Green Investment Bank

Written evidence submitted by The Energy Services and Technology Association (GIB 19)

Executive Summary

i. Report after report stresses the central importance to our low carbon future of energy efficiency.

ii. Energy efficiency will reduce the size of the ‘gap’ between low carbon supplies and consumer demand. Minimising the gap will reduce the costs of bridging it.

iii. Energy efficiency requires more than just the installation of energy-efficient equipment. The use of all energy-using equipment needs to be optimised and controlled, in order to maximise the savings.

iv. The non-domestic sector represents an undoubted opportunity to make significant and rapid savings.

v. We have over the years learnt that ‘picking winners’ is not a precise task. Putting all the ‘eggs’ of the GIB into just a few ‘baskets’ could be a high cost route to a low carbon future.

vi. The UK has a vibrant, innovative SME sector. It is the area that generates a large share of UK wealth and jobs. The GIB should support the smaller, innovative companies that can deliver real savings.

vii. The Carbon Trust has undoubtedly been very successful in encouraging innovation. However, we feel that the GIB should use a slightly different model – of being a facilitator rather than a market-shaper.

viii. The latest energy management standards, in particular BS EN 16001, need to be promoted to incentivise better energy management.

ix. A robust auditing and compliance regime is essential to ensure that support achieves the savings promised.


The Energy Services and Technology Association (ESTA) represents nearly 120 major providers of energy management equipment and services across the UK. Members provide smart metering, Heating Ventilating & Air Conditioning (HVAC) control systems, Building Energy Management systems (BEMS), consultancy and many other energy-related services. A number of our members operate as Energy Services Companies (ESCOs) delivering a complete package of energy efficiency investments through performance contracts. Most of our members’ activities are focussed on the non-domestic buildings sector.

ESTA has represented the interests of the energy efficiency industry for several decades now and regularly contributes to consultations regarding policy formation and policy implementation. Through its members, it also actively participates in the development of national and international standards relating to energy efficiency.
Energy Efficiency and the Low Carbon Economy

1. The importance of energy efficiency, both in terms of combating climate change and in improving security of energy supply, is acknowledged at both national and European level. The EU has adopted a target of achieving a 20% increase in energy efficiency by 2020 in an attempt to make real inroads into carbon emissions. The UK Energy and Climate Change Secretary, Chris Huhne, speaking to the TUC Annual Climate Change Conference on 11 October, said that the Government’s first priority was to build a low carbon economy that would "help us recover at home and compete abroad". He noted that saving energy was one of the key principles underlying the low carbon agenda. And he reminded his audience that: "Saving energy is still the cheapest way of closing the gap between supply and demand." Energy efficiency is a fundamental part of the Green Deal to be included in the Energy Bill.

2. Closing, or at least reducing, the gap between supply and demand will mean that less investment in new generating capacity is needed to replace aging fossil-fired stations. This will help to reduce the overall cost of the transition. An aggressive energy efficiency campaign can also flatten the slope of the rising energy demand curve.

3. However, energy efficiency is about more than just the installation of energy efficient devices and equipment. If these are used inappropriately or needlessly, they will still waste energy: lights burning in an unused room are still wasting energy even if they are low-energy lights. Energy usage needs to be controlled in order to be truly efficient.

4. Control strategies vary widely, depending on the specific location and patterns of use. Controls can be simple on-off switches, sensor-controlled switches (occupancy- or light-activated), timed controls, right through to full Building Energy Management Systems (BEMS). Advanced or smart metering systems incorporated into control systems offer a way of monitoring consumption and targeting savings.

5. ESTA would argue that non-domestic buildings offer a more immediate opportunity to improve efficiency and reduce emissions than domestic buildings. By and large they are more modern and are easier to adapt to new energy efficiency strategies. The energy consumption – and potential savings – per building are much higher in the non-domestic sector. Commercial organisations are more accustomed to evaluating the case for financial investment based on likely savings over a period of time. The Government is already targeting this sector through a number of measures such as the CRC Energy Efficiency Scheme. There is also a wealth of information freely available on ‘best practice’ in non-domestic buildings.

6. Businesses and other organisations have experience in planning improvement programmes of all kinds – and of evaluating their impact. The non-domestic sector can therefore generate concrete data about the efficacy of specific energy efficiency measures. Quantified savings figures will inform Government and policy makers about which measures are most effective for reducing carbon emissions. These can inform policy on progress towards statutory climate goals.

7. There are a number of proven technologies available that are very successful in reducing energy consumption in non-domestic buildings. The energy efficiency industry has been in existence for several decades and has a track record in delivering real savings. It is continually developing new technologies and processes to bear down further on energy wastage. That process of development can be increased still further if the market expands. This can be through support for new technologies on the one hand and increased demand on the other. How should the Government and its agencies support that process?

8. The process of ‘picking winners’ in any industry is unpopular today. Previous attempts to do so in a range of industrial sectors show indifferent results at best. Choosing a preferred technology at an early stage may not lead to the desired results. It may be the case that, given restricted funding levels, a rigorous filtering is required in the case of large-scale projects. It remains, though, a high-risk strategy.

9. However, many of the developments occurring in energy management have relatively low research and development budgets. The energy efficiency industry consists largely of successful, innovative SMEs. We believe that the most efficient way of moving the industry forward is to support several of the more promising projects in a particular area and then let the market choose which will ultimately succeed. There will inevitably be failures but the successes will reflect the needs and preferences of the market. It is more likely to produce the right results for the market than one where the end product is pre-ordained.

10. The SME sector is the engine of innovation in the UK economy. Support for this sector will drive the transition to the low carbon economy, creating more long-term, sustainable employment.

11. The Carbon Trust has been very successful in moving the industry forward through its support programmes. This is undoubtedly due to its understanding of the private sector and the ways in which it operates. However, the Trust has over the years tended to shape the market through its support mechanisms. ESTA believes that the Green Investment Bank should be more of a facilitator of innovation than a market-shaper. We are pleased to see the statement from the GIB Commission that: "Operationally, the GIB should work under strict principles to ensure it does not crowd out the private sector, with the private sector leading and executing deals wherever activity is viable and the GIB operating only where its actions achieve a result that would not otherwise have been possible and then in partnership with the private sector wherever possible." We welcome that statement but hope it would also apply to any subsidiaries that might be set up to administer future projects.

12. In order to achieve significantly greater take-up of energy efficiency measures in the non-domestic sector, the latest international standards and best practice need to be promoted. BS EN 16001 Energy Management Systems (prepared with substantial UK input from ESTA members), the forthcoming international (ISO) standard on energy management and the forthcoming European standard on energy audits, need support in their implementation by Government and bodies like GIB. In this way, the UK can establish a common, high level approach to energy management.

13. Without auditing, investment programmes will fail to make the contribution to a low carbon economy that we are all working towards. Equally, without enforcement procedures, new regulations will be ineffective. Compliance monitoring is an essential part of achieving a green future for the UK.

15 October 2010