The Environment Agency has just started writing to organisations with details of qualification for the Carbon Reduction Commitment Energy Efficiency Scheme (CRC). For many public bodies this will mark an important shift in the scheme, turning it from a conversation point to something that actually requires action. When the qualification packs arrive, organisations will need to determine whether they qualify and submit data on their energy use.
And it’s not a question of choice. Failure to register for the scheme in time will result in a financial penalty of £5,000, plus £500 for each additional day past the deadline. What’s more, failure to provide qualification information after the enforcement order could result in a penalty of £500,000. With many departments facing the prospect of introducing cost efficiencies in the near future, it’s an additional financial drain that must be avoided.
For those who don’t yet know, the CRC will involve organisations that had a minimum electricity consumption through half hourly meters of 6,000 MWh during 2008. In the public sector this will cover many central and local government departments, and include emissions from any sites that fall under their management, such as schools, colleges and other large civic premises.
Those that qualify will be required to buy allowances to cover their total carbon emissions for each year – one allowance per tonne of CO2 at a price initially fixed at£12 per tonne. At the end of each year, the revenue from purchases will be recycled according to each participant’s contribution to the overall CRC footprint.
A league table will also be published detailing the best and worst performers in terms of emissions reductions. Those at the top will be paid a bonus payment; those at the bottom will face a penalty. It’s hoped it will provide the financial and reputational incentive for organisations to improve energy efficiency to cut emissions.
While qualification is undoubtedly the pressing concern, there’s a danger in placing too much emphasis on it. It has to be remembered that qualification is exactly this: the beginning, not the end. By concentrating exclusively on whether they qualify for the scheme, organisations risk forgetting what they need to do if they actually qualify. It’s akin to looking for the chequered flag before the race has even started.
In many areas, the public sector is already playing catch-up, as some private businesses have already started formulating CRC strategies, investigating where and when they can make energy efficiency savings and how this will affect their allowances purchases and league table position.
It’s an approach that public sector bodies should look to follow if they are to succeed under the scheme and make the CRC work to their advantage.
Organisations will need to have detailed plans in place in order to record and report on their emissions, and then reduce them. For many not used to such detailed reporting on energy use, this will call on a change of mindset. It also will likely require the introduction of tools and technologies. Smart meters, for example, capture detailed data on energy use, which can then be analysed to make informed decisions on energy efficiency. After all, how can you be expected to report on and reduce energy, if you don’t even know how much you’re using?
The ability to forecast allowance requirements, risk exposure and cash flow related to allowance purchases will also be crucial.
Those that do not embrace the challenge risk suffering financially by missing out on league table bonus payments, or by having to purchase allowances to cover emissions which are higher than their private sector counterparts.
The good news is there’s time to respond. The first emission purchases will not be made until 2011, but this date must not become a reason to delay taking action. A plan will be needed for the CRC and the time to start formulating that plan is now.
Dave Lewis is head of business energy services at energy supplier npower
