CRC Energy Efficiency Scheme

Aberdeen, 26th May 2010

Simon Francis, DECC CRC Team

Why CRC?

To incentivise energy efficiency in large energy users

BECAUSE users are not taking up the energy savings which would save them money

• Mandatory participation for large energy users - those who spend ≈ £0.5m a year on

electricity

• CRC will create greater reputational drivers for organisations to act - Performance League

Table

• Financial drivers – cost of allowances and revenue recycling (but those of CRC are a

fraction of the savings from reduced energy bills)

Key points

• CRC mandatory energy efficiency scheme which will :

• Incentivise energy efficiency and reduce energy use

• Foster behaviour and infrastructure change

• Deliver carbon emissions reductions

• CO2 emissions reduction ensured by cap

• Method of reductions determined by participants

• Revenue neutral to the Exchequer

• Designed to avoid overlap with emissions covered under EU

ETS and CCAs

For determining qualification & participating, undertakings will be

grouped under the highest parent undertaking where the ‘parent’-

•Holds a majority of voting rights in an undertaking

•Has the right to appoint or remove a majority of an undertaking’s board

of directors

•Has the right to exercise a dominant influence over an undertaking(see Section1162 of the Companies Act 2006 for full text)

Where there is no parent relationship as above, the undertaking must

assess CRC qualification in its own right.

Organisational structure

1. Organisation has at least one Half-Hourly (HH) Meter settled on the HH Market

Qualification

2. Organisation HH electricity consumption exceeded 6,000 MWh over the course of 2008

• HH electricity use must includeo Mandatory HH meters

o Voluntary HH meters

o Remotely read AMR

o Pseudo HH metering readings

• Policy intent – to incentivise energy efficiency regardless of where, how and by

whom the electricity was generated

• Therefore large electricity users need CRC allowances at the point of deemed

supply under CRC – this is in addition to any EU ETS (or CRC) allowances

required at point of generation

• Participants will not have to surrender CRC allowances for EU ETS ‘permitted

emissions’

• Participants may have to surrender CRC allowances for electricity supplied to an

EU ETS installation (if core or on RML)

• Electricity Generating Credits available in limited circumstances for non-EU ETS

installations.

CRC - electricity supply & generation

Supply definition one

• ‘A’ agrees with ‘B’ that ‘B’ will supply electricity to ‘A’ and that ‘A’ will pay ‘B’ for that

supply

• ‘A’ receives a supply further to that agreement

• The supply is measured by a metering device * or is a dynamic supply

OR...

Supply definition two (‘self-supply’)

• Where a public body or undertaking supplies electricity to itself for purposes other

than generation, transmission or distribution of electricity.

* not relevant for fuels

CRC supply rules (applicable to electricity,

gas and fuels)

1. Overview EU ETS installation

Customer responsible for surrendering CRC allowances if a core supply or included in residual measurement list (RML)

Meets supply definition 1

Electricity: Doesn’t meet supply definition 1

Not a supply under CRC: no CRC allowances

No Electricity Generating Credits (EGC)

operator of EU ETS installation

customer

Supply definition 2 (‘self supply’) – operator needs CRC allowances for own electricity use unless licensed/exempt activities.

operator of non-EU ETS installation

customer

Input fuel classified as supply if core gas or fuel source listed on RML – responsibility of operator (zero if renewable)

Operator may be eligible for EGCs from value of electricity generated – if no ROCs/FITs claimed and supply/self-supply definition met

Electricity doesn’t meet supply definition 1

Not a supply under CRC: no CRC allowances

Electricity meets supply definition 1

Customer responsible for surrendering CRC allowances if a core supply or included in residual measurement list (RML)

Supply definition 2 (‘self supply’) – operator needs CRC allowances for own electricity use unless licensed/exempt activities.

2. Overview non-EU ETS installation

Supply rules – participants & undertakings

CRC participant boundary

Undertaking 1 Undertaking 2Can’t be self-supply (def 2). Potentially ‘supply def 1’

Potentially self-supply (def 2)

EGCs potentially available at the participant level for either supply or self-supply

Emission coverage – core sources

• All half hourly meters

• Meters profile classes 5 – 8

• Daily-read gas meters

• Hourly gas meters

• Non-daily metered gas > 73,200 kWh/annum

Emission coverage 90% rule

• 90% of Footprint regulated by either EU ETS, CCA or

CRC (the ‘Residual Percentage’)

• Core Sources included on mandatory basis

• Must include non-core sources to reach 90%

• Can include non-core sources voluntarily if above 90%• Recorded on the Residual Measurement List

Excluded from CRC

• Transport energy use

• Domestic energy use

• Energy not for own use (except Landlord/tenant)

• Energy not for supply in the UK (* def. of UK includes UK coastal waters and the

UK sector of the continental shelf)

Key components of the CRC

Penalties

• Scheme has financial penalties which are proportionate to the offences.

• Failure to comply with key obligations

• Criminal offences in the case of falsification or non-compliance with

enforcement.

Key components of the CRC

Revenue Recycling - Performance League Table

• Adds financial and reputational incentives

• Based on 3 weighted metrics:

i. voluntary early action metric (Extent of voluntary AMR and extent of

Carbon Trust Standard or recognised equivalent)

ii. compulsory absolute metric (Change in annual emissions relative to

preceding 5 year average)

iii. voluntary growth metric (Change in emissions per unit

turnover/revenue expenditure)

• Bonus or penalty payment based on position in league table

November

2008 2009 2010 2011 2012April

July

October April

July

October

July

1st sale of allowances

• 1st Annual Reporting Year • Start of the Footprint Year

Start of the Introductory Phase

2013

1st Recycling payment

Footprint Report due

3rd Annual Report due

2nd Recycling payment

2nd sale of allowances

Timeline – Introductory Phase

1st Annual Report due

Allowances surrendered for 2nd year

Allowances surrendered for 3rd year

EA sent letters on qualification guidance to organisations with mandatory HHM.

Start of Registration PeriodLasts until 30 September 2010

2nd annual reporting year

Start of QualificationLasts until 31 December 2008

Start of 3rd annual reporting year

2nd Annual Report due

Further information

DECC CRC web pages

http://www.decc.gov.uk/crc

EA CRC web pages

http://www.environment-agency.gov.uk/crc

Any further queries

CRCHELP@environment-agency.gov.uk