Energy Efficiency Commitment : A view from energy suppliers Russell Hamblin-Boone Head of Corporate Affairs

What is the ERA? It is the only dedicated trade association for energy suppliers All the main energy suppliers operating in the domestic market in GB are members

Why was it set up? Responds specifically to retail issues Dedicated service to energy retailers ERA established October 2003

Characteristics of the ERA ‘Punching above its weight’ Strong customer focus Lobbying, engagement, research, representation Unlike traditional trade associations, very much a delivery organisation Does not tell the industry what to do - but asks it some difficult questions Led by members, facilitates the debate on key policy issues

Energy Efficiency Commitment Government’s target and needs to be realistic and reflective of: the product range industry capacity market potential changes in market dynamics (e.g., reduction of social housing opportunities) future changes to Building Regulations.

Measures, costs and values Insulation Costs will increase as evidenced by insulation manufacturers’ response to EEC2 Insulation relies on reaching saturation There are two key factors that remain unproven a) installer capacity growth potential and b) consumer demand. Defra has overestimated available insulation Industry capacity has limited opportunities for expansion Difficult to predict increased cost of EEC3 – min 32% more + increased cost of materials.

Measures, costs and values Cavity Wall Insulation EEC3 carbon score for CWI considerably reduced. Removal of pre and post 1976 categories for cavity wall insulation.

Measures, costs and values Loft Insulation ERA supports BRE research recommending an increase in lifetime of Loft Insulation in line with CWI to 40 years EEC score for loft top-ups must take account of disturbance etc. Loft depth weighting should be based on the English Housing Conditions Survey. The number of Virgin lofts that have been installed during EEC2 as a weighted average will result, in lower overall carbon scores.

Priority Group A realistic % PG should be agreed at the outset and should not be set on traditional equity basis Balancing equity as in previous programme would come at a high price & limit programme carbon savings for a given spend 47% scenario is not possible without resort to high cost measures such as micro generation heating or solid wall insulation 25% scenario is at the top end of what energy suppliers and NIA believe is potentially possible with low cost measures High cost measures should not be included (except via the exemption option) Differential exemption option could play a crucial role in managing risk, limiting cost impacts to energy bills and balancing equity Fuel switching, feedback displays and micro generation volume assumptions are unrealistic

Priority Group Maximise energy savings potential Provide a holistic solution to fuel poverty Pool resources from EEC, Warm Front, DWP Benefits check, Social Services etc Maximise the benefit to low income and fuel poor households Restore an equity balance Balancing that equity not just to relevant customer groups but also to individuals Maintaining as a far as possible continuity of programmes for installers All suppliers offering PG work this winter DWP mailing = estimated 6% take up

Transition Most suppliers will have completed a large part of their EEC2 activity by March 2007 Without adequate transition arrangements there may be a lull in insulation activity during 2007 Defra must confirm their scoring methodology and indicative scores to be attributed to each measure by the end of 2006 Scores should state precisely the value of EEC2 GWh to EEC3 credits in terms of GWh or tonnes of carbon Early confirmation will not guarantee an early start, Costs may be double that of EEC2

Microgeneration All suppliers exploring expansion options for microgen A niche market that has not reached critical mass for market transformation Microgen currently not cost effective for consumers compared to insulation Work in progress to find solutions for cost of administering exports. Still not a significant part of EEC. Need support for heat led and electicity led microgen. A strong argument for innovation incentives.

Future challenges Smart meters Local generation – CHP Electric homes Fuel Poverty Energy Reduction v Energy Consumption

Thank you Russell Hamblin-Boone Head of Corporate Affairs