Getting in on the energy act

Tim Ashmore, energy services manager at London Energy, looks at ways in which UK industry can address the challenges of the Climate Change Levy and CO2 reduction, and achieve energy efficiency in a cost-effective way.

The combined effect of the Climate Change Levy (CCL) and the target for reducing CO2 emissions by 2010 has meant that UK industry is coming under increasing pressure to improve the environmental performance and cost-effectiveness of their processes and buildings. Action Energy, part of The Carbon Trust, estimates that every year £12Bn of energy is wasted in the UK, representing a staggering 30 per cent of the country’s consumption. With more incentives for industry to ‘act green’, coupled with the prospect of wholesale energy prices rising over the next few years, organisations are having to implement energy efficiency measures in order to avoid the heavy penalties which are likely to result from a failure to plan ahead.

Almost a year ago, in February 2003, the government published the Energy White Paper, committing Britain to a low-carbon future. By stating that carbon cuts of 60 per cent will be needed over the next 50 years, the case for more green energy and greater energy efficiency could not have been more strongly put.

Renewables Obligation

Actions aimed at limiting emissions are in fact already underway, in the form of the CCL and the Renewables Obligation, which requires electricity suppliers to sell a defined, and annually increasing, percentage of renewable electricity. These measures are making UK industry realise there is a growing cost implication for firms neglecting to properly address their energy wastage. The CCL and the Renewables Obligation, coupled with the current short supply of energy from renewable sources, has created an upward pressure on energy prices at a time when the electricity base-rate is rising from its recent low level.

In the run-up to last December’s Pre-Budget Report, the signs were hopeful that energy efficiency would receive a great boost in the form of a reduction in VAT on conservation measures and energy efficient materials. Unfortunately, no tax-reduction pledge was made by the Chancellor, leaving all hopes pinned on the full budget in the Spring. However, there was one concession made to encourage business energy efficiency and promote the reduction of carbon emissions. The eligibility criteria was extended for climate change agreements which offer 80 per cent reductions from the CCL if firms agree to increase their energy efficiency or meet specific targets for emissions reductions.

Future targets

The Energy White Paper outlines demanding goals for reductions in CO2 emissions, with targets or ‘ambitions’ set for 2010, 2020 and 2050. The government proposes to meet these targets by encouraging generation from renewable sources and simultaneously reducing total energy consumption by promoting energy efficient schemes.

Whilst the cost of renewable energy is expected to fall as supply increases, the government itself estimates that the various measures proposed in its White Paper will add between 10 and 25 per cent to industrial electricity prices. This implies that if UK firms are to avoid a large financial burden they need to act soon to get energy efficiency measures in place.

The EU is close to agreeing a directive on taxation of energy products aimed at encouraging energy efficiency. This would require all member states to introduce further taxes on business energy use. The UK government has backed this and has said that there could indeed be a role for tax, if other measures such as the European Emissions Trading Scheme (EU-ETS) do not create enough of a price signal to encourage users to consume energy more efficiently. This is supported by the government’s expectation, as stated in the Energy White Paper, that more than half the savings in emissions will come from energy efficiency measures.

Sustainable energy savings cannot be made overnight, therefore businesses need to take action now to begin using energy more efficiently in order to minimise any future financial penalties. Many organisations tend to view energy as an uncontrollable overhead, but this is far from true. There are several very simple measures firms can take to cut energy wastage, many of which are free.

Staff awareness

For implementing these easy measures, staff awareness is key. Even a small business can substantially cut its energy use by merely turning off computers, monitors, photocopiers and televisions overnight, rather than leaving them on standby. Imagine the energy wasted, and hence the cost generated, by a large firm which left all its computers and monitors on standby over the Christmas holiday.

These simple measures are a very worthy starting point, but other routes to energy, and hence cost savings, do require some investment. Energy use can be scaled to reflect levels of business activity and much can be done to control and manage energy, both in buildings and processes. The key to such control is to know how much energy is used and where, and then wastage can be identified and eliminated.

Certain products are available which can aggregate and analyse energy consumption data. One example is London Energy’s ‘Energy Performance Reporting Solution’. Via products such as this, changes in consumption can easily be delineated and linked to a wide range of variables, helping firms measure the effectiveness of any energy efficiency initiatives that have been implemented. Such monitoring and analysis can be done over multiple sites, large or small, or just used on a single site, making it suitable for all sizes of business.

Energy management has been too low on the priority scale for businesses for too long. Upward pressures on the cost of energy should encourage businesses to begin using it more efficiently. Reducing consumption is not as difficult as it may seem and there are many solutions on the market which can help UK industry improve its performance.

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