Ibec response to consultation on EEOS

Transcription

1 Ibec response to consultation on EEOS September 2016

2 Ibec response to the Department of Communications, Climate Action & Environment (DCCAE) consultation on the Energy Efficiency Obligation Scheme for Introduction Ibec, the group that represents Irish business, welcomes the opportunity to respond to the Department of Communications, Climate Action and Environment s (DCCAE) consultation on the operation of the Energy Efficiency Obligation Scheme for the period. Ibec is the largest business representative organisation in Ireland: we speak for over 7000 member companies across a range of industrial, commercial and non-profit sectors. The organisation and its sector associations strive for business conditions that enable sustainable economic growth. This response was prepared by Ibec s Energy Policy Committee which represents a broad cross section of Irish enterprises, indigenous and multinational, that are affected by energy legislation and policy at national, EU and international level. Ibec has consistently viewed energy efficiency as being the most cost effective method of reducing carbon emissions and combatting climate change. Ibec also recognises that energy efficiency brings added benefits in reduced costs, greater security of supply and increased productivity. In this vein, Ibec supported the Government s decision in 2014 to join other EU Member States and establish an Energy Efficiency Obligation Scheme (EEOS) as part of its implementation of the 2012 Energy Efficiency Directive (EED). And while Ibec fully supports the continuation of the EEOS as a complement to alternative measures, it is imperative that the Department aims to achieve least costcompliance in its implementation. It is our view that some of the suggestions in the consultation document would effectively translate into higher energy costs and be better addressed through alternative measures. Ibec also believes that a few alterations - as presented below would reduce costs and enhance the delivery and efficiency of the scheme for the next period.

3 Response to consultation questions Question 1: Could the objectives of the Energy Efficiency Obligation Scheme be better aligned with national climate and energy goals? Government is currently preparing its first statutory National Low Carbon Transition and Mitigation Plan. It is crucial that all policy measures relating to climate action and decarbonisation be aligned with this plan. This, together with the Government s commitment to an evidence-based approach to policy development - as outlined in its Energy White Paper should ensure reduced implementation costs and maximum efficiency. Any changes to the EEOS for the next period should be undertaken with this in mind. Question 2: Is the level of the current target level of energy savings obligated parties are required to deliver appropriate? Ibec strongly believes that current targets are appropriate and should be retained for the next period. It would be a mistake to see the recent success of the scheme as a reason to increase the targets for obligated parties (OPs). While the scheme has indeed delivered energy savings of 1,110GWh since its inception, the Department cannot expect this rate of delivery to continue in the years ahead. Much of the low hanging fruit has already been targeted and OPs are now beginning to see a notable reduction in the availability of energy saving opportunities. Increased energy efficiency building standards are adding to this challenge. The competition between OPs for the remaining pool of energy efficiency retrofits is quickly intensifying and higher targets would be unjustified. Moreover, as the pool diminishes, the marginal cost of capturing efficiency savings increases as deeper and more expensive measures are required. As a result, the Department must recognise that any increase in targets for OPs would lead to higher compliance costs and consequently increased energy costs for consumers. This would only add to the competiveness pressures Ireland currently faces as result of the Brexit vote in the UK and the current exchange rate volatility. In a 2014 report the ESRI came to the same conclusion noting that the scheme was likely to involve unnecessary costs for society, even taking account of the benefits from energy savings 1. Ibec also fundamentally believes that OPs under the EEOS should not be charged with subsidising alternative measures which have proven less successful than expected. 1 Irish Energy Policy; an analysis of current issues John Fitzgerald, Laura Malaguzzi Valeri, October

