Department for Business, Enterprise and Regulatory Reform Consultation: Social and Environmental Guidance to the Gas and Electricity Markets Authority

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1 Department for Business, Enterprise and Regulatory Reform Consultation: Social and Environmental Guidance to the Gas and Electricity Markets Authority ACE response September 2008 Introduction to the views of ACE The Association for the Conservation of Energy is a lobbying, campaigning and policy research organisation, and has worked in the field of energy efficiency since Our lobbying and campaigning work represents the interests of our membership: major manufacturers and distributors of energy saving equipment in the United Kingdom. Our policy research is funded independently, and is focused on three key themes: policies and programmes to encourage increased energy efficiency; the environmental, social and economic benefits of increased energy efficiency; and organisational roles in the process of implementing energy efficiency policy. We welcome this opportunity to respond to this consultation. For further information please contact: Olivia Andrews Parliamentary Campaigner Association for the Conservation of Energy Westgate House, 2a Prebend Street London N1 8PT (020) olivia@ukace.org Summary ACE welcomes the proposed new guidance. However we believe that the proposed guidance needs to reflect a fundamental shift in the role of the Authority to meeting the Government s climate change objectives as well as a transition to a low carbon economy. We are concerned that the proposed guidance is not as robust as the previous guidance in certain areas. We are also concerned that some of the targets or goals which were incorporated into the previous guidance have now been omitted, thus removing the Authority s responsibility to contributing to the achievement of Association for the Conservation of Energy 1

2 these targets or goals. We believe that the proposed guidance needs to be strengthened in the areas as set out below. Questions 1. Do you agree that it is appropriate for the Government to provide guidance to the Authority on its contribution to the achievements of the Governments relevant social and environmental aims at this time? Yes. The next few years will be critical to ensuring that the UK begins a transition to a low carbon economy and for a framework to be put in place to ensure that our climate change targets will be met. ACE believes that the primary duty of the Authority should be changed to include a duty to ensure a reduction of greenhouse gases and to provide a framework that will facilitate the meeting of the UK s climate change targets. The proposed guidance should therefore reflect this. This is a timely opportunity for the new guidance to strengthen the role of the Authority to ensure that the infrastructure is in place to support this transition. 2. Do you agree with the guidance provided on contributing on the achievement of Government policy aims on: a) Networks Electricity networks should enable and encourage the use of distributed energy as well as improving access to the grid for renewables in remote locations. b) Energy efficiency Compared to the previous guidance of 2004 the proposed guidance is not as robust regarding energy efficiency. ACE strongly believes that the proposed guidance should be strengthened with more emphasis on the Authority contributing to the achievement of the 9% energy saving target by 2016 under the European Union s End- Use Efficiency and Energy Services Directive. The 2008 Energy White Paper states that the target of reducing carbon emissions by 2020 is 26-32%. 1 The proposed guidance only mentions at least 26%, this should be changed to 26-32% to reflect the Energy White Paper target. The words at least need to be inserted in front of the 60% target in the proposed guidance, as stated in the Energy White Paper. The UK Climate Change Programme states the national goal of reducing carbon dioxide by 20% below 1990 levels by We are concerned that this target has been omitted in the proposed guidance and thus the Authority s contribution to the attainment thereof. 1 BERR, Meeting the Energy Challenge: A White Paper on Nuclear Power, January 2008, Pg 12 2 DEFRA, The UK Climate Change Programme Annual Report to Parliament, July 2008, March 2006 Association for the Conservation of Energy 2

