4 Energy end-use efficiency and energy
services
| (25197)
16261/03
COM(03) 739
| Draft Directive on energy end-use efficiency and energy services
|
| Legal base | Article 175(1)EC; co-decision; QMV
|
| Document originated | 10 December 2003
|
| Deposited in Parliament | 22 December 2003
|
| Department | Environment, Food and Rural Affairs
|
| Basis of consideration | EM of 3 February 2004 and SEM of 13 May 2004
|
| Previous Committee Report | None
|
| To be discussed in Council | No date set
|
| Committee's assessment | Politically important
|
| Committee's decision | Not cleared; further information awaited
|
Background
4.1 Greater energy efficiency has been recognised within the Community
as a useful means of helping to meet the commitments it has undertaken
to reduce greenhouse gas emissions under the Kyoto Protocol, and
(through reducing demand) of improving its security of supply
against a background where an increasing proportion of its energy
needs are having to be met by imported supplies. The Commission
suggests that final energy consumption in the Community is currently
about 20% more than can be justified on purely economic grounds,
and it sees increased end-use efficiency —
involving the provision by suppliers of an integrated package
under which the consumer makes a single payment for energy, energy-using
equipment or technology and energy efficiency measures —
as playing an important part in bringing about such savings within
the Member States. It has therefore set out in the current proposal
the targets, mechanisms, incentives and the institutional, financial
and legal frameworks it believes are needed to remove existing
market barriers, and to develop a market for energy services and
for the delivery of energy efficiency programmes and other energy
efficiency measures to end users. As such, it sees these measures
as complementing those adopted recently on the opening of the
internal markets for electricity[27]
and gas,[28] aimed at
supply-side efficiency improvements.
The current proposal
4.2 More specifically, the proposal would require
Member States:
- to set a mandatory target whereby
1% of the average energy[29]
distributed and/or sold to final consumers in the previous five
years would have to be saved each year for the next six years
on a cumulative basis as a result of energy services, energy efficiency
programmes and other energy efficiency measures;
- to set an equivalent target of 1.5% in the public
sector, and to promote energy efficiency through public procurement;
- to remove barriers so as to ensure that distributors
and retailers of energy offer and actively promote energy services
and provide free energy audits until 5% of their customers are
covered by such services;
- to require distributors and retailers to refrain
from activities which might impede the delivery of energy services,
and to provide information on their end-use customers to enable
the proper design of energy efficiency programmes;
- to ensure that energy services are offered to
all eligible customers, and can be delivered by qualified bodies;
- to ensure that appropriate qualification, certification
and accreditation schemes are in place for those delivering energy
services;
- to remove legislation that impedes or restricts
the use of financial instruments and contracts for energy savings
in the market for energy services;
- to ensure the removal of distribution tariffs
providing an incentive to increase the volume of transmitted energy;
- to ensure that reasonable and competitive costs
of investments to improve efficiency can be recovered through
distribution tariffs;
- to ensure the availability of independent, high-quality
energy audit schemes; and
- to ensure that customers have available individual
meters showing actual consumption and time of use, and are provided
with informative billing of energy consumption, including comparisons
with past use and with other benchmarked users.
4.3 In addition to these mandatory provisions, the
proposal would enable Member States to establish funds, which
would be open to all energy services providers, for energy efficiency
programmes. It would also leave open the possibility of the Commission
coming forward in due course with a proposal to develop further
the market approach in energy efficiency by means of so-called
"white certificates", which would confirm claims of
energy savings achieved as a consequence of energy end-use efficiency
measures.
The Government's view
4.4 In his Explanatory Memorandum of 3 February 2004,
the Parliamentary Under-Secretary of State (Farming, Foods and
Sustainable Energy) at the Department for Environment, Food and
Rural Affairs (Lord Whitty) said that, although the Government
supported the general aim of the proposal, it did not at that
stage have a final position on the details, pending the results
of inter-departmental discussions, clarification of a number of
issues, the completion of a Regulatory Impact Assessment, and
the need to analyse responses to a public consultation exercise
which was due to be launched shortly. In view of this, and the
Minister's undertaking to address these issues in due course in
a supplementary Explanatory Memorandum, we decided that it would
be sensible to await this before seeking to take a view on the
proposal.
