****y typical!’ said Mr Clamp. He spoke a bit like Geoffrey Boycott.

‘Call the fire brigade,’ said Constable Potter.

And the rest is history…

ReEnergise is currently running a concerted campaign to raise awareness about renewable heat. For shameless attention grabbing in schools, the theme is Shakespearean and tongue in cheek. But the underlying rationale is perfectly serious. Here is the opening from Episode 5 just to give you a flavour.

Oh Romeo, Romeo, wherefore art thou Romeo?

Down here.

Oh Romeo…

Yes, my love? (Sigh)

My Father says we can’t see each other anymore.

What?! But…

He says nothing good will come of it.

It’s now Government’s policy to phase out the installation of high carbon forms of fossil fuel heating in new and existing businesses off the gas grid during the 2020s. Might seem a long way off, but it’s already relevant if you’re on oil and need to replace a boiler. Just consider the intended lifespan of that new boiler in the context of 2030…

Transferring to renewable heat usually saves a lot of money. Annual returns on investment can be as high as 20%, thanks to savings on the fuel costs and generous Government subsidies. The subsidies are index-linked to the CPI and last for 20 years. However, the heat subsidy scheme will be closing for new entrants on 1st April 2021. So, estates need to act soon, or risk having to switch after April 2021 without the support of the current subsidy regime.

Switching to renewable heating systems is not just a way to save money. There are clear sustainability and CSR benefits.

All types of renewable heat generate less NOx than oil, so air quality is improved. Quality of life is better: there is lots of evidence that when renewable systems are designed and installed correctly the quality  of the heating improves, both output and occupancy comfort.

Fuel price security is improved: our extensive modelling of differing fuel price and CPI inflation rates shows that the greatest financial risk is to remain on oil.

The best return on investment is achieved when the school or rural estate finance the programme. However, for those that don’t have a budget but want to act soon, we have a range of financing options that have evolved in the light of feedback from clients.

The renewable heat market has matured a lot in recent years and there are now several reliable options. We’ve yet to find a situation where one of them does not fit the bill. It’s usually more a question of which one best suits a specific estate.

There’s a good reason to be banging the drum.

The Prologue.

Since we started working in the sustainability industry in 2010 we’ve talked to hundreds of independent school Heads and senior managers. Some common themes have emerged regarding the curbing of energy usage and getting off fossil fuels, and it has all the makings of a minor tragedy:

• Senior managers are frequently concerned about excessive energy usage. Not everybody cares about saving the planet, but most people do want to reduce energy usage – because it’s expensive.
• However, there are often more pressing tasks that get in the way of tackling excessive energy usage.
• Furthermore, there are plenty of apparent reasons to drag one’s feet: people are confused about renewables and the related legislation; often they don’t realise how much money can be made from them; they think the subsidies are all finished; there’s that anecdotal local school that had a bad experience with a biomass; the market is confusing and hazardous, because there are so many options, so many suppliers, and so many vested interests; and so on.

Here’s the Tragedy…

Contrary to popular opinion, renewables are still an excellent Government-backed investment option. Returns on investment of 12-20% per annum remain typical, in the right situation. Renewables are now a mainstream part of UK energy provision. However, in the Education Sector, good opportunities to act are being lost through all the reasons discussed.

It’s not all bad: several schools are embracing the opportunities presented. Nonetheless, the majority are not.

Here are two examples to show you why it’s well worth finding out more about renewables within the UK, and finding a way to take the plunge…

 

Solar PV returns chart: Fandangle Hall School

The chart above shows the returns on a typical solar PV installation in a school:

• The initial investment – the installation cost – is £33,000. (This could be funded in other ways if the school did not have the cash to spare).
• The saving comes from using as much as possible of the solar power generated on site, so that there is the highest possible reduction in power purchased from the grid.
• Plus, there is the substantial revenue from the two categories of subsidy.
• Over 20 years, which is the life of the subsidy, there is a net benefit of around £110,000 or 22%.

If you walked into a bank and told them that you could offer investors a return of 22% on their investment, and it was backed by the Government – they’d laugh. Yet this is what we have here.

 

Ground Source Heat Pump returns chart: Fandangle Hall School

The chart above is an example of a heat generating technology: a Ground Source Heat Pump. Never mind how the technology works – that’s for another day. Please note the return on investment.

So What?

Most schools will have several places where they could install renewables in order to generate pockets of longer term revenue. The idea is not to welcome with open arms the first renewables installer who comes through the gate. Due diligence remains essential. But I’d suggest that every school should have a plan – linked to the map of the estate – which shows which technology could best be used in each location, with the cost versus benefit noted alongside it. And then work steadily through the implementation. If you’re not sure how to do this, just seek independent advice.

It will be time and money well-spent.

At the 2017 ISBA conference we collected data from 53 schools on their annual energy costs. The purpose of this exercise was to establish benchmarks on energy usage per pupil, taking account of fundamental differences such as boarding/day, or percentage of boarding. Using this data, we created a model to work out the cost of energy per equivalent boarder per annum and produced graphs and charts to circulate to each participating school, so that they could see where they sat in relation to the rest of the sample.

Below is an example of the bar chart produced for the schools (as at July 2017), without the labelling (to provide confidentiality to the schools), and without energy costs because that is confidential to us.

