The UK government has launched an industry consultation on barriers to energy efficiency and how new markets could be established to incentivise uptake amongst businesses.

The consultation, launched on 22 July 2019, invites views until 25th September 2019 on how to secure the role of energy efficiency in the wider energy market, including its contribution to network flexibility and how it can become a “reliable alternative” to increased generation and network reinforcement.

The announcement follows a damning report of an MP select committee earlier in July, which warned that the UK “stands no chance” of meeting its emissions reduction targets – including its 2050 net zero goal – without urgent policy action on energy efficiency.

Energy efficiency has a vital role in the energy system transition and decarbonisation, as it can help avoid or reduce the need to build new generation and reinforce electricity networks. However, its effects are rarely evaluated in a way that sees its contribution suitably valued by the market and network operators. 

Following a pilot run between 2014 and 2018 to test if energy efficiency, or permanent electricity demand reduction (EDR), could be viable as part of the Capacity Market, the Department of Business, Energy and Industrial Strategy (BEIS) concluded that energy efficiency projects are “not yet ready” to enter the auction scheme.

Despite this, the government has suggested that there is “considerable potential” for energy efficiency to provide grid reinforcement, with 40TWh of energy efficiency potential in commercial and industrial buildings, and 10TWh of potential in industrial processes.

However, there are certain market barriers to this potential, including measure and verification, permanence, access to multiple revenue streams, high transaction and implementation costs, and behaviour change.

As a result, BEIS wants to gather industry views on these market barriers to energy efficiency, and how they could be tackled to help inform future policy.

Removing such barriers could help incentivise the greater uptake of energy efficiency by UK businesses, with organisations not only able to benefit from the savings created through implementation, but also through the potential of commercialising energy efficiency via access to new markets.

The SMS view

We welcome the government’s approach in undertaking a wide-scale consultation on facilitating energy efficiency in the electricity system.

This represents a real opportunity to understand what the blockages to enhancing energy efficiency are, and what can be done to unlock the 50tWh of untapped energy efficiency in the UK.

If we are to reach our net-zero position, we will need to go much further in enabling energy efficiency than we have ever gone before.

While current policy has done much to set the foundation, it is clear that there needs to be a very considerable level of effort in ensuring energy efficiency plays its part in securing national targets, reducing the UK’s contribution to climate change and ensuring much higher levels of energy security for the long-term.