Policy paper

2010 to 2015 government policy: energy demand reduction in industry, business and the public sector

Updated 16 February 2016

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This publication is available at https://www.gov.uk/government/publications/2010-to-2015-government-policy-energy-demand-reduction-in-industry-business-and-the-public-sector/2010-to-2015-government-policy-energy-demand-reduction-in-industry-business-and-the-public-sector

This is a copy of a document that stated a policy of the 2010 to 2015 Conservative and Liberal Democrat coalition government. The previous URL of this page was https://www.gov.uk/government/policies/reducing-demand-for-energy-from-industry-businesses-and-the-public-sector–2. Current policies can be found at the GOV.UK policies list.

Issue

Large public and private sector organisations in the UK are sensitive to rising energy prices because energy can account for a large part of their operating costs. These sectors are also responsible for a significant proportion of the UK’s greenhouse gas emissions.

Our Carbon Plan states that if the UK is to cut its greenhouse gas emissions by 80% by 2050, energy efficiency will have to increase across all sectors to the extent that energy use per capita is between a fifth and a half lower than it is today.

To help achieve this, we are supporting industry, businesses and the public sector to use less energy, which will reduce the impact of rising energy prices.

Actions

CRC Energy Efficiency Scheme

The CRC Energy Efficiency Scheme is a mandatory reporting and pricing scheme to improve energy efficiency in large public and private organisations.

Enhanced Capital Allowances

Enhanced Capital Allowances (ECAs) let businesses that invest in certain energy-saving equipment write off the total cost of the equipment against their taxable profit as a 100% first-year capital allowance.

Climate Change Agreements

Climate Change Agreements (CCAs) give energy-intensive industries a discount on the Climate Change Levy (a tax on energy use in industry, commerce and the public sector) as long as they meet government-agreed energy efficiency improvement targets.

EU Emissions Trading System

The EU Emissions Trading System (EU ETS) puts a price on greenhouse gas emissions to create financial incentives for industry and businesses to reduce emissions. It also limits emissions from electricity generation and the main energy-intensive industries.

Green Deal

The Green Deal lets businesses and other non-domestic organisations pay for some or all of the cost of energy-saving property improvements through savings on their energy bills over time.

Smart Meters

The Smart Meter Programme will see gas and electricity smart meters that provide near real-time information on energy use installed in households and buildings so consumers can save money on their energy bills and reduce emissions.

Combined Heat and Power

Combined Heat and Power simultaneously generates usable heat and power in an efficient, single process, allowing for the use of by-product heat that would otherwise be wasted. For many organisations CHP offers the most significant single opportunity to reduce energy demand.

Electricity Demand Reduction project

Reducing electricity demand through being more efficient can help cut energy bills for consumers, reduce costs for businesses and bring down our emissions. The Energy Act 2013 contains provisions so that a financial incentive to encourage lasting reductions in electricity demand can be delivered through the Capacity Market. We ran a pilot scheme to test this approach.

Reducing the government’s carbon emissions

We’re making our procurement more sustainable and reducing our greenhouse gas emissions, waste and water usage. Read more about how DECC is reducing its own energy demand.

Salix Finance

Salix Financeis a government-funded scheme that provides interest-free loans to public sector organisations for energy efficiency improvements.

Guidance for local authorities and other public bodies

The Committee on Climate Change guidance for local authorities helps local authorities plan how to reduce carbon emissions in their areas.

We issued guidance on the Greenhouse gas emissions reporting and publishing process for local authorities. The purpose of this guidance is to encourage local authorities to report their emissions and help them submit and interpret the data.

Our Guide to financing energy efficiency in the public sector, updated in January 2015, explains the options that are available for public sector organisations to help fund energy efficiency measures. This updates the original version of the guide to financing energy efficiency in the public sector which was published in November 2012.

Model Energy Performance Contracts, published in January 2015, are an approach designed to assist public sector organisations retrofit their buildings by installing energy conservation measures to reduce carbon emissions and achieve substantial guaranteed annual cost savings. The improvements to the buildings are installed by Energy Service Companies that design and implement the energy conservation measures and guarantee the energy savings.

