Think tank: Save the world – rent your fridge

A return to leasing domestic goods can cut energy usage, says Lord Oxburgh

Lord Oxburgh

Hiring, rather than owning, domestic goods, such as a radio or television, was common in Britain until the 1970s. As the cost of domestic goods has fallen, incomes grown and the desire to own increased, the practice has fallen out of fashion. However, it is a business model that has the potential to cut our energy usage and it is time to revisit it.

When a consumer purchases an energy-using product — for example, a dishwasher, refrigerator, car or boiler — he is required to pay the energy cost for operating the product. If the price is reasonable, consumers will usually try to buy the most energy-efficient product available. The European Union’s energy labelling directive has made the task of identifying the most energy-efficient product considerably easier.

As technology improves, the most energy-efficient product at the time of purchase can soon become the most energy-inefficient product. The products that guzzle the most energy — cars, boilers, washing machines — are typically too expensive for an individual consumer to pay for frequent upgrades. Some savvy consumers will work out that the cost of the upgrade will be offset by cheaper energy bills in the long term, but most do not operate this way.

The environmentally aware consumer may fret about the embodied carbon in the replacement product and feel that even if replacement saved a little on running costs and thus reduced emissions, this might be outweighed by the carbon released in the process of manufacturing a replacement. Working out the best strategy is pretty complicated.

The alternative to owning an appliance is to buy a service rather than the appliance itself. For example, instead of buying a refrigerator, a consumer might pay a monthly fee to have the use of a fridge of a chosen size. The supplier would supply and maintain the appliance and would pay running costs and have an interest in reducing the overall cost of the service by providing a fridge that was reliable and economical. The supplier would need to decide when replacement made economic sense and might have a regulatory obligation to reduce the carbon footprint of the service and to dispose of end-of-life appliances responsibly.

The service leasing concept for vehicles has been around for many years in many variants, from simple short-term car hire to long-term lease. One variant that has only recently attracted much attention is the car club. These can be run on a commercial or co-operative basis. Because the club pays fuel costs, it has an interest in operating a fleet of energy-efficient cars. The less fuel the cars use, the larger the surplus the car club can make from subscriptions and charges. Some car clubs limit the amount of free fuel available in order to encourage users not to make unnecessary journeys and to drive in a more fuel-efficient way.

Car clubs can be attractive to local authorities because they may reduce congestion. For example, Westminster city council, which operates a car club, aims to take between 15 and 20 privately owned cars off the area’s roads for every car used by the scheme. Westminster is not the only local authority to offer such a service; councils across the country are starting to operate car clubs in conjunction with private organisations and are able to offer user benefits, such as preferential parking in town.

Although everyone knows how much it costs to fill up their car, it is much harder to work out the cost of running a particular domestic appliance. Here technology comes to the rescue: smart meters will soon be able to display the energy usage of individual appliances and the government intends that every home shall have a smart meter by 2020. As people become more aware of these costs, they may well become more interested in the opportunity that service leasing provides to have up-to-date efficient appliances at home and at work.

It would be wrong to pretend this service leasing approach is appropriate for every appliance or every situation. Nevertheless, it might be made to work in unexpected ways. For example, a company might supply a service that guaranteed to maintain minimum temperatures in a building. The company would be concerned about the insulation of the property, would provide and change the boiler as appropriate and pay for fuel. This service could be offered by an electricity or gas supplier who could thereby make their business more profitable by selling less energy. This model is most easily applied to office buildings and commercial properties, but it could work in other situations as well.

With the pressing need to reduce energy demand in response to the combined challenges of climate change and energy security, we need to consider whether service leasing offers win-win opportunities to save energy and also to have a better service.

Lord Oxburgh is former chairman of Shell UK and co-chairman of the Carbon Connect inquiry into the commercialisation of low-carbon technologies