- Household energy consumption is an important area of
public policy. UK households spend £20 billion on energy each year,
mostly on electricity and gas, and account for just under 30 per
cent of all energy consumed in the UK. Programmes to improve energy
efficiency and reduce energy consumption cost some £2.6 billion a
year: a mixture of direct expenditure and compliance costs borne by
business and households. However, the value of the possible energy
savings is thought to outweigh these costs many times over –at
current prices the typical household could save at least £280, or
roughly 30 per cent of their energy bills, if they adopted the
cost-effective measures already available to them. In addition to
its financial importance, household energy consumption is
responsible for 27 per cent of all carbon emissions, and is central
to efforts to mitigate climate change. And in times of rising
energy prices and concerns over energy security, reducing household
energy consumption can help reduce fuel poverty and reduce reliance
on imported energy.
Key targets
There are two measures against which government
has set targets: energy consumption and energy efficiency.
Improving energy efficiency contributes to the ultimate goal of
reducing energy consumption.
On energy consumption:
On energy efficiency:
- government has set a target for households in England to
be 20 per cent more energy efficient in 2010 than they were in
2000; and
- government has also set a target to save 4.2 million
tonnes carbon (MtC) per year by 2010 through energy efficiency
measures in the UK residential sector (3.5 MtC in England) from a
1990 baseline. Footnote
1] This carbon-based target reflects a similar
outcome in terms of the required improvement.
- This report examines the programmes government has put in
place to reduce energy consumption in England, including UK-wide
programmes, but excluding programmes specific to Scotland, Wales or
Northern Ireland. It sets out government’s targets and
expectations, progress to date and the significant issues
influencing the cost-effectiveness of the four major programmes in
this field. In doing so, it draws upon departments’ own
estimates of energy savings, which are produced in accordance with
cross-departmental guidance and processes.
Main findings
- Programmes to influence household energy consumption have
been in place since the early to mid 1990s. The main programmes
have been those to promote and install energy efficiency measures
in households, particularly in vulnerable households to reduce fuel
poverty, setting energy efficiency standards for new homes via
Building Regulations, and requirements for new household appliances
to be more energy efficient. There have also been information
campaigns to influence householder behaviour. These programmes are
delivered by a range of government bodies, principally Defra, CLG
and BERR. Defra is responsible for overall coordination and
delivery.
-
These programmes have contributed to
improvements in household energy efficiency (it now takes less
energy to heat our homes to the same temperature) but, until very
recently, overall household energy consumption has risen. Household
energy efficiency improved steadily between 1990 and 2004 – by
approximately 1.4 per cent a year (19 per cent since 1990), with
greater improvements in social than in private housing, reflecting
past concentration of efforts on vulnerable groups. However,
improvements in energy efficiency have until recently not been
enough to offset other trends – such as the growth in the number of
households, more comfortable homes (e.g. more of the house heated
to the same temperature), and the growth in energy-using appliances
– which have meant that household energy consumption rose 19 per
cent between 1990 and 2004.
- Prior to 2004 there were no targets specifically for
household energy consumption or efficiency. Targets and
expectations have built up over time as a result of EU requirements
and UK policy reviews. As a result, the main energy targets to
which UK households contribute differ in the nature and timings of
the baselines, their target dates and their geographical and
sectoral coverage. No specific energy-related targets have been set
beyond 2016. Therefore, the contribution that household energy
consumption is expected to play in meeting the range of energy
policy objectives in the longer term (including reducing fuel
poverty, reliance on imported energy and climate change, where
UK-wide targets have been set to 2050) is unclear. Departments
expect that in the future, targets for household energy consumption
will be driven by carbon budgets set by the Government in response
to the recommendations of the proposed Climate
Change Committee.
-
Despite the gradual rise in household energy consumption since
1990, government now anticipates a significant reduction in
household energy consumption. Indeed, energy consumption has fallen
in 2005, 2006 and 2007 (gas consumption decreased 12 per cent over
the period; electricity consumption decreased only marginally and
remained slightly higher in 2007 than in 2004). These are
promising signs, and if this trend continues, suggest that
households’ share of the key targets for consumption, set for 2010
and 2016, can be met. Departments have made considerable efforts in
recent years to pull together a more systematic approach to
household energy consumption – especially in the Energy Efficiency
Action Plans of 2004 and 2007. Achievement depends on successful
delivery of various programmes; but is also dependent on non-policy
factors influencing energy consumption such as energy prices.
