• April 9, 2014 - Domestic Renewable Heat Incentive Released - Solar Thermal has got the great government funding through the Domestic RHI which it deserves! Solartwin Solar Thermal panels have just become not only a cost cutting and very green option to heat your water but now you will receive additional... More →
  • November 6, 2013 - Notice to Solartwin customers - Letter's from Stenfield & Co - A number of Solar Twin Ltd customers have been in touch this week to query a letter they have received from legal firm Stenfield & Co. - The content relates to Solar Twin Ltd's liquidation, and claims that customers "undoubtedly paid more than... More →
  • July 12, 2013 - Renewable Heat Incentive Updated - Solar Thermal to have Heavy Support - The Government have today released the Renewable Heat Incentive: The first step to transforming the way we heat our homes. If you are looking to buy a SolarTwin System contact Genfit. "the scheme will be open to anyone in these groups who installed... More →
  • May 27, 2013 - DECC announce they are doubling the RHPP grant for solar thermal from £300 to £600 - Solar Thermal Panels Receive Huge Renewable Heat Premium Payment - Solar Thermal has received a huge boost, it's a great time to buy a Solartwin Product. - Greg Barker tweeted about the scheme - - Big uplift for #RHPP Vouchers to put a shot in the... More →
  • February 14, 2013 - Solartwin DIY reviews - SolarTwin Reviews from Reviewcentre - "Review Centre is a community of real people, just like you, sharing their product and service experiences. - Our community of reviewers are a passionate bunch who want to help you discover what's right for... More →
  • January 17, 2013 - Crackdown on aggresive solar selling - YouGen, a leading consumer body serving the renewable and energy efficiency sectors, is calling for a change in the law after a review by the Office of Fair Trading revealed unscrupulous selling tactics by solar and other energy efficiency... More →

OFT Publish Off-Grid Energy Market Study Which Includes Solar.

Filed under: Latest News

The OFT Off Grid Energy Market Study reports are here.

Here are some key summary phrases [With ours in square brackets]. Clearly the British solar panels industry did not get a clean bill of health:

From Press Release.

There were also some concerns surrounding the potential for mis-selling of solar panels. [Glad that this was noticed]. The OFT will work with the industry code operator [REAL Code] to monitor complaints and ensure they are properly handled, [Presumably this statement validates our concerns about improper handling in the past.] and when necessary will take steps to address unfair commercial practices [This bit is particularly interesting.].

From Main Report 6.49  Competition.

At this stage of its development, the market is fragmented with a number of manufacturers and small independent installers. While it is difficult to fully evaluate competitive conditions due to the early stage of market development [an interesting proviso], to date, we are not aware of any issues that could [why use this tense? how about right now?] be expected to restrict competition. [Does this mean that the present competition problems for Solartwin are non-existent, or that the present is being cleverly excluded by this wording?] Membership of trade bodies can be instrumental in a company being able to access consumers (such as those wishing to apply for FIT and RHI funding). Therefore, industry bodies play an important role in facilitating competition and have obligations to ensure that firms are treated without bias. [Is this paragraph a coded rap on the knuckles of the Solar Trade Association and their mates, who have comprehensively boycotted us?]

Clearly the British solar panels industry did not get a completely clean bill of health:

 

Here is the OFT Press statement of 18 October 2011. We have put the microgeneration and solar issues is bold.

The UK’s Office of Fair Trading [OFT] today published the findings of its off-grid market study. It showed that on the whole competition works well, with consumers offered a good choice of suppliers, and that the off-grid sector does not need price regulation.

However the OFT does have concerns that some heating oil and possibly some other off-grid fuel suppliers may not be treating their customers fairly and is currently examining practices further.

Four million households rely on off-grid energy such as heating oil, liquid petroleum gas (LPG) and, more recently, microgeneration which encompasses renewable energy sources like solar panels.

When looking at heating oil, the OFT found the primary driver of price increases to be the crude oil price, which accounts for over 90 per cent of the variation in the retail price of heating oil.

The OFT also specifically looked at why some heating oil customers experienced high prices during last winter. It found that a sudden increase in demand (up 40 per cent on the previous year), at the same time as deliveries were hampered by the severe weather, led to a short lived ‘price spike’. However, with 97 per cent of off-grid households living in an area served by at least four suppliers, the OFT found that competition has constrained prices over the year as a whole and that profit margins have not been excessive.

The specific OFT concerns about consumer protection in the off-grid energy sector include:

  • The OFT received complaints that some suppliers were charging a different price on delivery from that quoted when the order was taken. The OFT is currently examining this and related practices.
  • During the study it received complaints that people may be locked into expensive LPG contracts following an initial introductory rate, and it is working with the industry to resolve this matter.
  • There were also some concerns surrounding the potential for mis-selling of solar panels. The OFT will work with the industry code operator to monitor complaints and ensure they are properly handled, and when necessary will take steps to address unfair commercial practices.

During the market study, the OFT took action against certain heating oil companies and price comparison websites to improve website transparency and prevent consumers being misled when searching online for heating oil supplies. Following this action, transparency has improved further for households buying heating oil, as some traders have also changed their practices so that people are better informed about which company owns heating oil brands.

Clive Maxwell, OFT Executive Director, said: ‘We looked at both competition and consumer issues as part of this comprehensive study, and whilst there seems to be a good choice of suppliers across most of the country, we have real concerns about whether consumer protection law is being complied with in all cases.

‘It is important that the off-grid energy sector works well and that people who rely on it are protected, which is why we have already taken action to increase transparency on websites and are currently undertaking a wider examination of pricing practices.’

NOTES

  1. A full copy of the final report can be found on the Off-grid energy market study page.
  2. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows the OFT to obtain information and conduct research. Effectively, they allow a market-wide consideration of both competition and consumer issues. They take an overview of regulatory and other economic drivers in the market and consumer and business behaviour. Possible outcomes of market studies include: enforcement action by the OFT, a market investigation reference to the Competition Commission (CC), recommendations for changes in laws and regulations, recommendations to regulators, self-regulatory bodies and others to consider changes to their rules, campaigns to promote consumer education and awareness, or a clean bill of health.
  3. The OFT has provisionally concluded that it is not appropriate to make a market investigation reference on heating oil to the Competition Commission at this time, and invites views on the proposed decision. Interested parties are invited to submit responses to this consultation by 5pm on Friday 18 November 2011 to offgrid@oft.gsi.gov.uk or in writing to the Off-Grid Energy Market Study Team, Services and Infrastructure Group, Office of Fair Trading, London, EC4Y 8JX.
  4. On 9 September 2011, the OFT announced that it secured undertakings under the Consumer Protection from Unfair Trading Regulations (CPRs) from WCF Fuels Limited and Boiler Juice Limited which prevent them from engaging in business practices that could be misleading. View the press release, ‘The OFT takes action against heating oil companies and price comparison websites’.
  5. The OFT welcomes the information and advice provided by ACRE, Citizens’ Advice, Consumer Focus and the industry as part of the ‘Buy Fuel Early’ campaign to support people using off-grid fuels.
  6. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers can seek advice from Consumer Direct on 0344 567 9032 or at www.direct.gov.uk/consumer

Here is the full text of the microgeneration section.