The Street Lighting Toolkit, launched in February 2015, has been conceived to assist local authorities to identify and implement street lighting or exterior lighting projects that will improve energy efficiency, reduce carbon consumption and generate significant financial savings.

This toolkit, which comprises a financial tool designed to help local authorities to calculate potential savings (financial, energy and carbon), and a separate document incorporating guidance on developing business cases, is being published by Local Partnerships and can be downloaded on the Local Partnerships website.

Background

In 2005 the Carbon Trust published a report (‘UK Climate Change Programme: potential evolution for business and the public sector’.) The report recommended how policy can be optimised to significantly reduce carbon emissions from businesses and the public sector while maintaining and enhancing the competitiveness of UK companies.

In response to this report, we announced the CRC Energy Efficiency Scheme in the 2007 energy white paper and launched the scheme in April 2010.

In May 2010 the Prime Minister announced that central government would reduce its carbon emissions by 10% within 12 months. The government exceeded this target (13.8%) by managing buildings more efficiently and investing in energy-efficient technologies and green information technology. You can see data on our performance.

From 2010 to 2011 we piloted the Local Carbon Frameworks programme to test different approaches and develop templates local authorities could use to reduce carbon emissions. The programme provided a practical basis for the Local Government Association’s Council Framework for Climate Change and its Climate Local initiative.

On 13 April 2011, Minister for Climate Change Gregory Barker wrote to chief executives of local councils in England requesting that each local authority measure and report its greenhouse gas emissions and publish a summary on its website by the end of July each year.

In July 2011 the Prime Minister David Cameron announced a 5-year commitment to reduce government greenhouse gas emissions by 25% between 2014 and 2015 (compared to a 2009-to-2010 baseline) across a broader scope of the central government estate and from business-related transport.

In November 2012 DECC published the Energy efficiency strategy, which sets out how we will maximise existing energy efficiency policy and realise the UK’s wider energy efficiency potential over the coming decades.

Who we’re working with

The Carbon Trust is a global organisation that helps businesses, governments and the public sector to save energy and reduce carbon emissions.

Salix Finance Ltd is a not-for-profit limited by guarantee company funded by the government to provide interest-free loans to public sector bodies for energy efficiency improvements.

The Environment Agency is an executive non-departmental public body that helps the government implement its environmental priorities.

Appendix 1: Electricity Demand Reduction

This was a supporting detail page of the main policy document.

Reducing the amount of electricity consumed through being more efficient can help cut energy bills for consumers, reduce costs for businesses and bring down our emissions.

The Electricity Demand Reduction (EDR) Project was initiated in 2011 to fulfil a commitment made within the Electricity Market Reform White Paper, to assess whether there is sufficient support and incentives available for households, businesses and organisations to use electricity more efficiently.

Our analysis indicated there is significant potential for using electricity more efficiently in the UK and that, even after taking account of existing and planned policy, we are unlikely to realise all of this potential.

In November 2012 we launched Options to encourage permanent reductions in electricity use (Electricity Demand Reduction), a consultation which sought views on what more might be done to incentivise, support and encourage the efficient use of electricity. The consultation closed on 31 January 2013 and our response was published on 21 May 2013.

In June 2013 we introduced provisions into the Energy Bill (now the Energy Act (2013) so that a financial incentive to encourage lasting reductions in electricity demand could be delivered through the Capacity Market.

We are running a pilot scheme to examine whether capacity savings resulting from the installation of more efficient electrical equipment could form part of the Capacity Market and to learn lessons for Government and stakeholders on the delivery of EDR schemes. Full guidance on the pilot can be found on the EDR Pilot page

Other publications and research

The following assessments and reports were published by DECC during the development of the EDR project

Appendix 2: Combined heat and power (CHP)

This was a supporting detail page of the main policy document.

CHP is a single, efficient process that generates usable heat and power (usually electricity) at the same time. It uses a greater proportion of the fuel energy, reducing the energy wasted as low-grade heat when generating electrical or mechanical power.

Find out more about how CHP works.

For many organisations CHP offers the most significant single opportunity to reduce energy costs. As heat is responsible for around a third of the UK’s greenhouse gas emissions, CHP can also help organisations improve their environmental performance. The Future of heating: a strategic framework for low-carbon heat in the UK explains CHP’s role in reducing these emissions.

