A recording of the webinar is now available and you can take part in the follow-up discussion over at the 2degrees website.

DECC said “This event will provide an opportunity for an exchange of views on Government’s simplification proposals on the CRC, which will help inform the final amendments to the scheme. The Minister of State for Climate Change, Gregory Barker will provide the closing speech at the London event.”

The draft agenda and venue details are available here.

Local Energy will register to attend the London event; if you are unable to attend, but would like to make your thoughts known, please email your comments and we will present consolidated views on behalf of public sector participants.

The small print:

To register your interest in attending the simplifying the CRC consultation event in London or Manchester please email CRC@decc.gsi.gov.uk by Friday 27th April and clearly state in the title “CRC Consultation event London / Manchester (delete as appropriate)”

Please state whether you wish to attend the London or Manchester event and provide your name, email / contact details, job title, organisation and sector and indicate whether your organisation is a scheme participant (if so please include your CRC registration number).

Please note that emails will not receive a response until the week commencing the 30th April, when places will be confirmed. If the consultation events are oversubscribed then DECC may have to limit attendance, with DECC ensuring we have a good representative profile of the CRC community.

The webinar will be hosted by 2degrees, and Karen will be joined by Becky Clissman from the Practical Law Company.

Participation is free of charge; to register, please click here. If you are not a member of the 2degrees network, you will be asked to join (also free of charge).

The EA’s CRC website now has a new-look guidance page, which has done away with the myriad guidance documents that had built up during the last two years and replaced them with new, streamlined versions.

The guidance now includes a simplified guide to Phase 1 which has consolidated 30 earlier documents into one (although it is more than 250 pages long!). Much of this guidance is not new, although one item to note is in Annex N, an example of the Memorandum of Account, which will be issued when purchasing allowances. This is designed for use in place of an invoice, and may be useful to some participants who normally require an invoice before payment can be made.

Of immediate interest will be the new guidance on the purchase and surrender of allowances, which confirms the allowance purchase deadline as 31 July, by which time participants must ensure that their cleared payment has reached the EA’s account. In law, the surrender deadline is also 31 July; however, the new guidance confirms that the EA has taken a ‘regulatory position’ to permit the surrender of allowances up until 28 September.

In practice, this won’t make much difference to participants. It may allow you an extra day or two to make your payment, but our advice would be not to cut it that fine anyway!

Finally, there are some new ‘screenshot guidance presentations‘ designed to walk you through the online processes for buying allowances.

If you spot any useful nuggets of information (or errors/anomalies) please do let us know.

The consultation document is available on the DECC website; the deadline for responses is 18 June.

There are a large number of proposals for simplification; a few of these are unlikely to apply to the public sector, but most affect all participants. I have highlighted some of the key proposals below:

1. Qualification -
1. base future qualification on electricity supplied through settled half hourly meters only from Phase 2;
2. threshold to remain at 6,000MWh.
2. Supply rules -
1. reduce number of fuels (electricity, gas, gas oil (diesel) and kerosene only) – the latter two only when used for heating;
2. remove 90% rule, footprint report, core/residual distinction, residual measurement list – possible de minimis rule for gas oil and kerosene;
3. remove requirement for payment to be made for supplies in order to qualify as a supply;
4. include passive unmetered supply in scope of CRC;
5. exclude profile class 01 and 02 electricity meters and non daily metered gas supplies consuming 73,200kWh or less (to be re-assessed annually);
6. remove Electricity Generating Credits (EGC) from the scheme;
7. adopt emission factors used for greenhouse gas reporting, updated annually;
8. extend and improve obligation on energy suppliers to provide annual statements.
3. Organisational rules -
1. four options for the treatment of Academies;
1. status quo, with possible changes to funding
2. Academies participate as a group with Department for Education;
3. Academies qualify with their Local Authority but may disaggregate;
4. both schools and Academies participate in a separate scheme.
4. Allowance sales -
1. continue with retrospective sales throughout the introductory phase;
2. remove emissions cap and safety valve mechanism;
3. in Phase 2, hold two fixed-price sales each year, the price at the forecast sale to be lower than the price at the buy-to-comply sale;
4. ability to trade on the secondary market and/or bank allowances within a Phase, but prevent carrying allowances over between Phases;
5. from 2013 onwards, extend surrender deadline to end of September (for 2012, enforcement guidance will be set out).
5. Performance league table (PLT) -
1. retained, but rules on calculation of the metrics will be removed from regulations and placed in guidance to make them easier to change in future.

From a local authority point of view, most of these changes will be welcome. In particular, a combination of changes of could see some authorities fail to qualify for future phases – for example, removing AMR supplies from qualification criteria, together with the possible removal of schools/Academies, will reduce qualifying consumption significantly.

If you do qualify, however, the removal of the passive streetlighting ‘loophole’ may increase consumption (and allowance costs) significantly.