6    MICROGENERATION Summary
6.1    Our key findings are as follows:




The installation base for microgeneration technologies is growing rapidly and is currently estimated to be around 82,000 units per year. The most popular microgeneration technologies are solar photovoltaic (PV) and solar thermal. Government financial incentives such as the Feed-in-tariffs (FIT) have been crucial in driving domestic uptake.
The domestic market for microgeneration technologies is fragmented with thousands of certified installers distributed across the UK. There are also a number of manufacturers providing a wide range of certified products.
Given the complexity of the technologies, and consumers’ reliance on advice from salespeople, consumers are vulnerable to mis-selling (for example being sold a technology inappropriate for their needs) and misleading claims (for example overstatement of likely benefits). Complaints data from various sources confirm that such problems are just starting to arise in this market.
We are monitoring these trends closely and expect that most of these complaints will be addressed by suppliers and are confident that the arrangements in place through the REAL Assurance Scheme Consumer Code will support this. The OFT will undertake any additional work, including enforcement action, as may be necessary.
OFT1380 | 168
Introduction
6.2    Microgeneration is the onsite generation of heat or electricity by individual households for small scale domestic use.287 It comprises a range of different technologies, including heat pumps, solar thermal, solar photovoltaic (PV) panels, micro wind, micro hydro, and micro combined heat and power (CHP).
6.3    With its lower running costs and green credentials, microgeneration is potentially an attractive longer term alternative for consumers off the gas grid (including those currently using heating oil and LPG) who are facing rising and volatile energy costs. Indeed, off-grid consumers are seen as being ideally placed candidates for early adoption of microgeneration. This is evidenced by uptake to date being highest amongst this group.288
6.4    Although new, the value of the domestic market is already substantial. Based on current annual uptake of about 82,000 units, we estimate it to have a value of approximately £697 million in 2011.289 With rising oil prices, Government policies including financial incentives that reduce upfront costs, and an increasingly environmentally aware population, uptake is expected to grow substantially.
6.5    However, as with many nascent markets, there are emerging consumer issues in the microgeneration market that, if not addressed early, risk undermining consumer confidence and growth. These issues are mainly
287 According to sub-section 82 (8) of Energy Act 2004, the capacity in relation to the generation of electricity is 50 Kilowatts and in relation to the production of heat 45 kilowatts thermal. This is largely consistent with the definition in European Directive 2004/8/EC.
288 ‘The Microgeneration Customer Journey – A report into the domestic uptake of microgeneration in the United Kingdom’ was prepared by the EST for DECC (March 2011).
289 Derived from volume and costs data from Ofgem Feed-in-Tariffs database, the Renewable Heat and Energy Uptake Journey research proposal, and the Renewables Consumer Journey Research (2011) by Purple Market Research on behalf of the EST.
OFT1380 | 169
centred round allegations of poor quality service, mis-selling of technologies, and misleading information as to expected returns or payback times.
6.6    In this section, we assess the scope and viability of microgeneration as a current and future alternative source of energy for off-grid households. Of course many of the issues for consumers looking to install microgeneration are common to both on-grid and off-grid communities.
6.7    In our assessment, we consider:
•    The main types of microgeneration technologies available (both heat generating and electricity generating technologies).
•    Microgeneration as an option for off-grid households, noting also the role of insulation in the economics of domestic heating.
•    How to ensure that the nascent market for microgeneration gets off to a healthy start, so households can invest in microgeneration with confidence.
6.8    Overall we believe that microgeneration has the potential to be a viable and attractive alternative source of energy for off-grid households over the longer term. However, there remain significant barriers to take-up. Government policy can and does address many of these. Successful growth will also depend on the market being competitive and working well for consumers as it develops.
Microgeneration Technologies
6.9
For the purpose of this study, we have focused on the most common microgeneration technologies used by domestic consumers in the UK to meet their heating and electricity needs. These are:
•    Heat generating technologies: – Heat pumps (ground source heat pumps and air source heat
OFT1380 | 170
pumps). – Solar thermal (hot water, underfloor heating).
•    Electricity generating technologies: – Solar (Photovoltaic panels).
– Micro wind turbines.
6.10    We have not considered micro hydro and micro combined heat and power (CHP) technologies in any depth as the number of installations to date is very small.290
6.11    The benefits of microgeneration technologies are their lower running costs and lower cost to the environment. The extent to which these benefits are realised will depend to a large part on the characteristics of the property in which they are installed – in particular the technologies are likely to perform well only in well-insulated homes.
6.12    Table 6.1 provides a short description of the main technologies, suitability factors, and their low carbon credentials in terms of expected reduction in CO2 emissions.
Table 6.1 – Domestic microgeneration technologies
290 According to volumes data from Ofgem E-Serve’s Feed-In Tariff Update, Issue4/June 2011, current weighted average uptake stands at 17 micro hydro and 8 micro CHP units per month.
291 Data on carbon savings were obtained from the EST website.
Technology
Description291
Heat Pumps:
Ground Source Heat Pumps (GSHPs)
Air Source Heat Pumps (ASHPs)
ASHPs and GSHPs operate in a manner similar to household fridges, but in reverse. They take heat from the ground or air and compress it. While both pump types require electricity to run, when running properly they produce up to three units (kJ) of heat output for each unit (kWh) of electricity used (to power the pump). Heat pumps provide hot water and space heating and work best in well insulated buildings. ASHPs are most suitable for small properties while GSHPs are more
OFT1380 | 171
suitable for properties where there is a large amount of land available to install the heat pipes. Per annum, for a three- bedroom semi-detached house, carbon savings for a typical performing ASHP are approximately -105kg against gas and 4,600kg against electricity. For GSHP savings are in the region of 280kg against gas and 4,895kg against electricity.
Solar Thermal
Solar thermal systems collect heat from the sun which is then used to provide hot water (but generally not space heating) for household use. These systems are the most popular form of microgeneration in the UK at present and suit households with a higher demand for hot water, especially in the summer. Carbon savings are approximately 250kg switching from gas and up to 570kg from electricity.
Solar Photovoltaic (PV) Panels
Solar PV generates electricity when exposed to daylight by converting solar radiation. It can produce electricity even on cloudy days. Solar PV is most suitable for houses with a south facing roof although in some cases they can be mounted on a pole. A typical 2.7kWp domestic system can generate CO2 savings of approximately 1,200kg per annum (against using mains electricity).
Micro Wind Turbines
Domestic micro wind turbines range from 1kW to 6kW. The turbine works by converting the wind energy captured by the rotor into electrical energy by means of a generator. This generated power can be stored in batteries or synchronized to the national grid. If a wind turbine is placed in a suitable site it can provide a reliable and economical means of generating clean energy. For a 6kW system, CO2 savings are approximately 5,500kg per annum (against using mains electricity).
Source: Information obtained from various sources including the Energy Savings Trust (EST) website,292 the Micropower Council,293 and NHBC Foundation Report.294
292 www.energysavingtrust.org.uk 293 www.micropower.co.uk
294 NHBC Foundation report (2008), A review of microgeneration and renewable energy technologies.
OFT1380 | 172
6.13    As the table suggests, these microgeneration technologies are typically used to meet either the heating or electricity needs of a household, not both. Electricity generating technologies can of course be used to provide heat through electric heaters but this is a relatively inefficient way of heating space.295
Awareness and uptake of microgeneration
6.14    In this section we look at the extent to which these technologies represent a real alternative to traditional fuels for off-grid households and communities. Specifically we look at consumer awareness of microgeneration, uptake to date, and barriers to uptake.
Awareness
6.15    Available evidence shows that public awareness of most microgeneration technologies and what they offer to the individual household remains limited. A 2009 attitude tracker survey by Defra296 found that a large proportion of the general public are unaware of some of the main types of microgeneration technologies, with heat technologies (excepting solar thermal) having overall the lowest levels of awareness. This finding of a relatively lower level of awareness of heat generating technologies compared to electricity generating
295 In addition, using electricity as a source of heating (as well as for other domestic energy uses) will reduce the potential income from selling unused electricity back to the grid. Moreover, energy bill savings are likely to be substantially reduced as the amount of electricity generated may not be sufficient to meet all of the household’s energy needs leaving the household possibly needing to buy electricity from the provider.
296 Defra (2009) Public Attitudes and Behaviours Towards the Environment Tracker Survey. A research report completed for Defra by TNS. Based on a sample of 1,335 respondents, the survey found that levels of awareness for different technologies range between 29 per cent and 54 per cent.
