28 September 2007

 

 

Existing Housing Stock and Climate Change Memorandum submitted by Environment Industries Commission

 

 

Environmental Industries Commission (EIC)

 

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 per cent by 2050. In 2004, 27 per cent 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 per cent 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 3 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 per cent 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 per cent 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 - 2011.

 

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 per cent 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 (2005-2008) that is surplus to their Phase II obligation.

 

The recent Ofgem report 'A Review of the Second Year of the EEC 2005-2008' concluded that to the end of the second year of phase II of the Energy Efficiency Commitment the suppliers combined had achieved 93 per cent 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 per cent 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 per cent 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 - 2011 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 per cent 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 per cent 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 per cent 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 3 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 e.g. 270mm 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 per cent grants to the poorest households and, for social housing, incentives for housing bodies.