Select Committee on Environmental Audit Appendices to the Minutes of Evidence


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 decade;"

  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 technology—domestic 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 CHP.

  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.

March 2002

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