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Renewable Energy: An Ethical Decision or Simple Economics

angusAngus Duguid  has worked in the international design and construction industry for 18 years leading projects in both the public and private sectors. Duguid (pictured right) was a senior director at a major engineering company responsible for commercial performance, regulatory compliance and project risk including the Rio 2016 Olympic Masterplan. Full bio can be found below.

For many,  a move to a more renewable and sustainable culture is an essential part of our development as a society, but does this reflect more of an ambition than a reality? Our collective conscience is often pricked by the media in particular the campaigning of celebrities and high profile figures in relation to charitable appeals. The desire is to make a personal connection with the individual and engage their ethical side to contribute to the cause. But do such appeals work when it comes to the sustainability agenda in particular when you are asking consumers to spend significant amounts of money installing equipment and converting to a renewable lifestyle? Can the economics match the ethical ideal and is it acceptable that the benefits are often limited to those who can simply afford it?

In the U.K. renewables market over recent years, moving across to renewable technologies has been clearly supported by the economics. Many users of renewable energy have made an ethically driven environmental decision allied with a desire to achieve energy independence. However much of the uptake has been a purely economic decision with lucrative government backed agreements allowing users to make significant financial return on the installation of systems. And this has in many ways has been the basis of the industry’s sales pitch, be a good person whilst making a return on investment, what’s not to like? And if it creates investment which expands the use and development of systems and markets then again this has to be seen as a positive as without the backing of the markets the dream of producing the majority of our energy from sustainable and renewable means is wholly unachievable.

So sustainability becomes a by-product of investment–the economics rather than the ethics drive the agenda.

But what happens when the economic stimulus disappears? Then we are in a situation where we really are appealing to the consumer’s personal opinion on sustainability, and this is where we start to run into problems. As noted earlier, the upfront capital cost of moving from fossil fuels to renewables is still prohibitive for many, even with the provision of competitive financing payback periods have extended significantly and are starting to get close to the lifespan of the equipment. In effect, this is not such a straight forward choice financially even for those who have both the means and the desire to change.

We are now reliant to people taking the sustainable option based on their ethics and long term view that fossil fuels are finite and that we need to develop systems for the future. This is not unfortunately not a recipe for large scale adoption of renewable technologies, as demonstrated by the U.K. market, so we must find a balance between the long term need for energy security and the simple economics of affordability .The two must have some form of amicable marriage between finance and fundamentals, so how do we achieve such a harmony?

We need first to address the economic arguments, once we have countered the ‘it costs too much’ then we can focus on the ethical question.  As consumers we are reliant upon suppliers, be that energy companies for traditional means and manufacturers of renewable energy technologies for the sustainable option. Consumers as in any market need to be persuaded of the cost benefits or presented with a readymade solution which minuses disruption to their lifestyle.  We need to improve investment strategy which focuses on developing products which are cost effective and deliver the best return for the money both in financial and usage terms. In many ways the real estate industry should look to the car industry, hybrid and efficient engines are now normal within the market place, therefore consumers are adopting a more environmentally friendly position by simply purchasing a car.

This is where larger scale solutions such as district heating systems and Combined Heat and Power (CHP) plants can drive forward renewable energy. By providing the sustainable solution at source the adoption of new consumers will consider the application and cost of adopting renewable energy solutions as part of a larger package which provides a cost benefit and allows them contribute to the green agenda through a normal transaction rather than a singular capital purchase. The design and construction industry can lead on this but it will need support and encouragement thus focusing such support towards those developing and delivering the product rather than those consuming it is likely to produce a longer term benefit.

The private sector must consider this part of their development of CSR and ethical practices, as the future of their industry relies on the evolution of sustainable design.

Government and legislators must take a both an economic and ethical view as it is they who create the macro environment through policy and financial incentives. Using the principal of stick and carrot it they can create legislation which encourages consideration of the ethical basis for renewables whilst providing financial support for those who adopt these solutions.

So how would you apply legislation whilst maintaining the market forces? In the UK the standards have been set via planning and building regulation. Developers and designers work within these frameworks currently and are used to the changing demands of policy and develop the financial case accordingly. In order to support more stringent targets economic support to offset costs should be available with the main focus being lowering initial cost to the consumer, making the sustainable option attractive both in terms of economics and ethics. This does not have to simply take the form of hard cash subsidy but potentially the reduction of contributions which real estate developers and investors are required to make to public infrastructure, with government contributing to the gap. A public-private partnership in the real sense rather than a financing mechanism.

Hearing the words governments and legislation will not appeal to all, in fact many will make the case that the market must be allowed to address the situation without interference. This is unfortunately an unlikely reality. Aligning environmental ethics with investment is the key to success. Rather than investing on a singular micro level, as subsidies in the U.K. currently do, and rewarding people for using energy, government should be sponsoring sustainable design by those conceiving and delivering projects and promote the efficient use of that energy. This will encourage all to consider the sustainable ethics of development and create a basis to maintain the fledgling renewables industry which at the moment is too sensitive to subsidy and fickle consumer tastes to thrive on its own economic platform.

The technology is of course transferrable on an international level and by creating an economy of scale, we can also support developing nations to adopt renewables.

Most importantly the ethical argument needs to move on and become part of the consumer DNA which considers the long term energy viability of their property as they do with their cars, and understand that they support long term development of an industry which will guarantee the security of energy for future generations long after we, the pioneers, are gone.

Author Biography:

Angus Duguid has worked in the international design and construction industry for 18 years leading projects in both the public and private sectors. He was a senior director at a major engineering corporation responsible for commercial performance, regulatory compliance and project risk including the Rio 2016 Olympic Masterplan. He most recently served as Managing Director of the U.K. Leading Biomass Supplier Innasol and has a strong interest in the viability of sustainable building and design. He provides commercial training a support to students of numerous professional bodies such as The Institute of Civil Engineers and The Landscape Institute. 

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