Efficiency could reduce bills by £10 billion a year

Electricty pylons
Published on Tuesday, 16 October 2012 10:48
Posted by Vicki Mitchem

A new report published today by Green Alliance and WWF-UK argues that the upcoming Energy Bill must incentivise energy efficiency and create a 'market' for electricity savings.

The report highlights research commissioned by the Government, which found that effective measures to reduce electricity use could mean that 40 per cent of electricity demand might be avoided by 2030 – equivalent to the output of 15 nuclear power plants - saving in excess of £10 billion per year.

The research shows that current policies to tackle energy demand are not ambitious enough and will only deliver a third of the UK's electricity saving potential by 2030. The draft Energy Bill however contains nothing to fill this gap – it only puts in place policies that pay for new low carbon supply and contains nothing that will reduce demand for electricity.

Green Alliance has looked at three ways that the government's Electricity Market Reform could help reduce demand for electricity. The research finds that, of the three options considered, an electricity efficiency feed-in tariff (EE FiT) - a new financial incentive for energy saving – will be the most effective and simple means to lower consumers' energy bills. An electricity efficiency FiT would stimulate a new market for 'negawatts' (saved energy) allowing new and existing companies to compete with each other to find innovative ways to help consumers across the economy save electricity.

Green Alliance's director, Matthew Spencer, said: "The Coalition can show it cares about hard pressed families by making sure the energy system rewards energy saving as much as energy production. An electricity efficiency feed-in tariff is the simplest way of doing this, and evidence from the USA suggests that it will incentivise a wave of new energy saving amongst business and households. The Energy Bill offers the opportunity to support negawatts as well as megawatts, and to do so at a lower cost to the UK economy."

The charities said that without amendment, the Energy Bill would reward the building of expensive power stations ahead of the pursuit of lower cost energy efficiency and that consumers would pay over the odds for their electricity as a result. They argued that the Bill must incentivise energy demand reduction rather than doing the opposite, a point which the Energy and Climate Change Select Committee raised specifically in their recent report.

David Nussbaum, chief executive of WWF-UK said: "Energy efficiency is the obvious 'win-win' in the upcoming reform of our electricity market; keeping a check on rising energy bills while also reducing our dependency on fossil fuels. Thus far the draft Energy Bill has failed to recognise this gilt-edged opportunity, and energy efficiency is conspicuous only by its absence.

"The Green Alliance/WWF report released today demonstrates that the case for implementing an Electricity Efficiency Feed-in tariff in the Bill is overwhelming. WWF urges Government to ensure that when the Energy Bill is published it includes options to adequately incentivise energy efficiency."

Drawing on international experience the report demonstrates how the UK can learn from energy demand reduction programmes abroad; schemes in the USA show that it is much cheaper to reduce demand when compared with building new supply. For example, replacing inefficient appliances with new efficient ones costs on average £33/megawatt hour (MWh) compared with the cheapest low carbon supply costing £83/MWh.

The report said that the EE FiT would complement other energy saving policies such as product labelling and, if designed appropriately, the EE FiT would also have the potential to work well with the Green Deal thus maximising energy savings from homes.

Source: ©WWF

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