Don’t throw out the energy efficiency baby with the Brexit bathwater

Will Brexit put energy efficiency progress in the UK at risk, ask Jan Rosenow, Pedro Guertler and Richard Cowart of RAP (Regulatory Assistance Project)? In electric appliances and heating systems – probably not. The biggest risk is in the building sector.UK policymakers will need to put efficiency first if they want to reach carbon targets and keep costs down.

Brexit has opened a new era in British politics. After the vote to leave the EU on the 23rd of June 2016 there is considerable uncertainty in all policy areas. Energy efficiency is no different.

Discussing the implications of Brexit for energy efficiency policy, a Member of Parliament recently asked during a hearing of the House of Commons’ Business, Energy and Industrial Strategy Committee, “now that we have left the EU, what new freedoms do we have?”.

In reality, the EU never prevented Britain from being more ambitious on energy efficiency—it set minimum standards allowing Member States to define their own approach based on those standards.

Many of the UK’s energy efficiency policies such as building codes and product policy have been implemented in the context of EU directives. As a result, individual households now use around 30 percent less energy than they did in 1970, with the bulk of this decrease occurring since 2004. At 2016 energy prices, this has reduced the average household energy bill by around £420 per year.

Total household gas use decreased by 19 percent between 2000 and 2014, despite a 12 percent increase in the number of households and a 9.7 percent increase in population. Much of this success story is driven by European policies. So now that the UK leaves the EU—does Brexit put future energy efficiency progress at risk? Read more ›

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Transforming the Low Energy Housing sector

“Insulation is not sexy. Energy efficiency is not sexy. Putting more insulation in your walls that you will never see and you will never even know is there, is not sexy.  But your bills are a bit lower,” said Alex Hunt, a sustainable building consultant and partner with Bright Green Homes.

Is it time for the Low Energy housing sector to shed its frumpy image and have a face lift? What needs to be done to bring about a low energy housing transformation? That was the question at the heart of a workshop on Low Energy Housing organised jointly by the Energy Savings Trust and the Centre on Innovation and Energy Demand.

Low energy housing may not be “sexy”, but it is important. Domestic buildings were responsible for approximately 23% of total UK carbon emissions in 2014. Under the Climate Change Act, the UK has to achieve at least an 80% reduction in the carbon emissions from our homes by 2050. If we are to be ready by to meet those carbon targets by 2050, the industry needs to transform. Despite the urgent need, according to Philip Sellwood, CEO of the Energy Savings Trust, the government’s green ambition has been “roughly halved” in recent years.

Clearly, current national policy support for the low energy housing sector is minimal. If government isn’t going to force people to improve the energy efficiency of their homes through regulation, then consumers need to see the benefits of buying low carbon homes or carrying out low energy retrofits for themselves. How could consumers come to see low energy housing as something that they want and are willing to pay for? Stakeholders from government, the housing industry and campaigning organisations came together at the workshop to find some answers.

Workshop participants sit at a table discussing steps forward at the workshop.

Workshop participants discussing steps forward at the workshop.

Sell the sexy design and not the energy efficiency

Energiesprong, a Dutch initiative, has clearly picked up on the importance of shedding the frumpy green image. It sells their product as a “makeover for your house.” It’s proposing a package that transforms houses into “net zero energy houses”. This is done by installing new smart heating and cooling technologies, prefabricated housing facades and insulated rooftops with solar panels. It all comes with a 30 year warranty, and is paid back, they say, through the money saved on energy bills. Nine houses in Nottingham owned by the Nottingham City Homes housing corporation will be the first in the UK to undergo the renovation this spring.

Providing incentives

This issue was identified as crucial by a number of participants. Hunt proposed that if building works carried out by an accredited building company improved a household’s energy efficiency by a band or two (say from D to B), then a household should be able to claim back the VAT for the works. This would encourage people to carry out energy efficiency measures by accredited, reputable builders carrying out high quality work, thus improving the energy efficiency of older housing stock in the UK and reducing the appeal of “cowboy” builders.

