Demand for energy efficiency technology set to soar as UK firms face impacts of Government’s changes to carbon Legislation

Industry comment

Published: 27 October

Author: Alan O'Brien

Type: Industry comment

Year: 2010

Government’s u-turn on Carbon Reduction Commitment will result in Treasury pocketing £1 billion per year from participating organisations. Industry experts claim changes have increased the net cost of carbon for all participants by 10 times.

Uptake of energy efficiency technology is now the only option for organisations to minimise the increased costs. Changes may be the “stick” to engage FD’s to increase investment in low carbon technologies.

The Government’s changes to the Carbon Reduction Commitment Energy Efficiency scheme (CRC), announced in the recent Comprehensive Spending Review, is to be redesigned.

The participants cost for each carbon emission will not be reimbursed to top performers - instead, all monies will go straight to the Treasury, generating £1bn a year.

Previously, the scheme was revenue neutral for the Treasury and the capital would have been redistributed among UK businesses and local authorities which demonstrated the greatest reductions in carbon emissions and their position in the league table.

For some time the industry has called for the CRC to be simplified, which the Government has delivered. However the increased costs were not expected.

Alan O’ Brien, Sabien Technology chief executive, said: “CRC participants were not expecting this. Many of the 3,000 plus participants will need to revisit their CRC strategies as the cost implications become apparent.

“In one surprise swoop the cost of the CRC has rocketed. For example, one of the UK’s largest UK retailers is claiming the CRC costs for their organisation has now increased from £10m to £20m a year.  Some of the early action metrics organisations have invested in become less important as participants accelerate the implementation of energy efficiency technology,” said O’Brien.

There is no doubt the CRC is now a tax burden. Many of the participants will need to revisit their cash flow forecasts, budgets and timelines to deliver the energy efficiency initiatives. Minimising these unexpected financial impacts is a priority.

“The need to reduce energy consumption will now be firmly in the sight of the Finance Directors, with increasing pressure and demand being placed on the Energy Managers to deliver cost effective initiatives to reduce emissions,” he added.

“Organisations will now need to re-budget in light of the CRC changes and begin to source proven technologies that deliver the greatest level of savings with the quickest paybacks.

“Many of the UK energy efficiency technology providers, Sabien included, will benefit from the changes as participants require proven technology and services to reduce these unbudgeted costs,” claimed O’Brien.

“Our technology, which consistently delivers double digit reductions and quick paybacks combined with our track record and expertise, puts us in a good position to capitalise on the demand created by the Government’s changes.”

Sabien’s client base includes FTSE 100 Index listed blue chip giants such as RBS, Aviva, O2, Lloyds, Vodafone and BT, along with a host of local councils – most recent of which is Hampshire County Council.

The company is currently in discussions about further roll-outs for the remainder of 2010 and into 2011 with existing blue chip and local government clients.