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  1. 1. Industrial Energy Efficiency – the role ofGovernmentNiall Mackenzie, Head, Industrial Energy Efficiency Programme, DECC5th Annual Smart Grids & Cleanpower 2013 Conference5 June 2013
  2. 2. 01002003004005006007002008200920102011  (P)2012201320142015201620172018201920202021202220232024202520262027MtCO2eProgress  against  the  UK  carbon  budgets  Oct  2012  emissions  projections   Actual  net  UK  carbon  account  Budget  1  indicative  annual  average Budget  2  indicative  annual  averageBudget  3  indicative  annual  average Budget  4  indicative  annual  averageUK strategy– framed byCarbon Budgets•  Carbon budgets = cut of at least 34% in greenhouse gas emissions in 2020 (1990 levels) .•  4th carbon budget (2023-2027) = 50% over the period relative to 1990 levels.•  2050 goal = 80%2
  3. 3. 3The Carbon Plan (December 2011) sets out theGovernment’s plans to meet the fourth carbonbudget, showing how doing so sets us on aplausible pathway to 2050In the nextdecade……the UK will complete the easy wins we have already begun,focusing on energy efficiency. We will also prepare for thefuture by demonstrating and deploying low carbontechnologiesUp to 2030 andbeyond…… emissions from hard-to-treat sectors will need to betackled – such as industry, aviation, shipping, and agriculture,while buildings and transport make use of decarbonisedelectricity suppliesDuring the2020s……key technologies in low carbon heat and ULEVs will movetowards mass roll out. A range of solutions for decarbonising‘hard-to-reach’ sectors like agriculture and industry will need tobe tested
  4. 4. For the fourth carbon budget we have set outranges of ambition for four key technologyareas that are consistent with 2050, deliverableand cost-effective4• Up to 2.5 million solid wallsinsulated by 2030• Around 1.9 million other energyefficiency installations• Up to 5.2 million solid wallsinsulated by 2030• Around 7.2 million otherenergy efficiency installations• 20% of new cars areelectric or plug-in by 2030• Overall new car fuel efficiency =70gCO2/km by 20301.6 million renewable heatinstallations by 2030, delivering87 TWh of low carbon heat(alongside 10 TWh via district heating)8.6 million renewable heatinstallations by 2030,delivering 165 TWh of lowcarbon heat(alongside 38 TWh via district heating)DomesticretrofittingLow carbontransportRenewableheatCarbon intensity of generatingelectricity falls to 100 gCO2/kWhby 2030Carbon intensity of generatingelectricity falls to 50 gCO2/kWh by 2030Low carbonpower• 50% of new cars are electricor plug-in by 2030• Overall new car fuel efficiency= 50gCO2/km by 2030Low end of ambition High end of ambition
  5. 5. UK emissions & projections 1990 – 2030What existing policies will deliverSource: DECC Updated Energy Projections 2012Carbon budgets5
  6. 6. A key component of our strategy is toreduce demand by promoting energyefficiency6MisalignedfinancialincentivesEmbryonicMarketsInformationUnder-valuingenergyefficiencyThe benefits of greater energy efficiency include:§  Economic growth and productivity§  Savings for customers§  Emission reductions§  Sustainable and secure energyThe Energy Efficiency Strategy, published November2012, has set out the four barriers in the UK economy toachieving these benefits as well as those actions that weare taking to address themThe Green Deal addresses each barrier:§  It drives the market for suppliers and installers§  The bill payer funds the measure taken§  Trustmark and impartial assessment report§  ‘Golden rule’ means that expected savings covercosts
  7. 7. Industrial Energy Efficiency ProgrammeDelivering reductions across half of all UK emissionsAim: To improve energy efficiency and reduce emissions from large energy users whileimproving UK industrial competitivenessScheme Participants Projected impactEU Emissions Trading SystemCovers 46% of UK emissions1,100 large industrial emittersin the UK (12,000 across theEU) and all airlines243 mtCO2ereduction 2012-20Covers 4% of non-traded emissions2,000 large electricity usersoutside of the EU ETS20 mtCO2ereduction 2012-30Climate Change AgreementsCover 2% of UK emissions9,000 energy intensive facilities– from steel manufacture topoultry farming~ 11% improvement inenergy efficiency 2008-207
  8. 8. EU ETS emissions/projections 2008-2030Existing policies and measuresSource: DECC Updated Energy Projections 2012Emissions above the EU ETS capmean allowances have to bebought, emissions below the caplead to allowances being sold8
  9. 9. The EU ETS remains critical for EUcarbon reduction but needs reform•  Future role of EU ETS – UK sees EU ETS as at the core of EUcarbon reduction•  Increased ambition – UK continues to press for a move to a 30% EUcarbon reduction target by 2020•  Commission “backloading” proposals – will remove allowances frommarket in short term and sustain carbon price•  “State of the European Carbon Market in 2012” publication from theCommission - medium term structural reform – active debate nowbeginning in Europe - Govt has started the dialogue with UK industry ashow to reshape the ETS.9