There are different charts for boarding schools and day schools, to reflect the major differences in circumstance.

These results are obviously quite raw: some key factors such as location in the country and local weather conditions have not yet been factored in. However, even at this early stage it seems clear that there is a wide variation amongst schools, which cannot all be explained by local conditions. Over time we want to gather enough detail and schools on the database, so that the benchmarking becomes a reliable guide to what is really going on in the sector. The more schools involved and the more refined the data, the more useful the results will be to participating schools.

Would you like to join our research?  There is no cost to joining and you only need to email me: [email protected] the following data:

• Number of children at the school (& the number of boarders, if applicable).
• Annual heating cost and annual electricity cost, including VAT.
• Are you heating on mains gas, oil, LPG, or some other type – e.g. electric heating?

If you wish, it would also be helpful at this stage to hear any thoughts you may have on issues that particularly influence your energy costs.

All data we receive will be put into the model, and updated charts sent out so that the school can see where it sits in the wider scheme of things, with all the actual costs included.

For one school in particular this has been a significant issue this year (2017). In September 2016, the Bursar at Lucton School in Herefordshire asked us for a feasibility study on the relative merits of installing a biomass system on his estate. The estate was on oil, so we were sure there was potential; but with renewables it’s always important to do the cost/benefit analysis carefully before committing to an installation. Our modelling established that the most cost-effective option for the school would be a medium-scale district heating system serving the whole site. However, it would have to be commissioned and registered with Ofgem prior to the impending changes in RHI tariff. The financial case stacked up well on the old rates, but it would not be viable on the new rates. At the time the government had announced that the changes would happen in April 2017. As it turned out, the changes were delayed by some 6 months, but nobody could have foreseen that and no responsible school bursar or contractor could plan on it: so the latest safe date for registering with Ofgem was agreed as 1st April 2017.

A biomass system on this scale can take anything from about 4-6 months to complete, so time was of the essence. We were financing and managing the project, so we had to ensure the deadline would be met, but without any short-cuts or increased technical risk. The school had to be quick in considering the case and getting Governing Body approval; (any bursar reading this will know that that is not easy but Lucton School were exemplary in their efficiency). Ecovision, who won the tender for installer, had to meet a challenging timescale and budget.

In the end the project went remarkably well. Anyone who has ever been involved with biomass will know that there are almost always technical challenges: it’s not the same as bunging in a gas or oil boiler, but in the right circumstances the financial and carbon rewards are worth it. At Lucton, for example, tasks such as trenching for the district system still had to be scheduled to minimise disruption for the school, even though time was short: school life has to go on.

Well done to Ecovision for meeting the 1st April 2017 deadline successfully. The system is now all up and running and we’ll be going back to the school in the coming winter months to confirm that it’s performing as modelled and also to check that the school support staff are happy with it.

System size: 500kW. Anticipated net benefit over the life of the 20-year RHI subsidy, including having paid off the finance, is £600,000.

Predicting what energy markets will do is no easier than predicting any other commodity. Indeed, simply working out what the price of energy has been in the past is difficult, because there is so much data available, presented in so many different ways, to suit so many differing vested interests.

Nonetheless, some general trends are apparent:

• We do know that the national supply of both power and heat is under growing strain. The weight of informed opinion, as well as current purchasing information, suggests that the UK supply for the next 5 to 10 years is likely to be volatile but rising, especially in the provision of power. We do also know that retail prices have already risen a lot this year.
• Current indicators are that grid power prices are likely to increase substantially in the next few years, owing to a shortage of provision and, ironically, the rising burden of government levies to fund the transition to renewables.
• Therefore, goes the logic, estates should be looking for cost-effective ways to reduce their reliance on grid power.

This chart shows the National Grid’s own assessment of wholesale power price inflation. The wholesale price represents about half of what the consumer pays for power. The rest is made up of infrastructure charges and government taxes and levies.

ReEnergise Finance has had a busy Summer of 2017 with two transactions in particular placing our Lease Finance offer competitively at the forefront of the 3rd-party finance market.

Through our growing relationship with Societe Generale, we have supported Lucton School with the finance for the installation of a new biomass district heating system with repayments spread over 9 years. We are also providing finance to Sherborne Girls to support the purchase of a new ground-source heat pump that is being installed as part of their development of a new centrepiece Arts Centre within the heart of the school.

Transactions over the summer totalled £768,250.

Our focus is to support businesses looking to finance energy projects that are either stand alone or part of a more comprehensive new or redevelopment programme. We are in most cases able to offer finance (including VAT), pre-commissioning stage payments and flexible payback terms at competitive Lease Finance rates of interest.

The benefits of lease finance include the ability to preserve your own existing financial resources, retain full ultimate ownership of the asset (including the revenue streams from subsidies such as the RHI and FiT) and even match cost savings to repayments over the term of the loan.

We are happy to work with consultants and installers who are looking to present a viable business case to clients for an investment in energy efficiency and are comfortable supporting most technologies including LEDs, Solar PV, Biomass, Heat Pumps and even conventional boiler systems.

If you have a project that might benefit from Lease Finance support then please call Stuart Murray, Director of ReEnergise Finance on 01428 608462.