OFT1380 | 173
technologies is supported by numerous other studies including a more recent survey conducted on behalf of the EST.297
6.16    An earlier study by EST298 revealed that on-grid consumers knew substantially less about microgeneration technologies than off-grid consumers, as illustrated in Table 6.2.
Table 6.2 – Awareness of microgeneration technologies
Source: Purple Market Research/EST
Uptake
6.17    Low levels of awareness have been reflected in relatively low uptake across technologies to date. Table 6.3 shows that as of 2008 estimates of the number of installations of microgeneration technologies stood at less than 200,000, most of which was solar
297 Renewables Consumer Journey Research (2011) undertaken by Purple Market Research for the EST. Based on a sample of 1,223, the survey revealed that, with the exception of solar thermal, over 50 per cent of respondents had little or no knowledge of the main heat generating technologies that can be installed in the home.
298 ‘The Microgeneration Customer Journey – A report into the domestic uptake of microgeneration in the United Kingdom’ was prepared by the EST for DECC (March 2011). This report draws on evidence primarily from previous EST studies and surveys. Based on a sample of 1,058 on-grid and 164 off-grid respondents, it found that compared to on-grid consumers, a far lower proportion of off-grid consumers said they knew little or nothing about microgeneration technologies.
I know little or nothing about this technology
Technology
On-grid
Off-grid
Overall
GSHP
52%
44%
51%
ASHP
75%
58%
72%
Solar Thermal
15%
10%
15%
Solar PV
21%
16%
20%
Micro wind
32%
25%
31%
OFT1380 | 174
thermal. This means that less than one per cent of UK households had installed a renewable energy technology at that time. We have no up to date figures for total installations but note that take-up of electricity generating technologies has increased markedly since the introduction of feed-in tariffs (discussed in more detail later in this chapter).299
Table 6.3 – Estimated installation of microgeneration technologies (up to 2008)
Source: Element Energy 2008302
299 Although data on the rate of installations are available for 2010 and 2011, the most recent year for which data on the estimated number of installations are available is 2008.
300 Using data from Consumer Focus Report, Welsh Government; OFT analysis of NI Utility Regulator data and 2009 NI House Condition Survey data, we estimate the number of households in the UK to be 25,843,000 of which England accounts for 21,407,000, Scotland 2,330,000, Wales 1,365,000, and NI 740,000. Refer to Annexe A for more details.
301 There have not been many ASHP installations under the major UK microgeneration programmes for England & Wales. However, there have been ASHP installations under various pilots but data for these are not readily available.
England
Scotland
Wales
NI
UK
Total
72,600- 76,100
12,590- 13,100
6,130- 6,410
16,700- 17,300
108,000 – 113,000
Percentage of households (approx)300
0.36%
0.56%
0.50%
2.34%
0.44%
Number accounted for by:
GSHP
1,620
1,057
155
583
3,415
ASHP301
n/a
96
n/a
73
169
Solar thermal
66,800- 69,600
10,700- 11,100
5,590- 5,830
14,400- 15,000
97,490- 101,530
Solar PV
2,511
95
155
232
2993
Micro-wind
1,297
410
142
473
2322
OFT1380 | 175
6.18    NI has the highest rate of installations. Indeed the pattern across nations reflects the proportion of households who are off-grid – 80 per cent of households in NI are off-grid with much lower proportions in the other three nations. This is not surprising – the pattern of off-grid households being more aware of microgeneration is reflected in the pattern of uptake. Research by the EST has confirmed that uptake amongst off-grid consumers is higher than average.303
6.19    However, the Purple Market Research survey304 found that adopters of microgeneration technologies tend to be middle class home owners living in larger rural properties that are not connected to the gas grid. A substantial proportion of the off-grid population – those living in flats, social housing, or rented accommodation – do not fall into this category.
6.20    The higher uptake amongst (at least a subset of) off-grid households almost certainly reflects the fact that the running costs of microgeneration technologies are considerably lower than those of other off-grid energy sources. For consumers on mains gas, the difference is smaller.
6.21    This suggests that the off-grid population represents a promising class of early adopters of microgeneration technology. In the next section we discuss Government targets, policies and financial incentives aimed
302 Obtained from the 2008 report ‘Numbers of microgeneration units installed in England, Wales, Scotland, and NI’ prepared by Element Energy on behalf of The Department for Business, Enterprise and Regulatory Reform (BERR).
303 According to the 2008 report ‘YIMBY Generation – yes in my back yard: UK householders pioneering microgeneration heat’ by the EST, 29 per cent of those who switched to microgeneration were heating oil users, eight per cent electricity and 19 per cent were users of other fuels such as LPG and solid fuel. ‘The Microgeneration Customer Journey – A report into the domestic uptake of microgeneration in the United Kingdom’ which was prepared by the EST for DECC (March 2011) also reported that adopters of microgeneration are typically not connected to the gas grid.
304 Renewables Consumer Journey Research (2011) by Purple Market Research for the EST.
OFT1380 | 176
at stimulating future uptake. Later we discuss the barriers to uptake and other factors that limit the attractiveness of microgeneration as an alternative source of energy.
Government targets, policies and financial incentives
6.22    In March 2007, the European Council established a target of generating 20 per cent of the EU’s energy from renewable sources by 2020 and in 2008 a new Renewable Energy Directive (Directive 2009/29/EC) resulted in agreement of country shares of this target. The UK target was set at 15 per cent of gross final energy consumption.
6.23    To meet this target for final energy consumption, the UK has set specific targets for heat and electricity generation. For heat the target was set at 12 per cent with a potential for 22 per cent of that to be met by the domestic sector. For electricity the target was set at 30 per cent305 with two per cent of this coming from small scale sources. However, the NI Executive has committed to a non statutory target of 40 per cent of electricity generated from renewables by 2020.306
Policy
6.24    While these targets set the broad foundation that supports the microgeneration market, its growth is driven by four key Government strategies that augment each other – The UK Low Carbon Industrial Strategy, The UK Low Carbon Transition plan, UK Renewable Energy Strategy, and the Microgeneration Strategy. Although the first three strategies are not focused on microgeneration, they seek to create an environment within which microgeneration can become a mainstream source of fuel for domestic consumers.
305 See www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/renewable_ener.aspx.
306 See www.detini.gov.uk/strategic_energy_framework__sef_2010_-3.pdf
OFT1380 | 177
6.25    The 2009 Low Carbon Industrial Strategy sets out the case for moving to a low carbon economy and provides a strategic view of Britain’s low carbon potential. The strategy aims to provide an environment that encourages businesses and workers to be in a position to take advantage of the new demand created by climate change policies. The accompanying 2009 Low Carbon Transition plan describes, sector by sector, how carbon savings can be achieved in order to meet the UK’s 2020 carbon emissions target. On the domestic side, the Government requires that all new homes be built to higher environmental standards with a ‘zero carbon’ requirement from 2016 (that is, net carbon emissions over a year must be zero).
6.26    The 2009 Renewable Energy Strategy puts forward a roadmap for achieving the UK’s target of 15 per cent energy from renewables by 2020. It focuses on reducing UK dependence on fossil fuels and moving to using more renewable sources of energy.
6.27    At a more granular level than the other strategies, DECC’s 2011 Microgeneration Strategy307 focuses on non-financial barriers and is centred round small-scale renewable and low carbon technologies. It sets out plans to complement the financial incentives that have been or are being put in place to bolster the microgeneration market.
Financial incentives
6.28    In terms of financial incentives, the UK Government and Devolved Administrations have put in place several schemes to encourage domestic adoption of microgeneration technologies.308 Some of these schemes are UK wide (covering all the devolved territories) whilst others are only available in one or some of the devolved territories. By helping to reduce upfront costs, these schemes have been and
307 www.decc.gov.uk/en/content/cms/meeting_energy/microgen/strategy/strategy.aspx
308 There are other Government supported energy efficiency financial schemes but these do not cover microgeneration. For that reason they are not included here.
OFT1380 | 178
continue to be instrumental in stimulating an increase in the adoption of microgeneration technologies. Table 6.4 lists the main current schemes and indicates their geographic coverage. Further information on these schemes can be found in Annexe L.
Table 6.4: Main current Government and Devolved Administration financial incentives that support microgeneration installations
Source: DECC, Department of Enterprise Trade and Investment (DETINI), Element Energy,309 NI Executive, Ofgem, Scottish Government, and the Welsh Government
6.29    Currently, the two main schemes directly supporting the uptake of microgeneration in GB are the FIT (electricity generating technologies) and the RHI (heat generating technologies). The FIT scheme has been in operation in GB since April 2010. In February 2011, the Secretary of State for Energy and Climate Change announced the start of the first review of the FIT scheme. In doing so, he explained that a principal objective of the review was to determine how the efficiency of FITs will be improved to deliver the expected savings in 2014/15 that were committed to in the 2010 Spending Review. As such, one aspect
309 Element Energy Limited for BERR: Numbers of Microgeneration Units installed In England, Wales, Scotland, and NI, 2008
Schemes
England
Wales
Scotland
NI
Renewable Heat Incentive (RHI)



