CRC Energy Efficiency Scheme
Eight Days To Go
Are You Ready?
Workshop presented 22 March 2010 by
Michael Webb, Client Services Manager
John Treble, Managing Director
The Green Consultancy Ltd
Why CRC?
Global Warming/Climate Change
(finite supply of fossil fuels being depleted –
predicted massive price increases)
• focus on large non energy intensive users
• reduce UK CO2 by 4.4m tonnes pa and help
deliver 80% UK CO2 savings by 2050
• shift awareness especially at senior level
• drive changes in behavior and infrastructure
How CRC Works
• 6,000 MWh HHM electricity in 2008; 5,000 participants
• highest parent organisation and all subsidiaries
• buy allowances to cover forecast annual emissions
• record and report actual emissions and surrender
allowances
• receive recycling payment based on number of
allowances, performance against base year and relative
to other participants
• performance table published
• Phase 1 (2010-13) allowances £12 a tonne
• auctioned In Phase 2 (2013 onwards) - £50 a tonne?
How CRC Works
• compulsory; financial incentive to reduce emissions;
places a price on carbon emissions
• overall emissions reduction target achieved by a ‘cap’ on
total allowances set by Government (Phase 2)
• participants determine most cost-effective means to act
– buy allowances or invest in energy reduction
• annual performance league table of participants reputational driver
• not a tax (all revenue recycled back to participants)
• scheme administrator Environment Agency
• scheme regulator – EA (Eng + Wales), Dept of the
Environment for N.I. , Scottish Env. Protection Agency
How CRC Works
• participants have to monitor emissions - improved
understanding of consumption and efficiency
opportunities
• financial and reputational incentives encourage
participants to develop energy management strategies
and generate awareness of emissions at a senior level
• covers emissions outside Climate Change Agreements
and EU Emissions Trading Scheme
• Includes large non energy intensive public and private
sector organisations and all central government - approx
10% of UK’s emissions
TIMELINE
Key Dates – Phase 1
2010-2013
• qualification year: Jan – Dec 2008
• introductory phase April 2010 – 2013; unlimited
allowances at fixed price of £12 per tonne
• footprint year: 2010-11: determines CRC carbon footprint
• 2010/11: first compliance year; complete registration by
September and be able to report actual emissions
No Allowances to purchase
• April 2011 - first sale of allowances – 2011-12 in advance
• July 2011 – final date to submit footprint data and
2010-11 annual report
• October 2011 first recycling payment based on 2010-11
Key Dates – Phase 2
• April 2010: start of qualification period for year two
• 2011-2012: footprint year and first reporting year
registration starts
• July 2012: first annual report + footprint report
• April 2013: first capped auction
Timeline – Phase 1
Start of the Introductory Phase
Start of
Qualification
Period for
Introductory phase
During 2008,
participants with at
least one HH
settled meter
settled on the half
hourly market need
to determine their
total HH electricity
consumption.
Start of the Footprint Year.
Participants monitor their total energy
use over the footprint year.
1st Annual Reporting Year Participants
monitor their energy use over the
coming year 2010/11 in order to
submit an annual report in July 2011.
For this year only participants will not
have to purchase CRC allowances.
Start of Registration Period for the
Introductory Phase.
2008
Start of 2nd annual reporting year
Participants should monitor energy
use during the 2nd year 2011/12.
1st sale of allowances
Participants pay for allowances to
cover forecast 2011/12 emissions.
November
The EA sends out information on CRC to
all half-hourly billing addresses.
The EA sends out information on qualification
guidance to all potential participants.
2012
2011
October
July
End of registration
period for the
Introductory Phase.
End of footprint year for
Introductory Phase.
End of first annual reporting year
for Introductory Phase.
Timeline 1 – Introductory Phase
2nd Recycling payment
Revenue from 2st sale
2012/13 recycled
1st Recycling payment
Revenue from 1st sale
2011/12 recycled
April
End of the Qualification period
for Introductory Phase.
