department for business, enterprise & regulatory reform

RENEWABLE ENERGY STRATEGY September 2008

| Association for the Conservation of Energy 1

Department for Business, Enterprise & Regulatory Reform consultation: “Renewable Energy Strategy” ACE response – September 2008

Introduction to the views of ACE The Association for the Conservation of Energy is a lobbying, campaigning and policy research organisation, and has worked in the field of energy efficiency since 1981. Our lobbying and campaigning work represents the interests of our membership: major manufacturers and distributors of energy saving equipment in the United Kingdom. Our policy research is funded independently, and is focused on three key themes: policies and programmes to encourage increased energy efficiency; the environmental, social and economic benefits of increased energy efficiency; and organisational roles in the process of implementing energy efficiency policy. We welcome this opportunity to respond to this consultation. For further information please contact: Darryl Croft Researcher Association for the Conservation of Energy Westgate House, 2a Prebend Street London N1 8PT (020) 7359 8000 [email protected] www.ukace.org

mailto:[email protected]

http://www.ukace.org/



Summary of the ACE’s response to the consultation 1. ACE is pleased that the role of energy demand policy in helping to achieve

the renewables target has been recognised. The statements that: reducing energy demand will help reduce the absolute amount of renewable energy required to meet the target [paragraph 15]; that the costs of meeting the target will be much lower if demand can be reduced [paragraph 21]; and that the estimated cost of reaching the target could make energy efficiency measures of up to £45/tonne CO2 economically attractive [paragraph 27], combine to make a compelling argument for the widest possible energy efficiency drive.

2. There is much that can be achieved at a cost of far less than £45/tonne CO2. As the chart below from reports by McKinsey1 and Vattenfall2 illustrates, energy efficiency improvements to buildings are the most cost-effective way of tackling climate change, representing negative marginal abatement costs and releasing value for the UK economy.

3. Reducing energy demand is paramount to addressing the UK’s four primary

energy objectives: improving energy security by reducing imports; reducing costs to the consumer; reducing CO2 emissions; and ensuring a competitive UK economy through reduced wastage. With this in mind it is vital that the UK develops a truly integrated approach to energy policy with

1 The McKinsey Quarterly, 2007, Number 1. http://www.epa.gov/air/caaac/coaltech/2007_05_mckinsey.pdf

2 Global Mapping of Greenhouse Gas Abatement Opportunities, Vattenfall, 2007.

http://www.vattenfall.com/www/ccc/ccc/Gemeinsame_Inhalte/DOCUMENT/567263vattenfall/P02.pdf

http://www.epa.gov/air/caaac/coaltech/2007_05_mckinsey.pdf

http://www.vattenfall.com/www/ccc/ccc/Gemeinsame_Inhalte/DOCUMENT/567263vattenfall/P02.pdf



energy efficiency at its centre, thus ending the current cross-departmental division of supply and demand side policy.

4. Given the above, ACE finds the statement that the role of energy efficiency “should not be exaggerated” in paragraph 2.1.4 of the consultation particularly worrying. Whilst it is true that a 7kWh reduction in energy demand will only reduce the renewable target by 1kWh, it will reduce the required investment in other generational capacity by 6kWh. And that says nothing for the CO2 savings that will result, and the wider benefits of curtailing demand as set out above.

5. ACE does not believe that the choice should be between investing in

renewables and energy conservation to meet this target. The widest possible energy saving programme should be started immediately to help householders with their bills, the UK with its energy supply and climate/energy targets, and business with improved competitiveness. As a by-product, the amount of absolute renewable generation required by 2020 will be reduced.

6. This would also avoid the need to look internationally for some of our

renewable energy deployment. Paragraph 1.5.4 suggests that meeting the marginal percentage point of the target by supporting renewable deployment outside of the UK could reduce the overall cost by 15-20%. However, this takes no account of further demand reduction which would effectively also replace the marginal costs of the final percentage point; would provide real benefits in terms of reduced fuel bills, reduced occurrence of fuel poverty and increased comfort levels to the UK population; would help achieve the UK’s climate change targets; would reduce the UK’s reliance on imported fuel; would improve the competitiveness of UK business and create many jobs in the energy service sectors; and finally, could remove the oft-cited accusation that the Government simply wants to export the UK’s problems elsewhere. None of the above benefits would accrue should the UK export some of its renewables target.

Specific questions and answers Chapter 1 - Renewables and the Energy and Climate Challenge 7. (Q1) How might we design policies to meet the 2020 renewable energy target

that give enough certainty to business but allow flexibility to change the level of ambition for a sector or the level of financial incentive as new information emerges?

