Budget 2016: Changes to the UK Government Energy Efficiency Strategy

Significant changes to the Government’s energy efficiency strategy were announced in today’s budget (16 March 2016).  Key points are summarised below:

  • The Carbon Reduction Commitment (CRC) energy efficiency scheme will be scrapped at the end of the 2018-19 compliance year (the end of Phase 2). Obligated businesses will be required to surrender allowances for the final time in October 2019.
  • Lost revenue will be recovered through an increase in the Climate Change Levy (CCL).  This will come into effect from 1 April 2019.  This is designed to cover the cost of CRC abolition (although 2019 appears to be a bumper year for the Government – with increased CCL rates and a final CRC payment).
  • CCL rates and CRC allowance prices will increase in line with RPI annually until 2018-19.
  • The CCL discount for sectors with Climate Change Agreements will be increased to cover increases in CCL main rates.
  • The Government will retain existing eligibility criteria for Climate Change Agreement schemes until at least 2023.
  • The main rates of CCL for different fuel types will be rebalanced to reflect recent data on the fuel mix used in electricity generation. In the longer term, the Government intends to rebalance rates to deliver greater energy efficiency savings and reach a 1:1 ratio of gas and electricity rates by 2025.
  • Finally, the Government will consult later in 2016 on creation of a simplified energy and carbon reporting framework planned for introduction by April 2019.

Please contact Paul Sutcliffe at EVORA for more information (psutcliffe@evoraglobal.com)

Pre-Budget: Rethinking the Energy Efficiency Taxation Landscape

With the energy efficiency taxation review just around the corner, it is expected that the CRC Energy Efficiency Scheme will be scrapped or at least changed significantly.  Below, we make three key predictions:

What are the key predictions for the upcoming budget review?

  1. A simpler energy efficiency taxation landscape: A single new tax based on the climate change levy and a single reporting framework
  2. Scrapping of the CRC Scheme
  3. Further developments based on ESOS supported by an incentivisation scheme to drive the implementation of improvement measures.

Moving away from the older policy environment, the translation of theory to practice will present new opportunities to utilise ESOS to spur the uptake of energy efficiency measures. Following on from our reflections on ESOS, it makes sense for businesses to develop strategies to address energy regulations in a coordinated fashion and to reap the benefits of a combined approach. A good example of this is having a combined approach to ESOS and MEES, where meeting minimum energy efficiency requirement aligns with the broader achievement of reducing energy costs in the building.

Please stay in tune for the budget announcement on the 16th of March 2016 and our post-budget review.

Links:

Reforming the business energy efficiency tax landscape

http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2015/11/Consultation_reforming_the_business_energy_efficiency_tax_landscape1.pdf

http://uk.practicallaw.com/3-623-4911?source=rss#

 

 

Reflecting on ESOS: The Next Steps

Going forward, what are the prospects for ESOS? EVORA highlights the next steps for the scheme.

A Coordinated compliance and improvement approach?

EVORA recommend that clients should consider the establishment of a collective approach to address all regulatory risks and opportunities. It makes sense for example, for real estate businesses to develop a strategy addressing both ESOS and the Minimum Energy Efficiency Standards (MEES).

ESOS: a burden or an opportunity for businesses?

On the whole, we believe that businesses have found the compliance process more challenging than regulators anticipated. ESOS is new and businesses will certainly feel that they had a short period of time in which to prepare. Nevertheless, EVORA is already seeing evidence that assessment results are being incorporated into energy action plans. Overtime, ESOS has the ability to deliver the energy savings the UK industry needs. However, ESOS needs to form part of a structured and stable energy policy framework.

ESOS and ISO 50001

In the latest round of ESOS, only 0.9% of businesses chose ISO 50001 as a route to compliance. EVORA believes that, over time, an energy management system approach will help deliver the best results. However, the ISO 50001 approach is also the most time and resource intensive. Nevertheless we believe that, ISO 50001 will grow in popularity over time. The low level of initial uptake will have been restricted by the long time it takes to gain certification and the lack of available certification assessors.

For more information, Paul Sutcliffe will be speaking at the UK Green Building Council (UK-GBC) ESOS Showcase Event in London on the 15th of March. The link to the event can be found on the website: http://www.ukgbc.org/event/esos-showcase

Stay in tune for further updates on the energy efficiency taxation review budget to be announced soon!

Reflecting on ESOS: The EVORA Experience

Over the last six months, EVORA has supported a broad range of clients to meet ESOS requirements. Through our support programmes we have engaged with 27 companies from Real Estate to a Big Six energy provider.

Energy spend assessed equated to £55m and saving opportunities of £2.8m (5.2%)  where identified (this equated to 27,000 MWh per annum).

ESOS routes to compliance

It was also interesting to explore the ESOS routes to compliance. From an analysis of all ESOS participants and responses to the notification questions (excluding personal data) across the UK and a selection of industry sectors, 65% of the notifications were made during or after December 2015.

The breakdown by compliance routes was as follows:

  • ISO 50001 – 0.9%
  • DECs – 5.3%
  • Green Deal – 0.2%
  • Audits -90%
  • De Minimus – 3.6%

Audits formed the main route to compliance; although ISO 50001 could become a popular option in the future.

EVORA predicts an increase in the take-up of ISO 50001, although significant time investment is required. This reflects the opportunities that energy management system frameworks present for target-setting and monitoring for continual improvement in the long-term.

How about transport?

This is often neglected since traditionally businesses have focused on health & safety when considering travel. Many opportunities exist including training, installation of tracking-systems, promotion of alternatives to travel including video conferencing and introduction of site-specific green travel plans. Focusing on transport could present new ways to achieve significant energy and cost reductions.

Please check out our Reflecting on ESOS: The Next Steps article for more on our reflections on ESOS and the next steps going forward.

For more information, Paul Sutcliffe will be speaking at the UK Green Building Council (UK-GBC) ESOS Showcase Event in London on the 15th of March. The link to the event can be found on the website: http://www.ukgbc.org/event/esos-showcase

Stay tuned for further updates on the energy efficiency taxation review budget on the 16th of March.