CRC Scrappage: Winners and Losers

Today marks the end of the monitoring period for the third year of Phase 2 of the Carbon Reduction Commitment (CRC): the seventh year the scheme has operated.

That means in two years, CRC Participants will be starting to collate, report and then pay for their relevant emissions for the final time. Understandably, that can’t come soon enough for some.


The CRC started with good intentions under a progressive cap and trade scheme that rewarded those who reduced emissions through ‘recycling’ CRC allowances from those who did not. Before the Scheme took off, however, it was announced in the Spending Review 2010 that CRC allowances would not be recycled to participants in the scheme but instead would be used to support the public finances. Thereby, the CRC became a tax for all intents and purposes.

The CRC will be scrapped in 2019 and from this, it is important to understand who are the winners and losers and what actions should be taken now to mitigate risks for the ‘losers’ and take opportunities for the ‘winners’.

[clickToTweet tweet=”Who are the winners and losers of the #CRC scrappage? What are the risks and opportunities?” quote=”Who are the winners and losers of the CRC scrappage? What are the risks and opportunities?”]

A key decision to scrap the scheme was the cost of administration. Back-of-an-envelope maths tells me that the annual £1,290 subsistence fee paid by all 1,869 Participants in 2015/16 equates to an administrative cost of 0.27% of total revenues (£2.4m subsistence fee over £902m revenue through CRC allowance purchases).

For comparison, administrative costs for the Swedish Tax Administration is 0.1 % of total revenues for their carbon tax model.1 The approach used in Sweden (since 1991) will be implemented in the UK to maintain carbon tax revenues once the CRC is scrapped (more on this later).

So the Swedish model appears to cost half as much as the UK CRC model to administer. The true cost, in reality, is far higher once you add in the internal resource time and/or external consultant costs required to administer and meet CRC requirements such as maintaining an Evidence Pack, undertaking an Internal Audit and fulfilling actions to report, order and then surrender CRC allowances. Compared to the £1,290 annual subsistence fee, the true cost to Participants is likely to be three to 15 times higher, dependent on size and complexity, based on our experience. Suddenly, the Swedish models looks much more appealing: it has also contributed to Sweden’s total greenhouse gas emissions falling by 16 percent between 2000 and 2012, while its overall GDP grew by about 30 percent. 2

The CRC is being replaced by an increase in the Climate Change Levy (CCL): a tax on energy delivered to non-domestic users that is charged per kWh usage. Notably, the CCL is applicable to all energy users (with some exemptions), rather than a select group of CRC Participants. Key to the reduction in administrative cost, is the fact that energy users ‘do nothing’ to calculate their tax liability: a value is calculated and inserted as a line item on energy invoices and collected by the energy supplier. This will be a relief for some, however, the benefits of reporting emissions to improve understanding of impact (and costs) should not be forgotten.

From April 2018 to April 2019, the CCL is going to increase 48% in one year to ensure the CRC revenue of about £1bn is maintained for public finances. This increase will add approximately 3% to the ‘typical3’ energy spend of an air-conditioned office (see Table 1 below for estimated values).

At EVORA, we recommend building owners and tenants take action now to mitigate the onset of the tax hike through identifying and implementing energy efficiency measures that will lead to energy reductions.

[clickToTweet tweet=”Take action now to mitigate the onset of the #CCL tax hike… Identify #energy efficiency measures.” quote=”Take action now to mitigate the onset of the CCL tax hike… Identify and implement energy efficiency measures.”]

However, even with a 48% increase in the CCL, existing CRC Participants will see a net benefit through CRC scrappage, with a tax reduction equivalent to a 5.5% of total annual energy spend (see Table 2 below for estimated values).

The tax saving through scrapping the CRC Scheme (for CRC Participants) is notable at asset level and will be even greater when considered across a portfolio for an existing CRC Participant.

These savings present a great opportunity to budget for energy efficiency improvements that may otherwise have been put on hold. I recommend landlords / energy managers hold early dialogue with tenants / finance directors to discuss the savings and identify the economic case for progressing measures that will deliver attractive returns on investment. A number of measures could be considered, from strategic metering  and Monitoring and Targeting programmes (such as SIERA) to energy efficient retrofits  of LED lighting.

Whether you are a winner or a loser from the CRC scrappage / CCL tax hike, the overall message is the same: if you want to reduce your energy spend, the best action you can take is identify, implement and track the impact of energy efficiency measures.

Planning ahead will give you the best chance of success.

