Energy Efficiency Commitment 2008-11: A view from energy suppliers

1. Energy Efficiency Commitment 2008-11: A view from energy suppliers Russell Hamblin-Boone Head of Corporate Affairs

2. What is the ERA? • It is the only dedicated trade association for energy suppliers • All the main energy suppliers operating in the domestic market in GB are members

3. Why was it set up? • Responds specifically to retail issues • Dedicated service to energy retailers • ERA established October 2003

4. Characteristics of the ERA • ‘Punching above its weight’ • Strong customer focus • Lobbying, engagement, research, representation • Unlike traditional trade associations, very much a delivery organisation • Does not tell the industry what to do - but asks it some difficult questions • Led by members, facilitates the debate on key policy issues

5. Energy Efficiency Commitment 2008-11 Government’s target and needs to be realistic and reflective of: • the product range • industry capacity • market potential • changes in market dynamics (e.g., reduction of social housing opportunities) • future changes to Building Regulations.

6. Measures, costs and values Insulation • Costs will increase as evidenced by insulation manufacturers’ response to EEC2 • Insulation relies on reaching saturation • There are two key factors that remain unproven a) installer capacity growth potential and b) consumer demand. • Defra has overestimated available insulation • Industry capacity has limited opportunities for expansion • Difficult to predict increased cost of EEC3 – min 32% more + increased cost of materials.

7. Measures, costs and values Cavity Wall Insulation • EEC3 carbon score for CWI considerably reduced. • Removal of pre and post 1976 categories for cavity wall insulation.

8. Measures, costs and values Loft Insulation • ERA supports BRE research recommending an increase in lifetime of Loft Insulation in line with CWI to 40 years • EEC score for loft top-ups must take account of disturbance etc. • Loft depth weighting should be based on the English Housing Conditions Survey. • The number of Virgin lofts that have been installed during EEC2 as a weighted average will result, in lower overall carbon scores .

9. Priority Group • A realistic % PG should be agreed at the outset and should not be set on traditional equity basis • Balancing equity as in previous programme would come at a high price & limit programme carbon savings for a given spend • 47% scenario is not possible without resort to high cost measures such as micro generation heating or solid wall insulation • 25% scenario is at the top end of what energy suppliers and NIA believe is potentially possible with low cost measures • High cost measures should not be included (except via the exemption option) • Differential exemption option could play a crucial role in managing risk, limiting cost impacts to energy bills and balancing equity • Fuel switching, feedback displays and micro generation volume assumptions are unrealistic

10. Priority Group • Maximise energy savings potential • Provide a holistic solution to fuel poverty • Pool resources from EEC, Warm Front, DWP Benefits check, Social Services etc • Maximise the benefit to low income and fuel poor households • Restore an equity balance • Balancing that equity not just to relevant customer groups but also to individuals • Maintaining as a far as possible continuity of programmes for installers • All suppliers offering PG work this winter • DWP mailing = estimated 6% take up

11. Transition • Most suppliers will have completed a large part of their EEC2 activity by March 2007 • Without adequate transition arrangements there may be a lull in insulation activity during 2007 • Defra must confirm their scoring methodology and indicative scores to be attributed to each measure by the end of 2006 • Scores should state precisely the value of EEC2 GWh to EEC3 credits in terms of GWh or tonnes of carbon • Early confirmation will not guarantee an early start, • Costs may be double that of EEC2

12. Microgeneration • All suppliers exploring expansion options for microgen • A niche market that has not reached critical mass for market transformation • Microgen currently not cost effective for consumers compared to insulation • Work in progress to find solutions for cost of administering exports. • Still not a significant part of EEC. • Need support for heat led and electicity led microgen. • A strong argument for innovation incentives.

13. Future challenges • Smart meters • Local generation – CHP • Electric homes • Fuel Poverty • Energy Reduction v Energy Consumption

14. Thank you Russell Hamblin-Boone Head of Corporate Affairs russell.hamblin-boone@energy-retail.org.uk www.energy-retail.org.uk