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Removal of recycled payments from CRC has impacted business energy efficiency plans

18 July 2011

The overwhelming majority of businesses (94%) want to see the financial incentives reinstated in the Carbon Reduction Energy Efficiency Scheme (CRC). While a third of businesses (32%) believe that the removal of recycled payments from the scheme has had a negative impact on plans to invest in energy saving measures. These findings are from the npower Business Energy Index (nBEI), an annual report tracking business opinion on energy use, energy risk and carbon emissions.

The report follows the government’s announcement of proposals to simplify the CRC – which do not include plans to reinstate financial incentives. Nearly half of the businesses surveyed (46%) felt they had not received adequate guidance from the government on the CRC since it was implemented in April 2010. Changes to the scheme have lead to confusion and disillusionment among businesses, and as the next significant milestone approaches – footprint reporting on 29 July – this confusion continues. The nBEI reveals that many businesses are not confident they will hit the deadline with the correct data.

Dave Lewis, head of business energy services at npower, comments: “The issues businesses have faced since the implementation of the CRC and through its subsequent changes have lead to ongoing confusion. This is concerning as we approach the deadline for footprint reporting on 29 July.”

In terms of the future of the scheme, opinion is divided. The report showed that businesses believed that it is unnecessarily complex and unwieldy, and that it places an unnecessary financial burden on business. Some also stated that they thought it should be postponed completely until the UK’s economic recovery is more secure.

Over a quarter (26%) want it scrapped completely, while over half (52%) wanted there to be no more changes to the scheme. The majority - 82% - required more clarity of what is required of their business.

However, despite the ongoing confusion, many businesses did admit that the CRC was an important piece of legislation and some indicated that there has been a positive impact of the CRC. Of those surveyed, 72% of businesses have invested in energy efficiency measures as a direct result of their participation in the scheme, 62% have installed smart meters and one in five have taken on additional staff to manage their inclusion in the scheme.

Dave Lewis continues: “While it is encouraging to see businesses are investing in energy efficiency measures, it is clear that the removal of recycled payments have meant that perhaps businesses have not implemented as much as planned.

“Although a significant number want to see the scheme scrapped, this is not going to happen and businesses participating in the scheme need to continue to implement energy efficiency measures. It is encouraging to see the government has announced proposals to simplify the scheme, and we will be consulting with our customers on the plans and feeding responses back to DECC.”

The report also revealed ongoing scepticism about the government’s carbon emissions reduction targets – over two thirds (69%) of businesses believe that the target to reduce emissions by 2050 is unrealistic.

Among other findings of the survey, energy risk – particularly in terms of security of supply and supply costs - has been identified as the top risk major business energy users are facing, above legislation, security and health & safety. Added to this, many believe it is the government’s responsibility to help reduce instability through funding for self generation projects and demand management tools to bridge the supply gap and keep the nation’s lights on.

According to the report, when asked what was of most concern in relation to energy within their business, supply costs came top with a risk ranking of 6.6 out of 10, followed by security of supply with a ranking of 6.1.
For major energy users, increased regulation in the energy sector, the subsequent impact on reputation, and ambitious carbon reduction targets were identified as other high risk areas that are adding to the challenging picture businesses are facing.

However, despite risks associated with energy being identified as a top concern, one in six major business energy users still do not have a policy in place to manage it – although 91% do have one in place for health & safety, a more ‘traditional’ business risk.

David Cockshott, director of industrial and commercial markets at npower comments: “It is worrying that while businesses have identified that risks associated with energy - from security of supply to cost - pose a real threat to their immediate and future operations, many have admitted to not having a strategy in place to manage it. While many businesses have embraced the benefits of energy management and energy efficiency, when it comes to solutions to manage risk, there is less of a focus from organisations.

“This could be because they don’t believe the two main areas of concern – cost and supply - are something within their control. However, there are ways businesses can mitigate their risk, including investing in self generation or demand management technology.”

However businesses’ attitudes to investing in self generation as a means of shoring up security of supply, paints a picture of disengagement. Despite their concerns over energy risk, nearly two thirds (62%) say that investing in self generation and demand management technology is not a business priority. While 51% cite lack of finance as a barrier, and 38% say they simply do not have the resource to manage the project.

When asked who should finance investment in self generation, 61% of businesses of all sizes felt that the government should be responsible – only 18% believe it should be self funded. While the government’s proposed ‘Green Deal’ should go some way to assisting SMEs, it would not provide the same help for larger energy consumers.

David Cockshott continues: “While this year’s nBEI shows that more easy-to-implement energy efficiency measures and improvements are happening across businesses of all sizes. When it comes to large scale self generation projects or demand management initiatives, there is still some resistance.

“This is despite many businesses highlighting energy risk as their top concern for the foreseeable future. As demand on the grid starts to become a major issue, large energy users in particular will need to look at new ways to manage their energy more intelligently; whether through self generation or through demand management tools such as load management.”

David Cockshott concludes: “What is clear, however, is that businesses believe that investment in these areas should come from government. While the government is keen to support smaller companies through initiatives such as the Green Deal, the report shows that larger businesses believe the government should also look at ways to help them. For instance, to mitigate risk and reduce instability through incentivising self generation and demand management tools.”

The white paper,
Energy Risk Management for UK Business, can be downloaded here.


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