[clickToTweet tweet=”Want to reduce #energy spend? Identify, implement & track the impact of energy efficiency measures” quote=”Want to reduce your energy spend? Identify, implement and track the impact of energy efficiency measures.”]


Don’t leave any compliance matters to chance.
Speak to one of our experts today.


1 Ministry of Finance, Sweden Senior Advisor Susanne Åkerfeldt, 2011
2 Worldbank.org, 2014
3 Typical energy usage calculated from Better Building Partnership Real Estate Environmental Benchmarks (BBP REEB) 2015 for air conditioned offices. Typical energy costs based on BEIS Prices of fuels purchased by non-domestic consumers in the UK, December 2016

‘No win, no fee’ – Does this approach have a place in the energy consultancy industry?

I am one of the three co-founders of EVORA.  Nearly six years ago, we set up the firm because we believed that energy and sustainability consultancy across the real estate industry was not being delivered effectively.

Not for want of interest; our industry was, and still is, affected by legislation, reputational and cost drivers, and the technology is not overly complicated – we are talking about heating, ventilation and air conditioning systems here – not complex manufacturing processes.

However, traditional environmental, sustainability and energy consultancies have struggled to gain a significant foothold. In my opinion, this is for the simple reason that those who work in real estate must understand and work with the complexities associated with managing buildings where landlords pay for energy that is consumed by others (namely, tenants and visitors).

[clickToTweet tweet=”How well does your #energy / #sustainability consultancy understand the #CRE sector?” quote=”How well does your energy or sustainability consultancy understand the complexities of the commercial real estate sector?”]

Admittedly, there is still a long way to go. However, the industry is making significant progress, and I am delighted that we are playing an active role.

It is therefore unsurprising that different approaches, ideas and solutions have been put forward. One of these is the ‘no win, no fee’ energy saving consultancy package. Typically, approaches involve an initial visit and review of performance data. Proposals are then submitted, which highlight that no-cost Building Management System adjustment measures can be implemented to generate energy, carbon and financial savings. The consultant’s remuneration is based on a percentage of cost savings.

On the face of it, a good idea. But be cautious…

There are several challenges that must be considered. From the outset, I would like to set out that I am not against the idea. It can work, and work very well – especially in single let owner occupier buildings or locations, like hotels, where the operator has control over most plant and where budgets and costs are not available to fund consultancy up front.

But, when it comes to commercial multi-tenanted office buildings and shopping centre environments, the complexities highlighted above must be recognised.  Here are some thoughts:

  • Although simple when compared to, say, the nuclear industry, the interaction of heating ventilation and air conditioning systems can cause challenges and must be thoroughly understood at building level.
  • The impact of occupancy changes is notoriously difficult to model.
  • An understanding of other plans for the building must be considered and factored into energy models.
  • Initiatives involve adjusting BMS temperature and time set points.  Changes may at first seem feasible, but leases must also be checked. Leases may specify when office space must be conditioned and must be applied.

In conclusion, if the service charge can cover the cost of an operational improvement programme (which must contain regular review stages), then this is the best way to go.

[clickToTweet tweet=”Be wary of ‘no win, no fee’ #energy consultancy! Understanding buildings is paramount…” quote=”Be wary of ‘no win, no fee’ energy consultancy! Understanding the energy use of different buildings is paramount…”]


We understand the complexities of the commercial real estate sector.
Get in touch to learn more about our approach to making buildings more productive, profitable, and resilient to change.

The 2017 GRESB Reporting Cycle (Part 2): A Review of the Recently Released Reference Guide

Two months ago, I set out the main changes to the 2017 GRESB Real Estate survey, based on what could be gleaned from the ‘pre-release’ of the questionnaire.

Critically, the full 2017 Real Estate Reference Guide has now been released.

At the time of writing, the Health and Wellbeing module and its accompanying reference guide had still not been released.


[clickToTweet tweet=”Important updates to the 2017 @GRESB survey – Part 2 of EVORA’s series: #GRESB #CRE #sustainability” quote=”Important updates to the 2017 GRESB survey – Part 2 of EVORA’s series.”]

Additional key changes to note

Having read (comprehensively skimmed!) all 203 pages of the new Real Estate Reference Guide, I can share a few additional key changes that are worth noting:

Content

  • Performance indicators: There is a new table to complete as part of the energy question (Q25). Participants must set out the following total floor areas for each property type (the contents of the table are not scored):
    • Managed Assets split across:
      • Common areas, shared services and tenant spaces and/or;
      • Whole building.
    • Indirectly Managed Assets:
      • Whole building.
    • Stakeholder engagement: The question, “Does the entity include sustainability-specific requirements in its standard lease contracts?” (Q39.1) has changed in the last two months (i.e. since the 2017 pre-release) and is now aligned with the BBP Best Practice Lease standard.

