Extending CERT Consultation

Extending the Carbon Emissions
Reduction Target
Consultation on a CERT framework for the period April 2011 to December 2012
URN 09D/845 December 2009

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Extending the Carbon Emissions Reduction Target
Fo re wo rd
The energy we use to heat our homes is responsible for 13% of the UK’s total
greenhouse gas emissions. The Carbon Emissions Reduction Target, in driving
subsidised energy efficiency measures at scale into Great Britain’s households,
not only plays an important role in the fight against climate change but also helps
millions of households enjoy warmer homes and lower energy bills.
CERT has been a proven success in terms of delivering significant carbon dioxide
reductions cost effectively. It has helped get energy efficiency measures into
homes at scale - for example almost two-thirds of cavity walls are now filled in the
UK and 35% of lofts are insulated to at least 150mm. It is imperative that we don’t
lose the momentum we have built over the last seven years. The proposals here
look to build on CERT but also provide a bridge to our longer-term environmental
and social ambitions.
The proposals for the CERT extension will escalate the delivery of insulation
measures as a major contribution to our 6 million homes insulated commitment
and our ambition for all homes to be insulated with cavity wall and loft insulation,
where practicable, by 2015, so that we remain on course to meet our carbon
budgets.
The proposals aim to enhance an equitable distribution of benefits to lower income
vulnerable households, and thereby reinforce the strategy to alleviate fuel poverty.
CERT will facilitate the transition to a new Household Energy Management
strategy beyond 2012, which will ensure the remaining standard insulation
measures are completed in all households while continuing to promote investment
in innovative products and more broadly encouraging consumers to understand
and act on increasing their energy efficiency so as to save carbon and save
energy.
If we are to avoid the worst effects of climate change, we need to ensure that by
2050, the UK has reduced demand for energy and decarbonised the energy we
use in our homes almost totally. This means we all need to become smarter in the
way we heat, power and insulate our homes, and the CERT extension proposals
will ensure that consumers are offered a head start to this brave new world.
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Co n te n ts
Executive summary
Consultation questions
Chapter 1 Introduction
Chapter 2 CERT extension ambition
Chapter 3 Increasing equity and assistance for the most vulnerable households
Chapter 4 Scaling insulation delivery
Chapter 5 Innovation, evidence and reporting
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Exe c u tive s u m m a ry
In the Low Carbon Transition Plan published July 2009 1, the Government committed to:
• extend the Carbon Emissions Reduction Target (CERT) to the end of December 2012 at
no less an ambitious target;
• increase the focus of CERT on those vulnerable, lower income households who are more
likely to be in fuel poverty;
• increase the scale of insulation delivery.
This document is the Government’s statutory consultation on the CERT framework for the
extension period (April 2011 – December 2012) to meet these central ambitions.
P o lic y c o n te xt
CERT started on 1st April 2008 and is part of a broader framework of policies acting to drive CO2
savings across Great Britain. It has been successful, delivering insulation to more than two
million households in its first 18 months, building on the 5 million households insulated by
predecessor schemes from 2002. There is evidence that UK household energy demand reduced
as a result – domestic gas sales fell three years running 2004 – 2007, with energy efficiency
programmes thought to be responsible for half this fall 2. Like all policies, CERT needs to evolve
to take account of changing policy ambitions and an evolving regulatory and policy landscape.
Since CERT began, the 2008 Climate Change Act has introduced a legally-binding commitment
to reduce green house gas emissions by 80% by 2050, putting pressure on our policies to
deliver greater savings than ever. To plot a course to meet this target, carbon budgets for each
sector were drawn-up in the Low Carbon Transition Plan, with the household sector now
required to deliver a 29% cut on 2008 CO2 levels by 2020. The Government committed to
insulate a further 6 million homes by December 2011 and also introduced a Community Energy
Saving Programme on electricity and gas suppliers and electricity generators. At EU level, the
Energy Using Products Directive requirement that by 2010, the standby power consumption of
equipment in any condition has to be less than 1 Watt if the equipment is providing a reactivation
function or 2 Watts if the equipment is providing a status/information function; as well as the
mandatory phase-out of incandescent lamps, will impact the products and savings under CERT.
Looking ahead, the commitment to introduce feed-in tariffs in April 2010 and a renewable heat
incentive in April 2011 both potentially interact with CERT, and need to be considered when
designing CERT extension policy. Whilst these policies offer synergies with CERT, accredited
CERT activity must continue to deliver additionality and be demonstrated to do so.
1
http://www.decc.gov.uk/en/content/cms/publications/lc_trans_plan/lc_trans_plan.aspx
2
Value For Money report, published July 2008; www.nao.org.uk/pn/07-08/0708787.htm
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Equally, under the Ofwat managed water efficiency target to be introduced in January 2010
water companies will be expected to achieve a minimum saving by providing householders
information on how to use water sensibly, and by promoting water saving devices, contributing to
the Government’s ambition to reduce per capita consumption of water by 20 litres by 2030. On
2nd December 2009, Government also announced its plan for smart meters to be rolled out
through energy suppliers to every home by the end of 2020 including a standalone display
device. The detailed design phase is likely to be completed around summer 2012, paving the
way for the build and roll out phase.
CERT Up lift
Government has already acted to amend CERT in light of these developments. Government
increased the scale of CERT by 20% in July 2009, raising the target from 154 to 185 Million
lifetime tonnes of CO2, in line with the Prime Minister’s announcement of September 2008 3.
Exte n d in g CERT
A question on extending CERT was included in the Heat and Energy Saving Strategy
consultation in February 2009 4. The rationale for this proposal was to align the end of CERT with
the end of the first 5 year carbon budget period (2008 – 2012). The majority of respondents
welcomed the extension for the ongoing investment certainty it would deliver. The Government
therefore confirmed in July’s Low Carbon Transition Plan that it would “maintain an obligation on
energy suppliers... extending the end date of the CERT from April 2011 to the end of 2012”.
CERT e xte n s io n a m b itio n

The Government proposes to maintain the target at a pro rata level of ambition, increasing the
overall CERT for the additional 21 months by 108 Million lifetime tonnes of CO2 savings to 293
Million lifetime tonnes of CO2. This will drive significant additional carbon saving activity.
In c re a s in g e q u ity a n d a s s is ta n c e for th e m o s t vu ln e ra b le h o u s e h o ld s
Ensuring an equitable distribution of measures, especially to those most vulnerable and who can
least afford energy saving measures, remains a key aspect of CERT’s design. As set out in the
2009 Fuel Poverty annual report 5, CERT is a key component of the Government’s commitment
to tackle fuel poverty. This document proposes to use the CERT extension to increase the
proportion of assistance committed for the most vulnerable households. At least 40% of CERT
must be met in a ‘Priority Group’ of households where at least one occupant is a benefit recipient
(including disability benefits, income support and income-based jobseekers’ allowance, housing
benefit, council tax benefit, pension credit and child tax credit) or is aged 70 and over. This
group constitutes some 11 million households. While a high number of these households are not
on a form of means-tested financial support and thus less likely to be fuel poor than lower
income households, they are more vulnerable than the general population. Whether through age
or disability, this means they are more likely to spend a significant amount of time at home so
the benefits of improving thermal comfort through energy saving measures is potentially greater.
It is understandable from a commercial perspective that suppliers might target the more affluent
households within the priority group as they can be easier to locate and are more able to make a
financial contribution to the cost of the measures.
3
www.number10.gov.uk/Page16807
4
http://hes.decc.gov.uk/consultation/chapter-4/executive-summary/
5
www.decc.gov.uk/en/content/cms/what_we_do/consumers/fuel_poverty/strategy/strategy.aspx
6
As a result, there is a risk that little CERT activity takes place in lower income Priority Group
households. This goes counter to the aim of the Priority Group of securing an equitable
distribution of measures to lower income vulnerable households. The Government therefore
proposes that a new obligation be introduced to ensure that more of the most vulnerable, lower
income households who are more likely to be in fuel poverty stand to benefit from energy saving
measures. The Government proposes a ‘super’ Priority Group, mandating that a proportion of
the existing Priority Group activity be offered to poorer vulnerable households (for example,
recipients of Pension Credit and possibly recipients of Child Tax credit at existing or lower
income thresholds). For illustrative purposes, we have suggested that this obligation be set at
around a quarter of the Priority Group target. However, the final level will depend on decisions
about which groups should make up the ‘super’ Priority Group, taking account of evidence
provided by stakeholders and energy efficiency opportunities remaining in that sector as a result.
S c a lin g in s u la tio n d e live ry