8. ACE believes that the best way to achieve this is to set sectoral CO2

reduction targets and then allow each sector to decide how they meet this



target- either through energy efficiency or renewables or a mixture of both. ACE believes strongly in the effectiveness of statutory targets for organisations, with a variety of incentives and sanctions including the option of Judicial Review. Statutory CO2 targets will not only give direction to Government, but are vital to give business the certainty it needs to make the appropriate investment decisions as well as flexibility in how the targets are met.

9. It is essential that Government considers emissions at the sectoral level. If

each sector is not given specific targets upon which they must report, individual companies and businesses will present excuses as to why they should not have to reduce their emissions. Businesses will state that Government needs to concentrate instead on other sectors and may try to demonstrate that any action they take will have negligible results. Each business will pass the responsibility of reducing emissions on to the other, resulting in little or no emissions reductions in the commercial sector. Therefore ACE is campaigning for the draft Climate Change Bill to be amended to include sectoral targets (see Appendix 1 for the proposed amendment).

10. The Association also believes that Government should be leading by

example and should thus be subject to the most challenging statutory targets. ACE is therefore supporting an additional amendment to the Climate Change Bill which would require all newly procured central Government buildings to have an energy efficiency rating of A or B (see Appendix 2 for this proposed amendment). Strong and demonstrable public sector leadership – aside from contributing to the fulfilment of some of the requirements of the Energy End-use Efficiency and Energy Services directive – increases the political acceptability of ambitious targets for other sectors and represents the first best option for facilitating the creation of the low carbon and energy services market needed to continuously lower the cost of carbon savings going forward.

11. Useful flexibility is not just about the range but, more importantly, the

quality of policy options available: Sectoral targets allow the monitoring of progress towards targets to inform sector-specific – i.e. more effective – policy adjustments to be made over time, should individual sectors fall behind schedule. Without sectoral targets, the appropriateness, degree of, and audience for policy adjustments will be much harder to determine.

12. (Q2) To what extent should we be open to the idea of meeting some of our

renewable energy target through deployment in other countries? The Association believes that Government should be aiming for 100%

internal provision to achieve the UK’s renewable energy target. This would allow the UK economy to receive the full benefits associated with installing renewable energy technologies, and, if investment is suitably targeted, could also help to achieve the Government’s existing fuel poverty targets.



It would also avoid the risk, highlighted in the consultation document paragraph 1.5.5, of undermining domestic support mechanisms for renewable energy.

13. The Association strongly believes that the best way to reduce the cost of

meeting the renewable energy target is by reducing energy demand, rather than by trading with other countries. As highlighted in paragraph 1.5.4, meeting the marginal percentage point of the target by supporting renewable deployment outside of the UK could reduce the overall cost by 15-20%. However, this takes no account of further demand reduction which would effectively also replace the marginal costs of the final percentage point; would provide real benefits in terms of reduced fuel bills, reduced occurrence of fuel poverty and increased comfort levels to the UK population; would help achieve the UK’s climate change targets; would reduce the UK’s reliance on imported fuel; would improve the competitiveness of UK business and create many jobs in the energy service sectors; and finally, could remove the oft-cited accusation that the Government simply wants to export the UK’s problems elsewhere. None of the above benefits would accrue should the UK export some of its renewables target. Achieving the entire renewable energy target domestically does not represent a higher cost; it represents a higher level of genuine investment in the UK.

14. See our response to chapter 2 below for our views on how to maximise energy savings. The Association agrees with the Government’s view that saving energy should be the starting point for energy policy.

Chapter 2 - Saving Energy

15. (Q3) In the light of the EU renewable energy target, where should we focus

further action on energy efficiency and what, if any, additional policies or measures would deliver the most cost-effective savings?

16. ACE’s concern is with the use of energy in buildings, and therefore our

focus is on the following areas: the existing housing stock, new build, industrial and commercial buildings, and public buildings. Further action is required in each of these areas if we are to meet the consultation’s stated aim of “using every unit of energy as efficiently as possible”.

Addressing the existing housing stock

17. ACE would like to draw attention to an interest free/low interest loan scheme for energy efficient refurbishment in Germany. Current policies that encourage take up of energy efficiency measures cover many sections of society (e.g. the vulnerable, people living in Warm Zones, householders approached under CERT, those moving homes) but fail to offer assistance



to the many millions who don’t fall into these categories, and for whom one barrier is preventing take up: the initial capital costs.

18. Such a scheme has been central to Germany’s integrated energy and climate change programme (which includes a target to reduce electricity consumption through energy efficiency by 11% by 2020), and is much admired by the energy efficiency industry across Europe. Borrowers are able to take out low interest loans for measures that help older properties reach new-build standard through refurbishment (only pre-1984 dwellings are eligible for the loans scheme). Upon reaching this new-build standard, the Government will write off a percentage of the loan as an additional incentive. This percentage has had to drop over time as the number of homes reaching new-build standard exceeded expectations. In other words, this has been a huge success and demonstrates the policy flexibility inherent in financial instruments geared to a specific sector.

