Nick Eyre, senior research fellow at Oxford University’s Environmental Change Institute, said government plans to incentivise cuts in demand via a capacity market could lower consumption at peak times but would not encourage investment in long-term energy-saving measures.
He said: “The capacity mechanism is potentially a good way to get demand-side response, but less good for demand reduction.”
The Department of Energy and Climate Change estimates that up to 32TWh can be saved though energy efficiency by 2030. Davey said there was “a strong argument” for the capacity market approach. “It targets the peak, where energy is the most valuable,” he said.
He claimed such an approach had worked in the US. However, Eyre countered that in New England, just 7 per cent of energy efficiency investment had come from the capacity market, with the bulk coming from supplier obligations.
Davey admitted there were “constraints in terms of finances and time”.
The Green Alliance backs a feed-in tariff for investments in energy-saving technology – “negawatts” of avoided demand competing with megawatts of generation. However, such subsidies are capped under the Levy Control Framework, while there is no set limit on payments through the capacity market.