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ACE’s initial response to the Clean Growth Strategy

Dr Joanne Wade, CEO of the Association for the Conservation of Energy (ACE) welcomes the aims, targets and aspirations outlined within the Clean Growth Strategy. There is recognition of the value of energy efficiency at very core of the strategy and a commitment to further developing policies, and we see the strategy as a clear step in the right direction.

The scale of the opportunity of energy efficiency in buildings is huge. ACE research shows that the net present value of energy efficiency to the UK is at least £45 billion in energy efficiency savings[1]. The UK’s building stock is in dire need of urgent action. Therefore, we welcome the government’s intervention to stimulate energy efficiency markets in both the domestic and non-domestic sectors – to deliver the scale and pace of change that is required to meet current and future carbon budgets. However, there is a lot of work still to be done to drive energy efficiency in the UK and to develop a low carbon economy that works for everyone.

We welcome the government’s proposals surrounding the energy performance of domestic buildings, especially the proposal to further consult on the Minimum Energy Efficiency Standards (MEES) regulations, an enhanced trajectory for the regulations – taking homes in the private rented sector to band C by 2030 – and a commitment to looking at replicating the target in the social housing sector.

We are also pleased that the Energy Company Obligation (ECO) will be extended to 2028, providing longer term certainty for the energy efficiency industry. While it is right that ECO will focus on eradicating fuel poverty, ACE questions whether the investment needed in this area needs to be higher.

The Government have demonstrated leadership in enacting a target to reduce carbon emissions from the public sector, however we are disappointed that the target is voluntary rather than mandatory. We welcome the call for evidence consultation to further develop policies and programmes.

The team at ACE are taking the time over the coming days to analyse the Clean Growth Strategy and supporting documents to identify where there are still gaps in the market, and will then begin to develop the evidence base that the government have called for, thus ensuring that the voice of the energy efficiency industry is heard.

 

[1] £26 billion for homes, and £20 billion for business, ACE & RAP (2016) Buildings and the 5th Carbon Budget.

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Cost of Energy Review: will it deliver lower bills?

Yesterday, BEIS announced details of its ‘Independent review to ensure energy is affordable for households and businesses’.  Here are my initial thoughts on whether or not it will deliver lowest cost, sustainable energy services for consumers.

First the ambition: the government defines this as ‘for the UK to have the lowest energy costs in Europe, for both households and businesses’.  Assuming that they mean energy service costs, rather than fuel costs, I have no problem with that as a starting point.  But, looking at the detail, I do have one or two concerns.

The review will be led by Prof. Dieter Helm and will look at how the cost of electricity can be kept as low as possible, as we meet our climate targets.  Which is my first concern: is electricity really the only form of energy that we should be concerned about?

No, it isn’t.  Electricity use accounted for only 17.5% of final energy use in 2016 (DUKES, 2017), whilst gas accounted for nearly 30% and petroleum products almost half of total use.  Of course, for this review we are interested in the cost to the consumer, rather than the amount used.  And electricity costs are dominant for industrial and commercial users.  But in homes, expenditure on gas and electricity account for roughly equal shares of the money spent.  And for our transport, virtually all our fuel expenditure is on petroleum products.  So, shouldn’t the review be looking at the costs to consumers of all energy services, not of any given fuel?

Perhaps those who defined the scope of the review believe that the future is all-electric.  Indeed, a report published last Thursday by Forum for the Future included the following quote from Prof. Helm:

‘Decarbonisation should eventually bring about the end of fossil fuels, but they face a much more immediate threat.  That threat is digitalisation. Everything digital is electric.  The future of energy is therefore electric too.’

And we have seen recent government announcements of future bans for fossil-fuelled vehicles, albeit 20 years hence.  So, perhaps we are heading towards an all-electric energy system.  But what about heat?  Will this become all-electric?  And, if so, how quickly?  National Grid’s Future Energy Scenarios 2017 offers four future scenarios, and in only one of these (admittedly, the one in which we meet our climate aims) does gas use in homes decrease dramatically.  Even in this scenario, the replacement of gas takes more than 30 years. And, surely, the next 30 years of consumers’ energy bills is something that we should be thinking about.

Which brings us to my second concern: the review ‘will consider the whole electricity supply chain – generation, transmission, distribution and supply’.  What about demand?  As we all know, one of the most cost-effective ways to reduce consumers’ energy costs is to reduce the amount of energy they have to buy.  Indeed, in the National Grid scenario, one of the main drivers that reduces gas demand is the fact that consumers ‘live in housing stock that is good at retaining heat’.

