Do you need to worry about ESOS?

Probably not.

You may not qualify and even if you do the reporting deadline is not until 5 December 2015.  

ESOS is the energy savings opportunity scheme. It implements art. 8 of the EU Energy efficiency directive.  It's a regulation but the Department of Energy and Climate Change (DECC) say that they will operate it with a light touch. Certainly it's very different from CRC. It's not a tax and although there could be penalties they will only apply in exceptional cases.The objective is to save energy, to make organisations more efficient and therefore more competitive, although in the face of collapsing oil prices and falling coal and gas prices the urgency of this may not be immediately apparent. Of course, to a large extent reducing energy usage reduces the nation's carbon footprint which is high on the priority list for DECC.

So is your organisation covered by ESOS?

If your organisation is in the public sector then it is excluded. If you operate in the private sector you are covered by ESOS if you employ more than 250 staff or you have a balance sheet total of more than £34 million or an annual turnover of more than £40 million. The reference date for this is 31st December 2014. ESOS applies to all UK operations which meet the criteria even if the ultimate owner is overseas. It also applies to non-profit organisations which fulfil the other criteria.

Assuming that you are covered by ESOS,  the first requirement is for you to identify the energy that you use in your buildings, your industrial processes and in transport. You must calculate the total use over a 12 month period and present an audit trail to justify your figures. If appropriate, you can use data from other schemes like the CRC or the EU emissions trading system to back up your results.You then have to audit at least 90% of the energy used by your organisation in accordance with the ESOS criteria.Your audit plan must be approved by your lead assessor. This may be an employee or an external consultant. Either way, the lead assessor must be qualified and appear on the Approved Register held by iema (Institute of Environmental Management and Assessment) or by a number of other Approved Organisations. A full list of Approved Registers is on the GOV.UK website.

 Once your audit is complete the report must be signed off by your lead assessor and by a director of the company. It must then be submitted to the environment agency not later than 5 December 2015. The environment agency is the scheme administrator. The next stage is to act on the ESOS audit recommendations.The whole objective of the process is the help organisations find ways of being more efficient and making better use of energy, so this step is arguably the most important. 

The Environment Agency will review a sample of audit reports and may possibly wish to review yours. Apart from that, your only obligation is to produce your next audit report in four years’ time: 2019.

At the time of writing, 15th January 2015, the oil price is around $47/barrel. That means it’s more than halved since the summer. Some say it’s down for the long term and I talk about that in "Energy - the story of 2015". For the moment, ESOS is designed to help save energy and that must sharpen your competitive edge, whatever the energy price. And designing and implementing energy saving strategies now is protecting your organisation against the day the price spikes back up again.

Want to know more? Go to www.gov.uk and search for ESOS, or drop me an email: mail@anthony-day.com 

August – and it’s all gone quiet

The Olympics are over, and everyone seems to have gone on holiday.

What have we got to look forward to when we get back? CRC is still with us for the foreseeable future. There were suggestions that it would be abolished in the Autumn, or replaced with something simpler, but will the Chancellor give up the £750m it yielded this year?

Mandatory Greenhouse Gas Reporting (GHG) has had wide press coverage. It’s been hailed as an example of the UK being a world leader in carbon management. How can this be?

• It will apply to UK-registered companies quoted on the Main Market of the London Stock Exchange, European exchanges, NYSE or NASDAQ. That’s about 1,800 companies, whereas CRC covers 2,700.


• The proposals are to monitor the six Kyoto gases. There are constant calls for CRC to be simplified, and that scheme only monitors the one gas – CO₂. They are even talking about including Scope 3 emissions (created by your product in the hands of your customer.)


•  There are no plans to impose penalties or charges for emissions.


• There is no standard methodology required for reporting.


• The whole consultation is very vague (only 6 pages.)

Greenwash, anyone? Oh, I forgot, it’s the silly season.

Hopefully there’ll be some sense by the time the consultation closes on 17^th October, but aren’t we leaving things a bit late? If the government is truly going to reduce the nation’s emissions by 80% by 2050 or even 30% by 2020, is a vague scheme which will allow people to report in any way they like really going to make a difference?

This certainly looks less and less like the greenest government ever. Was I really naïve enough to believe the hype?

