Archive for the ‘Energy efficiency’ Category

Solar the cheapest form of energy?

A December report by Bloomberg New Energy Finance found that unsubsidised solar is beginning to see lower costs than wind and other forms of energy, becoming one of the cheapest forms of energy. While the lowest solar costs are being seen in countries such India and Chile (where it is now about half the cost of coal), 2017 looks to be the year that solar becomes truly mainstream.

Windy up north

Not to be outdone, wind generated enough power to supply Scotland for four straight days at the end of December (including Christmas day itself), the longest period when wind supply has matched demand.

The strong end to the year resulted in wind power contributing more to the UK supply in 2016 than coal for the first time, 11.5% of total UK output compared to 9.2%.

However, the government’s withdrawal of subsidies for new onshore wind power has resulted in criticism that one of the lowest cost forms of generation is being denied the support given to far more costly technologies including offshore wind and nuclear.

2017 Christmas in the dark?

The British Infrastructure Group has warned that the National Grid’s buffer between supply and demand could fall to as little as 0.1% next winter, resulting in power failures, particularly if there’s unusually severe weather.

At the moment the supply-demand margin is 1.1%, increasing to 6.6% if emergency measures are implemented.

These measures include paying power stations that would otherwise be closed to be kept on stand-by, businesses and other large consumers using emergency generators and old coal-powered stations being put back into operation, all of which add around £30 a year to a residential energy bill.

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New research indicates that landlords could have problems renting property that falls below new minimum energy efficiency standards.

The Energy Act requires new leases or lease renewals from April 2018 (and for all rented property from April 2023) to have a minimum EPC rating of ‘E’, with properties required to meet at least this threshold before landlords are able to let the space.

According to the Cushman & Wakefield report around 20% of commercial property currently has EPC ratings of F or G, making it unlawful to rent them from April next year, with 19% rated E. Owners of non-compliant property could be fined up to £150,000.

While there will undoubtedly be a cost to improving a building’s EPC rating it’s important to take the longer-term view that upgrading a facility protects, if not enhances, its value, while also making it more attractive to tenants increasingly conscious of operating and service charge costs.

There are a number of exceptions from the regulations, though owners will have to sign-up to a register opening in October 2016.

 

 

With the 5 December 2015 deadline fast approaching the Environment Agency has revealed that only 150 of the estimated 10,000 eligible business have confirmed their compliance.

All UK business with more than 250 employees or £40 million annual turnover and a balance of sheet of over £34 million are required to complete an energy audit. Those failing to meet the deadline could be liable for fines of up to £50,000 plus £500 per day for every day of non-compliance.

With fears that there aren’t enough certified ESOS Lead Assessors companies to meet the backlog, the first priority should be to appoint an Assessor, ideally one experienced in your specific sector who can bring value beyond merely meeting the regulatory requirements.

While there’s speculation that fines could be avoided for late compliance as long as progress is being demonstrated, that’s a risky approach that leaves open the possibility of substantial fines.

The Energy & Carbon Management team are proficient at helping businesses achieve ESOS compliance so do get in touch. In addition to achieving compliance and avoiding penalties, our lead assessors will identify opportunities to reduce energy use, cut consumption and save money.

Government plans to improve the energy efficiency of commercial rented property could have significant implications for the commercial property market.

The proposal put before Parliament under the provisions of the 2011 Energy Act would apply to new leases or lease renewals from April 2018, and for all rented property from April 2023.

The key measure is that the minimum energy efficiency standard will be an EPC rating of ‘E’, with properties required to meet at least this threshold before landlords are able to let the space.

According to existing EPC rating data, around 18% of leased properties currently have ‘F’ or ‘G’ ratings and 20% ‘E’. With EPC efficiency standards expected to tighten in the long-term, it’s possible that properties currently rated ‘E’ may be caught by the new measures.

Implications

If the new efficiency standards are not met it’s possible that some properties may become un-letable after 2018, or that rents – and asset values – will be under heavy pressure.

Acting early by identifying which properties are rated ‘F’ or ‘G’ means that there’s time to assess your options and incorporate the implementation of energy efficiency measures into your asset management plan.

Landlords will need to weigh the costs of upgrades against those of doing nothing, which could see reduced rents and asset values. Alternatively, selecting the right efficiency measures should improve asset values while making properties more attractive to tenants.

First steps

Using the results of the current EPC advisory report, or ideally a comprehensive energy audit, the first step should be to identify at-risk properties and rank the recommended energy efficiency measures by effectiveness, cost and payback period.