19. Features of the loans provided in Germany include:

Offered whenever householders seek a ‘general’ home improvement loan – i.e. a financially more attractive offer provided energy improvements are incorporated into the home’s improvement

A fixed (and heavily subsidised) interest rate for ten years - the rate varies depending on loan amount and duration, and is revised annually.

Flexible repayment over four to 30 years (increasing repayments incurs no additional cost)

Up to €50,000 per dwelling, regardless of which package (see below) is chosen

Loans can cover 100% of the investment as well as labour costs, project management costs, and secondary costs, such as scaffolding

Can be used in combination with other (non-energy) refurbishment

ESCOs carrying out refurbishments are eligible for the loan

20. Furthermore, the programme takes a 'whole house' view. To be eligible for finance, refurbishments must achieve a reduction in CO2 emissions of 40kg/m2/year. This is to be achieved through one of five packages of measures on offer. Packages one to four are different combinations of standard refurbishment measures (e.g. loft insulation, wall insulation, basement ceiling / ground floor insulation, window renewal, heating renewal, and fuel switching etc). These packages can be applied to most dwellings, and are ‘guaranteed’ to achieve the required reduction if fully applicable. Package five is designed for unusual cases or buildings which already have some measures installed, and is more tailor-made. Under package five, a certified expert will help determine the measures necessary for achieving the emissions reduction.

21. ACE notes a recent report commissioned by the Federation of Master

Builders, wherein a scheme such as that in Germany could be one way of moving towards the incorporation of energy into general refurbishment,



thus tapping into a repair, maintenance and improvement market which is already worth £23bn a year and could be – provided the huge energy improvement opportunities within this market are taken – worth £26.5-29.5bn per annum3, leading to large reductions in energy demand, CO2 emissions, and increasing the resistance to fuel poverty of the existing housing stock. Since the value of the loan is recouped by the treasury, the cost of such a policy to the public purse would be less than for policies that rely on subsidies.

22. Energy Performance Certificates are a valuable tool for allowing homeowners to make purchasing decisions based on energy efficiency, and make significant improvements to their new homes once they move in. However, the information displayed in EPCs is only useful in informing and influencing potential home/building buyers and tenants if it is proactively displayed and publicised when people are making buying/renting decisions. Therefore it is vital that this information is not hidden away amongst other paperwork, but actively displayed and publicised as part of the marketing of the house/building. Just as consumers can easily glance at a refrigerator or a washing machine and clearly see its energy efficiency rating, the same needs to become the norm for homes and buildings for sale or rent, which obviously represent a much larger investment decision.

23. ACE believes that the Government should make it mandatory for the EPC

rating of a building/home to be clearly visible and displayed in a prominent position in all marketing material associated with the home/building. No new legislation is required to impose this requirement on estate agents- an Order or Regulation under the 1979 Estate Agents Act would suffice. As awareness of EPC ratings grows, this should build demand in the market for ‘greener’ homes and buildings and make this a marketing tool in its own right. Furthermore, visibility of EPCs is the crucial first step for further EPC-based regulation and incentives, opening the door to more and more politically acceptable policy options over time.

24. When people have recently purchased a home or building, they are much

more likely to undertake renovations to make desired changes to the property. This is therefore an ideal time to encourage them to improve the energy performance of the property, and will allow them to reap the maximum benefits from the improvements over their whole period of residence. The Government could encourage this behaviour by introducing a Stamp Duty Rebate, whereby a householder/building owner was refunded the Stamp Duty Taxes incurred when the property was bought or offer council tax rebates if the cost-effective energy-saving improvements recommended on the EPC are implemented within (say) two years. A Council Tax Rebate could be designed to work in a similar way. These financial incentives need not be funded by the Government- they could be

3 http://www.existinghomesalliance.org.uk/media/FMBBuildingAGreenerBritain.pdf

http://www.existinghomesalliance.org.uk/media/FMBBuildingAGreenerBritain.pdf



funded by imposing a surcharge on (say) F and G rated homes and buildings that are not improved within a set period of purchase, perhaps two years.

25. The installation of energy efficient products would also be incentivised

through amendments to the rate of VAT. Currently a reduced rate of VAT of 5% is offered for the supply and installation of certain energy efficient products or materials in non-grant schemes when householders employ contractors. ACE recommends that this should be extended to all measures, and that the Government should intensify its calls, in concert with the French Government, for a change in EU VAT legislation to allow the reduced rate to apply when householders install the measures themselves. This will prevent discrimination against low income households who are more likely to install energy saving measures themselves than pay someone else to do it.

26. ACE is disappointed that the Government has recently made a u-turn on

their policy to make energy suppliers provide real-time electricity display devices to domestic customers free on demand (for a period of two years) and with new and replacement meters. Instead energy suppliers can choose to make them available, at cost, purely on a voluntary basis or provide them under the CERT programme.