2nd Sale of allowances
Participants buy allowances for forecast
2012/13 emissions.
Start of 2nd Phase
2010
2009
Start of 3rd annual reporting year
Participants should monitor energy use during
the 3rd year 2012/13.
Footprint Report due
Participants submit
their Footprint based
on 2010/11 footprint
period data.
1st Annual Report
due
Participants submit
an annual report on
2010/11 data.
2013
October
April
July
2nd Annual Report
due and allowances
surrendered for the
2nd year 2011/12
Participants submit
their Annual Report
and surrender
allowances for
2011/12.
July
3rd Report due and
allowances
surrendered for the
3rd year 2012/13
Participants submit
their Annual Report
and surrender
allowances for
2012/13.
Timeline – Phase 2
1st Auction of allowances
Participants bid for allowances for 2013/14 forecast emissions.
Start of Qualification
Period for Second
Phase
Participants with at
least one HH settled
meter need to monitor
their total HH electricity
consumption.
Start of 2nd Annual Reporting Year
Participants must monitor energy use
during the 2nd year 2013/14.
Start of the
Second Phase
Start of Footprint Year
for Second Phase
Participants will need
to monitor their total
energy use over the
footprint year
2010
Start of Registration for the
Second Phase
1st Annual Reporting Year for the
Second Phase Participants must
monitor their energy use over the
coming year in order to submit an
annual report in July 2013.
Participants will not have to purchase
CRC allowances for the first annual
reporting year of the second phase.
2011
Registration for the
Second phase ends
Qualification period for the
Second phase ends
Timeline 2 – Second Phase
2012
Footprint Report due
Participants submit
their Footprint Report
based on 2011/12
footprint period data
Start of 3rd Annual Reporting Year
Participants must monitor energy
use during the 3rd year 2014/15.
2nd Auction of allowances
Participants bid for allowances for
2014/15 forecast emissions.
1st Recycling payment
Revenue from April 2013
sale recycled.
2013
1st Annual Report due
Participants submit their
annual report for 2012/13
2nd Recycling payment
Revenue from April 2014
sale recycled.
2014
2nd Annual Report due
and allowances
surrendered
Participants submit an
annual report and
surrender allowances for
2013/14
INFORMATION DISCLOSURE
QUALIFICATION
& REGISTRATION
Information Disclosure
• all organisations with a HHM settled on half hourly
market at any point during calendar year 2008 but total
HHM electricity less than 6000 MWh (approx 15,000)
• disclosure made via online registry
– List HHMs settled on half hour market including meter point
admin number
– Identify kWh via all HHMS and if below 3,000 provide contact
details, above 3,000 details of amount
• between April-September 2010
• £500 fine per HHM if failure to comply
Qualification
• 6000 MWh of electricity through any HHM settled on half
hourly market Jan – Dec 2008
• estimated 5,000 organisations qualify
• participants legally required to comply; substantial fines
for non compliance
• registration packs sent to all half hour billing addresses
Sept 2009
• register online April – September 2010
Organisation Definition
• highest parent company responsible – as defined by
companies act
• includes all UK based subsidiaries
• includes franchises
• includes companies with 50%+ ownership
• special rules for tenant/landlord
• all central government will participate
Qualification (Jan – Dec 2008)
•
responsibility of “highest parent” to report
•
structure at Dec 2008
•