Insulation delivers deep and long lived carbon saving benefits. If we are to achieve our 2050
greenhouse gas emissions target savings it is imperative that we meet the Government’s
ambition to insulate all homes where practicable 6 by 2015. CERT is currently the primary
instrument for delivering insulation into people’s homes at scale. The CERT extension has a
clear role in increasing the volume of insulation being installed, as well as in providing an
increase in the insulation industry operational levels. This document suggests two reinforcing
proposals for ensuring that insulation is prioritised and installed at scale under CERT: the
provision of an insulation minimum, that is, to require a minimum percentage (65% is initially
proposed) of the increase in target to be met through insulation; and that Compact Fluorescent
Lights are removed from the list of eligible measures, which will encourage the increased
installation of insulation, which is the next most cost effective measure.
In n o va tio n
CERT plays an important role in bringing through new innovative carbon saving products.
However, it is critical that CERT stays fleet footed in an ever changing market, to allow new
products to come through quickly, to ensure products are benchmarked effectively and to phase
out those measures which have achieved high levels of market penetration or which have been
overtaken by changes in EU product legislation. The Government therefore intends to make
changes which ensure that only the most energy efficient products and appliances remain
eligible to be supported under CERT.
Be yo n d a CERT e xte n s io n
Government consulted earlier this year on the options for household energy efficiency delivery
arrangements beyond 2012, including the possibility of continuing with a version of the supplier
obligation. The Government will publish its Household Energy Management strategy early in the
new year, setting out plans for the post-2012 period. The Government recognises that it is
imperative to retain momentum in the transition to this period so that all cavity walls and lofts are
insulated where practicable by 2015 and that the supply chain for more significant carbon saving
measures builds quickly.
6
www.decc.gov.uk/en/content/cms/publications/lc_trans_plan/lc_trans_plan.aspx
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Co n s u lta tio n Qu e s tio n s

CERT extension ambition
1. Do you agree that there should be an extension to CERT rather than a new
obligation period i.e. that the current CERT mechanism is largely retained but the
end date extended to December 2012?; if not, why not?
2. Given the potential costs, do you agree that the size of the extended CERT
obligation should be increased pro rata to the existing overall CERT obligation
(which was increased by 20% in summer 2009)? If not, what should the level of
the new overall target be, and why?
Increasing equity and assistance for the most vulnerable households
3. Do you agree that under the CERT extension there should be a requirement for
ensuring a proportion of the Priority Group target to be delivered to a subset of
the most vulnerable customers (a Super Priority Group), who are also more likely
to be in fuel poverty? Please explain your answer.
4. Do you agree that Pension Credit recipients should be at the heart of the Super
Priority Group? Should Child Tax Credit households that qualify for the Priority
Group also be included in the super Priority Group? If not, what groups would
you suggest, and what evidence do you have to support alternative proposals?
5. Do you think that lower income thresholds or sub sets of the identified benefit
groups should be identified to form the Super Priority Group if this means it is
likely to result in better targeting of those with a greater propensity to be in fuel
poverty? Is your answer the same if this required a lower ‘super’ Priority Group
target to be applied?
6 Do you agree that we should introduce a limited list of heating and insulation
measures of which Super Priority Group households benefit from at least one?
How far should this list extend? Are there other ways of promoting these
measures and so significant bill savings?
7 Do you think that the options and incentives proposed will encourage more help
to vulnerable rural households? What else can we do to help rural households
access CERT?
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8 Would a CERT obligation based on energy supplied (kWh) by an energy supplier

to its customers, rather than its customer numbers, represent a fairer, more
equitable method by which to apportion the overall CERT obligation and thus
lead to a more equitable scheme?
Scaling insulation delivery
9. Do you agree with the proposals for setting an insulation minimum and removing
CFLs as eligible measures so as to secure and drive insulation levels?
10. Subject to your views on the desirability or otherwise of introducing an insulation

