Sustainability and carbon

Carbon Reduction Commitment Energy Efficiency Scheme (CRC)

Significant changes to the CRC were announced in the Comprehensive Spending Review (CSR) on 22nd October 2010. Please refer to our fact sheet Opens in a new window for more information. Our joint responses with the Local Government Group to the DECC consultation on the the October changes, and to their more recent consultation on the simplification of the CRC are attached below. Our view is that government’s proposals do not substantially reduce the administration burden and we believe that the treatment of PFI, schools and academies must be reviewed.  We also offer our own suggestion for alternatives to a cap and trade scheme, which retains incentives and straightforward qualification, supply and emissions source rules.

The new modules (Modules 2 and 3) of the CRC Toolkit mentioned below will take account of the changes, but we do not plan to update the original module published in 2009.

The CRC Energy Efficiency Scheme is a key element in achieving the emission reduction targets set out in the Climate Change Act 2008. The changes announced in the CSR 10 mean that the scheme will have even greater financial and administrative impacts on all London councils. It is imperative that authorities continue to respond to and comply with the regulations, in order to avoid substantial fines. You can find links to further information on the Scheme on our Useful links Opens in a new window page.

It was clear that the CRC presented a major challenge for London's public sector, and LEP worked in partnership with consultancy Pulse 24 to develop and launch its ground-breaking CRC Guide and Toolkit Opens in a new window in June 2009 with the aim of enabling authorities to manage their risk and cost around the CRC. This comprehensive resource is being used by all London boroughs and has now been distributed to approximately 400 users across England and Wales.

Since the launch of our CRC resources, LEP has been asked by a number of authorities to investigate solutions to more effectively manage carbon trading, financial and risk management, carbon reporting and reduction. The purchase of carbon allowances across London boroughs alone could be in the region of £20million, and the potential fines and reputational damage for non-compliance or inaccurate reporting could be severe. With this in mind, LEP has recently launched the first of two new CRC Guide and Toolkit modules: one with an energy and asset management focus, the other for accountancy and legal issues.

The principal focus of the first new module, which was released in February 2011, is to support early years participation and it is aimed, like the first guide, at those who have direct responsibility for managing the CRC scheme. It aims to identify and mitigate the risks and costs and ensure current users can continue approaching the CRC in a systematic best practice manner, sharing tools and techniques across local government and police and fire authorities.
This CRC module enables participants to plan their ongoing strategy and compliance activities and prepare for forecasting and managing emissions. In addition, the new module incorporates an audit process to allow assessment of an individual organisation's CRC management.

The principal focus of the second new module, which will be delivered through a partnering arrangement with CIPFA Business Ltd and Eversheds LLP, is to provide finance and CRC/Energy managers and borough solicitors with a clearer understanding of the activities related to CRC. It is intended to improve effective and efficient planning, decision making and risk/cost reduction, and explain technical accountancy, audit requirements, compliance and organisational boundary issues.

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CRC and unmetered electricity supplies: London boroughs

The way a local authority trades its unmetered supplies has a direct impact on the costs associated with CRC scheme participation. The CRC supply rules state that an unmetered electricity supply measured on a passive basis is not classified as a CRC supply and therefore is not reportable and has no surrender obligations under CRC.  Affected London boroughs should be able to avoid costs of approximately £150,000 during the Introductory Phase of the CRC Energy Efficiency Scheme by switching their unmetered electricity supply arrangements from dynamic to passive supply.  The CRC Order provisions do not prevent such an action, therefore whether boroughs choose to use passive or dynamic supply was previously and remains a matter of choice. 

Some distribution businesses were reluctant to allow the change and others were agreeable to the change but wished to impose caveats on their local authority customers.  The London Energy project was able to take this up on behalf of London Boroughs and liaised with Ofgem, Elexon, Electricity Networks Association and UKPN to find an acceptable solution, UK Power Networks have now agreed to allow customers to change to Passive HH trading on the basis of certain specified arrangements Opens in a new window. Further information is available on our fact sheet page.

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CRC and schools

All state funded schools will need to participate in the CRC as part of their local authority's CRC organisation and LEP has produced a schools' leaflet Opens in a new window which councils can use to explain the responsibilities schools have under the CRC. It should be noted that this leaflet was produced when there was still a bonus and penalty league table impact within the Scheme.