27. Householders need to receive timely and accurate information about their energy use to help them to reduce their energy consumption. These devices would have helped users better understand their electricity use and relate these to their costs, and so instigate behavioural change. Simple display devices can save up to 10% of electricity consumption and more complex displays have shown savings of up to 18%4. The DEFRA cost impact assessment concluded they would benefit the UK economy by £500m.

28. As the roll out of smart meters will take anything from 10 to 20 years it seems a real missed opportunity that display devices (which could be interoperable with a future smart meter roll out) are not being given out to customers as soon as possible.

29. Smart meters should be provided to all homes and businesses (large and small), as quickly as possible and real-time portable display devices should form part of the smart meter package. The instant feedback provided by smart meters with displays allows consumers to see how their behaviour affects their energy consumption and how the implementation of energy efficiency measures can also reduce consumption.

4The Effectiveness of Feedback on Energy Consumption, A review for Defra of the literature on metering, billing and

direct displays, Environmental change Institute, Sarah Darby, April 2006. http://www.defra.gov.uk/environment/climatechange/uk/energy/research/pdf/energyconsump-feedback.pdf

http://www.defra.gov.uk/environment/climatechange/uk/energy/research/pdf/energyconsump-feedback.pdf



30. Smart meters must be accompanied by accurate monthly billing to enable the user to monitor their energy use and easily view the impact of any changes they make in the premises.

31. Smart meters can also encourage the uptake of microgeneration by providing the consumer with accurate information on how much electricity they are generating and by allowing them to export electricity to the grid.

32. The Government has recently launched a consultation5 which proposes to repeal the Home Energy Conservation Act 1995. The Act requires a 30% improvement in residential energy efficiency over a 15 year period (1996 – 2011) by Energy Conservation Authorities. During its first eight years, HECA resulted in 93.4 terawatt hours of energy savings.

33. Two new performance indicators have been introduced, and Government

is proposing to use these to “replace” the Act – one on fuel poverty and the other on per capita CO2 emissions. However, these will not be mandatory targets, and ACE is concerned that many councils are giving them insufficient priority, with a minority of councils reporting against the per capita CO2 indicator, and only a handful against the fuel poverty indicator. This is not surprising, since each council has 196 other indicators competing for its attention. The two new indicators are also not an exact proxy for energy efficiency. They may of course have an additional role to play in helping local authorities tackle climate change.

34. Under Section 4(3) of the Sustainable Energy Act 2003 the Secretary of State may exercise a power to give an ‘energy efficiency direction’ to all or some authorities. Authorities must then comply with this direction. To date this power has not been used. The use of this power would compel the worst performing authorities to do better. ACE believes that the Home Energy Conservation Act should not be repealed but instead be strengthened and supported properly thereby allowing it to reach its full potential to deliver household energy savings.

35. Given the statutory requirement to abolish fuel poverty by 2010 for

vulnerable households and by 2016 for all households in England, it is absurd that in the 2007 Comprehensive Spending Review, Government cut funding for its primary fuel poverty program, the Warm Front, from £350m for the year 2007/8, to what amounts to an average of £267m/a for the period April 2008 to March 20116. This was despite fuel poverty being at its highest level for nearly a decade, and despite recommendations by the Fuel Poverty Advisory Group (FPAG) that the 2007/08 level of funding be at least retained if the statutory targets were to be met. The announcement in September 2008 that the Warm Front budget would be increased by £75

5

Consultation on the Review of the Home Energy Conservation Act 1995, DEFRA, 2008. http://www.defra.gov.uk/corporate/consult/heca/index.htm

6 Fuel Poverty Advisory Group (for England), Sixth Annual Report, 2007. http://www.berr.gov.uk/files/file45365.pdf



million over the April 2008 to March 2011 period, still leaves the budget on an average of £292m/a, 16.5% less than the minimum £350m/a required as recommended by FPAG.

36. Warm Front has been very successful. It has reduced fuel bills for low

income customers (by £200 pa or 20% in 2006); reduced CO2 emissions in a very cost effective way according to the two separate NAO reports, the latter of which states that expanding Warm Front would earn the UK over £250/tonne CO2 saved; has always spent the money allocated to it through its success in finding eligible customers. For these reasons, funding for Warm Front must be restored then increased.

37. ACE welcomes the proposals for a Supplier Obligation, provided that it puts

the onus on energy suppliers to reduce energy demand. ACE has had a long-term policy of supporting upstream cap and trade scheme for the post-2011 supplier obligation, away from schemes based on individual measures delivering putative energy savings, to one based on capped carbon emissions in the domestic sector which deliver actual savings. With a measures-based scheme, only the number of energy-saving measures is known, but the absolute level of energy and carbon dioxide reduction is uncertain. It is possible for a supply company to offer their customers CFLs one day, and energy intensive patio-heaters the next. A cap and trade scheme delivers a more certain outcome in carbon/energy terms, ensuring that energy suppliers fully transform into ESCOs.