The Academies issue will not be resolved until Phase 2, but the options proposed now offer the prospect of genuine improvements.

We’d very much welcome your thoughts and comments, particularly on the impact these proposals will have on your organisation.

Thanks you to 70+ delegates who attended and for all your valuable contributions throughout the events. For those of you who could not attend, please do take a look at the presentations and contact us if you have any questions or comments.

Thank you also to our guest speakers: the London presentations include slides from Christoph Harwood, Marksman Consulting and Clare McNeil, IPPR; the Manchester presentations from Howard Bedford, Cynergin and Michelle Hartin, Guys and St Thomas NHS Foundation Trust are available separately below.

London event presentations: http://db.tt/GtydOWG1

Manchester event presentations: http://db.tt/darPsS4O

Howard Bedford, Cynergin: http://db.tt/JiFOcvVg

Michelle Hartin, Guys and St Thomas NHS Foundation Trust: http://db.tt/gj62gJ5t

Scotland event presentations: http://db.tt/aK7VJlxq

The consultation, issued on 31 January, sets out proposals in four sections with a general closing date of 27 April; however, section two, covering Part L (conservation of fuel and power), includes proposals for additional ‘consequential’ improvements in existing buildings, with a submission deadline of 27 March 2012. This is to tie in with the planned introduction of the Green Deal scheme in October this year.

What is proposed?

The paper proposes to introduce, on a phased basis, requirements for additional energy efficiency improvements to be carried out when other notifiable work is planned, and Green Deal finance is available as an option to meet the costs.

Consequential improvements would be required in the following circumstances:

• Extensions or increases in habitable space – all existing domestic buildings that undergo works to add an extension, and increases in habitable space (i.e. loft and integral garage conversions). (Consequential improvements are already required for buildings over 1000m²).
• The replacement of specified controlled services or fittings – for homes, the replacement of a boiler or a percentage of the home’s windows. Views are sought on whether there are appropriate trigger points that could apply across the board to non-domestic buildings.
• The initial provision of a fixed building service, or an increase to the installed capacity of a fixed building service only in buildings over 1000m² – these triggers are already in the Regulations.

If introduced, this would mean that an owner or occupier who carries out work to their building (e.g. an extension, loft conversion or replacement windows) would be asked to undertake additional work that is “technically, functionally and economically feasible”. Although the use of Green Deal finance would not be compulsory, the availability of this option is considered to be important so that any additional measures required could be installed at no upfront cost. If Green Deal finance were unavailable (due to failure to meet the Golden Rule), then the additional measures would be deemed not to be economically feasible and need not be installed.

Identification of what additional work is required may be made by reference to a Green Deal assessment, an EPC or otherwise, but the decision must be approved by Building Control. The range of improvements that may be required will be drawn from the SAP list currently being updated for use in generating domestic EPC and Green Deal assessments.

When replacing domestic windows or boilers (also notifiable work), the requirement for consequential measures will be limited to one, some or all of the following:

• Loft insulation
• Cavity wall insulation
• Hot water cylinder insulation
• Draught proofing

What are the impacts?

The impact assessment suggests that the requirement for consequential improvements will have a ‘significant impact’ and produce large carbon savings. It also identifies increased work for small builders.

However, there are some possible negative impacts: the requirement for additional work may deter homeowners from carrying out any improvement work at all, especially where the work requires additional contractors and/or extended timescales; they may be disinclined to apply for consent or to notify Building Control of planned work; from the local authority point of view, there will be an increased workload with Building Control officers required to assess and approve planned consequential measures.

What next?

There is much more detail in the consultation documents. The full Part L consultation also includes proposals for tighter carbon dioxide emission standards for new homes and non-domestic buildings, to take the next step towards ‘zero carbon’ standards, plus tighter performance standards for works to existing buildings. It can be found on the Communities and Local Government website.

What do you think? Do you welcome these proposals, and will they drive take-up of Green Deal finance? Please post your comments – or this or on other important issues in this consultation.

Solar PV panels

The Government has announced its improvements to the FIT scheme following the Phase 1 consultation on solar PV. It has also published two further consultations: Comprehensive Review Phase 2A on solar PV cost controls, closing on 3^rd April, and Phase 2B on FIT tariffs other than solar PV, closing on 26^th April.

We’ve summarised the immediate impacts and key proposals for solar PV, particularly those likely to affect the public sector.

Immediate changes

In response to the Phase 1 consultation the following decisions have been taken:

• A tariff of 21p/kWh will take effect from 1^st April 2012 for domestic-size (≤4kW) solar panels with an eligibility date on or after 3^rd March 2012. Other tariff reductions apply for larger installations.
• Properties installing solar panels on or after 1^st April 2012 will be required to produce an Energy Performance Certificate rating of ‘D’ or above to qualify for a full FIT.
• From 1^st April 2012, new ‘multi-installation’ tariff rates set at 80% of the standard tariffs will be introduced for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations. The threshold is set at more than 25 installations: Individuals or organisations with 25 or fewer installations will still be eligible for the individual rate.

