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Go Green For Profit

Nicholas Woolley considers the financial implications of going green
Having been introduced as the man from the Pru and the rural fund asset
manager for Zurich Assurance I want to consider with all of you the
financial implications of going green, from a property fund manager’s
point of view.

Cold, clinical and boring after the more inspired and visionary views of
my old friend Jerry Harrall – here charity fund raising with Lynn
Redgrave. However, as I quite often say to him, for goodness sake we
must look at the financial implications of all this wonderful green
hyperbole!

Sir Nicholas Stern succeeded in waking up not just this country but also
many other seats of government around the world by his remarkable paper
on the economics of going green and how they could be justified against
infinitely greater costs of not so doing.

Buildings and their use produce 40% of all carbon emissions.

Today I want to bring this to all of us much more at our own home level.

First I want to consider energy. It’s cost today compared with what it
was ten years ago and then look at what it might be in a few years time.

My listed home will be small in comparison to some of yours but it still
costs me the thick end of £3000.00 in oil to heat each year whereas ten
years ago it was seventh of this cost. Energy is basically a global
commodity because whether we are talking about gas, oil or even much of
our electrical power, it is all geared to the international commodity
that is basically fossil fuel. We live in a fossil fuel economy.

Jerry isn’t reliant on it. He doesn’t use any of it – lucky him I say
but not just lucky – also very sensible. He doesn’t worry if oil dries
up tomorrow. He will still be able to run his home and his office and he
will still be able to drive his car. He is fossil fuel free.

If any of you, like myself, are presently reliant on fossil fuel energy,
then we have to make a move and start changing our ways.

One thing that Jerry didn’t mention was that his beautiful home of
something over 2500 sq feet costs him less than £8 per week to run
before council tax and that, ladies and gentlemen, is a house which he
designed some seven years ago and which he now regards as old tech and
expensive to run.

How many of you are aware that in the last ten years India and China
between them have doubled their oil usage and over the next eight years
are expected to at least double it again?

How many of you are aware that India and China now have an agreement
between their governments to go out jointly as one to buy up oil
reserves from elsewhere in the world – basically take those reserves out
of the current global pool for the rest of us?

Venezuela intrigues me. It has recently nationalised its entire oil
reserves and, surprise – surprise, just happens to be producing about
the same amount of oil that China and India will soon require. It is the
fifth largest producing country in the world. Now bear in mind how the
rest of us, are still expecting greatly to increase our oil demand over
the next few years.

Here is the peak oil assessment of demand and supply. Many people now
question the validity of the data attached to the supply curve and I’m
not going to argue one way or another but sure as hell, the supply curve
is not going to keep on going up! It has to be correct that probably at
best we are just about at the top of the supply curve in which case the
demand curve must give us cause for considerable anxiety.

In 10 years I can see our oil prices at least trebling in real terms! I
am aware that it will then make other fuels including biomass more
attractive and boost that production but unless it does so to a colossal
extent, along with other forms of energy production, then we are in for
a mighty economic shock.

We in East Anglia are especially aware of our lack of water. Bearing in
mind this region is threatened by 505k homes by 2016 plus all the
commercial industrial and other development that goes with it, the
impact on our water supplies is pretty terrifying – even before climate
change.

Our present construction industry is run by dinosaurs and they won’t
change until they are forced to go green. Like the dinosaurs – I wish
they would go extinct! In new development, we can save water – we must
save water – Our farmers need it – our environment needs it!

It might interest you to know that one of my city institutional clients,
for whom I am the UK Fund Asset Manager, has agreed that I take forward
a commercial office development project on the basis that it is one of
the new generation of eco-buildings planned to be totally autonomous
both in water and electricity – of course it will have a zero carbon
footprint. What’s more, ladies and gentlemen, it is planned to cost less
to build per square metre than a conventional office building which
would almost certainly be fossil fuel reliant!

