Select Committee on Environmental Audit Minutes of Evidence



APPENDIX 7

Memorandum from Energy Saving Trust

1.  ENERGY POLICY

  The response implies (paragraph 2) that the White Paper "Conclusions of the Review of Energy Sources for Power Generation" is a comprehensive statement of Government energy policy. As the title of the White Paper implies, it does not include any detailed assessment of energy efficiency options, and therefore is restricted in its coverage.

  The cautious response to the Committee's request for a sustainable energy hierarchy (paragraph 3) is justified in so far as Government clearly needs to take into account economic and social factors as well as environmental ones. However, energy efficiency is generally the most economic and socially beneficial option as well as the most environmentally desirable. The Committee's view that energy efficiency should be the top priority therefore remains correct, in our view.

2.  ENERGY SOURCES

  Paragraph 7 states that Government will ensure NETA provides fair market prices for CHP and renewables. However, most independent commentators believe that the proposed arrangements are unhelpful both to small generators and those with unpredictable output. CHP and renewables are therefore both likely to be disadvantaged.

  Paragraph 8 states that NETA will take into account embedded generation benefits. NETA itself refers the issues of embedded benefits back to DTI review. This seems to be a contradiction.

3.  FUEL POVERTY AND VAT

  The statement that "VAT on energy saving materials has been reduced to 5 per cent" (paragraph 11) is misleading. In practice the effect of the reduction only benefits measures installed under the Home Energy Efficiency Scheme. The statement that "we are also exploring with the European Commission the possibility of a further reduction" could usefully be further probed. Our discussions with officials in Customs and Excise indicate that the Government has yet to respond to the Commission invitation to list labour intensive measures which might benefit from a lower rate of VAT (paragraph 36). France has already taken advantage of the proposal to reduce VAT on energy efficiency investments.

  The Committee may also wish to explore the statement that one third of Capital Receipts Initiative expenditure will improve energy efficiency. We suspect that the definition is very broad and includes measures with only marginal benefits for energy efficiency. It would be more helpful to know what measures are included and what the projected energy efficiency benefits will be.

4.  OBLIGATIONS TO ACHIEVE ENERGY EFFICIENCY IMPROVEMENTS

  The Government has now indicated that it will take the powers to set Energy Efficiency Standards of Performance in new legislation (Paragraphs 20, 21). This is welcome, but the level at which new EESoP will be set is not clear. The level will be critical for carbon dioxide emissions reduction from the domestic sector. The Committee may wish to probe Government intentions in this area.

5.  THE CLIMATE CHANGE LEVY

  Paragraph 34 states that "an additional £50 million in the first year" from the Levy will be used to support renewables and energy efficiency. This leaves open the possibility that the amount will be raised in future years, which would be very helpful in responding to the Committee's request for additional energy efficiency funding.

  Paragraph 34 also notes that Treasury is considering "additional incentives for energy efficiency investment". It is likely that these are fiscal measures, either as Levy reductions or accelerated depreciation. Either would be helpful, but the Committee may wish to press the Government to consult with business and energy efficiency interests on what would be most effective.

6.  REGULATION

  Paragraph 41 alludes to the "sellers pack" initiative which has subsequently been announced. However, the extent to which energy efficiency opportunities will be identified in the proposed mandatory survey has not been announced. It would be most helpful if the survey could provide both an overall rating (SAP or similar) and a list of cost effective opportunities. The Committee may wish to consider this.

November 1999


 
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