Boost for business energy efficiency and electricity sector investment

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Business, industry and other organisations will get help to cut their energy costs with £10 million available this year to improve efficiency and reduce energy demand.

Energy and Climate Change Secretary Ed Davey announced today. He also unveiled new plans that will remove barriers to investment in energy infrastructure.

Mr Davey told the CBI’s Energy Conference that the energy sector had seen £45 billion of investment between January 2010 and December 2013, with nearly £8 billion investment in renewable technologies in 2013 alone, as he published the Government’s first report on energy investment in the UK.

This investment tackles a legacy of underinvestment and neglect in Britain’s energy sector that had threatened energy supplies. Instead, the investment won since 2010 will keep the lights on and build a low-carbon energy system that will support up to 250,000 jobs by 2020.

Energy and Climate Change Secretary Ed Davey said:

“Our plan is powering growth and jobs in the UK economy. We are building a secure, sustainable energy system for the future, dealing with an historic legacy of underinvestment and neglect that threatened to undermine the whole economy.

“The funds we invest now in keeping the lights on could, in the future, be available to support cheaper projects that deliver lasting reductions in peak electricity demand.

“I want to unlock the untapped potential of better efficiency in electricity use – so that more efficient kit can compete with building new power stations in the future. Our £20 million pilot will fund schemes that will help reduce our demand – not only saving businesses and their customers money, but reducing the amount of electricity we’ll need to generate.

“And by stripping away barriers to investment in our energy market, we’ll make attracting capital investment cheaper and easier – meaning real benefits for the British economy and British consumers.”

Mr Davey set out the details of the first £10 million Electricity Demand Reduction auction from a £20 million budget for the full pilot. Businesses will compete for funding for projects that reduce electricity demand, where projects would not have happened without the funding. The projects will save businesses money on electricity bills as well as cutting carbon emissions and demand on the National Grid. Expressions of interest open on 29 July.

Electrical efficiency could mean savings equivalent to 9% of total demand by 2030 – reducing the need for new power stations. The Government is testing whether projects that deliver lasting electricity savings at peak times, like replacing old light bulbs with LEDs or improving motors and pumps, could compete with generation, demand side response (DSR) and storage in the UK Capacity Market.

Over 300 organisations as diverse as hospitals, airports and supermarket chains have already come forward to indicate they are considering participating in the auction.

The Government also plans to remove unnecessary barriers to investment in infrastructure by amending the rules that prevent the same companies investing and exercising rights in both generation and transmission networks at the same time.

The Government will consult on changes to the rules that would give Ofgem the flexibility to decide whether problems would actually arise based on the facts, on a case by case basis, rather than having their hands tied. This means companies that want to invest right across Britain’s energy will be able to do so where there are no harmful consequences.

Mr Davey told the CBI that the changes were part of the Government’s strategy to create an energy secure, energy efficient economy.

The report published today shows that energy projects make up around 60% of the UK’s total infrastructure project pipeline – worth around £200 billion in its entirety. The UK remains one of the most attractive places in the world to invest in renewable energy, according to Ernst and Young, and is the best place in the world to in invest in offshore wind and marine power. Fifteen per cent of Britain’s electricity now comes from renewable sources.

The UK has one of the most secure energy systems in the world – ranked 4th by the US Chamber of Commerce. To further improve energy security and to deal with the problem of tightening electricity margins up to 2018, the Government has announced safeguards to ensure more electricity is available at peak times and to allow mothballed plants to be used if necessary.

Mr Davey has written to Ofgem informing them that we will be reviewing the implementation and enforcement of the Electricity and Gas (Internal Market) Regulations 2011. The new regulations are expected to come into force in early 2015 (subject to the will of Parliament).

Information on the Electricity Demand Reduction Pilot (EDR)

The EDR pilot is open to all sectors of the economy across Great Britain. It aims to test whether efficiency projects can compete in the forthcoming Capacity Market – and offers the chance to organisations to bid for funding for projects which will replace inefficient kit with new kit.

This has carbon, security of supply and cost benefits. Organisations can bid in for money for their savings in winter peak 2015/16 but they’ll save money whenever they’re using the new kit. The pilot will run for two years and will help us decide how to design an enduring scheme.

We’re looking for anyone with projects that can deliver at least 100 kilowatts of savings throughout the winter peak. We’ve already heard from retail chains and banks, local councils, ports and airports who are interested in taking part.

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