CRC: confusion ahead

Instead of its intended role - to help the UK do its bit to roll back “global warming” - the CRC Energy Efficiency Scheme could soon become better known as a new government money-raising exercise that, like the hidden traffic camera, penalises the unwary more than the guilty.
Just weeks before the 30 Sept deadline, it seemed that any number between 1,000 and 2,000 companies will fail to register for the scheme and so be liable for fines of £5,000, plus £500 for every subsequent day of non-registration, as well as having to fund the CRC carbon-trading mechanism.

When performance league tables are published in October 2011, companies in the bottom rankings will only get 90% of their credits back while those at the top will receive a 10% bonus, explains Steve Ruddell, ABB’s UK energy spokesperson. This incentive, he added, will ramp up in subsequent years from +/-25% in Year Two, rising annually to reach +/-50% by Year Five.

Risking reputations

Non-registrants risk reputational damage even before the CRC performance league table - now expected to list around 3,500 organisations - is published in October 2011.

Details of all registered participants are listed on the Environment Agency (EA) website. The agency also seems to be considering the option of identifying companies that fail to register by the end of September.

“We will not be publishing before the deadline a list of those organisations that have not yet registered,” said an EA spokesperson. The hope, she added, is that “there will be no need to fine or name-and-shame anyone because we are working with businesses to help them get it right”.
The low response rates have been linked to general confusion surrounding the scheme, which lumps process plants and water treatment facilities in the same group as hotels, swimming pools and local authority buildings. Government ministers and the EA have also been accused of a lack of appreciation of the difficulties created by the scheme.

The official naivety was reflected in a recent comment from Tony Grayling, head of climate change and sustainable development at the EA, who said: “Carbon reduction doesn’t need to be complicated or expensive. There are simple and inexpensive steps every organisation can take to cut their energy consumption - from motion sensors for lighting in offices to higher-efficiency motors in manufacturing.”

Industry has a vastly different view, as highlighted by UK energy consultancy M&C Energy Group, which has strongly criticised the progress made in connecting with participants in the CRC scheme. The company has also questioned the government’s effectiveness in communicating impending deadlines.

“UK energy and climate change minister Greg Barker has admitted that the complexity of the scheme may have deterred some organisations in registering,” said Chris Davenport, director at M&C Energy Group. “There is simply no ’may’ about it. [We have] seen first hand how this legislation is leaving businesses cold.”

According to Barker, many organisations do not know whether CRC applies to them and therefore run the risk of missing the deadline and incurring significant fines. Likewise, many will not have established the full extent of their organisational structure, as required for full
“Due to the complex nature of the scheme, an organisation cannot predict with accuracy where they will be in the league table of all participating organisations,” added Barker. “This unknown makes investment criteria for capital to spend on efficiency improvements, as well as budgeting for the cost of the scheme, very difficult.”

Stuart Hutchinson, group sales and marketing manager at Deritend, said: “Our industry is inherently ’energy-heavy’. The majority of the large manufacturing and engineering companies use far more energy than the 6,000MWh limit set by the CRC.
“Yet we are seeing a distinct lack of motivation, and indeed a lack of understanding, from many of these firms to prepare for the reality of the CRC. Unless they do something quickly, they risk not only a fine for failing to register in time, but significantly larger sanctions further down the line as well.”

According to Hutchinson, this poor take-up to date is indicative of the fact that many companies, especially in industrial sectors, are unsure of how to make their businesses more energy efficient in the long term.

“Compliance with CRC set aside, most business leaders acknowledge the benefits that greater energy efficiency can provide, and are striving to achieve this ’greener’ way of working,” said Hutchinson. “But for businesses in traditionally ’dirty’ sectors such as manufacturing and engineering, it is often easier said than done.”

The need for more advice is highlighted by the findings of two recent ABB-sponsored surveys showing that most engineers rated “turning off the lights” or “changing energy supplier” as their preferred energy-saving options, while “installing drives and motors” featured as a low priority.
“There are still too many organisations who have not yet embraced their benefits,” said ABB’s Ruddell. “When you consider that 65% of all energy consumed in industry is by electric motors and around only 5% have variable speed drives fitted, then we still have a long way to go.”

The energy spokesman believes that more than 50% of the now 3,000-4,000 participants in the scheme are in process-related activities captured in the CRC net. Typical, he said, is the water and wastewater sector, which should be looking to upgrade its often dated equipment with energy-saving technologies. For a water company consuming around 270GWh a year, he estimated that 80% of its usage (more than 215GWh) is from the pumping of water and sewage.

Meanwhile, some industry observers link the low response to the CRC scheme to complacency among companies regarding its enforcement. This, they believe, is based on experience with other recent legislation, such the ATEX safety regulations.

Meeting obligations

But, countered Ruddell: “ATEX was mandatory, but you still had to be caught, either by a HSE spot-check, or an incident at your facility. With CRC you are monitored by the utilities, so it’s a case of when, rather than if, you get caught.”

But the real driver for CRC will revolve around managers’ concerns about the financial and reputational fall-out from finding their organisations in a lowly position when the CRC league tables are published next year.

Asked if the CRC had impacted ABB sales, Ruddell said: “Nothing massive. We were not expecting a sudden uptake. Some are saying we do need to get new drives (for example, due to the CRC) and we can get a bit of money off it now.”

ABB is incentivising current users of drives and motors by offering at least 17.5% discount off list price for those who swap their old products from any manufacturer for new ABB drives and motors. The company has also launched a Survival Kit, which includes a six-step CRC plan that describes what is needed to successfully meet a CO2 obligation.