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Value Management - Overcoming barriers to smarter heat solutions in UK homes. Annex 1b Analysis of existing policy


Citation Frontier Economics Value Management - Overcoming barriers to smarter heat solutions in UK homes. Annex 1b Analysis of existing policy, ETI, 2015. https://doi.org/10.5286/UKERC.EDC.000521.
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Author(s) Frontier Economics
Project partner(s) Frontier Economics Limited
Publisher ETI
DOI https://doi.org/10.5286/UKERC.EDC.000521
Download SSH_SS1401_4.pdf document type
Associated Project(s) ETI-SS1401: Smart Systems and Heat (SSH) Programme - Value Management and Delivery
Associated Dataset(s) No associated datasets
Abstract This project studied how value can be delivered across a smart energy value chain - in the context of the UK. It built a clear understanding of how smart energy systems can deliver combined consumer value alongside commercial value for market participants - producers, suppliers, distributors. The analysis will help to make the commercial deployment of smart energy systems more likely. This £600,000 project was delivered by Frontier Economics, a leading economic consultancy.

The final report has 11 annexes. This is Annex 1b: Analysis of existing policy.

This annexe sets out the analysis of existing heat and energy efficiency policies underlying our analysis of barriers and solutions. The annexe is structured as follows.
  • We first summarise our findings.
  • We then review existing heat and energy efficiency policies in the UK and internationally, analysing how far policies have overcome barriers to uptake, and their wider effectiveness (e.g. in terms of cost, or impact on industry confidence).
Summary of findings
  • No ‘silver bullet.’ Our analysis has shown that there is no ‘silver bullet’ that effectively addresses all barriers at onc
  • Absent mandating, overcoming or bypassing interestbarriers is a prerequisite for policy success.TheGreen Deal hashad little success in this area to date.
  • Supplier obligations have been successful in driving energy efficiency take up but they may not result in the most effective delivery.
  • Mandating can be an effective last resort.
  • To minimise the cost of mandated standards, they should be set in as broad a way as possible. 
  • Setting broad mandates also helps avoid adverse outcomes.
  • If financial incentives are high enough, manyother barriers can be overcome.
  • Alignment with long-term decarbonisation goals has not always been achieved.
  • To be effective, financial incentives must be designed with awareness and interest barriersin mind.
  • Consumers’ tendency to focus on near term costs and benefitsand credit constraints could also be driving low take up of financial incentives that are not paid up front.
  • Upfront grants may be a more cost effective way of driving uptake than ongoing payments.
  • Green Deal loans have not been a success.
  • District heat development internationally has relied on a range of enabling policy measures.
  • Experience with district heat also highlights the importance of supply side and competition policy.
This report was initially produced in March 2015. The detailed information and analyses documented within may beout of date with current thinking.