The Greatest Myth about the CRC – I don’t need to act now!
Posted : April 14, 2010 by Edwina, Category: Building Regulations
The greatest myth surrounding the CRC is that there is no need to act now. This misconception is based upon the fact that the initial scheme year is the footprint year when you monitor and report on your ‘baseline’ energy use (which started on April 1st 2010 –see my previous blog). The thinking is that by having a higher carbon footprint at the start of the scheme it will be easier to reduce emissions and move quickly to the top of the league table. However, there are two main reasons why acting now is the best course of action:
1) The design of the league table involves three metrics to determine an organisation’s position, not just their absolute carbon reductions. An Early Action metric takes into account energy saving measures put into place before the starts of the CRC, while a Growth Metric gives credit to organisations expanding in an energy efficient way. In fact the Early Action metric has a 100% weighting in the 1st year!
2) By acting now organisations can reduce energy usage and make savings on energy costs directly. These saving could even provide budget for the purchase of the initial carbon allowances in 2011, and go towards energy saving initiatives. Why wait to make reductions now and pay what will undoubtedly be a higher energy rate for more energy further down the line.
And that’s before you even look at the other benefits of performing well…
Analysis by PricewaterhouseCoopers suggests that the worst performers could be adding nearly 20 per cent to their annual energy costs by 2015, equating to an additional £500,000 on a businesses’ annual energy costs of £1m. But companies who plan ahead and perform well could turn an early loss into a gain, seeing their energy costs reduced by over 8% in 2015. For a company with a total energy bill of £1 million, this would be worth just over £85,000 in 2015 alone, or £150,000 over the course of the next five years.
Initially, the amounts at stake are relatively small. An organisation may spend 10 per cent of its utility bill on allowances. If ranked in the top half of the table, it stands to make a profit of up to 10 per cent of that stake, and to forfeit an equivalent amount if not. But the CRC is staggered. In the second year, the bonus goes up to 20 per cent, in the third to 30 per cent and so on.
The clever bit of the CRC scheme is the combination of fiscal and reputational incentives. The effect of a low ranking on an organisation’s reputation is an even greater spur, especially for companies with green credentials to preserve.
Now as you will know from my previous blog any organisation with a half hourly settled electricity meter needs to do something – whether that is full participation or an information disclosure.
A key tool for success for those participating fully is to produce a good forecast and strategy, and for that you need good knowledge. Those with a planned year-on-year approach will perform the best – by starting to make carbon reductions from low-hanging fruit before progressing to more involved options.
Businesses now have twelve months to devise and implement monitoring systems, working out what energy is being used and how many allowances they will need to buy, ahead of then paying the full amount for their estimated carbon emissions in April 2011. A good place to start, after you’ve defined a clear responsibility for CRC scheme management and data collection, is by fully understanding the performance of your building portfolio.
Our new Carbon Assessor (www.checkmycarbon.com) platform, developed in conjunction with Davis Langdon is a low-cost do-it-yourself programme for assembling energy use data and gaining a high-level overview of comparative performance. This kind of comparative approach highlights areas of inefficient energy use and under-performing buildings which enables reduction activity to be targeted where it is most effective.
It’s supported by a range of consulting services from IES and Davis Langdon that will help minimise ongoing costs and keep a spend-to-save philosophy at the heart of the agenda.
Building Operational Audits – Reviewing how a building is used and the disciplines of its management.
Building Energy Audits – An engineering based check of the systems in place, how efficiently they operate and what scope there may be for further enhancements.
Tax Relief Reviews – Any expenditure on existing assets will be highly tax friendly and early identification of the potential savings can help enhance the viability of possible improvements.
Utilisation Reviews – Our experts can consider the way buildings are used and contribute to better space planning.
Dynamic Simulation Modelling – Virtual modelling can be used to identify energy/carbon efficiency opportunities and quantify potential reductions, which can then be costed and tax-relief planned to balance against reduced energy costs and fewer CRC Carbon Allowances.
Useful Links
Scheme Administrators:
- England & Wales: Environment Agency www.environment-agency.gov.uk
- Northern Ireland: Northern Ireland Environment Agency (NIEA) www.ni-environment.gov.uk
- Scotland: Scottish Environment Protection Agency (SEPA) www.sepa.org.uk
DECC CRC User Guide: http://www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx
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