Message to energy ministers - let industry lead the way on energy efficiency

Let’s put ourselves in the shoes of Greg Clark, Nick Hurd or Baroness Neville-Rolfe. It’s not an easy brief, in fact it’s tough, really tough. An area filled with failed policy, over-reliance on subsidy, barriers and a broad number of policy interventions which are being flung at ministers each and every week. And we still have increasing numbers of people in the UK slipping from low incomes into fuel poverty with the coldest, “leakiest” homes in western Europe.  

The signal from Treasury officials is that there’s no money in the pot, it is the end of subsidy as we know it. Best not forget to mention the fragmented voices, myriads of stakeholders all eager to push their solution as the solution to climate change, energy reduction, energy security, decarbonisation and de-risking the energy supply in this uncertain world.

Confidence in the sector is low – internally and externally. You can experience the lethargy every day from all stakeholders whether they be industry or government. This is a 'just about managing' (JAM) industry, an industry which desperately needs to be able to restore its strength, confidence and stability and to be matched by a bold and brave government and policy framework.

To ministers it cannot be clearer that this area needs government support and even intervention, a big no-no with this new Government. This industry has been decimated by bad or failed policy – policy that was not well thought-through or was just too short-term. The Green Deal burnt many fingers. We urgently need Greg Clark, Nick Hurd and Baroness Neville-Rolfe to reframe, reset and reassure this market to bring certainty in what is an uncertain time.

What would I want to see were I Energy Minister? There are a raft of solutions out there. As a minister I would feel bombarded by them, almost drowning in the sea of ideas. “But how does a solution fit together and deliver?”, I might say, wishing to see industry bringing an achievable long-term vision package to my ministerial desk that clearly outlined and addressed fuel poverty, decarbonisation, energy security, demand reduction and the health and wellbeing of consumers – and more widely addressing how we improve our housing stock, housing stock that is the coldest in western Europe. An energy minister needs to have the right information, the framework to convince Treasury.  As Baroness Neville-Rolfe knows from her background in retail, industry itself is best placed to do this.

Furthermore, for too long we, as the industry, have been in denial on the reality of politics. For many years we had an easier ride with other political parties in government. This Government has policy objectives that are tightly honed on value for money and leveraging private finance and it has repeatedly communicated its desire to reduce subsidy particularly in the longer term. Conservatives have a ‘less is more’ approach to regulation with a ‘one in and three out’ policy but are also in dire need of some positive policy and an economic hit as they negotiate Brexit.

For industry, this context needs to be central to any thinking. Let’s put ourselves in the Government’s shoes. Let’s ensure we understand the political agenda and the political language: i.e. what the Government needs to do, what it wants to do and the restrictions they face in addressing the enormity of this brief.

Industry is now coming together with the forming of the Energy Efficiency Infrastructure Group (EEIG) and putting together the pieces of the jigsaw for government – a successful, high value for money infrastructure programme for energy efficiency.  The reframing of this issue as an energy efficiency infrastructure programme would enable government to move away from short-term interventions, to set out an ultimate vision to get all homes up to a high standard of energy efficiency and to have an infrastructure delivery model for getting us there.

The concept is simple to understand - energy efficiency is infrastructure and it delivers economic returns comparable to other major infrastructure programmes. This approach will deliver for government, consumers and industry. With economic and social benefits which will boost the economy and bring jobs and savings for consumers, we can strengthen the UK’s energy security and stamp out fuel poverty, and finally realise decarbonisation to help the UK meet its challenging climate targets.

With cross-party support, Scotland is leading the way and has already committed to making energy efficiency an infrastructure priority supported by capital funding. My message to the minister is to take up this opportunity and do better, be bold, go further. Let’s not look at this as a social subsidy but instead as a savvy public capital investment and great value for money. Let’s, at the very least, get UK homes to Band C by 2030 to meet carbon budgets.

The EEIG will start 2017 by reframing the issue: we have commissioned a shared “20-year vision for a building energy efficiency infrastructure programme” with Frontier Economics to support energy ministers to create a long-term energy efficiency infrastructure programme for Britain.  The vision will be shared across Government, with Parliamentarians and central and local government policymakers.

As an energy minister I would want to make each and every UK citizen the king (or queen) of his own, “warm” and “efficient” castle again. We must not forget the consumer is king. Let us also help the ministers deliver. As the International Energy Agency’s most recent energy efficiency market report stressed: “The greatest efficiency gains have been led by policy, and the greatest untapped potentials lie where policy is absent or inadequate.” It continues: “Harnessing the potential of energy efficiency is key to transitioning to a sustainable and secure energy system that generates prosperity for our world.” Let’s get harnessing and working with ministers to deliver the future of energy efficiency.

