Delivering energy efficiency in the UK through Domestic Energy Service Companies (DESCOs)
Charlie Morris-Marsham, UCL
Research Questions:
What are the barriers to domestic energy efficiency?
Can these barriers be addressed through Domestic Energy Services Companies (DESCos)?
Supervisor: Dr Steven Firth (Loughborough University)
Abstract
UK government interventions such as EEC and the Green Deal attempt to close the energy efficiency gap by addressing the upfront cost and information barriers to domestic energy efficiency. This study explores whether Domestic Energy Service Companies (DESCos) have the capacity to close this gap through fixed term ‘energy service’ contracts. It employs an economic model, and an analysis of the strengths and weaknesses of DESCos, to comment on their viability. For the simple case of loft insulation the study found that DESCo contracts delivered savings on household energy bills of 7-9%, compared to 14% savings from self-financing. Plus DESCos were found to reduce the upfront cost, risk and consumer inertia barriers. The study concludes that DESCos may have the potential to deliver energy efficiency in the domestic sector but may be prevented from doing so by systemic institutional and market barriers.
Charlie Morris-Marsham talks about this project:
Background:
Recent research by NHER indicated that, of those home owners who had read their homes’ Energy Performance Certificate, 44% were either not considering implementing or were not sure about implementing any of the energy saving recommendations[1].
Of the reasons for non-implementation 44% stated that lack of time, lack of confidence about value for money or the hassle and disruption involved were influential factors[2]
Therefore we can use these findings to hypothesise about why even when householders are informed of energy efficiency options available a significant proportion fail to act and that this action is in fact a rational one due to:
The opportunity cost of taking action (in terms of time and hassle)
Householders lack of ‘reliable’ information on costs and benefits and hence the implicit risk involved
These issues are not currently addressed by current financial assistance provision, i.e. the Green Deal, which although designed to mitigate the up-front cost barrier to investment does not address the implicit ‘risk’ barrier.
Methodology:
a review of literature on barriers to energy efficiency, existing government interventions and energy service companies
an economic analysis of the DESCO business model using, as inputs, energy efficiency measures, interest rate, transaction costs, take-back rates, energy price rises with outputs as percentage bill savings and expected rate of returns.
Outputs:
A report on the viability of DESCOs versus other forms of funding
A submission of evidence to the Energy Bill Committee
[1] 24% were not considering implementing any of the recommendations, 18% said they might consider implementing some recommendations in the future – but not sure (26, NHER, 2009)
[2] 44% stated either i. they had not had time to think about it (22%), ii. they had not had time to sort it (9%), iii. they did not believe they offered value for money (9%) or iv. It was too much hassle or disruption (4%), (28, NHER, 2009)
Project Team
Student(s)
Charlie Morris-Marsham
Supervisor(s)
Steven Firth
Outputs
Conference paper
The domestic energy supply business model: why it should sell services rather than commodities
ECEEE 2013 SUMMER STUDY PROCEEDINGS
Energy Service Companies: Do they represent a means of increasing take-up of the Green Deal?
Submission following Westminster Energy, Environment & Transport Forum: Delivering the Green Deal
Conference proceeding
The domestic energy supply business model: why it should sell services rather than commodities
Presentation
Dissertation
UK government interventions such as EEC and the Green Deal attempt to close the energy efficiency gap by addressing the upfront cost and information barriers to domestic energy efficiency. This study explores whether Domestic Energy Service Companies (DESCos) have the capacity to close this gap through fixed term ‘energy service’ contracts. It employs an economic model, and an analysis of the strengths and weaknesses of DESCos, to comment on their viability. For the simple case of loft insulation the study found that DESCo contracts delivered savings on household energy bills of 7-9%, compared to 14% savings from self-financing. Plus DESCos were found to reduce the upfront cost, risk and consumer inertia barriers. The study concludes that DESCos may have the potential to deliver energy efficiency in the domestic sector but may be prevented from doing so by systemic institutional and market barriers.
Other
A spreadsheet which can allow the user to make an economic assessment of domestic energy service company model versus the traditional utility energy supply model (baseline).
Presentation
Delivering energy efficiency in the UK via Domestic Energy Service Companies (DESCos)
Presentation for MRes Viva
Report (progress/mini project/consultation reports)
Energy Bill Memorandum
Click here to view outputs
Submission of written evidence to the Energy Bill Committee indicating the provisional findings of research and making recommendations.