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Energy insight - Energy efficiency policies and regulations in the UK

EI Knowledge; 27/08/2021

In this Energy Insight:

Existing UK policies and regulations
Energy-saving targets and plans
UK rules and regulations concerning buildings and energy
Energy-saving technologies and products
Financial incentives and obligations driving energy efficiency improvements
Domestic energy efficiency
Fuel tax for vehicles
The future of energy efficiency measures

From 2000 to the end of 2019, total energy consumption in the UK fell by 11 percent to 1.4 million tonnes of oil equivalent (mtoe), despite the population rising by over 13% from 58.9 million to over 66.7 million in the same period. (Over the period 2018 to 2019 total energy consumption in the UK decreased by 1% while “population growth at 0.5% was slower than any year since mid-2004”). The impacts of COVID-19 on the population are not yet available, but ONS has issued some information on its possible effects.

Final Energy Consumption by Sector in the UK, Department for Business, Energy & Industrial Strategy (BEIS)

To meet the legally binding target, laid down in the Climate Change Act 2008, (as amended) of reducing the UK’s greenhouse gas emissions by at least 100% below the 1990 base year levels by 2050, more has to be done to reduce the use of fossil fuels. Improving energy efficiency is one of the major solutions.

Existing UK policies and regulations

EU directives and UK Statutory Instruments

While a member of the European Union, the UK agreed to comply with the Energy Efficiency Directive (EED)(2012/27/EU), under which. from 1 January 2014 to 31 December 2020 EU Member States are obligated to achieve energy savings. They had to do this by using Energy Efficiency Obligations Schemes and/or other targeted policy measures to drive energy efficiency improvements in households, industry buildings and transport.

But, having finalised withdrawing from the EU, from 31 December 2020 these regulations "cease to apply to and in the United Kingdom”.

Different UK Statutory Instruments implemented different aspects of the EED. For example SI 2014 No 3120 The Heat Network (Metering and Billing) Regulations 2014 implemented the requirements of the EED in respect of the supply of distributed heat, cooling and hot water. This, and many other such SIs, remain unchanged after Brexit.

Some, however, are in the process of being amended. For example, the UK government has consulted on “Ecodesign and Energy Labelling Regulations”, (SI 2010 No 2617), and is in the process of publishing new regulations in 2021.

A search on the official UK legislation website finds over 200 results relevant to the Energy Efficiency Directive, including those laid before Parliament due to Brexit. In February 2019 the Hansard Society were reporting doubts that all the pre-Brexit legislation would be ready by 29 March 2019 when the UK was scheduled to leave the EU. On 27 January 2021, the Hansard Society published Brexit and Beyond: Delegated Legislation criticising the lack of scrutiny of around 960 Brexit-related statutory instruments being laid before Parliament.

Energy-saving targets and plans

Article 7 of the EU Energy Efficiency Directive “requires Member States to achieve a cumulative end-use energy savings target by 31st December 2020 equivalent to 1.5 per cent of annual energy sales to final energy users relative to the average energy sales over the period 2010-12”.

The UK’s approach for complying with Article 7 was set out for the period 2010-2020; and the progress of the UK’s national energy efficiency action plan was reported annually. In the 2017 report we were told that since 2007, industrial energy consumption has fallen by 23%; household energy consumption has fallen by 12%; passenger transport consumption has fallen by 8% (but passenger kilometres increased by 6% since 2014); and road freight transport has decreased by 3%.

Following the 2016 referendum, which resulted in the UK leaving the EU, the UK government put forward a policy paper in October 2017 - Industrial decarbonisation and energy efficiency action plans - ”setting out government and industry commitments to reduce greenhouse gas emissions and improve energy efficiency”. The plans covered seven energy intensive sectors. This built on research and analysis, published in March 2015 by the then Department of Energy and Climate Change (DECC) and the Department for Business Innovation & Skills BIS) Industrial Decarbonisation and Energy Efficiency Roadmaps to 2050

UK rules and regulations concerning buildings and energy

Buildings

UK Building regulations

The Building Regulations 2010 (SI 2010 No 2214) “are minimum standards for design, construction and alterations to virtually every building. The regulations are developed by the UK government and approved by Parliament.”

Approval is required for building work on new and existing buildings for, amongst other things:

The insertion of insulation into a cavity wall
Work affecting the thermal elements, energy status or energy performance of a building.

Part L of the Building regulations concerns Conservation of fuel and power. It lays down the minimum U-values for roofs, walls, floors and windows for new buildings, and alterations to existing buildings

New public buildings

Regulation 25B of the Building Regulations sets out that new buildings should be nearly zero energy, and in a circular letter of 14 January 2019, the Ministry of Housing, Communities & Local Government informed building control bodies of the requirements that new public buildings should be nearly zero energy.

Who makes sure Building Regulations are complied with?

