Post date: Thursday, 15th December 2011

Britain to show Europe the way on energy efficiency

Chris Huhne

Many meaures in the Directive are already being taken in Britain - with more ambitious targets.

Chris Huhne has signalled his determination to show leadership in Europe over the next significant energy policy development.

Tomorrow, the Council of Europe working group on energy efficiency meets to discuss the design of the new European Energy Efficiency Directive.

Chris Huhne told the House of Commons on Monday, while reporting on progress at Durban, that "perhaps most progress (on climate change) will be made on the energy efficiency directive, because it should be relatively easy to agree and we know that energy efficiency measures tend to have benefits outright".

He expressed "hope that the European Union will be able to move forward on domestic action in the first six months of next year".

His announcement followed conversations during the Durban climate talks with Martin Lidegaard, the energy and climate change minister of Denmark, which will hold the presidency for the first half of next year.

He also hopes that the proposals to reform the energy market, which he announced today, will save energy.

Barriers to energy efficiency

Progress across Europe is not good; on average it is only half way to achieving the 20% energy savings by 2020.

The impact assessment for the Directive identifies the following barriers to implementing energy efficiency:

  • insufficient political commitment, policy coordination and long-term political planning
  • insufficient incentives for consumers to tackle high upfront costs
  • insufficiently developed markets
  • poor knowledge of the benefits and costs
  • insufficient price incentives for energy suppliers
  • high transaction costs because of lengthy administrative procedures.


Britain's solutions

Many of these barriers are already being tackled in Britain under the Energy Act 2011 and other initiatives.

The CRC, the EEC and the Green Deal are key policy tools, of which Chris Huhne hopes to spread awareness throughout Europe.

In the domestic sector, besides the Green Deal and the EEC, for rented accommodation, by April 2016 residential landlords will not be able to unreasonably refuse requests from their tenants for consent to energy efficiency improvements, where financial support is available; and by April 2018 all private rented properties must be brought up to a minimum energy efficiency standard, likely to be set at ‘E’. These measures are in the Energy Act 2011.

As for enforcement, local authorities are charged with enforcing the domestic minimum standard regulations, with the ability to impose a civil fine of up to £5,000; and Trading Standards will enforce the minimum standards in the non-domestic sector, and the level of civil penalty will be defined in secondary legislation.

DECC expects that the EPC database (due to be improved) will be a key inspection mechanism as it will show the EPC rating of properties in the local area.

The current proposals in the EU Directive focus on binding measures such as the 3% renovation of public buildings and the 1.5% energy savings obligation scheme for energy companies.

These are measures already being taken in Britain - with more ambitious targets.

For instance, the coalition government is committed to ensuring that carbon emissions from government buildings fall by no less than 25% during the current Parliament.

Yesterday, in a Parliamentary answer to LibDem Simon Hughes, minister for the Cabinet Office Francis Maude said: "I am confident that we will fulfil that commitment."

Financing energy efficiency

The directive faces opponents. Lobbying group Business Europe is arguing that the directive must stimulate energy productivity instead of reducing growth; this is the old chestnut, recently revived, that curbing energy use restricts growth, one not even shared by the CBI.

The UK clearly believes the opposite to be true, and is not alone. Anders Wijkman, a former MEP and vice president of the Club of Rome think tank says that “Saying that it could slow down economic growth is ridiculous. You can do more with less energy through the rebound effect, so how could it impede growth?”.

In the IEA's global survey of how countries are doing on energy efficiency, published in October, it noted that while nations' spending focus on energy efficiency remains largely unchanged, "fiscal challenges remain, especially moving forward in a time of increasing financial constraints for almost all countries".

So, how to finance the measures required?

The MEP working on this directive in the European Parliament, Claude Turmes, has already tabled a key amendment that spells out how financing could happen without hampering growth.

The amendment says that member states should establish financing facilities which would aggregate a mix of funds, including: cohesion and structural funds; technical assistance and financial engineering funds; resources allocated to energy efficiency from the European Investment Bank, the European Bank for Reconstruction and Development and the Council of Europe Development Bank.

Once all money is pooled, it would be available immediately, with the costs being recovered through savings on the bills of consumers, as in the Green Deal. Since companies will reduce the consumption of energy for their users, the balance will be neutral.

There is an existing model for this, which proves that it works: energy efficiency investments made by the publicly-owned German KFW banking group.

According to a recent study of its effectiveness by the Julich Research Centre in Frankfurt, for every €1 that went into the promotion of energy-efficient construction and refurbishment in 2010, public authorities collected €4 to €5 in revenue.

More than this, the current interest rate for leanding money for energy efficiency in the KfW Energy-efficient Refurbishment Programme is effectively 1% per annum. But the return on investment is found to be up to 12.5%.

This scheme will be of interest in the final design of how the Green Deal will work.

National plans

All countries in the European Union had to submit their second National Energy Efficiency Action Plans by 30 June 2011.

Under these, an increasing number of countries noted the importance of energy management in accordance with ISO 50001.

Germany, as ever, is a significant mover. The German government is providing €10 billion annually to help industry make greater use of its economic potential for energy conservation, and will support private sector initiatives, for example via a Partnership for Climate Protection.

Transport is also a significant and difficult area. Spain estimates that 50.6% of its energy savings by 2020 will come from the transport sector. Italy’s NEEAP includes measures in the transport sector such as technological solutions, use of biofuels, demand-side measures, infrastructures, upgrading quality of urban mobility systems, speed control limits.

This is one weak area in the UK. If it does go ahead with increasing its top speed limit to 80mph, this is going to make meeting targets even harder.


There is also a clear and growing role for Energy Service Companies (ESCOs).

ESCOs sell the service of energy to clients, competing on price. This means they must keep their own costs down and so they have an incentive to promote energy efficiency.

This model is being promoted in Korea, where the government has substantially increased the share of ESCO activities through its Energy Efficiency Soft Loan Budget this year. This has tripled investment in ESCO business to $344.5 million.

Phil Wynn Owen, director general, International Climate Change and Energy Efficiency, is responsible for encouraging the transition to a low-carbon economy at DECC, including the design of the CRC.

He will be outlining the department's latest plans at the Low Carbon Communities for Future Growth conference next February, by which time first discussions on the EE Directive between member states will have taken place.

Story: David Thorpe, News Editor

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