Intermediaries to connect actors

Dr Paula Kivimaa and Dr Mari Martiskainen from CIED presented their research on both retrofit and new build projects in Finland and Brighton. Dr Kivimaa has found that while building regulations and national policy set the direction of low energy housing, local government can have an important influence acting as an intermediary to connect actors during the planning stages of projects. Their research suggests that intermediaries, such as architects, local government or annual eco home events, which bring together different groups to share ideas and plan, are vital for inspiring and driving low energy housing projects forward.

Dr Mari Martiskainen. Credit: CIED

Dr Martiskainen shared an example of two home-owners who had built a new eco-home in Brighton, which she called a “hot spot” for low energy housing. The couple had long been interested in building an eco-home, having been inspired by a visit to the Centre on Alternative technology (CAT) in Wales. While they wanted an eco-home, they also wanted the house to “look and feel good”. They visited the Brighton and Hove Eco open houses every year to gather ideas, while their architect acted as a ‘local champion’ during the process of building a zero carbon home. But Dr Martiskainen was quick to point out that intermediaries do not work in isolation. They are not immune to changes in policy, such as the removal of zero carbon homes policy.

Connecting the end user with the home

Donal Brown, a sustainable construction consultant also undertaking research with CIED into the barriers to low energy buildings in the UK, believes the answer is “reconnecting the end user with the home”.

Donal Brown.  Credit: CIED.

Unfortunately most speculative builders don’t care about a building’s energy performance because they will likely build speculatively on the land or buildings might be resold four or five times before being lived in. There is currently no interest in making the building any greener than they are mandated to. But adopting a “grassroots, bottom up approach” changes the incentives, says Brown. Self-build eco projects are built for an end user who will live in the house for 30 years and can see the long-term benefits of building a low energy house.

Keep it simple, stupid

“There is no one way for innovation to go,” Sellwood said, but, “simplicity is key”. Keeping solutions simple by avoiding lots of legislation and green tape was one of the key messages to come out of the workshop. For example, Hunt believes his suggestion on claiming back VAT could work, because of its simplicity.

The new quality mark that is being recommended by the Government’s Each Home Counts Review (also known as the Bonfield Review )[PDF], in order to build consumer trust, failed on this criteria, based on the reaction from some of the workshop participants. The review aims to increase the quality assurance of work by recommending the creation of a quality mark for all energy efficiency and renewable energy measures to ensure consumers “can be properly protected and advised when they install energy efficiency and renewable energy measures in their homes”. Those who wish to use the standard will have to adhere to a consumer charter, a code of conduct and codes of practice.

Hunt, a builder who has carried out a number of energy efficiency retrofits on homes, was strongly opposed to the Bonfield Review. He called it “another talking shop, another set of accreditation, another stamp.” Donal Brown, agreed. “Builders have been hammered with all this compliance” he said. “Yet it only addresses 20% of the issue,” said Brown. “The problem is demand – people aren’t asking for retrofit – it’s not a product people want to buy. Unless we force people to do this [through regulations] the demand has to come from the consumers. But people don’t even know what the benefits are.”

Building that consumer desire will be a crucial task for the low energy housing industry over the next few years.

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Tidal lagoon energy in Wales

The report of an independent review of UK tidal lagoon energy was published on 12 January 2017 by a former UK energy Minister Charles Hendry. The report praises the proposed ‘pathfinder’ tidal lagoon in Swansea Bay as a ‘no-regrets option’, and sets out a supportive case for developing the sector.

The Hendry Review was commissioned in February 2016 by UK Government to assess the strategic case for tidal lagoon energy as a new industry in the UK. This followed a successful planning proposal by Tidal Lagoon Power (TLP) to develop the world’s first tidal lagoon in Swansea Bay, as well as a subsequent programme for a ‘fleet’ of five larger projects, including three in Welsh waters (Cardiff, Newport and Colwyn Bay).

Despite the Swansea Bay project appearing in the 2015 UK Conservative Party manifesto and receiving development consent in June 2015, uncertainties around cost and subsidy subsequently prompted the UK Government to commission an independent review. Its aim was to examine the ability of tidal lagoon energy to cost-effectively contribute to the UK’s energy mix, and the level of subsidy required to do so.