- It is difficult to assess progress against the 2010
energy efficiency targets; the latest available data are for 2004.
Although Defra has an agreed method to measure performance against
the target, it has not done so since 2005.
- Departments’ plans to reduce future household
energy consumption rely mainly on an expansion or continuation of
existing programmes, or new programmes: more stringent
Building
Regulations which require new homes and some
renovated homes to be more energy efficient; obligations on energy
suppliers, which require them to promote
household energy efficiency measures to consumers; and
programmes to improve
the efficiency and labelling of household
appliances to require or encourage the
purchase of more energy efficient models. In addition the
government provides information to influence
behaviour, including proposals for Better
Billing and Metering so that households are more energy-aware. But
there are some major challenges:
- There is a growing recognition that non-compliance may
undermine the effectiveness of Building Regulations, especially as
they become increasingly stringent. But as yet there is little
concrete information on the extent of non-compliance or how best to
tackle it. There are also concerns, but little information, over
the capacity of the construction supply chain to deliver more
stringent energy standards .
- Obligations on suppliers to promote energy saving
measures have been successful, particularly in targeting vulnerable
homes. But there are concerns about the capacity of the energy
efficiency industry (e.g. insulation manufacturers and installers)
to meet the required installation rates of key measures (such as
loft and cavity wall insulation); and about the level of consumer
demand required to drive expected future energy savings,
particularly in private households.
- Even by 2050 two thirds of the housing stock will have
been built before 2005, so there is a need to focus on existing
housing as well as new homes. Future obligations on energy
suppliers will require them to install more measures in private
households, but it is uncertain whether sufficient consumer demand
can be generated. Also, 43 per cent of homes in England have
at least one feature associated with ‘hard to treat’ housing stock
– so cannot be fitted with all standard energy
efficiency measures.
- Programmes to move consumer choice to more energy
efficient appliances through design and labelling schemes have had
some effect although the UK lags behind others in Europe. Estimates
of their future effectiveness depend on as yet unknown
technologies, and on the European Union’s preparedness to adopt
them (the UK government is not able to set mandatory standards for
products; international agreement is required). There are
particular risks and uncertainties regarding the growing consumer
electronics sector. Also, UK and EU standards are not as
wide-ranging or as stringent as some in other parts of the
world.
- Alongside technological efforts, programmes will need to
address householder behaviour. Householder behaviour is not only
important for the take-up and impact of the other programmes listed
above but also because behaviours such as leaving lights on and
using unnecessary heat have a big impact on overall energy
consumption. But there remains a significant gap between
householder awareness and behaviour. There is limited
information about the outcomes of information programmes (in terms
of a discernible shift in consumer attitudes and behaviours) and
thus about their cost-effectiveness, or how they could be better
designed in the future. In particular, there is considerable
uncertainty over the likely impact of better ways of
metering.
- There is a growing recognition that non-compliance may
undermine the effectiveness of Building Regulations, especially as
they become increasingly stringent. But as yet there is little
concrete information on the extent of non-compliance or how best to
tackle it. There are also concerns, but little information, over
the capacity of the construction supply chain to deliver more
stringent energy standards
Recommendations
- After years of increasing household energy consumption,
the relevant departments (Defra, BERR, CLG) now anticipate a
significant reduction in energy consumption and continued
improvements in energy efficiency. But to achieve future targets,
and for these programmes to be cost-effective, there is much that
still needs to be done:
- There are no
explicit targets for household energy consumption beyond 2016 and
none for energy efficiency beyond
2010. Instead, departmental
expectations are embedded in the analysis supporting the Energy
White Paper and Climate Change Programme. Defra should consider
whether household energy consumption is important enough in its own
right to warrant more explicit targets, and clarify expectations of
household energy beyond 2016.
