BG Group's MicroGen unit - a great future for MicroCHP

• Climate Change - With 1.5m tonnes of CO2 saved per household, per annum, the potential is enormous - if all 13m suitable UK homes were converted, this would yield around a quarter of the UK's total Kyoto commitment by 2010. As the Performance and Innovation Unit pointed out in its review that led to the Energy Policy White Paper,, unlike many other Carbon reducing options, it achieves this at an overall negative net cost to the economy.
  
  
• Security of Supply - Greater energy efficiency leads to reduced consumption and can only help to improve supply security. In addition, MicroCHP adds diversity to the generation mix by increasing the levels of distributed generation. Millions of customers generating a proportion of their own power-needs clearly makes sense in the pursuit of supply security. In addition, MicroCHP also has the potential to offer emergency heat and power to householders so that even in the event of a power cut, their central heating and essential electrical appliances can continue to run. This is particularly important for vulnerable households in rural areas.
  
  
• Low Cost Energy - Through significant reductions in the volume of energy consumed by domestic customers, MicroCHP can achieve savings upwards of £150 per household per annum. Of course this achieves the objective of lower cost energy, but it also has wider benefits in the economy overall - reduced waste leading to greater economic efficiency, greater consumer spending power and more available resources in the economy generally.
  
  
• Fuel Poverty Relief - MicroCHP can also make a significant contribution towards the Government's aim of eradicating fuel poverty. The UK Fuel Poverty Strategy highlighted that MicroCHP ' has a considerable potential to reduce fuel poverty'. Support for MicroCHP is especially important in view of the evidence submitted to the DTI (in the White Paper consultation) by the government's Fuel Poverty Advisory Group, that fuel poverty eradication objectives will not be met unless current programmes are increased by at least 50%.
  

MicroCHP can bring particular benefits to 'hard to heat' homes, where there are limited, if any, opportunities to improve the insulation characteristics of the building. In such homes, there is little choice other than to install the most efficient form of heating system available.

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Measures to address 'market failures'
It is widely accepted that there are a number of market failures, which are barriers to investments in energy efficiency. To achieve the maximum energy efficiency benefits, the challenge for government is to produce specific policy measures that transform the consumer market and permanently change consumer attitudes towards energy efficiency and energy saving technologies. The Government's four main policy objectives have been obvious for some time. The absent component is the detailed and specific measures that effectively deliver these high-level policy objectives. We, together with many supporters of MicroCHP, have been engaging in the policy development process with three specific measures that we believe will make a significant, and cost-effective difference to meeting all of these objectives simultaneously.

• Extending the 5% VAT rate for MicroCHP beyond grant-funded installations into the mass market. The Chancellor announced in his 2004 budget that the government is ready to adopt this measure in 2005, subject to the emerging results from field trials.
  
  
• Providing domestic sector Energy Service Companies (ESCOs) with the ability to access capital allowances, where they are adopting highly carbon efficient sources of generation, such as MicroCHP.
  
  
• Market-transforming measures - e.g.: specific enhancements within the Energy Efficiency Committment scheme for MicroCHP or a form of technology 'kick-start' grant scheme which would be phased out over time.
  

MicroCHP Achieves All Four Energy Policy Goals