Tidal lagoons generate electricity by enclosing an area of sea adjacent to coastline with a sea wall, and capturing the energy from the rise and fall of tides using turbines. A number of lagoon projects in Wales have been proposed due to the significant tidal range along the Welsh coastline – particularly in the Severn Estuary, which has the second largest range in the world. Read more ›

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Policy packaging or policy patching? How energy efficiency policies have developed in the UK and Finland

Guest blog by Dr David Vincent

Since 1945, UK energy policy has undergone seismic shifts as I set out in my first blog. Looking to the future, I think we will see more disruptive changes as we struggle to meet our climate change greenhouse gas emission reduction targets and learn to live responsibly (and happily) in a resource-limited world. In this endeavour, energy efficiency will continue to have an important role to play. However, it can only deliver its full potential if encouraged to do so through well designed policy instruments which support both innovation and behavioural change. For energy efficiency, and some would say more widely, we have yet to design a mix of market and interventionist policies which are fit for purpose for the 21st century and the challenges we face. If we don’t get that mix right, we risk being overtaken by events beyond our control.

Knowing this, I read with interest a recent paper, which discusses how energy efficiency policies and programmes have developed in the UK and Finland respectively over the period 2000-2014. The paper also explores how the UK’s approach compares, or contrasts, with that of Finland. The evidence shows a continuation of the ebb and flow of policy interest in energy efficiency that has been the hallmark of successive UK Governments’ treatment of energy efficiency as part of energy policy, and in recent years as part of the energy/climate change mitigation policy mix. It shows a multiplicity of policies and measures implemented to greater or lesser effect. Their paper shows that there is still much to do.

Image taken of the spiral staircase inside City Hall.

City Hall in London was built with its unusual shape in order to reduce the building’s surface area and improve its energy efficiency. Credit: Nick Garrod (CC BY-NC 2.0).

Ebb and flow of energy efficiency as a political priority

Over my years in energy efficiency since the mid-1970s, I have seen the ebb and flow of energy efficiency as a higher or lower policy priority for Governments of the day. (I count myself lucky to have been part of the former Energy Efficiency Office from 1986 to 1992.)

Today, sadly, energy efficiency is, in my view, a lower political priority than it has been for a long time. It was more important in the 1980s (mainly to help reduce energy bills) and the 2000s (mainly to reduce energy bills and CO2 emissions; and to meet various EU Directives and regulations – e.g. the Energy Efficiency Directive, the Boiler Directive and the Energy Performance of Buildings Directive).

The point the paper makes about the philosophy of different Governments, especially with respect to the role of markets to deliver policy outcomes, is, in my view, one of the factors central to the success, or failure, of Government actions to achieve energy efficiency policy goals. The team’s identification of the plethora of energy efficiency policy instruments, and the temptation to combine policy goals, are also relevant.

“Churn” in energy efficiency policies and policy makers

Since the 1980s, there has been a lot of “churn” of energy efficiency policies and measures, more so than in other policy areas, in an attempt to achieve energy efficiency policy goals. Unfortunately, these policy instruments have generally been too weak to address the scale of the challenge effectively, and have not been allowed to run for long enough to build up a critical mass of success and interest in the marketplace. The consequence has been that publicly funded policy initiatives designed to stimulate self-sustaining market interest and activity have been less successful than Ministers and policy makers had hoped.

It is worth adding here that churn in policies is not the only kind of churn going on. There is also a “churn” of policy makers. Policy makers move on to advance their careers. New and good, well-meaning but inexperienced people move in and start to design new policies under new Ministers who have their own views about which policy instruments they like the sound of and which are less attractive to them – irrespective of whether those instruments were likely to be more effective. On top of this, energy efficiency, and energy more generally, has been subject to machinery of Government changes too. Most recently these changes have culminated in the closure of the Department of Energy and Climate Change and the transfer of energy and energy efficiency policy responsibilities to the Department for Business, Energy and Industrial Strategy.

Absence of evaluation

As if the churn of policies, policy makers, Departments and Ministers are not enough, there is another challenge for policy makers. The paper refers to the absence of evaluation. There is no mechanism (at least during my time in the respective Departments which have been responsible for energy efficiency policy from the 1970s to 2001) for learning how well, or otherwise, particular policy initiatives have performed.

