The draft EU Energy Saving Directive proposes that Member States should introduce energy efficiency obligations on energy companies (also known as White Certificates) to save energy in their customers’ premises and homes. The five schemes that have currently been running in the UK, Italy, Denmark, Flanders and France have been judged to be successful by their national governments and have been expanded over the years.

Furthermore, Poland and Ireland are introducing their own versions of these in the very near future, so it is timely to ask whether energy efficiency obligations actually deliver?

The British Government has the longest running and largest energy efficiency obligation currently in place. It has expanded greatly, particularly since 2005 and there is now clear evidence that it is turning down gas demand in the residential sector. The rest of this column explores the various drivers underlying gas demand and why the turn down in demand is linked to energy efficiency obligations.

In Britain, natural gas is the main non-transport fuel in the residential sector accounting for more than 70% of the final energy demand in households. Prior to 2005, residential gas demand had been increasing at between 1–2% per year. Since 2005, as Government figures show in the figure below, the total gas supplied to the residential sector has been decreasing. However there are several factors influencing demand and it is important to look at these to understand where the main impacts are coming from.

In 2005, the energy efficiency obligations in Britain were doubled and since 75% of the energy savings come from insulation measures, this had a significant impact on gas demand. Furthermore in the period 2000 to 2005, subsidies provided by the energy efficiency obligations for energy efficient (condensing) boilers had increased the market penetration of their sales from 4% to 36%.

As this had been accompanied by a large training and awareness campaign aimed at heating installers, the Government felt confident in 2005 to require under the Building Regulations that all retrofit gas boilers would be condensing with exceptions when dealing with pluming from the flue gas and/or fitting a condensate drain where the costs would be too expensive. Despite concerns that there would be significant problems with condensate removal and costs of flues, the market responded quickly and by the end of 2007, 97% of all boilers (~1.5 million/year) installed were condensing. In practice, solutions to the perceived problems of condensate drainage and flue costs were found and the increased scale of condensing boiler and flue installations greatly lowered their costs such that the problems largely disappeared.

Also important was the fact that around 2005 was when gas prices for residential customers began to rise and this has an impact in reducing household demand. So in effect there were three distinct pressures pushing down gas consumption in the residential sector downwards – accelerated insulation installations, rapid switch to high penetration of retrofit condensing boilers and gas price increases.

There were also factors which were increasing gas demand in the period from 2004 to 2009. First the number of gas customers increased by around 1.6 million (7%) to 22 million thus increasing the demand for gas in the residential sector. Second, there were more degree days in 2008 and in 2009 than in 2004; in other words, warmer winters were not an issue in the observed reduction in gas demand.

So as the figure shows, gas demand in Britain has dropped by the order of 15% in five years due to more insulation being installed, better retrofit boilers and increased energy prices despite significant increases in the number of gas customers. British Gas, the largest gas supplier in Britain, has carried out a study looking at the average energy consumption of their customers over this period and beleive that the 22% reduction in the average individual household gas demand is largely due to energy efficiency. This is a complicated area and there is a Government analysis is examining all the factors, but I have no doubt that once the evaluation is complete, it will show that energy efficiency obligations and subsequently building regulations have been the major drivers in finally turning down residential gas demand in Britain.

I look forward to similar results being achieved under the new EU Energy Saving Directive!