Policy development

We are working under EU directives 2004/8/EC and 2012/27/EU to support and monitor the growth of the UK’s CHP industry. We are doing this with regulatory measures that ensure:

  • fair and easy access to the grid for smaller generators through Licence Lite
  • emphasis on CHP benefits in guidance for planning
  • revised guidance on power station consents and environmental permitting applications to highlight CHP possibilities

Incentives and support for CHP operators

The main financial incentives, assessment tools and guidance for CHP developers are:

Certification and standards

The CHPQA programme runs the Good Quality certification scheme, which awards CHP developers a kitemark so they can access these grants and tax exemptions:

  • exemption from the Climate Change Levy
  • eligibility for Enhanced Capital Allowances (ECAs)
  • preferential treatment under the Business Rates
  • enhanced eligibility for Renewables Obligation Certificates (ROCs) for renewable CHP schemes
  • eligibility for ROCs for the biomass element of fuel used in energy from waste on CHP plants

Further information

The CHPQA detailed guide offers guidance, application forms, useful contacts and other resources for CHP operators.

The CHP detailed guide provides access to a CHP scheme public database, an assessment tool and a map of heat loads.

The CHP helpline is available from Monday to Friday between 9am and 4pm. Telephone 0845 365 5153 / 0870 190 6196.

Appendix 3: CRC Energy Efficiency Scheme

This was a supporting detail page of the main policy document.

The CRC Energy Efficiency Scheme (or CRC Scheme) is designed to incentivise energy efficiency and cut emissions in large energy users in the public and private sectors across the UK, together responsible for around 10% of the UK’s greenhouse gas emissions. Participants include supermarkets, water companies, banks, local authorities and all central government departments.

Overview

The scheme is designed to target emissions not already covered by Climate Change Agreements (CCAs) and the EU Emissions Trading System (EU ETS) features a range of drivers to encourage organisations to develop energy management strategies that promote a better understanding of energy usage and to take up cost-effective energy efficiency opportunities.

Organisations that meet the qualification criteria are required to participate, and must buy allowances for every tonne of carbon they emit.

The scheme is expected to reduce non-traded carbon emissions by 16million tonnes by 2027, supporting our objective to achieve an 80% reduction in UK carbon emissions by 2050.

As a devolved scheme, DECC has developed CRC policy in partnership with the Scottish Government, the Welsh Assembly Government and the Department of the Environment Northern Ireland.

How the CRC works

Qualification

Qualification for the scheme is based on electricity usage. For Phase 2, organisations will qualify if, during the qualification year, they consumed over 6,000 megawatt-hours (MWh) of qualifying electricity through settled half-hourly meters.

Organisations that meet the qualification threshold must register using the CRC Registry, which is administered by the Environment Agency. Qualifying organisations have to comply legally with the scheme or face financial and other penalties.

A summary of steps to determine whether your organisation qualifies for participation in the CRC and more information on qualification can be found on the Environment Agency CRC web pages.

Compliance requirements

Organisations which participate within the CRC are required to monitor their energy use, and report their energy supplies annually. The Environment Agency’s reporting system applies emissions factors to calculate participants’ carbon dioxide (CO2) emissions on the basis of this information.

Participants must purchase and surrender allowances for their emissions. Allowances can either be bought at annual fixed-price sales, or traded on the secondary market. One allowance must be surrendered for each tonne of CO2 emitted.

The allowance price in the first phase was £12 per tonne of CO2.

In the current phase, participants have the option of buying allowances in advance in the cheaper ‘forecast sale’ at the start of a compliance year, or in a more expensive ‘compliance sale’ after the end of the year.

For the current phase, the following prices apply:

CRC Scheme Year Forecast Sale Price Compliance Sale Price
2014/15 £15.60 £16.40
2015/16 £15.60* £16.90

More information on reporting and allowance sales is available on the Environment Agency CRC web pages.

