European legislation designed to curb industry's emissions of Carbon Dioxide, as part of the strategy to limit the damaging effects of Climate Change, is starting to have an impact directly and indirectly on businesses across the world.
Wholesale electricity and gas prices are on a long-term upward trend and supplies are often controlled by unstable regimes. In the shorter term there are also the influences of the value of European Union Allowances (EUAs) for Phase 2 of the Emissions Trading Scheme, further demonstrating the shift towards a low carbon economic future.
Inteb are already helping clients to manage the impact of the power / carbon dynamic and the associated risks, for example, in gathering data for and managing the Carbon Reduction Commitment (CRC), now called the CRC Energy Efficiency Scheme. Energy intensive organisations covered by the EU ETS and Climate Change Agreement will be excluded, together with possible reporting exceptions for organisations smallest supplies.
The CRC sets businesses on a path to reducing carbon emissions by creating a financial incentive for businesses to invest in infrastructure and projects which will result in those reduced emissions. For any organisation this commences with creating access to the clearest and most accurate data on current and on-going utility usage and then progresses to using this data as the foundation for active, on-going cost, carbon trading and usage management.
The CRC will be mandatory a “cap and trade” emissions trading scheme for commercial property. Organisations with half hourly meters will be required to participate in the scheme if their aggregated electricity consumption exceeds 6,000 MWh per annum (approximately £500,000 of annual spend). This includes the electricity consumption of any property that the organisation occupies in the course of its business but also investment property wherever the owner buys electricity on behalf of its tenants, even if recharged through the service charge.
The CRC does not distinguish between owner occupied and tenanted premises. It does not look at who consumes the energy, only at the ultimate addressee on the bill who will become responsible for emissions trading on behalf of all the properties in a “POOL” deemed to be under its control.
Ultimate liability rests with the “highest UK parent organisation” - both to report emissions and to trade allowances for all its subsidiaries and their tenants. The gathering of the necessary data alone will present a huge logistical challenge to many organisations.
Organisations will be sent registration packs in October 2009, the introductory phase started in April 2010 with a requirement to purchase allowances in April 2011 for the first two periods (2010/2011 and 2011/2012) at a fixed price of £12/t CO2.
Organisations submit annual reports at the end of each period which are self-certified by a Board Director and these are used to allocate positions in a Performance League Table (PLT) based on reductions in emissions over the previous period. The allowances are then recycled back to participants in October each year with a bonus or penalty based on their position in the PLT. The bonus/penalty is initially 10% but rises by 10% a year to 50% after 5 years.
As an example, a 10,000m2 office block with an annual energy bill of £450,000 made up of 1,250 MWh gas consumption and 7,250 MWh electricity has CO2 emissions of 4,124 tonnes / annum. They will be required to purchase £100,000 worth of allowances for the first two periods in April 2011 with the potential of receiving from £80,000 to £120,000 back as a recycling payment in October 2011 depending on their position in the PLT.
The first recycling payments will be determined from actions taken in the previous 3 years on Automated Metering and accreditation to the Carbon Trust Standard as there is no other data (after that 80% of position will be determined from year on year reduction).
There is the potential for significant fines if the organisation does not meet the scheme requirements. These are linked to the size of the emissions and, as an indication, the penalty for the above office block for not submitting the Annual Report on time is £3,500 per day overdue.
The Performance League Table will be published and promoted as a “name and shame” report so DECC hope that it will have significant reputational impact and attract high level organisation focus.
Most importantly, at Inteb we are flexible. We want you to have choice from a menu of services depending on their requirements, including M&T, procurement, bill validation, metering, carbon emissions reporting or simply our highly respected Energy Clinics.
Inteb work in partnership with our clients and have established a unique portfolio solution to utility management.
If you would like to discuss Inteb’s CRC Services, please phone us on +44 (0)151 346 2141 or e-mail: info@inteb.co.uk.