Benefits of Efficiency – Cumbrian Energy Revolution

There are several reasons why energy efficiency should be central to any Plan B for Cumbria:

cost effectiveness
meeting climate change objectives
tackling fuel poverty in Cumbria
macroeconomic benefits

Cost Effectiveness

Firstly, energy efficiency is probably the most cost-effective way of satisfying the demand for energy services compared with other measures such as building new power stations. This is advocated by Secretary of State for Energy and Climate Change, Ed Davey, who said “…measures that reduce demand can contribute in a more cost-effective way to meeting our energy and climate goals than supply-side measures.” The Government’s own Energy Efficiency Strategy estimates that the equivalent of 22 power stations could be saved with socially cost-effective investment in energy efficiency.⁽¹⁾ A Draft Report for the Department of Energy and Climate Change (DECC) by McKinsey estimates that up to 40% of electricity demand could be saved by 2030. Most of these energy savings would also mean an overall financial saving as well, even before considering the reduction in carbon emissions.⁽²⁾ Measures could include: replacement of incandescent light bulbs with compact fluorescents; replacing consumer electronic equipment and white goods with more efficient appliances; and retrofitting buildings to reduce consumption for heating purposes.

Meeting Climate Change Objectives

Secondly, energy efficiency could help meet the UK’s climate change objectives. Our homes are responsible for 27% of UK carbon emissions. Most of the dwellings standing today will still be in use in 2050 (25 million out of 25.8 million across the UK.) In order to achieve an 80% cut in carbon dioxide emissions in the UK by 2050, we are going to have to cut emissions from the domestic sector by around 80%. To do this every home will need to have excellent insulation and some form of low and zero carbon technology (LZCT). This might mean installing some sort of small-scale renewables like solar panels or a small wind turbine, or installing a ground-source or air-source heat pump which can transfer heat from the ground or air into a building to provide space heating in a similar way to the way a fridge works. Or it could mean replacing a central heating boiler with a micro combined heat and power (micro-CHP) boiler which can generate electricity as well as provide hot water. (These technologies are together known as microgeneration). Alternatively homes could be connected to a district heating network which provides hot water to a group of buildings through a network of pipes from a central boiler which usually generates electricity as well.⁽³⁾

Prime Minister, David Cameron, wants “to make Britain the most energy efficient country in Europe”.⁽⁴⁾ But the Government’s National Policy Statement on Energy foresees a need for a doubling or even tripling of total installed electricity generating capacity by 2050 because of an increased demand for electricity in the transport and domestic heating sectors.⁽⁵⁾ Yet Germany, which is planning an entirely non-nuclear route with the same 2050 objective of an 80% reduction in greenhouse gases, expects electricity demand to be 25% below present levels by implementing an energy efficiency programme.⁽⁶⁾ The UK Government relies on a model called the ‘Pathways Analysis’ to reach its conclusion that electricity demand will double. But this consists of various scenarios for 2050, some of which are quite pessimistic. For example none of them look at the possibility that more than 1 in 3 homes might install basic energy-saving measures like solid wall insulation. Similarly, it is assumed that the commercial sector can only improve its energy efficiency by just 20% over the next 40 years – an aim so much below what has been achieved historically as to be inexplicable.⁽⁷⁾

On the other hand, Cumbria could choose to emulate Europe’s most successful economy. Germany’s plan is to be partly achieved by renovating 2% of the total building stock every year. The minimum efficiency standards for buildings will be gradually raised and a long-term modernisation plan developed for the existing stock of buildings. Overall, primary energy demand from buildings should fall 80% by 2050. But as well as tightening up regulations the Government will also enhance the economic incentives for energy efficiency modernisation. Since 2001 loans have helped insulate and seal over 2m homes, employing 200,000 people a year in the process. The key is very low interest rates, currently 1-2%, compared with the UK’s Green Deal which charges around 7%. In the UK Green Deal loans of up to £10,000 are available. German home-owners can borrow up to €75,000 – enough to provide a very cosy and efficient home often including some domestic low-carbon power generation. In the German scheme, the higher the aim, the better the deal. For the most efficient homes – Passivhaus standard⁽⁸⁾ – the householder gets up to 12.5% of the loan handed back to them. Householders who don’t like loans can get grants of up to 20% of the cost. It all adds up to a massive commitment to energy efficiency.⁽⁹⁾ In Germany around 40% of homes are owner occupied, 35% are rented from small landlords, and around 25% are rented from larger commercial landlords. Private landlords include various non-profit making companies and homeowners associations. All these bodies are eligible to apply for loans.⁽¹⁰⁾

Tackling Fuel Poverty in Cumbria

Thirdly energy efficiency is one of the few effective ways to tackle fuel poverty – something the Government has committed itself to eliminate by 2016. Statistics published by the Department of Energy and Climate Change (DECC) show the total number of households suffering from fuel poverty⁽¹¹⁾ in the UK in 2010 was 4.75 million, with 3.5 million of those in England. Of this 3.5 million, 3 million were defined as vulnerable.⁽¹²⁾ The Government has a statutory duty under the Warm Homes and Conservation Act 2000 to eradicate fuel poverty in England by 2016 as far as is reasonably practical. It also had an interim target to eliminate fuel poverty among vulnerable low income households (pensioners, disabled people and families with children) by 2010. It has clearly failed to meet this, yet it says it still intends to meet the 2016 target.⁽¹³⁾