Feed–in Tariff (FIT)



Green Deal



NI Renewable Obligation (NIRO)

Renewable Incentive NI (RHI NI)

Carbon Emissions Reduction Target (CERT)



Interest Free Loan Scheme (IFLS)

Nyth/Nest

Arbed (Wales’ Strategic Energy Performance Investment Programme)

Community Energy Savings Programme (CESP)



Energy Assistance Package (EAP)

OFT1380 | 179
Current
under consideration is tariff levels. DECC have said that they will consult on the comprehensive review later this year, with tariffs remaining unchanged until April 2012 (unless the review indicates the need for greater urgency).310 We note, however, that those who have already installed an eligible low-carbon electricity generating technology and are receiving FITs will not be affected by the review and will continue to receive the FIT at the current levels.
6.30    The RHI for domestic GB consumers is not due to come into full effect until October 2012.311 However, as an interim measure, a Premium Payment scheme of £15m, available from 1 August 2011, was set up to fund up to 25,000 household installations. Under this interim measure, any household in England, Scotland, and Wales can apply to secure funding for solar thermal installations. However, funding for the installation of heat pumps is only available to those off the gas grid.
6.31    The main financial incentives available in NI are similar to those in GB. The NI Renewable Obligation (NIRO), which was introduced in 2005, provides similar support to the FIT for electricity generating technologies. With regard to heat generating technologies, DETINI launched a public consultation in July 2011 on the introduction of a RHI in NI. Like its counterpart in GB, the NI RHI is expected to be implemented in October 2012. A Renewable Heat Premium Payment scheme of £2m will also be available in advance to domestic households until March 2012 (with further funding available as required until October 2012).
310
www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/feedin_tariff/fits_review/fits_ review.aspx
311 The RHI for non-domestic installations in the industrial, businesses, and public sector has been in operation since July 2011.
OFT1380 | 180
Impact on installations
6.32    Under the FIT scheme, the rate of domestic installations of electricity generating technologies increased from a few hundred in April 2010 to over 3,800 a month by June 2011.312
6.33    Given the success of the FIT scheme in its first year of operation and the past relatively greater popularity of the heat generating technologies (see Table 6.5 below), there is the possibility that the RHI may have an equal or greater multiplier effect on the number of installations of heat generating technologies.
6.34    However, while the RHI is expected to have a significant positive impact on the number of installations, the delay in defining the qualifying criteria and its subsequent implementation could limit growth. According to several industry stakeholders who spoke to or submitted their views to the OFT Off-Grid Market Study team, the uncertainty round the RHI has hampered the demand and supply of heat generating technologies, with focus being switched to electricity generating technologies.
6.35    The increase in the popularity of electricity generating technologies is anecdotally evidenced by the data shown in Table 6.5. Under past schemes (and as evidenced by 2010 data) heat generating technologies accounted for the vast majority of installations. However, since the introduction of the FIT and with greater certainty round this scheme, domestic installation of electricity generating technologies has far exceeded that of heat generating technologies.
312 Obtained from Ofgem E-Serve’s Feed-In Tariff Update, Issue5/September 2011. Total uptake increased to, on average, 4932 a month of which 77 per cent can be attributed to domestic installations. Around 98 per cent of installations were of solar PV.
OFT1380 | 181
Table 6.5 – Estimated number of installations per month
Source: Ofgem314 and EST315
6.36    With recent Government policies, financial incentives, rising oil prices and a growing number of consumers who are concerned about the environment, the outlook for installations is positive. Indeed, according to a 2008 National House Building Council (NHBC) Foundation report,316 lower energy costs are the main driving force encouraging homeowners in the UK to explore the idea of adopting microgeneration. Similarly, results from the 2011 Purple Market Research317 showed that the availability of funding and rising oil prices provide the greatest impetus for installation. At present, replacing a mains gas boiler is
313It is assumed that absent the RHI, the rate of installation for heat generating technologies has remained the same.
314 Ofgem E-Serve – Feed-in Tariff Update – Issue 5/September 2011.
315 Purple Market Research Renewable Heat and Energy Uptake Journey research proposal (2011) commissioned by the EST.
316 NHBC Foundation report (2008), Zero Carbon: what does it mean to homeowners and housebuilders?
317 Renewables Consumer Journey Research (2011) undertaken by Purple Market Research for the Energy Savings Trust.
Technology
Estimated number of installations per month as at 2010313
Estimated number of installations per month as at June 2011
Heat Generating Technologies
GSHP ASHP
1,083
1,083
Solar Thermal
2,083
2,083
Electricity Generating Technologies
Solar PV
833
3,730
Micro-wind
42
48
OFT1380 | 182
typically cheaper than installing most microgeneration technologies.318 Therefore, reducing the relative cost of renewable energy is likely to be crucial in prompting households to switch to microgeneration technologies.
6.37    The implication is that to achieve a significant increase in installations, schemes such as the FIT, RHI, and Green Deal must be successfully implemented. In particular, it is important to ensure that there is certainty around qualifying criteria and tariff and incentive levels. Raising awareness of these schemes and the qualifying technologies will also be important as will raising awareness of the continued likely increase in the cost of fossil fuels. Nevertheless, since the RHI and Green Deal are yet to come into force, for now microgeneration heating solutions for off-grid consumers are limited.
6.38    Despite the current absence of funding for heat generating technologies, by achieving economies of scale, community schemes may offer some households an opportunity to reduce the cost of installation. A 2011 study by EST319 found that with a community of 50 dwellings, community-scale projects could reduce capital costs by seven per cent for solar PV and 34 per cent for solar thermal compared to individual purchases. There have been a number of such schemes across the UK. For example, in 2010, under the Government sponsored Low Carbon Community Challenge initiative,320 12 local communities across the UK were awarded up to £500,000 to undertake green measures such as the installation of microgeneration technologies. Under this initiative, approximately 20 homes in Oxfordshire will receive funding for the installation of solar panels and two thousand
318 Installation of a microgeneration technology costs between £2,000 and £23,000 (see Table 6.6) whereas a straightforward replacement of a gas boiler typically costs £2,300 (see www.energysavingtrust.org.uk/In-your-home/Heating-and-hot-water/Replacing-your-boiler)
319 ‘The Microgeneration Customer Journey: A report into the domestic uptake of microgeneration in the United Kingdom’ prepared by EST for DECC.
320 www.energyefficiencynews.com/microgeneration/i/2786
OFT1380 | 183
homes in Wales will receive power through the installation of two wind turbines.
Barriers to uptake
6.39    Even with the existence of Government financial incentives, there are still barriers that may constrain supply and limit the demand base hence hindering growth in the microgeneration market. The most significant of these are:
Cost and payback period
6.40    Mirroring the main drivers of installations, installation costs and the resulting lengthy payback periods are cited by respondents to the Purple Market Research survey321 as the main deterrents to uptake. Although Government finance schemes have incentivised many households to install a microgeneration technology, for many the upfront costs – in the range of £2,000 to £23,000 as shown in Table 6.6 – remain a barrier. According to the Purple Market Research survey, 57 per cent of those who are not yet actively considering adopting microgeneration technologies would require a 50 per cent or greater reduction in upfront costs in order seriously to consider installation. The survey also found that 63 per cent of all respondents are only prepared to wait five years or less to recoup their investment in a microgeneration technology – a payback period which is not feasible for most microgeneration technologies. The SPA qualitative consumer research found that the age of some participants was also a concern as they did not expect a return in their lifetime.
6.41    Table 6.6 provides a summary of the estimated annual running costs, installation costs, and payback period for the main microgeneration technologies. This compares to annual costs of £1,096, £1,611, and £2,272 for heating an average-size three-bedroom house with gas,
321 Renewables Consumer Journey Research (2011) by Purple Market Research for the EST.
OFT1380 | 184
heating oil or LPG respectively.322 The relatively higher number of installations for solar thermal is consistent with it being the cheapest technology.
Table 6.6: Running costs, installation costs, and estimated payback periods (as at August 2011)
Source: NHBC Foundation Report325/Element Energy 2008326/Purple Market Research/EST327
322 Data from Sutherland Tables, July 2011. 323 Information on running costs was obtained through correspondence with EST.
323 NHBC Foundation report (2008), A review of microgeneration and renewable energy technologies.
323 Element Energy Limited for BERR: The growth potential for Microgeneration in England, Wales and Scotland (Final Appendix), 2008
324 Estimations of payback periods are based on current financial incentives and current levels of usage for the fuels being replaced.
Technology
Annual running costs per annum323
Average Installation Costs (estimations)
Estimated Payback period324
2011
2020
GSHP
£655
£8,000 – £20,000
£7,434
8-15 years
ASHP
£745
£6,000- £10,000
£6,181
8-15 years
Solar thermal
No running costs
£3,000-£6,500
£3,264
8-20 years
Solar PV
No running costs
£11,000 – £14,000
£5,974
12-25+ years
Micro wind
No running costs
£2,000 – £23,000
£3,126
10-15 years
OFT1380 | 185
6.42    According to industry participants, in the long run, as the market develops and the costs of using fossil fuels rise, microgeneration technologies are expected to become relatively cheaper than other energy sources. This will result in shorter payback periods. The quality and performance of these technologies are also likely to improve. However, much will depend on consumers placing a higher value on low running costs than on upfront costs.
