Keynote Address by Minister Rabbitte
23rd September 2011
Introduction
It gives me great pleasure to be with you this morning and to have the opportunity to speak directly to those who are working to bring the Better Energy programme to life.
It is at events such as this that we see the key stakeholders in the programme come together to share experiences and build on what has been learned to date.
‘Bringing Retrofit to Market’ will require energy suppliers, financial institutions, and energy service companies to work together to make retrofitting achievable for Irish homeowners. In this regard, I am especially pleased to welcome the publication of ‘Thinking Deeper: Financing Options for Home Retrofit’ which draws together the expertise of the Sustainable Energy Authority of Ireland (SEAI), and the Institute of International and European Affairs (IIEA), with the European Climate Foundation (ECF).
Every year, homeowners and businesses lose money through wasted energy. Improving energy efficiency requires everyone – individuals, businesses and Government - to take action. Individuals and businesses can play their part by investing in energy efficiency measures for the home and workplace, and by choosing to purchase more energy efficient buildings and products. I am increasingly convinced that the best way of looking at energy efficiency is as an investment in your future comfort and health, rather than solely a financial investment.
We know that our national targets will be difficult to achieve given the economic constraints we are operating under, but the reality is that we cannot afford to maintain the status quo. Government will continue to encourage businesses and individuals by ensuring that the framework is in place to incentivise action and to deliver continuing improvements to the energy efficiency of buildings and products. We will provide the supporting framework, but much will depend on your action and innovation.
NEEAP
Ireland has an ambitious target of reducing our energy demand by at least 20% in 2020. The current National Energy Efficiency Action Plan (NEEAP) sets out actions for the period to 2020 to achieve the energy efficiency targets. The savings identified in the Action Plan represent approximately €1.6 billion in annual energy cost reductions for the economy in 2020 whilst also reducing our CO2 emissions by approximately 5.7 million tonnes per annum.
To put this target in perspective, the national 20% energy saving target is equivalent to 32,000GWh (gigawatt hours) saved by 2020. The actions outlined in our second NEEAP, which I will shortly be bringing to Government, are projected to realise 33,500GWh of energy savings in 2020. While these projections represent a slight overachievement of our target, a fundamental change in the energy sector, focused on the efficient management and correct use of energy, will be the means to achieving this.
It should be noted that the EU Commission’s proposed Energy Efficiency Directive signals an intention to place a mandatory obligation scheme on all energy suppliers, with a fixed target for energy savings. This will prove challenging, and while we have an advantage in rolling out our programme now, we need to be aware of the demands of future EU policy measures.
Better Energy: Workplaces & other non-domestic
Energy efficient supports provided by SEAI to industry and business have helped companies in Ireland to collectively reduce their energy costs by €200 million per annum. The diversity of the businesses in Ireland requires a corresponding diversity of available supports.
The dedicated SME programme gives free energy management training, advice and support to any business that is willing to show a commitment to becoming more energy efficient. Over 1,600 businesses have already availed of the many support services under this programme, with 10% savings routine in the first year. I would urge businesses to systematically avail of this service.
SEAI’s Large Industry Energy Network (LIEN) and the Energy Agreements Programme is a well-established networking and information programme for large industrial energy users. It engages over 150 of the largest energy users to share information on energy-saving technologies and techniques to maximise savings and maintain competitiveness.
Many key elements are highlighted through these programmes: funding, regulation, policy, advice. We want a wide range of entrepreneurs and enterprises to flourish, though recognising that their needs are different.
Public Sector Obligations
This equally applies to the public sector where we are developing an energy monitoring and reporting system to help all public sector bodies to track their progress towards the 2020 targets.
This will place demanding requirements on public bodies, including the development of a monitoring & reporting system for energy efficiency, reporting of energy consumption and the publication of a Public Sector Energy Report. These are the first steps towards organisation-level energy efficiency targets, to ensure that we meet the 33% energy efficiency target for the public sector. There is an onus on the public sector to lead from the front and we should embrace this opportunity.
There is much discussion in national and European circles about the role of Energy Service Companies in unlocking energy savings. For instance, the new Energy Efficiency Directive views ESCOs as having a key role to play in meeting national energy efficiency targets. My objective is to create the conditions for a vibrant market that will not only stimulate ESCO activity generally, but which will use the Public Sector to support the creation of a pipeline of projects for years to come. There are several policy barriers to be addressed which include asset ownership, borrowing limits and the development of model contracts but these will be overcome, the opportunity is simply too great to ignore. I see ESCOs as very much aligned with the creation of a national Pay As You Save scheme.
As a precursor to this kind of activity, Better Energy: Workplaces will provide €11.5 million in funding for projects in the public and private sectors this year. Through the experience we hope to gain from this programme we can turn our businesses into the model of 21st century sustainable entrepreneurship.
Such projects may comprise individual or packaged measures aimed at achieving lasting savings in energy usage for thermal, electrical or transport purposes. The main focus this year will be on achieving delivery of sustainable energy (mainly energy efficiency) investment projects of differing sizes and complexities. Similar projects in 2009 and 2010 had a spend of €5.9 million and €7.8 million respectively, with annual savings of 63GWh.
PAYS Financing
I’ve spoken about what have achieved already, but now I’d like to focus on what we could be and should be doing.
I think most people will recognise that it is difficult to give promises about future funding levels. However, what I can say is that the Programme for Government commitment to move out of state supports for energy efficiency and into a pay-as-you-save scheme is something that I am very keen to progress.