Energy efficiency policy makers were (and still may be) designing policy instruments in the dark, in the absence of an evidence base grounded in scheme performance data. The absence of a mechanism to learn from their predecessors has, in my view, made life more difficult for energy efficiency policy makers. (The same might be said of other areas of policy making where policy evaluation is weak or missing.) In contrast, RD&D programmes were, in the 1990s, subject to a system of research assessment consisting of the development of “ROAME” statements for the appraisal of programmes and regular independent evaluation of the success and impact of the research on the basis of a five year cycle. As far as I am aware, no such systematised evaluation of energy efficiency schemes on a par with RD&D programmes was ever required or took place.)

Energy efficiency policy implementation

Getting the mix of policy instruments right is only part of the process of achieving effective policy outcomes. Effective policy implementation is, in my view, just as important. Policy makers should regard their role as being not just policy formulation and scheme design but also to work closely with the respective implementing agencies to design ways to ensure effective feedback to inform policy makers. That means having a policy process whereby lessons can be learnt and policy instruments adjusted in the light of experience in order to make implementation as effective as possible.

Yet, increasingly, energy efficiency policy implementation is at arms-length from energy efficiency policy formulation. In the early 1990s, the then Government set up the Energy Saving Trust, and in 2001 the Carbon Trust came into being. Both organisations designed and delivered a range of energy efficiency initiatives funded by, but at arms’ length from, Government. Following the end of Government funding for these organisations in early 2011, the energy companies have become the principal delivery agents for the Government’s energy efficiency policy, for example via the Energy Company Obligation (ECO) and predecessor schemes.

So how well is that working? Well, let’s take a look at one specific element: improving the wall insulation of dwellings. We know from field work carried out by the British Board of Agreement and presented by their Chief Executive, Claire Curtis-Thomas, to a public lecture at University College London on 17 November 2016 entitled “Policy and perverse behaviours – understanding the landscape for large insulation retrofit projects” that the quality of wall insulation projects installed under the ECO is variable, to say the least. On the basis of this evidence, the effectiveness of implementation of this particular energy efficiency policy measure, and the estimated energy efficiency savings, are both questionable. This experience may be exceptional. Other ECO schemes may be achieving savings as intended. A key question to ask is what have been the results of independent evaluation of ECO schemes?

The effectiveness of policy implementation is an area well worth exploring. The aim is not to embarrass policy makers and those responsible for implementation (they are different entities), but to help inform them so they can learn from independent evaluation, what works and what doesn’t.

Innovation and the policy environment

On innovation, the Sussex paper says “a rapidly fluctuating policy environment can slow innovation”. I agree. Stability of the (right) policy environment is what investors need in order to have confidence to invest in innovation – especially innovation for technologies for which market “pull” is weak. Where markets cannot deliver societal goods unaided, Governments have tended to see a role for themselves. How different Governments see and interpret that role has implications not just for energy efficiency but also a whole range of societal challenges from climate change mitigation to elderly care provision.

I agree with the Sussex team’s conclusion that “there is an increasing interest in the effects of combinations of goals and instruments”. Combining policy goals needs careful handling because, without careful design of the policy instruments, it risks compromising the set of goals so that none is achieved in practice. “The introduction of social and carbon reduction goals into traditional energy efficiency ambitions” is a case in point. Tackling fuel poverty requires a different set of policy instruments from those designed to drive innovation in energy efficiency measures and technologies, for example.

The paper includes a useful “comparison” dimension with Finland’s energy efficiency policies over that period. Comparisons between countries, approaches, policies and outcomes are useful, not just to academics but to policy makers and those interested in learning from the experiences of others facing similar challenges. The authors have developed an approach which could be used in other comparative analyses and I urge them to put their experience to good use as and when further research opportunities arise.

Energy efficiency helps people, businesses and service providers make better use of the energy they buy and avoid paying for wasted energy. Second, in the event of supply difficulties, it makes the energy we have go further; and also reduces our energy imports bill. Third, it helps reduce our carbon emissions and thereby helps to meet our greenhouse gas emission reduction targets. In short, energy efficiency helps underpin the three elements of what has been UK energy policy for over a decade – affordability, security of supply, and reducing carbon emissions. It should be treated with the importance it deserves, and not left to sink or swim in the turbulent sea of market driven energy policy.

