Memorandum submitted by the Environmental
Industries Commission
EIC was launched in 1995 to give the UK's environmental
technology and services industry a strong and effective voice
with Government.
With over 330 Member companies EIC has grown
to be the largest trade association in Europe for the environmental
technology and services (ETS) industry. It enjoys the support
of leading politicians from all three major parties, as well as
industrialists, trade union leaders, environmentalists and academics.
EIC's Energy Efficiency Working Group represents
over 80 companies involved in providing advice and technology
in the field of energy efficiency.
INTRODUCTION
EIC believe that tackling the climate change
impact of our homes is crucial if the Government is to fulfil
its commitment to reduce UK carbon emissions by 60% by 2050. In
2004, 27% of the UK's total emissions of carbon dioxide came from
the energy we use to heat, light and power our homes.
If the domestic sector took a proportionate
share of the Government's target to reduce carbon emissions by
60% on 1990 levels by 2050—as set out in the Climate Change
Bill—carbon emissions in the domestic sector would need
to fall from around 154 million tonnes of carbon dioxide to around
62 million tonnes of carbon dioxide.
However, there are two factors that could mean
that a far greater reduction will be needed:
1. The increase in housing development—the
Government is committed to building three million new homes by
2020.
2. The commitment in Gordon Brown's Labour
party Conference speech to review the targets under the Climate
Change Bill. If the targets increase the domestic sector will
needed to make a greater contribution than what is already required.
New homes are of course crucial to this. In
this area the Government recently announced an ambitious target
for all new homes to be zero carbon by 2016, which EIC welcome.
However, at least 75% of homes are still expected
to be in use in 2050, therefore tackling the carbon footprint
of existing homes is crucial.
EIC do not believe that there is a panacea for
reducing the contribution of existing homes to the UK's carbon
emissions. Instead a mix of measures is crucial.
A coalition of thirty-six cross-party MPs and
leading business and environmental organisations—led by
EIC—recently launched a Joint Statement on Energy Efficiency
outlining 11 clear and achievable measures to help people and
companies waste less energy.
As part of the Joint Statement signatories called
on the Government to introduce a number of measures aimed at reducing
the climate impact of existing homes.
I enclose a copy of the Joint Statement for
your information with a full list of signatories.
CARBON EMISSION
REDUCTION TARGET
One of the Government's key measures for reducing
carbon emissions from existing homes has been the Energy Efficiency
Commitment (EEC). Under the scheme electricity and gas suppliers
are required to achieve targets for the promotion of improvements
in domestic energy efficiency.
The first phase of the EEC ran from 1 April
2002 to 31 March 2005 and is expected to save 0.3 million tonnes
of carbon annually by 2010. The second phase of the EEC runs from
1 April 2005 to 31 March 2008 and is expected to save 0.5 million
tonnes of carbon annually by 2010.
Despite these expected savings, the Scheme has
suffered from a significant lack of ambition and more than fails
to fulfil the potential for energy savings in households. For
example, the EU Energy Efficiency Action Plan concluded that the
largest cost-effective savings potential lies in the residential
sector, where the full potential is now estimated to be around
27% of energy use by 2020.
Alongside the recent Energy White Paper, the
Government, therefore, launched a statutory consultation on a
new Carbon Emission Reduction Target (CERT), which will replace
EEC for the Phase III period of 2008-11.
The framework of CERT will be broadly the same
as the EEC but it will include a wider range of measures that
suppliers can use to meet their commitment, such as microgeneration.
These are in addition to the energy efficiency measures of the
current EEC. Furthermore, the design of the Scheme has been amended
to reflect a new focus on reducing carbon emissions.
Level of Obligation
EIC welcome the Government's proposal that the
level of obligation for supplier under CERT will be approximately
double the level of activity of the current EEC 2005-08.
Furthermore, EIC broadly welcome the Government
proposal that the total CERT obligation on all suppliers for the
period 1 April 2008 to 31 March 2011 should equate to an annual
saving of about 1.1 MtC by the end of the programme.
Whilst EIC welcome the increased level of the
obligation on suppliers, Members believe that there is still far
greater potential to improve energy efficiency in households.
The aforementioned EU Energy Efficiency Action
Plan states that the largest cost-effective savings potential
lies in the residential sector, where the full potential is now
estimated to be around 27% of energy use by 2020.
EIC believe, therefore, that the targets for
CERT must be more ambitious to reflect the full potential for
energy savings in the household sector.