minimum what level of minimum do you consider justifiable? Within this, should
the minimum exclude DIY insulation as a qualifying measure?
11. Do you have any evidence on alternative options which could successfully drive
a sustainable increase in insulation levels?
Innovation, evidence and reporting
12. Do you agree with the proposals for ensuring that only the most energy efficient
products and appliances should be eligible measures under the CERT
extension? Do you have views on how else this can be best delivered?
13. Do you agree that only providing carbon scores for A rated LEDs provides the
greatest certainty on delivering carbon savings from lighting products?
14. Should micro-generation measures remain eligible measures under the CERT
extension? If so, it may be sensible to introduce new rules e.g. that these
measures or subsets of these measures only remain eligible to Priority Group
and/or proposed Super Priority Group households; or no longer be eligible for a
carbon uplift; do you agree?
15. Do you think that the cost, carbon and wider assumptions set out in the
associated impact assessment are fair? If not, please provide evidence to
support how the assumptions should be amended.
16. Do you think that the current reporting and monitoring arrangements are robust
enough to ensure that Ofgem identify and avoid the risk of double counting
between different programmes? If not, how can this risk can be avoided?
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Ch a p te r 1 – In tro d u c tio n
Ba c kg ro u n d
1.1 The Electricity Act 1989 and the Gas Act 1986, as amended by the Utilities Act 2000, the
Climate Change and Sustainable Energy Act 2006 and the Climate Change Act 2008 contain
powers for the Secretary of State, by Order, to impose an obligation on electricity and gas
suppliers to achieve carbon emissions reduction targets. The existing CERT obligation is set by
the Electricity and Gas (Carbon Emissions Reduction) Order 2008 (SI 2008/188) 7 as amended
by the Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2009.
1.2 The Carbon Emissions Reduction Target (CERT) 8 commenced on 1st April 2008 and
concludes on 31st March 2011, and is the third phase of a household energy supplier obligation
(previously called the Energy Efficiency Commitment). CERT applies in England, Scotland and
Wales. Suppliers achieve their targets by promoting to households (e.g. through subsidised
offers) low carbon and energy efficient measures such as cavity wall insulation. The primary aim
of CERT is to contribute to the UK’s legally binding target under the Kyoto protocol to cut
greenhouse gas emissions by 12.5% below 1990 levels by 2008-2012 and the Climate Change
Act 2008 requirement to cut emissions of green house gas emissions by 80% below 1990 levels
by 2050.
1.3 Energy saving in homes has multiple benefits, beyond carbon savings. Many
interventions have a high net present value, that is they save householders more than they cost,
so have a direct financial benefit. CERT sets energy suppliers an obligation requiring at least
40% of the overall carbon saving target be achieved in a priority group of households which
contain an eligible benefit recipient or someone aged 70 and over. This means that an estimated
£1.3 billion over the CERT extension period (April 2011 – December 2012), will be invested in
delivering low carbon measures to vulnerable households. CERT is therefore one of a number of
schemes which combine to implement the Government’s fuel poverty strategy.
1.4 CERT leads to wider energy security benefits and in the context of the EU’s demanding
renewable energy target 9, it also reduces the absolute investment needed to attain a given
percentage of renewable energy supply. CERT has a role in market transformation and in
encouraging activity by suppliers to promote innovative measures or approaches. As an
incentive to the promotion of these measures, CERT attributes an additional 50% in carbon
savings to eligible market transformation qualifying actions. In order to limit any potential loss of
carbon savings the uplift is only attributable within a ring fenced percentage of a supplier’s total
CERT obligation.
7
www.opsi.gov.uk/si/sis05-02.
8
The legislative basis is set by the Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2009
which amended the existing Electricity and Gas (Carbon Emissions Reduction) Order 2008 (SI 2008/188)
9
The 2009 EU Renewable Energy Directive set a binding target of achieving 20 per cent of the EU’s energy
consumption from renewable sources by 2020. The UK’s share of the EU target commits us to sourcing 15 per cent
of our energy from renewable sources by 2020
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Re c e n t CERT a m e n d m e n ts
1.5 The overall CERT was increased by 20% in July 2009 to 185 MtCO2 over the life of the
measures. Additionally, the innovation ring fence was increased from 6% to 10% (retaining 2%
headroom for micro generation); upfront carbon scores were introduced for Real Time Displays
and Home Energy Advice packages as an incentive to these behavioural measures (capped at
2% of the suppliers’ total carbon saving obligation). Direct mail CFL schemes are removed as
eligible measures from 1st January 2010.
Co n s u lta tio n
1.6 This consultation delivers on the Government’s commitment set out in the Low Carbon
Transition Plan to extend the CERT from April 2011 to December 2012 at no less than the same
ambition; to ensure a focus on ensuring fairness for the most vulnerable; to increase the scale of
insulation being delivered; and to publish a consultation on the detail by the end of 2009. All
other elements of the design, operation and reporting of CERT not captured by this consultation
paper are proposed to remain the same as they are believed to reinforce delivery of these stated
ambitions.
Co s t a n d b e n e fits to c o n s u m e rs
1.7 The provisional costs and benefits are set out in the accompanying consultation stage
impact assessment 10. The central proposals are expected to require an estimated £2.4 billion
investment (undiscounted) by suppliers in meeting their targets. This will mean additional
average annual pass through costs of £11 per household per year on top of current CERT costs
if passed on in full to a customer of both gas and electricity supply 11. These costs are
outweighed by average annual benefits, in terms of lower energy bills or increased comfort, of
about £24.50 per household per year for the lifetime of the measures averaged across Great
Britain, and continuing for up to 40 years beyond the CERT period.
Ne xt s te p s
1.8 The Government will publish a draft order during the consultation period on the DECC
website, detailing how it will give effect to the policy intentions set out in this consultation paper.
Government also intends to hold outreach events over the course of the consultation period.
Following the consultation close, having considered the consultation responses, the Government
will publish a summary of responses and announce policy decisions. The Government will then
lay an order before Parliament with a view to it coming into force no later than the end of 2010.
1.9 Comments on all aspects of the proposals contained in this document are invited, and
should be sent no later than the 14th March 2010 to:
CERT team
Department of Energy and Climate Change
Area 1D, 3 Whitehall Place
London, SW1A 2AW
E-mail: CERT_2012_Extension@decc.gsi.gov.uk
10
http://www.decc.gov.uk/en/content/cms/consultations/open/open.aspx
11
Equating to total average annual pass through costs of £52 increasing from a £41 existing CERT baseline
11
1.10 Consultees in Scotland are asked to respond to DECC at the address above, and are
invited to submit copies of their comments to:
Colin Imrie
Business, Enterprise and Energy Directorate
The Scottish Government
4th Floor, 5 Atlantic Quay
150 Broomielaw
Glasgow G2 8LU
Email: Colin.Imrie@scotland.gsi.gov.uk
1.11 Consultees in Wales are asked to respond to DECC at the address above, and are invited
to submit copies of their comments to:
Charlotte Gibson
Climate Change and Water Division / Yr Is-adran Newid yn yr Hinsawdd a Dŵr
Llywodraeth Cynulliad Cymru / Welsh Assembly Government
Parc Cathays / Cathays Park
Caerdydd / Cardiff
CF10 3NQ
e-bost / email: charlotte.gibson@wales.gsi.gov.uk
1.12 In line with the Department of Energy and Climate Change policy of openness, at the end
of the consultation period copies of the responses received may be made publicly available on
the DECC website. The information they contain will be published in a summary of responses
and shared with other Government departments and Devolved Administrations. If you do not
consent to this, you must clearly request that your response be treated confidentially. Any
confidentiality disclaimer generated by your IT system in e-mail responses will not be treated as
such a request. You should also be aware that there may be circumstances in which DECC is
required to give information to third parties on request, in order to comply with its obligations
under the Freedom of Information Act 2000 and the Environmental Information Regulations.
1.13 If you have any complaints about the consultation process (as opposed to comments
about the issues which are the subject of the consultation) please address them to:
Ferry Lienert
DECC Consultation Co-ordinator
3 Whitehall Place
London SW1A 2HH
Email: ferry.lienert@decc.gsi.gov.uk
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Ch a p te r 2 – CERT e xte n s io n a m b itio n
Exte n d in g CERT
2.1 This consultation proposes a straight extension to CERT i.e. that much of the existing
CERT framework is retained, extending the end date from 31st March 2011 to 31st December
2012. In practice this will see the increased aim and new overall target become effective as soon
as the secondary legislation is in force. The alternative would be to require the existing target of
185 Million lifetime tonnes of CO2 to be met by 31st March 2011 with a separate obligation period
and new framework following.
2.2 A straight extension negates the need for any carryover arrangements and allows
suppliers to plan smooth delivery strategies to the end of the extended obligation period. This
will see the new arrangements implemented as soon as the legislation comes into force – which
we hope to do as early as possible and no later than the end of 2010, which is when on current
trajectories energy suppliers will have met their existing CERT obligation. It avoids suppliers
needing to close down and re-contract for new schemes with the potential for a hiatus in
consumer offers that this would imply. This can also benefit industry players who can suffer
additional costs from having to scale back and then increase their operational capabilities.
2.3 To ensure a clean break in how Ofgem administer qualifying schemes to the existing and
extended target, we propose that suppliers will need to bank with Ofgem (i.e. report and agree
the carbon savings delivered by their schemes) all relevant schemes within one month of the
amended legislation coming into force. This will also allow Government to undertake an interim
review of CERT by the end of 2011. This review will ensure CERT continues to present value for
money whilst learning from delivery as we build towards the post 2012 framework. This interim
review will specifically look to focus on those elements of the scheme which are new – including
the proposal here for a ‘Super’ Priority Group; the insulation minimum; the delivery of
behavioural measures provided for as part of the 20% CERT increase; and more broadly how
well CERT ensures an equitable distribution of benefits. There will also be a lessons learned
assessment of how well CERT operates through smaller retailers.
Co n s u lta tio n Qu e s tion
1. Do you agree that there should be an extension to CERT rather than a new
obligation period i.e. that the current CERT mechanism is largely retained but the
end date extended to December 2012?; if not, why not?
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CERT e xte n s io n a m b itio n