Dr David Vincent is a former senior civil servant, who contributed to the development of the UK’s energy efficiency policies and programmes from the mid-1970s to 2001. He was the Carbon Trust Technology Director working on various energy efficiency and low carbon technology programmes and initiatives from 2001 to 2011. He is now an independent energy consultant, a member of the Sussex Energy Group and Centre on Innovation and Energy Demand’s Steering Group.

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The historical foundations of UK energy policy since the 1940s

Guest blog by Dr David Vincent

Since 1945, UK energy policy has undergone seismic shifts, starting with the energy industry nationalisations of the late 1940s and moving on to energy industry privatisations of the 1980s and 90s. These shifts were tempered with some ground-breaking, longer term thinking with respect to the climate change mitigation aspects of energy policy. It is this backdrop which I think has defined, more than any other single factor, how energy efficiency policy has developed in the UK over the last few decades and into the new millennium.

A recent paper on policy packaging or policy patching analyses and discusses how energy efficiency policies and programmes have developed in the UK and Finland respectively from 2000-2014 and explores how the UK’s approach compares, or contrasts, with that of Finland. While the paper covers the period from 2000-2014, reading the paper got me thinking about how the UK’s energy efficiency policies have developed and I think it is helpful to put this period into the wider context starting in the 1940s.

Richborough Power Station, which is now derelict, was built in the late 50s, and burned millions of tonnes of coal. Credit: Andrea (CC BY-NC 2.0).

In the 1940s and 1950s the Government of the day directly intervened, for example, to create an energy efficiency for industry service. Compare this with the early 1980s when the UK’s energy policy under the then Secretary of State, Nigel Lawson, was “to set a framework which will ensure that the market operates with a minimum of distortion and energy is produced and consumed efficiently”.

Privatisation has created a totally new energy landscape of generators, distribution companies and electricity and gas transmission systems operators (National Grid) operating in a highly complex market overseen by the regulator, Ofgem.

Energy technologies, similarly, have seen major changes – disruptive changes in the modern terminology. These include, for example the development of nuclear power in the 1950s (a technology adventure with which we are still fixated); the progressive shift out of coal into gas for power generation, and the development of combined cycle gas turbine technology; the exploitation of unconventional fossil fuels – tar sand extraction and fracking; the tentative introduction of renewable energy technologies; the amazing developments in battery and storage technologies which will enable intermittent energy generation technologies like wind power to play a fuller role; and the first, tentative steps to smarten up our grids and the way we use energy.

Reviewing this historical context is important. First, because attitudes and mind sets towards policy formulation develop years, if not decades, before and become part of our very own set of status quo biases. Second, because past events drive, or extinguish, interest in topics. And third, I think that the development of the UK’s energy policy since nationalisation in the 1940s to now is absolutely fascinating and has lessons for today’s policy makers.

Events driving action on energy efficiency

Two examples of events driving interest and action on energy efficiency in the UK over that longer period are:

  • Energy shortages during and after the Second World War made it essential for everyone to use energy efficiently. At the macro-economic level, the surplus of domestic energy production in the 1930s would become a serious deficiency by the late 1940s. This situation was likely not only to persist, but to worsen. The Committee on National Policy for the use of Fuel and Power Resources (the Ridley Committee) concluded that much could be done to reduce the deficit by eliminating waste, and recommended that “the Ministry of Fuel and Power should invite industry to set up an organisation to provide a greatly increased fuel efficiency advisory service for industry, and the Ministry’s Fuel Efficiency Service (set up during the war) should be retained and should continue to give advice on fuel efficiency to industry.” The National Industrial Fuel Efficiency Service came into being in December 1953 as a direct result of Government intervention.
  • The first oil price rise in 1973 resurrected Government action on energy efficiency. I say “resurrected” because since the Second World War, when energy shortages drove action to improve energy efficiency in industry, Government interest in energy efficiency took second place to action to promote the growth of our energy supplies. Electricity generation and the transmission and distribution networks were expanded. So too was gas use as open fire coal combustion was restricted by the 1956 Clean Air Act and gas supplies were developed as North Sea gas was brought ashore. 1973 changed that policy position. A four-fold increase in oil prices forced not only the creation of the first Department of Energy that year but also a rethink about energy efficiency.

