By Prof Jim Watson, UKERC Presented at the EUED Centres Gala, on 2-3 July 2014, in Lancaster, UK.

1. Click to add title
Energy demand and energy policy
Jim Watson, Research Director
UK Energy Research Centre
EUED Centres Gala, Lancaster, 2-3 July 2014

2. Overview
1. Why the energy system exists: trends in demand
2. Energy demand and the energy policy trilemma
3. Ambitious strategies and mixed realities

3. Why the energy system exists
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1970 1975 1980 1985 1990 1995 2000 2005 2010
Industry Transport Domes c OtherSource: DECC

4. Why the energy system exists
Source: DECC

5. Reducing GHG emissions:
Good progress? Will it continue?
0
100
200
300
400
500
600
700
800
900
1990 1995 2000 2005 2010
Emissions:mtCO2(equiv)
CO2 emissions Other GHGs Total GHGs
Source: Department of Energy and Climate Change
CO2 emissions
are down 19%
since 1990
But emissions rose
20% (1990-2009) on
a consumption basis

6. Reducing GHG emissions
Source: Committee on Climate

7. There was good progress in 2012 on adding new wind
generation capacity to the system, insulating lofts and cavity
walls in residential buildings, and improving the efficiency of
new cars. However, there is a risk that progress will not be
sustained, particularly as regards wind generation capacity
and insulation. Progress was very limited in other areas,
notably low-carbon heat, and energy efficiency improvement
in commercial and industrial sectors.
Committee on Climate Change, 2013 progress report
Reducing GHG emissions

8. 0
100
200
300
400
2000 2002 2004 2006 2008 2010 2012
Index(2000=100)
Gas Electricity
Gas prices have
trebled since 2000
Electricity prices have
doubled since 2000
Affordability:
Domestic gas & electricity prices
Price rises and affordability

9. Click to add titlePrice rises and fuel poverty
Source: Department of Energy and Climate Change

10. Affordability
Impacts of policies to 2020 (DECC)Price rises and affordability

11. Energy security is high on the agenda
for many reasons:
 High energy prices since mid 2000s
 UK’s shift back to net energy importer
 Geopolitics and conflicts
 Impacts of extreme weather
 Ageing and/or inadequate
infrastructure
Debates often focus on geopolitics, but
many risks closer to home
Security of demand matters too –
especially to energy suppliers
Maintaining energy security

12. Maintaining energy security?
from gas exporter to importer

13. Maintaining energy security?
Fracking has become a national
debate in Britain – and it’s one
that I’m determined to win. If we
don’t back this technology, we will
miss a massive opportunity to
help families with their bills and
make our country more
competitive. Without it, we could
lose ground in the tough global
race
David Cameron, August 2013

15. Maintaining energy security?
DECC Energy
Security
Strategy,
Nov 2012

16. Tensions between policy goals

17. Tensions between policy goals
Security of supply, affordability, and
playing our part in combating
climate change. And that for me is
the order
Michael Fallon, Energy Minister
2nd Dec 2013

18. Energy policies and demand:
some radical visions
[w]e are looking at how to create a shared incentive between
consumers and energy suppliers to reduce energy use. We
must look at how [energy suppliers] can change from just
selling units of electricity to providing energy services—
heating and lighting homes—making it their business to
increase energy efficiency and cut demand
Alistair Darling, Trade & Industry Secretary, June 2006

19. Energy policies and demand:
some radical visions
We cannot afford to be just a provider of units and that a
way to differentiate ourselves will be to embark our
customers on this journey
Vincent de Rivaz, CEO, EDF Energy, January 2007

20. Energy policies and demand:
some radical visions
‘I want Britain to get as close as possible to using only the
energy we really need. We could be saving 196TWh in 2020,
equivalent to 22 power stations through, socially cost-
effective investment in energy efficiency’. Ed Davey, Nov 2012

21. A mixed reality: supply side bias?
We have become so used to ministers doing things like
opening new power stations or new gas pipelines or
whatever, even new wind farms, always with a nice white hat
on their head and stuff like that, but we have never yet seen
a minister open a well-insulated loft
Andrew Warren
Association for the Conservation of Energy
January 2007

22. A mixed reality: supply side bias?

23. Electricity market reform has been
priority for energy policy since 2010:
 A missed opportunity to integrate
supply and demand?
 Most of the focus on large-scale low
carbon generation
 Energy efficiency feed-in tariffs
suggested but not taken up
 Capacity mechanism has more space
for demand-side measures
 Contrast between pilots for demand
and full auction for gas-fired capacity
A mixed reality: supply side bias?

24. A mixed reality: models of change
Source: DECC
Energy efficiency is not just low-hanging
fruit; it is fruit that is lying on the ground
Stephen Chu, US Energy Secretary

25. A mixed reality: models of change
 High expectations of flagship energy efficiency policies:
Green Deal and Energy Company Obligation
 Green Deal makes sense in theory: solving the up-front
cost problem via loans linked to energy bills
 Projections that 130,000 loans would be taken up by the
end of 2013; uptake of measures would be much higher
 By April 2014, 834,000 measures installed via Green Deal
and ECO. Much lower annual rate than previous policy
 Green Deal update disappointing: 235,000 assessments
and 2,800 loans in place by May 2014
 Additional up-front finance offered by government to
accelerate uptake

26. Click to add titleA mixed reality: politics

27. Click to add title
Thanks
http://www.ukerc.ac.uk
@UKERCHQ @watsonjim2