2.4 The Government announced in the Low Carbon Transition Plan that the CERT extension
phase would be no less ambitious than CERT (including the 20% increase). Increasing the
overall size of CERT will drive significant household energy efficiency activity. This will extend
the overall target pro rata by 108 Million lifetime tonnes of CO2 for the additional 21 months of
the scheme. This means a new target of 293 Million lifetime tonnes of CO2 by December 2012
(over the whole 57 months of CERT).
2.5 The target is well within the available cost effective carbon saving opportunities available
in the household sector but is believed to maximise outcomes for the expected costs which all
consumers may have to pay through their energy bills. The overall target for the CERT extension
is established using an optimisation model to demonstrate the feasibility of the target and the
balance of costs and benefits. This also builds in assumptions on supply chain constraints,
expected consumer demand and an understanding of how suppliers operate. The detailed costs
and benefits of different target levels, and model assumptions, are set out as part of the
accompanying impact assessment.
2.6 The central extension proposals are expected to require an estimated £2.4 billion 12
investment by suppliers in meeting their targets which if they passed on in full to their customers
would mean average annual costs of £52 per household ( if a customer of both gas and
electricity supply) 13. The net resource cost over the CERT extension phase for all parties is
approximately £6.1 billion 14. The costs are more than offset by annual benefits to GB (net of
costs) of £668 million for the lifetime of the measures - up to 40 years.
2.7 Alternative options explored include a 20% lower and a 20% higher level of target than a
pro rata extension. A target of 86.4 MtCO2 would lead to net resource costs for all parties at
approximately £3.7 billion. The annual benefits to GB (net of costs) would be £476 million for the
lifetime of the measures. This option would pass through costs of £26 per household per year.
Although reducing the cost of the programme significantly, this option is not considered to
present sufficient impact against the Government’s environmental targets – which require all
cost effective carbon saving opportunities in the household sector to be installed as soon as
possible if it is to be met.
2.8 A target of 129.6 MtCO2 would lead to net resource costs for all parties at approximately
£7.1 billion. The annual benefits to GB (net of costs) would be £726 million for the lifetime of the
measures. This would substantially increase cost pass through onto bills - to £63 per household
per year. The risk is that, given the supply chain restrictions on some of the larger measures –
notably cavity wall insulation, at the margin, more expensive measures would have to be
pursued. This could therefore push significantly more of the poorest households into fuel poverty
than the policy is able to remove, given their greater spending on energy as a proportion of
income.
12
These are undiscounted levels. The exact level of expenditure is a matter for the companies concerned, who try
and reach their carbon targets as cost-effectively as possible
13
The central CERT extension proposals set out in this paper will therefore be some £11 more expensive (per
household per year) than estimated for the current CERT (with estimated costs of £41 on the same basis).
14
This includes assumptions on householders ‘hidden’ costs for the first time
14
2.9 A draft order demonstrating how all the proposals in this paper will be enforced will be
published part way through the consultation period. Alongside extending the end date of CERT
and increasing the size of the target, several consequential amendments e.g. to the reporting
deadlines will need to be made. These will be made clear as part of the draft order.
2. Given the potential costs, do you agree that the size of the extended CERT
obligation should be increased pro rata to the existing overall CERT obligation
(which was increased by 20% in summer 2009)? If not, what should the level of
the new overall target be, and why?
15
Ch a p te r 3 - In c re a s in g e q u ity a n d
a s s is ta n c e fo r th e m o s t vu ln e ra b le
Go ve rn m e n t’s c om m itm e n t to th e m o s t vu ln e ra b le
3.1 The Government is committed to tackling fuel poverty. Delivering energy saving
measures can improve the thermal performance of a home and deliver long term reductions in
household energy bills. In turn, this can offer a lasting solution to fuel poverty. On this rationale,
this document proposes to use the extension of CERT to ensure that energy efficiency
measures are offered to more of the poorest and most vulnerable in society, many of whom are
fuel poor.
3.2 For reasons of equity, a minimum of 40% of the carbon savings delivered by the energy
suppliers must be delivered to a Priority Group. This consists of households containing a benefit
recipient (including disability benefits, income support and income-based jobseekers’ allowance,
housing benefit, council tax benefit, pension credit and child tax credit) or a person aged 70 or
over. The Priority Group makes up over a third of the total households in Great Britain. An
ongoing Priority Group will in itself help ensure a proportion of the benefits of CERT are directed
to households deemed more vulnerable or less able to afford measures than the general
population. On the basis of historical activity, it is estimated that to meet a 40% obligation
suppliers need to invest over 50% of the total investment costs of the CERT extension. The
costs of meeting the Priority Group are higher as measures tend to need higher or full subsidy
before being taken up.
S e ttin g s u p p lie rs a ta rg e t to a s s is t th e m o s t vu ln e ra ble

3.3 Government wants to ensure assistance for the most vulnerable, lower income
households and so contribute to fuel poverty objectives, without adding excessive costs or
undermining carbon saving objectives.
3.4 It is clear that different groups within the Priority Group are more likely to be fuel poor
than others, especially following the inclusion of non-means tested households aged 70 or over
in the CERT Priority Group 15. Evidence on where benefits are accruing within the Priority Group
requires ongoing data gathering and analysis, including through the English Housing Survey.
However 16, commercial patterns of behaviour would suggest that opportunities to deliver
measures in more affluent households would be prioritised over opportunities in lower income
households where costs of sourcing opportunities and delivering measures are likely to be
higher.
15
The inclusion of those aged 70 and over in the Priority Group was needed to ensure that there were sufficient
opportunities for a 40% obligation to be cost effectively achievable
16 “The inclusion of the over 70s in the Priority Group however has taken the focus away from those on a low
income (i.e. those on benefits”) Ofgem CERT Year 1 Annual Report to the Secretary of State, August 2009
16
3.5 There is a risk that, without changes to the equity provisions in the design of the CERT
extension, the level of measures accruing to the poorer, most vulnerable households will remain
disproportionately low. We believe that simply increasing the scale of the Priority Group will
increase the costs of the scheme whilst doing no more to direct assistance to those most in
need. It may also affect our ability to meet our carbon targets through cost effective measures
such as insulation, given that there are fewer insulation opportunities remaining in the Priority
Group. Alternatively, changing the composition of the Priority Group, for example by excluding
households with someone aged 70 or over not on a form of means-tested financial support,
would remove the impetus for investing in households which are still more vulnerable than the
general population.
3.6 Government therefore proposes to include an additional obligation on suppliers for the
CERT extension requiring that a proportion of the ongoing 40% Priority Group obligation should
be delivered to those most vulnerable, lower income households who are more likely to be in
fuel poverty within a new ‘Super’ Priority Group.
3.7 It is accepted that the targeting of fuel poor households through existing proxies will be
imperfect - there will always be some households within the eligible group which are not fuel
poor and some households outside of the eligible group which are. There is though a strong
rationale for focusing support for vulnerable households within CERT on a tightly defined group
of households that have a high propensity to be fuel poor to ensure that more of the poorest and
most vulnerable have the opportunity to benefit from the scheme.
3.8 Over the coming months, we will undertake further analysis and stakeholder engagement
to help inform a decision on the most appropriate balance of effort between the Priority Group
and Super Priority Group. However, for illustrative purposes for inclusion in this consultation
document, we have assumed that no less than 10% of the overall carbon reduction effort in the
extension period should be focused on the Super Priority Group (i.e. no less than a quarter of
the current Priority Group target). A decision on the level at which the Super Priority Group
target should be set links closely to decisions on the eligible recipients making up that group, on
the number of energy saving opportunities remaining, on the ease with which those households
can be found and on the impact it presents to total scheme costs.
3. Do you agree that under the CERT extension there should be a requirement for
ensuring a proportion of the Priority Group target to be delivered to a subset of
the most vulnerable customers (a Super Priority Group), who are also more likely
to be in fuel poverty? Please explain your answer.
17
De fin in g a S u p e r P riority Gro u p h o u s e h o ld

3.9 Identifying the fuel poor at any point in time requires us to have information about the
income, energy efficiency and fuel costs of every household in Great Britain. It is clear that there
is currently no single mechanism or proxy that allows us to identify a Super Priority Group
comprising only those in fuel poverty. However, we do know from survey data that those
households in the lowest income decile have a much higher propensity to be fuel poor17. The
CERT extension is an opportunity to direct assistance towards more of those vulnerable and
lower income households with a higher propensity to be fuel poor.
3.10 In considering how we might best define eligibility within the Super Priority Group, we
have considered potential options against the following key criteria:
• Evidence of vulnerability and risk of detriment of a given target group as a result of living
in poorly heated homes;
• Availability of stable benefit proxies for a target group and feasible means to identify
eligible households (i.e. by stable we mean that if a particular household is identified as
fuel poor in one year, there is a high probability that the household is fuel poor the
following year);
• Evidence that the fuel poverty rate in the group is higher than the average for the current
Priority Group; and,
• Sufficient opportunities to deliver cost-effective energy saving measures.
3.11 Further to this analysis, the Government is minded to propose that older poorer
pensioners be at the core of the Super Priority Group, using Pension Credit receipt, or a sub-set
thereof, as a proxy. In addition, there is a good case for including poorer families in the group,
using Child Tax Credit receipt under an income threshold as a proxy.
Ra tio n a le fo r S u p e r P rio rity Gro u p e ligib ility

