Government launches £20m Energy Reduction Fund for businesses

Energy and Climate Change Secretary Ed Davey has unveiled details of a new £20m fund to incentivise businesses, industry and other organisations to improve energy efficiency.

Announced at the CBI’s Energy Conference earlier today (17 July), the Electricity Demand Reduction (EDR) auction will allow firms to compete for cash to fund projects that reduce electricity demand.

“Our plan is powering growth and jobs in the UK economy,” said Davey. “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.”

Removing barriers

The first £10m from the £20m EDR auction will open for expressions of interest on 29 July. Over 300 organisations including hospitals, airports and supermarket chains have already come forward to indicate they are considering participating in the auction.

Davey also mentioned 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 system will be able to do so where there are no ‘harmful consequences’.

The energy sector saw £45bn of investment between January 2010 and December 2013, with nearly £8bn ploughed into renewable technologies. The Government hopes this will ignite the development of a low-carbon energy system that will support up to 250,000 jobs by 2020.

Return on investment

Electrical efficiency could mean savings equivalent to 9% of total demand by 2030, reducing the need for new power stations. The Government is specifically looking to provide funding for businesses with projects that can deliver at least 100 kilowatts of savings throughout the winter peak.

Responding to Davey’s announcement, the Carbon Trust’s EDR piliot programme director Paul McKinney said: “Reducing peak time electricity demand is an absolutely critical part of delivering a secure, low-carbon energy system at the lowest cost, helping to keep the lights on in the UK. And improving energy efficiency frequently comes with a rock-solid business case, so the decision to invest in it seems like it should be a no-brainer. But we know that despite this businesses often don’t recognise or act on the opportunity.

“The Carbon Trust has supported the design of the new £20 million Energy Demand Reduction Pilot, and we would urge organisations to see whether they can take advantage of this scheme. This will help to make the business case for energy efficiency even stronger, allowing organisations to achieve returns on investment earlier than they would have otherwise.”

Luke Nicholls

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