Memorandum from the Energy Saving Trust
The Energy Saving Trust plays a key role in
implementing part of the UK Government's Climate Change action
plan for tackling UK CO2 emissions. The Trust is the
UK's leading organisation working through partnerships to achieve
the sustainable and efficient use of energy by householders and
small business consumers. We also support programmes encouraging
the deployment of renewable energy technologies.
This submission should not be taken as representing
the views of individual Trust members.
As our focus is specifically on energy efficiency
and renewables in households and small businesses, our response
concentrates on your question 4:
"the outcome of the PIU energy review and
the development of a sustainable energy strategy".
Two of the PIU recommendations endorse the role
of energy efficiency in a future UK energy strategy:
(v) "the immediate priorities of energy
policy are likely to be most cost-effectively served by promoting
energy efficiency and expanding the role of renewables . . .
(vii) step changes in energy efficiency .
. . are needed, with new targets for both. In the domestic sector
the Government should target a 20 per cent improvement in energy
efficiency by 2010 and a further 20 per cent in the following
In our submission to the PIU Towards an Energy
Efficiency Strategy for Households to 2020 (copy attached)
we called for the Government to set a target for reducing energy
use. Our call for a 12.5 per cent reduction in energy use is consistent
with the PIU's 20 per cent improvement in energy efficiency, because
we factored in the DTI's projected 6 per cent rise in energy use
over that period ie an 18.5 per cent reduction. There is also
some difference between energy efficiency and actual energy saving
which makes our target slightly more ambitious than the PIU.
We know there is large untapped potential for
cost-effective savings, and that this reduction can be achieved
without any net costs, and indeed with benefits to the rest of
the economy. The benefits of energy efficiency stem from the fact
that the cost of reducing demand is less than the cost of increasing
supplies and so the capital costs are far outweighed by the benefits
of reducing demand for fuel. Once the capital items are installed
the savings in fuel use continue over the lifetime of the measure,
which in the case of household installations can be as long as
30 years (for cavity wall insulation) and around 15 years for
a household boiler. Energy efficiency is an extremely cost-effective
way of reducing carbon emissions, because for every tonne of carbon
saved the economy benefits by £150.
Energy efficiency policies are unique in that
they contribute to all the UK's key energy and environment objectives.
Energy efficiency reduces carbon dioxide emissions, is the sustainable
solution for fuel poverty, reduces consumers' fuel bills, helps
conserve indigenous energy supplies, and creates employment.
We envisage that these targets can be met through
a range of policy instruments (as currently):
Public/private incentives as in the
Energy Efficiency Commitment (the obligation on energy suppliers
to offer energy efficiency to their customers).
Fiscal incentives such as reduced
VAT for energy efficient products, Stamp Duty rebates for home
movers, and tax credits.
Regulation including much tighter
Building Regulations (leading to near zero emission homes by 2012)
and minimum appliance standards.
Changing consumer behaviour and attitudes
to energy efficiency.
There are further details about these proposals
in our Strategy (attached).
Our assessment shows that if the full range
of energy efficiency measures are taken, energy consumption in
households will fall by 12.5 per cent or 100 TWh of energy per
year by 2010, which is equivalent to the output of five gas-fired
power stations each year. These policies will also save 7 seven
MtC/ each year, allowing the Government comfortably to achieve
its Climate Change Target. The electricity component of this reduction
alone would be sufficient to meet the shortfall for the domestic
sector (20 TWh) in 2010, when the existing nuclear power stations
are no longer operational.
We envisage that CHP with its efficiency in
fuel use will also contribute to achieving these energy savings.
However, unless current NETA arrangements are changed, and unless
electricity exports from good quality CHP are exempt from the
Climate Change Levy, CHP is unlikely to make a significant contribution.
There is also a newly developed technologydomestic
CHP (dCHP)which will help energy saving in households in
the next few years. DCHP will provide all the household heat needs
and about half its electricity. EST believes that a realistic
expectation is that around 700,000 units could be in place by
2010, saving around 0.3 MtC on average. However uptake of these
units could grow rapidly to around eight million units by 2020
and with expected increase of electricity output from the dCHP
units (especially if fuel cell units are used) CO2
savings will rise.
If dCHP becomes widely installed in houses potential
technical and regulatory difficulties in the electricity distribution
system will have to be overcome. Government and regulator activity
to overcome these barriers will also be needed to encourage householders
to take up the new technologies.
Beyond 2010 there will clearly be further technical
advances and newer technology, such as domestic combined heat
and power (dCHP), could take off more rapidly. Energy efficiency
is likely to remain an exceptionally cost-effective way of reducing
carbon emissions, and it is thus likely to be possible and well
worthwhile to secure a further 12.5 per cent reduction in domestic
energy demand below 2010 levels by 2020. For this target to be
met more R, D&D will be needed to support the development
of low carbon technologies for households.
Renewables must play an ever increasing role
in energy supply for the UK and indeed the PIU recommends that
this reaches 20 per cent of supply by 2020. We see small community
based renewables schemes contributing to the overall renewables
developments, as communities often accept smaller scale schemes
that bring local benefits.
We believe there are important regulatory and
institutional barriers to be overcome if such new sources are
to contribute to their maximum potential. There are a number of
renewables suitable for small-scale production at community and
household level: Small scale wind power projects; energy crops
(biomass); photovoltaics (PV) and solar thermal water heating.
Support measures are necessary to overcome local resistance to
renewables development at the planning stage (providing help for
developers to gain community approval for schemes). Favourable
buy-out tariffs will be essential, as will help in overcoming
the problems engendered by the New Electricity Trading Arrangements
(NETA) for non-firm energy sources such as some renewables and
Ofgem has a critical role in the success or
failure of government policies on energy efficiency, CHP and renewables.
The operation of NETA is just one example where policy has adversely
affected the renewable energy and CHP suppliers, particularly
for new generators. The potential impacts of NETA were clear even
before the arrangement came into effect, and Ofgem's attempt to
pass responsibility back to the Government is a discouraging interpretation
of its environmental responsibilities. In addition, technologies
such as smart meters should be encouraged so consumers, electricity
distributors and suppliers see the benefits of energy efficiency
and power generation in the household.