Installer capacity and skills
6.43    In some areas in the UK, there are a limited number of installers of microgeneration technologies. This is mainly due to low consumer demand and the process for MCS certification, particularly amongst smaller companies, being seen as onerous and expensive. However, even in areas like London, with a large number of properties and a considerable ‘able to pay market’, there are relatively few installers. There are also concerns over the lack of skilled labour capable of meeting the MCS standards, which prevents companies from expanding their businesses. For example, in a recent EST report, concerns over skill shortages and lack of places on training courses were highlighted.328 Further details on the number of installers in the UK are provided in the next section.
327 Renewables Consumer Journey Research (2011) by Purple Market Research for the EST.
328 EST 2010 report, Microgeneration in the capital: An investigation into the drivers and barriers facing the London Industry.
OFT1380 | 186
Uncertainty around future market scenarios
6.44    With the RHI for domestic consumers still in its development stage, manufacturers are reluctant to commit to product development of microgeneration heat generating technologies and installers are less willing to get MCS certification for these technologies.
6.45    Although for existing users and businesses there is clarity around FIT levels, for consumers looking to install or businesses looking to enter the market, the current review of the FIT presents a period of uncertainty as to future tariff levels.329 It is important that consumers clearly understand, in a timely manner, the implications of any changes that may be introduced.
Planning permission
6.46    The Permitted Development Rights introduced in England in 2008 and Scotland in 2009 and the relaxation of permitted developments in Wales in 2009 and NI in 2011 have made it easier to secure permission for domestic installations.330 However, obtaining planning permission remains a barrier.331 Both homeowners and installers are reluctant to seek planning permission, as there is still lack of clarity
329 With regard to the non-domestic sector, a fast track consideration was given to large-scale (over 50 kilowatts) and standalone solar PV projects as well as farm-scale anaerobic digestion projects (up to and including 500 kilowatts). Following consultation during the first half of 2011, proposed changes to tariff levels came into force on 1 August 2011.
330 Ground source heat pumps are permitted and with some exceptions so are solar thermal and solar PV. Air source heat pumps and micro wind are not currently covered.
331 See for example, www.decc.gov.uk/en/content/cms/meeting_energy/microgen/solar_pv/solar_pv.aspx and www.energysavingtrust.org.uk/Generate-your-own-energy/Wind-turbines/Choosing-a-site-and- getting-planning-permission
OFT1380 | 187
over what works require building control notification.332 This is most likely to affect ASHPs and micro wind, both of which need planning permission and also solar thermal and solar panels, for which there are still exceptions to the permitted development rights.333
The market for microgeneration
6.47    Industry and consumer bodies play an important role in increasing awareness of the benefits and functionality of microgeneration. They are also instrumental in moving it from being a niche market to being a mainstream market. In recognising the importance of industry and consumer bodies, a key aim of the Government’s Microgeneration Strategy is to strengthen the ability of these bodies to tackle non- financial barriers in the market.
6.48    The main industry and consumer bodies providing information and guidance for consumers and businesses wishing to participate in the microgeneration market are the Microgeneration Certification Scheme (MCS), the Renewable Energy Association (REA), the Renewable Energy Assurance Limited (REAL), and the EST.
332 EST 2010 report, Microgeneration in the capital: An investigation into the drivers and barriers facing the London Industry.
333 See www.planningportal.gov.uk/planning/
OFT1380 | 188
Table 6.7: Industry and consumer bodies
Source: REAL website, MCS website, REA website, and EST website
Competition
6.49    At this stage of its development, the market is fragmented with a number of manufacturers and small independent installers. While it is difficult to fully evaluate competitive conditions due to the early stage of market development, to date, we are not aware of any issues that
334 Gemserv Limited, a company commissioned by DECC, is responsible for the administration of the MCS scheme.
Description
Industry bodies
MCS
Launched in April 2010, the MCS is an independent, industry led body supported by the DECC.334 It is responsible for the assessment and certification of heat and electricity generating microgeneration products and installers in the UK. To be eligible for the FIT and RHI incentives, both the product and installer must be MCS certified. The body provides assurances that rigorous standards on quality, safety, and performance of microgeneration technologies are met across the industry. To be MCS certified, members must also abide by the REAL Assurance Scheme Consumer Code.
REA
REA was established in 2001. It represents renewable energy (power, heat, and fuels) producers in the UK. During 2010, it had a membership of 650 companies, covering generators, project developers, fuel and power suppliers, equipment producers, and service providers. The REA sponsors the REAL Assurance Scheme.
Consumer Bodies
REAL
The REAL Assurance Scheme was set up in 2006 by the REA to provide quality assurance for UK consumers wishing to buy or lease small-scale energy generation systems for their homes, a community building or a small business. It has a membership of 4,036 firms.
EST
The EST is a non-profit organisation, which was established in 1993. It is funded by the UK Government, Devolved Administrations, and the private sector to help promote sustainable use of energy by providing free and impartial advice on saving or generating own energy.
OFT1380 | 189
could be expected to restrict competition. Membership of trade bodies can be instrumental in a company being able to access consumers (such as those wishing to apply for FIT and RHI funding). Therefore, industry bodies play an important role in facilitating competition and have obligations to ensure that firms are treated without bias.
6.50    To be eligible for FIT or RHI funding, the consumer must ensure that the technology and installer are both MCS certified. Currently, there are 3,462 MCS certified microgeneration products being sold by a number of manufacturers in the UK and across the UK, there are 3,111 MCS certified installers.335 Information provided by REA suggests that although some manufacturers will supply directly to domestic consumers they typically sell to an agent or wholesaler who in turn supply installers.
6.51    Based on data obtained from the MCS and the REAL Assurance Scheme, Table 6.8 provides a summary of the number of MCS and REAL members across the UK who supply and install the five main heat and electricity generating technologies.
335 Further information can be obtained from the MCS website –
www.microgenerationcertification.org
OFT1380 | 190
Table 6.8 – Microgeneration installers (August 2011)
Source: MCS website and REAL website
6.52    Solar PV and solar thermal account for the highest number of installers. Although there are a number of installers operating in the UK, the geographic spread reveals that some areas are differentially served by installers. Widest coverage by MCS installers is in South East England with 2,336 and South West England with 2,317 whilst only 1,617 and 1,786 MCS installers cover the whole of NI and Scotland respectively. This means that for some consumers, installer choice and availability might be limited.
6.53    With various Government initiatives currently driving market growth, the number of products and installers and the geographic spread are expected to increase to cater for the growing demand for renewable energy. In turn, a well supplied market is likely to encourage further demand.
Consumer issues
6.54    Satisfaction amongst microgeneration users is high. According to the Purple Market Research survey,336 90 per cent of respondents who installed microgeneration technologies were satisfied with performance
336 Renewables Consumer Journey Research (2011) undertaken by Purple Market Research for the EST.
Technology
Membership of the REAL Assurance Scheme
Number of MCS approved installers
GSHP
960
556
ASHP
1,217
651
Solar Thermal
1,636
939
Solar PV
3,321
2,443
Micro wind
466
143
OFT1380 | 191
levels337 and nearly a quarter said that performance exceeded their expectations. In the SPA consumer research, users also expressed satisfaction with their choice of microgeneration technology. For instance, a user of heating oil stated that ‘we used to use about 2,000 litres of oil and now the last couple of years since we’ve had the heat
pump, it’s been 1,500’. Another participant noted that ‘I haven’t quantified it but I do know that before we had the solar power panels for the hot water, we had the boiler on 365 days a year and now we have the boiler on for probably only 6 to 8 months in a year’.
6.55    With reports of positive experience, improvements in the technologies and reduction in costs are likely to make microgeneration an attractive alternative for off-grid consumers in the future. However, at present, there are features of the market that make it susceptible to problems that if not addressed may undermine growth. A number of problems were identified from responses to our Off-Grid Market Study call for evidence, extensive desk research, and from Consumer Direct data which, for January to August 2011, contained an average of 179 complaints a month about microgeneration technologies. The main concerns regarding microgeneration can be summarised as follows:
Table 6.9: Main concerns of microgeneration consumers
337 With equal numbers saying they were very or quite satisfied.
Consumers who have already installed a microgeneration technology
Consumers thinking of or in the process of installing a microgeneration technology
Complex product – unable to use effectively
Complex product – poor consumer knowledge
Poor quality installations/products
Misleading claims/omissions
More joined up redress mechanism
Poor service and selling practices
More joined up redress mechanism
OFT1380 | 192
Complex products
