1. Article 5 of the Energy Services Directive Edward Green

2. Introduction The policy context; The main provisions of the Energy Services Directive; Article 5; Implementation process.

3. Current policy context Climate Change Bill; Energy White Paper; Energy Efficiency Action Plan; Climate Change Programme; Sustainable Procurement Action Plans and Strategies.

4. Energy Services Directive: Scope and purpose To enhance the cost effective improvement of energy end use efficiency in Member States; Covers all forms of energy: Electricity, natural gas, liquid fuels etc; Aviation and bunker fuels are not included

5. Energy Services Directive: Main provisions Target to improve energy efficiency by 9% by 2016; Electricity suppliers and distributors to promote energy efficiency; Provisions on metering and billing; Public sector to play an exemplary role under Article 5.

6. Article 5: Summary Public sector to fulfil an exemplary role in the context of the Directive. Specifically: Focus on cost effective improvements with the largest saving in the shortest time; Publish guidelines on energy efficiency as possible assessment criterion in competitive tendering; Facilitate best practice between public bodies and communicate actions to business and individuals; Assign an organisation(s) to integrate the relevant policies; Introduce 2 measures from a list linked to procurement.

7. Consultation The public consultation seeks views on: Exemplary role; Which specific measures linked to procurement to introduce; Voluntary vs. legislative approach to implementation.

8. Article 5: Exemplary role Not defined in the Directive. In the consultation paper Government proposes two key factors to be taken into account when determining the nature and extent of an exemplary role: the relevant public sector body is implementing cost effective energy efficiency improvement measures; the extent to which the existing or proposed measures show leadership to consumers and businesses by taking cost effective action.

9. Article 5: Measures linked to procurement (a) requirements concerning the use of financial instruments for energy savings, including energy performance contracting, that stipulate the delivery of measurable and pre- determined energy savings (including whenever public administrations have outsourced responsibilities); (b) requirements to purchase equipment and vehicles based on lists of energy-efficient product specifications of different categories of equipment and vehicles to be drawn up by the authorities or agencies referred to in Article 4(4), using, where applicable, minimised life- cycle cost analysis or comparable methods to ensure cost effectiveness; (c) requirements to purchase equipment that has efficient energy consumption in all modes, including in standby mode, using, where applicable, minimised life-cycle cost analysis or comparable methods to ensure cost effectiveness; (d) requirements to replace or retrofit existing equipment and vehicles with the equipment listed in points (b) and (c); (e) requirements to use energy audits and implement the resulting cost-effective recommendations; (f) requirements to purchase or rent energy-efficient buildings or parts thereof, or requirements to replace or retrofit purchased or rented buildings or parts thereof in order to render them more energy-efficient.

10. Cost benefit analysis Average annual cost (£m) Average annual benefit (£m) Total Cost (£m)Total Benefit (£m)Net Benefit (£m) Option ACompliant Option b11.5323.36129.68281.01151.33 Option b and c11.6623.42131.26281.83150.57 Option d67.3230.7720.49404.16-316.33 Option e7.6322.2485.58310.97225.39 Option f84.1937.998761,038.44162.44

11. Voluntary vs legislative approach Voluntary approach is the preferred option, but must have an equivalent effect; Propose to enter into voluntary agreements with high level organisations in each sub sector; Would welcome views on the best placed organisation(s) to enter into an agreement on behalf of Local Government.

12. Voluntary arrangements The key characteristics a voluntary arrangement might include are: A clear commitment to promoting the voluntary arrangement in the sector To communicate effectively the nature of the voluntary arrangement To promote the guidance to be published To provide flexibility for local decision making To identify how to monitor the effectiveness of the voluntary arrangement over time.

13. Summary: Government’s preferred option Continue to review the effectiveness of existing energy efficiency loan schemes and if necessary seek funding in the future; To put in place voluntary agreements to implement options (b) and (c) related to the procurement of products across the public sector; Publish guidance on energy efficiency and energy savings as a possible assessment criteria in public tendering; Assign responsibility to integrate the relevant procurement policies to the lead procurement bodies for the various parts of the public sector; Ensure robust, regular data is provided by all parts of the public sector.

14. Implementation process Public consultation launched on 13 December 2007, closing on 6 March 2008; Directive to be implemented by May 2008.

15. Contact Details Edward.green@defra.gsi.gov.uk 020 7238 5650