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By Prof Jim Watson, UKERC Presented at the EUED Centres Gala, on 2-3 July 2014, in Lancaster, UK.
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Energy demand and energy policy
Jim Watson, Research DirectorUK Energy Research Centre
EUED Centres Gala, Lancaster, 2-3 July 2014
Overview
1.Why the energy system exists: trends in demand
2.Energy demand and the energy policy trilemma
3.Ambitious strategies and mixed realities
Why the energy system exists
Source: DECC
Why the energy system exists
Source: DECC
Reducing GHG emissions:Good progress? Will it continue?
Source: Department of Energy and Climate Change
CO2 emissions are down 19% since 1990
But emissions rose 20% (1990-2009) on a consumption basis
Reducing GHG emissions
Source: Committee on Climate Change
There was good progress in 2012 on adding new wind
generation capacity to the system, insulating lofts and cavity
walls in residential buildings, and improving the efficiency of
new cars. However, there is a risk that progress will not be
sustained, particularly as regards wind generation capacity
and insulation. Progress was very limited in other areas,
notably low-carbon heat, and energy efficiency improvement
in commercial and industrial sectors.
Committee on Climate Change, 2013 progress report
Reducing GHG emissions
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
100
200
300
400
Gas Electricity
Inde
x (2
000
= 10
0)
Gas prices have trebled since 2000
Electricity prices have doubled since 2000
Affordability:Domestic gas & electricity prices
Price rises and affordability
Click to add titlePrice rises and fuel poverty
Source: Department of Energy and Climate Change
AffordabilityImpacts of policies to 2020 (DECC)Price rises and affordability
Energy security is high on the agenda for many reasons: High energy prices since mid 2000s UK’s shift back to net energy
importer Geopolitics and conflicts Impacts of extreme weather Ageing and/or inadequate
infrastructure
Debates often focus on geopolitics, but many risks closer to home
Security of demand matters too – especially to energy suppliers
Maintaining energy security
Maintaining energy security?from gas exporter to importer
Maintaining energy security?
Fracking has become a national
debate in Britain – and it’s one that
I’m determined to win. If we don’t
back this technology, we will miss
a massive opportunity to help
families with their bills and make
our country more competitive.
Without it, we could lose ground in
the tough global race
David Cameron, August 2013
Maintaining energy security?
DECC Energy Security Strategy,Nov 2012
Tensions between policy goals
Tensions between policy goals
Security of supply, affordability, and
playing our part in combating
climate change. And that for me is
the order
Michael Fallon, Energy Minister2nd Dec 2013
Energy policies and demand:some radical visions
[w]e are looking at how to create a shared incentive between
consumers and energy suppliers to reduce energy use. We
must look at how [energy suppliers] can change from just
selling units of electricity to providing energy services—
heating and lighting homes—making it their business to
increase energy efficiency and cut demand
Alistair Darling, Trade & Industry Secretary, June 2006
Energy policies and demand:some radical visions
We cannot afford to be just a provider of units and that a way
to differentiate ourselves will be to embark our customers on
this journey
Vincent de Rivaz, CEO, EDF Energy, January 2007
Energy policies and demand:some radical visions
‘I want Britain to get as close as possible to using only the energy we really need. We could be saving 196TWh in 2020, equivalent to 22 power stations through, socially cost-effective investment in energy efficiency’. Ed Davey, Nov 2012
A mixed reality: supply side bias?
We have become so used to ministers doing things like
opening new power stations or new gas pipelines or
whatever, even new wind farms, always with a nice white hat
on their head and stuff like that, but we have never yet seen
a minister open a well-insulated loft
Andrew WarrenAssociation for the Conservation of Energy
January 2007
A mixed reality: supply side bias?
Electricity market reform has been priority for energy policy since 2010: A missed opportunity to
integrate supply and demand? Most of the focus on large-scale
low carbon generation Energy efficiency feed-in tariffs
suggested but not taken up Capacity mechanism has more
space for demand-side measures
Contrast between pilots for demand and full auction for gas-fired capacity
A mixed reality: supply side bias?
A mixed reality: models of change
Source: DECC
Energy efficiency is not just low-hanging fruit; it is fruit that is lying on the ground
Stephen Chu, US Energy Secretary
A mixed reality: models of change
High expectations of flagship energy efficiency policies: Green Deal and Energy Company Obligation
Green Deal makes sense in theory: solving the up-front cost problem via loans linked to energy bills
Projections that 130,000 loans would be taken up by the end of 2013; uptake of measures would be much higher
By April 2014, 834,000 measures installed via Green Deal and ECO. Much lower annual rate than previous policy
Green Deal update disappointing: 235,000 assessments and 2,800 loans in place by May 2014
Additional up-front finance offered by government to accelerate uptake
Click to add titleA mixed reality: politics
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Thanks
http://www.ukerc.ac.uk
@UKERCHQ @watsonjim2