For the first time in more than two decades, the UK has no energy efficiency programme for the bulk of the market, write Jan Rosenow and Richard Cowart of the Regulatory Assistance Project (RAP). The authors note that the pace of reduction in energy demand is already slowing down and this will only get worse in the coming years. They call on the UK government tot take action: the market won’t deliver energy efficiency without incentives or regulations.
In recent years across the UK, citizens, government, and the business community have all demonstrated a willingness to lead the world in the fight against climate change. So the mystery today is: Why is the UK walking away from energy efficiency, the most effective and least-cost way of reducing carbon emissions?
We certainly know better. When it comes to energy efficiency, the UK has achieved a great deal. On average, individual households now use 37 percent less energy than they did in 1970, with the bulk of this decrease occurring since 2004.Total household energy use decreased by 19 percent between 2000 and 2014, despite a 12 percent increase in the number of households and a 9.7 percent increase in population.
Those impressive reductions in energy use have not been accidental—they have been driven by energy efficiency policies such as Energy Efficiency Obligations on energy suppliers, regulations supporting condensing boilers, and grant programmes such as Warm Front.
Research commissioned by British Gas has shown that about two-thirds of the large reduction in domestic gas use has been achieved by energy efficiency improvements.
However, the introduction of the Green Deal and the reorientation of the Energy Company Obligation (ECO) resulted in a sharp drop in the installation rates of energy efficiency measures. By mid-2015 the average delivery rate for loft insulation had dropped by 90 percent, cavity wall insulation was down by 62 percent, and solid wall insulation had declined by 57 percent compared with 2012.It is now widely accepted that the Green Deal failed, and the recent report by the National Audit Office confirms this view. The level of reduction in energy demand is therefore expected to slow down in coming years.
International experience shows that where energy efficiency improvements have been delivered, they succeed either by providing incentives to consumers or through regulatory requirements, or both
Going forward, the ECO will be focused on households in fuel poverty, an area that has traditionally been supported by dedicated grant programmes. For the first time in more than two decades, there is currently no energy efficiency programme for the able-to-pay market, even though most of the properties requiring energy efficiency measures are within this segment. In order for the UK to meet its carbon targets, this acute policy void needs to be filled.
This cannot be achieved simply by wishing that “energy markets will deliver energy efficiency,” without either helping consumers or regulating energy businesses. International experience shows that where energy efficiency improvements have been delivered at scale, they succeed either by providing incentives and other supports to consumers or through regulatory requirements, or a combination of the two.
The Westminster Sustainable Business Forum’s new report Warmer & Greener: A guide to the future of domestic energy efficiency policy, which extensively cites work by Jan Rosenow, provides a number of important recommendations in those areas.
Developing more stringent regulatory requirements for existing properties at the point of sale or rental is one of them. New financial mechanisms are equally important to trigger investment in energy efficiency. Providing rebates for energy efficiency improvements would offer home buyers the option to claim back part of the Stamp Duty they have to pay if they upgrade their properties. If designed carefully, this could be done so that it is fiscally neutral. The report also considers including the able-to-pay market within the ECO, which has been proven to work in the past.
An alternative approach could be to deliver carbon credits or carbon revenue to energy service companies or building contractors who deliver efficiency savings, thus mobilizing the UK’s carbon levy to actually deliver carbon reductions while lowering, rather than raising, the nation’s energy bill.
There is no shortage of ideas for upscaling energy efficiency delivery. It is time for the government to reconsider its approach and develop a bold policy to make the most of the energy efficiency opportunity in the UK.
The Regulatory Assistance Project (RAP) is a globally operating independent and nonpartisan team of experts dedicated to accelerating the transition to a clean, reliable and efficient energy future. Senior Associate Jan Rosenow is a policy advisor to the European Commission, the European Parliament, government departments, and energy companies. Richard Cowart, Principal and European Programme Director leads RAP’s international team in Brussels. This article was first published on RAP’s website RAP Online and is republished here with permission.
