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The market is not a black box

Louise Sunderland freelance built environment sustainability consultant. She previously worked as Senior Policy Advisor at UKGBC and before this in both the research and parliamentary teams here at ACE.

The ruling theory governing energy efficiency policy has for some time now been that the ‘market will deliver’ the energy and carbon savings we as a society need. And the guiding framework for national and European policy is based on interventions to enable the market to deliver.

But as we know ‘markets’ are not sentient beings that make decisions. What we actually mean by ‘the market will deliver’ is that huge numbers of diverse consumers will respond to market signals and engage, behave and invest (often) their own money in “rational” ways that deliver against policy goals. They will change energy profligate behaviours, they will undertake disruptive works to their homes and businesses, they will purchase equipment, materials and services in exactly the ways that ‘socially’ we need them to.

In the last decade we have seen headline European buildings policy begin to make useful interventions to enable the consumer overcome market barriers – the building energy information tool, the Energy Performance Certificate (EPC), was introduced about 15 years ago and more recently there has been a focus on energy use awareness through accurate billing and ‘smart meters’, and the provision of finance to overcome investment barriers.

But what we haven’t really cracked is getting under the skin of what consumers really need ‘end to end’ to enable them to do what society needs them to – for example taking on deep renovations of their buildings. There is no definition of consumer information or advice provision in the relevant European energy efficiency directives (the 2010 Energy Performance of Buildings Directive [EPBD] and the 2012 Energy Efficiency Directive [EED]), there is no indication of what level of consumer support might be needed to achieve our existing buildings refurbishment ambitions (stated in the EPBD as incrementally moving the existing stock to nearly zero energy [and sometimes carbon] buildings!), and current advisory services (with a few notable exceptions) across Europe are inadequate to address the needs of consumers to achieve these aims.

Unfortunately, we haven’t thought seriously enough about the consumer journey and how well the policy framework supports every step. We also haven’t given sufficient focus to those few examples of really rigorous energy advice and support ‘one-stop-shops’ in Europe – like those in France and Germany – and evaluated these and other programmes to develop understanding and evidence of what support produces what results. This reveals a major blind spot.

Focussing on the market rather than the consumer allows us to imagine a kind of black box – ‘the market’ – in which the most difficult questions, like how does an uninformed consumer negotiate conceiving, financing, managing and getting feedback on a complex whole building renovation, get answered by undefined forces or market players. Until we open this black box and do the work to figure out exactly what we need to put in – what support consumers actually need – to get out what we know we need to get out then the market can never be expected to deliver sufficiently to meet our long-term climate and energy objectives.

Louise, as a member of the Energy Advice Exchange, has recently published a discussion paper and briefing (downloadable here) on revisions to the European energy efficiency package which aim to stimulate exchange and debate on the subject and propose improvements to the key European Directives. Louise has also recently posted a blog on her reaction to the European Commission’s recent “winter package” on sustainable energy (downloadable here).

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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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data,Energy Company Obligation,Green Deal

DECC’s Household Energy Efficiency Statistics: the good, the bad and the whaa…?

Liz Warren is a founder and director of SE2, a small consultancy helping individuals, communities and organisations build their capacity to respond to climate change. You can find out more about their work at www.se-2.co.uk.

DECC recently published statistics on the take-up of energy efficiency measures by households during 2015.  In this blog post, we unpick some of the data, exploring the good, the bad and the frankly baffling within the rich data set provided. How did policy announcements affect the market? Have whole-house energy assessments unlocked energy efficiency opportunities? And could we have found the elusive answer for improving the private rented sector?

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Latest developments in energy efficiency financing

Dr. Steve Fawkes is the founder of EnergyPro Ltd which provides advisory services in energy efficiency financing and incubates new ventures. He is Senior Adviser to the Investor Confidence Project and sits on the Investment Committee of the London Energy Efficiency Fund. His blog onlyelevenpercent.com covers energy efficiency financing and related matters.

For many years the energy efficiency industry has complained of lack of finance as being a barrier – but the truth is more complex. The industry has always focused on capital cost and energy cost savings, usually expressed as payback period. It is time to move beyond this simplistic model. In the last few years the existence and value of non-energy benefits such as increased productivity, better health, increased revenues and many others has started to be recognized. The International Energy Agency estimated that non-energy benefits could be worth four times the value of energy savings. Recent work by the UK Green Building Council, Marks & Spencer and others, has looked at valuing these benefits in the retail sector. As well as financial value these non-energy benefits are much more strategic than simple energy savings, if retailers can increase sales or reduce employee turnover, those are strategic issues in way that energy savings will never be. The energy efficiency industry needs to learn to identify and value the strategic non-energy benefits in business cases for investment, whether it be internally or externally funded investment. It also needs to learn to build better business cases.

