There is huge potential in the area of behavioural energy efficiency programmes in the UK, according to Guy Newey, Head of Environment and Energy at Policy Exchange, who presented on our recent webinar, Quantifying the potential of behavioural energy efficiency in Europe.
If energy efficiency goals are met, the UK government points out that 22 power stations may not have to be built by 2020. Although this target may seem ambitious, explains Newey, there is huge potential when it comes to saving wasted energy. He says, “This ambitious goal will need policy support to ensure that we reach these goals and that we take definite advantage of the new understandings from behavioural economics and where they work.”
Newey points out that behavioural efficiency programmes are mostly aimed at doing the following:
Trying to reduce the effects of climate change-Energy efficiency is a means to that end.
Lower energy bills-The UK has been calling for the government to improve this. A recent poll shows that customers want help to cut their utility bills.
From 2004, the average annual UK household bill has increased dramatically while consumption has dipped. Newey says this could be due to the high cost of power and the growth of energy efficiency programmes, and regulation around appliances and boilers. While Newey agrees that savings in household energy are definitely possible, behavioural energy efficiency programmes may unlock the potential to save even more energy.
Programmes must deliver measurable savings
“We don’t currently have a lot of good evidence as to which behavioral programmes work although Opower has been able to fill in some gaps,” says Newey, “Before investing in these programmes, we have to ask whether they can deliver real and measurable savings and whether they are cost effective in comparison to other energy efficiency programmes. Cost –effectiveness of behavioural programmes must be a focus.”
Where behavioural energy programmes have been properly measured and monitored, they appear to offer more cost-effectiveness savings than standard energy efficiency programmes. Camden is a good example of a well-measured and controlled behavioural energy programme. Significant energy savings were recorded during this programme at a very low cost.
“We understand that behavioural efficiency programmes work but we need to do more work around it to improve our understanding of the concept and its benefits. Energy efficiency programmes that involve insulation for instance are generally preferred by policy makers as it is a piece of kit that is installed, has been subsidized and generally shows results which can be measured,” explains Newey.
Smart meters will help sophisticate energy efficiency programmes in the UK. However, the UK smart policy faces a number of risks:
They are costly at £11 billion, this including a major IT project
Major risks of public backlash exist due to privacy and trust concerns
Uncertainty about how much energy savings smart meters will deliver as results are based on weak trials generally
Lack of evidence about how much energy savings will cost to deliver. The cost of insulation is known but not behavioural energy programmes.
Building the case for behavioural programmes
Newey suggests that there is sufficient evidence that behavioural programmes deliver substantial savings and that the following policies should be adopted:
Allow behavioural programmes to compete for energy efficiency subsidy (if they can demonstrate real, sustained savings). These programmes must show that they can compete with measurable insulation solutions for instance. Subsidies should be opened up to third parties, including private firms. More competition is definitely needed in the area.
More properly-controlled trials are required. A better understanding of the programmes and what is working should be acquired
Innovation should not be limited by restricting tariffs
Smart meters need to work (communication, roll-out technology) and will be a huge facilitator of innovation in behavioural economics and allowing that to flourish is going to be a major challenge going forward.
Says Newey in conclusion, “We need to ask ourselves how we will create a greener environment in a more cost-effective way. It is hard to justify expensive power generation when energy efficiency measures could save a significant amount of energy.”