My first job in energy efficiency was in the former Department of Industry in 1975. We realised that, whereas there was good data on energy supply, there was very little information on energy use. We had little idea about how efficiently or not energy was being used by the manufacturing industry. We also had little idea about what measures could be applied in manufacturing companies and their processes to use energy more efficiently. The Department’s Industrial Energy Thrift Scheme was the first industry-wide attempt to gather information on energy use and to provide advice on how to improve energy efficiency on site. Over 6000 site visits were carried out during the mid-late 1970s and the information gathered was aggregated and published in industry sector guides.

In contrast, events can extinguish interest. For energy efficiency, the easy availability of cheap energy imports in the 1960s, the discovery and exploitation of North Sea oil and gas in the 1970s onwards, and the faith we had then in the rapid expansion of nuclear power all combined to depress policy interest in energy efficiency. “Too cheap to meter” was interpreted by many as not worth bothering about energy efficiency – an antithesis to the adage “if you can’t measure it, you can’t manage it”.

Energy efficiency from bit part to supporting role

Building our energy supplies was essential to underpin the development and growth of the post-war UK economy. However, the lack of interest in the efficient use of energy during a time of relatively cheap energy, though understandable, unfortunately laid the foundations for thinking about energy efficiency for decades to come: build more supply; energy is cheap; no need to think about energy efficiency – unless circumstances change.

Apart from that immediate post-war flurry of policy interest, and the four-fold oil price rise in 1973, action on the energy efficiency front lost momentum. North Sea oil and gas, the growth of our electricity generating capacity and, importantly, relatively cheap energy prices and easy availability once again took the policy spotlight off energy efficiency. Even the Miners’ strikes of 1972 and 1984/5 did little to stimulate action on energy efficiency.

Only when Peter Walker was appointed Secretary of State at the Department of Energy in 1983 did we see real political support for energy efficiency. He was the first (and some might say, with regret, the last) peacetime political heavyweight champion of energy efficiency. The creation of the Energy Efficiency Office (EEO) in April 1986, with strong support from Peter Walker, was a huge step forward for energy efficiency. (As an aside, the EEO came into existence not because of an energy supply event or price rise. It came into being as a direct result of Prime Minister Margaret Thatcher’s desire to see energy efficiency improvements in Whitehall. The formation of the EEO was the result of an efficiency exercise; and, ironically, launched at a time when oil prices had actually dropped!).

Ministerial weight and interest raised energy efficiency from the doldrums and almost to the status of energy supply. I say “almost” because although energy efficiency was more important in the mid-late 1980s than hitherto, it never achieved parity with energy supply. Careers weren’t made in energy efficiency: they were made in energy supply.

Attitudes, status quo bias and the demise of the Energy Efficiency Office

Attitudes are formed by what we see and what we have grown accustomed to over decades. Since the end of post-war rationing in the 1950s, we have not needed to save energy or use it more efficiently. It has always been available (barring wartime rationing, extreme weather events and the “three day week” during the 1972 Miners’ strike). Our attitude towards energy efficiency has been conditioned by the fact that most of us have always had enough energy supplies, and can afford to pay for them. Status quo bias suggests (some might say dictates) that, from our previous experience, we don’t need to be energy efficient – unless there is a significant change in status quo; and that not to respond to that change would leave us significantly worse off.

The EEO was an exceptional policy initiative that ran alongside, but never ahead of, energy supply policy. Unfortunately, like all good things, the EEO came to an end. In 1992, the EEO “dissolved” into the then Department of the Environment. Energy efficiency per se was subsumed into the wider Departmental policy. These changes separated energy efficiency policy from energy supply policy, which became the responsibility of the then Department of Trade and Industry. Government policies on energy efficiency in buildings, in industry and in transport were distributed across Government Departments, under the ever-watchful eye of the Treasury.

From the above brief tour, you can see that the stage is set for the development of the energy efficiency story in the UK from 2000-2014, which is examined in this paper and compared with the energy efficiency experience in Finland. I will explore this paper in more detail in my next blog.

Dr David Vincent is a former senior civil servant, who contributed to the development of the UK’s energy efficiency policies and programmes from the mid-1970s to 2001. He was the Carbon Trust’s Technology Director working on various energy efficiency and low carbon technology programmes and initiatives from 2001 to 2011. He is now an independent energy consultant, a member of the Sussex Energy Group (SEG) and Centre on Innovation and Energy Demand’s Steering Group.

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