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Annex 1 Summary of UK-Wide Measures
1. Reducing Energy Consumption
1.1 The UK Government is responsible for the implementation of the EU Energy End Use Efficiency and Energy Services Directive which aims to improve energy efficiency, manage demand and reduce energy consumption across Europe. The Directive's main target is for each Member State to achieve a 9% reduction in energy use (measured by actual consumption, rather than by emissions) over a 9 year period to 2017. It also requires more accurate metering and billing to allow consumers to make better informed decisions about their energy use . The public sector will be expected to play an exemplary role for energy suppliers and distributors to promote energy efficiency when the directive is implemented in 2008.
2. Smart Metering
2.1 Smart meters display and record real time information on energy consumption that is available immediately or remotely to energy suppliers and consumers. Providing better information on consumption patterns can help reduce energy usage and therefore reduce fuel bills, help to deliver carbon and fuel poverty targets and increase security of supply.
2.2 A better understanding of consumption patterns would also offer the opportunity to introduce innovative demand-management tariffs, and those meters with an "import-export" facility can allow consumers with microgeneration installations to sell surplus electricity to the grid.
2.3 The purchase and installation costs of smart electricity meters varies depending on their functionality but it is estimated that householders with such technologies installed, could reduce their energy bills by an average of 6.5%.
2.4 A range of smart meter trials are currently being undertaken across the UK in the domestic, business and public sectors. These pilots are due to report during 2007 and 2008.
2.5 The Carbon Trust is currently conducting a smart metering trial amongst SMEs to promote awareness and to help build support for smart metering. Early results suggest that significant energy savings are possible.
2.6 In partnership with the energy supply companies, DTI are to commence Smart Metering trials across the whole of the UK during 2007. The trials provide the opportunity to explore the wider benefits of smart metering to the UK economy and will include the value of gas smart meters combined with realtime displays. It will also highlight technical issues which are to be overcome and demonstrate the cost effectiveness and value for money of Smart Meters. The UK Government is also currently piloting real-time electricity displays to determine the extent of energy savings that it can deliver to consumers.
2.7 The UK Government is responsible for the introduction of any mandatory metering and billing measures. Once the results of the various pilots are available, the UK Government will consult with Ofgem, energy suppliers and other interested parties on what these measures should be, how they may be implemented and will ensure they fit with the UK's obligations under the EU Energy End Use Efficiency and Energy Services Directive.
3. More Efficient Use and Production of electrical appliances
3.1 Making energy-using products more efficient and removing the least efficient products from the market, will help to reduce energy consumption and fuel bills, and therefore cut carbon dioxide emissions.
3.2 The UK Government's Market Transformation Programme ( MTP) is working at a European and international level and with manufacturers and retailers in the UK to drive improvements in the energy efficiency of products through EU legislation, voluntary agreements and labelling schemes. Several groups of products from the domestic and business sector have been identified as a priority for action, such as:
- Domestic lighting;
- Consumer electronics such as set top boxes, television sets and chargers;
- White goods such as fridges, freezers and washing machines;
- Static electric motors and drives used in machinery such as pumps and fans (as used, for example, in air conditioning systems); and
- Office equipment such as computers, printers and photocopiers.
3.3 The most recent estimate by MTP is that taken together, consumer electronics, home computing equipment, domestic cooking equipment and office equipment in the UK produced approximately 800,000 tonnes of carbon in the UK during 2004 and that in the same year, 8% of all domestic electricity was used to power appliances on standby.
3.4 MTP has been encouraging manufacturers to reduce both the "on" and the "standby" power consumption of household appliances. The Eco-design of Energy Using Products ( EUP), which is expected to come into force later this year, will provide a streamlined and effective route for setting EU-wide environmental requirements for traded goods.
3.5 EUP requires the Commission and member states to treat the issue of standby energy consumption as a priority area for consideration. The UK Government will work proactively with the Commission and other member states to influence and speed the delivery of measures under EUP.
4. Fiscal Measures & Financial Incentives
4.1 There are a number of regulatory and fiscal measures which aim to improve energy efficiency across the public, business and domestic sectors.
4.2 The business and public sector is subject to a tax on their energy use known as the Climate Change Levy. It came into effect on 1st April 2001 and aims to encourage industry and the public sector to reduce their demand for energy and improve energy efficiency, and thereby reduce carbon dioxide emissions. It is paid through energy bills and the rates vary depending on the type of fuel used.
4.3 Defra has responsibility for the Climate Change Agreements with energy-intensive sectors. The agreements provide an 80% discount from the climate change levy for those sectors that agree challenging targets for improving their energy efficiency or reducing carbon dioxide emissions. Climate change agreements have now been concluded with almost all of the eligible sectors.
4.4 The EU Emissions Trading Scheme which started on 1 January 2005, sets a cap on carbon dioxide emissions allowances for the largest energy users. Organisations must meet their installation-level caps or buy allowances from the market. Those who do better than their cap can sell their allowances. The first trading period runs to 31 December 2007 and Phase 2 will cover the Kyoto commitment period from 2008 to 2012.
