CRC: Commit your energy

CRC stands for the Carbon Reduction Commitment Energy Efficiency Scheme. It is a mandatory trading scheme designed to improve energy efficiency and reduce the amount of carbon dioxide emitted in the UK.

by Carol Hopper

1 April 2010

 

Will your organisation be  affected by CRC?
The simple answer is yes, if you had at least one half hourly meter settled on the half hourly market in 2008 (your electricity supplier should be able to tell you this). If this is you, you must register and disclose information on your energy consumption to the administrator of the scheme. Then your organisation will be obliged to buy allowances for each tonne of carbon dioxide emitted if you satisfy the following tests:

(a) you have at least one half-hourly electricity meter (settled as above)
(b) you have an agreement to receive energy (direct with a supplier or through an intermediary such as an energy management company) or if you are the sole recipient of energy from a generating plant; and
(c) your organisation consumed 6,000 MWh of electricity or more (generally accepted to be a bill of £500,000 or more) between 1 January 2008 and 31 December 2008 (as measured through half-hourly meters).
Once you qualify, the net broadens and it is more than electricity that the government is interested in. You will need allowances for 90 per cent of your energy use (which is to include 100 per cent of your core sources – metered electricity and gas).

When does it come into force?
1 April 2010. However, following a change of plan from the government, the first year will be a dry run not requiring the purchase of allowances. It will however oblige all those who qualify (based on 2008 electricity consumption) to register and to monitor their energy use. Registration must be completed between 1 April 2010 and 30 September 2010.

What should you be doing now?
It is likely that much of the administrative role and information gathering and reporting will fall on facilities managers. It is also likely that, as the effects of CRC become more apparent, those in charge will be looking for a change in occupier behaviour and will look to facilities managers to achieve this.

Immediate action required:
1. Register your organisation. If more than one entity within your organisation would qualify independently then a decision will need to be made. Should the entities that separately qualify be registered as separate participants in the scheme and buy their own allowances? Note, even if there is only one group entity that is registered as a participant, but there are others that would qualify in their own right – known as a “significant group undertaking” – it will be necessary to separately record information for the energy use of each SGU and this will need to be disclosed to the administrator.
2. Calculate whether the other elements of the test apply – see (b) and (c) above.
3. Monitor the organisation’s energy use from all sources of fuel.

Medium term actions:
1. In July 2011 participants will have to submit their Footprint Report for the introductory phase and their Annual Report for 2010/11.
2. Purchase allowances from the government (initially these will be set at £12 per tonne of carbon and not capped but once the introductory phase is over these allowances will be limited and the price will not be fixed).
3. In October 2011 you should receive your first recycling payment.
4. Devise a strategy for improving the energy efficiency of the buildings for which you are responsible. This will not only reduce the number of allowances that need to be purchased but efficiencies made during the year in excess of any anticipated by the allowances purchased will enable the organisation to either hold over the “saved” allowances for another year (for one year only) or trade them on the secondary market (note it will not be possible to bank them or hold them over from the introductory phase through to later phases). Any strategy is likely to require a combination of investment in new technologies as well as changes in occupier behaviour. The publication of performance league tables will form part of the government’s approach to incentivise participants – these may become a feature of buildings if facilities managers can accurately record energy use on different floors and shame those who leave their lights on.

Watch out!
CRC is likely to be only part of the government’s initiatives on improving the energy performance of buildings. The built environment we are told accounts for almost half of the total annual emissions in the UK. Therefore if the government is to have any hope of meeting the ambitious target it has set of reducing emissions by at least 80 per cent compared to 1990 levels by 2050 the built environment will be a significant focus.

The government has already announced that it will consult on:
• making display energy certificates mandatory for all buildings. These record the ongoing energy performance of a building not just give a building a one-off rating as per an energy performance certificate (EPC)
• whether to require all properties to have an EPC with a rating of F or above – it would be worthwhile checking the properties that you are responsible for to see what their current EPC rating is.

More information at the Environment Agency

Carol Hopper is a consultant at law firm Allen & Overy LLP