In September, our new Sustainability Works website launches, based on my new keynote speech and my book of the same title.

You can keep ahead of the game because the book is AVAILABLE NOW on Kindle. 

 

Pay CRC PDQ. Is GHG your new USP?

CRC payments are due tomorrow – 31st July – which means the money must be cleared and in the government’s bank account by then.

Although it’s likely that the Chancellor will announce a consultation in September on replacing the CRC, it’s not over yet. The scheme could survive until the end of the first phase, which means that we’ll be reporting – and paying – right through to July 2014.

If the CRC is replaced, something will have to be done to replace the government’s £750m revenue from the sale of allowances.

There’s another consultation out since last week. DEFRA wants your opinion on the Greenhouse Gas Reporting draft regulations. Answers, please, by 17^th October.  At the moment the suggestion is that they will review reports by quoted companies in 2015 and consider widening the net in 2016 to include other large organisations. There is no suggestion of financial levies or penalties, but then, CRC was supposed to be financially neutral.

There is already controversy over the GHG Reporting proposals, particularly that no consistent method is required for measuring emissions. This and other concerns are raised in a recent Guardian blog. The idea of reporting is that shareholders and stakeholders will be made aware of the risks that the reporting companies face and presumably will encourage them to act responsibly. Doesn’t all this sound incredibly laid-back? Doesn’t it sound as though we’ve got all the time in the world?

So how is the government going to maintain or replace its CRC revenues? In the short term, while the scheme still exists, it could get the goose to lay as many golden eggs as possible by raising the price of carbon allowances. Watch out for the Chancellor’s Autumn Statement in October! Or maybe they’ll follow the example of the Australians, who are now taxing major CO_2e emissions from landfill at AU$23/tonne (£15.35). Or perhaps they’ll do both. But will it really make a difference?

Managing emissions is only one part of sustainability. I’ve just published a review of the issues called Sustainability Works. You can buy it for your Kindle here for only £1. Or if you’d like a free copy send me an email and I’ll let you have a link to the pdf version.

Something to read on holiday – and if you’re going on holiday have a good one!

 

 

CRC Update

More than 4,000 organisations still to register - less than 12 weeks to the 30th September cut-off - more time for disaggregation - PFI: who’s responsible? - landlord and tenant - Early Action Metric - monitoring carbon footprint - buying allowances - evidence pack and audit - super-smart metering to save energy and save cost.

The total number of CRC full participants was estimated at 5,000 and according to the Environment Agency only 651 have so far registered. That leaves less than 12 weeks for the remaining 4,349 to complete the process by 30th September. Of course you may already have started, but if you’re waiting to clear up some minor query or you have some doubts about your particular case the Environment Agency urges you to register now and sort out queries and errors later. No doubt there will be increasing pressure on the system as we get closer to the cut-off.

Good news if you were planning for disaggregation. The Environment Agency has extended the initial deadline until 31st July, although all your SGUs still have to be registered on their own account by 30th September.

Some organisations operate facilities provided under PFI and the PFI company has claimed that the organisation which uses the facilities is responsible. The Environment Agency has now made it clear that the “counterparty to the supply contract” principle applies, so if the PFI company is paying the bill then the PFI company is the participant.

CRC remains an issue for landlords. Remember, if you bought more than 6,000MWh of half-hourly electricity in 2008 you are a full participant even if you sold that electricity on to your tenants. When we get to the reporting phase, the landlord is responsible for reporting the total carbon footprint from all energy sources, including energy used by tenants. Can you negotiate an amendment to the lease? The CRC legislation gives you obligations, but no additional rights vis-à-vis the tenant.

If you are a tenant and taking steps to improve your energy efficiency, will the landlord pass on the benefit of lower CRC costs to you? Again, can you re-negotiate the lease?

Your Performance League Table position and your total CRC cost are both affected by the Early Action Metric and it’s not too late to get the benefit. The earlier you put in voluntary AMRs (automatic meter reading) the better, because the benefit is calculated on the proportion of your total energy that flows through them in 2010/11. Don’t forget gas meters. You have until 31st March 2011 to achieve the Carbon Trust Standard. As long as you have it in place by that date you qualify in full. The Environment Agency has just approved CEMARS as an alternative to the Carbon Trust Standard. Other standards are under review.