to include: information on subsidiaries; responsible
person (Director); list of all HHMs; total HHM used in
qualifying period
•
failure to register - £5000 and £500 per additional day
•
registration fee: £950, annual fee £1,290
Registering
• via online registry, April – September 2010
• pay £950
• “registrant” starts process but cannot complete
• senior officer contact, responsible for CRC
• primary and secondary contact (could be senior officer)
• can appoint an “agent” as primary or secondary contact
BUT only after registration completed
CRC FOOTPRINT
Identifies the CRC relevant carbon footprint for each participant and is
fixed for each phase
“Relevant Emissions”
“Footprint Emissions”
“Regulated Emissions”
“CRC Emissions”
Footprint Year
• participants identify and report CRC defined carbon
footprint (CRC emissions)
– phase 1: April 2010 - March 2011; submit by July 2011
– phase 2: April 2011 - March 2012; submit by July 2012
“Relevant Emissions”
•
all energy used in period – electricity, gas, oil, etc
•
based on bills – estimates increased by 10%
•
suppliers legally obliged to provide information BUT
customer must formally request by no later than end
Feb 2011 (for 2010-11) – provided by mid May
•
convert to CO2 using standard CRC factors
•
deduct any transport and onward supply
RESULT = “relevant emissions”
•
“relevant emissions” remain fixed for first phase
“Footprint Emissions”
• Climate Change Agreement (CCA) excluded from CRC:
deduct from “relevant emissions” to give CRC “footprint
emissions”
– If single entity and 25% of total emissions covered by CCA whole
organisation exempt
– If 25% of a subsidiary’s organisation, that subsidiary is exempt
– If remaining HHM is under 1000 MWh then total exemption
– Proof required, if CCA lost re-enter from next compliance year
“relevant emissions” – CCA = “footprint emissions”
“Footprint Emissions”
• must Include all “core” sources:
all HHMs and AMRs, profile class 5-8 meters; daily read gas; gas AMR; non
daily gas if 73,200 kWh a year (unless covered by CCA or EUETS)
• if core sources + CCA or EUETS are less than 90% of
total footprint emissions add non core “residual sources”
to reach at least 90%
• residual sources can be included if wished
• %age covered is minimum to cover in subsequent
phases
“footprint emissions” – allowable “residual sources” =
“regulated emissions”
CRC Emissions
Finally…
If any emissions covered by CCAs or by EU ETS remain
in the “regulated emissions” deduct to arrive at
“CRC emissions”
This is the basis for reporting annual emissions and
forms the basis for determining each participants “share”
of total CRC footprint emissions – a key determinant of
the recycling payment.
Footprint Report
• end of footprint year 2010-11, report via online registry:
– “footprint emissions “
– “CRC emissions”
– exemptions through CCAs
• submit by end July 2011
• failure?
£5,000 fine + £500 a working day up to 40 days, then
doubled
Annual Report
• via online registry report annual CRC emissions by
energy source
• automatically converted into tonnes CO2
• submit by end of July following end of compliance year –
first one July 2011
• surrender equivalent number of allowances
• backed up by auditable “evidence pack”
• failure: £5,000 fine plus £500 a day, doubled after 40
days; EA determines emissions and will double;
allowances for doubled amount to be surrendered
• failure to surrender allowances: £40 tonne, withheld
recycling payment and published
CRC Evidence Pack
Records to support information provided to EA must
be kept in an evidence pack.
