Andrew Warren, chairman of the British Energy Efficiency Federation, warns energy saving product rules that slash domestic and business costs could be at risk post-Brexit. The article first appeared on the Business Green website. Importantly, Andrew’s comments were echoed by Energy Institute vice president and former National Grid CEO Steve Holliday who warned that “the stakes are high for the UK’s energy economy” as written in Business Green:
“The potential is there for significant industrial benefit and emission reduction at least cost to consumers and taxpayers, but sound policy making should not be drowned out by Brexit or other political upheavals,” he said.
“Energy professionals’ advice could not be stronger on putting energy efficiency at the heart of the government’s strategy. The benefits of energy efficiency stack up for emission reduction, energy security, industrial growth and affordability.”
We must protect the EU ‘red tape’ that saves UK businesses millions
Just before the General Election was launched, one of the most senior Conservative MPs, the former Cabinet Office Minister Sir Oliver Letwin, announced he had drawn together a cross-party committee of the Great and Good, entitled the Red Tape Initiative, to operate over the next 30 months.
Launching the initiative, Sir Oliver said: “We need to grasp the opportunities that Brexit will give us to cut red tape. And we mustn’t lose any time doing that. So the point of the Red Tape Initiative is to identify ‘early wins’ that can command cross-party support in both Houses of Parliament immediately after we leave the EU.”
It has become clear that in the immediate firing line are the European Union directives covering which products can be offered for sale. There is no question that this particular policy area is one of the main options under consideration.
Already much attention has been given to the undeniable fact that both the compact fluorescent lightbulbs (CFLs), and latterly the LEDs, which have been replacing incandescent lightbulbs, are so much more expensive to purchase. This has placed, it is argued, a quite unreasonable burden upon, in particular, “just about managing” households.
Opinion surveys of LEAVE voters in last June’s referendum reveal that buying lightbulbs familiar to the late Victorians, is up there with “patriotic” icons like blue passports and selling vegetables by the pound rather than the kilo.
Brexit enables precisely this “red tape” to be scrapped.
What receives rather less attention are two key benefits that more modern technologies bring. The first is their relative greater longevity. The second is that they require much less electricity to provide the same amount of illumination (or other services).
After all, recent – albeit obscure and unpublicised – UK government statistics now do show that the single most cost-effective energy efficiency policy, for every category of energy consumer, covers the standards set for energy-using products.
But products policy right now is exclusively controlled by the European Union. And therefore firmly within the Letwin Committee’s sights.
The EU Ecodesign Directive establishes a framework under which manufacturers of energy-using products are obliged to reduce the energy consumption and other negative environmental impacts occurring throughout the product life cycle. The Energy Labeling Directive complements it, providing standardised product information for prospective consumers, under the familiar CE marking.
The genesis of both directives goes back 25 years, to 1992, when the European Single Market for products was first created – ironically with strong backing from a (then as now) Conservative UK government.
Its scope currently covers more than 40 product groups. Such as air conditioning equipment, ventilation units, computers and TVs, boilers, lighting, domestic white goods like fridges and washing machines. Between them, these products had historically been responsible for around 40 per cent of all EU greenhouse gas emissions.
Official UK government figures show just how much the existence of these directives is saving all of us money on our electricity bills.
The current estimate is that these policies alone already save the average household some £67 a year. Given what is in the pipeline the official estimate for 2020 for each household’s electricity savings each year is £153, including VAT. That will be cutting the assumed average electricity bill by 20 per cent.
Savings for the average small business are reckoned currently to be £700 a year off electricity bills. To put that into context, the annual cost to such businesses of the UK’s unilateral Carbon Floor Price tax is £1,100. By 2020 the products policy will be delivering £1,700 off electricity bills for the average small business: White Van Man included!
For larger businesses, of a size to be involved with the Carbon Reduction Commitment, the European products policy is now taking an average £24,000 a year off electricity bills. By 2020 that average is officially reckoned to have soared to £62,000 annually. In contrast, the yearly cost to such businesses by 2020 of the UK government’s unique Contracts for Difference and Capacity Market regimes is due to be £133,000.
What about large energy intensive industries, albeit ones that benefit from all Floor Price exemptions and compensations? Even they are making useful savings. Those with an average £6.4m electricity bill can reckon to be gaining £125,000 each year from these unsung product policies. By 2020 the bonus savings from European product policies is set to be worth some £432,000 a year to companies of this size.
As Brexit doesn’t take place until the financial year 1919/20, all these 2020 savings can reckon to be “in the bank”. But what happens then? Particularly if the UK does quit any formal involvement with the European Single Market?
After all, it has up till now been the exclusive role of the European Commission to police implementation of product policy. Who will fill this vital role?
As the House of Lords energy and environment committee chair, Lord Robin Teverson, acidly observed recently, his committee has “found that effective enforcement of existing legislation would be crucial to overcome such ‘short-term vulnerabilities'”.
And, naturally, what will happen regarding the introduction of any new categories of products?
The Ecodesign Directive is a framework directive. Meaning that it does not directly set minimum ecological requirements. These are adopted through specific implementing measures for each group of products. Adopted via the so-called comitology procedure, these implementing measures are based on EU internal market rules governing which products may be placed on the market.
Manufacturers who market any energy-using product covered by an implementing measure in the EU area have to ensure that it conforms to the energy and environmental standards set out for the measure.
And of course from 2019 UK manufacturers are set to be directly excluded from the process of setting these standards. In practice, the introduction of any new minimum requirement results in effectively banning all non-compliant products from being sold in the 28 Member States.
It is clear that, regardless of the fuel bill savings forgone, there are many zealots who will wish many of these product standards to be abolished in the UK: witness those vituperative stories regarding high-efficiency vacuum cleaners and energy saving lightbulbs – let alone toasters that were never included – printed in the Express, Mail, and Telegraph newspapers.
Be warned. We will need to seriously guard against surrendering those ever-increasing savings on all our electricity bills, once we have “taken back control” of our energy-using product policy.
Oliver Letwin and team, please take note. Crashing out of the European eco-products standards must not be one of your “easy wins”.