Cutting electricity use with energy efficiency measures is cheaper than generating more electricity

November 29th, 2012 by HM Government Department of Energy and Climate Change

The UK Government has published proposals to dramatically reduce electricity demand across the whole UK economy.

Cutting the amount of electricity used in Britain’s homes, businesses and industry can be much cheaper than paying firms to supply it; saving money through lower bills and reducing the need for new generation capacity.

Just a 10% reduction in electricity demand could produce savings for the UK economy of around £4 billion in 2030, which would more than compensate for the cost of making efficiency investments upfront.

A 10% reduction in demand would also cut 4.5 megatonnes of carbon, equivalent to that produced by one large city in a year, and save an amount of electricity comparable to that generated by five power stations in a year.

Leading the way on efficiency also makes good business sense, helping to put the UK at the forefront of the growing global market for energy efficiency goods and services and driving growth in green jobs.

Edward Davey, UK Energy Secretary, said “the Coalition Government is absolutely determined to help cut energy bills for consumers, reduce costs for businesses and bring down our emissions.”

“We need to make our energy supply fit for the 21st century, and in a world of rising gas prices we must power our homes and businesses in a much more efficient way.”

“That’s why I am setting out economy wide, ambitious proposals to cut electricity demand. These build on our energy efficiency strategy and will help us lower bills and reduce the need for expensive new energy generation,” he said.

“We have schemes already in place but there are more avenues to be explored and that’s what these ambitious proposals, a first for the UK, are designed to do.”

The UK’s Department of Energy and Climate Change (DECC) is seeking views on a number of key proposals to reduce electricity demand across the whole UK economy, including:

Financial incentives – market wide initiatives:

  • Premium payments – payments for each kWh saved through energy saving measures installed such as energy efficient lighting.
  • An energy supplier obligation in the non domestic sector – ensuring energy suppliers deliver a specific target of electricity demand reduction in the non-domestic sector to complement the Energy Company Obligation to reduce carbon emissions that is targeted at households.
  • Demand reduction included in the Capacity Market as part of Electricity Market Reform – as part of proposed reforms to the electricity market to be set out in the Energy Bill, the UK Government wants to ensure there is sufficient electricity capacity to keep the lights on, even at times of high demand. This consultation looks at whether there is scope for people to participate in this market by committing to permanent reductions in electricity use and so reduce the amount of electricity that needs to be produced.

Financial incentives – schemes targeted at specific sectors:

  • Financial incentives to encourage uptake of energy efficient equipment in homes and businesses – incentives to replace older, less efficient technologies with new more efficient equipment such as lighting, pumps and motors, specifically targeted at different sectors.

Non financial incentives:

  • Voluntary schemes and better energy efficiency information – clearer energy efficiency information to reduce demand, including an energy efficiency information ‘hub’ for the industrial sector and better labelling on products. The consultation looks at whether a scheme to recognise achievements by organisations who commit to buying only highly efficient products could help drive reductions in electricity use.

Taking current and planned UK schemes into account, analysis undertaken with the support of McKinsey has identified around 92TWh of potential electricity savings in 2030, equivalent to around 26% of total demand. A saving of 10TWh is equivalent to the electricity generated by a power station in a year.

The UK Government already has a range of schemes in place and in the pipeline aimed at reducing energy use and these bold new proposals are intended to complement the action already being taken.

The Green Deal and new domestic Energy Company Obligation will help cut electricity use in buildings alongside the roll out of smart meters.

Together, these schemes are expected to reduce electricity consumption in the UK by nearly 6.5TWh in 2030.

The Green Investment Bank will support access to finance for investment in green infrastructure, and in time, energy audits required under the EU Energy Efficiency Directive will help businesses become even more energy savvy.

The electricity demand reduction consultation will close on 31 January 2013.

The UK Government will outline final details on the way forward for electricity demand early in 2013.


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