Columnists: Andrew Warren, British Energy Efficiency Federation

Published on: 28 Mar 2017

Why is Theresa May ignoring the 'first fuel'?

Within days of taking office, the UK's Prime Minister, Theresa May, made two major interventions into energy policy.

She placed a (swiftly reversed) moratorium on proceeding with the construction of the first new nuclear fission plant in a generation, at Hinkley Point C. And she offered new inducements (bribes?) to communities that agree not to oppose exploratory gas fracking.

Refreshingly, both interventions have led to a widespread debate about energy policy. They prompted considerable discussion about how best we should keep the wheels of industry turning. How best we should keep ourselves warm in winter, cool in summer. And how best we should generate electricity.

What it manifestly has not led to is any consideration about how we consume the fuel we use. Almost without exception the entire debate has revolved around which sources of supply are best, are most reliable, are cheapest, are most eco-friendly. And which can be bought from the most dependable sources.

Even as the International Energy Agency continues to describe energy efficiency as strategically 'the First Fuel' - both in terms of its success to date, and importantly its enormous unrealised potential - any discussion about seriously integrating demand management into strategic energy policy has been woefully absent from the debate.

This has happened even though electricity consumption across the UK has fallen by 15.2 per cent across the past decade - and gas consumption by a whopping 32.8 per cent.

Editorial after editorial, opinion column after opinion column, it seems to be taken as a given that the issues thrown up by the Prime Minister's interventions seem exclusively about which forms of energy supply deserves the greatest amount of financial support.

No question. Every form of energy supply receives some form of assistance from the Exchequer: from tax breaks in the North Sea to Treasury guarantees on financing Hinkley, from Renewables Obligations to Contracts for Difference. All offset against tax, of course.

In contrast, if you are a householder wanting to install, say, a more efficient boiler, or more energy efficient windows, you will be expected to be paying for these out of already taxed income. On top of that you will have to pay a further 20 per cent, in Value Added Tax. (In contrast, the VAT imposed on purchasing gas and electricity is levied at just five per cent: ridiculously, this means energy conservation is taxed at four times the rate of energy consumption. That discriminatory bias is even before the Brexit Leave campaign promise to scrap the five per cent VAT rate on consumption!)

Despite all this discouraging bias, the fact remains that year on year the UK is consuming less and less fuel. According to the headline conclusion from the Office of National Statistics in its latest report, the UK is consuming less energy than it did in 1998.

Even this hasn't altered the relentless focus of discussion, which continues to entirely ignore what has been happening on consumption.

In 2006, the then government issued a White Paper entitled 'the Energy Challenge'. This led to the first formal endorsement of the need for Hinkley Point C, due to be up and running by December 2017. It would provide some seven per cent of anticipated national electricity consumption, a statistic relentlessly repeated subsequently.

Justifying this percentage were projections that, within the decade consumption would have increased by 12 per cent. In practice, it has already fallen by over 15 per cent, making that prediction out by a whopping 27 per cent. Within a single decade.

Even so, official government forecasters continue to predict that the decline in consumption levels will suddenly go smartly into reverse, and that by 2030 electricity sales will have regained all of that lost 25 per cent, and more.

It is less than five years since the then Prime Minister David Cameron went to the Royal Society to launch the seminal strategy from his new Energy Efficiency Deployment Office (EEDO)

Entitled 'The Energy Efficiency Opportunity in the UK', it began by showing that a per capita reduction in energy usage of 54 per cent could and should be delivered. The Secretary of State's Ministerial Foreword identified potential savings by 2020 "equivalent to 22 power stations, through socially cost-effective investment in energy efficiency".

Just over two years later, Institutional Whitehall used the run up to the May 2015 General Election surreptitiously to close the EEDO. Nothing strategic was left in its place – after unceremonious culling, the only civil servants left now oversee the few remaining specific efficiency programmes.

In contrast, the numbers of civil servants involved with energy supply, in particular, nuclear and "unconventional oil and gas" (e.g. fracking) have remained high, and indeed have often increased.

External commentators are bombarded by the big and well-organised battalions of commercial interests, anxious to promote their own energy supply options. It remains in their interests to promote that Armageddon, lights- going -out, scenarios. Whereas in contrast the platoons concerned with reducing, rather than increasing consumption, remain diffuse and disturbingly quiet.

For the first time in a generation, the 'First Fuel' is in danger of becoming the 'Last Fuel' to be considered.

Sadly there seems to be so very few countervailing voices, ensuring that Ministers are made fully aware of just how large the contribution of the 'First Fuel' has already been. And how enormous the realistic potential remains, to build on that success.

Andrew Warren is Chairman of the British Energy Efficiency Federation

The views expressed in this column are those of the columnist and do not necessarily reflect the views of eceee or any of its members.

Other columns by Andrew Warren