6.56    Microgeneration technologies are complex to operate and are not easy to understand. This is compounded by the fact that microgeneration technologies are experience goods whose quality can only be verified after installation. In EST’s 2008 YIMBY report,338 65 per cent of a sample of 167 users of microgeneration were found to have had difficulties or uncertainties with operating the system’s controls to make the best use of the technology. The Purple Market Research339 survey also found that 22 per cent of respondents did not know what technology best suits their home.
6.57    The effective operation of microgeneration technologies also require properly insulated properties. Consumers without proper insulation may find that their chosen technology works poorly and does not yield the expected benefits. Therefore, insulation should be regarded as a prerequisite in moving to microgeneration, especially as a substantial proportion of homes in the UK are poorly insulated.340
6.58    Challenges faced in understanding how best to use the technology are exacerbated by the difficulties encountered in obtaining independent assessment and advice. According to the Purple Market Research survey, 10 per cent of respondents said that not being able to obtain impartial advice has made it difficult for them to install microgeneration. Indeed, 42 per cent of respondents said they would consider paying for impartial independent advice if they were thinking about installing.
338 EST (2008) YIMBY Generation – yes in my back yard: UK householders pioneering microgeneration heat.
339 Renewables Consumer Journey Research (2011) by Purple Market Research for the EST.
340 Data from Consumer Focus Report and NI House Conditions survey (2009) reveal that a substantial proportion of both off-grid and on-grid consumers live in poorly insulated properties.
OFT1380 | 193
6.59    Under the current system of separate certification for product and installer, installers are more likely to encourage installation of the technology that they are certified to install rather than provide an independent assessment of what is most suitable for the consumer.341 As such, there appears to be a risk that consumers may install certain technologies without being fully informed of the suitability or overall benefits. A 2010 investigation by Which? into the sale of domestic solar thermal systems found that 10 out of 14 companies exaggerated the potential savings and none of the 14 companies investigated identified all the important technical challenges before providing a quote. 342 In 2011 Which? conducted an investigation into the sale of solar PV that also found problems. Out of the 12 MCS certified firms investigated, using the Government’s required SAP assessment methodology, three quarters were found to overestimate the annual amount of energy that the PV system would produce and eight underestimated the payback period.343
6.60    Together, possible installer bias or lack of knowledge and the complexity of microgeneration technologies create an environment where customers may not be provided with the necessary or correct information before deciding which technology best suits their property and needs. This is supported by the Consumer Direct data which indicates that allegedly misleading claims or omissions are just starting to become a feature of the market.
341 See www.which.co.uk/documents/pdf/draft-microgeneration-strategy-which-response- 237753.pdf and Consumer Focus Scotland 2010 Report ‘Power at Home – Improving Consumer Access to the Benefits of Microgeneration’ www.consumerfocus.org.uk/scotland/files/2010/11/Power-at-home.pdf
342 www.which.co.uk/news/2011/06/solar-panel-firms-give-consumers-poor-advice-says-which– 256929
343 www.which.co.uk/about-which/press/press-releases/product-press-releases/which- magazine/2010/04/solar-sellers-slammed
OFT1380 | 194
Misleading claims
6.61    Our consumer research indicated that some microgeneration users thought they would see a return on their investment earlier than expected and the Which? investigation found that firms provided poor advice and made unrealistic claims about the benefits of the technology. Which? found that 10 out of the 14 companies exaggerated the potential savings that could be made from switching to solar thermal. Consumer Direct data also revealed that the number of complaints about mis-selling and misleading claims increased by 75 per cent for the year to August 2011.
6.62    The Advertising Standards Authority (ASA) has also recently taken action against some firms for making misleading claims. In 2008, the Advertising Standards Authority (ASA) upheld a complaint against Danfoss Heat Pumps Limited after finding that it could not substantiate claims that consumers could reduce their heating costs by up to 70 per cent.344 In a more recent case the ASA ruled that claims made by ACS Renewable Solutions that their air source heat pumps would reduce winter fuel bills by 40 per cent were misleading.345
6.63    Concerns about mis-selling and misleading claims can undermine consumer confidence in the market. For instance, in the Purple Market Research survey only nine per cent of respondents said they would trust installers to provide impartial information and advice.
Poor quality products/service and selling practices
6.64    A number of complaints to Consumer Direct about microgeneration technologies relate to poor quality goods and services. In 2010, poor
344 www.asa.org.uk/ASA-action/Adjudications/2011/8/Danfoss-Heat-Pumps-UK- Ltd/SHP_ADJ_157342.aspx
345 www.asa.org.uk/ASA-action/Adjudications/2011/8/ACS-Renewable-Solutions- Ltd/SHP_ADJ_141588.aspx
OFT1380 | 195
quality goods accounted for 27 per cent of complaints. Pressure selling and cold calling accounted for about nine per cent. For the period January 2011 to August 2011, although there has been a decline in these types of complaints, the figures remain significant at 14 per cent and seven per cent respectively.
6.65    Results in the EST’s 2008 YIMBY report346 also highlighted that 17 per cent of respondents who use microgeneration complained about the unreliability of the system (for example, component breakdown and leaks) and a further 12 per cent complained that the system provided less heat or hot water than expected. The latter is consistent with mis- selling or misleading claims and with poor product quality. In addition, concerns over quality of service are reflected in results from the Purple Market Research survey, which found that 53 per cent of respondents at preparation or installed phase had doubts about the skills and experience of installers.
6.66    As with mis-selling and misleading claims, poor quality service and selling practices can cause significant detriment, leading consumers to withdraw from the market.
Redress mechanism
6.67    At the moment, consumers have two main avenues for redress outside of court action – provisions under the MCS accreditation scheme and the REAL Assurance Scheme Consumer code allow for complaints resolution between consumers and members. Members who do not comply with the rules governing these schemes (including the findings from the complaints process) can have their membership revoked. Last year, following audit compliance checks, REAL excluded three companies from the scheme due to non-compliance. As MCS and REAL certification are crucial for consumer access to Government financial incentives such as FIT and RHI, for members, the threat of exclusion
346 EST (2008) YIMBY Generation – yes in my back yard: UK householders pioneering microgeneration heat.
OFT1380 | 196
can be a significant deterrent against non-compliance. The important deterrent role played by MCS and REAL is consistent with the high level of satisfaction reported by respondents in the SPA research.
6.68    Our view is that, while REAL and MCS play a crucial role in ensuring consumers obtain redress where appropriate, there are opportunities to further strengthen this regime. For both consumers already using or in the process of installing microgeneration technologies, seeking redress can be challenging. For instance, separate MCS accreditation of installers and technologies make redress and accountability difficult, with installers and manufacturers expecting the other to accept responsibility for faults. As a result, consumers may find it difficult to determine which party is liable if the technology does not perform as expected.
6.69    In addition, since complaints regarding installation can be made to either REAL or the relevant MCS accreditation body, consumers may be confused as to which avenue to pursue. MCS certification bodies handle complaints regarding the technical aspects of the installation while REAL deals with complaints about the standard of service or aspects of the contract. However, since there is separate accreditation for installers and products, the consumer must first ascertain the nature of the problem and whether it is best handled by REAL or MCS. Given the complexity of the technologies, this may not always be straightforward.
6.70    If the consumer is not happy with the outcome of the complaints process under the REAL scheme, they can seek independent arbitration. Arbitration can cost from £100 and the outcome is binding.347 In its response to DECC’s ‘Consultation on a Microgeneration Strategy’, Which? notes as a concern that arbitration is costly to the consumer, does not generally find fault, and the
347 See www.realassurance.org.uk/consumers/independent-arbitration
OFT1380 | 197
outcome can deny the consumer the right to go to the courts if they are not happy with the results.348
Actions and recommendations
6.71    Our research found that satisfaction amongst users of microgeneration is high. Against that background the OFT uses its complaints database as an ‘early warning system’ to monitor trends in the market. The latest Ofgem and EST figures record 6,900 installations a month349 generating 179 Consumer Direct complaints.350 We expect that most of these complaints will be addressed by installers and are confident that the arrangements in place through the REAL Assurance Scheme Consumer Code will support this. Alongside Trading Standards, the OFT will monitor the market and will undertake any additional work, including enforcement action, as may be necessary.
6.72    The OFT also recognises the need for the following:
•    Clarity around Government schemes. In particular, the FITs scheme is currently under review. While the outcome of the review is not yet known, it is important that Government, trade bodies and industry work together to ensure that any changes that may be made are understood in a timely manner by consumers.
348 See www.which.co.uk/documents/pdf/draft-microgeneration-strategy-which-response- 237753.pdf
349 Number of installations for electricity generating technologies is based on Ofgem data
www.ofgem.gov.uk/Sustainability/Environment/fits/Newsletter/Documents1/Feed- in%20Tariff%20(FIT)%20Update%20Newsletter%20Issue%205.pdf. The Ofgem data contains a lag on current market activity and so will not reflect any recent changes in the rate of take up. Monthly installation for heat generating technologies was based on estimates from the Purple Market Research Renewable Heat and Energy Uptake Journey research proposal (2011) commissioned by EST.