Local authorities have the duty of making sure that any building work in their area complies with the Building Regulations. Advice can be found for homeowners; professionals, such as architects and builders; and local authorities, on the Local Authority Building Control LABC website

Energy Performance certificates (EPCs)

An EPC gives a property an energy efficiency rating on how it's built, as well as showing the propery’s energy use and how it could be reduced.

It is the Building Regulations which lay down that EPCs are required for new and modified buildings. They are also required when a property is sold or let, and have to be carried out by an accredited person.

The relevant Statutory instrument making this law is SI 2012 No 3118 The Energy Performance of Buildings (England and Wales) Regulations 2012

Energy Savings Opportunity Scheme (ESOS)

The ESOS Regulations 2014 implemented the EU Energy Efficiency Directive Article 8 (4 to 6). These regulations made it mandatory for UK organisations employing 250 or more people, or with an annual balance sheet total in excess of €50mn (£39mn), to carry out annual audits including an estimate of total energy consumption covering buildings, industrial processes, and transport, and to identify energy saving opportunities. But there was no regulatory requirement for organisations to implement the energy saving opportunities identified. Changes are in the process of being made to these regulations (July 2021).

The audits must be carried out by an approved ESOS Lead Assessor such as those assessed and listed by the Energy Institute

What standards exist to help?

Organisations are encouraged to use ISO 50001 Energy Management systems. Requirements with guidance for use which provides a framework to help implement an energy management system. Training, such as that offered by BSI, or the Energy Institute is available.

Energy-saving technologies and products

Energy technology list (ETL)

BEIS updates the Energy Technology List monthly, providing details of nearly 60,000 energy-saving products from 56 technology categories, for businesses and the public sector.

There are guides for manufacturers wanting to add their products to the list, and for purchasers wishing to reduce their energy costs.

[The Enhanced Capital Allowance (ECA) scheme for energy saving technologies, from which businesses could benefit from tax breaks when investing in eligible energy saving equipment, ended in April 2020.]

Lighting and other energy-using products

With the introduction of SI 2007 No 2037 The Ecodesign for Energy-Using Products Regulations 2007 the UK implemented an EC Directive subsequently superseded by further directives.

The Carbon Trust estimates that “up to 40% of a building's electricity use is accounted for by lighting”.

Energy-hungry incandescent light bulbs have been unavailable for purchase in the UK since 2009 and halogen light bulbs were gradually phased out from 2016 and completely banned for sale from October 2018.

SI 2001 No 3316 The Energy Efficiency (Ballasts for Fluorescent Lighting) Regulations 2001, which implemented an EC directive on minimum standards for energy efficiency of fluorescent lighting and put into effect the EC Directive 2000/55/EC aimed at reducing energy consumption for ballasts for fluorescent lighting has been revoked by SI 2007 No. 2037 The Ecodesign for Energy-Using Products Regulations 2007.

Domestic appliances

The EU Label

SI 1524: 2011 The Energy Information Regulations 2011 implemented the EU directives for the labelling of domestic appliances to show their level of energy consumption, and the measures to be taken to ensure the accuracy of the information given. The EU directives give the now familiar layout of the labels.

This SI is still in the process of being amended (August 2021) by: SI 2019 No 539 The Ecodesign for Energy-Related Products and Energy Information (Amendment) (EU Exit) Regulations 2019

Information about the New Energy Label, which in the UK is taking the place of the EU label, can be found on the Label 2020 website.

The new label is simpler, showing straight ratings from A to G

For example, for fridges and freezers (other examples are given on the Label 2020 website):

At present August 2021), they cover

• Household refrigerators and freezers

• Washing machines and wash-dryers

• Dishwashers

• TVs and electronic displays

Light sources will be covered from 1 October 2021 when the Ecodesign for Energy-Related Products and Energy Information (Lighting Products) Regulations 2021 come in to force.

Guidance is given for suppliers and dealers at Regulations: energy information and in the BEIS business com,panion Trading Standards explained: Energy rating information

Financial incentives and obligations driving energy efficiency improvements

CRC Energy Efficiency Scheme and its successor

The CRC Scheme (formerly known as the Carbon Reduction Commitment Scheme), introduced by BEIS and the Environment Agency in July 2015, aimed to incentivise energy efficiency and cut emissions in large energy users, in the UK's public and private sectors, by requiring them to buy allowances for every tonne of carbon they emit.

However, after consultation with industry and other bodies (Consultation: reforming the business energy efficiency tax landscape – outcome published March 2016) this scheme was closed following the 2018 to 2019 compliance year. (Revoked by SI 2018 No 841). Regardless, existing participants of the scheme still have some actions they have to take until 31 March 2025.

The Government’s new reporting framework – the Streamlined Energy and Carbon Reporting (SECR) – came into effect on 1 April 2019.

For more information see our Energy Insight: Streamlined Energy and Carbon Reporting (SECR)

Climate Change Levy (CCL)

The CCL is a business tax aimed at reducing businesses energy consumption. It is the energy suppliers’ responsibility to charge the correct amount, and there are many exemptions, and many differing rates.

