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Government Outlines Ten Step Plan In Drive Towards Net Zero

Prime Minister Boris Johnson has announced a £4bn package to:

“Create, support and protect hundreds of thousands of green jobs, whilst making strides towards net zero by 2050. Our green industrial revolution will be powered by the wind turbines, propelled by the electric vehicles and advanced by the latest technologies, so we can look ahead to a more prosperous, greener future.”

The plan is wide-ranging, with a clear focus on creating jobs and addressing climate change at the same time, but many have challenged the allocation of funds needed to deliver on the challenge.

The Prime Minister’s plan outlines ten key deliverables:

  1. Produce enough offshore wind to power every home in the UK, quadrupling how much it produces to 40 gigawatts by 2030.
  2. Create five gigawatts of ‘low carbon’ hydrogen production capacity by 2030 – for industry, transport, power and homes – with the first town heated by hydrogen by 2030.
  3. Making homes, schools and hospitals greener, warmer and more energy efficient, including an aggressive target to install 600,000 heat pumps every year by 2028.
  4. Accelerate the transition to electric vehicles by phasing out sales of new petrol and diesel cars and vans by the end of the decade.
  5. Advancing the provisioning of nuclear power as a clean energy source, with new plant likely to be located at Sizewell and a new generation of small nuclear reactors.
  6. Invest in zero-emission public transport for the future.
  7. Support projects researching zero-emission fuels for planes and ships.
  8. Develop carbon capture technology with a target of removing 10 million tonnes of carbon dioxide by 2030.
  9. Plant 30,000 hectares of trees a year.
  10. Create a global centre of green innovation and finance based in the City of London.

Business Secretary Alok Sharma has stated that the announced £4bn investment is part of a wider £12bn package of public investment, but to put that sum into perspective, Germany has already committed to a €7bn investment in hydrogen alone to deliver a filling station network and create a hydrogen-powered train.

Concerted efforts to further decarbonise the grid through offshore wind, nuclear power and a further a subsidy of up to £500m to develop hydrogen production, partly by excess energy from offshore wind, will continue to impact on the way new and replacement commercial heating and hot water systems will be designed. But there remains little indication of how these investments in the green economy will directly support commercial organisations coming under pressure to address ageing, inefficient systems. The Government failed to gauge the scale of demand from domestic sites with the Green Homes Grant, and this plan has extended that support for a further year to attempt to address the over-subscription already seen, and the same can be said for businesses that are facing a short timeframe to secure non-domestic RHI support, without a clear replacement being announced. The initial propositions for replacement commercial Green Grants, being excised.

The drive to see the installation of 600,000 heat pumps a year by 2028 is again a domestic focus, although hospitals and schools have been quoted in the same breath, and no doubt additional public sector funding is going to be extended to drive this adoption. But it is worth remembering that the demands and complexity of a commercial system based around a heat pump is decidedly more complex than a domestic installation. Even now, the domestic market is struggling to identify where the large number of competent, approved installers for these hundreds of thousands of heat pumps is coming from, and that scenario will be more deeply felt in the commercial space. The lack of provisioning for large scale retraining of installers is concerning, and again a failure to show support for commercial organisations that are increasingly being mandated to demonstrate clear and real investment in sustainable and low carbon technology seems to be a critical oversight. Especially given the percentage of emissions building stock contributes each year.

Labour MP Alun Whitehead, shadow minister for Business, Energy and Industrial Strategy, has stated that a mixed approach encompassing different technology types such as electric and gas solutions was the way to ensure heat decarbonisation.

“We believe in speedy progress on heat decarbonisation, but we need to see a horses for courses approach. This would include heat pumps – or hybrid heat pumps where appropriate – particularly in new build and off-grid properties; district heating islands in more urban areas; and a substantial expansion of green gas (bio-methane and hydrogen) in the system.”

The Labour Party expects gas heat, specifically from boilers modified for greener fuels, to be an essential part of the decarbonisation of UK buildings. Labour’s Green Economic Recovery strategy hints at the importance of hydrogen, and in sourcing greener hydrogen produced via electrolysis, for transforming how buildings get their heat. It also highlights the need to retrain workers and create new roles around greener energy and infrastructure, as well as supporting businesses to become more sustainable.

There remains a year until the COP26 UN summit, to be hosted in Glasgow, anticipated by many to be the most critical since the Paris Agreement in 2015. That gives twelve months to further define objectives and provide a clear path with meaningful inducement for the commercial sector if the increasingly aggressive timetable is to be met. The previous carbon budgets set by the government have been achieved, but the ‘easy wins’ are now behind us; future carbon budgets are no longer on track to be achieved and it will only get more difficult. This ten-point plan, should be seen as encouraging, establishing a more defined set of targets for the nation, but greater clarity is required and much still needs to be done in terms of ensuring their practical delivery.