Evidence uploads

  • GRESB has introduced an ‘evidence template’ for use as standalone document or document cover page (see the last page of the guidance document).
  • The attachment feature has been amended, adding in an option to make uploaded documentation accessible to investors. This feature is optional on a document by document basis. The default option will be for documentation to not be made available to investors.
  • It will now be possible to upload multiple documents per indicator.

Response check

  • The deadline for the response check is two weeks earlier than last year (1st June).

Validation

  • The number of respondents subjected to Validation Plus and Validation Interviews, is expected to “increase significantly” this year. GRESB anticipates selecting approximately 25-40% of respondents for Validation Plus and approximately 5% for a Validation Interview.

What Next?

I’m sure many of you will agree that the speed at which these past two months have passed is somewhat terrifying. There are now approximately 100 days left until the 2017 deadline…

As before, these remain my five tips for GRESB survey submission success:

  1. Start early.
  2. Remind yourself what went well and less well last year – consider both the process and individual question responses.
  3. Engagement and education of people that will support you in delivering GRESB. Keep in regular touch with these people, particularly if they will be providing you with information.
  4. Data automation – our propriety software, SIERA, delivered 41 GRESB submissions in 2016, helping clients to seamlessly acquire and report data. Why not take a look at the following blog post: GRESB Data Automation: Ensuring Seamless Does Not Result in Senseless.
  5. Seek external support / advice.

[clickToTweet tweet=”Free eBook @GRESB Survey, Submission, Success! Download now in preparation for your 2017 submission” quote=”Free eBook: ‘GRESB Survey, Submission, Success!’ Download it now in preparation for your 2017 submission”]

Tips for ESG management and performance success

For more general advice on how to implement practical and tailored sustainability solutions, download your free copy of our GRESB eBook.


For market-leading GRESB submission support, please contact our experts today.

 


GRESB Premier PartnerAs a GRESB Real Estate Premier Partner, we are perfectly positioned to provide GRESB support. View our official Premier Partner profile.

We can work with you to complete the submission and understand your scoring, as well as develop a sustainability plan that will improve your future GRESB performance and align with your organisation’s key environmental objectives.

Healthy and Wealthy! Upcoming Event: How to Improve Health and Wellbeing in Existing Commercial Properties

On Monday 3rd April, EVORA is running an event in partnership with BRE focusing on the health and wellbeing of operational buildings. There has been a lot of attention on health and wellbeing at the design and construction stages, but practical steps need to be considered for our existing building stock.


[clickToTweet tweet=”Event: How to Improve Health and Wellbeing in Your Existing Commercial Properties – book now!” quote=”Event: How to Improve Health and Wellbeing in Your Existing Commercial Properties – book now!”]

As professional sustainability consultants, a key part of our role has focused on reducing the environmental impacts in buildings, especially energy, due to the greater carbon impact and cost.

However, with the World Green Building Council’s Health buy levitra india online https://levitraed.com/ Levitra is a modern medicine that can give me unforgettable emotions during sex. I prefer Vardenafil pills as it rapidly impacts my body, has a long-lasting effect and even is compatible with alcoholic beverages that I like to drink on a date. Wellbeing and Productivity in Offices study referencing that 90% of a typical business’s overheads are staff costs compared to less than 2% for energy, common sense dictates that we must also ensure focus on providing healthy and productive properties for our landlords.

Although far from easy, approaches like the WELL building standard are available to support application in design and construction phases. However, consideration in existing buildings, especially from a landlord perspective, is more challenging. The infrastructure is already in place and the fabric of the building is set, so is there much opportunity to address the key elements of health and wellbeing as defined by the WELL Building Institute, i.e.

  • Air
  • Water
  • Nourishment
  • Light
  • Fitness
  • Comfort
  • Mind

Secondly, where tenants are in situ, what influence can the landlord have? Energy management has generally been straightforward with the majority of managed offices providing shared services of heating and ventilation enabling the landlord to influence the energy efficiency throughout the building. Health and wellbeing is more complex where the real opportunity is in the tenants’ own demises. How should the landlord engage, who pays for an evaluation of the tenant’s space and what are the intended outcomes both for the tenant and the landlord?

In our Healthy Buildings event, we bring together a number of industry experts to share their knowledge, experience and latest research to provide clarity and practical application in achieving healthy and productive operational spaces to work in.

