Is BEIS committed?
Firstly, there’s money on the table, but not much, perhaps £162 Million. As a step in the right direction, it’s to be applauded. In reality though, it’s only for development and feasibility programmes. Private industry are going to have to invest and make this work. Whilst government departments are happy to make the right noises, the public sector isn’t taking a lead. BEIS is offering a package of measures supporting businesses to achieve a 20% reduction, why not do the same for the public arena? Policy Exchange recently suggested that public sector savings could be as high as 13TWh per annum. As ESOS round two approaches, why not extend it to government departments and realise some of that potential?
Part of the BEIS strategy will be to establish an Industrial Energy Efficiency scheme to help large companies cut their bills. Given that there is already a similar scheme for intensive consumers, is this just window dressing? ESOS reports sit on desks across the UK, but only 24% of businesses admit to having discussed it at board level. Those of us with daily involvement in this sector know that output comes first. It’s a common thread that investment in effectiveness always trumps efficiency. Without significant incentives or operational requirements, most businesses won’t look at anything unless a quick return on investment is on offer.
The UK has an increasingly complex system of tariffs and taxation surrounding energy consumption. I’ve spoken before about the shifts in this, with changes to various elements and the subsequent rises in Non-Commodity charges. Even last week, I found myself advising business managers about the changes, it’s still not being heeded. There’s clear evidence that the various charges have, to date, only been a weak driver. Inertia often rules due to a lack of incentive, combined with high project costs, unless there’s a degree of coercion. Contrary to the government’s decision to increase the CCL discount available to Climate Change Agreement (CCA) participants from April 2019, the recent Policy Exchange report recommends the opposite in order to drive further energy efficiency within the industrial sectors.
Higher value projects often derive greater overall returns and also tend to be off the balance sheet. The downside is that the third party finance necessary to deliver can be subject to strict accounting rules, even requiring investment grade audits. BEIS has hinted at support and it will be interesting to see if it’s similar to the existing and successful Heat Networks Delivery Unit.
Many commercial properties are tenanted; short leases impact on RoI decisions. Would it be an idea to link EPCs to Business Rates? Rather than operate fiscally, Energy Managers could reframe efficiency strategically. Several of our clients are already measuring “Energy usage per unit output”. However, smaller companies are suffering cost increases disproportionally and were missed out of ESOS. Even those who took part had no compulsion to change, so the status quo effectively remains.
How do I develop my own Clean Growth Strategy?
In conclusion, it’s our view that things need to change:
- Bring the Public Sector in line with Commercial.
- Post-Brexit UK law must reflect the various international agreements in place.
- ESOS progress and reporting to be mandatory (and subject to sanction).
- ETL list to expand and change focus to incorporate newer ideas and multi-solution projects.
- BEIS to provide off-the-shelf tools to help Energy Managers predict and measure success.
This will enable businesses to focus on the necessary elements to develop their own strategy and meet those targets.
For unbiased advice on any of these topics, contact Dave or Kevin at Efficient Power Solutions on 01909 569016.