Why Laissez-faire Energy Efficiency Policy Fails in the UK

           Energy Efficiency
Energy Efficiency Policy

Research has been published in the journal of Energy Policy that describes successful energy efficiency policy for households. The average home in the UK is 4°C warmer today than it was in 1970, while its emissions are down 15% from its 1990 levels. However, progress in household energy efficiency has slowed down. Policy failures can be attributed to the slowdown, and new  recommendations for policymakers in energy efficiency have been developed.

The research presents three rules for successful energy efficiency policy. The first is to keep overall capital costs low, using public subisides where possible. The second is to focus on value rather than cost. Energy efficiency does save money, but not much. Policies have rarely acknowledged its secondary benefits in comfort, health, and peer reward. The last is to make finance mechanisms easy to understand and access.

Energy efficiency measures are usually installed with financial support because payoffs are slow. An upfront investment for a boiler or insulation retrofit requires £6,000-10,000, while only seeing returns of £200-300 per year. Policy for increasing the uptake of retrofits has focussed on market transformations, which leverage the value of energy cost savings. However, their effectiveness is poorly understood. In 2013, the Green Deal was introduced in the UK. That year, retrofits of wall and loft insulation fell off a cliff. After 2.5 years, 14,000 Green Deal schemes had been funded, and the policy was ended. It had originally targeted 14 million homes to be funded by 2020. Energy efficiency retrofits currently occur at a rate 5% of their peak in 2012, and their industry has been set back years in both confidence and capacity. There is now a policy vacuum in the UK on domestic energy efficiency. The Green Deal broke all three rules. Its interest rates were much higher than those available on the high street. It only focussed on cost savings. It was complicated to access, with a multitude of actors involved in service delivery.

The research shows that financial mechanisms cannot improve energy efficiency when there is no wider effort to support demand and supply chain capacity. The policy toolkit put forward promotes careful policy design for energy efficiency to involve the private sector over a laissez-faire approach.

Nick Fedson MEng MSc

Nick is an analyst with an interest in energy, climate, and sustainability. Nick maintains both technical and policy interest in these areas, with an undergraduate background in mechanical engineering from the University of Bristol and a recently completed Master’s degree in Global Energy and Climate Policy from SOAS, University of London. He has completed internships in a solar energy consultancy in Brighton, a not-for-profit independent think tank in New Delhi, and in data analysis at a software company in Cambridge.