3.12 We propose that Pension Credit recipients, or a sub-set thereof, should be at the heart of
the super Priority Group. People of retirement age are more susceptible to excess winter death
than the population average, with the level of risk increasing as people grow older 18. Older
people are in general more vulnerable to detrimental health impacts if they are fuel poor or live in
homes which are not adequately heated, compared to the average healthy adult of working
age 19.
3.13 Pensioner households by definition tend to have a more stable income through time than
a household of working age, the income for which can vary significantly as household members
lose, find or change job. As a result, the fuel poverty status of pensioner households is also
more stable by comparison. If a pensioner household is in fuel poverty one year, then in the
absence of dramatic decreases in energy prices, it is also likely to be in fuel poverty the following
year.
17
Around 90% of the fuel poor are in the lowest three income deciles. A household in the lowest income decile has
a 74% probability of being fuel poor, compared to a 32% chance for a household in the second income decile and
14% for a household in the third income decile.
18
www.statistics.gov.uk/statbase/ssdataset.asp?vlnk=7089
19
For example, the WHO finds that elderly people are more likely to suffer from hypothermia than non-elderly adults
and, due to poor circulation, elderly people require higher room temperatures than younger adults to remain healthy:
http://whqlibdoc.who.int/euro/ehs/EURO_EHS_31_part2.pdf
18
3.14 To determine the eligibility criteria of the Super Priority group, we need to assess the
trade off between ensuring that there are sufficient and identifiable opportunities for energy
suppliers be able to fulfil their obligation on the one hand and the group having a good fuel
poverty hit rate on the other. Pensioners on low income are eligible for Pension Credit, which is
composed of two elements: Guarantee Credit provides a standard minimum income guarantee,
and Savings Credit rewards low-income pensioners who have made modest provisions for their
own retirement, either through employment or savings. Around 2.7 million households in Great
Britain receive Pension Credit benefits, with 2.1 million of those on some form of guarantee
credit. The rate of fuel poverty amongst Pension Credit claimants is higher than for the Priority
Group as a whole. We can increase the fuel poverty rate further by reducing the income
threshold. However, this group would then increasingly present a smaller number of households
and thus fewer opportunities to deliver energy saving measures compared to the wider group.
3.15 There is a good case for including households in receipt of Child Tax Credit below a given
income threshold in the super Priority Group. Children who are fuel poor or live in homes which
are not adequately heated suffer from many of the same health risks as older people 20. For
example, children living in fuel poverty are at particular risk of respiratory illness 21, as well as
suffering developmental problems22 including poor weight gain, and infants in fuel poor
households are at 30% greater risk of admission to hospital or primary care facilities when other
contributory factors have been accounted for 23. We know that the income of working age
households is less stable over time than pensioner households. Experience of operating the
Child Tax Credit policy for those households on the very lowest income has shown that incomes
often vary month by month. Child Tax Credit is a form of means-tested financial support for
working families, and as such provides the best available proxy for low income working families
when combined with an upper income threshold.
3.16 The fuel poverty rate among the 1.5 million households in receipt of Child Tax Credit
under the income threshold which qualifies them for the Priority Group is equivalent to the wider
Priority Group. This is because household income is measured before the sum of the benefit has
been taken into account. However, if the income threshold is lowered to reflect the sum of the
benefit in addition to other income sources, the rate of fuel poverty increases significantly. As
with Pension Credit claimants there is a corresponding trade off with the level of energy
efficiency opportunities 24. The rationale for a more tightly defined stable target group is
potentially stronger for a policy such as Social Price Support which, whilst providing an important
source of benefit to vulnerable consumers, does not have a sustained longer term impact on fuel
poverty and requires an annual payment to the relevant household (increasing the importance of
the stability of benefit proxy for a given household from one year to the next). Equally it will not
contribute towards meeting the UK’s carbon reduction emission targets.
20
http://whqlibdoc.who.int/euro/ehs/EURO_EHS_31_part2.pdf
21
Howden-Chapman, P. et al., (2007). Effects of insulating houses on health inequality : Cluster randomised study
in the community. British Medical Journal, doi:10.1136/bmj.39070.573032.80
22
Barnes, M. et al., (2008). The Dynamics of Bad Housing : The Impacts of Bad Housing on the Living Standards of
Children. London : National Centre for Social Research
23
www.apho.org.uk/resource/view.aspx?RID=53281
24
The English Housing Survey suggests that the level of opportunities remaining in the Child Tax Credit Group is
higher than the Pension Credit group and the rate of improvement is slower for households in receipt of Child Tax
Credit under the income threshold.
19
Co n s u lta tio n Qu e s tion s
4. Do you agree that Pension Credit recipients should be at the heart of the super
Priority Group? Should Child Tax Credit households that qualify for the Priority
Group also be included in the super Priority Group? If not, what groups would
you suggest, and what evidence do you have to support alternative proposals?
5. Do you think that lower income thresholds or sub sets of the identified benefit
groups should be identified to form the ‘super’ Priority Group if this means it is
likely to result in better targeting of those with a greater propensity to be in fuel
poverty? Is your answer the same if this required a lower ‘super’ Priority Group
target to be applied?
He lp in g e n e rg y s u p p lie rs fin d e lig ible h o u s e h o ld s

3.17 The more Government can help suppliers identify and source Super Priority Group
eligible households, the more confidence we can have in setting a higher level of carbon target
for this group. To this end, the Government is exploring the possibility of sharing data on certain
Pension Credit recipients with energy suppliers through a gateway provided in the Pensions Act
2008, with a pilot under discussion with energy suppliers for possible implementation in 2010.
This is on the basis that eligible households will receive an automatic benefit in the form of a
deduction off their electricity bill. If data sharing with pension credit data is found to be effective,
it could establish a relationship between relevant Pension Credit households and energy
suppliers and help supplier identify opportunities to deliver energy saving measures through the
CERT extension for the Super Priority Group. Subject to Parliamentary scrutiny Government is
looking to undertake data matching from spring 2010.
3.18 We do not currently have an equivalent legal power to enable those in receipt of Child
Tax Credit, to benefit in a similar way. Moreover, the Government believes it is prudent to test
the viability, effectiveness and security of data matching using the existing gateway for Pension
Credit data before considering the creation of new gateways. However, Government is exploring
the potential for providing other ways to assist suppliers cost effectively identify target
households in the Child Tax Credit group.
P ro m o tin g m e a n in g fu l e n e rg y b ill s a vin g s

3.19 For the Super Priority Group to be effective in ensuring that those households offered
assistance are promoted measures which could make a real difference to their energy bills we
propose requiring that every household reached has to receive at least one insulation or heating
measure which has the potential to deliver deep and long term improvements in the thermal
comfort of a property. These households will not be precluded from being offered further
measures.
20
Eligible measures Improvement in

annual energy bill 25
Cavity Wall Insulation £128

Insulation
Loft insulation (from <60mm) £79
Solid Wall Insulation (external) £446
Solid Wall Insulation (internal) £422
Fuel Switching c.£700
Ground source heat pumps £161

Heating
Air Source heat pumps £469
Wood Chip CHP £521
Early replacement of G rated boilers £194
6. Do you agree that we should introduce a limited list of heating and insulation
measures which super Priority Group households benefit from at least one of?
How far should this list extend? Are there other ways of promoting these
measures and so significant bill savings?
Wid e r e q u ity c o n s id e ra tio n s : ru ra l ho u s e h o ld s

3.20 The Government recognises that CERT should aim to encourage an equitable distribution
of benefits to vulnerable households not only across income deciles but also geographically.
CERT will never be able to do this perfectly as it is a market based instrument influenced by
factors including consumer demand and the local supply chain. CERT is delivered in the most
cost effective way by energy suppliers (which in turn ensures that cost pass through onto all
consumer’s energy bills are minimised) and an even spread of benefits can never be guaranteed
or ensure costs are minimised.
25
to average three bed Priority Group household if taken in full; although note that those in the Super Priority Group
with a higher propensity for fuel poverty may not have average consumption patterns.
21
3.21 Nevertheless, on the principle of equity, it is important that those households likely to be
most vulnerable in rural areas stand to benefit from the scheme. We believe that by setting a
CERT obligation by the end of 2012, energy suppliers will as a matter of course need to exploit a
higher proportion of the available carbon saving opportunities, including those households which
to date, have proved less cost effective, such as in rural areas. We also believe that the advent
of the Super Priority Group will reinforce the delivery of activity to rural vulnerable households.
3.22 A high proportion of rural properties are off the gas grid with solid walls, meaning energy
saving measures often require a comparatively high level of investment. To ensure that these
measures are incentivised, so that the benefits of Priority and Super Priority Group targets
accrue to rural households, we propose to allow the existing flexibility option to apply to ‘Super’
Priority Group households 26. The flexibility option provides for carbon uplifts for solid wall
insulation and heatpumps in off gas grid properties to encourage more of these expensive
measures to be installed in vulnerable households. The trade off of this carbon uplift is that fewer
vulnerable households in total may need to be reached in meeting targets.
7. Do you think that the options and incentives proposed will encourage more help
to vulnerable rural households? What else can we do to help rural households
access CERT?
Wid e r e q u ity c o n s id e ra tio n s : p a s s -th ro u g h c o s ts