For instance, lighting upgrades usually have 2-3 year payback periods and are relatively straightforward to implement, and may shift a property rating up one score, while larger investment in windows and insulation will have a longer payback but make the property easier to rent and future-proof against future efficiency regulations.

Other considerations include:

  • how will the landlord work with tenants to implement the efficiency works?
  • are any of the costs re-chargeable under the terms of the lease?
  • or will the landlord recover costs through an uplift in the service charge?

While tenants may baulk at the prospect of contributing to efficiency improvements, they will benefit in terms of reduced operating costs and an improved working environment. In these situations a thoroughly assessed and costed efficiency proposal will be vital to selling the benefits to tenants (current and future).

Cost or benefit?

While there will undoubtedly be a cost to improving a building’s EPC rating it’s important to take the longer-term view that upgrading a facility protects, if not enhances, its value, while also making it more attractive to tenants increasingly conscious of operating and service charge costs.

Exceptions

There are a number of exceptions to the regulations for properties falling below the ‘E’ rating, including:

  • lease term for less than 6 months or more than 99 years
  • required measures are not cost-effective either with a 7-year payback or under the commercial Green Deal ‘golden rule’ which states that energy savings made in a 25-year period must be equal to or more than the cost of implementing those savings
  • despite reasonable attempts, the landlord is unable to obtain the consents needed to conduct the work (eg from tenants, lenders, listed status restrictions)
  • the energy savings measures would decrease the value of the property by 5% or more or that wall insulation would damage the property

The Department of Energy and Climate Change (DECC) will operate a register of landlord notifications to seek an exemption, which will also be available to local authorities, who in turn will have responsible for enforcing the regulations.

A recent npower survey found that 49% of UK manufacturers are unaware of the new Energy Savings Opportunity Scheme (ESOS), while 69% feel uninformed about the scheme’s requirements.

Organisations meeting the ESOS criteria must complete an energy audit by 5 December 2015 or face fines of up to £90,000. The policy is designed to help businesses cut energy use as part of the UK’s commitment to cutting carbon emissions.

While the audit is mandatory, implementing the efficiency recommendations is not, which leaves ESOS at risk of being seen as a costly tick-box exercise, rather than something with the potential to reduce energy consumption at the average business by 20%.

Long-term benefits of ESOS

ESOS will only turn from cost to benefit if the recommendations are implemented, so it’s important to consider your capacity to deliver these recommendations when appointing your ESOS Lead Assessor.

A ‘full service’ Assessor will help to maximise savings through impartial advice on the best solutions tailored to your operational and financial criteria that:

  • improve your bottom-line
  • reduce energy consumption
  • future-proof your business against rising energy costs
  • make premises more comfortable and efficient for your staff and customers

Energy management system

With ESOS now on a 4-yearly cycle it’s also worth establishing an energy management system that makes future compliance straightforward, particularly energy data collection and an asset register that includes key ESOS data.

A robust system means that next time round ESOS can become a stock-taking exercise that measures progress, highlights new opportunities and maintains efficiency momentum, rather than a costly one-off project that has little long-term benefit.

To gain a clear idea of the costs and benefits of ESOS do get in touch.

 

The latest energy statistics show that the average person in the UK is using 10% less energy than they were five years ago, despite a (slightly) growing economy according to analysis from the Energy Savings Trust.

Advances in technology and an increasing focus on energy efficiency seem to have broken the link between growing wealth leading to higher energy use, despite an ever-increasing number of gadgets, larger TVs and so on.

According to the BBC report, EU regulations on household appliances have played an important part, with, for example, the latest A-rated fridge-freezer using 73% less energy than a 20-year old model. The ban on old-style incandescent light bulbs and fast-improving LED lighting technology is also having an impact. According to the Committee on Climate Change, the average household energy bill would be around £165 higher between 2004-13 if these savings had not been made.

Significant improvements in gas heating and hot water boilers coupled with increased loft and cavity wall insulation mean that the typical household uses 25% less gas than 25 years ago.

The overall impact is that the UK’s energy use is lower than it was in 1970, despite the economy being twice the size.

Government energy policies, which have played a vital role in this shift, may not be the most popular (green taxes etc), but this analysis clearly shows the individual and national benefits of proactive energy efficiency – and for most businesses there are still substantial savings to be made.

The independent Committee on Climate Change (CCC) has released its latest projections on the impact of carbon budgets on UK energy bills, which forecasts relatively low increases in household energy bills, but higher costs for business.

