Incentives to make the right decision: Policy measures to enhance consumer decarbonisation

Transcription

1 Incentives to make the right decision: Policy measures to enhance consumer decarbonisation Lisa Ryan 25 th October 2018 ESIPP Symposium, UCD

2 Future energy systems: how to decarbonise? Policy targets: Renewable energy Energy efficiency improvements Low CO2 emissions Security of supply and cost recovery for energy network and supply utilities How can energy consumer behaviour be harnessed for low carbon energy systems?

3 Investments: RE EE technology Choices CO2 emissions Renewable energy % Energy efficiency Electricity Users Infrastructure Electricity Supply Retail price Fixed and variable costs

4 Household energy choices Insulation/windows - Efficient lighting and appliances - Heating system - Renewable heat or electricity - Transport mode and fuel Energy bill savings Warmer home Increased disposable income Poverty alleviation Asset value Health and wellbeing Clean air Household action Direct Impact Multiple benefits 6

5 Policy Options for Consumer Clean Energy: Information, Regulation, Economic incentives Fiscal instruments Financial measures Market-based instruments Tax relief Loans Price design Taxes User charges Grants Emissions trading schemes White certificate schemes Feed in tariffs 7

6 Economic instruments for EE in industry, transport and buildings Transport Vehicle tax incentives Advanced vehicle subsidies Fuel taxes User charges Infrastructure investment CO 2 emissions trading Buildings Grants for EE equipment Loans/grants for refurbishment Direct investment in social housing 3 rd party finance and ESCOs Tax relief Energy prices Industry Tax relief Audit support CO 2 emissions trading Energy management support R&D incentives Energy prices 3 rd party finance and ESCOs 8

7 Price and consumer behaviour Energy price level and structure key drivers of investment and consumption patterns Electricity tariff example: Policy target Flat rate Time-ofuse tariffs Block tariffs Net metering Energy efficiency Demand response X X X Renewable generation Cost recovery ~ ~ X Notes: = good for the policy target; X = bad for the policy target; ~ = ambiguous or not applicable. 9 Ryan et al., 2018 Harnessing electricity retail tariffs to support climate change policy, WCERE 2018, Gothenburg.

8 Smart metering trial Smart meters trialled at over 5,000 homes in Ireland in 2009 and 2010, included four time-of use tariffs Reduction of 2.5 percent reduction in overall electricity demand; Peak-time demand reduction of 8.8 percent (di Cosmo 2014) Real-time information, ie smart meter, produced greater pricing impact Experiences from other European countries show total energy savings from smart metering in the range of two to three percent, broadly in line with the results from the Irish smart metering trials. 10

9 Price design CRU decision Ireland Suppliers Standard Smart Tariff should seek to promote more efficient use of energy by applying meaningful price differences which reflect the costs borne by the supplier in supplying that customer Features: A supplier s Standard Smart Tariff offering to domestic electricity customers must also have the following features: a) A three-rate tariff with the following Time Bands (all local time, IST): i. Day = 08:00 to 23:00 (excluding Peak ) ii. Night = 23:00 to 08:00 (single night rate) iii. Peak = 17:00-19:00 b) Unit rates: i. Unit rates across the three periods (time bands) must have meaningful price differences and reflect the costs borne by the supplier in supplying that ii. Go-live Q4 2019! particular class of customer; Unit rates will be limited to a maximum of three and apply to all days 11

10 Case study 1: Change in passenger car tax design Policy objective: to encourage purchase of cars with low CO2 emissions/fuel economy Shift from engine size to CO2-based system in July 2008 Motor tax rates pre-2008 Motor tax rates 2008 Tax Band (Engine CC) Annual Tax CO2 Band (g/km) Annual Tax

11 Case study: Policy impact Source: CSO and SEAI 18% shift to diesel in the first year Over 10 years: - CO2 emissions - NOx emissions - PM emissions AMT and VRT revenue: 2.3 billion Consumers pay lower taxes Marginal impact on overall emissions -> more ambitious objective needed 13

12 Case study 2: Building energy ratings BER Database BER Building Energy Rating: An objective measure of the energy performance of a building Estimated based on space insulation, hot water heating, ventilation and lighting Compulsory from 2009 to display BER cert at point of sale or lease 2013 Legislation extended to advertising of rental properties. SEAI grants available to upgrade properties with BER BER database: 438,316 observations in total - 50,327 rental BER s 387,989 controls 14 14