3.23 In July 2009 Ofgem published a paper27 exploring how changes to the way the supplier
obligation target was applied could influence the equity of the scheme. The paper argues that “in
an effective market, suppliers are likely to alter their pricing structures to reflect changes in their
costs given the competitive risks of not doing so” and that structuring the obligation in terms of
who pays can have a positive social benefit.
3.24 A supplier’s obligation is currently based on customer numbers and so represents to

suppliers a fixed cost per customer. Although we do not know exactly how suppliers recover
these costs from customers, in a competitive market we assume suppliers pass these costs on
as they face them. That is, costs incurred in meeting their CERT obligation are assumed to be
passed onto the consumer base evenly with consumers paying the same absolute amount per
fuel, regardless of their consumption level. This means that, even at modest consumption levels,
where consumers have little scope to be energy efficient or are already being energy efficient,
they contribute the same amount as customers with high consumption.
26
See article 2(3) and 14 of the CERT Order 2008
27
July 2009 ““Can energy charges encourage energy efficiency?”” Anna Kulhavy, Ofgem
22
3.25 The Ofgem paper recommends basing CERT on annual sales (i.e. kWh supplied) to help
improve the equity of the obligation. An obligation based on energy supplied and passed through
to consumers as such could be more progressive on average, as high income households with
typically higher consumption profiles would pay more in absolute terms as part of their energy
bills to fund the programme. In turn, on average, people in lower income deciles would therefore
pay slightly less as their energy usage tends to be lower. An obligation based on kWh supplied
could also provide a stronger incentive to high use consumers to become more energy efficient
and manage energy use through take up of measures offered under CERT. This would help
reduce their energy charges including what they pay to fund the programme.
3.26 Of course, these averages mask variation in the patterns of energy use within income
groups. For example, vulnerable groups who spend a significant amount of time at home,
because they are of pensionable age and/or due to limited mobility, will require higher energy
usage to keep their home warm, especially in hard to treat housing. A perverse consequence of
measuring CERT by energy usage could therefore be that, for certain fuel poor households,
costs passed through onto their energy bills could be higher.
3.27 As a result of changing the basis of the obligation to energy supplied Ofgem would be
required to collect supply data as they currently do for customer numbers and to then divide the
additional obligation up across suppliers on a pro-rata basis. It is possible that some suppliers
could face a larger obligation than they had previously. We also recognise that if people actually
heated their homes to the recommended level the differential between income deciles and thus
cost pass through would be less. The Government would welcome any further views.
8. Would a CERT obligation based on energy supplied (kWh) by an energy supplier

to its customers, rather than its customer numbers, represent a fairer, more
equitable method by which to apportion the overall CERT obligation and thus
lead to a more equitable scheme?
23
Ch a p te r 4 – S c a lin g in s u la tio n
d e live ry
In s u la tio n is a Go ve rn m e n t p riority
4.1 With almost two thirds of household carbon emissions linked to space and water heating,
it is imperative that CERT looks to drive through measures such as insulation which improve the
thermal efficiency of a property. In the short term this can mean additional scheme costs, but in
the long term in driving through measures which deliver deeper and longer lived carbon and
energy savings it will lever significant additional benefits, both at a household and at a national
level. Moreover, if we are to meet our long term carbon saving targets we need to mine these
easier wins early.
4.2 In recognition of the long term carbon benefits insulation delivers, Government has made
a commitment to insulate 6 million households by December 2011 28, as well as an ambition to
insulate all households where practicable with cavity wall insulation and loft insulation by 2015 29.
CERT is the strongest lever at the Government’s disposal for driving insulation into GB homes.
4.3 CERT has been successful in getting insulation installed with some 2 million households
benefiting in its first 18 months. However, the pace of installation across all insulation products
needs to increase if we are to meet our carbon saving targets (the household sector is required
to deliver a 29% cut on 2008 levels by 2020 to stay on course for an 80% cut by 2050). We also
need this increase to be sustained. This is especially important for cavity wall insulation, which
requires the most upfront investment in people and machinery.
4.4 We need to see an increase in insulation delivery across all household sectors, including
owner occupier households where the majority of opportunities exist, but also the private rented
sector which has seen the least activity proportionally to date and the social rented sector, which
has seen significant energy savings delivered through CERT and its predecessors, but which
has numerous cost effective opportunities remaining. In total we expect some 5.5 million
households30 to still require cavity wall insulation and some 1.7 million households with less than
100mm of loft insulation at the outset of the CERT extension phase.
4.5 If we are to successfully increase insulation levels we need to raise consumer demand
and Government will continue to use marketing and other tools to help see this realised. Equally
we need to engage with partners at all levels of the insulation supply chain to ensure that
everyone is focused on this agenda, and to lever cost savings into the system, so that it is a
more cost effective product for suppliers to promote.
28
This is from an April 2008 baseline and was made alongside an announcement of the £1 billion Home Energy
Saving Strategy which included a 20% increase in CERT and aimed to save households up to £300 every year.
29
This was set out as part of the Heat and Energy Saving Strategy in February 2009
30
This excludes some 800,000 cavities which are currently considered to be technically difficult or impractical to fill
24
4.6 Social landlords, for example, have a role to play, working in partnership with local
authorities and the energy suppliers, to access those homes that still have potential for basic
insulation measures, not only in their own stock but to stimulate demand from other homes in the
same community. In this way landlords can help scale the insulation work that remains to be
done and help lever supplier offers by reducing their search and marketing costs. Equally,
energy suppliers will benefit from continuing to engage positively with social landlords and local
authorities when they bring forward work, delivering their targets more cost effectively.
4.7 We propose two reinforcing amendments for ensuring the CERT extension increases its
focus on insulation. Firstly, through setting a minimum insulation requirement, and secondly by
removing the main measure which competes with insulation on economic grounds (i.e. Compact
Fluorescent Lights).
S e ttin g a n in s u la tio n m in im u m
4.8 In requiring a minimum percentage of a supplier’s CERT obligation to be met through the
installation of insulation, we can have certainty on a minimum level of insulation over the
extension period. It may mean however that suppliers reduce insulation installation until the new
minimum insulation requirement comes into force. In the short term, this could have an adverse
impact on the insulation industry and see longer lived carbon saving measures offset by other
measures. A minimum would though allow the Government to remove any risk to insulation
levels over the extension period.
4.9 The level of insulation minimum is proposed to be set at no less than 65% of the increase
in target. Suppliers will still have freedom to meet this through different proportions of qualifying
measures so as to adjust for demand. A 65% minimum would mean no less than 70.2 MtCO2
could be delivered through qualifying insulation measures (currently qualifying insulation
measures are running at around 60% of carbon savings to target). Qualifying measures are
proposed to be cavity wall insulation, loft insulation (both from empty and top up) and solid wall
insulation. As we need the number of professional employees to increase to meet our
challenging insulation delivery aspirations, there is argument to suggest we should restrict this to
professionally installed insulation only. In turn, this may mean a need to slightly lower the
insulation threshold e.g. to 60%.
4.10 For illustrative purposes, if a 65% minimum were delivered through cavity wall insulation
jobs only, on average, that would mean 2.8 million households insulated. If delivered 60%
through cavity wall insulation; 30% professional loft insulation (split evenly from <60mm and
>60mm) 5% DIY insulation and 5% external solid wall insulation then that would mean around
4.9 million insulation measures in total (1.7 million cavity wall insulation jobs, 3.15 million loft
insulation jobs and 50,000 solid walls insulated). In terms of numbers of households, if we
assume that a third of the houses that had cavities installed would also get loft insulation, that
would mean around 4 million households receiving insulation of some kind.
4.11 Given supply chain constraints, as you move to a higher insulation minimum it
progressively presents further uncertainties - in terms of costs to the programme from generating
sufficient consumer demand for insulation and from ensuring the necessary supply chain
capacity evenly across GB.
25
Re m o vin g c o m p e tin g m e a s ure s (i.e . CFLs ) a s e lig ible