- There are some
lags and deficiencies in the data needed to monitor progress
towards targets. The latest available
household energy consumption data are a provisional figure for
2007. The target for energy efficiency was set in 2004 but Defra
has not updated the data used to measure performance against it
since that year. Defra will need to improve the data on which
progress is monitored, so that programmes can be responsive and
kept on track.
- The evidence base
about programme effectiveness needs further
work. Defra, BERR and CLG have
developed better models and projections, but there is as yet a lack
of genuine ex-post evaluations of effectiveness based on real
practice in homes. This should include a deeper understanding of
the impact of installation techniques on the effectiveness of
insulation; the capacity of industry supply chains to meet required
insulation installation rates and to meet stricter Building
Regulations; and the performance of measures once installed,
perhaps through learning from exemplar
housing developments.
- Until recently,
there had been little work carried out to establish whether
non-compliance with Building Regulations may be a significant
factor inhibiting effectiveness. Until now,
projected impacts for this programme have assumed full compliance.
A project, part funded by CLG, is now underway to look at
average levels of compliance with energy efficiency standards in
the Regulations. This work needs to be concluded and continued
and convincing proposals made to address the issues. The results of
this project must be used to inform future amendments to the
Regulations and support more realistic estimates of impact. This
will be especially important since future Regulations are expected
to be more stringent and non-compliance correspondingly more
likely.
- Older and private
homes may need to assume greater importance if energy targets are
to be met. Existing homes dominate the
housing stock. Although departments believe that the current policy
mix will deliver the required energy savings, there are nonetheless
significant risks and uncertainties. It will be important that
departments monitor the progress of current programmes in
addressing the poor energy performance in many older and
privately-owned homes and consider whether further intervention is
required when deciding on the design of the Supplier Obligation
post-2011.
- Better
information on the use of energy efficient appliances could help
bring about more effective policy. Data on
the use of such appliances varies by type of product; Defra should
consider what scope there is to improve the evidence base, for
example by setting up long term monitoring of appliance use in a
representative sample of homes. There is also limited information
from which to compare and learn lessons from UK performance with
European counterparts; Defra should renew its efforts to work with
other Member States as far as possible to put together a more
systematic picture of performance across the EU.
- Whilst
householders are aware of energy efficiency and climate change,
there are many barriers to action, both real and
perceived. How householders use energy in
their homes can undermine attempts to improve energy performance in
UK homes; overcoming the barriers to action is crucial to
delivering energy savings in the existing and new housing stock.
Whilst Defra now has a good understanding of these barriers, it is
less clear whether the policy mix is addressing all of them
sufficiently. There is also a need to assemble more evidence about
the outcomes of information programmes, incorporating the results
of ongoing evaluations, and about how householders are likely to
respond to Better Billing and Metering initiatives. The evidence
base for the cost-effectiveness of smart metering compared with
other ways of providing information to households is thin, and
needs development before departments can be in a position to
recommend expansion.
- Earlier work on
cost-effectiveness gives some assurance but could be updated and
improved to inform future decisions on the best mix of
programmes. Work carried
out at the time of the 2006 Climate Change Programme Review was
based on carbon reductions rather than energy saving, and explored
a limited number of options for varying the mix of programmes.
Things have moved on, and departments should use forthcoming
reviews of household energy policy to look again at the most
effective mix of policies to reduce household
energy consumption.
Value for money conclusion
- Reducing household energy consumption should provide
value for money for consumer and taxpayer alike. If
government programmes are designed and carried out well, many
householders across England will benefit from warm homes and lower
energy bills, whilst wider objectives relating to climate change
and energy security are made more achievable. There are some signs
that these programmes have begun to reverse the long term trend of
rising energy consumption and analysis shows that they have been
cost-effective. However, for all types of intervention, departments
must collect more evidence to be sure that their programmes are
working as well as they could be.
- To achieve their longer-term targets, programmes must
focus increasingly on homes that are harder to treat, technologies
that are newer and more expensive, and householders who are less
keen to act. These challenges make the risks to cost-effective
delivery of energy savings in the future all the greater.
Departments have done good work to identify these risks, but as yet
there is not convincing evidence that these risks can be
overcome.