The event is split into three sessions: the first focusing on the landlord and occupier perspective; the second provides a consultant’s viewpoint, identifying both the challenges and opportunities; and the final session identifies research and the application of solutions in relation to key elements of healthy buildings including lighting, biophilia, air quality and thermal comfort.

[clickToTweet tweet=”Healthy Buildings: join @evoraglobal @UKGBC @BRE_Conf @ArupGroup @TheCrownEstate + more. Book now!” quote=”Healthy Buildings event: join EVORA, UKGBC, BRE, Arup, The Crown Estate, British Land and others on 3rd April. Book now!”]

Among the 15 speakers are:

  • John Alker, UKGBC
  • Rebecca Pearce, CBRE
  • Darren Wright, Arup
  • Jane Wakiwaka, The Crown Estate
  • Matthew Webster, British Land

I am extremely excited by this event which will challenge the real estate industry on what can be done to make our existing assets healthy and productive places to work.


Don’t miss this exciting event – click here to view the full agenda and book your tickets now.

Are you Future-Proofed for IoT? How SIERA can help you navigate the IoT landscape (part 3 of 3)

I highlighted in parts 1 & 2 of the series that the Internet of Things (IoT) will have a dramatic effect in shaping the commercial real estate industry but that it also presents significant opportunities to add value. With an emphasis on Big Data, data acquisition, accessibility, visualisation and more efficient reporting tools, the need for a solution has never been greater.

EVORA has created a solution which is fit-for-purpose now, but is also able to be continuously enhanced to meet industry requirements as these evolve. Our platform SIERA (Sustainability Intelligence Environmental Reporting & Analysis) is specifically designed to harness the IoT landscape to navigate and make sense of the data being collected, as I will elaborate below.

Are you future-proofed for IoT?

Our SIERA platform really channels the true potential of the IoT network. SIERA is a solution which draws together data, processes and people. For example:

  • Disparate data sources can be brought together to build powerful reporting analytics; data feeds have been established directly with SIERA enabling mass data acquisition of performance data, property information and data for normalisation.
  • Data can be accessed anytime and anywhere in the world, 24/7. The cloud-based application is available at your fingertips ensuring accessibility, availability and security.
  • Personal logins can be created for different types of users across your organisation.
  • It is built by Commercial Real Estate specialists for the industry, meaning that we share a common language with you to really understand your needs.
  • Powerful data visualisation capabilities, and data validation functionalities ensure data tracking, performance reporting, data completeness and robustness.
  • Our in-house consultancy service is part of the SIERA solution providing you with specialist Commercial Real Estate sustainability support. SIERA can help you harness the value of data to inform your strategy.

Common Issues Addressed by SIERA

I also wanted to summarise some of the most common issues of the industry to explain how, through SIERA, EVORA is providing a solution. If any of the challenges below sound familiar then SIERA could be the solution for you.

Common Issue 1: “My data is held physically on a hard drive. I can only access it when I am on a specific computer. It has been difficult connect all my information together as they are held in different locations.”

SIERA Solution: The IoT is demanding massive improvements in data management, connectivity and accessibility. To truly prepare for the data-driven landscape and extract the value that Big Data provides, we have focused on connecting these different elements together in one simple platform. If you need a better system for data storage and management, SIERA is a cloud-based application enabling data access anytime and anywhere 24/7 via the web. With data capture from various sources, all your environmental data will be held in one, simple and secure portal.

Common Issue 2: “How can I link all my disparate data sources into one place? Can this be achieved automatically?”

SIERA Solution: With the ever-increasing quantity of data available as part of the information age, it is crucial to link different datasets together to identity trends and conduct analyses to extract value. This is the essence of what Big Data is all about. For SIERA, we have really focused on connectivity and data acquisition. Where it is cost-effective and depending on the infrastructure in place, a direct data feed can be established with SIERA. This information is supported under the secure file transfer protocol (FTP) and an application programming interface (API) when can pull data into one place. We also have our consultancy service to support you on devising an appropriate strategy for you, which is informed by your data and reporting requirements.

Common Issue 3: “I already have an existing system, but it’s not working too well. It’s been a challenge to manage data across my portfolios. I want to engage the Facility Managers, Managing Agents and other nominated responsibilities to input and review performance data for specific buildings.”

