Can energy demand reduction help tackle equity challenges in the energy transition?

Image from the “What are the equity challenges in delivering actions to reduce energy demand?” panel session. The five panel members are sat at a table facing a crowded conference room. Slides with EDRC and CEP’s logos are projected on a wall behind them.
Blog 14 June, 2024

The Centre for Energy Policy (CEP) hosted a session on the crucial issue of ensuring equity in efforts to reduce energy demand at the recent All-Energy conference in Glasgow. While it’s an important topic in the energy sector, the demand side often gets overlooked at the expense of supply. The All-Energy conference provided an unparalleled platform for stakeholders from academia, businesses, policymakers, and industry to discuss policy, challenges, opportunities, and innovations required or happening in energy and the net zero transition.

Under the title: ‘What are the equity challenges in delivering actions to reduce energy demand?’, CEP and EDRC’s event facilitated a dynamic dialogue between the panel and the attending public. The panel included representatives from the Scottish Government, industry, and academia. In this blog, I want to share the four main insights provided by the panel that enabled a thought-provoking discussion on the economic and societal implications of energy demand reduction.

Equity in energy demand

The first insight from the panel was that equality and equity are not interchangeable. While equality means sameness or equal distribution, equity refers to due proportion or balance related to justice and fairness. This distinction is more useful when discussing the financial and economic implications of energy demand. The concept of equity helps us understand that different people have different starting points. Factors such as income, geography, or housing tenure will influence the decisions and, eventually, the energy demand actions available for each person.

Karen Turner explained that CEP’s research on how best to support low-income and fuel-poor households has looked at two types of government support. The first has been direct support to cover the price of energy bills (monetary support), and the second is energy efficiency solutions to reduce energy demand (e.g., retrofitting). Both of these actions not only support people but also show the associated wider economic gains of doing so. For example, direct bill support can alleviate fuel poverty, giving individuals the freedom to spend their money on other necessities. At the same time, energy efficiency measures can decrease energy demand, freeing up funds that would otherwise go towards energy bills. Although requiring an upfront high investment, these measures hold the promise of supporting both the people and the net zero transition in the long-term.

Energy efficiency and flexibility in energy demand

The second insight relates to how energy efficiency technologies and flexibility measures can support the energy transition while reducing energy demand equitably, as Dr Ramirez-Mendiola. He said that the transition from carbon-intensive generation plants, mainly relying on oil and gas, to smaller and distributed generation, using renewables, has impacted how the system used to be balanced through the supply of energy. However, flexibility brings other challenges. For example, programmes that try to encourage people to use energy according to the system’s needs, i.e., when demand is lower, reducing consumption when energy demand is high, means that those who cannot adapt their consumption patterns will be worse off than those with the capacity to adapt. In this case, EDRC research has shown that people living in energy poverty will struggle more to adjust their energy consumption. At the same time, those who can adapt and invest in energy-efficient measures will benefit more. This difference can generate more inequality and mean that the worse-off sectors of society might end up subsidising the better-off sectors.

Challenges of energy demand reduction

The third insight revealed that people’s ability to adopt low-carbon technologies and benefit from flexible demand solutions faces similar challenges to those related to the first insight on equity issues. Rob McGaughey from Scottish Power talked about the company’s experience implementing a flexible demand solution for domestic users. The trial included a few ‘events’ in which consumers were asked to stop or decrease their energy consumption as much as possible between 5 and 7 pm, with the promise of being paid for this behaviour.

A total of 44,000 people participated between November and April, and while there was a good level of participation, participants shared they were uncertain about incentives. For example, participants did not know how much money they would earn, which shifts would give them the best benefit, how to solve technical issues like glitches in their smart meters or if they had additional options for participating if their caring responsibilities, including disease or disabilities in the household, impede them to participate in these ‘events’. These issues are linked to the incentive barriers people face when investing in a low-carbon technology like heat pumps, where they do not know how much money they can save or if a heat pump is the best option available for their home.

Energy demand and policy directions in Scotland

Commenting on how these key issues interact with policy, Catherine William shared her experience leading the Scottish Government’s Heat in Buildings area, which has been working on reducing heating demand through the adoption of energy efficiency measures and technologies. On the issue of equity, she explained that funding these measures has the potential to support the transition to clean heating while also reducing fuel poverty. However, the challenges in Scotland are diverse, and the government is not able to fund everybody to transition to clean heating, but it can develop the right funding schemes to support those who need it most.

For example, Catherine shared that the Warmer Home Scotland scheme seeks to support people living in damp and cold homes by providing funding for retrofitting and energy efficiency, which in some cases might mean installing a more efficient gas boiler. She explained that the solution isn’t just about individuals installing heat pumps in their homes, as this overlooks situations where the property might need a significant retrofit investment or where the occupant is not the owner and cannot choose the type of intervention. And so, to support people at their ‘different starting points,’ the government has developed models that provide funding to embed equity into energy demand reduction actions.

In the energy demand landscape, an equity approach is essential if we want to achieve our net zero goals in a just and fair manner that does not leave anyone behind. To ensure the energy transition delivers sustainable and equitable prosperity, CEP’s research and forthcoming publications as part of the Energy Demand Research Centre and other projects will bring a deeper understanding of the wider economic impacts of direct bill support and energy efficiency improvements.