13 Case study 2: Policy impact 15% 12% 9% 6% 3% 0% -3% -6% -9% -12% -15% -18% -16.5% 8.5% -6.1% -1.0% 9.5% 11.5% 9.3% 7.3% 6.5% 10.7% 7.8% 7.0% Expected Premium g = 4.5% 3.3% 3.5% 2.7% 1.7% 2.2% Rental properties with higher BER command rental premium Premium is in line with expected costs -1.2% 0.1% -0.7% -2.4% -2.9%-2.3% -4.7% -4.8% A1 A2 A3 B1 B2 B3 C1 C2 C3 D1 D2 E1 E2 F G h h=1 1 BER g (m 2 )p h 12 + R BER D1 (m 2 )p h 12 + R w h -7.1% -11.3% Dublin Rest of Ireland Expected Premium indicates statistical significance at p<0.05 Petrov, I. and L. Ryan (2018) Information Asymmetry, Split Incentives and Energy Efficiency in the Residential Rental Market, WCERE 2018, Gothenburg.

14 Case study 3a: Consumer attitudes to new technologies Electric Vehicles View on electric vehicles 37% 18% 45% 21% 8% 71% 44% 49% 37% 39% 18% 12% 45% 52% 38% 35% 33% 37% 20% 21% 28% 29% 28% 35% An electric car would Electric cars could be save me money good for the environment Electric cars are reliable Electric cars are easy to use Electric cars are fast and efficient Disagree Neutral Agree If I buy an electric I will consider buying car, my an electric car friends/relatives would appreciate it Existing home infrastructure is compatible for an electric car Policy incentives A grant to purchase an electric cars A low interest loan to purchase electric cars Lower annual motor taxes for electric cars Free parking for electric cars Free public charging for electric cars More public charging points Free motorway tolls for electric cars 3% 6% 8% 12% 11% 11% 24% 26% 35% 39% 49% 52% 59% 66% Top incentive Any mention 16

15 Case study 3b: Consumer attitudes to new technologies Heat Pumps Reduce energy bill/ save money Concern for environment (e.g. global Having funds available to invest Influenced of others who already own a Drivers for uptake 5% 4% 2% 2% 1% 9% 18% 12% 9% 32% 40% 38% 44% 39% 66% 79% Top trigger Any mention Grant to purchase a heat pump Low interest loan to purchase heat pump Free BER assessment with each heat pump Availability of information on heat pumps Free expert advice on heat pump Law requiring all home renovations to Policy incentives 4% 3% 3% 9% 11% 28% 41% 39% 52% 58% 69% 83% Top incentive Any mention 17

16 Case study 3c: Consumer attitudes to new technologies Solar PV Views on solar PV 69% 79% 63% 33% 30% 53% 40% 41% 45% 38% 35% 22% 27% 16% 9% 5% 10% 14% Installing a solar PV panel could save money A solar PV panel could be good for the environment A solar PV panel could be too expensive If I install a solar PV panel at my home, my friends/relatives would appreciate it Policy Disagree incentives Neither Agree 30% A solar PV panel creates too much trouble to install 21% 20% My existing home infrastructure is compatible for a solar PV panel I will consider installing a solar PV panel at my house Grant to purchase solar panel Payment at lower price for electricity generated by solar Low interest loan to purchase solar panel Payment at full price for electricity generated by solar panel Free expert advice on solar panels Availability of information on solar panels and installers Law requiring all home renovations to include solar panels 11% 10% 6% 3% 2% 2% 24% 27% 29% 37% 44% 58% 65% 82% Top incentive Anymention 18

17 Vital to engage consumers in energy transition Conclusions Financial incentives: carrot for consumer investment and behaviour Policy packages required: Financial incentives + information + regulation alignment Underlying prices have to be right Understanding consumer attitudes is first step More ex-post analysis and forwardlooking research necessary! 19 19

18 Contact Details This publication has emanated from research conducted with the financial support of Science Foundation Ireland under the SFI Strategic Partnership Programme Grant Number SFI/15/SPP/E3125. The opinions, findings and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the Science Foundation Ireland. 20