Domestic energy efficiency

Energy Company Obligation (ECO) Scheme and fuel poverty

The ECO scheme, which started in April 2013, is administered by Ofgem on behalf of BEIS. The scheme obligates suppliers under the Home Heating Cost Reduction Obligation (HHCRO), also known as “The affordable Warmth Obligation”, to improve the ability of low income, fuel poor and vulnerable households to heat their homes. This includes upgrading inefficient heating systems

Guidance for obligated suppliers is available for the years 2018-2022, but BEIS opened a new consultation on 20 July 2021 for the Design of the Energy Company Obligation ECO4: 2022-2026

The UK government has introduced various other measures to help combat fuel poverty by making impoverished households more energy efficient.

Tax incentives and grants for energy-saving products in homes

For some energy-saving products, such as loft insultation, only 5% VAT should be charged, but just for qualifying people. For most people, VAT at 20% is still levied on home improvements such as double-glazing and energy efficient boilers.

Various grants are available for some qualifying residents, e.g. for installation of cavity wall insulation; upgrading of boilers; loft insulation – paid for by the energy suppliers under the Energy Company Obligation (ECO) Scheme.

However, the Green Homes Grant voucher, which opened for applications in September 2020, and intended to help householders pay for home insulation and other energy saving products, was scrapped by the government six months later in March 2021. Various reasons for its failure were given, such as excessive red tape for builders registering for the scheme, and householders unable to find builders to even provide a quote for the required work.

Smart meters

The government required the energy suppliers to offer each of their customers a smart meter by the end of 2020 (although customers can refuse to have one installed). Due to the COVID19 epidemic the deadline was extended to the end of June 2021, but a new target comes into force on 1 July 2021 with which energy suppliers have to comply. The idea is that people will be able to see how much energy they are using, and what it is costing, in real-time, thereby enabling them to better manage their energy use.

By 28 July 2021, over 13.3 million smart meters were connected to the UK's DCC network

Fuel tax for vehicles

It could be argued that the high percentage of duty and VAT on road fuel has encouraged the design of more energy efficient vehicles; and for drivers to limit their journeys. This even though the rate of duty per litre (eg 57.95p for unleaded petrol), has remained unchanged since 2011, and the 20% rate of VAT, since 2012. While the number of vehicles on UK roads has continued to rise steadily, fuel consumption by road vehicles has remained much the same over several years.

Although the pandemic caused a drop in demand for energy from all sectors in 2020, the transport sector still consumed over 40 million tonnes of oil equivalent (MTOE), the largest consumption of any sector, just topping that of the domestic sector. The total 2020 demand for energy in the UK was 127.5 MTOE.

The IEA in their report Fuel Economy in Major Car Markets: and Policy Drivers 2005-2017, published on 20 March 2019, stated that, for newly registered vehicles in the UK, while the average fuel economy of “various vehicle segments improved in the 2005-2014 period, … it has generally stagnated since.”

The future of energy efficiency measures

Small and Medium size businesses

Having dealt with large organisations with ESOS, in his Spring Statement in March 2019, the UK Chancellor of the Exchequer set out the government’s intentions including plans concerning energy efficiency for smaller businesses:

An Energy efficiency scheme for small and medium sized businesses: call for evidence was launched by BEIS for the period 13 March 2019 – 8 May 2019, to “help smaller businesses reduce their energy bills and carbon emissions…to explore how [the Government] can support investment in energy efficiency measures”. A summary of responses was published in June 2020, from which it was clear there was no clear way forward. So BEIS commissioned research “into auction design in order to further inform the policy-making process.”

See UK SBS CR20059 - Designing an Auction to Install Energy Efficiency Measures in Small and Medium Sized businessesd (SMEs) to see how far the process has reached.

Future Homes Standard

He also stated, “to help ensure consumer energy bills are low and homes are better for the environment, the government will introduce a Future Homes Standard (FHS) by 2025, so that new build homes are future-proofed with low carbon heating and world-leading levels of energy efficiency”. A consultation was held between October 2019 and February 2020 The Future Homes Standard: changes to Part L and Part F of the Building Regulations for new dwellings. The Government response (published in January 2021) states that work on a full technical specification for the FHS has been accelerated and the government will consult on it in 2023 so that “from 2025, the Future Homes Standard will deliver homes that are zero-carbon ready”

UK government’s Industrial Strategy Challenge Fund

UK government’s Industrial Strategy Challenge Fund, being delivered on behalf of the UK government by UK Research and Innovation, aims to “strengthen UK science and business innovation and take on the biggest challenges that society and industry face today” and includes ensuring that the UK prospers from the energy revolution including moving to a low-carbon, more resource-efficient economy. Reported in May 2018, £102.5 million will be invested in developing smart, clear energy systems.

Energy Insight details

Keywords: Energy Saving Opportunity Scheme (ESOS)

Subjects: Energy efficiency, Policy and Governance, Domestic, Fuel poverty, Environmental policy