carbon limited

The Green Building Council published a response in July to the Draft Statutory Instrument (which comes into force on October 1) for stamp duty exemption as proposed by our now Prime Minister in the last budget. I wish I had read it more carefully at the time…

Colleagues and I have been trying to disentangle the most cost-effective routes to achieving Code Level 6 of the Code for Sustainable Homes for a number of far-sighted and sincere clients who want to deliver the most efficient housing possible, and not just for those that can afford it.

Anyway, the budget announcement stated that zero-carbon homes would be exempt from stamp duty, which in reality is nothing more than a political gesture as the costs involved outweigh the stamp duty savings. Originally, the Code was written to allow for accredited offsite renewables which could demonstrate clear additionality, to be acceptable in achieving true zero carbon status. This was a bold step that, despite the uncertain mechanics of administration had the potential to allow developers the choice of investing in off-site renewables. Imagine being able to deliver say 30-50% CO2 reductions for the cost of a planning requirements of 10%? Or even a 100% reduction for an acceptable extra over to secure a particularly plum site. Too good to be true perhaps?

So, in attempting to determine what the administrative mechanisms might be, it would appear that the Treasury, who I am told, are the smartest guys in the room and are never wrong, have kinda done a U-turn and undermined the whole prospect. The word is that the budget announcement was based on the belief that the exemption would only apply to say 500 flats in total over a five year period, resulting in a loss of receipts of £7.5m. Small change for a hard-hitting inspirational policy.

Only problem is that the new Draft Statutory Instrument appears to exclude off-site renewables and that the Code for Sustainable Homes will be revised to reflect these changes. Details are still very murky, but it would appear that the DSI requires that any renewables provided to satisfy power consumption must be directly connected via a private wire network from the generating appliance to the home/homes in question. This would effectively rule-out large scale off-site systems such as a wind farm.

More alarming is the possibility that this change may have come about as the Treasury are anxious about the loss of stamp duty receipts if thousands of homes a year achieve the zero-carbon status. Where’s the net present value in that? Previously, I wouldn’t have been cynical enough to suspect that this was deliberate, but now I am not so sure.

Even more alarming still, is that the zero-carbon energy sources quoted in the DSI are limited to solar, wind and hydro. So biomass or biogas fired CHP doesn’t count either. True that these are not 100% zero carbon technologies, but they are pretty much as damn near it. This would prevent a major scheme using a mixture of biomass CHP and say a smaller wind turbine to achieve 100% offset. Given that CHP and CCHP are being actively promoted by English Partnerships and the GLA, there is a serious conflict of interest here.

Reading between the lines, it would appear that near sited generating capacity, such as one or a number of turbines located near a development would still be able to qualify, provided that there was a physical private wire connection between the development and generators. The scheme would also require an ESCO and via the private wire a long term supply contract with the occupants. This alone is problematic as it contravenes the 28 day rule, except where it is possible to confirm ‘demonstrable value’ where the renewable energy is guaranteed to be less costly than grid brown. This would suggest that a large scale new rural town, with space for a number of near sited community owned wind turbines (with 100% capital funding provided by the housing developer) connected via private wire could qualify for zero carbon status, but a large urban brownfield development would have no chance.

Now there may be any number of ways to circumvent this legislation, such as having National Grid Plc as one of the stakeholders in the ESCO, which could mean that the national grid be perceived as part of a private wire network. I do doubt it though.

So in short, it would appear that the Government, via DCLG wanted Code for Sustainable Homes standards far in excess of EcoHomes Excellent, hence the introduction of Levels 5 & 6, and yet the proposed Stamp Duty Tax Exemption legislation will effectively eliminate any cost effective attempts to achieve Level 6 for the majority of projects.

Given the ambition for zero-carbon homes by 2016 and the fact that large developers need the framework to plan, design and procure this now, the implications of the stamp duty debacle look set to far exceed the 5 year period the legislation is designed to cover.

To the cynic, this looks like a major attempt to discourage developers from even attempting to address the issues we have been berating them for over the last few years. I just don’t understand how this is consistent with the capitalist economic mantra of allowing the market place to find the most cost-effective solution.