4 Question 3: Is the threshold at which energy distributors or retail suppliers become obligated appropriate? Ibec believes that the threshold for obligation should be lowered to ensure that all energy suppliers are competing on a level playing field. The Department should consider reducing the threshold using the Primary Energy Factor to 240GWh of total final energy consumption/delivered energy. Question 4: Is the current sectoral split of targets (75 % commercial, 20 % domestic, 5 % energy poverty) appropriate? While Ibec understands the motivation behind the current breakdown, it is our view that the methodology is flawed and should be reconsidered. The sectoral split of targets is leading to a higher cost of compliance than necessary as OPs are being forced to identify and undertake costly energy savings in the energy poverty sector. If the current arrangement continues into 2017/2019 there is reason to believe that these compliance costs will translate into higher energy costs for consumers including those in the energy poverty sector. The findings of the aforementioned 2014 ESRI report should be taken into consideration in this regard. It must also be recognised that the OPs do not all operate in the same market and all have differing abilities to generate energy efficiencies in different sectors. Therefore the scheme s operational efficiency could be enhanced by giving OPs full flexibility as to where they target and achieve their energy savings obligations. Question 5: Are there any potential benefits to requiring obligated parties to achieve savings in more discrete areas? For example, assigning energy saving targets for the transport sector or requiring obligated parties to deliver deep retrofits? Ibec strongly disagrees with this proposal as it would lead to a dramatic increase in the cost of compliance. For example, a simple comparison between the cost per kwh of credit attaching to a shallow insulation measure and a deep external wall insulation measure shows a relative cost multiplier of between 4 and 6.5. These costs would have to be recovered in the market leading to increased energy costs. Moreover, the scheme should not be extended to cover sectors of the economy outside the OP network e.g. transport. If the Department wishes to achieve savings in other sectors, appropriate alternative measures should be developed in cooperation with actors who operate in those sectors in question.

5 Question 6: Should the obligation scheme have a more explicit role in addressing energy poverty? No. As set out in our response to Q4, we believe that the EEOS is not an appropriate or cost-effective instrument to address this social policy objective. As acknowledged in the consultation document, forcing OPs to identify and undertake costly energy savings in the energy poverty sector could lead to increased energy costs for all consumers - including those in the energy poverty sector. Question 7: What more detailed analysis should be undertaken to examine the costs of the energy efficiency obligation scheme? Ibec supports the Department s commitment to evidence-based policy and rigorous analysis - as outlined in the White Paper: Ireland s Transition to a Low Carbon Energy Future. Therefore Ibec would welcome any research that could be undertaken to measure the cost of energy efficiency compliance between now and 2020/ assuming the existing programmes are extended. Within the scope of this study it would be helpful to compare the cost of delivering energy efficiency savings across the EU. There are indications that the costs are relatively higher in Ireland than in other Member States. Question 8: How should the cumulative nature of the energy savings be reflected in targets for obligated parties? If so how? Is there merit to incentivising obligated parties to engage in early action? Ibec believes that the current targets already reflect the cumulative nature of savings and the penalty for underachieving in the early years of the scheme is clear to all OPs This is evident in the level of achievement of savings since Adding additional targets of this nature could lead to a peak in market activity, exhaustion of available credits and significant price spikes which could threaten and undermine the viability of energy services businesses - as was the case in the UK. Question 9: Has an appropriate balance been struck between the Obligation Scheme and Alternative Measures? Are the energy efficiency schemes operated by SEAI sufficiently complementary to the EEOS or should other measures be considered? Ibec firmly believes that Ireland made the right decision by choosing to balance implementation of the EED between an EEOS and alternative measures. Both complement each other in many ways. However there is certainly room for greater overlap and cooperation across both channels of activity. For example, the overlap in the Better Energy Communities programme has proven very successful. To encourage this, the Department should consider adding a facility whereby OPs receive credits for complementary efforts.

6 As per the reasons outlined above, Ibec fundamentally believes that OPs under the EEOS should not be charged with subsidising or replacing alternative measures which have proven less successful than expected. Instead the alternative measures should be reviewed, updated and sufficiently resourced to improve their effectiveness. Question 10: How often should the operation of the scheme be reviewed and the associated guidance document be updated? Is there any other information that should be published in the annual report on performance by obligated parties? We believe that it should be reviewed annually firstly with regard to: Costs vs previous year and vs EU Ibec recommends that the current three-yearly cycle be retained but with some additional flexibility to make small changes to its operation based on the previous year s performance and in consultation with the Obligated Parties. Question 11: Are there any characteristics from obligation schemes operating in other jurisdictions that the Irish Government should consider replicating? Businesses SMEs in particular repeatedly identify access to low cost finance as a major barrier to investment in energy efficiency projects. Ibec is aware of schemes in other countries that have proven successful in helping businesses overcome this challenge. For example KfW Bank in Germany run a series of energy efficiency, refurbishment and waste heat programmes that offer favourable interest rates for investments that achieve a set amount of energy end-use savings. Such schemes should be considered. Question 12: Are there any other considerations not addressed here that should be taken into account in the design and operation of the Obligation Scheme? N/A

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