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15 Jun 2011
Amid all the budgets that were cut owing to the recent recession, environmental spending has managed to stay on the boardroom table. And investment in low carbon is becoming ingrained in the psyche of most big companies.
The mood of uncertainty that greeted the budget cuts in the UK Government’s Spending Review announcements last October meant the news that it was upping its spending on the environment by 21 per cent was somewhat lost. Within the Department of Energy and Climate Change (DECC) itself, capital spending is to increase by 41 per cent in real terms.
Up to £1bn of investment will go to create one of the world’s first commercial-scale carbon capture and storage demonstration plants; £860m will be found to launch the Renewable Heat Incentive in 2011-12 to drive a ten-fold increase in renewable heat through technology such as biomass boilers, air- and ground-source heat pumps and biomethane; £200m is being committed to fund low-carbon power generation methods such as offshore wind farms and a green investment bank is to be created with £1bn of funding.
The rate of this sort of investment affects the speed of change but not the direction of travel, which is governed by the Climate Change Act 2008. But, while the government can offer incentives and legislate, senior politicians realise that success will come only if the private sector is properly on board. That means ensuring that supportive moves, such as a floor price for carbon, succeed in raising confidence. It is also important to show that investment in low-carbon services, goods and utilities is money well spent and that laggards are likely to face increasing penalties.
In reality these signals only underline a truth that is becoming universally acknowledged: that there is a great deal of business sense in working to reduce carbon and the cost of carbon.
But what are businesses doing on the journey towards a low-carbon future? Mike Doble, principal consultant, carbon management, at Atkins company Faithful+Gould, believes that many are still struggling to sort out their priorities.
“Historically, organisations tend not to respond particularly quickly to price signals on energy,” he says. “It’s often seen as a fixed overhead, which is completely untrue. Most organisations will have a lot of scope to save energy and money – there is still a lot of energy being wasted.”
How much is “a lot”? Doble believes the average organisation can look to save between 10 and 20 per cent relatively easily through “tried and tested good practice” – measures such as low-energy lighting, powering down computers, optimising heating and air-conditioning and switching off electrical systems at source. To make sense of these activities, organisations need better energy survey data so that they can benchmark their performance and identify the areas of greatest potential improvement.
Organisations can also structure emissions reduction more effectively. The Carbon Trust Standard certification scheme, for example, was conceived as a way for all organisations to tackle their emissions by measuring, managing and then reducing them over time. Atkins was the first engineering consultancy to achieve this standard. On average, businesses can look for an initial 12 per cent cost saving from implementing the standard and help to boost their reputation in the process.
Organisations that are successful at achieving the standard can then communicate their carbon credentials to stakeholders, investors and customers. This translates into benefits, such as more customers and increased customer and staff loyalty; more interest from ethical investment fund managers and venture capitalists; and better supply chain relationships. Already, almost 500 UK organisations are certified and the Carbon Trust has now developed an online approach tailored to making the scheme more accessible to SMEs.
Energy efficiency measures encompass actions ranging from changing plant and equipment to more energy efficient equivalents, to improving building fabric with additional insulation and better air tightness; to using new buildings constructed with more carbon conscious materials and energy-optimised designs.
In tandem with energy efficiency, organisations can also look to use lower carbon energy. In this respect, the UK government is offering an incentive investment with a premium payment to those that are micro-generating energy through its Feed-In Tariffs scheme and now the Renewable Heat Incentive. Such investments have the attraction of delivering income streams as well as lower energy costs. Atkins, for instance, is working with a number of developers to assess the deployment of photovoltaics (PV) across their building portfolios. According to Sean Lockie, sustainability director for Faithful+Gould: “Installing a PV roof to an average home costs about £12,000 and until now the long payback time has meant it hasn’t been a viable option for most UK homeowners. However, the new tariff will improve the return on investment to such an extent that installing PV will become a sensible option for householders and businesses alike.”
The impact of investment in carbon reduction can be significant and easily self-financing. When Barclays rolled out one of Atkins’ “carbon tools” – Remote Technology (ArT) – to its 350 sites, the retail bank saved more than 12,000 tonnes of carbon in year one. That translated into 71 per cent of its annual energy reduction target, equalling over £1m in savings since its installation, or just over £400,000 per year.
Phil Whiting, principal sustainability consultant, looks after ArT for Atkins. He explains that ArT monitors building energy consumption and reports on it, but, unlike other monitoring products on the market, ArT also lets organisations change how energy is used at remote sites. That makes a big difference.
“With ArT you can actually turn your boiler off or turn down the air conditioning remotely, so it answers the question: ‘What do I do with meter readings now I have them?’” says Whiting. “It’s about having one estate management product rather than having to reinvest in another piece of kit to actually make the savings.”
On average, ArT customers are seeing a 34 per cent reduction in energy consumption. That means they see a return on their investment within two years. Whiting also notes there are additional operational benefits from ArT. When a server room is overheating, or a boiler misfires, the system can send alerts that enable operators to take action before the impact is acute.
Atkins uses ArT in 12 of its own buildings and produces energy savings of up to 40 per cent – depending on how efficiently the building was running before ArT was installed.
Many organisations are already choosing to reduce carbon voluntarily but thousands more UK firms will now have less choice in the matter because of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC). This is the UK’s mandatory emissions scheme for companies that consumed more than 6,000MWh of half-hourly metered electricity in 2008.
The scheme† was significantly reconfigured in the Government’s 2010 Spending Review. Most notably, “revenue recycling”, where firms doing well on reducing carbon were rewarded at the expense of other scheme members, will no longer take place. From 2012, participants will have to buy allowances equalling the volume of their emissions in the previous 12 months (at the moment each tonne of emissions is priced at £12), with no chance of the money being returned to them.
“The changes will certainly increase the cost of legal compliance quite significantly; at the same time it will give participants more certainty as to costs,” says Doble.
The changes have also uncoupled the link between “early action” and the prospect of receiving more allowances back.
Atkins is helping clients get to grips with the CRC – in terms of both ensuring they are compliant – working with them to validate data and managing the submissions process – and helping them to mitigate their level of liability cost effectively.
Given increasing legislation and public pressure to demonstrate a commitment to the low carbon economy, there are financial reasons for organisations to deal with the situation. But, with the right tools, the results could have long-term benefits for company and climate alike.
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