EY UK Energy blog

“Less is more”

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Posted: Tuesday, 7 July 2015 at 1.00am

It’s great to see energy efficiency featuring as a priority in this report by the Aldersgate Group “A Brighter, More Secure Future: Low carbon priorities for the new government”.  One of the key ambitions in this report is the change needed in society and in government policy to enable everyone to shift to using less energy.  Using less energy is the most cost effective measure in the overall carbon business case and yet it still seems to be the laggard in the mix.

At EY, we are developing a new set of services to help businesses optimise energy.  We see this as an opportunity across 3 dimensions of price, volume and time.  It’s what we call 3D energy strategy – enabling businesses to pay less for each unit of energy, use less energy overall, and shift energy out of peak periods.

On the first dimension of energy price, the government needs to simplify policies, encourage competition and enable more efficient purchasing.  We need to encourage consumers and business to buy lower priced and lower carbon energy – potentially through long term contracts directly with generators.  An A-G label on all electricity sold in the UK, would be a great step forward and enable price incentives for lower carbon energy, in the same way that lower road tax encourages consumer demand for A and B rated cars.

On the second dimension of volume, this report highlights a key priority for the government to build a more energy efficient infrastructure – to enable the UK economy to grow sustainably and become more competitive in the long term. We will need a step-change in government policy to provide simple, clear, easy-to-understand incentives for home owners, tenants, and businesses to actively monitor their energy usage, and implement energy efficiency and smart building controls.

On the third dimension of time, it is good to see Vattenfall and Dong Energy both highlighting the need for smarter management of the grid.  Changing the time of energy consumption (ie: when we use energy in the home and in business) requires a technological and behavioural shift as well as time-of-day based tariffs. The time dimension is a big opportunity, but it is less understood and more complex.  We are seeing an array of new policies that are rapidly changing the shape of the business case.  As the report points out, this is making it difficult for businesses to plan and invest.  We need to create a solid business case to shift energy use out of peak periods and use more energy during the troughs when power stations or wind turbines are generating and there is little demand for the power.  Reducing the stress on the grid is not only good for maintaining a reliable national grid infrastructure, but it will also optimise future capex investment by reducing the amount of spinning reserve.

The Aldersgate report raises the stakes and calls for more ambition.  It is good to see a common theme coming out – “less is more”.  We need to simplify the complexity, reduce uncertainty and build business cases on long-term policy foundations. A top priority for building the low carbon economy has got to be optimising energy across the three dimensions of energy price, energy volume and energy time.

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