What to do to make an energy efficiency fund an eligible alternative measure to energy efficiency obligations schemes under the regime of the Energy Efficiency Directive Article 7? Calculation of the Ukrainian target for the implementation of the Energy Efficiency Directive Article 7 Andrew Abraham 20/05/16

Overview Delivery mechanisms in the UK: non-domestic & domestic Calculation & measurement of savings Quality & Monitoring Funding and UK lessons Establishing an energy efficiency fund Calculation of Ukranian obligation 2

Non-domestic delivery Principle delivery through carbon reduction commitment (CRC) & SALIX CRC obligates high use end users to pay for emissions Secondary trading of emissions SALIX for public sector bodies 3

UK delivery mechanisms - domestic Domestic energy efficiency delivered through supplier obligations Model has been used since 2001 Participation threshold currently 250k customers Scheme participants have increased as energy market liberalises Current scheme is ECO2 4

Overview of current and previous schemes 5 CERTCESPECO1 & ECO2 1.5 year scheme (alongside CESP) 2.Very large (293 MT CO2) 3.Obligated energy suppliers to deliver insulation, heating measures, renewable, appliances and more 4.Contained sub-obligations for professionally installed insulation and for the fuel poor 5.Contained incentives for innovative products 6.Used deemed scores 7.Measures reported at scheme end 8.Aggregated (i.e. not address-level) data 1.4 year scheme (alongside CERT) 2.Quite small (~19MT CO2) 3.Obligated energy suppliers and generators to deliver insulation, renewables and heating measures, restricted to ‘low income’ areas via local authorities 4.Contained a lot of incentives (measure, whole house and area based) 5.Used deemed scores 6.Measures reported at scheme end 1.Each scheme ~2 years 2.Carbon ~40 MT CO2 and £8bn lifetime cost savings 3.Obligates energy suppliers 4.3 separate obligations under ECO targeting different outcomes. 5.Each measure required to be recommended and bespoke saving calculated using SAP/RdSAP (EPCs) 6.Measures reported each month throughout the scheme

ECO2 Runs until 2017, though Govt consultation to extend it is pending Focus is split between alleviating fuel poverty and reducing carbon emissions Retrofitted insulation and boiler measures Target for solid-walled properties 6

Calculation & measurement of savings Savings calculated using Standard Assessment Procedure (SAP) Produces bespoke score for each property Lifetime & annual savings for each Allows calculation towards EED but also represents longer term (lifetime) savings 7

Quality & Monitoring Implementation of EED requirement for monitoring – Using existing scheme monitoring regime 5% monitoring requirement under ECO2 – Technical monitoring (installation) – Score monitoring (scores) – Question set developed by Ofgem 8

Funding &UK lessons Although not delivered as a fund, Govt determines estimated spending through impact assessment Supplier obligation means approach is market driven, which should drive down costs Can distort policy intent / unintended consequences Initial subsidy levels set expectations for future schemes 9

Funding &UK lessons Market-driven approach means little transparency on costs Obligated parties need to have appropriate market access Long supply chains have potential for fraud / non-compliance 10

The ECO supply chain Domestic customer Must meet eligibility requirements Domestic Energy Assessor or chartered surveyor Visits property and recommends measures to install Installer or subcontractor Installs recommended measures (approx 500 installers operating in ECO2 to date) Managing Agent/Local Authority Often act as conduit between installer and supplier Obligated energy supplier Finances measure/notifies it to Ofgem the month after installation Ofgem Approves/reject s measures and credits towards supplier’s obligation Technical monitoring agents Conduct checks on the quality of installation and accuracy of scores for a sample of ECO measures Software providers Provides tools to calculate the carbon savings of measures

Establishing an energy efficiency fund Policy intent needs to be defined – domestic, commercial or a mix? Expected costs need to be stress-tested Compliance and quality monitoring essential to getting value for money Reporting mechanisms need to be established Penalties for non-compliance? 12

Considerations for calculation of Ukrainian obligation Delivery profile Delivery model Savings calculation methodology Obligated parties & end user engagement Post 2020 programme 13