Mike Parr says
The article makes some fair points but links to some very old reports (e.g. Brit Gas report from 2011). As an aside – British Gas came up with a service offering of: “read you own meters once/month & submit by SMS/Internet & you get, once per month a real bill”. They also gave away a home energy monitor by Alertme (recently taken over by…….British Gas). The Alertme showed people how they were doing in terms of consumption/savings to other anonymised houses. The programme (40K dwellings or more – not sure BG were a bit cagey with data) was giving savings of 12% to households – just from IT.
The assertion that the UK saved a great deal of energy post-2004 is undoubtedly correct. The attribution of this to the impact of UK energy savings programmes is fallacious. Remind me what happened to global energy prices post-2008? So, the trigger for energy saving was high energy prices. In the UK average electricity bills went from £350/yr 2004 to £600 in 2014 (source NAO). That is what triggered energy savings – not UK unfit-for -purpose energy efficiency programmes.
The recent report (14th July 2106) from the House of Commons on the Green Deal report was interesting reading: e.g.: “The scheme was overly complex with many process steps and excessive paperwork. People were also put off by interest rates of between 7% and 10% on Green Deal loans, particularly when they could access finance independently at lower rates”. There is a reason for these high interests rates, the UK finance sector “funds” the Tory party, so we are seeing a case “you scratch mine – I’ll scratch yours”. Corruption? nobody does it better than the Tories.
Or let’s try this also from the HoC report: “demand for the Green Deal was extremely low, with only 14,000 households taking out a loan resulting in minimal saving in CO2. This meant the scheme cost taxpayers £17,000 for every loan arranged”. You can do a fantastic energy upgrade on house for this sort of money – but not in “rip off UK” where the aim appears to be to extort the maximum amount of money from UK peasants/tax payers and transfer it to the UK finance sector & presumably a grateful Tory party
The problem is the current & previous Tory government. Both are wedded to the ideology of markets delivering. And the writers make a fair – but mild point in this respect that energy efficiency and market solutions tend not to work that well together. However, given the gravity of the situation (climate change) and the evidence before our eyes, this touching belief (markets will deliver substantively in the area of energy efficiency) falls into the same category as that of adults believing in Father Christmas, living at the north pole with a pack of elves (for those children reading this – keep on believing – for the UK Tories reading this – I know some good psychologists).
What is needed in the UK and other EU MS are large-scale house energy rennovation programmes.”Large-scale” means at least £100bn and a 20 year programme – per MS – not as the UK (and other MS) has been doing £50m here or £200m there – tokenism.
Jeffrey Michel says
Mike Parr’s reference to the British Gas efficiency program demonstrates how much energy might be saved by communicating real-time data on consumption as well as on associated environmental effects to customer points of decision. A diagram illustrating some of the mechanisms involved is given at my website (www.volksmeter.de) together with links to detailed treatments on the subject.
Most discussions concentrate on the efficiency improvements achieved by the cross-correlation of individual consumer data, for instance, through comparisons between two successive years. Data between individual customers may be avoided due to concerns over security breaches. However, personal information can be eliminated without diminishing its relevance within a collective data ensemble, as long as a suitably coded identification tag can be substituted.
The positive influence on efficiency achievable by cross-correlating customer data was vividly demonstrated two decades ago in a study of socialist-style apartments in Dresden, Germany. The Johannstadt South subdivision consisted of 2,523 prefabricated dwellings pieced together into five and ten storey apartment buildings. Despite the high degree of living-space standardization, variations in heating energy consumption of up to 4:1 were determined between the individual apartments. Even after discounting data extremes due to low occupancy or insulation differences, the considerable variations between nominally comparable living conditions made it plausible that most occupants were unaware of whether their personal consumption habits were excessive or frugal, simply because they lacked any basis of comparison. As soon as such information is conveyed, those individuals at the high end of the ensemble will be motivated to reduce their consumption, while those at the bottom of the scale may perceive little need for corrective action. The cumulative result will be a reduction of overall demand, enabling the supplier of district heating or of natural gas to serve additional customers with the corresponding amount of energy saved.