New build

38. Strict standards on the energy performance of new buildings helps to set an example, and develop the advanced skills-set needed in the work force for tackling the wider problem of existing buildings. ACE believes that there is a concerted effort being undertaken to water-down the definition of ‘zero-carbon’ to a point where the energy demand of the building is irrelevant, providing developers can pay to develop renewables off-site. This is clearly unacceptable, and does nothing to restrain UK energy demand as is required. Government needs to ensure that the energy requirements of new build are kept to a minimum.

39. An improvement in the compliance of new buildings with Building

Regulations is required if improved energy efficiency standards are to be effective. Work undertaken by the Energy Efficiency Partnership for Homes (EEPfH) revealed serious failings in the implementation of the 2002 changes to Parts L and F of the Building Regulations7. The recent National Audit Office (NAO) report warned that there is a “growing recognition that non-compliance may undermine the effectiveness of Building Regulations”,

7Energy Efficiency Partnership for Homes (2004) Assessment of Energy Efficiency impact of Building Regulations

Compliance http://www.eeph.org.uk/uploads/documents/partnership/Building%20Regs%20Compliance%20Report%20Oct%2004.pdf

http://www.eeph.org.uk/uploads/documents/partnership/Building%20Regs%20Compliance%20Report%20Oct%2004.pdf

http://www.eeph.org.uk/uploads/documents/partnership/Building%20Regs%20Compliance%20Report%20Oct%2004.pdf



especially as the Regulations become more stringent8. The report concluded that there are three reasons why buildings may be being built or renovated in a sub-standard way: “Poor compliance can result from poor understanding of the requirements, poor workmanship, and local authorities’ limited resources for enforcing compliance”.

40. The same report criticises Government for complacency, “Until now,

projected impacts for this programme have assumed full compliance.” The Communities & Local Government Department (CLG), which oversees Building Regulations, is criticised for the absence of official studies into “whether non-compliance may be a significant factor inhibiting effectiveness”. The CLG has now commissioned a study jointly with the EEPfH. The NAO report insists that results from this study into 100 homes built under the 2006 standards “must be used to inform future amendments to the Regulations, and support more realistic estimates of impact”. Clearly improvements in compliance are required for there to be any certainty that tightened regulation is delivering the expected energy savings.

Industrial and Commercial Buildings

41. Climate Change Agreements (CCAs) have been made with 46 separate industrial sectors, and in return for agreed investments in energy reductions, the firms get an 80% tax break on the Climate Change Levy. This has been a successful policy. However we do not know what proportion of these savings are occurring in the factory building envelope itself, as opposed to making the factory process more efficient. ACE believes that CCAs should be adjusted to ensure a higher proportion of savings come from improving the efficiency of buildings.

42. Energy use in private sector buildings would also be improved if the

Government insisted on the correct interpretation of Article 7.3 of the EU Energy Performance of Buildings Directive (EPBD). The Article states: “Member States shall take measures to ensure that for buildings with a total useful floor area over 1000 m2 occupied by public authorities and by institutions providing public services to a large number of persons and therefore frequently visited by these persons an energy certificate, not older than 10 years, is placed in a prominent place clearly visible to the public.”

43. ACE believes that Article 7.3 should be interpreted to include private sector

organisations “providing public services to a large number of persons”, such as banks, supermarkets and retail stores, rather than limiting the definition to services funded by taxpayers, as the Government has chosen to do. By using the Government’s current interpretation, Article 7.3 is

8National Audit Office (2008) Programmes to reduce household energy consumption

http://www.nao.org.uk/pn/07-08/0708787.htm

http://www.nao.org.uk/pn/07-08/0708787.htm



repetitive because publicly funded services are already covered as “public authorities”.

44. This would be in keeping with the spirit of the EBPD, which states in Recital

No 16 that: “Public authority buildings and buildings frequently visited by the public should set an example by taking environmental and energy considerations into account and therefore should be subject to energy certification on a regular basis. The dissemination to the public of this information on energy performance should be enhanced by clearly displaying these energy certificates”.

45. Given that large non-energy intensive businesses covered by the Carbon

Reduction Commitment (CRC) programme will need to have an energy audit completed as part of the CRC, it would present a small marginal cost to produce Display Energy Certificates (DECs).

46. ACE welcomes the Government’s proposal to consult on whether the

requirement for DECs should be extended to include private sector buildings occupied by commercial organisations where large numbers of members of the public regularly visit the building. It is important to note, however, that the Government has already consulted on this very issue. As long ago as July 2004. 74% of respondents to the then ODPM’s consultation document on amending Part L of the Building Regulations supported the proposal to require DECs to be displayed in private sector buildings frequently visited by large numbers of the public.