*DECC (via its payment provider SSCL) is writing to CRC Energy Efficiency Scheme participants who purchased allowances in the April 2015 forecast sale to notify them that they will be entitled to a refund of 50 pence per allowance purchased in that sale. This was due to an administrative error. The table above has been amended to reflect the correct forecast sale price for 2015/16 (£15.60). Only those participants who purchased allowances in the April 2015 forecast sale should receive details of next steps from SSCL.

Further information about the refund and next steps can be found in the Q&A Document.

Management of the CRC Scheme

The Environment Agency administers the CRC Scheme on behalf of DECC the UK as a whole. It runs the UK-wide registry, and is responsible for all matters related to registration, reporting, and allowance sales within the CRC Scheme.

Auditing and enforcement functions are carried out by the Scottish Environment Protection Agency (SEPA) in Scotland, the Department of the Environment Northern Ireland in Northern Ireland, and Natural Resources Wales (NRW) in Wales.

Simplification of the CRC Scheme

Following a public consultation we published proposals to simplify the CRC Scheme in December 2012. These proposals will:

  • radically reduce the administrative costs of participants by 55%, which equates to £275m up to 2030
  • reduce scheme complexity and overlap with other energy efficiency schemes, and provide greater business certainty

The CRC Energy Efficiency Scheme Order 2013 came into force on 20 May 2013, following approval by Parliament and the devolved legislatures.

The majority of the proposals were introduced at the start of the second phase, in 2014 with a few still to come into force by April of 2014.

In November 2013 we consulted on our proposal to deliver the commitment given in the government response on simplifying the CRC Energy Efficiency Scheme to consider how the CRC could incentivise the uptake of onsite renewable self-supplied electricity. In addition, to introduce an exemption to energy supplied to metallurgical and mineralogical processes, which arose from changes to the Climate Change Levy, announced by the Chancellor in the 2013 Budget.

The Government response to this consultation was published on 25 February and The CRC Energy Efficiency Scheme (Amendment) Order 2014 came into effect from 1 April 2014.

Annual report publication

The Environment Agency has published the second Annual Report Publication (ARP) for 2013-14 under the legislation establishing the CRC scheme.

This allows publication of information on the basis of participants’ annual reports, plus details submitted when they registered for the scheme.

The ARP is made up of two parts:

  • spreadsheet of information for each participant
  • a narrative report to provide context and explanation on the content of the spread sheet and accompanying information on the CRC scheme

The report represents the second release in a new format of information drawn from the annual reports of CRC participants. It replaces the Performance League Table as part of the government’s wider simplification of the CRC scheme.

Case studies

Read our case studies to find out how participants in the CRC Scheme are managing their energy use to improve energy efficiency.

Guidance documents

Official guidance on all aspects of complying with the CRC Scheme is available from the Environment Agency web pages.

Appeals guidance

Appeals guidance is available:

Guidance on the CRC repayment mechanism for surplus allowances

DECC has issued guidance on the CRC repayment mechanism for surplus allowances.

The guidance outlines the conditions under which requests for repayment in respect of surplus allowances will be considered, and the process by which participants should make a request. A repayment request form is included to facilitate the submission of repayment requests. DECC will only make payment where a refund request has been able to be verified.

Appendix 4: Climate Change Agreements

This was a supporting detail page of the main policy document.

Climate Change Agreements (CCAs) are voluntary agreements that allow eligible energy-intensive sectors to receive up to 90% reduction in the Climate Change Levy if they sign up to stretching energy efficiency targets agreed with government.

A total of 53 industrial sectors across more than 9,000 sites have signed up to targets. Targets apply to participating sectors from 2013 to 2020, with the scheme running until 2023. Here is a list of the agreed sector targets and a list of sites that are participating in the CCA scheme. The estimated carbon and energy savings of the CCA scheme is set out in the 2 April 2013 press release.

The government has introduced a 100% exemption from CCL for energy used in certain energy-intensive (metallurgical and mineralogical) industrial processes. All businesses which hold a CCA and carry out these processes can continue to participate in the scheme. These businesses can claim 100% relief for those industrial processes now exempt from CCL and, where applicable, CCA discount on all other industrial processes.

Target review 2016

In October 2014 we published a discussion paper setting out the government’s proposals for the 2016 review of Climate Change Agreements targets and invited views from stakeholders on the proposed approach and methodology. This paper also included a call for evidence to inform the review of sector commitments. The views of stakeholders have been considered, information for the call for evidence has been collected, and a Government Response has been published.

