UK should introduce energy efficiency FIT

Paying individuals and businesses to reduce their electricity consumption is the best way to inspire retrofits and improve energy efficiency, says environmental think tank

In a joint analysis of potential energy saving mechanisms that could be introduced alongside the Energy Bill, Green Alliance and WWF conclude that introducing an electricity-efficiency feed-in tariff (FIT) would result in greater energy savings than imposing new efficiency obligations on energy suppliers or relying on a market-led approach. It would also be simpler to implement, they say.

The report sets out how the government would pay businesses and consumers for every kilowatt (kWh) of electricity saved after installing an efficiency measure or programme.

It argues that with uptake of the non-domestic green deal expected to be low, a FIT would encourage the retrofitting of commercial and industrial buuildings by providing support for projects, such as upgrading building fabric or heating and air conditioning systems, which are not covered by existing policies.

Deploying a FIT would not require any major changes to the electricity market, would encourage organisations to invest in a range of technologies and take a long-term view of energy efficiencies, concludes the report.

“Evidence from the US suggests that [a FIT] will incentivise a wave of new energy saving among business and households,” commented Matthew Spencer, director of Green Alliance.

David Nussbaum, chief executive of WWF UK, said: "Energy efficiency is the obvious win-win in the upcoming reform of our electricity market; keeping a check on rising energy bills, while also reducing our dependency on fossil fuels. Thus far the draft Energy Bill has failed to recognise this gilt-edged opportunity.

“WWF urges the government to ensure that when the Bill is published it includes options to adequately incentivise energy efficiency.”

According to recent research carried out on behalf of DECC, the UK has the potential to cut electricity use by 40% by 2030, but is currently only on track to only cut demand by 14%.

The Green Alliance calculates that energy efficiency initiatives would cost around one-third of the price of new low-carbon generation. It also estimates that the UK could save £10 billion a year in electricity costs by 2030, if demand is reduced by 40%.

Meanwhile, energy secretary Ed Davey has confirmed that the final Energy Bill will be published in November, following meetings this week between DECC and Treasury over its contents.