47. The Association welcomes the introduction of the Carbon Reduction

Commitment (CRC) in order to tackle emissions from previously neglected non-energy intensive large business and public sector organisations. However, we believe that the threshold should be annual consumption on all fuels (not just electricity) and should be lowered from 6,000 MWh per year to 3,000 MWh per year equivalent. This equates broadly to annual fuel bills of £250,000 or over, leading to anticipated savings by each participant of at least £50,000 p.a – 20% of fuel bills. With the current threshold, even its greatest champions think the CRC can reduce emissions by no more than 3.7 million tonnes by 2020. Lowering the threshold would include more organisations in the scheme and increase the potential emissions reductions.

48. In addition, ACE believes that the CRC revenue should not be recycled

directly back to participants, but instead all the income (minus administration costs) should be invested into incentives to make improvements to carbon efficiency. This could be administered by the Salix fund, which would pay out grants on successful application by individual participants in the scheme. The issue of additionality is very difficult for grant making bodies to monitor, and could be abandoned if the overall



investment in energy efficiency is increased, rather than diminished, by the overall requirements of the CRC.

49. Regarding SMEs, ACE urges the Government to increase the size of the

Carbon Trust administered zero-interest loan scheme. There is much greater demand for this scheme each year than there are funds available. Public Buildings

50. The Government should support an amendment to the Climate Change Bill, Procurement of Public Sector Buildings, to be tabled by Anne Snelgrove MP. This amendment will require all newly procured central Government buildings to have an energy efficiency rating of A or B in accordance with the energy rating system used for the purposes of an energy performance certificate (see Appendix 2 for the proposed amendment). This will not only reduce energy use in the public sector but create demand for low carbon buildings across the rest of the commercial sector.

Chapter 4 – Heat

51. (Q18) How far should the Government go in focusing on areas off the gas grid as offering the most potential for renewable heat technologies? Installing renewable heat technologies in areas off the gas grid is an important strategy for tackling fuel poverty. ACE, the Centre for Sustainable Energy and Dr Richard Moore completed a research project entitled “How Much? The Cost of Alleviating Fuel Poverty”. Hard to treat (HTT) homes are those located in areas without mains gas and/or which have solid or non-traditional walls (making insulation more costly). They house nearly half of all fuel poor households in England. The project found that in order to eliminate fuel poverty in England in HTT homes, significant numbers of renewable energy technologies would need to be installed, with all biomass boilers and 74% of ground source heat pumps in the model being installed into homes within this group. The average SAP rating for HTT homes is lower than for other dwellings to begin with, but in 80% of cases it rises to 65 or over once these measures are installed. The higher number of refurbishments containing renewables results in a higher SAP after measures are installed with only 20% of households in HTT homes remaining in fuel poverty. Across all and vulnerable fuel poor households only 70% and 72% respectively would see their SAP ratings rise to 65 or over.

Chapter 5 - Distributed Energy

52. (Q22) Do you agree with the Government’s current position that it should not introduce statutory targets for microgeneration at this stage in its development?



Paragraph 5.5.2 of the consultation document reports that ‘research shows that it is in fact a positive policy environment and not targets per se that drive decisions made by industry and investors’ and ‘the research was not able to uncover any discernible benefit of having a target’. It specifically quotes (at footnote 162) the Element Energy Research as the basis for these statements. In fact the Element Energy research actually found:

‘Legally binding microgeneration targets are perceived to drive the creation, monitoring and revision of government policy so that the targets are met.’

‘There appears to be a sensible logic for establishing a microgeneration target in the UK.’

‘The only value identified in establishing targets for the microgeneration sector appears to be in bringing forward cost reductions, through increasing confidence for suppliers and hence bringing forward investment and required scale-up.’

‘Targets backed up by policy could help to support investment.’

‘The type of target most likely to stimulate investment by suppliers is specific about sales volumes and hence a “units installed” or “sales per year” target is most relevant.’

‘If the government is prepared to alter microgeneration based policies to be more supportive of microgeneration, then this can be backed up with a target for microgeneration at relatively low risk and at no additional cost.’

‘The summary tables suggest that a number of plausible policies could lead to well over 2 million installations by 2020, with a possible stretch target of 3 million installations by 2020.

‘…Additional subsidy schemes (including a supplier obligation beyond 2011) should ensure at least 500,000 installations (by 2015). The following targets would therefore be achievable, yet challenging:

o 2015 – 500,000 units installed o 2020 – 2-3 million microgeneration units installed’

57. With the actual Element Energy evidence in mind, rather than the

distorted evidence presented in the consultation document, ACE believes that Government should introduce statutory targets for microgeneration.

Chapter 9 - Business Benefits 58. (Q38) What more could the Government or other parties do to ensure that

the UK secures the maximum business and employment benefits from the EU renewable energy target?