My old friend from the Pru, Professor Paul McNamara, who is director of
property research, is now warning fund managers that they need to
consider carefully how they take forward new green buildings. Since this
new build only accounts for about 2% of the fund each year, that means
they have also got to take positive steps to green their existing
portfolio in an economically viable manner. If one of the lead funds in
the whole of the UK is doing this and, what’s more persuading other
funds that this is the way to go, then I believe all of us who live in
our own private homes will be no more than ostriches if we don’t give
the matter some pretty hard thought.

Many of you will know that I served on the Council of English Nature for
nine years and therefore you may think of me more as someone proclaiming
this from my environmental background rather than more clinical
institutional pension fund experience. I promise you that is not so. Let
me assure you I am going to look at those costs and the return on
investment on new build very carefully indeed. However, the figures that
I am getting out tell me that the options available are a no brainer
when it comes to a clinical financial decision. Ladies and gentlemen –
go green on new build and recommend it to others.

Now I want to talk a little bit about the big conundrum of greening our
present housing, in particular, yours and my listed buildings. I
understand that the CLA are having a huge number of members ringing them
up throughout this region quite apart from the rest of the country. They
are asking how to go about this, particularly in the light of a number
of local planning authorities who seem to be quite determined to take
the English Heritage line and stop anything appearing externally on a
listed building that could possibly change its appearance for the worse.

Like so many of you who have been confronted by such an obstacle, I find
this attitude patronising, hypocritical and ill founded. It is
patronising in that in I can’t believe that anyone would want to do
something, which truly damaged the appearance and therefore the ultimate
capital value of a beautiful building. It is hypocritical because of
what the Government is exhorting us to do in every other case of new
build; it is ill founded since so many of the Government policy
guidelines are changing. We have a complete new agenda and one of the
most pressing things incumbent upon every man, woman and child in this
country is to change their ways in the use of fossil fuel and their
operations which cause yet further climate change. English Heritage –
get real!

One of the things which I have long admired about the Suffolk CLA is
that my predecessor chairman started a process of ensuring that he, and
a number of local leading members visited each district council on an
annual basis. The objective being to discuss relevant issues with the
council and try to build up an improved dialogue through which the rural
economy overall will be enhanced.

Only a couple of weeks ago I was asked to attend as one of the local
members a visit to Forest Heath District Council and a couple of weeks
or so before that we made our Suffolk County Council annual visit. I am
delighted to report that from both of those meetings, their message was
to go green. The Chief Executive of Forest Heath District Council
emphasised that in this whole issue of greening listed buildings, the
world was changing. He accepted many of our arguments that we were
putting forward. This will not be giving us a green light with all local
planning departments to put solar panels and photovoltaic cells on or
all our roofs as well. However, he did indicate that these things had
got to be looked upon in a new light as necessary for a more secure future.

Through this type of liaison, the CLA can play an invaluable role not
only locally but also centrally in helping members take forward sound,
environmental improvements to their properties.

For my part, I most certainly do not wish to damage the external
appearance of what I, and most of my friends, believe is a rather
beautiful old house dating back to 1540. However, to my mind if I now
see a house that has no obvious means of capturing our greatest source
of energy and warmth I tend to look at it rather sadly, I would regard
this property and its owner more highly if he or she was actually making
use of natural resources to save themselves money – and the planet as well.

I just want to touch on this whole issue of photovoltaic cells because
you may not be aware that this whole business is changing dramatically.
Up to the present time, I could not, and would not, advocate to others,
or myself, that photovoltaic cells were a viable option. The old
silicone PV cells, the only ones available, are not a viable solution.
However, Professor Alberts and his team at Johannesburg University have,
over the last 12 years, been working hard and last year came up with an
answer which they call CIGS which stands for
copper-indium(gallium)-diselenide. It is firmly claimed that five
microns of CIGS in a remarkably flexible and wrapable foil produce the
same energy as 350 microns of silicone and what’s more, apart from being
much easier to install, lasts far longer. The South Africans claim that
the payback period is about 3 years.