The terms of reference do give some hope.  They state that the review will consider ‘the key factors affecting energy bills’, and energy efficiency is included in the list.  The question is whether demand reduction and response – particularly for heat and transport – will be given sufficient weight, given the clear emphasis on the electricity supply system in the minds of those who have shaped the review.

If the review does not fully consider the costs and benefits of energy demand reduction, it will not deliver on the government’s aim of the lowest bills for consumers.

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Brexit,European Energy Efficiency Directive,European Energy Performance of Buildings Directive,European Union

New PM must stick to key EU climate change targets for 2020

Irrespective of Brexit, UK Prime Minister Theresa May and her cabinet must commit to critical EU targets for the year 2020 on cutting carbon emissions and transforming the UK’s energy infrastructure.

This is the call made today (Friday) by 30 environmental and energy-related organisations¹ in a letter² to Greg Clark,  the new Secretary of State for Business, Energy and Industrial Strategy. Signatories include leading business associations covering the renewable energy and energy efficiency sectors, two of the UK’s biggest green NGOs and Energy UK, the body representing the  major energy suppliers.

Their letter argues that EU laws and regulations on energy and buildings have played a leading role in enabling the UK to reduce its emissions of greenhouse gases and to provide global leadership on climate change.³

Three EU targets for the year 2020 have paved the way for future emission reductions. The signatories say the UK Government should now declare that it is sticking to these, as it prepares to commence exit negotiations from the union, to give badly-needed confidence to businesses and investors.

The three targets are:

  • 15% of all energy used for electricity, transport and heating should come from renewable energy sources (under the Renewables Energy Directive)
  • UK final energy consumption should fall to 129.2 million tonnes of oil equivalent or less (the Energy Efficiency Directive)
  • All new buildings must be nearly zero energy buildings by the end of 2020 (by the end of 2018 for public buildings) (The Energy Performance of Buildings Directive)

The letter says that a combination of EU and UK laws, regulations and policies have given businesses, investors and consumers the confidence to begin putting the UK on the path towards a low carbon future.

“Following the referendum, it is now critical that Government restores this already-eroded confidence by giving an assurance that, until the terms of leaving the EU are in place, all relevant EU directives and targets are still in place and the UK Government is legally obliged to continue to meet them.”

Dr Joanne Wade, CEO of the Association for the Conservation of Energy, says: “The Brexit vote has caused industry uncertainty. Government must move quickly to confirm it will continue on a clear path to meeting key energy targets.”

Sue Riddlestone, Chief Executive of sustainability charity Bioregional, says: “Cutting emissions is the pathway to secure, affordable energy for the UK in the long term as well as tackling climate change. We need a firm commitment to these long-agreed targets for 2020.”

Dr Nina Skorupska, Chief Executive of the Renewable Energy Association, said: “For the sake of jobs and investor confidence the Government cannot afford to row back on the EU 2020 renewables targets.”

Contacts:

  • Nicholas Schoon, Policy and Communications Manager, Bioregional, 07732 381728
  • Jenny Holland, Campaigns Director, Association for the Conservation of Energy, 0207 359 8000, 07875 629781, jenny@ukace.org

[1] SIGNATORIES

  • Ashden
  • Association for the Conservation of Energy
  • Bioregional
  • British Blind and Shutter Association
  • British Pump Manufacturers Association
  • British Rigid Urethane Foam Manufacturers Association
  • Cavity Insulation Guarantee Agency
  • Centre for Sustainable Energy
  • Chartered Institution of Building Services Engineers
  • E3G
  • Energy Saving Trust
  • Energy Systems Trade Association
  • Energy UK
  • Existing Homes Alliance Scotland
  • Friends of the Earth
  • Glass and Glazing Federation
  • Greenpeace
  • Insulated Render and Cladding Association
  • Lighting Industry Association
  • Mineral Wool Manufacturers Association
  • National Energy Foundation
  • National Insulation Association
  • Oil Firing Technical Association
  • Property and Energy Professionals Association
  • Regen SW
  • Renewable Energy Association
  • Solar Trade Association
  • Sustainable Energy Association
  • Thermal Insulation Consortium
  • Town & Country Planning Association

[2]  TEXT OF LETTER

Dear Mr Clark,

We would like to warmly congratulate you on your appointment as the Secretary of State for Business, Energy and Industrial Strategy, and wish you well in this important new post.

