From Supply to Advice

10 September 2010

APRIL 2010 SAW THE introduction of two notable pieces of green legislation – the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) and Feed-In Tariffs (FiTs) that raised the profile of sustainable energy substantially. However, four months on it appears that organisations are struggling to adapt. For example, of the estimated 5,000 organisations to which full CRC registration and reporting applies, to date (only weeks from the deadline) only around 1,250 companies have registered their data with the Environment Agency.
The current low level of compliance with regulation such as the CRC scheme is likely to be due to the complexity of reporting. Organisations are required to present all electricity consumption records, as well as an organisation chart showing the legal structure of the business and how much energy each part of the business uses. What’s more, each business is required to nominate a board level director to be responsible for overseeing the CRC process, plus a primary and secondary invoice contact. Failure to register, or failure to present accurate information, carries not only the risk of a fine, but also the reputational risk of a low ranking from the subsequent league table.
For many organisations adapting to the demands of such complex legislation can appear a daunting task.
Energy companies, with experience in translating legislation and carbon targets into low carbon energy solutions, are responding with a wide array of services designed to help businesses cope. However in many cases such offers of assistance are falling on deaf ears with some organisations seeing energy providers as just that, a source for their day-to-day energy needs rather than as a value business partner. To showcase the advantages of sustainable energy generation to clients, E.ON has installed one of the UK’s largest combined solar thermal and photovoltaic arrays on the side of its head office in Coventry. Not only does the installation give a real example of what a large commercial array can generate in revenues (were it eligible for a Feed-In Tariff), it also demonstrates to existing and potential customers the advantages of fully adopting low carbon energy solutions. I believe it is only through the ‘carrot’ of such rational business decisions that UK organisations can be persuaded to comply with the ‘stick’ of new legislation to reduce their carbon emissions.
A rapid return on investment is key but, in the current strained economic times, for some organisations such capital investment is simply not possible. In these cases E.ON’s Sustainable Energy consultants have developed an alternative financial model that is proving popular. Created to meet the needs of facilities managers for a rapid and simple fix to the demands of the CRC scheme, E.ON has worked with Self Energy to launch the Energy Performance Guarantee (EPG) – a ‘no gain, no fee’ service to help business drive down costs while meeting Government energy targets. The novel financial model shifts the risk of investing in sustainable generation from the client to the energy provider, with future savings on energy bills subsidising the initial upfront costs whilst still delivering a saving.
Higher Education is another sector that has to adapt to not only the demands of the CRC scheme, but also the requirements of the Department for Education’s goal to reduce carbon emissions by 34 percent by 2020. Again the energy sector is stepping up to the mark with consultancy services to help achieve these stretching targets without compromising budgets that are under intense pressure and scrutiny. King’s College, London - is a good example of such counsel. Here the FM team was advised to install a 1MW trigeneration solution to provide heat, power and cooling and an onsite renewables system to serve several of the College’s campuses, including the Strand in central London.
It is clear that the traditional model of energy provider and client is changing, but it is going to take time for such thinking to enter the mainstream of business decision making. For organisations able to adapt to a world where energy generation is a partnership rather than a service, the business benefits are compelling.
● Michael Woodhead, Managing Director of E.ON’s Sustainable Energy business