Sarah Kostense-Winterton is executive director of MIMA and provides the secretariat to the Energy Efficiency Infrastructure Group

The views in this article are those of the author, and not necessarily those of Bright Blue

We need a new Green Deal

One of the first achievements of Theresa May's new government was to secure the passage through Parliament of the fifth carbon budget. This committed the UK to reducing emissions by 53 per cent between 2028 and 2032 relative to 1990 levels. It was an important demonstration that our cross-party consensus on tackling climate change will continue. But how is the government going to make good on this now legally binding ambition?

Twenty-two percent of the UK's carbon emissions currently comes from heat and power used in homes. The Committee on Climate Change does not think that there is a cost-effective path to decarbonisation without eradicating these emissions. Owner-occupiers are the biggest sector in the housing stock. They also have the worst energy performance. Yet since the scrapping of the Green Deal in 2015, there has been no scheme to incentivise home energy improvements. That's why today Bright Blue is today publishing a new report proposing fresh policies to cost-effectively stimulate this market.

The first set of improvements that should be prioritised are energy efficiency measures, which reduce the amount of energy homes consume. Good progress has been made on installing cheaper measures, like cavity wall insulation, but for more expensive measures, like solid wall insulation, there is still much further to go. The Committee on Climate Change believe that around 10 per cent of the UK's carbon emissions could be mitigated cost-effectively through improving the energy efficiency of residential buildings.

The second set of improvements that should be prioritised are decentralised renewables, which decarbonise the remaining electricity and heating supply. For electricity, there is now about as much small-scale solar power in the UK as a large power station generates. Much of this uptake has been driven by falls in price. Renewable heat has seen slower progress, with just 2.5 per cent of our heating demand met by low-carbon sources. The Committee on Climate Change believes this heating figure needs to be at least eight per cent by 2020 if we are to achieve a cost-effective route to decarbonisation in 2050.

The government's previous scheme to incentivise these measures in the able to pay market, the Green Deal, is widely regarded to have failed. When the Green Deal launched in 2013, ministers predicted 14 million homes would be improved by 2020. Yet the reality was no way near that. Just 15,000 Green Deal plans had been signed by the time the scheme ended last year.

The Green Deal allowed households to fund improvements by a loan that was repaid through energy bills. This attractive off-balance sheet financing was made unappealing as a result of high interest rates and the long average payback period. In addition, the 'Golden Rule' limited the size of the loan such that repayments could not exceed the amount that was being saved on bills from the measures. As a result, the average Green Deal loan was just £3,500 - insufficient to finance expensive measures like solid wall insulation or heat pumps.

Bright Blue is making a number of recommendations for how these deficiencies with the Green Deal can be overcome.

First, the government should introduce new 'Help to Improve' loans and ISAs. The government should underwrite loans to households to finance an exciting package of home energy improvements including energy efficiency measures, decentralised renewables, battery storage, and smart appliances. The interest rates would be considerably lower than under the Green Deal, because the government has much cheaper borrowing costs than private lenders. In Germany, where there is a similar scheme to the one we are proposing, every €1 of public money spent on the programme earns the Treasury €4 in additional taxes and reduced welfare spending. A new Help to Improve ISA should also accompany this policy, to encourage households to save for improvements.

Second, the government should introduce new regulation to ensure there is consumer demand for home energy improvements and to give the supply chain confidence to invest. Homes should be prevented from being sold if they do not meet minimum energy performance ratings. Building regulations should also be amended to ensure that any general renovations, such as constructing a new conservatory or an extension, do not increase the home's overall carbon emissions.

The new government is currently drawing together its emission reduction plan for the end of the year. This will set out how it intends to meet the legally-binding fourth and fifth carbon budgets, in a way that is cost-effective and guarantees energy security. Incentivising more home energy improvements in this sector should be a top priority.

Sam Hall is a researcher at Bright Blue and co-author of 'Better homes'

This article originally appeared on BusinessGreen and can be viewed behind the paywall here.

Smart meters: powering the new economy

As a nation we are becoming more and more reliant on electricity to power our lives.

Whether this is through the expanding range of gadgets in our homes or the predicted rise of electric cars – our energy demands are set to rise. 

This week we published a piece of research conducted by the Centre for Economics and Business Research on Powering Future Cities, which details the rise in demand that UK cities will face over the next twenty years.  