350 Thus the proportion of complaints to number of installations is about three per cent. This is substantial. For instance, in our Second Hand Car Market Study, the proportion of complaints to number of transactions was less than one per cent.
OFT1380 | 198
•    Availability of independent assessment. While consumers can access information and independent advice on technologies, it is difficult for them to obtain an independent assessment of the options for their property. As the market develops, this service may emerge. If not, the Government may wish to consider sponsoring such a service.
•    Opportunity to further strengthen redress mechanisms. Consumer satisfaction levels in the market are high and in this regard we would highlight the important role played by REAL and MCS in this industry and the fact that consumers have access to redress mechanisms via the MCS and REAL. There is an opportunity to further strengthen these mechanisms in the future by further integrating the approach to consumer redress.
6.73    Much of this work is already in hand. In its recent Microgeneration Strategy, the UK Government has begun the process of addressing some of these issues. In particular, there are recommendations around strengthening the role of the MCS and the REAL Assurance scheme in terms of providing independent assessment and more robust redress mechanisms. Some of these recommendations do not extend to the Devolved Administrations and for a comprehensive approach will need to do so.
OFT1380 | 199
7    CONCLUSION AND RECOMMENDATIONS
7.1    Off-grid consumers represent a diverse population using a wide range of different fuel types. Some face challenges that include fuel poverty, limited possibilities to improve the energy efficiency of their homes, and potential disruptions to supply because they are dependent on the road transport network for delivery of their fuel. The most pressing concern that consumers have repeatedly raised with us relates to the high and increasing level of prices. Affordability concerns are not likely to abate given expected upward pressures on energy prices in general, both on- grid and off-grid. Furthermore, these price trends may not be directly remediable given that they are to a large extent driven by the internationally traded prices of oil and LPG.
7.2    While we recognise that wider challenges exist for some off-grid consumers, the OFT’s remit is to consider competition and consumer protection issues for these consumers. Our study has examined competition in the supply of heating oil but has not found evidence of either market power or coordination problems, with a choice of supplier generally available to consumers, low barriers to entry, and no apparent evidence of collusion. These features indicate that, while firms are able to make profits at times of peak demand, competition will constrain the extent to which they do so over time. In some outlying areas, consumers may face a limited choice of suppliers. However, this is true of many services in such localities and is not readily susceptible to competition remedies.
7.3    Hence, while a number of parties have advocated price regulation in the heating oil market, the OFT does not see any justification for this on competition grounds. Moreover, even if we had identified market power concerns, any such regulation would be challenging to administer and may not be cost-effective given the large number of firms in the market.
7.4    However, further support for off-grid consumers should come from the enforcement of existing consumer protections by the OFT and Trading Standards. Such enforcement is particularly important in sectors, such as this, which include a number of vulnerable consumers. We note the
OFT1380 | 200
recent actions taken by the OFT against some heating oil firms and price comparison websites, and by Trading Standards in relation to heating oil. Our study has also identified potential consumer protection concerns in the domestic supply of bulk LPG and microgeneration. We are taking appropriate actions in these matters as summarised below.
7.5    Beyond this, the UK Government and Devolved Administrations can of course consider policy interventions targeted towards the vulnerable parts of the off-grid population. In this respect, we hope the evidence base from our study will be of use to all interested parties.
7.6    The OFT’s key actions and recommendations from this study are summarised as follows.
Summary of the outcomes and recommendations from our study
Heating oil
•    It is important that consumers can genuinely shop around and make informed decisions about which suppliers to use. The OFT has taken action against several heating oil companies and price comparison sites in order to prevent consumers being misled when searching online for heating oil supplies. This was announced in September 2011. The changes secured mean that domestic heating oil consumers will be better able to compare deals on offer. It should also be clear to any heating oil company running a price comparison site that the law requires transparency around ownership and links to heating oil suppliers.
•    The OFT also notes the court case successfully brought in August 2011 by Carmarthenshire County Council against GB Oils Limited (trading as O. J. Williams). In light of this case and of complaints received from consumers elsewhere regarding allegedly unclear pricing practices, in particular over last winter, the OFT is now examining this and related practices.
•    We also recommend that the industry strengthen its codes of practice in relation to consumer protection and redress. The OFT is working with the FPS and the NIOF to support their activities in this regard.
OFT1380 | 201
LPG
•    The OFT has considered the compliance of industry, to date, with the Orders made by the CC in respect of the supply of domestic bulk LPG. Some areas of possible compliance weakness exist. The OFT will engage with the industry to address and monitor these areas. A breach of the Orders, if found, could lead to enforcement action.
•    The OFT maintains FAQs on the implementation of the Orders and recommends that consumers – particularly those on metered estates, where switching rates remain low – consider these FAQs if they have queries about the Orders or experience difficulties switching.
•    The OFT is engaging with the industry regarding concerns that some terms in domestic bulk LPG consumer contracts, particularly as regards early termination rights, may not be fully consistent with existing consumer protection legislation.
•    Furthermore, we take the view that the Orders apply even where contracts are terminated early and we recommend the industry make this clearer in its consumer guidance.
OFT1380 | 202
Microgeneration
•    We have identified a particular risk of mis-selling problems within the microgeneration industry, and some recent evidence of such problems materialising. We expect that most of these complaints will be addressed by installers and are confident that the arrangements in place through the REAL Assurance Scheme Consumer Code will support this. The OFT will undertake any additional work, including enforcement action, as may be necessary alongside Local Authority Trading Standards.
•    Going forward, the OFT recommends that Government and the devolved administrations should continue ongoing work considering:
–    Measures to increase access to and use of independent advice.
–    Opportunities to further strengthen existing independent redress mechanisms if significant problems do materialise.
Provisional decision not to make a market investigation reference to the CC
7.7    A possible outcome from a market study is a market investigation reference (MIR) to the CC. The OFT has considered whether this would be appropriate in respect of the main market where this study has made a competition assessment – the heating oil retail distribution market.
7.8    In order to make a MIR to the CC, the OFT must have reasonable grounds for suspecting that any feature, or combination of features, of a market in the UK for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or
OFT1380 | 203
services in the UK or part of the UK (the ‘reference test’, as detailed further in Annexe O).351
7.9    The OFT has only assessed whether the main sector we have reviewed in the course of our off-grid energy market study – the domestic heating oil retail distribution market – meets the reference test. We have not applied the reference test in respect of the other fuels because:
•    For bulk LPG: The CC has already investigated the domestic bulk LPG market. Instead of looking at issues already addressed by that investigation, we have focused on evidence of the initial impact of the Orders.
•    For cylinder LPG: while there are some features of this market which may give rise to competition concerns, these concerns would, if valid, go beyond the supply of cylinders for domestic heating and therefore require consideration of the wider cylinder LPG market (including commercial and industrial customers) beyond the scope of this study. We may return to these issues in the context of the wider cylinder LPG market at a later date (subject to OFT prioritisation principles).
•    All other energy markets examined (microgeneration, solid fuels and electricity) have, within the context of this particular study, been considered primarily in relation to their role as alternatives to heating oil and LPG rather than individually in their own right.
7.10    As regards heating oil, and as set out in Chapter 4, the OFT has not, in the course of its study and on the basis of the evidence seen to date, found reasonable grounds for suspecting the presence of any feature or features of the heating oil retail distribution market in the UK that may prevent, restrict or distort competition in connection with the supply or acquisition of domestic heating oil in the UK or part of the UK.
351 The reference test is set out under section 131 of the Enterprise Act 2002.
OFT1380 | 204
7.11    Therefore, the reference test is not met and the OFT does not propose to make a MIR to the CC in respect of the domestic heating oil retail distribution market.
7.12    For the avoidance of any doubt, our study has not examined the wholesale market for petroleum products in detail and does not reach any conclusions on this market.
7.13    We are consulting on our provisional non-reference decision and invite relevant views. Responses should be emailed to offgrid@oft.gsi.gov.uk by 5pm on Friday 18 November 2011. Alternatively, they can be sent to:
Off-Grid Energy Market Study Office of Fair Trading Fleetbank House 2-6 Salisbury Square
London EC4Y 8JX
7.14    We will consider any responses received and will publish our final decision on a MIR in due course.


