National Home Energy Conference

All Change for Climate Change

Bournemouth, 10-11 May 2005

The Pace and the Climate:

Both Are Getting Hotter

John Chesshire

The broad policy context• Sustainable development• Post-Kyoto Protocol commitments• Liberalisation and competition• Anticipated decline in UK self sufficiency • Supply security & import dependence• Economic competitiveness & resource

productivity• Social inclusion & fuel poverty• New industrial/export markets, skills & jobs• But energy efficiency not a ‘silver bullet’,

difficult supply-side choices, too

Evolving policy imperatives • Energy policy historically supply-side driven• Then dominated by liberalisation & privatisation

measures• PIU Report (2002) & Energy White Paper (2003),

response to Royal Commission• Energy efficiency now much more central in

strategic policy terms but is still a relatively ‘immature’ policy field

• Energy Efficiency & FP Action Plans, 2004• But demand side is more than energy efficiency

Some elements of UK energy efficiency policy

• Direct Government policies: building regs• Product policy and standards, & procurement• Energy Efficiency Commitment• Fuel poverty (social) programmes• CHP target for 2010• Climate Change Levy, but reluctance to tax• EST & Carbon Trust• Energy Efficiency Partnership & MTP• Devolved functions in ee & FP

Some policy lacunae

• Demand reduction hindered by:– lower real energy prices until very recently– confusion of market v. policy messages– focus? - lower prices v. lower quantities– cut in VAT on domestic energy to 5% – reluctance to internalise external costs– low price elasticity of demand in any event– fragmented energy efficiency supply chains &

no ‘one stop’ shop for energy efficiency– some (possibly severe) skill shortages

Energy efficiency potential

• Potential shaped by several major drivers:

– Behaviour & life styles– New & retrofit investment: - Purchased measures

- Installed & retrofitted measures– Capital stock renovation & rotation– New technology & its diffusion– Diminishing returns to ‘barriers’ analysis!

Some conclusions

• Need policy framework for at least 2015-2020• Objective: least-cost low carbon strategy• Need wide range of measures• Integration of several Govt. departments• Widen economic instruments debate: not just

sticks (taxes) but carrots (incentives)• One priority is analysis of energy efficiency

supply chains, to anticipate & overcome constraints