Talk to Adveco today about how you can leverage renewables including air source heat pumps, solar thermal and heat recovery to drive sustainability within your commercial hot water and heating systems.

SECR Streamline Energy and Carbon Reporting

New Environmental Reporting and Taxation Framework Still a SECRet to Most UK Businesses

Conceived to reduce administrative burdens, raise awareness of energy efficiency, reduce bills, and save carbon, the Streamline Energy & Carbon Reporting (SECR) is a new, mandatory reporting regime that will replace Carbon Reduction Commitment (CRC) and greenhouse gas (GHG) reports. As a public document, SECR will show what companies are, or are not doing, to reduce their emissions. Any failure to address the rising cost of fuel through reduced use will be clear to see. The report will also show how companies are reacting to the risk of climate change, so there will, for the first time be an additional reputational risk if any organisation fails to reduce its emissions to counter climate change.    

Does SECR apply to your business?

A large number of companies and Limited Liability Partnerships (LLPs) will be required to report as part of SECR. The framework is mandatory for ‘large’ companies (under the Companies Act 2006) that meet two of three set benchmarks:

  • More than 250 employees
  • More than £36 million in annual turnover
  • An annual balance sheet larger than £18 million

SECR would extend the number of companies that report information in annual reports from ~1,200 to ~11,900, similar to the Energy Savings Opportunity Scheme (ESOS) organisational reporting. This is also a climb from the ~4,000 companies currently required to comply with CRC regulations.

The suggested vehicle for reporting is company accounts and a UK-wide approach is in line with other existing initiatives such as ESOS and mandatory GHG reporting.

Organisational reporting will be similar to ESOS in that:

UK subsidiaries, that qualify for SECR in their own right, will not be required to report where they are covered by a parent’s group report, although they may report individually on a voluntary basis.

Companies that are not registered in the UK (non-UK incorporated) are not obliged to file annual reports at Companies House, and will, therefore, fall outside the scope of the mandatory SECR framework.

However, where a parent company is not registered in the UK, but has subsidiaries that are registered in the UK, these subsidiaries, if qualifying for SECR in their own right, would need to report.

It has already been announced that to compensate for the removal of approximately£790m in annual CRC tax revenues the Climate Change Levy (CCL) has been noted for increase in 2019.  SECR legislation has passed through Parliament into law and the mandatory report will be linked to taxations with the new the tax rates already set out:

Taxable commodity  Rate From
1 April 2018  
Rate From 1
April  2019 
Change
Electricity (£ per
kilowatt hour (kWh))
0.00583   0.00847 +45.28%
Natural gas (£ per kWh) 0.00203   0.00339   +67.00%
LPG (£ per kilogram) (kg) 0.01304 0.02175 +66.79%
Any other taxable
commodity (£ per Kg)
0.01591 0.02653 +66.75%

Climate Change levy Rates 2018-2019

Who is exempt?

  • De-minimis threshold of 40,000 kWh, for companies using low levels of energy to be exempt from reporting, similar to ESOS (this equates to approximately 500organisations).
  • Unquoted companies where it would not be practical to obtain some or all of the SECR information.
  • Disclosure of information which the Directors think would be seriously prejudicial to the interests of the company.
  • There is no exemption for energy used in other schemes – e.g. Climate Change Agreements(CCA) / EU-Emissions Trading Scheme (ETS).
  • There is no exemption for Limited Liability Partnerships (LLPs), as they are required to report under SECR through an equivalent to a directors’ report (this equates to approximately 230 large LLPs).
  • Public sector organisations are currently exempt, but there is an expectation that they will adopt SECR as a standardised environmental planning and reporting tool.

UK quoted companies registered in the UK will be required to: 

  • Where practical, disclose Scope 1 & 2 emissions according to the GHG methodology (Scope 3 will remain voluntary). Electricity, gas and transport will as a minimum require reporting and an intensity metric is required in their annual reports which, where practical, will also report on global energy use.
  • Provide a narrative commentary on energy efficiency action taken in the financial year, though they won’t be required to specifically disclose ESOS recommendations and how they have been taken forward (although they can do so). This will apply to both quoted, large unquoted companies, and large LLPs. The idea behind disclosing annual energy efficiency actions is to incentivise action outside the four-yearly ESOS cycle.
  • Having completed the report it will need to be audited to a standard that meets the requirements of the Financial Reporting Council (FRC) and be signed off by the Board. For private companies the report must be registered with Companies House.

Organisations will report under the CRC for the last time at the end of July 2019 and surrender allowances for emissions from energy supplied in the 2018-19compliance year by the end of October 2019. The new tax will be collected as part of the Climate Change Levy payments by an organisation’s supplier.