Around 15% of public sector carbon emissions arise from activities in the English school system. As this in turn accounts for up to 60% of councils' CRC emissions, schools' performance in terms of energy consumption has a significant impact not only on the league table position, but also the ability to forecast emissions if access to consumption data is hard to come by.

Who pays for the cost of allowances has been a sticking pint since the inception of the CRC scheme.  On 9th February, the DfE issued a letter to all Directors of Children’s Services proposing that “the purchase of allowances relating to schools should be an allowable item against the central part of the schools budget… this would not be allowable as a formula factor”. This means that the total cost in relation to schools can be charged as a single deduction from the total Dedicated Schools Grant, rather than the General fund.  However, as this will not be charged to individual schools, the incentive for schools to tackle energy efficiency is likely to be compromised.  As it stands, councils will have to meet the cost imposed by Academies while having no means of controlling the liability (local authorities cannot require action to reduce carbon emissions).  The sector’s view is that any costs for academies should be met by DfE and not councils.

Note: if you are going to print the leaflet, for double sided colour print, printer settings should be: 2 sided print, flip on short edge. To increase size to A4 pamphlet: layout option, - fit to new paper size, A3, flip on short edge as before.

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Borough CRC Health Check Service

LEP offered a new CRC Health Check Service to London boroughs during 2010. The aim of the service was to mitigate the costs, penalties and other risks associated with the CRC Energy Efficiency Scheme prior to registration and to support borough compliance through an independent Red Amber Green (RAG) based assessment of preparation, future planning and operations conducted to date. A bespoke report summarising the findings and highlighting any errors, omissions or areas of non-compliance was delivered to each of the 31 participating boroughs during face-to-face meetings to enable them to follow proven best practice, avoid unnecessary scheme administration costs and target resources where they are most needed.

As the CRC is more than a compliance exercise, the CRC Health Check also reviewed organisations' preparation for managing their obligations under CRC and, where necessary, suggested areas for improvement, including:

• estimated cost of CRC
• data management
• governance and operations
• integration of carbon costs into decision making and accountancy
• broader carbon footprint issues

The Health Checks were conducted at borough level by an independent specialist using an LEP approved format. As part of the assessment process and to inform the Pan-London review of energy performance (see below), information about energy efficiency actions already implemented, their outcomes and future actions planned was gathered. A detailed report Opens in a new window on London Boroughs' readiness for the CRC, the problems they faced in common and the opportunities to reduce their energy consumption is attached.

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Review of Pan-London Energy Performance

Delivered through an independent borough level CRC review and risk assessment "Health Check", LEP delivered a pan-London report Opens in a new window on

• London's preparedness for CRC
• the current energy performance of London's public buildings and
• an analysis of the efficiency measures that could most improve energy efficiency.

For the first time, it also provided a picture of the DEC and EPC ratings achieved by London. Borough level information was analysed across energy efficiency actions already implemented, their outcomes, including carbon and cashable savings, plus future actions planned and barriers to change.

Recommendations within Display Energy Certificates (DEC) and Energy Performance Certificates (EPC) were made using an approved assessment methodology. By using this data, London has an objective method of assessing available opportunities as well as assessing and targeting those measures that can be most cost effectively employed, especially when comparing the list of needs to the results obtained from actual borough projects already undertaken.

Overall, the aim is to establish those projects delivering the best results and to share the combined experience of boroughs. This analysis should highlight the potential for future capital investment, collaborative procurement and probably lead to the development of other LEP/Capital Ambition projects, which will accelerate change pan-London and the potential to realise approximately £25 million further savings on a pan-London basis.

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Automated meter reading

Automated Meter Reading (AMR) is the term used to describe the use of a device that remotely collects meter readings, normally from electricity and gas meters. It allows meters to be read accurately and more frequently and these readings can be provided to both suppliers and consumers.
To help understand and manage their energy use, many organisations have already voluntarily invested in or are in the process of implementing AMR, and this provides some benefit to an organisation's position in the CRC league table.

LEP issued a fact sheet on AMR Opens in a new window in August 2009, and we held a workshop on 5th July 2010 Opens in a new window to highlight the metering and AMR options available from buying organisations and gas and electricity suppliers, and to provide information about the public sector frameworks for demand reduction technologies and AMR.

In February 2011, LEP submitted a response to the Ofgem consultation on addressing consumer protection issues arising from the rollout of smart metering. The response letter is attached below. Our main concerns are the interoperability of devices, ability to switch suppliers and most importantly, that suppliers should not be allowed to disconnect domestic or industrial and commercial customers remotely.