1. The Energy Efficiency Commitment
Kate Smith, Deputy Head of Energy Efficiency, Ofgem
National Home Energy Conference May 2005

2. Summary Outcome of EEC 1 The EEC 2 target
A comparison of EEC 1 and EEC 2
A checklist for SHPs
Opportunities
Discussion

3. Key features Energy saving target Domestic consumers Priority group
Flexibility for suppliers
‘Additional’ energy savings
Energy saving target
No requirement to spend money
Priority group
Flexibility
Measures, fuels, consumers (inc those who pay for their fuel through their landlord)
Additionality
Must exceed what would have happened anyway
Eg exceed Building Regs for new build, boilers or glazing
Or increase retail sales or extend SHP work

4. Ofgem Sets suppliers’ targets Approve schemes Monitor activity
Per scheme
Per supplier
Report to the Secretary of State
Enforce compliance where necessary
Target setting – based upon customer numbers
Assessing proposed schemes – suppliers set up schemes which we approve
Monitoring activity
Per supplier – scheme completions
Per scheme – quarterly reports, the EEC Update
Reporting to the Secretary of State – Final report for EEC 1 will be available by 31 July. If you would like a copy, us.
Enforcing compliance where necessary

5. Energy savings achieved
Priority consumers to benefit = 5m
Non priority consumers = 5 – 6m
Energy savings
84 TWh achieved. Excess to be carried over to EEC 2.
Insulation
Dominates, over half of the total savings
PG – mainly with SHPs
Lighting
Mainly free CFLs to the Priority Group
Non Priority – direct and through retailers
Appliances
Mainly to non PG through retailers
Some to PG through fridgesavers
Heating
Inc SWH, GSHPs, fuel switching
To the PG – mainly through SHPs
Energy savings achieved by measure type for Priority and non Priority consumers

6. A comparison EEC 1 62 TWh 0.4 MtC a year £3.60/customer/fuel/year
50% Priority Group
EEC 2
130 TWh
0.7 MtC a year
£9 /customer/fuel/year
£1200m
50% Priority Group
NOTE The 62 TWh is not directly comparable to the EEC 2 target of 130 TWh.
How does this contribute to the Government’s CCP?
Energy White Paper goals
1. Path to reduce UK CO2 (the main contributor) by 60% by With real progress by 2020.
2. Reliable energy supply: Secure, diverse
3. Promote competitive markets in UK and beyond. Raise the rate of sustainable economic growth and improve productivity.
4. Ensuring every home is adequately and affordably heated.

7. Carbon savings from households
Taken from Energy Efficiency, The Gov’s Plan for Action, April 2004
Programmes to save carbon up to 2010.
UKCCP = existing policies.
Policy MtC/yr %
UKCCP
Warm Front
EEC
EEC
Community Energy
Building Regulations
Other
Total
Projected carbon savings from the household sector (MtC pa) to 2010

8. EEC 2 – what’s new? More of the same…
Creating improvements in energy efficiency
Domestic consumers
Priority Group
Incentives for energy services
And, new…
Incentives for innovative measures
Creating improvements in energy efficiency – above what would have happened anyway
Eligible measures – same, any EE measure, no renewables, innovative uplift inc dCHP, energy services
The Priority Group – same. Certain income related benefits & tax credits and disability benefits
Innovative – something which was not used under EEC 1.
or, the measure was used under EEC 1 but the means of creating that measure was not used AND the savings are significantly greater that that achieved under EEC 1.

9. Defra’s Illustrative mix
Insulation Cavity wall and loft 2.8m
DIY loft m
Tank Jackets / draught proofing 0.77m
Window glazing m2
Appliances Cold and wet m
Set top boxes m
Lighting CFLs m
Heating Boilers m
Fuel switching m
Heating controls m
130 TWh
New additions to the model
Window glazing - E to C rated glazing
Fuel switching – replacing elec or coal with gas
Set top boxes – acknowledges the savings potential from consumer electronics
All measures must exceed the Building Regulations, such as boilers
This includes new build.
So, how does this relate to EEC 1?
EEC is a market mechanism – it is up to the suppliers how they meet their targets and they want to do it as cost effectively as possible.

10. EEC 1 quarterly savings compared to EEC 2
62 TWh does not equal 130 TWh
Defra has revised its assumptions and savings, using experts such as the BRE
Therefore savings from insulation has increased slightly
Appliances are no longer incentivised to the transformation of the market.
CFLs – an average saving is now used for all households. Decreased by more than half. Includes the HRE
Savings from boilers have decreased very slightly.
EEC 2 indicative average = > 10 TWh per quarter.
Suppliers are not quite at this level yet. The high activity reflects: an increase in activity for carry over and final, accurate reports
EEC 1 achieved energy savings comparable to the EEC 2 energy savings and EEC 2 indicative quarterly savings

11. Energy savings by measure type
EEC 1 – energy savings actually achieved by measure type over the three years
EEC 2 – energy savings in Defra’s illustrative mix
heavy reliance on insulation
the pie is much bigger in EEC 2.
The percentage energy savings achieved by measure type from EEC 1 and the indicative percentage savings for EEC 2

12. What SHPs need to know Domestic consumers can benefit
Schemes must be ‘additional’ to BaU
No retrospective funding
Priority Group definition
Monitoring
Properties
Quality
Customer satisfaction
Free CFLs – limited to four per household
SHP declaration must be signed
Checklist of the things that SHPs should be aware of
Domestic consumers – self contained, permanent dwellings. Halls of residence and residential care homes, for example, are excluded.
Measures must be additional ie the supplier’s funding must enable work which would not have happened otherwise.
funding cannot be used for measures already installed.
Monitoring – fuel type and property type
we are now getting the final monitoring results in from suppliers for EEC 1.
technical monitoring – 5%
customer satisfaction – at least 1% of professional insulation and heating works.
CFLs 1. ask if consumers want them
2. collect their name and address
3. provide them with up to four bulbs
OR if the consumer can’t be asked and if names and addresses cannot be collected,
1. provide two CFLs

13. SHP Declarations Confirms
The scheme would not have gone ahead without the supplier’s funding,
The supplier’s funding has not replaced any funds for such work, from any source,
There has been no retrospective funding of measures, and
The proportion of recipients in the Priority Group

14. Opportunities for SHPs
Insulation the most cost effective measure
….but a mix of measures is desirable
Social housing partnerships key
…with increasing focus on private households
Priority Group
Incentive for innovative measures

15. Opportunities, continued!
Eight suppliers
Three years
£1 billion pounds
Contact details at
‘EEC 3’
Defra to review the EEC in 2007

16. Points for discussion EEC 1 EEC 2 Potential post 2008?
Examples of successful partnerships
What have been your experiences over the last three years?
How have you benefited?
What lessons can be learnt
EEC 2
What do you want to achieve over the next three years
Potential post 2008?

17. Promoting choice and value for all gas and electricity customers