Quite apart from the Early Action Metric and your league table position, the surest way to reduce your CRC costs is to improve your energy efficiency and cut your energy bills. Have I told you about the super-smart metering that gives you instant feedback and detailed analysis for close cost control? Give me a call on 07803 616877 and I’ll tell you more!

Once registration is complete the next task is to prepare for the annual report and for the purchase of carbon allowances in April 2011. You need to have an evidence pack, and 20% of all participants will be audited. Have you been monitoring your carbon footprint since April? Have you got detailed records and an audit trail?

If you would like to discuss any of these points in more detail please give me a call on my direct line: 07803 616877. Together with strategic partners, Cyber Associates can help and advise on CRC registration, obtaining benefit from the Early Action Metric, monitoring your carbon footprint and establishing an employee engagement programme to maximise your energy efficiency.

I look forward to talking to you!

Best wishes,

Anthony Day

PS NoWatt, our super-smart metering partners, have a window in August due to customer holidays. If you want a rapid assessment and installation we can help you to start saving money on energy in a matter of weeks. Call me on 07803 616877!

CRC - do you need to buy allowances next April?

The CRC Energy Efficiency Scheme which came into effect on 1st April 2010 is a sort of carbon-trading system for larger organisations. I say “sort of” because the government sells carbon allowances in April and gives all the money back in October. Those organisations which do really well in controlling their emissions, and hence find themselves at the top of the league table (more of that later!), will get their money back with a bonus of up to 10%. In order to pay these bonuses those who do less well will be penalised to the same extent. Over 5 years this bonus/penalty will rise to 50%.

Let’s look at the first year. In April 2011 you have to buy allowances to cover your EXPECTED emissions in 2011/12. In October 2011 the cost of those allowances will be returned to you with a bonus or penalty depending on your ACTUAL performance in 2010/11. Your cost is therefore the cost of having your money tied up from April to October, offset or increased by the bonus/penalty. This bonus/penalty, by the way, at 10% of your allowances will be less than 0.7% of your energy bill.

What if you don’t buy any allowances next April? You don’t have to surrender them until July 2012 and there will be another sale of allowances in April 2012. By then you will know exactly how much you need and allowances can be transferred from year to year within each phase. If you adopt this procedure you will defer the cash flow effect (not increase it, because you will not buy anything for the following year either. When you get to the end of Phase 1 you can buy exactly the allowances you need, which is important because if you have any extras they cannot be carried into Phase 2 and so will be worthless.

Of course, if you do this you’ll miss out on a possible bonus in Year 1, but is 0.7% of your bill such a big deal?

CRC - is the league table a red herring?

For most people, the Performance League Table is a red herring.

Depending on how scheme participants manage their carbon footprints, they will be assigned a ranking on the Performance League Table. This will be publicly available, so the theory is that organisations will not wish to be named and shamed for appearing low down in the league. Secondly, there are financial penalties associated with your league table position.

Since the Environment Agency took over much of the information on CRC seems to have become both more complicated and more vague. For example, the fixed price for carbon allowances was originally announced at £12/tonne. This does not appear to be confirmed on the current CRC website. When participants get their money back through recycling payments, the original plan was that they would get a bonus or a penalty depending on their position on the league table. This could be between 5% and 50%. Again, these figures do not appear on the new CRC website.

Cyber Associates has requested clarification of these points from the CRC helpdesk, but in the meantime let’s use the original figures. On that basis a 5% bonus or penalty on your recycling payment is about 0.3% of your bill. That’s why we believe that the League Table is a red herring.

You will gain far more by reducing your energy usage than by trying to improve your league table position.

After all - as will be revealed at the 10th June conference - many participants will be prevented from taking advantage of the early Action Metrics and will have no way to improve their position at all.

This is all part of the obligation under the Climate Change Act to cut CO2 by 34% by 2020 and 80% by 2050. With UK emissions still growing, even standing still will be difficult. The oil price has been on the rise for most of this year, so energy is going to be expensive to buy and if you use it inefficiently the government is making it even more expensive to use!