Current Government policies, such as the Green Deal and the Energy Company Obligation are expected to remove between 125,000 – 250,000 households from fuel poverty by 2023. At best, this represents only 5% of the current number of fuel poor households.⁽¹⁴⁾

All districts in Cumbria have a higher proportion of households living in fuel poverty than the UK average.⁽¹⁵⁾ Parts of Barrow (Barrow Island, Hindpool and Central) and the Eden Valley (Crosby Ravensworth, Askham and Hesket) have some of the worst affected areas in the UK.⁽¹⁶⁾ According to Cumbria County Council more than 61,161 households in Cumbria were living in fuel poverty in 2011 or around 28% of the total number of households in the county. This is a 130% increase since 2005.⁽¹⁷⁾ There are estimated to be around 300 cold related deaths in Cumbria each winter as a result. Fuel poverty is particularly bad in rural areas where properties are older, unsuitable for cavity wall insulation, off the gas mains network and reliant on oil, solid fuel or electricity for heating. The cost of heating a rural home off the gas mains is much higher than heating a home with mains connection. In cold weather, a third of people living on a low income will cut back on food and two thirds will cut back on heating. This has a direct impact on people’s well-being.⁽¹⁸⁾

The permanent solution to fuel poverty would be to ensure that all homes are so energy efficient that they are ‘fuel poverty proof’. In practical terms this means:

Improving the energy efficiency of homes – reducing heat loss by improving insulation;
Installing energy efficient heating systems and ensuring that they are used effectively;
Using the most energy efficient appliances, lighting and electrical equipment.

Macroeconomic Benefits

Finally, spending on improving energy efficiency, particularly in fuel poor households, provides macroeconomic benefits, by stimulating the economy with increased spending by those who are spending more than they should on heating, and by creating jobs in the energy efficiency industry. A comprehensive energy efficiency programme for Cumbria could be a particularly effective way to stimulate employment in the places where it is needed most, and to employ people who have the greatest trouble in finding jobs. In terms of direct employment, the energy efficiency in buildings sector is labour intensive, engaging many small, geographically dispersed installation companies. Many of the jobs created would be in manual occupations in areas of high unemployment. Where schemes are designed to include quality training, skill levels for the workers involved can be increased. Furthermore, lower fuel bills mean more money to spend on non-energy items.⁽¹⁹⁾

A Report by Cambridge Econometrics & Verco for the statutory consumer protection organisation Consumer Focus, shows that there are clear benefits from spending revenues expected to be raised by the Government from various carbon taxes on improving energy efficiency in fuel poor households. Around £63 billion will be raised from electricity consumers between 2012 and 2027 via the EU Emissions Trading Scheme and the Carbon Floor Price mechanism. If the revenue from these new carbon taxes is invested in energy efficiency programmes it could create up to 71,000 jobs by 2015 in the UK and up to 130,000 jobs by 2027.⁽²⁰⁾

Crucially, the results suggest that investing in such a programme generates greater macroeconomic benefits – more jobs and greater growth – than the same injection of spending through other Government spending programmes or cuts in VAT or fuel duty.

Investment in energy efficiency means there is less spending on natural gas imports. If households spend less on energy imports, they are able to spend more on other products and services, which are in part supplied domestically. Energy security is also improved.

The Energy Efficiency Strategy: The Energy Efficiency Opportunity in the UK, DECC, November 2012

Capturing the full electricity efficiency potential of the U.K.Draft report, McKinsey, 2012.

Home Truths: A low carbon strategy to reduce UK carbon emissions by 80% by 2050, by Brenda Boardman, Friends of the Earth and Co-operative Bank, November 2007

David Cameron’s speech at the launch of DECC’s energy efficiency mission, 4th Feb 2013

Overarching National Policy Statement for Energy (EN-1), DECC July 2011, Para 3.3.14.

Energy Concept for an environmentally sound, reliable and affordable energy supply, Federal Ministry of Economics and Technology & Federal Ministry for Environment, Nature Conservation and Nuclear Safety, September 2010 page 5

Thirty Years On and Still Waiting for an Answer, by Andrew Warren. Association for the Conservation of Energy, 8th Feb 2011

In a Passivhaus the heating requirement is reduced to the point where a traditional heating system is no longer considered essential.

Guardian 24th May 2012

The KfW experience in the reduction of energy use in and CO₂ emissions from buildings: operation, impacts and lessons for the UK,UCL Energy Institute,November 2011.

Defined as households that need to spend more than 10% of their income to maintain an adequate level of heating.

Annual Report on Fuel Poverty Statistics 2012, DECC May 2012

The Energy Bill and Fuel poverty, Consumer Focus, May 2011

Jobs Growth and Warmer Homes: Evaluating the Economic Stimulus of Investing in Energy Efficiency Measures in Fuel Poor Homes, A report by Cambridge Econometrics and Verco for Consumer Focus, October 2012

Read some of the Case Studies here:

Cumbria Community Foundation website (accessed 19th May 2014)

Fuel Poverty Letter from Cumbria County Council Leader, 27th Feb 2012 For statistics see here.

Cumbria Community Foundation website (accessed 19th May 2014)

Energy Efficiency and Jobs: UK Issues and Case Studies, a report by Association for the Conservation of Energy for the Energy Saving Trust, September 2000.