Keeping up with these new demands will be a big challenge, but also presents some important opportunities. 

Smart meters and smart technology could help us as a nation meet these demands, ensuring the long term security of our energy infrastructure and helping us better-integrate renewables into our energy mix.

Policy makers are already thinking about new ways to manage Britain's energy demand. From the National Infrastructure Commission’s vision of Smart Power to the development of smaller-scale energy generation in local areas, the advent of a smart meter in every home is creating newly integrated energy communities, using new energy data as a platform for innovation.

Smart meters are here 

By 2020, every home and microbusiness in Britain will have been offered a smart meter by their energy supplier, at no additional cost. By establishing a digital connection between the home and the energy supplier, these new meters are bringing an end to estimated bills and showing us in pounds and pence what we’re spending on gas and electricity. They’re replacing traditional energy meters ticking away under the stairs in a language of kilowatt hours that few understand - one of the things holding us back from behaving as fully empowered consumers in this market.

Change is coming, and the national rollout is well underway, with over 3.5 million smart meters already installed. 

Our Smart energy outlook, an independent piece of research into the experiences of over 10,000 people conducted by Populus twice each year, has found that 80% of smart meter users are taking steps to use less energy, and 76% are more conscious about the energy they use. Nearly four in five smart meter users say they would recommend one to others.

The benefits of smart meters are even wider than the way they’re transforming individual experiences. Smart meters are digitising Britain’s last analogue industry, and will deliver both energy savings and system efficiencies of £6billion to the economy while saving 32.7 million tonnes of carbon dioxide.  

The smart energy grid

For the first time, we will have data on our energy use. Our energy networks will use this data, aggregated to postcode level, to better understand peaks in energy demand, and to identify power cuts more easily. 

Better data on how we’re using energy is essential as more of our energy starts to come from renewables – which by their nature are intermittent, generating when the wind blows or the sun shines. 

More sophisticated ‘time of use’ pricing will then empower households to play an active role in managing demand, via tariffs which offer cheaper energy when demand is lower or supply from intermittent renewable sources more plentiful.

Other countries are embracing this. In Texas, for example, to use up the surplus of wind energy at night time, a new tariff was introduced offering free energy to customers at night.

Smart grids mean a cheaper and more reliable energy supply. In its report, Smart Power, the National Infrastructure Commission said that moving to a smart grid could save consumers £8bn per year. 

Driving forward the low carbon economy

Operating a smart grid will allow Britain to fully benefit from low carbon technology like electric vehicles.

The electrification of transport will be a big driver of energy demand in coming years, but also essential in helping to tackle air pollution in cities. 

But the take up of electric vehicles will needs to go hand in hand with the development of a smarter energy grid. Cars will need to charge ‘smartly’ to avoid unmanageable pressure on the grid at peak times such as the end of the working day.

Electric cars are just one part of the broader smart home. Smart appliances like washing machines, freezers and dishwashers may also in the future make decisions about when to use energy – communicating the smart meter and drawing energy when it is cheapest.

Cities like Groningen in the Netherlands are already trialling this sort of approach with great success. Households are empowered to choose the sources of energy they use, including buying it from their neighbours who may have solar panels, and also selling excess energy back to the grid or to other residents.

Digital opportunities 

The opportunities of smart energy data goes far beyond the energy sector. Smart technology is opening up potential for innovators in every possible field to use new data to develop new services.

The UK's digital economy is the largest and fastest growing in the G20 and already makes up over 10% of our GDP. In the future, we are likely to see a whole host of innovative new services which use energy data. These could include the next generation of price comparison and switching websites using your smart meter to automatically switch consumers onto the best tariff – even hour by hour.

Smart meters could connect to fitness monitors and sleep trackers, turning the thermostat down to a lower temperature when you go to bed.

Data could be used at a local level by a fuel poverty charity to identify households who are regularly self-disconnecting from their energy supply. 

And it’s not just in energy that this data can provide insight and innovation.

Getting a better understanding of people’s energy behaviours could be applied in areas like health – allowing carers, agencies or relatives to keep an eye on those they care for. Changing patterns of energy use can help identify if an elderly relative hasn’t switched their kettle on in the morning as they usually do – prompting a carer to check in on them.   

Smart technology and smart meters will be transformational, and are unlocking exciting new areas for economic growth in the low carbon economy. 

Claire Maugham is Director of Policy and Communications at Smart Energy GB

The views expressed in this article are those of the author, not necessarily those of Bright Blue.