We welcome the 29 June statement of Amber Rudd, Secretary of State for Energy and Climate Change, that the UK government would not step back from international leadership in acting on climate change.

We agree that both the UK and the EU have been world leaders in addressing the enormous challenge posed by climate change. UK leadership has stemmed from the combination of EU and UK laws,  regulations and policies. Together these have given businesses, investors and consumers the confidence to begin putting the UK economy and infrastructure on the path towards a low carbon future.

Following the referendum, it is now critical that Government restores this already-eroded confidence by giving an assurance that, until the terms of leaving the EU are in place, all relevant EU directives and targets are still in place and the UK Government is legally obliged to continue to meet them.

In particular, we call upon the Government to commit to hitting 2020 targets under the Renewable Energy Directive, the Energy Efficiency Directive and the Energy Performance of Buildings Directive:

  • 15% of all energy used for electricity, transport and heating should come from renewable energy sources
  • UK final energy consumption should fall to 129.2 million tonnes of oil equivalent or less
  • All new buildings must be nearly zero energy buildings by the end of 2020 (by the end of 2018 for public buildings)

These targets make a key contribution towards implementing the UK’s world-leading Climate Change Act 2008 – pioneering legislation which requires ever-lower UK emissions in successive five-year carbon budgets. The policies and regulations required to meet these budgets have all been set in the context of EU law and policies on energy and climate.

Yours sincerely,

[3]  Between 1990 and 2014, the latest year for which final figures are available, UK territorial emissions of greenhouse gases fell by 35%. Between 2000 and 2014 they fell by 28%.

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commercial sector,ESOS,policy design

Non-domestic energy efficiency – policy design principles

Dr Peter Mallaburn is Director of Policy and Governance at the Energy Institute, University College London, and Editor of Climate Policy Journal. He has represented the UK on air pollution, climate modelling and energy policy in the EU, OECD and the IEA and worked on international climate negotiations. Peter helped write the UK’s first Climate Change Programme, set up the Carbon Trust, was Salix Finance’s first CEO, and set up his own consultancy, Policy to Practice, in 2008.

The government is currently reviewing its non-domestic energy efficiency policies as well as its wider policy portfolio as part of the Carbon Plan. DECC’s 2016 Departmental Plan provides some context:

Although the energy intensity of the UK economy has fallen by 24% since 2004, there remains significant untapped potential for energy saving in the business sector. Realising this potential will improve businesses’ productivity and will also support growth. But the business energy tax and policy framework is complex and businesses tell us it does not provide the incentive it could to reduce energy consumption. 

This article contributes to this process by outlining our state of knowledge on energy efficiency and identifies some key policy principles around which a new energy efficiency programme could develop. It is drawn both from the literature and from direct policy experience in the UK and overseas.

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A jobs tragedy that could have been avoided

Yesterday saw the sad announcement that energy efficiency and renewables employers Mark Group and Climate Energy had gone into administration. Many hundreds of people have lost their jobs. This is a direct consequence of the uncertain and unstable investment environment created by Government. A long-term policy framework is now DECC’s stated aim – and the newly announced Infrastructure Commission has a remit to consider energy infrastructure needs. But for these companies this is too little, far too late. Since May the Government has jettisoned policy after policy – playing havoc with industry’s confidence and longer term expectations.

While we believe it is possible – and necessary – to rebuild investor and supply chain confidence, without swift and clear indications of a stable, long-term policy framework, there is a significant risk that the UK will be written off as a place to invest in energy efficiency and renewables.  This would mean tens of thousands of jobs forgone, energy security undermined, competitiveness reduced, fuel poverty exacerbated and CO2 reductions made more expensive.

Current Government policy is recasting energy efficiency as Cinderella, whereas it is – as the International Energy Agency puts it – the First Fuel.  If we are to avoid further tragedies such as yesterday’s and reap energy efficiency’s rich rewards, it is high time for the whole Government to treat it as such.

Related reading / listening:

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Our response to Environmental Audit Committee inquiry into Government’s approach to sustainable development

The Environmental Audit Committee says that promoting sustainable development – which for the purposes of this inquiry includes protecting the environment, supporting the low carbon economy and improving wellbeing – could be worth billions of pounds to the UK economy. In 2013, the low carbon economy generated over £120 billion in turnover. The 2015-20 period will be crucial for ensuring the Government continues to promote sustainable development, with many key policies coming to an end and due for renewal or replacement.