Written and published by -
Genfit - 0344 567 9032

For speed, and for the sake of the environment, Solartwin offer feasibility checks and fixed price solar quotes by phone.
Unique in the world, Solartwin's phone survey now also uses online aerial photographs of your roof in most urban areas!

Unlike most solar surveys, our instant surveys and quotes are completely free and with no obligation.
Click here to request a survey

Or Call us on

0344 567 9032

Domestic Renewable Heat Incentive Released

Solar Thermal has got the great government funding through the Domestic RHI which it deserves! Solartwin Solar Thermal panels have just become not only a cost cutting and very green option to heat your water but now you will receive additional funding too! The Domestic RHI rates – Released April 2014 Ofgem have produced a […]

Read More | Archives

Notice to Solartwin customers – Letter’s from Stenfield & Co

A number of Solar Twin Ltd customers have been in touch this week to query a letter they have received from legal firm Stenfield & Co. The content relates to Solar Twin Ltd’s liquidation, and claims that customers “undoubtedly paid more than you should have and it is highly likely that you will have been […]

Read More | Archives

Renewable Heat Incentive Updated – Solar Thermal to have Heavy Support

The Government have today released the Renewable Heat Incentive: The first step to transforming the way we heat our homes. If you are looking to buy a SolarTwin System contact Genfit. “the scheme will be open to anyone in these groups who installed an eligible technology since 15th July 2009” so if you have a […]

Read More | Archives

DECC announce they are doubling the RHPP grant for solar thermal from £300 to £600

Solar Thermal Panels Receive Huge Renewable Heat Premium Payment Solar Thermal has received a huge boost, it’s a great time to buy a Solartwin Product. Greg Barker tweeted about the scheme – Big uplift for #RHPP Vouchers to put a shot in the arm of the market ahead of full Domestic #RHI tinyurl.com/ktxz3o2 — Greg […]

Read More | Archives

Solartwin DIY reviews

SolarTwin Reviews from Reviewcentre “Review Centre is a community of real people, just like you, sharing their product and service experiences. Our community of reviewers are a passionate bunch who want to help you discover what’s right for you.” (Review Centre) We are well rated on review centre, this shows the excellent product quality of […]

Read More | Archives


or jump to...