Energy Efficiency Innovation Review (2005)Energy Efficiency Innovation Review (2005)

Summary report: Summary report: http://www.hm-treasury.gov.uk/media/FB4/AE/ pbr05_energy_675.pdfhttp://www.hm-treasury.gov.uk/media/FB4/AE/ pbr05_energy_675.pdf

Domestic sector:Domestic sector:http://www.est.org.uk/uploads/documents/aboutest/Household%20energy%http://www.est.org.uk/uploads/documents/aboutest/Household%20energy%20efficiency%20action%20for%20a%20low%20carbon%20society.pdf20efficiency%20action%20for%20a%20low%20carbon%20society.pdf

Energy Efficiency Innovation Review (2005)Energy Efficiency Innovation Review (2005)

Launched – pre-budget report (2004)Launched – pre-budget report (2004) Published Dec 2005Published Dec 2005 Defra, HM Treasury, Carbon Trust & Energy Saving Defra, HM Treasury, Carbon Trust & Energy Saving

TrustTrust An input to the wider review of the UK Climate Change An input to the wider review of the UK Climate Change

ProgrammeProgramme

PurposePurpose Examine how a step-change in energy efficiency (domestic, Examine how a step-change in energy efficiency (domestic,

business & public sector) can be delivered cost effectivelybusiness & public sector) can be delivered cost effectively How can energy efficiency improvements be embedded into How can energy efficiency improvements be embedded into

decision making across the economydecision making across the economy

‘‘Innovation’ – technical & policy innovationInnovation’ – technical & policy innovation

FocusFocus

IncludesIncludes How to deliver demand side efficienciesHow to deliver demand side efficiencies How to increase the uptake of existing energy-efficient goods How to increase the uptake of existing energy-efficient goods

and servicesand services How to accelerate the development of new, energy-efficient How to accelerate the development of new, energy-efficient

technologiestechnologies Excludes:Excludes:

TransportTransport Energy servicesEnergy services The scope for local and regional deliveryThe scope for local and regional delivery

AssessmentsAssessments Potential energy & carbon savings projected to 2010 and 2020Potential energy & carbon savings projected to 2010 and 2020 Role of new technologies – up to 2050Role of new technologies – up to 2050

Energy intensity of EU countries in 2003 Energy intensity of EU countries in 2003 (tonnes of oil equiv/million EUR GDP at 1995 market prices)(tonnes of oil equiv/million EUR GDP at 1995 market prices)

UK position – consumer productsUK position – consumer products

UK/EU leads energy performance standards for UK/EU leads energy performance standards for washing machines & dishwasherswashing machines & dishwashers

Good energy performance standards & best practice standards for Good energy performance standards & best practice standards for heating demand reduction – not world leaderheating demand reduction – not world leader

Patchy coverage Patchy coverage other white goods, heating productsother white goods, heating products

Limited/no coverage Limited/no coverage consumer electronics, domestic lighting, cooking, ICTconsumer electronics, domestic lighting, cooking, ICT

UK/EU – few performance standards for motors, drives, commercial UK/EU – few performance standards for motors, drives, commercial lighting lighting

No UK/EUI minimum standards for commercial air conditioning & No UK/EUI minimum standards for commercial air conditioning & lightinglighting

UK/EU few endorsement standards, little best practice coverage UK/EU few endorsement standards, little best practice coverage except domestic boilers, gas water heaters, domestic heating, demand except domestic boilers, gas water heaters, domestic heating, demand

reduction and ICTreduction and ICT Where standards are in place – 40% standards lead world wide.Where standards are in place – 40% standards lead world wide.

