Source · Select Committees · Business and Trade Committee
Recommendation 36
36
Deferred
Bring forward energy efficiency funding, prioritise home retrofit, and reform the EPC rating system
Recommendation
Energy efficiency is the quickest and most cost-effective way to reduce gas demand and lower household energy bills. If significant strides are not made to reduce demand, it will become increasingly challenging and expensive to decarbonise 106 Decarbonisation of the power sector the electricity system. We call on the Government to bring forward the £6 billion funding package for energy efficiency allocated for the period 2025 to 2028 to now. The Government should prioritise delivering a locally co-ordinated programme of energy efficiency and home retrofit. This should be paired with a communications campaign on the benefits of home improvements and fuel switching. We recommend that the Government uses new powers in the Energy Bill to urgently reform the flawed EPC rating system, so that it gives a more accurate reflection of overall energy use and emissions, as soon as the Bill is enacted. (Paragraph 166) Delivery risks to the Government’s 2035 target
Government Response Summary
The government's response details Ofgem's mandate and the efficiency targets and funding allocated within electricity network price controls RIIO-ED2 and RIIO-T2, focusing on network costs, but does not address recommendations for energy efficiency funding, home retrofits, communications, or EPC reform.
Government Response
Deferred
HM Government
Deferred
112. Ofgem’s mandate is to ensure that network users are provided with a safe, secure and reliable energy network at the lowest possible cost. Within Ofgem’s current electricity distribution network price control RIIO-ED2, they have been ambitious in setting stringent efficiency targets. Despite the increase in baseline funding for networks in this price control compared to the last one, the impact on consumer bills is flat, as Ofgem have driven down consumer costs by being stricter on returns. The overall cost of capital allowance is lower than under the last price control (RIIO ED1) to reflect the market conditions. 113. Within the current electricity transmission network price control RIIO-T2, Ofgem have confirmed £30bn in upfront funding alongside lower allowed return on equity of 4.3% and a lower allowed return on debt than RIIO-T1, which should save consumers £2.3 billion over the five-year price control period. 114. Ofgem has also put in place measures in RIIO ED2 (the Return Adjustment Mechanism) to make sure that even if networks outperform the targets they have been set, a greater proportion of this outperformance is shared with consumers. Ofgem have also provided significant funding within RIIO-ED2 for improvements in data & digitalisation and network monitoring equipment that will help support a smarter, more flexible energy system.