According to the CCC, low carbon polices account for approximately 26% of commercial energy bills; these policies are set to increase bills by between 15-48% between 2013-30, however, with a central estimate of a 31% increase.

Despite the increasing proportion of energy costs accounted for by government policies, the CCC also found that the main cause of rising energy prices since 2004 is the increased cost of gas coupled with investment in the distribution and transmission infrastructure.

Post-2030, it’s expected that the cost of green policies will fall during the 2030s as clean energy support contracts being signed over the next five years begin to expire.

The main rationale behind the investment in low carbon energy generation is insurance against the potential costs of climate change: while green policies will add about £155 to a dual fuel household bill by 2020, the costs of not implementing these policies could be far higher.

In the meantime, the best way to offset these inevitable increases is through energy efficiency measures.

 

 

The new Energy Savings Opportunity Scheme (ESOS) requires UK-based organisations that meet the qualifying criteria – 250+ employees, or turnover of €50m+ and balance sheet of €43m plus – to complete an energy audit by 5 December 2015. The Environment Agency has released details of 13 approved registers for Lead Assessors, but it’s been reported by Energy Live News that just 112 people are currently qualified to approve energy audits for around 10,000 UK organisations. Companies must appoint a Lead Assessor to oversee the ESOS process and confirm that the business has been audited in a compliant fashion. The Lead Assessor may be external or internal as long as they are on the approved register of assessors list. Most companies will have to rely on external consultants, however, which means there’s a risk that demand for Assessors will exceed supply. While the Environment Agency are confident the number of approved Assessors will increase fairly quickly to 1,500+, it’s important that ESOS-qualified organisations start the audit process now as waiting could be risky

  • you’ll need 12 months of accurate energy data, which is much easier to start collecting now than trying to find at a later date
  • there will be pressure on ESOS Lead Assessors this time next year, which in turn could push up the cost of compliance
  • leaving it to the last minute means you may have no choice but to do an expensive full ESOS audit, rather than taking your time to identify the most effective route to compliance, building on existing energy savings measures/policies
  • undertaking an early ESOS scoping assessment will ensure that you opt for the most cost-effective solution, but also the one that identifies the most commercially and financially viable energy savings

The fines for qualifying organisations that do not submit a compliant audit could potentially reach £90,000, incentive enough to start the ESOS process now.

Manufacturing companies in the UK are expected to increase investment in energy management technology according to a report from Siemens, with 79% of UK manufacturers now seeing energy as a business critical issue.

“Energy, its use and its cost, will continue to be a key battleground for manufacturing organisations wishing to remain competitive as competition on a local, national and international stage accelerates”

The Siemens research found that self-generation was the primary area of investment, which serves the multiple objectives of reducing costs while delivering a decent long-term payback and reducing vulnerability to future supply interruptions.

While the importance of mitigating rising energy costs is accepted, barriers to investment remain, ranging from uncertain ROI, other priorities and the need for capital outlay, often leaving a disconnect between intentions and action.

Price risks

Just as important as reducing demand is managing the risk of volatile international energy markets, and ensuring that global trends and unexpected events (eg the Ukraine-Russia stand-off) don’t hit the bottom-line and competitiveness. This requires a proactive approach

  • monitoring energy markets
  • timing contract renewals to avoid market spikes
  • choosing the right contract type (fixed v. flexible) depending on appetite for risk
  • ensuring you’re comparing like-for-like when assessing energy contracts (eg implications of fixed price and pass-through contracts)

This can be a pretty time-consuming process requiring specialised knowledge, which many companies don’t have the time or resources for, which is why around two-third of businesses use energy consultants/brokers.

 

One-third of commercial properties could fail to meet new energy efficiency standards being introduced in 2018, making it difficult for landlords to let these properties.

A DECC consultation proposes to make it mandatory for commercial properties with an F or G EPC rating to have efficiency improvements made before they can be let from 2018, which they predict could impact 18% of properties.

However, a recent report by consultants WSP predicts 35% could be affected due to a tightening of EPC scores over time. For instance, a building receiving an E rating today, might receive an F rating by 2018. Such a result would have a significant impact on the landlord’s ability to rent the building, while also impacting its value.

There are two immediate actions that can be taken to mitigate this risk however…

  • ensure that you have an up-to-date and accurate EPC that reflects any improvements, and is not based on old assumptions
  • focus on energy-efficient lighting, which has a positive impact on an EPC rating as well as a strong ROI

Improving the efficiency of a commercial property has other benefits including making them more attractive to potential tenants and improved investment value.