  10. 10. Climate Change Agreements – a successfulGovernment - industry partnership• Voluntary agreements open to energy intensive industries• Participants receive up to 90% reduction in Climate Change Levy if theymeet energy efficiency targets agreed with Govt• Agreed Targets – industry has committed to deliver 11% improvementbetween 2008 and 2020 – sector specific targets agreed and shared out toinstallation level• Target setting based on penetration of technology to date, technicalpotential and agreed basis of commercially viable potential – more detailwill be published shortly10
  11. 11. Heat is the single biggest consumer ofenergy in the UK, & it’s mostly fossil fuel11CommercialIndustrialDomesticHeatOtherUKEnergyGasoilsolidresistiveGasoilsolidresistiveGasoilresistiveHeat supply (2008)Source: DUKES0 TWh712 TWh
  12. 12. March 2012: Strategic framework for heat• Main message of Strategic Framework: without changing the way we produceand consume heat, we will not meet our carbon reduction target or our renewableenergy target.•  Our Carbon Plan and almost all modelling work says that we will need to havenear zero carbon heating for buildings by 2050. Industrial heat will need tocut its emissions down to around one third of current levels.•  For buildings, this should be achieved by 1) energy efficiency measures likeGreen Deal and smart meters; 2) Renewable heat (mostly heat pumps) startingwith most cost effective ie off the gas grid; 3) heat networks (district heating) incities, with mix of different heat sources and heat customers.•  For industry, this requires 1) efficiency improvements, but limits to what morecan be done in some sectors; 2) fuel switching to bio or electricity (as the griddecarbonises); 3) industrial carbon capture and storageCommitted to produce a Heat Policy paper “within 12 months”.12
  13. 13. • 73% of industrial energy demand is forheat• Industry consumes 20% of all UKenergy as heat• Heat is integral to industrial processes:melting, drying, pasteurising, distilling• Heat use is concentrated among sixkey sectors• Industry uses natural gas, coal/coke,electricity, biofuels and other (egrefinery gases, coking gas)• Need up to 70% abatement by 2050  -­‐          5      10      15      20      25      30      35    TWh   Energy  Consump1on  in  UK  Industry  by  Sector  and  Fuel    Electricity  Natural  Gas  Oil  Solid  Fuel  March 2013: “The Future of Heating:Meeting the Challenge”Chapter 1: Industry
  14. 14. Energy EfficiencySome scope to improve efficiencybut much already implemented – egunder Climate Change Agreements?Fuel SwitchingHydrogen, electricity, biomasstechnically feasible but innovationand implementation barriers.Industrial CHPScope for more investment but whatbarriers exist/incentives neededEfficient, Low Carbon Heat in IndustryMeeting the challengeIndustrial Carbon Capture and StorageScope for CCS in iron and steel; chemicals; cement; oil refining. Costs areuncertain. Technology uncertain - transfer from power sector? Need to use sharedtransport and storage infrastructure.
  15. 15. Efficient Low Carbon Heat inIndustry – our commitments•  Sector-specific ‘low carbon roadmaps’ for key industrial sectors, with BISand industry – focusing on the most heat and CO2 intensive sectors.Runs over 2 years; Commitment from sectorsCurrently: DECC/BIS project planning and procurement•  Developing further evidence on supporting CCS for industry - we willcomplete a techno-economic study by the end of the year with BIS; and toexplore options for further supporting industrial CCS innovation incl through pilotdemonstrations.•  European Regional Development funding working with BIS to influence the£600m to support low carbon industry.•  Recoverable waste industrial heat – building our evidence and investigatinghow to incentivise harnessing waste heat from industrial processes, alongsidethe 2014 RHI policy review. Selecting a contractor, reporting by end of the year.•  Direct Fired Renewable Heat – explore support through the RHI 2014 review
  16. 16. 67% of industrial heat demand is in six key sectors. To date analysissuggests•  Oil refining: 9 sites in UK, complex sites, biggest heat demand, 40%emissions from process, use CHP extensively, could use biomass (?), CCSsuitable•  Iron and steel: 7 sites in UK (3 blast furnaces, 4 EAF), big heat demand,highly integrated process, no potential for renewables (?), CCS suitable•  Food and drink: 1000’s of businesses, 2nd biggest heat demand but notenergy intensive, use CHP widely, could use biomass.•  Pulp &paper: 50 sites in UK, lowest heat use, 50% use CHP, could usebiomass.•  Non-metallic minerals (including ceramics, cement and glass), multiplesites, direct fired heat use – no RHI, no CHP, CCS for cement•  Chemicals: 100’s of businesses and processes, often clustered, CHPsuitable, CCS suitable.Follow up work with sectors will start soonEfficient, Low Carbon Heat in Industry:Sector by Sector approach
  17. 17. The Renewable Heat Incentive: a firstof its kind•  The first scheme of its kind to provide support for the installation of renewableheating technologies – opened in November 2011•  2049 applications to date: 1367 Accreditations•  Heat generated and paid for under the scheme: 236GWh•  Currently consulting on revisions to tariffs17Technology   Current tariffs (1), (2)  Reviewed tariffs  (proposed for 2014/15)  BiomassBoilers  Small  (up to 200kW)  Tier 1: 8.6, Tier 2: 2.2  NO CHANGE  Medium  (200 to 1MW)  Tier 1: 5.3, Tier 2: 2.2  Large  (1MW and above)  1.0   2.0  GSHPs  Small  (up to 100kW)  4.8  7.2 (3) – 8.2 (4)  Large  (100kW and above)  3.5  Solar Thermal  (up to 200kW)  9.2   10.0 (5) – 11.3  
  18. 18. •• Information