Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Gov’t targets boost to business energy efficiency

The government published its Clean Growth Strategy (CGS) on 12 October, outlining a range of policies and proposals to decarbonise all sectors of the UK economy into the 2020s.

The strategy is intended to identify areas that need to see the greatest progress, both through technological breakthroughs and large-scale deployment, if the UK is to hit its binding climate targets.

One of those areas is the non-domestic sector, where the government identified significant scope for businesses to cut carbon emissions through energy efficiency, as well as secure savings on bills.

Business energy efficiency benefits

The government started by detailing the significant progress already made by businesses – between 1990 and 2015 emissions from non-domestic buildings were 18% lower.

However, there is still major improvement that could be made. Official estimates put the potential benefit from cost-effective energy efficiency upgrades in the commercial and industrial sector at up to £6bn by 2030 through investment in cost-effective energy efficiency technologies.

Roughly half of these savings are available through improving the efficiency of buildings and processes, including by fitting better insulation and smarter energy controls. The other half can be realised through eliminating electricity waste in business, for example using better lighting and energy management systems.

The government’s goal is to enable businesses and industry to improve energy efficiency by at least 20% by 2030. Policy makers will take a final decision on the level of this goal and how best to measure progress toward it in 2018. This will also contribute to overall economic growth by reducing the amount of energy required per unit of output.

Setting the framework

To help achieve the goal the government will put in place a simpler, more ambitious and long-term policy and regulatory framework.

This will make it easier for businesses to identify where they can save energy by simplifying the energy and carbon reporting framework. It will also ensure that those who lease premises to businesses, including in the service sector, continue to refurbish and improve the performance of their buildings. In parallel, all new commercial and industrial buildings should be more energy efficient.

The government also confirmed it will continue with plans to close the Carbon Reduction Commitment Energy Efficiency Scheme following the 2018-19 compliance year. Energy efficiency will be driven by implementing the previously announced increase to the main rates of the Climate Change Levy from 2019.

There was also a recognition that energy intensive industries will need steps beyond energy efficiency to decarbonise. Out to 2030 this will mean supporting steps to switch to low-carbon fuel use and ultimately deployment of carbon capture, usage and storage.

Public sector leadership

The strategy also recognised the unique leadership role that the public sector could take on in driving cuts to energy usage.

The annual energy bill across all public sector buildings in England and Wales is estimated to be around £2bn, which could be reduced significantly, releasing funds for front line services. The CGS pathway to 2032 sees emissions from the public sector falling by around 50% compared to today.

Therefore, the government will introduce a voluntary wider public and higher education sector target of a 30% reduction in greenhouse gases by 2020-21, against a 2009-10 baseline. A call for evidence was issued alongside the CGS to gain views from the sector on the target and a proportionate reporting framework to underpin this, as well as further policies to realise carbon and cost saving potential.

Driving low-carbon deployment

Outside of business energy efficiency, the government also detailed its plans to support deployment of new low-carbon generation.

Alongside the CGS, the government confirmed that the next UK Contracts for Difference (CfD) auction is planned for spring 2019, with up to £557mn to be made available for renewable energy projects.

The last CfD round was launched in April 2017, resulting in three offshore wind projects being awarded CfDs with strike prices going as low as £57.50/MWh, 50% lower compared to the results of the first auction held in 2015.

Industry reaction

The strategy overall won broad backing from business groups. Roz Bulleid, Head of Climate & Environment Policy at EEF, the manufacturers’ organisation said: “Manufacturers have been waiting some time to discover how the government intends to meet the UK’s challenging 2030 decarbonisation target and will be pleased to see a broad-ranging and well-structured report, that ties into the wider Industrial Strategy […] There is also much appreciated recognition of the need for more government support for industry in key areas, including energy efficiency, heat reuse and carbon capture and storage. Industry stands ready to now work with Government to ensure we move from strategy to delivery at the earliest opportunity.”

CBI Managing Director for People and Infrastructure, added: “The road to a low-carbon 2030 offers huge opportunities for the UK economy and is a vital part of an effective industrial strategy. Following a significant period of uncertainty in the energy sector, businesses need certainty about the plans and policies that will deliver a low-carbon future. Today’s long-anticipated Clean Growth Strategy is a welcome step towards clarity, and businesses will be pleased by much of the content.”

Next steps

Many of the goals and targets contained within the strategy are as yet aspirational, with the details set to be the subject of extensive consultation before becoming reality.
Also informative was indication that key decisions that have been long anticipated such as the future of low-carbon cost controls and carbon pricing will be taken in coming months.

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