The Role of Energy Efficiency in CERT
The primary purpose of CERT will be to place
a statutory obligation upon electricity and gas suppliers to meet
a target for the promotion of improvements in energy efficiency
among household consumers through the promotion of measures such
as cavity wall and loft insulation, energy efficiency light bulbs,
boilers and appliances.
EIC believes that, whilst a proportion of the
EEC should support microgeneration, energy efficiency should remain
the primary focus on the EEC.
As aforementioned the opportunities for energy
efficiency are huge.
Transition from EEC to CERT
It is proposed that suppliers will be able to
count towards their CERT targets any action taken under Phase
II of EEC (2005-08) that is surplus to their Phase II obligation.
The recent Ofgem report "A Review of the
Second Year of the EEC 2005-08" concluded that to the end
of the second year of phase II of the Energy Efficiency Commitment
the suppliers combined had achieved 93% of the overall target.
Whilst, of course, it is welcome that suppliers
have made such positive progress, the speed at which they did
so highlights that EEC targets in Phase II are not commensurate
to energy efficiency potential—this will result in a significant
surplus that can be carried over to CERT.
The Ofgem report shows that 6 out of 8 of the
major suppliers already have a surplus from Phase II of EEC. Telecom
Plus, for example, have a 365% surplus that can be carried over.
The unambitious targets for Phase II of EEC
will, therefore, result in a significant proportion of a supplier's
CERT obligation being met through action they have taken under
EEC, before CERT even begins.
EIC are concerned that this will undermine the
CERT obligation by significantly reducing the overall CERT target
suppliers will have to meet.
EIC believe, therefore, that a limit should
be set on the amount of surplus action a supplier can carry over
to CERT.
EIC believe that this limit should be proportionate
to a supplier's total surplus. For example, 10% of a supplier's
overall surplus could be carried over.
This would continue to incentivise suppliers
under Phase II of EEC as it will still mean that the greater their
surplus the greater the amount of their obligation they can carry
over. However, it will ensure that the maximum amount of CERT
is met during 2008-11 and not by action taken in Phase II of EEC.
Innovation Under CERT
Since there is a risk that innovative solutions
might result in a lower level of carbon saving than anticipated,
or none at all, EIC welcome the Government's proposal that suppliers
will be allowed to meet up to 5% of their CERT obligation from
demonstration activity or from market transformation activity,
or from a combination of both types of activity as long as the
total innovation activity does not go beyond the 5% limit.
1. DEMONSTRATION
ACTIVITY
This proposal will allow a supplier to count
towards their obligation innovative measures to which accurate
carbon savings cannot yet be attributed.
Under this approach there is a danger that technologies
will contribute to meeting a suppliers obligation when in fact
it has resulted in a lower carbon saving than expected.
EIC propose, therefore, that Ofgem establishes
a minimum "projected" carbon saving that an innovative
measure must achieve in order to qualify to contribute to a supplier's
CERT obligation.
2. MARKET TRANSFORMATION
ACTIVITY
This continues the approach in Phase II of EEC
of incentivising activity, which relates to innovative measures
for which carbon savings can be attributed.
EIC welcome the proposal that if an energy supplier
puts forward a product that is innovative, the supplier can count
a 50% higher contribution towards their EEC requirements than
would otherwise be the case.
Post 2011 Supplier Obligations
EIC welcome the commitment in the Energy Review
to keep an obligation on household energy suppliers until at least
2020.
Alongside the CERT consultation the Government
published a call for evidence for the proposed Household Energy
Supplier Obligation, which will run from 2011 until at least 2020.
The proposed Household Energy Supplier Obligation will replace
CERT in 2011.
EIC believe that it is crucial to ensure that
the targets for CERT and future obligations on household energy
suppliers are, at the very least, in line with the energy saving
potential outlined in the EU Energy Efficiency Action Plan.
Furthermore, the targets for future obligations
must in be inline with the interim 2020 target set by the Climate
Change Bill to ensure that the obligations make a proportionate
share of the UK's overall target for reduce carbon emissions.
To achieve this, EIC believe that the proposed
Climate Change Committee, which would be established under the
Climate Change Bill, should be consulted on the appropriate targets
for CERT.
Energy Performance Certificates
The Energy Performance of Buildings Regulations
implemented a requirement for all homes put on the market to include
a Home Information Pack (HIP). The HIP must include an Energy
Performance Certificate proving information on the overall energy
rating of the home and recommendations for the improvement of
the energy performance of the home.