4.12 Extending the CERT obligation will in itself require a significant increase in the number of
measures which will need to be offered to consumers. Insulation is one of the most cost
effective measures under CERT, but it is not as cost effective as CFLs. If the Government acted
to remove these more cost effective measures as eligible, this should realise an increase in
insulation promotion. In doing so, CERT will deliver more measures which realise carbon
savings which are more secure (most insulation under CERT is professionally installed, whilst
CFLs rely on consumers to fit them) and longer lived (insulation has a 40 year lifetime whilst
CFLs now have an 8 year lifetime).
4.13 CERT and its predecessors helped CFLs enter most households in this country at a time
when they were still competing with the cheaper and better known incandescent equivalents,
allowing households to benefit from energy and bill savings early. However, with over 300 million
CFLs now distributed through the supplier obligation (since 2002), and the phase out of
incandescent bulbs through EU legislation due to be almost complete by September 2012, the
Government believes that the time is now right to completely remove CFLs as eligible
measures31.
4.14 The Government recognises that the withdrawal of CFLs from CERT risks an increase in
purchase of less energy efficient lighting such as halogen GLS lamps, which are currently
energy label “C” and “D”. The Government also recognises that dimmable and spotlight CFLs
are not captured by the incandescent bulb phase out, nor have they been distributed in large
numbers. On balance however, by removing CFLs completely we remove the risk that CERT will
score carbon savings which would have occurred anyway. The removal of CFLs can therefore
have a positive impact not only on insulation levels, but also the certainty and length of carbon
savings accruing to the scheme.
Co n s u lta tio n Qu e s tion s
9. Do you agree with the proposals for setting an insulation minimum and removing
CFLs as eligible measures so as to secure and drive insulation levels? If not, why
not?
10. Subject to your views on the desirability or otherwise of introducing an insulation

minimum what level of minimum do you consider justifiable? Within this, should
the minimum exclude DIY insulation as a qualifying measure?
31
CERT legislation was amended in July to rule out the distribution of non-retail CFLs from January 2010. Given the
volumes of CFLs distributed early under CERT by direct mail there were concerns that further free distribution
risked these measures not being installed and so the carbon savings not being realised.
26
Dis c u s s io n
4.15 An incentives approach, whereby carbon is surrendered for additional insulation numbers,
is considered less optimal than the central proposals presented here. Given the market nature of
the scheme there is no way of knowing with certainty what suppliers business as usual insulation
activity will be over the extension period. Without this information, there is no way of designing
an incentive which will ensure that we provide incentives at a level sufficient to change the
economics of promoting additional volumes of insulation whilst avoiding rewarding business as
usual activity.
11. Do you have any evidence on alternative options which could successfully drive
a sustainable increase in insulation levels?
S u m m a ry
4.16 We expect these proposals to drive an increased focus on insulation activity in the
extension period. We expect this to allow us to meet the 6 million homes insulated target, as a
significant contribution to our carbon budgets. Our aim is to get the legislation in place well
before April 2011, so that suppliers can work to meet their obligations early, thus helping
consumers benefit from energy bill savings sooner. In turn, this can help avoid some of the risks
presented around introducing an insulation minimum.
27
Ch a p te r 5 – In n o va tio n , e vid e n c e a n d
re p o rtin g
Ove rvie w
5.1 CERT has a key role with regards innovation. Under article 2(3) it allows suppliers to
receive carbon scores for promoting investment in new technologies through a demonstration
route. Demonstration actions are 'an action which is reasonably expected to achieve a reduction
in carbon emissions 32. Secondly, for those product categories which are innovative, CERT
awards an additional 50% carbon savings so that they are more cost effective for suppliers to
subsidise to help promote greater levels of market penetration.
5.2 A market transformation action means:
a) the provision of solid wall insulation or micro-generation units where such provision will
achieve a reduction in carbon emissions;
b) the provision of a real-time display;
c) the provision of a home energy advice package 33; or
d) any other action which will achieve a reduction in carbon emissions but which were not
promoted under the electricity and gas order 2001.
5.3 Suppliers may meet up to 10% of their carbon obligation with market transformation and
demonstration actions. Where a minimum of 2% of their carbon obligation is achieved through
promotion of micro-generation, this limit is increased to 12%. All uplifts are applied after the caps
specified have been met.
5.4 Government does not propose any amendments to the demonstration action criteria.
However, we propose that the baseline for market transformation action 34 (d) be moved from
measures not promoted under EEC1 to those not promoted under EEC2 so that only new
innovative products remain eligible. Measures under (d) tend fall into two categories – lighting,
which has featured strongly under each phase of CERT and other electricity using appliances
and products whose individual contribution to the target is small, even when promoted in high
numbers. For those measures which are similar to those promoted previously the supplier must
satisfy Ofgem that it delivers a carbon emissions reduction of 20% above the standard achieved
by that similar action.
32
As demonstration actions do not have a determined carbon emissions reduction, the carbon emissions reduction
accredited to a supplier for undertaking these actions are dependent upon the cost of the activity (determined by
means of a translation factor set out in article 21 of the Order).
33
The requirements for a Home Energy Advice Package are set out in schedule A1 of the 2009 CERT amendment
Order; only advice which meets all the specified criteria is eligible to be scored as a behavioural measure.
34
www.ofgem.gov.uk/Sustainability/Environment/EnergyEff/InfProjMngrs/Documents1/Market%20Transformation%20vfinal.pdf
28
En e rg y e ffic ie n t a p p lia n c e s
5.5 The mandatory energy labelling of households products was introduced in 1992 35. This
has led to a significant change in the products which are now marketed in the EU. As part of the
CERT extension, as with the progression to any new supplier obligation phase, the Government
proposes to only allow those products whose energy performance is the best in class at any
particular time. For the extension, we therefore propose to allow only the products with the
highest energy label rating to be eligible, for the products and appliances for which there are
currently labelling requirements, including: refrigerators and freezers, washing machines, electric
tumble dryers, combined washer-dryers, dishwashers, air conditioners and electric ovens. Given
that it is now clear that the energy label will allow new classes above the A-class to be opened
when there is sufficient market saturation, the CERT scheme will need to ensure that it is
dynamic and allows only the top of class to be subsidised at any particular time.
5.6 For the products not covered by the European labelling standards (e.g. computers) we
intend to apply the Energy Savings Trust’s standards for “Energy Saving Recommended”
products. This will ensure that CERT only continues to promote the very best energy saving
technologies. Wider requirements could be introduced to ensure that CERT continues to avoid
deadweight (i.e. activity that would have happened without CERT support). It has been
recommended that Government consider not allowing innovative products to be supported if
they have reached a market penetration of somewhere between 30 and 40% 36. We could
achieve this by setting upfront sunset clauses37 which retire a measure as eligible once they
reach a certain level of market penetration (subject to providing sufficient market warning). We
would need to be satisfied that this is worthwhile introducing for a 21 month scheme.
5.7 The changes at EU level will also mean that some carbon scores are adjusted. For
instance, the lifetime of saver plugs is proposed to be reduced. Given that the Energy Using
Products Directive requires that all new IT equipment purchased after January 2009 should have
standby of < 1W, installing a saver plug with new equipment would have no effect. Defra’s
Market Transformation Programme estimates that home IT equipment is replaced, on average,
every 5 years. This suggests that the lifetime of the standby saver plugs should be reduced to no
more than 5 years.
5.8 More widely, Government proposes to provide that no product can be mailed unsolicited
under the CERT extension. This will ensure that there is no repeat of the CFL scenario –
whereby the number of CFLs distributed risked non-installation and so reduced the real carbon
savings.
12. Do you agree with the proposals for ensuring that only the most energy efficient
products and appliances should be eligible measures under the CERT extension?
Do you have views on how else this can be best delivered?
35
22 September 1992, the Council of the European Union unanimously adopted a framework directive for the
mandatory energy labelling of household products (92/75/EEC) (“the Framework Directive”)
36
Eoin Lees Energy Evaluation of the Energy Efficiency Commitment 2005 – 2008 (published in December 2008)
37
Sunset Clause: a provision in statute or regulation that terminates or repeals all or portions of the law after a
specific date, unless further legislative action is taken to extend it
29
Hig h e ffic ie n c y lig h tin g

