ERA’s Position
We fully support the Government's commitment to incentivise the energy industry to move away from selling energy to embracing an energy services model. It makes sense for the industry, the Government in its bid to tackle climate change and for energy-conscious households.

Overall, the Government has shown that it has listened to our views and the broad objectives for the CERT scheme are to be welcomed. However, a detailed industry analysis of the available households without insulation that can realistically and cost effectively be improved indicates clearly that DEFRA has overestimated the volume of CERT targets that can be achieved.

The ERA has serious concerns that the limited flexibility options will not enable suppliers to meet shortfalls in their CERT targets. The consultation paper estimates that will be 1.345m remaining fillable cavity wall households in the priority group by 2008. The illustrative mix requires 1.3m of those remaining to be filled. It is highly improbable that energy suppliers will achieve 100% coverage and will need to achieve up to 20% of their target in other measures in the priority group.

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Background on Energy Efficiency
The Government’s 2003 Energy White Paper set energy efficiency at the heart of UK energy policy, announcing a long term goal to reduce the UK’s carbon emissions by some 60% by 2050, with significant progress by 2020, in an effort to steer the country towards a low carbon economy.

Domestic energy efficiency has been improving steadily over the past few years, but there are still further possibilities for reducing energy consumption (the government estimates that a reduction of 30% could be achieved). It can not be stressed strongly enough that government, consumers and the industry all have a part to play in the drive towards a more energy efficient society. The energy retail industry has been fulfilling its obligations by meeting the targets set by the Energy Efficiency Commitment and the forthcoming Carbon Emissions Reduction Target.

What is EEC?
The Energy Efficiency Commitment (EEC1) began in April 2002 and required energy suppliers to achieve a target of domestic energy efficiency improvements by 31 March 2005. The Department for Environment, Food and Rural Affairs (DEFRA) is responsible for setting the overall target and policy framework of the EEC and OFGEM, the industry regulator, is charged with administering the scheme. DEFRA set an overall energy savings target of 62 TWh for the EEC1 (which is equal to a 1% annual reduction in domestic carbon dioxide emissions).

Suppliers were required to achieve these targets by installing energy efficiency measures in the household sector. Within the confines of the framework suppliers can fulfil their obligations by carrying out a range of approved measures (i.e. wall and loft insulation, energy efficiency boilers, and energy-saving light bulbs). In addition, suppliers must achieve at least half of their energy savings in households claiming income-related benefits and/or tax credits.

Although the overwhelming majority of the energy savings have been achieved through insulation measures, suppliers have also promoted large numbers of lighting, appliance and heating measures. Suppliers continued to use a range of delivery routes to meet their targets. The most successful was working directly with consumers, but they have also promoted measures with social housing providers, retailers, manufacturers and linking in with the Government’s Warm Front programme.

The energy savings achieved under EEC1 equate to £350m per year based on current wholesale electricity prices. In addition, Ofgem estimated that carbon emissions of 15.5mn tones were avoided, or about 1pc of their total. The targets for the second phase of EEC (EEC2), which runs from 2005-8, have doubled to 130 TWh.

The Government has stated that it is committed to maintaining a household obligation on energy suppliers in some form until at least 2020 and that the level of ambition from 2011 will at least be equal to that under CERT, delivering a minimum of 3-4 MtC by 2020.

The annual carbon saving of about 1.1 MtC from the CERT will add to the expected annual carbon savings of about 0.3 MtC and about 0.5 MtC by 2010, respectively from EEC 2002-05 and EEC 2005-08.

The Government's ambition is to move towards a scheme in which an energy supplier's incentives are more closely aligned with the Government's wider carbon and energy objectives. The Government wants to incentivise energy suppliers to engage more actively with customers to deliver greater energy efficiency in the home in the period post-2011.

One way to achieve this could be to move in 2011 to an obligation based on a tradable market set in terms of reducing absolute energy demand or carbon emissions from the household sector. In effect, energy companies would be required to develop a market based on selling less rather than more energy.

CERT will be a pathfinder to a new carbon reduction scheme in 2011.

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What are others saying?
“We need both to invest on a large scale in existing technologies and to stimulate innovation into new low carbon technologies for deployment in the longer term. There is huge scope for improving energy efficiency and promoting the uptake of existing low carbon technologies like PV, fuel cells and carbon sequestration.”
Tony Blair, Prime Minister, November 2004

"Action to reduce fuel bills must be twinned with a renewed focus on greater energy efficiency improvements, and the enhanced Warm Front scheme as well as the expanded Energy Efficiency Commitment can make a real difference."
Elliot Morley MP, Minister for Climate Change and Environment, July 2005

"The UK Government has taken a global lead by setting tough carbon dioxide emissions reduction targets. However, achieving these will be almost impossible unless household energy efficiency plays its full part."
Philip Sellwood, Chief Executive, Energy Saving Trust, July 2005

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