2. The 2006 Energy Review Regional Stakeholder Seminar: Fuel Poverty and Energy Efficiency 31 January 2006 Carl McCamish Deputy Head of Energy Review Team

3. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Outline 2003 Energy White Paper Goals and the Key Consultation Questions Current Situation - Fuel Poverty Current Situation - Energy Efficiency Discussion Questions

4. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy White Paper Goals 1. Reducing carbon emissions 2. Maintaining reliable energy supplies 3. Promoting competitive markets 4. Ensuring that every home is adequately & affordably heated

5. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Questions in the Consultation Document (Summarised)  What more could the government do on the demand or supply side to meet our CO2 reduction targets in the medium and long term?  How do we develop our market framework for delivering reliable energy supplies ?  Are there particular considerations that should apply to nuclear ?  Are there particular considerations that should apply to carbon abatement and other low carbon technologies?  Steps to take towards ensuring that every home is adequately and affordably heated ? Submissions are also requested on:  The long term potential of energy efficiency measures in transport, residential, business and public sectors and how best to achieve that potential

6. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Fuel poverty - targets In England, eradicate fuel poverty… — in vulnerable households by 2010 — in all households by November 2016 No household in the UK to be in fuel poverty by 2016- 18 * Fuel poverty = households that have to spend more than 10% of its income on fuel in order to heat the home to an adequate standard.

7. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Good progress so far Between 1996 and 2003: –Fall in number of English fuel poor households from 5.1 million to 1.2 million –Fall in number of UK fuel poor households from 6.5 million to 2 million

8. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar What moves households in and out of fuel poverty? Incomes  Estimated to be responsible for ~60% of the households that moved out of fuel poverty in 2002-3* Energy efficiency improvements ~17% Fuel prices ~22% * Fuel Poverty Strategy: Annual Progress Report 2005

9. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Income Employment Benefits, eg – Winter Fuel Payment – Pension credit – Tax credits

10. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy efficiency Government Warm Front (and equivalents) Energy Efficiency Commitment Decent Homes Warm zones Industry: Home Heat Helpline, special tariffs, trust funds

11. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Prices - been low, but rising again Historical gas and electricity prices in the UK 1985-2005 Index of real prices, 100=1985 2005 data is an estimate

12. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Challenges ahead?

13. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Fuel Poverty – Questions for discussion 1)What are the key strengths and weaknesses in the way we are tackling fuel poverty now? 2)What further steps should be taken towards meeting the government’s goals for ensuring that every home is adequately and affordably heated? 3)Are there key questions raised in other parts of the Review that could have a large positive or negative impact on fuel poverty? 4)What should the balance be between measures that improve the energy efficiency of the home and those that improve the income of the household?

14. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar What is energy efficiency? Energy efficiency – achieving the same output with less energy (eg a more effective boiler, or home insulation, or a more efficient car) Demand Reduction - Getting by with less output (eg, warming fewer rooms, turning appliances off, walking instead of driving) –Review is looking for input on both

15. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy Efficiency – key part of UK policy 2003 Energy White Paper – efficiency measures could deliver half of our 2020 carbon aspiration Great potential reinforced in the Energy Efficiency Innovation Review Importance re-stated in our Consultation Document

16. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy Intensity in the UK

17. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Global impact Energy Demand and Saving in the “IEA 11”

18. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar But actual carbon reductions required Numbers do not include international aviation emissions, which on current projections would take up 20-25MtC Power generation Transport Industry Homes ~150 MtC UK carbon emissions (by source) Million Tonnes of Carbon, Approx. 50 35 40 25 2050 target adjusted for GDP growth ~15 MtC ESTIMATES ONLY

19. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy Efficiency – the size of the prize The Energy Efficiency Action Plan sets out to deliver 12mtC savings by 2010 through energy efficiency measures (4.4 MtC from household) The Energy Efficiency Innovation Review identified that there were still substantial cost effective carbon reduction potential in the economy: –Domestic – 9MtC by 2020 –Business and public sectors – 8MtC by 2020 All based solely on the use of existing commercially available technologies

20. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy Efficiency Programmes (Selected) Business –ETS –CCL –Enhanced Capital Allowances –Carbon Trust Residential/ Buildings –EEC –Warm Front –Decent Homes –Building Regulations –Energy Performance of Buildings –Energy Saving Trust Transport –Voluntary Agreements –Company Car Tax scheme Appliances –EU Appliance Labelling and Standards –Framework Directive for the Eco-design of Energy Using Products

21. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Barriers to progress Investment cost “Hidden” costs Split incentives and other market failures Ignorance, inertia, and lack of interest Distrust and perceived hassle ‘Rebound effect’ –How do we overcome these barriers to access the full benefits of energy efficiency?

22. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Increasing demand Wealthier households More people living alone New gadgets (‘plasma TV generation’) Higher expectations – eg for warmth More energy intensive lifestyles – eg low-cost flights Continued waste – eg not turning appliances off

23. Energy Review: Fuel Poverty and Energy Efficiency Regional Seminar Energy Efficiency- Questions for discussion 1)Given our increasing understanding of the barriers to uptake of efficiency measures, what might government do to increase uptake of energy efficiency measures in the longer term? 2)What can we do to encourage users to use less energy (e.g. fly less, turn down the heating, turn off appliances)? 3)What is the ultimate potential of energy efficiency measures in meeting our long term carbon goals? As we become more energy efficient, will users simply use more energy (i.e. the ‘rebound effect’)?