UK carbon emissionsUK carbon emissions UK good progress on reducing greenhouse gas emissionsUK good progress on reducing greenhouse gas emissions On course for meeting Kyoto Protocol On course for meeting Kyoto Protocol

12.5% reduction in gg emissions below base year by 2008-1212.5% reduction in gg emissions below base year by 2008-12 ‘‘Significant effort needed’ to meet domestic 2010 goalSignificant effort needed’ to meet domestic 2010 goal

20% reduction of CO2 below 1990 levels20% reduction of CO2 below 1990 levels Revised emission projections – 10% below 1990 levels by Revised emission projections – 10% below 1990 levels by

2010.2010.

Household SectorHousehold Sector Responsible for 40MtC/year (30% UK total)Responsible for 40MtC/year (30% UK total)

Space & water heating 75%Space & water heating 75% Lights & appliances 25%Lights & appliances 25%

Scope to deliver 9MtC of cost-effective savings by 2020Scope to deliver 9MtC of cost-effective savings by 2020 7.5MtC from measures tackling space and water heating7.5MtC from measures tackling space and water heating 1.5MtC from appliances1.5MtC from appliances

Two types of decisions impact on energy efficiency Two types of decisions impact on energy efficiency investmentinvestment

(in addition to low or no cost behavioural measures)(in addition to low or no cost behavioural measures) One-off measures driven by energy savingOne-off measures driven by energy saving

• Eg retrofit insulation or heating controlsEg retrofit insulation or heating controls Purchase or replacement of fittings/appliancesPurchase or replacement of fittings/appliances

• Decision to purchase not driven by energy savingDecision to purchase not driven by energy saving• But scope to purchase high efficiency optionBut scope to purchase high efficiency option

Potential carbon emission similar but levers to influence Potential carbon emission similar but levers to influence decisions are very differentdecisions are very different

Energy Efficiency Commitment (EEC)Energy Efficiency Commitment (EEC)

Electricity and gas suppliers are required to achieve targets for the Electricity and gas suppliers are required to achieve targets for the promotion of improvements in domestic energy efficiency. promotion of improvements in domestic energy efficiency.

Environmental aimEnvironmental aim will contribute to the Climate Change Programme by cutting greenhouse will contribute to the Climate Change Programme by cutting greenhouse

gas emissionsgas emissions Social aim Social aim

EEC will also contribute to the alleviation of fuel poverty.EEC will also contribute to the alleviation of fuel poverty. 50% of energy savings must be focussed on a priority group of low-50% of energy savings must be focussed on a priority group of low-

income consumers in receipt of certain benefits and tax credits/pension income consumers in receipt of certain benefits and tax credits/pension credit. credit.

Eleven suppliers were set a target of 62 TWH in 2002 apportioned Eleven suppliers were set a target of 62 TWH in 2002 apportioned according to number of customersaccording to number of customers

1 M homes loft/cavity wall insulation1 M homes loft/cavity wall insulation 750,000 energy efficient appliances750,000 energy efficient appliances 450,000 condensing gas boilers450,000 condensing gas boilers 36 M low energy lamps36 M low energy lamps

All obligated suppliers met their energy saving targets or went All obligated suppliers met their energy saving targets or went beyond thembeyond them

Several key challengesSeveral key challenges

Current programmes deliver their savings through social Current programmes deliver their savings through social housinghousing

By end of decade the improvement of social housing insulation By end of decade the improvement of social housing insulation will be exhaustedwill be exhausted

Need to find ways to deliver to owner-occupiers & private Need to find ways to deliver to owner-occupiers & private landlordslandlords

Lack of focus on behaviour/ how to incentivise Lack of focus on behaviour/ how to incentivise behavioural changebehavioural change

Reduce heating hours, internal temperature, lighting levels and Reduce heating hours, internal temperature, lighting levels and appliance usageappliance usage

Current physical measures will reach saturation point Current physical measures will reach saturation point early to mid next decadeearly to mid next decade

