The UK government announced plans to motivate businesses to reduce power usage and increase energy efficiency efforts but said it would not offer feed-in tariffs for energy efficiency measures that resulted in significant energy savings.
The plans are based on a survey the Department of Energy and Climate Change (DECC) conducted last year, in which it offered respondents different options to cut electricity demand, so it could reduce the need to build expensive additional power plants.
DECC says there is potential for electrical efficiency to the tune of 32 terawatts, the equivalent of 9 percent of demand by 2030. This 9 percent will equal $3.46 billion in savings and the power generated by four power stations in a year.
But it rejected suggestions for an efficiency “premium payment” as an incentive and the idea of targeting specific high consumption sectors, instead announcing that it would make a financial incentive scheme available across market sectors to everyone, with the idea that scaling it up would significantly boost energy efficiency goals – what DECC refers to as a “capacity market.”
With the capacity market approach, those businesses reducing electricity demand can bid against those supplying capacity and get paid for each kilowatt of power reduced. It will also explore non-financial incentives such as recognition for using efficient products, labeling that shows lifetime energy costs of a device, a central efficiency information hub and additional energy meters that show users where they use energy.
The DECC response document explains that it prefers this route because it targets demand reduction during peak hours when it costs more to supply power. In the face of doubts that this approach will succeed, DECC justifies its belief that the capacity market approach will work, by citing the example of how it succeeded in New England.
Skeptics wonder whether the incentive will be sufficient enough to drive adoption of efficiency measures, whether the savings can be monitored on such a large scale and whether the auction process would be accessible to everyone, although respondents welcomed the general idea of financial incentives.
The American Council for an Energy-Efficient Economy suggests policymakers should consider increasing the federal tax incentive for energy efficiency of commercial buildings.