4.5 The European Commission is proposing to strengthen the Emission Trading Scheme post-2012 so that it provides a stable and transparent investment framework for business and greater clarity for investors. Work on reviewing the Scheme is underway and the UK Government, with support of Scottish Ministers, are developing and feeding in their views.
4.6 Following the Energy Review, the UK Government, with support of Scottish Ministers, is also considering proposals to achieve reductions in carbon dioxide emissions from large, non-energy intensive users of energy in the business sector, i.e., those not covered by the EUETS. A public consultation on this finished on 31 Jan. '07. Under consideration is a mandatory auction-based emissions trading scheme, called the Energy Performance Commitment ( EPC), and other options from which it is planned to reduce carbon dioxide emissions by 1.2M tonnes of carbon per annum by 2020. If the EPC emerges as the favoured option, it would involve some 5,000 organisations UK wide, including supermarkets, hotel chains, rail operators, large offices, universities, central government departments and large local authorities.
4.7 Enhanced Capital Allowances help businesses to invest in energy saving equipment by claiming 100% first year capital allowances on qualifying plant and machinery. The investment is offset against corporation tax. There are three schemes for Enhanced Capital Allowances:
- Energy-saving plant and machinery;
- Low carbon dioxide emission cars and natural gas and hydrogen refuelling infrastructure; and
- Water conservation plant and machinery.
4.8 The Energy Efficiency Commitment ( EEC) is the UK Government's main vehicle for delivering energy efficiency into the home. Under the Commitment, energy supply companies are required to achieve targets for assisting households to become more energy efficient. Measures supported to date include cavity wall and loft insulation and energy efficient boilers, appliances and light bulbs.
4.9 The first and second phases of the EEC, which run from 2002 to 2008 have so far delivered measures which are predicted to save 400,000 tonnes of carbon each year, saving consumers £9 for each £1 spent, and reducing consumer bills by £3 billion over the period to 2020. Insulation measures continue to dominate the measures used by suppliers to achieve their obligation - in the first year 430,000 cavity wall and 370,000 loft insulations were installed across the UK.
4.10 The EEC can also help to alleviate fuel poverty as at least half of all energy savings are directed at a 'Priority Group' of low income customers specifically, those in receipt of certain benefits and pension credits. Under the EEC 1 (2002-2005) the 'Priority Group' benefited from £1.8m in reduced energy bills and nearly half of the total energy savings achieved by suppliers resulted from measures provided to priority group households.
4.11 The third phase of the EEC will run from 2008 to 2011, and it is intended that the target for suppliers to promote energy efficiency improvements will be increased by a further 50 - 100%. Proposals for widening EEC3 to include measures addressing consumer behaviour, more accurate metering and billing and microgeneration are being considered. This will offer more flexibility for suppliers to deliver a larger range of measures to bring about carbon savings to householders. The UK Government carried out an initial consultation during Autumn 2006 and will issue a statutory consultation during Spring 2007.
4.12 The UK Government has announced a commitment to the maintenance of a household obligation on suppliers until at least 2020, and is currently considering mechanisms that would provide a more effective and sustained reduction in household energy demand post 2011, including better incentives for suppliers to help consumers reduce their energy consumption. As these mechanisms would involve a radical change of the supplier business model, the UK Government will be working closely with the energy supply companies and will consult widely before deciding the final scope and objectives of the post-2011 framework.
5. Microgeneration
5.1 The Climate Change and Sustainable Energy Act 2006 received Royal Assent on 21 June this year. Under the Act, the UK Government has to consider setting national microgeneration targets by November 2008. (These include the number of electricity microgeneration systems installed in Scotland while any targets for heat systems are for the Executive to set). The Executive is currently carrying out work to assess the potential for microgeneration targets in Scotland during 2007.
5.2 The Act also empowers the UK Government to require all energy suppliers, through licence modifications, to offer to acquire electricity exported by microgenerators during 2007. If by the end of 2007, energy suppliers have not developed a system to acquire electricity from microgenerators, the UK Government will intervene.
5.3 The DTI's Low Carbon Buildings Programme is available across the UK and provides grants for microgeneration technologies for householders, community organisations, schools, the public sector and businesses. It was launched on 1 April 2006 and will allocate £80 million of grants over a period of three years to March 2009 through two separate phases. The programme aims to demonstrate how energy efficiency and microgeneration can work hand in hand to create low carbon buildings, and supports a similar range of technologies as SCHRI. In addition, it also supports solar photovoltaics, micro CHP (Combined Heat and Power) and fuel cells.
5.4 Phase 1 of the programme was launched in April 2006 to replace the previous DTI Clear Skies and Solar PV grant schemes and will run over 3 years. This Phase applies to home owners, community groups, not for profit and commercial organisations and has £30 million funding.
5.5 Phase 2 of the programme launched in December 2006. It has funding of £50 million and aims to encourage the uptake of microgeneration in the public sector through procurement. This phase of the programme will operate on a framework-style agreement whereby a few suppliers of microgeneration installations (selected through an open and competitive tendering process) agree to provide products at reduced prices, in return for access to the market guaranteed by the £50 million grant funding. A condition of the grant award will be that equipment is purchased from signatories of the agreement.
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