Updated: The UK, Europe, and an energy efficiency revolution
Update 19/6/14: Uncertainty over the European Commission’s preferences for a 2030 energy efficiency target continue. A leaked impact assessment suggests it favours a binding EU-level reduction of at least 30 per cent with no national targets. But commission President Jose Manuel Barroso and energy commissioner Günther Oettinger are said to favour a non-binding 27 per cent goal. See paragraph five onwards for updates.
Does Vladimir Putin secretly want you to get your walls insulated? He certainly seems to be doing his best to encourage strong EU energy efficiency legislation.
But if the EU does raise its ambition on energy efficiency as part of its 2030 climate and energy package, UK energy saving policies would also have to become much more ambitious. How big a task would it be to meet an EU energy saving goal, and how would the UK go about it?
Persuasive Putin
EU member states are currently negotiating the details of the 2030 policy package that will set targets for emissions and – maybe – for renewable energy and energy efficiency too.
The UK and many other member states are against an energy efficiency goal. But Russia’s decision on Monday to shut off gas supplies to Ukraine will have focused minds. The EU currently spends more than â?¬1 billion per day on imports, a figure that is expected to rise. Russia supplies about a third of its coal, oil and gas imports. A 40 per cent energy efficiency target could remove the need to import Russian gas entirely.
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European energy commissioner Günther Oettinger is today meeting commission president Jose Manuel Barroso and climate commissioner Connie Hedegaard to discuss efficiency. Germany and six other EU member states have backed a binding efficiency target in a letter sent to the commission. They write:
“The current situation in the Ukraine emphasises the importance of reducing dependence on imported oil and natural gas.”
Target range
Details of the level of ambition or type of target we should be expecting are sketchy. A leaked commission impact assessment looks at a range of 25-40 per cent reductions by 2030 compared to business as usual.
It favours a binding EU-level energy saving target but says that binding national targets would not be coherent with the EU 2030 climate package and would have “uncertain effectiveness and economic efficiency”.
The meaning of the 2030 business as usual baseline is uncertain. Business as usual projections for 2030 were prepared for the commission in 2007 and then again in 2009. The results were ” very different” because of the intervening 2008 financial crisis.
Any 2030 target would build on an existing non-binding 2020 EU energy saving target, which aims for a 20 per cent reduction, currently thought unlikely to be met. The leaked paper says the 2020 goal is not expected to be missed by more than 2 percentage points, however.
The chart below shows UK non-transport energy use against a 1990 baseline. Actual data is in grey and the UK’s national energy efficiency action plan towards its 2020 goal is in blue. The pink and purple lines show the scale of a further 30-40 per cent cut for non-transport emissions relative to that existing plan, and progress so far.
Non-transport energy use has fallen but the UK will need to step up its efforts to reach its 2020 plan. Energy saving efforts would need to come quicker still after 2020 under reduction targets in excess of 30 per cent for 2030.
But the baseline uncertainty discussed above makes it tough to predict the real impact for the UK. When the commission predicted ‘business as usual’ for the UK back in 2009, it assumed non-transport emissions in 2030 would be 8 per cent below 1990 levels.
That baseline would translate into more stringent targets for the UK than the graph above implies – each reduction target would be around 5 percentage points tighter.
Increasing ambition on energy efficiency
So how are we currently doing?
The UK’s current progress on energy efficiency has received a mixed review. The Committee on Climate Change says it could and should do more, with progress so far patchy in both buildings and industry. These are the main areas where the non-transport efficiency target will be tackled.
How much potential there is to improve energy efficiency cost-effectively in industry is not well understood.
DECC expects its industrial energy efficiency policies to meet 12 per cent of the 2020 target, even though industry accounts for nearly a third of non-transport energy use. But two of the main schemes supposed to drive industrial efficiency were weakened by recent changes to policy, while investment in new, more efficient industrial plant has slowed since the 2008 financial crisis.
The government expects tighter regulations for the energy efficiency of new buildings to drive about two-fifths of planned energy savings for 2020. But these rules are much less ambitious than originally planned and to have the biggest impact would require old building stock to be bulldozed.
This issue is particularly acute for homes, where the vast majority of stock is old and not being replaced. Homes accounted for about half of non-transport energy use in 2012 so are key to future savings.
Home energy use is already falling, down 11 per cent in the decade to 2013. That’s due to a combination of higher prices, more insulation, better boilers and newer energy efficient appliances and suggests achieving further cuts could be pushing at an open door.
But a quarter of the 2020 savings projected by DECC are due to come from two successful home energy efficiency retrofit policies that stopped operating in 2012.
DECC thinks its replacement schemes, the Energy Company Obligation (ECO) and Green Deal, will contribute just 10 per cent of the total savings projected for 2020. But ECO was significantly weakened last year and the Green Deal is massively underperforming.
The Committee on Climate Change has warned that these schemes are likely to be less effective than those they replaced. It says home energy efficiency policies should be strengthened.
Too radical for a manifesto
How could ambition be increased in the UK?
Public service union Unison reckons there is much greater potential for energy efficiency retrofits of the UK’s ageing building stock to take a bite out of home energy use. It has proposed a massive 15 year, £68.5 billion door-to-door scheme offering free retrofits to all low income households and interest free loans to cover works for everyone else.
This could push all homes up to an efficiency rating of C from the current average of D. Unison says this would save homes £300-600 on average. Its proposal is closely related to the Energy Bill Revolution plan that we looked at in detail last year.
The challenge for both of these proposals is the high cost. They suggest recycling money received by the Treasury for emissions allowances under the EU emissions trading scheme and the Carbon Floor Price that tops up the value of those allowances.
That is nearly £4 billion a year that the Treasury would have to find from elsewhere.
The opposition Labour party is due to publish a green paper on energy efficiency shortly. Both Unison and Energy Bill Revolution advocates have or will meet with Labour to encourage it to adopt their ambitious plans.
Unison national energy officer Matthew Lay hopes Labour will take the idea forward but admits it would be “too radical” for a 2015 election manifesto.
Lay says:
“No-one is taking energy efficiency seriously. The benefits of our plan could be huge. Anything else would be a sticking plaster on an open wound.”
Shadow energy and climate secretary Caroline Flint told a conference last week that energy efficiency was “without doubt” the cheapest way to reduce bills and cut emissions. She wants the UK to be a paragon of efficiency and derided the “mediocre” Green Deal and ECO schemes.
This may suggest an incoming Labour government would want to boost UK energy efficiency efforts, whether the EU sets a binding 2030 target or not.