• records and evidence for all data used in footprint report
• all energy sources making up “relevant emissions”
• energy use and emissions for each compliance year
• evidence pack disclosed to the regulator when audited
• director required to be responsible for evidence pack
• failure to keep complete evidence pack viewable on
request: £40 per CRC tonne of CO2 and published
Self Generated Electricity/
Renewables
• if covered by EUETS – not in CRC
• if ROCs or FITs claimed – no CRC benefit
• no ROCS or FITs claimed – can claim CRC electricity
generating credits, used to offset allowances needed
• calculated at grid average emissions factor
• use of renewables noted on league table – reputational
benefit
BUYING AND
SURRENDERING
ALLOWANCES
Buying Allowances
Phase 1
• April of each compliance year, one per tonne of forecast
emissions
• no allowances purchased for 2010-11
• first sale of allowances in April 2011 for 2011/12
• no limit on total available in April BUT no more issued
after April; fixed price of £12 per allowance from EA
• must hold and surrender sufficient allowances to cover
actual emissions at year end
• can buy extra allowances after April from other
participants, traders or through EU ETS “safety net”
Buying Allowances
Phase 2
• total allowances available “capped” based on data from
phase one and UK carbon targets
• participants work out allowances needed at a range of
price points and “bid” for different amounts
• government decides how many allowances to issue and
price set by bids made by all participants
• participants failing to secure sufficient allowances have
to buy from anyone holding surplus allowances at a
“market” price
(marginal cost of carbon abatement)
Surrendering Allowances
Phase 1
• annual report submitted no later than 4 months after year
end – July – and allowances surrendered
No allowances to surrender for 2010-11
• cannot use allowances bought for current year to meet
obligations for previous year
• can roll over unused allowances into next year BUT not
from Phase 1 to Phase 2
• similar process in each year of Phase 1 after first year
PERFORMANCE
LEAGUE TABLE
&
REVENUE RECYCLING
Performance League Table
•
measures relative performance of all participants
•
performance measured against 3 “metrics”
– approximately 5000
– early action, absolute, growth
•
carbon reduction target, performance against target,
responsible director and employee engagement, use of
renewables also shown on league table
•
published
•
league table position determines +/- % “bonus” or
“penalty”.
bonus/penalty: year one +/- 10% rising to +/- 50% in
year five
•
The “Metrics”
• Criteria for league table position
• All “metrics” scored and then proportionally weighted
• Absolute: %age change in emissions measured as a
rolling average from “footprint” year figures
• Early Action: voluntary half hour metering + Carbon
Trust Standard Accreditation
• Growth: change in emissions intensity
• Only required to report Absolute Metric BUT will be
scored zero if early action and growth not reported
Absolute Metric
•
compares current year emissions with average of
previous five years emissions (or however many years
are known starting with the footprint year – 2010-11)
•
weighting
– 0% in year one
– 45% in year two
– 60% in year three
– 75% subsequently
•
compulsory reporting
Early Action Metric
• %age of non half hour metered CRC emissions covered
by voluntary installed automatic metering (AMR) as of
March 31st 2011
• and %age of CRC emissions covered by CT Standard
(or equivalent) at 31st March each year
• 50/50 split between meters and carbon standard
• weighting
– 100% in year 1
– 40% in year 2
– 20% in year 3
– 0% subsequently
• voluntary reporting
Growth Metric
• %age change in emissions per unit of turnover
or revenue compared with average for preceding
5 years
• weighting
–
–
–
–
0% in year one
15% in year two
20% in year three
25% subsequently
• voluntary reporting
Metric - Weighting by Year
Year 1
Early action
100%
Year 2
Early action
Absolute
Growth
40%
45%
15%
Year 3
Early action
Absolute
Growth
20%
60%
20%
PHASE 2
Early action
Absolute
Growth
0%
75%
25%
League Table
(Assuming 5000 participants)
• league table position based on point score for each
participant ranked in order
• each metric scored separately and weighted –
5000 points for first place and one point for last place
against each metric. Then added to give total score
• total score determines position on league table –
1 to 5000
Revenue Recycling
• 100% of money raised by Government from sale of
allowances recycled back to participants (not a tax)
• recycling payments are made 7 months after compliance
year end, 3 months after allowances surrendered –
October of each year
Recycling Payment
Calculation – it’s complicated!