PAYS is an innovative financing mechanism that will allow consumers to finance upgrades directly through the energy savings generated. My Department has convened a project team to undertake preliminary analysis of what a PAYS model could look like with a view to submitting an initial report to me in October. I expect to be in a position to bring proposals to Government soon after.
PAYS is anticipated to replace the existing grant supports in this area, for which the 2011 capital allocation is €91.4m. To date under Better Energy: Homes, efficiency upgrades have been completed in 33,559 homes this year and over 96,000 homes since the programme commenced in 2009. In total, the estimated energy savings achieved are 529 GWh or €33.14 million.
However, there are still obstacles and market failures preventing us realising the full technical and economic potential for energy efficiency. These barriers include a lack of knowledge of the benefits of energy efficiency measures; a lack of access to capital and high costs of capital; and a lack of motivation, awareness or interest amongst consumers.
The ‘Thinking Deeper’ report will prove to be an important touchstone in bringing forward ideas for future financing. It highlights problems in terms of financing barriers and underinvestment in energy efficiency but importantly it offers us solutions. I know that the PAYS project team will be analysing this work carefully, to build upon the identification of the ‘energy efficiency gap’.
Building on our knowledge of the barriers, any future PAYS scheme will be structured around consumer and business needs, ensuring widespread uptake and corresponding provision by the business and finance sectors. It is important that the PAYS scheme give finance providers the confidence to provide upfront capital, secure in the knowledge that they will receive payments from the energy saving s accrued.
The practical barriers to installing energy efficiency measures include the upfront cost of measures, the length of time required for measures to pay back in savings and the ‘hassle’ involved in planning and carrying out work. Most of all, many people have never even thought about retrofitting their homes and aren’t aware of the energy savings available to them. In today’s climate of rising energy prices, we can provide more incentives than ever to encourage uptake of energy efficiency measures.
In advance of moving forward with such a scheme, I need to highlight the depth and breadth of work carried out in the UK in advance of the Green Deal. While this may prove to be a good starting point on which to model our own PAYS scheme, it cannot be seen as a ready-made solution suitable for our national circumstances. Our PAYS system will require flexibility and choice for consumers to meet the demands of our differing fuel mix and consumer behaviours. However, I am confident that our finance community, who have been actively engaged to date, will step up to the mark in ensuring that whatever model is pursued will be supported by the finance industry.
Energy Suppliers Role
Before we can shift to alternative financing mechanisms, there is still much work to be done in building a successful Better Energy programme. Analysis shows that there are approximately one million buildings in Ireland that would benefit from some form of energy efficiency retrofit which could lead to lifetime energy savings worth €16 billion, setting aside the additional health and wellbeing benefits. Realising these benefits will create significant employment in the energy and construction sectors in support of economic renewal.
We are involving the energy companies and other partners, which will give consumers exciting new options. The energy services undertaken as part of Better Energy will typically include the installation of energy efficiency products such as attic or cavity wall insulation for households. However, I am keen to see innovation and expect the energy companies to step up to the mark in terms of new products and services. By working in partnership with the energy suppliers I hope that we will be able to build scale and encourage innovative solutions. Better Energy will allow for innovation and creativity in the green tech sector, providing an opportunity for indigenous companies to bring their services to market.
I want to see energy supply companies, energy service providers and the construction industry working together to deliver energy savings, cost reductions and smaller carbon footprints for energy customers. In this way, business, consumers and the environment all benefit.
Energy suppliers can and should demonstrate a leadership role in more efficient use of energy. By doing so, they can also achieve significant savings on their energy costs, enhancing their competitiveness and that of the economy as a whole. The Sustainable Energy Authority of Ireland's work with business has proven that the opportunities are there and that acting on energy efficiency are rewarded with real cost savings.
Affordable Energy
I am acutely aware of the difficulties that recent electricity and gas price rises by several utilities are having on householders and particularly those vulnerable customers who may already be struggling with arrears. The recent report from the Society of the St. Vincent de Paul is a sobering reminder that energy poverty and reduced income are a cause of deep anxiety among many older people in our society, especially as we head into the winter months. That is why the Government is determined to systematically tackle the causes and mitigate the effects of energy poverty across the country.
The Affordable Energy Strategy will be the framework for building upon the many measures already in place to protect households at risk from the effects of energy poverty, which include thermal efficiency-based measures delivered through the Better Energy: Warmer Homes programme.
The only long-term solution for those at risk is to provide energy efficiency improvements to homes in, or at risk of, energy poverty, it brings benefits to recipients in terms of energy affordability, tangible health improvements and overall well being.
To date, energy efficiency improvements in over 71,000 homes have been made under Better Energy: Warmer Homes. My Department and SEAI have a target of an additional 20,000 homes this year of which 11,197 have been completed to the end of August.
Conclusion
I will continue to work with all the key stakeholders represented here today to realise the full potential of the Better Energy programme to create sustainable employment, transform the construction industry, enhance energy services to consumers and deliver the highest standards of quality, safety and innovation.
The wide range of supports in place already can be improved upon by utilising the wealth of knowledge already available here in this room. I hope that this conference can help to forge the links necessary to make this a reality.
On a final note, may I thank the IIEA (and Joseph Curtin in particular) for hosting an event that is both timely and relevant in allowing us to assess our progress to date in implementing a retrofit programme that works for Ireland.
ENDS