SIERA Solution: We have really thought about usability when it comes to data input to streamline the process and improve engagements on all levels. In addition to automated consumption data feeds, data can be input by users through a simple tool. Data access and input, views are tailored according to the user depending on the locations they are responsible for as well permissions to appropriately manage security. Along with automated data validation functionalities and bulk data loading capabilities through CSV or Excel, data will be managed in the most effective way. Our audit trail is built into the application which will help you track data changes instantly. Our sophisticated data validation features ensure accuracy and completeness of data. Data variance checks are conducted to identify values above or below a threshold. Any data gaps and overlaps are also flagged. We also have on-going support to provide training where required.

Common Issue 4: “I want to normalise my portfolio performance by drawing in heating degree day (HDD) information to track against targets but I’ve been struggling to manage the information from lots of different sources and prevent errors creeping in. I want to centralise and standardise my data sources for reporting to GRESB and INREV.”

SIERA Solution: The API bringing in HDD and calculating intensity enables performance to be automatically HDD adjusted and normalised to be consistent with the way some of our clients report performance, whether this internally or externally such as for GRESB. Our cloud-based application has powerful automated reporting capabilities for GRESB and INREV. SIERA can model the data for reporting requirements, reducing on time and costs. As part of our integrated solution, we also have our consultancy service where our sustainability experts can support you on your reporting.

Common Issue 5: “I am concerned about the Minimum Energy Efficiency Standards (MEES) and risks across my portfolio.”

SIERA Solution: The visualisation capabilities of SIERA enable a quick and easy assessment of data from property management systems such as lease expiries, which can be intelligently analysed and modelled against EPC data to profile MEES risks.

SIERA – Our Solution

We are working hard at the leading-edge to understand our industry needs. We have adopted an agile development and management methodology which has enabled us to situate ourselves within a data-driven landscape. Get in touch to book a demo of SIERA today, which is our IoT platform designed for the information age. We are keen to have personal conversation with you to assess your current infrastructure and where SIERA could help you tap into new opportunities.


To speak to us about SIERA, or for any other enquiries, please don’t hesitate to contact us today.


Preparing for GRESB 2017

Last week we ran a productive and informative GRESB workshop at Schroders’ offices in central London.


Our own Ed Gabbitas kicked off, providing an overview of the Global Real Estate Sustainability Benchmark, its progression over the years and the changes being introduced in 2017 – finishing with his (our) ideas on how best to approach GRESB.

We then ran two productive workshop sessions focusing on identifying and then addressing the challenges of collating evidence needed to support GRESB submissions. The workshops were interspersed with an overview of Schroders’ approach to GRESB and a section from me on the increasingly hot topic – Health & Wellbeing.

So what were the conclusions. Well – both practical and strategic.

On a practical level:

  • Start early
  • Consider the 2017 questionnaire and evidence requirements in detail
  • Engage with others inside and outside of your organisations, who may not be fully aware of the GRESB process, but will be required to provide evidence.

HR and finance functions may need to contribute and engagement with Property Management teams is essential. Performance data collection is vitally important. Have a plan for your data (we use SIERA).

On a strategic level:

Have a strategy. GRESB is a survey based on best practice. It contains a lot of good stuff. However, an organisation’s single sustainability objective cannot, in my view, be to score well in GRESB. We recommend establishment of a management system (Plan, Do, Check, Act) approach tailored to deliver your own goals. Progress an approach that suits you, understand GRESB requirements and the results will look after themselves.


For more information have a read of our GRESB ebook.


EVORA EDGE Appointed by Wrekin Housing Trust for Heat Network Project

Our new technical engineering division, EVORA EDGE, has been appointed by Wrekin Housing Trust to oversee the re-commissioning and ongoing monitoring of the heat network at their Northfield Village Site in Stafford.


A major challenge with heat networks in the UK is to deliver system reliability with an effective metering and monitoring strategy. Wrekin Housing Trust experienced initial problems with the Northfield Energy Centre and approached EVORA EDGE Director Neil Dady to resolve the problems and provide ongoing monitoring support.

Having overseen some significant remedial repair works, EVORA EDGE has now produced a guide for the recommissioning works, taking into account the requirements of CIBSE CP1: Heat Networks: Code of practice for the UK.

Once recommissioning is complete, ongoing monitoring will be undertaken, including reporting for the Renewable Heat Incentive scheme.

Neil comments:

“Having worked with Wrekin Housing Trust for a number of years delivering energy reduction projects, it is pleasing that we have now been appointed to oversee such a significant project for the Trust”

Both Neil and fellow EVORA EDGE Director Andrew Cooper are CIBSE approved Heat Network Consultants.


To learn more about EVORA EDGE, or for any questions about heat networks, please don’t hesitate to contact our experts today.