Key Criteria
• League table position
• +/- bonus/penalty for year (+/-10% in year one rising to
+/- 50% in year 5
• Individual base year emissions as %age of total base
year emissions
• £ revenue available for recycling
• Bonus or penalty to be applied to each participant
Recycling Payment
Calculating…
%age of total base year (2010-11)
Total
8850 tonnes
100%
Org A – 100 tonnes
Org B – 2000 tonnes
1.13%
22.56%
Org A: year two emissions 90 tonnes:
allowances 90 x £12 = £1,080
Org A first in league table (based on early action metric)
Org B: year two emissions 1,900 tonnes:
allowances 1,900 x £12 = £22,800
Org B second in league table (based on early action metric)
Recycling Payment
Calculating…
1. calculate “size co-efficient”:
year one bonus penalty range x base year %age
Org A
Org B
0.2 x 1.13 = 0.23
0.2 x 22.56 = 4.52
2. calculate “R” value
subtract “size co-efficient” in sequence from maximum
bonus/penalty (year one = 10%)
Org A
Org B
Org C
10% - 0%
= 10% “R” value
10% - 0.23%
= 9.77%
9.77% - 4.52% = 5.25% … etc
Recycling Payment
Calculating…
3. calculate bonus/penalty rate
“R” value minus half of size co-efficient
Org A 10% minus half of 0.23 (0.11) = 9.89%
Org B 9.77 minus half of 4.52 (2.26) = 7.51%
4. calculate bonus/penalty payment
proportionate share of revenue x bonus/penalty rate
revenue available for recycling: £94,080
Org A: 1.13 x £94,080 = £1063 x 1.0989 = £1,168
Org B: 22.56 x £94,080 = £21,225 x 1.0751 = £22,819
Auditing and Regulation
• emissions self certificated
• 20% audited each year based on risk profile
• all organisations “can expect to be audited during the life
of the scheme”
• audit will cover all years to date
• desk based then site if needed
• £40 fine per incorrect tonne reported plus published
Phase 2 – Capped
• 2013-14 onwards
• process starts again, re-assess against qualification
criteria, re-do footprint (2011-12)
• some organisations in phase one will drop out and
others join (qualification criteria?)
Cap & Auction
• limited allowances, based on emissions in phase one
and government target for reduction
• allowances auctioned; participants state allowances
required at range of price points
• price fixed at point where demand = supply (as
determined by Government)
• if insufficient allowances obtained in auction, balance
purchased on open market
• Price of allowances likely to be significantly higher than
£12: £50?
• To make sound decisions on price to bid requires
Marginal Cost of CO2 Abatement
Implications?
Costs
• registration and administration fee
• administration – internal and/or external
resource
• improved monitoring
• potential fines
• capital tied up in allowances – seven months a
year
• loss or gain from recycling payment
Implications?
• reputation (league table published)
• requires senior management engagement
• increases importance of energy management
• Phase 2 cost of allowances unknown –
could be 5-10 times more than £12 a tonne
Implications?
Marginal cost of CO2 abatement
• by 2013 (Phase 2), participants need to be able
to work out financially appropriate price to bid
for for allowances
• which is more cost effective?
– invest in CO2 reduction OR buy energy + allowances
• typical energy costs per tonne of CO2 emitted
approx: £110.00 (assumes grid electric 6p per kWh
and grid gas 2p per kWh)
Cost Mitigation
reduced CO2 emissions =
lower allowance cost +
improved recycling payment +
lower energy bills
Act Now
• agree responsible senior officer and primary + secondary
contacts
• set up planning and delivery group
• develop CRC strategy
• register online
• identify CRC footprint
• agree any “early action”
• adapt or develop recording and reporting system
• integrate with other energy/carbon action
• organisation wide culture change and awareness
The Wider Picture
CRCEES places greater emphasis on energy saving and
carbon reduction amongst participants
In short term significant compliance requirements and
incentives to reduce consumption/emissions
Incentives escalate substantially in Phase 2 when
allowances are capped
HE and FE participants to think longer term about
maximising energy efficiency in a cost effective manner
and how to integrate CRC with other initiatives and
requirements – Carbon Management Plans
HE and FE below registration threshold to consider now
if likely to have to register for Phase 2
CRC, HEFCE & CMPs
• CRC and HEFCE are twin drivers demanding
that most universities produce comprehensive
robust Carbon Management Plans (CMPs)
• For assistance with CRC or CMPs please
contact Michael Webb
• michael@greenconsultancy.com
08450 176300
A Challenge?
If your electricity consumption is currently 6000 –
8000 MWh for 2009-10 can you get below 6000
MWh by 2011-12?