The main benefits of the CRC EES remain
With the scrapping of the performance incentives from the CRC Energy Efficiency Scheme, many commentators have complained that it is now just a stealth tax — but Paul Lewis explains how companies can still benefit from the scheme.
The CRC Energy Efficiency Scheme (CRC EES) was feted to save 4.4 Mt a year of CO2 by 2020, saving businesses an annual £1 billion in energy. But the more enticing part of the scheme was always that it was set to reward carbon-efficient organisations by offering a cash-back incentive. Now, however, as part of the comprehensive spending review, this part of the scheme has been withdrawn, and the money raised from high energy users will instead go to the Government rather than to the best-performing energy-savers.
There was already a high degree of inertia in organisations and an unwillingness to accede to the scheme due to its complexity. The withdrawal of the reimbursements has only served to add to that disaffection. So, now — apart from avoiding penalty charges for not complying — where’s the advantages for companies affected by this scheme? How can an organisation position itself to benefit from the scheme?
What are the remaining benefits of the CRC EES
The remaining benefits of the scheme are those that drove its implementation in the first place, and should not be forgotten: reduced energy costs and placement in the league tables. Aimed at the organisations responsible for around 10% of the UK’s CO2 emissions, it is set to save millions of pounds in energy every year.
Organisations can still use the scheme to encourage the implementation of practices and technologies that will bring greater energy efficiency and, in turn, significantly reduce their energy bills.
Another incentive is the publishing of league tables. These are set to offer a reputational incentive to organisations in all sectors. Appearing ahead of your competitors can only be a boost for a company’s brand image. A higher position may increase enquiries and lead to more sales. For example, it may encourage new suppliers to want to work with a business, perhaps offering superior terms or lower pricing.
Before the introduction of the CRC EES, energy managers and those responsible for carbon often struggled to get their finance director’s attention focused on low-carbon projects. Despite there being a clear bottom-line profit, it just wasn’t perceived as a high-priority undertaking. Now, because of the CRC EES, they are interested. There is a distinct increase in the buy-in from finance directors, and low-carbon projects are attracting more financial attention and being pushed through, instead of proposals sitting on the desk of the financial director for months.
Investment-grade analysis and energy-performance guarantees
Finance directors are now demanding investment-grade analysis as a next step following on from carbon-management plans to ensure that sufficient technical due diligence has been undertaken to allow for investment decisions, whether that be on or off balance sheet.
Energy services companies (ESCOs) can broker the conversations, with an energy performance guarantee (EPG) being the obvious choice for many organisations. EPGs allow for potentially zero performance risk exposure and capital outlay, as an ESCO will only recommend energy-performance measures that can be backed up through the energy-performance guarantee.
From air-handling units to combined heat and power, and from photo-voltaics to lighting controls, there are a number of viable energy-performance measures for buildings. Organisations should choose a supplier-neutral adviser so that they get an unbiased view and find the technologies and suppliers that are right for their industry and specific business activities.
Feed-in-Tariffs and the Renewable Heat Incentive
Both the Feed-in-Tariffs (FiTs) and the imminent Renewable Heat Incentive (RHI) offer financial incentives to organisations, even with the recently announced reviews.
In September, the Government lifted the ban on local councils selling surplus electricity to the national grid, meaning public bodies in particular could benefit from FiTs by installing solar PV or wind turbines on their buildings, and a number of councils are already doing this.
Many council buildings have roofs that are perfect sites for installing renewable-energy systems. With an EPG model, little or no up-front investment is required on the part of the council, making renewable energy an excellent money-spinner for them.
Private-sector organisations can benefit too; factories or warehouses with suitable roofing can install renewable energy, or rural businesses that own significant tracts of land can build full-scale solar parks or wind farms.
There is ongoing speculation that it the CRC EES is going to be scrapped or that it will be merged with other taxes such as the Climate Change Levy. Certainly, the Government has made a commitment to simplify it and is undertaking a consultation process. It is probably too much to hope that there may yet be financial incentives to come from the scheme, but the carbon reductions and reduced energy costs are worth it.
Paul Lewis is managing director of Self Energy UK.