The introduction of the Energy Performance Certificates
were delayed at the last minute and, instead of being introduced
for the sale of all homes, they were only required for the sale
of four bedroom homes. This has recently been extended to include
three bedroom homes.
EIC believe that it is crucial to ensure that
the necessary provisions are put in place for Energy Performance
Certificates to be rolled out to all homes at the earliest opportunity.
EIC believe that Energy Performance Certificates
will play an important role in helping householders reduce carbon
dioxide emissions, as well as saving on their fuel bills. EIC,
therefore, welcome the introduction of information on energy efficiency
to the process of buying and selling homes—EIC believe that
improving consumer awareness of climate change and energy efficiency
measures will play an important role in achieving the Government's
overall emission reduction targets.
Energy Performance Certificates will, however,
only fulfil their potential if they are supported by measures
to enbable householders to act on the recommendations set out
in the Certifcate.
The House of Commons' Environment, Food and
Rural Affairs Select Committee highlighted in their report "Climate
Change: The Citizen's Agenda" that the information people
are given about climate change is not being backed with adequate
resources to enable individuals and community groups to reduce
their carbon emissions.
EIC believe, therefore, that the recommendations
set out on the Energy Performance Certificate must be backed up
incentives to encourage homeowners to act on the information provided
by the Certificates. For example, a stamp duty rebate for homeowners
that make significant improvements in energy efficiency to a property
within six months of purchase.
Furthermore, EIC believe that the recommendations
set out on the Energy Performance Certificate should be listed
in order of cost effectiveness and the energy savings they can
be expected to achieve.
Calculating Energy Performance
One of the most significant issues raised by
meeting the Government's target for all new homes to be zero carbon
by 2016 was how to define "zero carbon."
The Government recently announced that the definition
of zero carbon should include emissions from all energy use—including
from appliances and cooking. Including emissions from energy use
associated with domestic appliances in the home will require modification
to the Standard Assessment Procedure (SAP) for measuring the energy
performance of the home.
SAP in its existing form does not adequately
take account of these emissions, nor does it provide for proper
accounting for the range of technologies that will reduce them.
The Department for Communities and Local Government,
jointly with the Construction Products Association, recently established
a Technical Working Group on SAP Modification, which will report
to Ministers early in 2008 on the modifications to SAP that are
required.
Energy Performance Certificates are calculated
using SAP, therefore EIC believe that when SAP is amended to take
account of emissions from all energy use—including from
appliances and cooking—Energy Performance Certificates should
also be amended so that the overall energy display includes information
on this energy use.
Low Carbon Buildings Programme—Households
Households are required to undertake a number
of energy efficiency measures before they are eligible to apply
for a grant from the Low Carbon Buildings Programme. Before applying
the Government require householders to have:
— Insulated the whole of the loft of
the property to meet current Building Regulations eg 270 mm of
mineral wool loft insulation or suitable alternative.
— Installed cavity wall insulation
(if applicable).
— Fitted low energy light bulbs in
all appropriate light fittings.
— Installed basic controls for the
heating system to include a room thermostat and a programmer or
timer.
Furthermore, there is a requirement for householders
to have planning permission before applying for grants under the
Programme.
EIC believe that the Energy Performance Certificate
scheme could be linked to the Low Carbon Buildings Programme.
For example, householders would be required to have implemented
the four measures above before applying for a grant or have achieved
an equivalent rating on the Energy Performance Certificate.
Metering
The Government is currently consulting on the
proposal that, from May 2008, every household having an electricity
meter replaced and every newly built domestic property should
be given a real-time electricity display, free of charge. Furthermore,
it is proposed that energy suppliers should give any household
requesting a real-time display for their electricity meter one
free of charge.
A significant barrier for the achievement of
greater energy efficiency in the home is a lack of consumer awareness
and interest in energy efficiency and EIC believe that ensuring
householders have direct access to information about their energy
use within their homes will enable consumers to manage that use
and reduce their carbon emissions.
Incentivising Action
A significant barrier for the achievement of
greater energy efficiency in the home is a lack of consumer awareness
and interest in energy efficiency.
Energy Performance Certificates should go some
towards reversing this, however the Certificates will only be
available to the purchasers of property.
More needs to be done, therefore, to encourage
those householders who will not be selling their property in the
near future to improve the energy performance of their home.
EIC believe that one of the ways of stimulating
consumer demand in energy efficiency products is to introduce
fiscal incentives. For example, stamp duty rebates, council tax
rebates, a reduction in (or zero) VAT on all energy efficiency
goods, 100% grants to the poorest households and, for social housing,
incentives for housing bodies.
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