The material is now going into production in Germany and with quite
extensive research we have tracked down the factory that will soon be
making and marketing them. I was hoping to have some specific costs of
both the material and installation but sadly in spite of a number of
attempts so far this information is not yet available. However, watch
this space AND – watch my roof!

I now turn briefly to solar heating panels. These have been around for
some time now. I am hoping to install a number of these very shortly on
my own roof prior to the PV cells. I would beg you to check out the cost
effectiveness of different types of solar heating panel. There is a very
substantial variation in both price and performance.

What else can we do to our old homes?

I believe there is a whole raft of ideas but I am sure many of you have
considered these and hopefully a number of you have actually started
going down some of these routes.

Increase the insulation in your roof. I have done it with quite a
dramatic effect.

Do, check all your chimneys and fireplaces and ensure that those that
are not in regular use are largely blocked off – though obviously not
completely – by something like a four-inch slab of rock wool that is
inserted into the bottom of the chimney to stop the draft and form a
pretty effective thermal buffer. Place a removable cover over fireplaces
when not in use.

Windows and doors. If, like me, you have a whole mass of fairly ill
fitting windows and doors, it is essential that you endeavour to seal
these more effectively and one of the most sensible ways may well be
secondary-glazing. I repeat secondary NOT double-glazing. Double-glazing
is the use of sealed units usually two skins of glass but sometimes even
three all sealed in a frame. In many cases you will find that to replace
particularly very old windows with these units may have a detrimental
impact because of a change in the fenestration to the building. This,
probably with some reason, the local planning officers will not be
prepared to consent on a listed building. Secondary glazing, however, is
the use of a single sheet of glazing in a frame that is set inside the
window which can either slide up and down, from side to side or even be
hinged to open into the room. Perhaps it is interesting to note that
this last form – the hinged one, is what is used in very many European
countries where the winter climate is very cold. One of the advantages
of this is that, when the sun shines brightly, the internal glazing can
be opened to allow the sunlight and its natural heat to penetrate deep
into the room. This cannot happen with sealed double-glazing units to
the same extent despite all that we are told by the makers of this new
glass. However, as soon as the sun begins to lose its heat, secondary
glazing can be shut, thus trapping the heat in the room and preventing
the cold air coming in.

Let me now turn to boilers – no not that old chicken you fool! – this
sort. I don’t know about you, but my energy costs have been compounded
by the fact that I have been using a very old, non-condensing oil fired
boiler. My objective is to install a new super efficient condensing
boiler which will be something like 90% efficient as compared with my
present one which is probably somewhere between 55% and 60% efficient of
the fuel used. Not only shall I be switching to a far more efficient oil
boiler, but I shall also fitting out the whole house with individual
radiator thermostats which should save me something like a further 10% –
15% of current fuel use. This should reduce my oil consumption by 30-35%
or nearly £1,000 per annum giving a 6 year payback at present prices
which WILL rise!

Because I – like so many of you – have an abundance of firewood that
would be more than adequate to heat the house, I had looked at going for
a biomass boiler and hopper feeder arrangement. However, when prior to
building a barn and the necessary infrastructure to chip and dry my
woodchips the cost of the boiler and hopper feeder was going to be
around £20,000 and that didn’t include the other works around the house
– I rapidly went off my biomass dream. Another of the benefits of the
oil boiler that I shall be putting in is that it will be perfectly happy
to transfer to bio-diesel if in the future that becomes more viable.

I can now show you quite a little chart that I compiled off the Internet
showing a comparison of costs for different types of fuel heating. As
you will see, the new super condensing oil boiler appears to beat
everything else into a cocked hat apart from gas, not available to me.
For these major improvements to any business building, the Carbon Trust
offers interest free loans.

Ladies and gentlemen, this is a very rapid and I fear somewhat cursory
glance at financial facts and figures and ideas on greening our existing
houses, but I hope it gives some green food for thought!

CLA ‘Clean, Green & Viable’ Conference | 27 April 2007

 

April 27th, 2007
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