Effective action needed now on energy efficiency

If the UK is serious about meeting its climate change targets and wants to cut business costs, we can’t keep putting energy efficiency into the ‘too difficult box’, argues Matthew Farrow.

A few years ago, David Cameron met a number of environmental NGOs to discuss energy efficiency. After some discussion of things the NGOs wanted the government to do, the then prime minister looked up in frustration and observed: “The problem with energy efficiency is that everyone agrees that it’s a good thing but no one knows how to deliver it”.

No one would accuse David Cameron of being an expert in energy management (though he did make one speech on the topic, which is one more than most prime ministers), but he was making a fair point. The technical steps involved in making our buildings more energy efficient are well known and available - ranging from changes to building fabrics to better training of facilities staff who operate building systems.  Yet despite an alphabet soup of energy efficiency initiatives - UKETS, CRC, CCL, CCAs, EU ETS, ESOS, MEES etc - no government has cracked the challenge of making enough companies, homeowners and landlords care enough to implement energy saving measures. 

Sometimes this lack of action is because the cost of energy as a proportion of total costs is simply too low to merit focus from senior executives. Sometimes it’s because of split incentives (landlords have no reason to make energy efficiency improvements if tenants pay the energy bills for example). Sometimes it’s because of human factors - a new building is designed with state of the art energy management systems but the building user does not train their staff to take advantage of these.

The newly published Clean Growth Strategy - basically ministers’ plan for meeting our legally binding carbon targets - includes strong statements of intent on energy efficiency. The plan talks of cutting the aggregate business spend on energy efficiency by 20% by 2030 compared to the business as usual trend.  But there is almost no detail. Instead, only plans for future consultations on measures which could be taken.  

So, what measures should ministers be considering? David Cameron was right in that a ‘silver bullet’ that would transform energy management has proved elusive. But there are several areas that EIC members believe need looking at, in terms of commercial and public sector energy use in particular.

First, we have to have a clear long-term direction on policy. In other environmental areas a long term policy has been very effective - such as the Landfill Tax escalator which galvanised investment in recycling plants.  We need something similar in energy management. From April next year, it will be illegal for landlords to rent out properties with the lowest energy efficiency ratings (F and G ratings). Why not announce now (and put in law) that these standards will be steadily toughened up, so that say from 2020 the prohibition will extend the next lowest rating (E), by 2022 D as well, and so on.

Second, we can do better in learning from abroad. The Energy Savings Opportunity Scheme is flawed because while it requires large commercial firms to identify cost-effective energy efficiency investments they could make, it does not stipulate any further action by them. The Dutch version of the scheme requires firms to act on identified opportunities that have a short payback. Why can we not do the same?

Third, we need to maximise the potential from the smart cities agenda for energy management.  The scope to use real time energy use monitoring and big data (e.g. being able to benchmark energy performance of similar buildings across different cities) is huge.

Lastly, we need to toughen up enforcement of existing policies. In theory all commercial buildings are supposed to have Energy Performance Certificates stating their energy efficiency rating, but there is a host of exemptions that building owners can use to get out of this. Likewise, air conditioning systems in commercial buildings are supposed to be regularly inspected to check they are operating efficiently, but only 5% of such systems do receive regular checks. Imaginative policies are useless without effective enforcement.

Since his meeting with those NGOs, David Cameron has been forced into an unexpected career change, and his successor has other things on her mind. But if we remain serious about meeting our climate change targets, and want to cut business costs, we can’t keep on putting energy efficiency into the ‘too difficult box’.  

Matthew Farrow is director of the Environmental Industries Commission, the leading trade body for environmental firms.