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.
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.Follow Sussex Energy Group