5.9 Government wants to continue to see the most efficient longest lived forms of lighting
continue to be promoted to households as they still offer an important vehicle for delivering
significant carbon savings. To this end, we intend for ESR-approved 38 A rated Light Emitting
Diodes to be qualifying measures under the CERT extension. By helping create an early market
for LEDs this can have a positive role in helping drive long-term carbon savings. The proposed
carbon score and lifetime are set out in the associated impact assessment.
13. Do you agree that only providing carbon scores for A rated LEDs provides the
greatest certainty on delivering carbon savings from lighting products?
Mic ro -g e n e ra tio n
5.10 The Renewable Energy Strategy proposed a lead scenario for increasing renewable heat
from current levels of just under 1% to around 12% in 2020. To encourage such a radical
change in the way we generate our heat, Government announced its intention to introduce the
Renewable Heat Incentive (RHI) scheme during the passage of the Energy Act in 2008. At the
domestic level, the RHI and Feed in Tariffs (FITs) 39 will offer financial support for a range of
technologies which generate low-carbon and renewable electricity, including ground and air
source heat pumps, biomass boilers, and solar thermal.
5.11 Should the RHI and FITs provide for very cost effective propositions to householders for
renewable energy micro-generation measures, increased demand is expected. In combination
with ongoing subsidy through CERT, this could be even higher. This may therefore provide for a
new cost effective opportunity for suppliers which acts to displace energy efficiency measures
under CERT (although this risk could be significantly reduced if we were to set an insulation
minimum).
5.12 We need micro-generation measures to be installed at scale if we are to meet our

challenging carbon saving targets. They also offer households significant potential energy bill
savings, and could be particularly valuable to vulnerable and rural vulnerable households. To
that end, the potential for reinforcing instruments to deliver these measures can be beneficial
and no specific provisions are expected to be provided under the RHI nor the (FITs) for the
potential overlap with schemes such as CERT.
5.13 It is clear, however, that by allowing these measures to remain eligible under CERT, there
will be more onus on suppliers to satisfy Ofgem that they pass the article 10 test (improvements
in energy efficiency) and that any reductions in carbon emissions that result will be over and
above that which would have happened without the CERT i.e. that there is 'additionality'.
38
Because LEDs are not labelled with the A-G mandatory energy labelling standards of the Framework Directive for
household products, LEDs promoted under CERT (and any other lighting not covered by the EU labelling
standards) will need to comply with the ESR standards.
39
http://www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx
30
5.14 This will also be expected for any suppliers who wish to promote the early replacement of
G rated boilers, following the 2009 Pre Budget report announcement that the Government would
work with industry to introduce in 2010 a new scheme providing for a £400 incentive to help up
to 125,000 households upgrade their working G-rated boiler with a new boiler or renewable heat
unit.
5.15 Some commentators have suggested that as Priority Group customers have less access
to capital, they may be less likely to benefit early from the proposed RHI and FITs. Heat pumps
are (alongside solid wall insulation) a Priority Group flexibility option measure helping provide a
more cost effective means of helping vulnerable, especially vulnerable rural households benefit
from significant energy saving measures. There may therefore be merit in retaining but
restricting the promotion of these micro-generation measures under CERT to Priority Group
and/or proposed Super Priority Group households. This needs to be considered alongside the
2009 Pre Budget report announcement that the Government will consult next year on measures
to help low-income households take advantage of clean energy cash-back.
5.16 If we acted to exclude or refine the eligibility for micro-generation measures under RHI
and FIT, other measures would need to fill the carbon gap. Although some of this may be cavity
wall insulation and loft insulation, given the supply chain constraints, other measures such as
efficient products and appliances may need to increase in scale. Alternatively, we may need to
reduce the level of carbon target. Practically, the removal of micro-generation eligible under RHI
and FIT may require us to consider lowering or removing the existing 2% trigger for micro-
generation which is in addition to the 10% innovation cap.
14. Should micro-generation measures remain eligible measures under the CERT
extension? If so, it may be sensible to introduce new rules e.g. that these
measures or subsets of these measures only remain eligible to Priority Group
and/or proposed Super Priority Group households; or no longer be eligible for a
carbon uplift; do you agree?
Evid e n c e
5.17 References have been made throughout this consultation paper to the evidence provided
by the supporting consultation stage impact assessment.
15. Do you think that the cost, carbon and wider assumptions set out in the
associated impact assessment are fair? If not, please provide evidence to
support how the assumptions should be amended.
31
Re p o rtin g
5.18 Within CERT itself, so as to better design supporting policy instruments, we increasingly
need to understand where measures have been delivered. We are working to ensure that there
is increasing evidence and transparency on where CERT benefits are accruing. As part of this,
we indicated in the Government response on amendments to CERT in July 2009 that we would
progress a revised voluntary agreement with energy suppliers. We hope to see this agreement
in force early in the new year requiring energy suppliers to transmit data to the Energy Saving
Trust (to upload onto their Home Energy Efficiency Database) the location of all professionally
installed measures. This would act retrospectively from the outset of CERT.
5.19 The introduction of the Community Energy Saving Programme, Renewable Heat
Incentive and Feed in Tariffs provide for additional support for energy saving measures in GB
households. Given the onset of carbon budgets, and the introduction of these new low carbon
measure incentives in the domestic sector, there is an increasing need to know where measures
have been delivered and under which mechanism they received support, so as to avoid any
potential double counting of carbon savings.
5.20 In order to avoid the risk of double counting under schemes such as CERT and CESP,
and also in the future under other programmes such as the Renewable Heat Incentive and Feed
in Tariffs, the Government is considering whether the current reporting and monitoring process
in article 16 and 19 of the existing CERT Order are sufficient to guard against this risk. In
particular the Government is considering whether the information currently supplied to Ofgem is
of sufficient detail to ensure that a proper audit of measures installed and thus the effectiveness
of the scheme can be carried out.
16. Do you think that the current reporting and monitoring arrangements are robust
enough to ensure that Ofgem identify and avoid the risk of double counting
between different programmes? If not, how can this risk can be avoided?
32
© Crown copyright 2009
Department of Energy & Climate Change

Area 3D
3 Whitehall Place
London SW1A 2HD
www.decc.gov.uk

Extending CERT Consultation

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Extending CERT Consultation

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Extending the Carbon Emissions

URN 09D/845 December 2009

Chapter 2 CERT extension ambition

Chapter 4 Scaling insulation delivery

Chapter 5 Innovation, evidence and reporting

• increase the scale of insulation delivery.

CERT e xte n s io n a m b itio n

S c a lin g in s u la tio n d e live ry

Co n s u lta tio n Qu e s tio n s

Increasing equity and assistance for the most vulnerable households

8 Would a CERT obligation based on energy supplied (kWh) by an energy supplier

Scaling insulation delivery

10. Subject to your views on the desirability or otherwise of introducing an insulation

Innovation, evidence and reporting

Ch a p te r 2 – CERT e xte n s io n a m b itio n

Co n s u lta tio n Qu e s tion

CERT e xte n s io n a m b itio n

Co n s u lta tio n Qu e s tion

S e ttin g s u p p lie rs a ta rg e t to a s s is t th e m o s t vu ln e ra ble

Co n s u lta tio n Qu e s tion

De fin in g a S u p e r P riority Gro u p h o u s e h o ld

Ra tio n a le fo r S u p e r P rio rity Gro u p e ligib ility

Co n s u lta tio n Qu e s tion s

He lp in g e n e rg y s u p p lie rs fin d e lig ible h o u s e h o ld s

P ro m o tin g m e a n in g fu l e n e rg y b ill s a vin g s

Eligible measures Improvement in

Cavity Wall Insulation £128

Loft insulation (from <60mm) £79

Solid Wall Insulation (external) £446

Solid Wall Insulation (internal) £422

Fuel Switching c.£700

Ground source heat pumps £161

Air Source heat pumps £469

Wood Chip CHP £521

Early replacement of G rated boilers £194

Co n s u lta tio n Qu e s tion

Wid e r e q u ity c o n s id e ra tio n s : ru ra l ho u s e h o ld s

Co n s u lta tio n Qu e s tion

Wid e r e q u ity c o n s id e ra tio n s : p a s s -th ro u g h c o s ts

3.24 A supplier’s obligation is currently based on customer numbers and so represents to

Co n s u lta tio n Qu e s tion

8. Would a CERT obligation based on energy supplied (kWh) by an energy supplier

Re m o vin g c o m p e tin g m e a s ure s (i.e . CFLs ) a s e lig ible

Co n s u lta tio n Qu e s tion s

10. Subject to your views on the desirability or otherwise of introducing an insulation

Co n s u lta tio n Qu e s tion

5.2 A market transformation action means:

Co n s u lta tio n Qu e s tion

Hig h e ffic ie n c y lig h tin g

Co n s u lta tio n Qu e s tion

5.12 We need micro-generation measures to be installed at scale if we are to meet our

Co n s u lta tio n Qu e s tion

Co n s u lta tio n Qu e s tion

Co n s u lta tio n Qu e s tion

Department of Energy & Climate Change

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