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Taking action to improve energy refurbishment of flats

David Weatherall has worked for many years on energy efficiency policy at UK and European level. He works for Future Climate and the Energy Saving Trust, and is currently a Knowledge Exchange Fellow with Oxford University Law Faculty working on the legal barriers to home energy improvements.

Most people might assume that flats are warmer than houses. After all, every flat has at least one other dwelling above or below it, making it a lot more difficult for heat to escape.  And flats tend to be newer than houses, with more modern construction, glazing and insulation features.

And across the English housing stock the average energy efficiency of a flat is indeed higher than that of a house. But that fact masks the problem that we’re not improving our older flats with energy efficiency upgrades at the same rate as we are our houses.

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Installers,Retrofit

Installer Power: Releasing the potential for local building trades to get energy improvements into homes

Catrin Maby OBE is an independent researcher and consultant, and PhD candidate at Cardiff University, with more than 30 years’ experience in delivering energy advice and energy efficiency programmes.

Installer Power: the key to unlocking low carbon retrofit in private housing’ by Catrin Maby and Alice Owen (University of Leeds) was supported by the Sainsbury Family Charitable Trusts Climate Change Collaboration.

It’s time to face up to reality. We need to achieve ‘near zero energy’ levels for all our home by 2050, but what are we actually doing to achieve this?  We have run programmes to increase the deployment of those technologies that fit a short term simplistic view of what is ‘cost-effective’, and Feed in Tariffs to shift the market in microgeneration. This is not enough. The focus is on single technologies, and there is little incentive or even encouragement to achieve really deep energy savings.

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People, places and practice: a case study of the energy implications of migration and domestic laundry practice

Guest-blogger Quqing Huang recently completed her Environmental Technology MSc (specialising in energy policy) at Imperial College London. ACE Research acted as her external supervisor for her thesis, upon which this piece is based. Quqing is interested in the human-environment relationship, sustainability and clean energy. She currently works as a researcher at SynTao in Beijing, analysing government policies on corporate disclosure, corporate social responsibility and corporate compliance in China.

Britons seem to place a high value on the cleanliness of their linen, as a typical household runs the washing machine 5.5 times per week and uses the dryer for 5 times every week on average1. On a macro level, wet appliances are estimated to consume 1.3 Mtoe in 2014, which is the second largest source of electricity use in the household2. Being an energy-intensive practice, it opens a window for change in terms of demand reduction.

  1. Zimmerman et al., 2012, Household electricity survey- a study of domestic electrical product usage. Final report issue 4
  2.  DECC, 2015, Energy Consumption in the UK (2015)

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Time to wake up to the reality

Amazement, shock and concern greeted the news that energy use has declined over the last 50 years. But will the Government finally catch on to the benefits of energy efficiency?

In September, Energy in Buildings & Industry’s Warren Report was headlined “The Silent Revolution in UK Energy Use”. In it, I revealed that over the past fifty years UK GDP wealth has increased by almost threefold while at the same time overall energy consumption across the economy has actually fallen (by about 5 per cent).

The level of interest in this simple juxtaposition of two trends, heading in opposite directions, was astonishing. I have been writing monthly columns on energy for over 30 years but I can honestly report that never before has a single column of mine stimulated quite so much interest.

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Behaviour,Domestic Energy Consumption,heritage,historic buildings

Building on the Past: energy efficiency in historic buildings

Dr Thomas Yarrow is a Senior Lecturer at Durham University.  In this perspective piece, he shares some findings and implications from his current project, Building on the Past.

In the UK we are obsessed with the past. Old buildings are all around us, valued in different ways, as symbols of history and tradition. They contribute to our sense of identity and place, and have a range of social and economic values. However, preservation of these buildings does not always sit easily alongside the aim of improved energy efficiency. Micro-renewables, double-glazing and improved insulation can all contribute to improved energy performance but can also adversely affect the aesthetic qualities and historic materials that we value. Around 20% of English homes were built before 1919, and older homes tend to be less efficient than those built more recently.  Making improvements to historic buildings poses challenges, so it is important to understand what these homes mean to the people who live in them, and work with them.

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