As the Treasury reviews business energy taxes and the National Infrastructure Commission looks at making energy efficiency a national priority, respected energy consultant Mervyn Bowden has a few pointers on how light-touch government intervention could deliver rapid results.
Very few buildings are run with energy efficiency as the prime driver – after core business of course. Energy management is often lumped in with FM, waste management, cleaning, sustainability and other activities which actually conflict with sound energy management. Take maintenance, for example, whereby plant and equipment is used well beyond its accounting life resulting in poor performance, breakdowns and additional cost rather than biting the bullet and replacing it. Similarly how many maintenance programmes are driven with energy efficiency as the prime consideration?
Energy management is massively influenced by finance. Whether it’s related to market commodity costs, infrastructural needs or equipping facilities with “state of the art” plant, systems, lighting and more the concerns are over:
- Making cost reductions
- Return on investment
- Availability of capital
- Avoiding thinking about life cycle costs
This provides several potential areas where the Government may usefully intervene (lite) to encourage energy efficiency.
What can inform the revolution?
I’d identify a number of key measures – mostly financial but some managerial – which would help:
- Make energy efficiency a tax-deductible activity, any expenditure on efficiency schemes, R&D, monitoring and metering systems should be given a simple relief from Corporation Tax. This could even include the cost of energy management itself.
- Measures should encourage, rather than purely incentivise, greater efficiency. Who needs subsidies when ROI’s can top 50% p.a.?
- Penalties from schemes like Esos, whatever is chosen as the future demand side option, should be recycled into training, and licensing, qualified energy managers.
- Perhaps a system of “energy efficiency capital credits” as a levy on I & C energy bills to artificially inflate the cost of energy and make efficiency more financially worthwhile. The credits could be used, perhaps through energy suppliers with services arms, to pay for energy efficiency work. Either way, a mechanism which rewards efficiency simply and quickly.
- Replace the Enhanced Capital Allowance scheme with one or more of the above.
- Set tangible targets for energy reduction and make it mandatory to have an auditable energy management plan covering perhaps five years forward setting out potential savings and the cost to achieve them. This would be of far more practical use than the woollier aspects of Esos and could be incorporated into ISO50001 easily.
- Mandate landlords immediately to sub-meter tenants on a retrospective basis. Landlords are some of the biggest energy suppliers, to their tenants, and don’t suffer the degree of regulation applied to primary energy suppliers – perhaps they should!
- Finally, I would link energy efficiency to Business Rates much as Vehicle Tax is linked to emissions.
Marketing the benefits?
Taking some of the grander aspirations of COP21 it surely isn’t sensible for a nation’s flagship energy efficiency scheme to quote the benefits of saving 0.7%, as Decc does.
What about 40% or even 50% over a defined and manageable timescale with structured guidance, and incentives, for getting there?
And extend throughout SMEs.
What a difference a 50% cut in energy costs would make to most businesses – it won’t come from the supply side so has to come from a radical and persistent approach to reducing demand.
Let us hope the Government’s current review drives an accelerating efficiency agenda – soon!
A more detailed version of this article features in the new 2016 Director’s Energy Report, which outlines the energy challenges faced by UK firms over the coming year. It’s free to download and includes: full results from our reader survey, covering energy efficiency spending plans and investments by technology; how the market views the trustworthiness of brokers and energy suppliers; whether companies could shift loads and participate in demand response; and what readers think government should do to decarbonise the energy sector and increase energy efficiency. Download it here.