4.5 We have now received from the Minister a supplementary
Explanatory Memorandum of 13 May, enclosing a partial Regulatory
Impact Assessment, though he has again indicated that the Government
has yet to reach a final position on the proposal, and that the
Assessment will be updated in due course. However, he has made
it clear that, although the Government still welcomes the aim
of the proposal, there a number of key issues which cause it concern.
In particular:
- although the UK is committed
to achieving a step change in energy efficiency, it does not currently
have a mandatory target, and needs to consider whether
it would be more appropriate to leave Member States to decide
on the best mix of policy instruments to achieve their Kyoto commitments;
the UK also wants to look in more detail at the implications of
the target being proposed, which the Minister points out is framed
solely in terms of energy sales rather than carbon reductions;
- the potential costs associated with a requirement
for actual-time-of-use metering could be considerable;
and
- the interaction of certain requirements,
such as those relating to distribution tariffs, with the liberalised
markets for gas and electricity needs to be considered.
4.6 On the other hand, the Minister says that the
concept of "white certificates" would be broadly
consistent with the UK's wider use of market-based mechanisms
to achieve energy efficiency savings; that the UK has already
recognised and taken steps to promote energy efficiency through
public procurement procedures; that the Government is already
committed to creating an effective market in energy services,
and has been working closely with Ofgem and suppliers to remove
barriers to market development, including any restrictions
on the use of financial instruments; and that energy audits
are already available to UK businesses.
4.7 The partial Regulatory Impact Assessment enclosed
with the Minister's supplementary Explanatory Memorandum seeks
to address the implications of the proposal in more depth, though
it makes it clear that there are a number of major uncertainties,
notably the extent to which the measures set out in the Government's
recent Energy Efficiency Action Plan can be taken into account
in meeting the mandatory savings targets. The Assessment suggests
that these target are likely to be realised by the measures in
the Action Plan, in which case little or no additional benefits
or costs would accrue in the UK from these elements in the proposal
(except in so far as the impact in other Member States might mitigate
the impact of climate change here). On the other hand, if additional
measures were required to meet these targets, the Assessment suggests
that this could involve capital investment costs of £1-2
billion a year over the six year period specified, as against
savings in energy costs rising from £250-350 million in the
first year to £1.5-2.1 billion by the end of the period,
and corresponding carbon savings valued at £77 million and
£460 million respectively.
4.8 So far as the other elements in the proposal
are concerned, the main costs would arise from the provision of
actual-time-of-use meters and the collection and processing of
the relevant data, which the Assessment suggests could amount
respectively to £100-300 million and £200 million-£5
billion a year for the next 14 years. In addition, there would
be corresponding costs of £10-30 million a year over that
same period for the provision of free energy audits, and of something
in excess of £40 million a year arsing from the accreditation
of energy services.
Conclusion
4.9 Despite having deferred our consideration
of this document until we had received the Minister's supplementary
Explanatory Memorandum, the remaining uncertainties are such that
we still find it difficult to assess the significance of the various
measures. In particular, it is clear that the costs and benefits
depend critically upon whether actions already envisaged in the
UK can be taken into account in determining whether the mandatory
savings targets have been met (and indeed on whether those targets
are made indicative instead). Another important factor is whether
changes are made to the requirement to install actual-time-of-use
meters. In the circumstances, we can at this stage simply report
the situation to the House, and continue to hold the document
under scrutiny, pending the receipt of the further information
which the Government has undertaken to provide in the light of
responses to its public consultation exercise and any changes
arising from the negotiations in Brussels, which commenced in
March.
27 Directive 2003/54/EC. OJ No. L176, 15.7.03, p.37. Back
28
Directive 2003/55/EC. OJ No. L176, 15.7.03, p.57. Back
29
Covering electricity, natural gas, district heating and cooling,
heating fuel, coal, certain transport fuels, and forestry and
agricultural energy products and waste. Back
|
