Since its inception the Carbon Reduction Commitment Energy Efficiency Scheme (CRCEES) has undergone a number of changes. However, despite this, ABB’s Steve Ruddell stresses that the ultimate goal remains the same

It is certainly not unusual for government backed schemes to be modified after their introduction and the Carbon Reduction Commitment Energy Efficiency Scheme (CRCEES) is no exception. Originally introduced as a revenue neutral scheme to lower emissions, it has been changed into a business tax that will generate the coalition government £1bn annually in additional revenue.

The CRCEES targets organisations that consume more than 6,000MWh per year and have at least one electricity meter measured on the half hourly market. The scheme is forcing large non-energy intensive users in the private and public sectors to address their annual energy spend by implementing charges based on their levels of CO2 output. During 2012, those affected by the new tax will have to purchase carbon credits for the first time, initially being set at £12/tCO2 – although this could be reviewed at the next budget.

The CRCEES will involve self certification of emissions, backed-up by spot audits carried out by the Environment Agency and will effect large, non-energy intensive organisations that are not already subject to Britain’s and Europe’s other anti-carbon laws. The tax will affect a range of companies whose annual electricity bills top about £500,000. Organisations are expected to buy allowances from the government each year to cover their emissions in the previous year.

Don’t pay the penalty

Under the rules of the CRCEES, organisations must make a disclosure about their energy use. As of 29th July this year, failure to report annual consumption will see tough penalties imposed under guidance published by the Environment Agency.

Failure to meet the deadline will result in a £5,000 fine and your name published in the CRC performance league table. Additionally, a £500 penalty charge will be added each day an organisation fails to submit their report, reaching a total fine of £20,000 by the 40th day. Failure to submit at this stage will see the penalty increase to £40,000 and an extra levy of £40 per tonne of carbon dioxide added. At this stage, organisations will also find themselves being moved to the bottom of the CRC performance league table, regardless of whether they report or not, so it is vital to meet the deadlines that have been set out.

Difficult times

The extra cost of adhering to the CRCEES will add up to ten percent to current energy bills and for many this extra cost could not come at a worse time. Many industries are experiencing tough economic conditions, magnified by the government’s recently implemented financial austerity measures, rising inflation and falling demand. Many organisations feel that the tax will have a major impact on their operations and hinder the opportunity for growth. However, those that make the effort to reduce their energy spend through the adoption of energy efficient technology will actually see a dramatic reduction in their energy bills.

According to The Department of Energy and Climate Change (DECC), electricity prices have risen a staggering 106% between 2004 and 2009. This trend looks set to continue as pressure is exerted globally on energy commodities from emerging markets such as China. With energy costs continuing to grow, it is time to explore the use of energy efficient technology as a way of lowering energy costs and reducing CO2, and thus complying with legislation.

The vast majority of organisations affected by the scheme understand the need to reduce their carbon output, however, many are unaware of the measures available for energy and CO2 reduction. There is a range of organisations out there that can help those affected by the scheme to identify how to reduce CO2 output across a range of applications.

Help is available

ABB for example, offer free, no obligation energy appraisals on motor driven applications. An ABB energy appraisal identifies applications that can benefit from variable speed drive (VSD) control. By installing a VSD, it is possible to reduce your energy spend by typically 20-50%, with payback often under 12 months. Of course this does means investing in energy efficient equipment which comes at a cost. However, the savings that are achievable far outweigh any initial investment and there is help available to make the cost of new equipment more affordable.

Organisations affected by the CRCEES can get finance through the Carbon Trust to fund energy saving projects. The Carbon Trust offers leases, loans and other financing options to any organisation wishing to invest in energy efficient technology and the financing is paid back through the energy savings achieved once the equipment is installed.

Whether we like it or not, it looks like the CRCEES is here to stay. It is likely that there will be further changes to the legislation as the government has recognised that the scheme is too complex and are already in the process of reviewing measures to simplify it. The emphasis, however, will continue to focus on CO2 reduction. Therefore, it is in the hands of the businesses involved to minimise the financial implications and ensure compliance through the adoption of energy efficient technology.