CCA guidance and policy documents

The Environment Agency is the UK-wide CCA scheme administrator. The Environment Agency CCA webpages have further information on how CCAs work including guidance for businesses on managing a CCA and on setting up a CCA.

Alongside the Environment Agency’s CCA operations manual, the government has produced policy documents that underpin the operation of the CCA scheme.

The government carried out consultations on simplification of the CCA scheme in March 2012, January 2012, September 2011, March 2010, December 2009 and March 2009.

Previous CCA scheme

The previous CCA scheme began in 2001 and expired on 31 March 2013. The government published the performance of CCA participants at various milestones from 2001 to 2012.

Further useful information on the previous CCA scheme can be found on the National Achives of the DECC: CCA webpages.

Legislation

The legislation that supports CCAs is available on the Legislation.gov.uk website:

Appendix 5: Energy Technology List (ETL)

This was a supporting detail page of the main policy document.

Buyers: find and compare energy-saving and energy-efficient products on the ETL.

If you’re a business that pays income or corporation tax, you’ll be able to claim 100% first year capital allowance on a product if it’s on the ETL at the time of purchase. If it’s been taken off the list, or is added at a later date, you will not.

For more details, see ETL: information for purchasers.

Manufacturers and suppliers: register and apply to add your product to the ETL.

For more details, see ETL: information for manufacturers.

The ETL (or Energy Technology Product List, ETPL) is a government-managed list of energy-efficient plant and machinery, such as boilers, electric motors, and air conditioning and refrigeration systems that qualify for full tax relief. For a product to be on the ETL, it must meet specific energy-saving or energy-efficient criteria. It is part of the Enhanced Capital Allowance (ECA) tax scheme for businesses.

The Department of Energy and Climate Change (DECC) annually reviews the technologies and products that qualify for inclusion. The ETL is managed on behalf of DECC by the Carbon Trust.

Products included

Air to air energy recovery
Automatic monitoring and targeting (AMT) equipment
Boiler equipment
Combined heat and power (CHP)
Compressed air equipment
Heat pumps
Heating, ventilation and air conditioning (HVAC) equipment
High speed hand air dryers
Lighting
Motors and drives
Pipework insulation
Refrigeration equipment
Solar thermal systems
Uninterruptible power supplies
Warm air and radiant heaters

For more details about eligible product types and the amount of energy they save, see the technology factsheets about ETL product types.

Budget 2015

On 18th March 2015 the Chancellor announced a number of changes to the technologies supported under the ETL. These changes are expected to come into force in late summer/early autumn. Further information will be provided on the site when the implementation date is confirmed.

The changes include the addition of a new technology for Waste Heat Energy Recovery; a significant change to the qualification requirements for Packaged Chillers; and the modification of ECA scheme criteria for 8 of the existing categories.

Budget 2015 criteria and technology changes

Enhanced Capital Allowance (ECA) scheme

The ECA scheme means that a business can invest in energy-saving plant or machinery that might otherwise be too expensive.

The first year allowances let businesses set 100% of the cost of the assets against taxable profits in a single tax year. This means the company can write off the cost of the new plant or machinery against the business’s taxable profits in the financial year the purchase was made.

An ECA is claimed through a business’s income or corporation tax return in the same way as any other capital allowance. HM Revenue and Customs is responsible for the tax-related aspects of the ECA scheme.

Contact

Email: ECAQuestions@carbontrust.co.uk
Telephone: 0300 3300657

Water Technology List (WTL)

The Department for the Environment, Food and Rural Affairs leads on the ECA scheme for water efficient technologies. It publishes the water technology criteria and keeps the Water Technology List (WTL) up to date.

ECAs for cars and refuelling

Besides plant and machinery listed on the ETL and the WTL, businesses can claim ECAs for the purchase of:

  • low-carbon dioxide emission cars
  • natural gas and hydrogen refuelling infrastructure

The attached links to HMRC guidance may be of use:

If you need to speak to HMRC for more detailed advice you can do so via the numbers provided:

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