Comments

The reduction in solar PV tariffs was expected. The requirement for EPC ‘D’ rating or above is rather less stringent than anticipated, and it has been estimated that half of all properties already meet this requirement. Those that do not must be brought up the required standard or receive a reduced tariff.

The multi-installation tariff, 16.8p/kWh for ≤4kW installations, will further reduce the financial return for organisations – such as local authorities and housing associations – looking to roll out solar PV across a social housing portfolio. Combined with the reduced standard tariffs, it may mean that this option is now financially unattractive, and therefore the number of installations on social housing will be greatly reduced. This will of course also apply to most ‘rent-a-roof’ operators.

Phase 2A consultation: solar PV cost control

This consultation proposes tariffs to be applied to solar PV installations after 1^st July 2012, and sets out a mechanism for the degression of tariffs thereafter.

• Proposed tariffs for ≤4kW installations post-July 2012 range from 13.6p/kWh to 16.5p/kWh. These will then reduce according to pre-planned degression, contingent degression and annual reviews.
• For solar PV, a 5% tariff reduction is proposed in October 2012, followed by a further 10% every 6 months.  If actual deployment levels exceed 125% of expected levels, an additional ‘contingent digression mechanism’ would be applied to bring forward the proposed tariff reductions. It is possible that this could result in tariffs changing more frequently than once every two months.
• A table of solar PV tariffs, modelled using the 10% baseline degression proposals, shows the payment for a ≤4kW system starting at 21p/kWh in April 2012, reducing to 12.9p/kWh by October 2012 and down to 7.7p/kWh by April 2015.

There is a proposal to reduce the tariff lifetime for new installations from 25 to 20 years and options to review the level of export tariffs including possible index-linking.

Comments

The proposed degression models introduce further uncertainty to the FIT scheme. It will be impossible to calculate payback and returns with any confidence, since the tariff paid may reduce sharply between project implementation and installation dates, with only two months’ notice of each reduction.

DECC’s press release and links to the consultation papers can be found here

Allocation period

The ‘primary allocation period’ will run from the start of June to the last working day of July. During this time, participants must request, pay for and surrender the correct number of allowances. Difficulties for participants may arise due to:

• Lack of any invoice or bill for allowances (usually required before payment can be made)

• Insufficient time for payment to be processed – both internally and by the Environment Agency – during the allocation period (some organisations have 30-day or even 60-day payment terms)

We recognise that it may not be possible to extend the allocation period beyond the end of July, as the deadline for surrender of allowances is set by the CRC Order.

Instead, we suggest that the proposed allocation period should open earlier, allowing requests for allowances to be made from the start of May. This may require some estimation (or forecasting) by participants, but would at least ensure that there is adequate time for payments to be made, and received, prior to the allowance surrender deadline.

Fees

The regulations make provision for an additional, unspecified fee to be charged for the allocation of allowances. This is in addition to the current registration fee (£950) and annual subsistence fee (£1,290) already charged to CRC participants.

We believe that making provision for this separate charge is an unnecessary additional administrative burden. If the current level of registration and annual subsistence fees is insufficient to cover the cost of Scheme administration, then these should be raised accordingly. This would maintain a level of simplicity and transparency in the charging regime.

Allowance price

Although this draft regulation makes reference to the price of allowances, the future price is set by the Treasury and will be announced in the Budget.

We strongly recommend that the allowance price is set and notified to participants well in advance, for example for the duration of each CRC Phase. Carbon reduction measures take many months or years to plan and implement; greater certainty over the future price of carbon would allow more accurate costing of payback periods and future savings, resulting in more projects delivered more quickly. The imminent Budget should include an announcement of CRC allowance prices for the next three years, at minimum.

The draft regulations can be found here

We’re planning to offer a ‘data verification’ service during June/July, to audit data and the annual report before it is submitted (and, of course, used as the basis on which to buy allowances). 

Our full audit costs £2,500 +VAT and normally takes 5 days (2-3 days onsite). Given the very tight timescale between collating data and reporting/buying allowances, we’d only be available to do a handful of these at the appropriate time. 

We now propose to offer the option of a two-stage audit: We can audit your CRC governance, processes/procedures and evidence pack documentation at any time of the year, before or after the reporting deadline, but we would undertake a one-day onsite data verification during June/July, to allow for sign-off of your annual report data prior to submission. 

The full audit fee would remain the same. Alternatively, we can offer the one-day data verification as a stand-alone for £500 +VAT. 

Please contact us if you’d like to know more.