Government should require 100% internal provision to achieve the UK’s renewable energy target (see response to question 2).

Chapter 10 – Wider Impacts

59. (Q39) Do you agree with our analysis of the likely impacts of the proposed increase in renewable deployment on: a. carbon dioxide emissions; b. the local environment; c. security of supply; d. energy prices; e. fuel poverty; f. the energy market; g. the economy; h. any other wider issues that we should be considering?

(e) ACE agrees with the Government that meeting the renewable energy targets need not mean an increase in the number of people entering fuel poverty, provided renewable measures, financial support, and energy saving policies are properly targeted. The problem of fuel poverty is an additional driver to ensuring that energy demand across the UK is reduced, for there is no more effective and lasting solution to rising fuel bills than improving the energy efficiency of people’s homes, allowing benefits to be taken either as reduced fuel bills, increased comfort, or both.

Chapter 11 - Delivering the Target

60. (Q40) What more could each of the parties do to ensure the UK meets the EU

renewable energy target?

Devolved nations 61. As set out in the consultation document, the devolved nations are

developing their own strategies and action plans for delivering renewable energy and energy efficiency. As mentioned above, an ambitious approach to energy efficiency will make achieving the renewable energy targets significantly easier.

62. Specifically, we would suggest that the devolved nations move swiftly to grant permitted development rights for microgeneration installations in most domestic and non-domestic settings. We would also urge the Scottish Government to provide greater support to local authorities in implementing the requirement in Scottish Planning Policy 6 (SPP6) for on-site microgeneration in developments over 500 sq m in size; also that the size threshold in SPP6 be removed, and the required carbon saving be gradually increased over time. The devolved nations should also examine whether national loans schemes to promote energy efficiency and microgeneration are required in order to stimulate demand, or



whether a UK-wide approach to such finance schemes might be preferable. Lastly, it is essential that the forthcoming Scottish Climate Change Bill maximises synergy with policies for the promotion of energy efficiency and renewables. We believe the best way to do this is through sectoral targets on the face of the Bill. Local authorities

63. Local authorities also have a key role to play in meeting the renewable energy target and improving the energy efficiency of their building stock. Consequently ACE strongly disagrees with the Government’s proposal to repeal the Home Energy Conservation Act (HECA) 1995, which requires a 30 percent energy efficiency improvement in domestic housing stock over the 15 year period from 1996 to 2011 by Energy Conservation Authorities (ECAs). Instead of being repealed, the Act should be properly implemented as intended by Parliament and Ministers.

64. ACE does not believe that the new national performance indicators for local authorities (NI 186 on per capita CO2 emissions and NI 187 fuel poverty) are an adequate substitute for HECA. These indicators, after all, are not mandatory targets. In addition, there will be 196 other National Indicators, to which local councils, in the absence of the statutory HECA requirements, may well choose to give higher priority. NI 186 upon which DEFRA places reliance as a more or less direct “replacement” for HECA is couched in very broad terms, referring simply to “Per capita CO2 emissions in the LA area”. This is by no means the same as a measure of domestic energy efficiency. There is no distinction between domestic and commercial emissions; transport emissions are included, alongside those from buildings; and emissions reductions could potentially be reduced by continued consumption of the same amount of cleaner energy – i.e. no reduction in consumption at all.

65. Nevertheless, we believe that they may have a useful additional role to

play in helping local authorities tackle climate change, energy efficiency and fuel poverty. However, the indicators need to be strengthened in order to give the maximum assistance to local authorities. They should also be made mandatory in all Local Area Agreements.

66. Local authorities need to have access to as much information as possible on the energy performance of their stock. Therefore the Energy Saving Trust (EST) and the Carbon Trust should make Energy Performance Certificate (EPC) data available to local authorities to enable them better to fulfil their various responsibilities for cutting carbon emissions, improving energy efficiency and reducing fuel poverty.

67. Local authorities are already able to access the EST’s Home Energy Efficiency Database (HEED; where EPC data will eventually be stored)



but currently the smallest geographical area about which local authorities (and others) are able to obtain HEED data is the ‘census output area’, which is around 125 households. While this information is clearly useful, we would argue that most local authorities already have a fairly clear picture of the state of their housing stock on a street-by-street basis. We therefore believe that local authorities should be able to access EPC data (via HEED) for individual households. This will help them to target their energy efficiency programmes and resources in the most cost-effective and efficient manner. The EPC data for non-domestic properties held by the Carbon Trust should be made available to local authorities in the same way.

68. Allowing LAs to access this data would pave the way for an obligation on all local authorities to geographically define and publicise a ‘Low Carbon Zone’ within their area. These could act as focal points to attract energy supplier support and other grant assistance, raise local awareness of energy consumption and CO2 emissions, and develop the local skills base and create new jobs, thus accelerating the development of the energy services market, deployment of low carbon technologies and adoption of behavioural change, at a grassroots level.