3 c) Distributed energy Renewable Energy The previous guidance included the aim of 10% of electricity from renewables by 2010 and an aspiration to double this target by ACE notes with concern that the proposed guidance only mentions the 2010 target but does not include any further targets or goals. The Renewable Energy Strategy consultation states that the UK goal is to increase the RO to encourage up to 30-35% of electricity to come from renewable energy by As this proposed guidance will last for many years ACE strongly believes that the proposed guidance should reflect this goal and that the Authority should contribute to the achievement of that goal. CHP The previous guidance included a target of 10GWe of installed good quality CHP capacity by We are concerned that this target has not been included in the proposed guidance. We believe that the proposed guidance should contain this target and that the Authority should contribute to its attainment. The guidance should also enable improved access for CHP and renewable energy to electricity markets. Microgeneration The proposed guidance has not incorporated a goal as set out in the 2008 Energy White Paper of lowering planning barriers to installing domestic microgeneration. 4 ACE believes that this should be incorporated into the proposed guidance. [I have contacted MPC Jonah Anthony is the relevant person and will get back to me.] d) Smart meters The proposed guidance states that the Authority should ensure that the smart metering policy is implemented in an efficient and timely manner. However we believe that this should be strengthened to as soon as possible. The smart meter rollout could take anything between 10 and 20 years, and we therefore believe that the guidance should stress the need for a prompt roll-out of smart meters so that the potential benefits can be realised as soon as possible. The guidance should also state that the Authority should work with suppliers to ensure that customers receive display devices through voluntary agreements. This will ensure that customers have access to real time information about their energy use in the interim period before the smart meter roll-out. e) Technology and innovation. ACE agrees with the proposed guidance regarding technology and innovation. 3 BERR, UK Renewable Energy Strategy, Consultation, June 2008, Pg 3 4 BERR, Meeting the Energy Challenge: A White Paper on Nuclear Power, January 2008 Association for the Conservation of Energy 3

4 3. Do you agree with the guidance provided on contributing to the achievement of Government policy aims on social issues? The previous guidance stated that Government expects the Authority to put measures in place to help achieve the fuel poverty targets of 2010 and ACE notes with great concern that this has not been included in the proposed guidance. We strongly believe that the Authority should contribute to the achievement of eradicating fuel poverty in vulnerable households by 2010 and rest of the fuel poor by The previous guidance made explicit that impact assessments carried out should include cost/benefit analyses of the social as well as the environmental impacts of the decisions. The proposed guidance refers merely to an expectation that the Authority will use impact assessments wherever appropriate. This would appear to be a lesser requirement in relation to the social impacts than that imposed by the previous guidance. We seek an assurance from BERR that this is not the case. The Authority should also ensure that the fuel poor are protected from rising energy costs in the future by improving the energy efficiency of their homes and ensure that pre-payment customers are not paying more than direct debit customers. This should be included in the guidance. 4. Do you agree that the Authority should have regard where appropriate to the Government s Green Book guidance, including ensuring policy options are assessed using values for the shadow price of carbon within the range recommended by the Government Economic Service? We agree that the Authority should have regard to the Government s Green Book guidance. However we believe that the current shadow price of 25/tCO2e proposed by Defra is too low. 5 If the shadow price of carbon (SPC) is used it should reflect the current trajectory towards ppm CO2 and the social cost of carbon then based on this accordingly. An example by Professor Paul Ekins illustrates this point 6 : The recent Heathrow airport expansion consultation bases the SPC on a 550ppm stabilisation concentration, as this is what the 60% emission reduction in the Climate Change Bill aims to achieve. The consultation therefore uses a low SPC which makes the expansion of Heathrow economically feasible. However if the expansion goes ahead the UK will not reach its 60% reduction target. The Government is using an SPC that assumes, against all evidence, that the UK is on a low carbon trajectory and will meet our emissions reductions targets. This in turn justifies and promotes high-carbon developments that will ensure that this trajectory 5 The Social Cost of Carbon and the Shadow Price of Carbon: What are they and how to use them in economic appraisal in the UK; Richard Price, Simeon Thornton, Stephen Nelson; December Path of least resistance, Professor Paul Ekins, The Guardian, February Association for the Conservation of Energy 4

5 will not be achieved. This strategy allows the Government to claim to be committed to climate change mitigation while continuing to build high carbon developments. 5. Do you believe that guidance should identify other aspects of Government social and environmental policies, to indicate that the Authority should make a contribution to the attainment of those? No. Notwithstanding everything we have mentioned in our response above, we agree that everything has been covered albeit in some cases wholly inadequately. Association for the Conservation of Energy 5