The Committee is exploring what impact the new Government’s fiscal and legislative agenda will have on sustainable development. It is looking to establish themes for its work during the Parliament and measures against which the Government’s success can be judged. The evidence received for this inquiry will feed into the Committees work over the course of this Parliament.

ACE’s evidence, submitted to the Committee, focuses on the role energy efficiency does, can and should play within the wider sustainable development agenda:

  • Increasing energy efficiency is a key prerequisite for meeting the country’s carbon emissions reduction and fuel poverty alleviation targets and will at the same time deliver increased business productivity, public sector efficiency improvements, and a comfortable and healthy indoor environment that promotes wellbeing for all;
  • Current government policy on energy efficiency is inadequate, and will not result in carbon targets or fuel poverty targets being met;
  • Over the course of this Parliament, the Government must put in place a clear and coherent framework of targets, incentives and regulations that require and support investment in cost-effective energy efficiency improvements;
  • Government should be encouraged to better monitor and report on the effectiveness of its policies, including through the collection and use of improved data on building energy efficiency.

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DECC,energy and climate change committee

Priorities for the Energy and Climate Change Committee: ACE submission to the ECC Inquiry on priorities for holding Government to account

The Energy and Climate Change Committee is holding an inquiry to gather views on what areas of DECC’s policies will require particular scrutiny in the coming years.  Responses to the consultation will help to inform the Committee’s work programme.  Here are ACE’s answers to the two specific question posed.

Which DECC policy areas do you think require particular scrutiny over the next five years?

The balance of affordability, energy security and sustainability is often most effectively addressed by a focus on using less energy.  Work by the Association for the Conservation of Energy, and others, using DECC’s 2050 Calculator (http://2050-calculator-tool.decc.gov.uk/#/calculator/ace-example) demonstrates how an increased focus on demand side actions can reduce the cost of meeting climate change aims.  And, clearly, using less energy results in lower costs for energy consumers.

A clear priority for the Committee over the next five years should therefore be to scrutinise the extent to which all elements of energy infrastructure, including those on the demand side of the meter, are treated fairly in the policy decision-making process, and that investment in the demand side of the system is adequately supported by Government policy.

What should be the Committee’s scrutiny priorities over the next twelve months?

Many of DECC’s previous policies to support energy efficiency (for example, support for the Green Deal Finance Company and the scheduled timetable to zero carbon new buildings) have already been withdrawn.  Energy efficiency investments supported through the Energy Company Obligation will largely be delivered by the end of 2015, with no further obligation currently scheduled until April 2017.  And Treasury is currently reviewing the main planks of energy efficiency policy for non-domestic buildings.

The need for early action is therefore particularly acute in relation to energy efficiency policy: investor confidence in this sector is very low despite an energy sector-wide view that investment in energy efficiency has to increase significantly (https://www.energyinst.org/information-centre/energy-barometer) and this has the potential to compromise future delivery of carbon emissions and fuel poverty targets.  Ensuring that action on energy efficiency policy is taken soon, and taken effectively, should therefore be a priority for the Committee.

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Cost-effective carbon emissions reduction and resource efficiency

The incoming government promised in their manifesto to cut carbon emissions as cost-effectively as possible.  As energy efficiency remains the most cost-effective source of emissions cuts, can we therefore look forward to a much needed shift in policy focus?

At first glance, it may seem not: there is little explicit mention of energy efficiency in the Conservative Party manifesto, and absolutely no recognition of how its multiple benefits can contribute to other government policy aims.

But increased energy efficiency can help deliver more competitive businesses and less wasteful public sector organisations. Investment in warmer homes helps families to stay healthy.  And local energy efficiency investment can stimulate local economies, creating worthwhile jobs for local people.

These are all arguments that should make sense to the government: it is up to us to make them persuasively and show how our sector can help them deliver on their election promises.

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Demand Reduction,demand-side measures

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Let’s tip the balance back towards demand management

Reducing demand is better value than continuing to plough money into increasing energy production. So why do we continue to favour energy production?

In almost all circumstances, it is cheaper to avoid having to use energy than it is to produce it. This is a mantra with which most will be familiar: it has been enunciated by practically every objective strategic energy study for decades. Again this month the European Commission repeated it forcefully, in its magisterial paper setting out the case for a full Energy Union.

So, if demand management is much better value than generating new supplies of energy, why do our political leaders in the UK consistently set out to handicap energy saving – while energetically promoting production?

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