Need to draw in new physical measuresNeed to draw in new physical measures• Solid wall insulation, low carbon technologies, high insulation Solid wall insulation, low carbon technologies, high insulation

productsproducts

Options for new or expanded policies on buildings: Options for new or expanded policies on buildings:

supplier obligation (EEC)supplier obligation (EEC) An effective route to drive energy efficiency take-upAn effective route to drive energy efficiency take-up Access to consumer is a key factor in delivering carbon savingsAccess to consumer is a key factor in delivering carbon savings Further increase in target is feasible - 50% increase on the current phaseFurther increase in target is feasible - 50% increase on the current phase 2 barriers2 barriers

Cost perception gap – customers have poor knowledge of costs and benefits of Cost perception gap – customers have poor knowledge of costs and benefits of measuresmeasures

Distrust of supply chainDistrust of supply chain How can EEC and other measures facilitate an increase in the uptake of How can EEC and other measures facilitate an increase in the uptake of

energy efficiency measuresenergy efficiency measures Move from a market which provides units of energy to one that addresses the Move from a market which provides units of energy to one that addresses the

heating, lighting and power needs of the consumerheating, lighting and power needs of the consumer Cost effectiveness not a key driver for installing insulationCost effectiveness not a key driver for installing insulation

Up-front costs, reliability and reputation of installer, perceived ‘hassle factor’, Up-front costs, reliability and reputation of installer, perceived ‘hassle factor’, personal recommendationpersonal recommendation

Supplier cap and trade scheme – after 2011Supplier cap and trade scheme – after 2011 Move away from installation of physical measures towards direct delivery of Move away from installation of physical measures towards direct delivery of

carbon or energy targetscarbon or energy targets Energy Consumption feedbackEnergy Consumption feedback

Cost effectiveCost effective Accessible real time displaysAccessible real time displays Smart metering Smart metering (Energy End-use Efficiency and Energy Services Directive)(Energy End-use Efficiency and Energy Services Directive)

Building RegulationsBuilding Regulations

Most consistently effective policyMost consistently effective policy Further tightening in 2010Further tightening in 2010 Opportunities will decline after 2010Opportunities will decline after 2010 Further improvements – low carbon technologiesFurther improvements – low carbon technologies

Solar water heating, small-scale renewables, micro-CHP, heat pumpsSolar water heating, small-scale renewables, micro-CHP, heat pumps Need to reduce costsNeed to reduce costs

Builders ObligationBuilders Obligation Sustainable Building Code for a small proportion of houses built by Sustainable Building Code for a small proportion of houses built by

volume house-builders volume house-builders Drive down costs of new technologies by increasing market penetrationDrive down costs of new technologies by increasing market penetration

Compliance with Building RegulationsCompliance with Building Regulations Study of 99 new housesStudy of 99 new houses Third failed to achieve recommended level for air tightnessThird failed to achieve recommended level for air tightness

Consumer GoodsConsumer Goods

Appliances & lighting - 20% household energy goodsAppliances & lighting - 20% household energy goods Long term energy and cost saving do not drive consumers decisions electrical Long term energy and cost saving do not drive consumers decisions electrical

goodsgoods Price is key factorPrice is key factor Personal recommendationPersonal recommendation

Where energy label exists the energy rating an important factorWhere energy label exists the energy rating an important factor• But fewer A+ & A++ products sold in UKBut fewer A+ & A++ products sold in UK

Domestic lightingDomestic lighting Market misalignmentMarket misalignment Financial benefits not regarded as importantFinancial benefits not regarded as important Poor quality lights & fittingsPoor quality lights & fittings Lack of product information & mandatory standardsLack of product information & mandatory standards Lack of compatibility Lack of compatibility

More scope for minimum energy performance standards & energy labelling More scope for minimum energy performance standards & energy labelling schemesschemes

EU levelEU level Up-rate labelling & standards for white goodsUp-rate labelling & standards for white goods New product standards and labelling information New product standards and labelling information on consumer electronics & lightingon consumer electronics & lighting

Business & public sectorBusiness & public sector

Business & public sectorBusiness & public sector

Studies feeding into Energy Efficiency Innovation ReviewStudies feeding into Energy Efficiency Innovation Review