69. Local authorities can also contribute to achieving the renewable energy target by exercising their rights under the Planning and Energy Bill (2008)9, which:

Enables Local Authorities to introduce policies that require a percentage of new developments’ energy needs to be met by renewable or low carbon sources located in the locality of the development;

Enables Local Authorities to set energy efficiency standards higher than those required by Building Regulations.

Annex 2 - Feed-in Tariffs For Small-Scale Electricity Generation

70. (Q4) Who do you think should have access to feed-in tariffs for small-scale

electricity generation? Factors that we would like you should consider in your response include:

Different generation technologies;

Size of generation station (i.e. to distinguish from eligibility of large-scale generation for support under the Renewables Obligation);

Whether generation is primarily for own use, supply locally or for export;

9http://www.ukace.org/publications/ACE%20Campaigns%20(2007-08)%20-

%20Planning%20and%20Energy%20Bill%20-%20final.pdf

http://www.ukace.org/publications/ACE%20Campaigns%20(2007-08)%20-%20Planning%20and%20Energy%20Bill%20-%20final.pdf

http://www.ukace.org/publications/ACE%20Campaigns%20(2007-08)%20-%20Planning%20and%20Energy%20Bill%20-%20final.pdf



Whether generation is on or off-grid;

Whether or not energy efficiency measures should be required. It is fundamentally important that any property applying for a feed-in-tariff is as energy efficient as reasonably possible. Energy efficiency measures are the most cost-effective way of reducing fuel bills and CO2 emissions, and only when basic improvements have been made should a feed-in-tariff be granted.

71. (Q5) Do you think it is reasonable to put in safeguards to limit the potential

cost of feed-in tariffs for small-scale electricity generation, and if so how could those safeguards be set, and what would the access criteria be? Possible factors and criteria we would like you to consider include:

A limit on overall number of new installations in a given period

A limit on new installed capacity in a given period

Whether priority should be given to particular groups; for example, people in fuel poverty.

Wherever possible, it is important to concentrate assistance on vulnerable groups such as the fuel poor.



Appendix 1: Proposed Amendment to the Draft Climate Change Bill with regards to sectoral targets

Climate Change Bill Report Stage New Clause

After clause 2 insert 2A Sectoral Targets (1) For the purpose of assisting with the achievement of the target specified in section 2, or any amendment thereto made pursuant to section 3, the Secretary of State must take all reasonable steps to ensure that the government sectoral targets for the time being specified in subsection (2) are achieved. (2) The sectoral targets referred to in subsection (1) are

(a) by 2020 the general level of energy efficiency of residential accommodation has increased by at least 20 per cent compared with the general level of such energy efficiency in 2010

(b) by the end of 2010 the general level of energy usage in the commercial and public services sector has reduced by at least 10% compared with the general level of such energy usage in 2005 and by the end of 2020 by at least 10% compared with the general level of such energy usage in 2010.

(c) As soon as practically possible the number of dwellings with one or more microgeneration installations shall be eight times the number of dwellings with one or more microgeneration installations in 2007.

(3) In this section ‘the commercial and public services sector’ means

(a) commercial and business premises, excluding industry; (b) retail premises, including warehousing; (c) hotels and restaurants; (d) premises used for the provision of any service or function by or on behalf of a

public body. ‘microgeneration’ has the same meaning as in the Energy Act 2004. For further information see: http://www.ukace.org/index.php?option=com_content&task=view&id=78&Itemid=67

http://www.ukace.org/index.php?option=com_content&task=view&id=78&Itemid=67



Appendix 2: Proposed Amendment to the Draft Climate Change Bill with regards to procurement of public sector buildings

Proposed 2nd ACE amendment Climate Change Bill

Report Stage New Clause

After clause 2 insert --- Procurement of public sector buildings

(1) For the purpose of assisting with the achievement of the target specified in section 2, or any amendment thereto made pursuant to section 3, a Minister of the Crown must, when procuring any commercial building for

the use of—

(a) his department, or

(b) any executive agency or non-departmental public body for which he is responsible

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ensure that the building has an energy efficiency rating of A or B, calculated on

the basis of information obtained within the previous 12 months, and in

accordance with the energy rating system used for the purposes of an energy

performance certificate.

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(2) In this section—

“commercial building” means a building procured for use as office

accommodation pursuant to the Town and Country Planning Acts or any statutory instrument made under those Acts;

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“energy performance certificate” means a certificate issued in

accordance with Regulation 11 of the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations (SI 2007/991);

“procure” means rent, lease, purchase or acquire through a private

developer scheme, a public private partnership, private finance

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initiative or similar arrangement.

department for business, enterprise & regulatory reform

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