financial mechanisms for improving the energy efficiency...
TRANSCRIPT
Assessing the indirect impacts of
energy efficiency improvements
in the UK building stock
Niall Kerr – [email protected]
I-Build – Infrastructure business models, valuation and innovation for local delivery
Sustainability Research Institute
University of Leeds
UK buildings and energy
• Buildings responsible for around 45% of carbon emissions1; entire building stock to be net carbon neutral by 2050,
• 80% of 2050 stock estimated to have already been built
• Oldest building stock in Europe: only stock in Europe where the majority of buildings were built pre-19602
• Some of the lowest gas and electricity prices in the EU-153
• The highest levels of fuel poverty in the EU-154
• One of the most energy inefficient building stocks in Europe4
Ref. 1: DECC, 2014 2: Buildings Performance Institute Europe, 2011 3: VassaETT, 2013 4: Association for the Conservation of Energy, 2013
UK buildings and energy policy
Motivation for improving the energy efficiency of the UK building stock, a policy priority by the UK Government
• Carbon emission reduction targets (CERT): legally binding reduction targets for energy suppliers
• Fuel poverty reduction: eradication target for 2016
• Energy security: concerns over gas supply, declining North Sea reserves, building new power stations, dealing with nuclear waste, and the potential exploitation of shale gas.
Energy Efficiency
Improvements (EEI)
• UK National Energy Efficiency Action Plan 2014: “bringing
as many residential and commercial buildings as possible up
to a high level of energy performance is a priority for the UK
Government”
• Association. Conservation of Energy: “energy efficiency is
the best long-term solution to tackling fuel poverty.”
• Association for Decentralised Energy: “14 fewer power
stations required due to energy efficiency of the last 30 years”
• David Cameron, “we are in a global race and the countries
that succeed in that race…..are those that are the most
energy efficient”
European energy prices
“UK households are currently paying the lowest retail gas prices and among the
lowest retail electricity prices in the EU 15.”
Department for Energy and Climate Change (DECC), 2013
Ref VassaETT, ‘Global Energy Think Tank’, 2013
Energy prices rise
Expenditure
0%
2%
4%
6%
8%
10%
12%
14%
16%
Food & n
on-alc
oholic b
ever
ages
Alc
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ever
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& to
bacco
Clo
thin
g & fo
otwea
r
Furnis
hings
Hea
lth
Com
munic
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Rec
reat
ion &
cultu
re
Educatio
n
Res
taura
nts &
hote
ls
Mis
cella
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goods & s
ervi
ces
Elect
ricity
Gas
Oth
er fu
els
Oth
er h
ousing
Vehic
le fu
els
& lu
brican
ts
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er tr
ansp
ort
Ex
pe
nd
itu
re s
ha
re (
%)
European gas price
UK energy bill
Ref: British Gas, 2012
Energy taxes
Energy Supplier Obligations (ESO)
• Large electricity and gas suppliers required to reduce the energy consumption of their customers
• Certain amount of savings have to be achieved on properties receiving income support
• Most cost effective measures implemented i.e. Cavity Wall insulation and Loft insulation
• Cost of implementation passed on to energy prices
Financial mechanism of ESOs
• Tax/levy on the price of energy
• All energy consumers fund energy
efficiency of some energy consumers
• Levy is non-tradable
Energy consumption
Energy Efficient Retrofit (EER)
Pre 2013 – Energy Supplier Obligations
• 70% of all Cavity Walls (CWI) and all Lofts (LI) that can be insulated, have been insulated
• High uptake of new efficient boilers, with cumulative uptake by 2013, 1.8 million above forecast
Post 2013 – Green Deal and ECO
• Collapse in CWI and LI installations
• Solid wall insulation, only 3% of homes that can be insulated are.
The Green Deal
• Move cost of energy efficient retrofit to
private property owner receiving the work
• Innovative finance - no upfront cost for
recipient, a loan is repaid through the
energy bill
• Very low take-up….
Revolving Fund
business model
• 10 year agreement • 50% of savings to revolving fund • 50% to home owner • More cost-effective measures funding less c-e measures
Policy criticism
• Energy Company Obligation (ECO) cut – ‘get rid of all the green crap’
• Creating financial products: bundled loans as securities
• Middle class subsidy: lack of focus on fuel poor
• Private debt: UK has second highest level in the world
• Investors require returns of 11 – 15%: benefits only go to investors rather than occupants
Future policy
Present day • New Energy Supplier Obligation: Labour Party focus on
fuel poor • Minimum Energy Performance Standards: regulation of
private rental market • Fund work through direct taxation: support form
energy suppliers and energy eff market The Future • Pay as you save/Revolving fund • Energy Service Company
