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UK Carbon Market

Post Brexit Changes to the UK Carbon Market

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Overview

As part of the negotiated Withdrawal Agreement of the UK from the EU and as a means of enabling the UK’s net-zero carbon strategy until the middle of the century, the UK government has confirmed in this week’s White Paper that it will establish a UK Emissions Trading Scheme (UK ETS) from 1st January 2021 to replace the UK’s current participation in the EU ETS. The scheme has been designed by the Department for Business, Energy & Industrial Strategy (BEIS) to closely replicate the EU system that UK companies have been part of for almost 15 years and is intended to promote cost-effective decarbonisation by ensuring the emissions reduction goals of the UK’s carbon pricing policy are met without unduly damaging the competitiveness of UK businesses.

While we have a good level of detail published by BEIS this week, full guidance to advise businesses of their compliance obligations within the UK ETS will be released by the newly established UK ETS Authority in early 2021 alongside additional guidance for small and ultra-small emitters as well as a Hospital Opt-Out Scheme.

UK Carbon Market
EU ETS will be replaced by the new UK ETS on 1st January 2021

Which sectors are covered under UK ETS?

As with the EU scheme it replaces, the UK ETS will apply to energy intensive industries, the power generation sector and aviation. It will cover activities involving combustion of fuels in installations with a total rated thermal input exceeding 20MW (except in installations for the incineration of hazardous or municipal waste). The UK ETS will also include all UK domestic flights, flights between the UK and Gibraltar, and flights departing the UK to European Economic Area states conducted by all included aircraft operators, regardless of nationality. All businesses that carry out an activity covered by the UK ETS will need a greenhouse gas emissions permit and may also need a small emitter or hospital permit or an emissions monitoring plan.

Cap and Trade Methodology

The UK ETS will work on the ‘cap and trade’ principle as with the EU ETS, where a cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme. This limits the total amount of carbon that can be emitted and, as it decreases over time, will therefore make a significant contribution to how the UK meets its Net Zero 2050 target. The scheme is designed to be more ambitious than the EU system it replaces as the cap on emissions allowed within the system will be reduced by 5% annually compared to the EU ETS annual reduction factor of 2.2%, with the cap starting at 155m tonnes in 2021 and falling to 117.5m tonnes by 2030.

Within this cap, participants receive free allowances and/or buy emission allowances at auction or on the secondary market which they can trade with other participants as needed. Each participant’s free allocation will be published in an allocation table soon after 1 January 2021. Stationary operators will also be required to submit verified Activity Level Reports by 30 June in 2021, and by 31 March each year after that. If data contained in these reports show an increase or decrease in activity of 15% or more, the operator’s free allocation will be recalculated in line with this change.

Emissions Trading Registry

As with the current EU ETS scheme, a UK Emissions Trading Registry has been developed for the UK ETS and participants require an Operator Holding Account (OHA) in the UK ETS Registry to acquire and surrender allowances in line with their obligations. Once a scheme participant has been issued a permit or emissions monitoring plan, the regulator will instruct the Registry Administrator to open an OHA on their behalf. They will then be contacted by the Registry Administrator and asked to provide details of a primary contact as well as authorised representatives to operate the OHA. Further information on onboarding will be provided in early 2021. It is this registry that will be used for businesses to submit UK Allowances (UKAs) ahead of the first compliance deadline in April 2022.

Market Auctions

Auctions will continue to be the primary means of introducing allowances into the market and participants will also be able to trade UKAs on a secondary market, with confirmation this week that the Intercontinental Exchange (ICE Futures Europe) will provide the auction platform and secondary market services under the UK ETS until December 2022 with an auction calendar to be published early next year. Despite the scheme officially launching on the 1st January 2021, auctions for the UK ETS are not likely to commence until some point in the second quarter of 2021, although ICE is working to start auctions as soon as feasible subject to regulatory approval. Unlike the EU ETS, the UK ETS will have a £15 Auction Reserve Price which establishes a floor price for which allowances can be sold at auctions. In addition, there will also be a cost containment mechanism providing a mechanism for BEIS to manage any significant price spikes in the market.

EU ETS obligations for the 2020 scheme year

During the Brexit transition period from 1 February to 31 December 2020, the UK remains a full participant in the EU ETS. This means that all UK businesses that currently participate in the EU ETS must continue to comply with their EU ETS obligations for the 2020 scheme year. The deadlines for UK operators participating in the EU ETS during the transition period are:

  • 31 March 2021 – submit Verified Annual Emissions Report for 2020 emissions
  • 30 April 2021 – surrender equivalent allowances to 2020 verified emissions

Potential price implications for UK businesses

The UK ETS has been purposely designed to mimic the current EU carbon market it will replace to reduce the administrative burden on UK businesses. However, as the UK carbon market will be much smaller than its EU counterpart (covering just 155m tonnes of emissions p.a. in 2021 compared to the EU market of 1.57b tonnes), there is a significant risk of high volatility and price spikes in the early months of the scheme due to poor market liquidity. The delay to fully functioning auctions until Q2-21 could also lead to a significant supply-demand imbalance in the early months of the scheme. Some analysts also doubt whether financial players will be attracted to participate in the scheme given its smaller scope and artificial floor price mechanism curtailing speculative opportunities, further harming liquidity. In the long term, questions also remain as to whether the UK scheme will continue as a standalone market or seek to align itself with other global carbon markets as part of post-Brexit trade negotiations to ensure a level competitional playing field, be it the EU arrangement it replaces or similar carbon reduction schemes in the US or Asia.

Unsure of the impacts on your business?

If you would like more details or to discuss the effect of these changes on your operations, get in touch. Call 0800 054 2577, email savings@envantage.co.uk or use our Contact Us page.


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UK Government Confirms UK Emissions Trading Scheme to Replace EU ETS

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The UK Government and the devolved administrations for Scotland and Wales have announced that a new UK Emissions Trading Scheme (ETS) will replace the UK’s participation in the EU ETS from 1st January 2021.

BEIS

In a communication from the Environment Agency’s Emissions Trading Team, Envantage learned this morning that the new scheme has been established to increase the climate ambition of the UK’s carbon pricing policy, whilst protecting the competitiveness of UK business.

The UK ETS will “apply to energy intensive industries, the power generation sector and aviation, ensuring continuity of coverage with the EU ETS.”

If your operation falls under EU ETS now, new permits will be issued for the new UK ETS in two stages, which are planned to be completed in early 2021. This will be accompanied by guidance, with the Aviation sector expecting more information in the coming days, and a How To Comply guide being published in early 2021 alongside more detailed information for sites which may be able to opt out etc.

An overview of this, alongside other initiatives announced by UK Government following the Climate Ambition Summit this weekend, can be seen by following this link.

Envantage Ltd will be in touch with all our clients involved in this important scheme, but if you have any queries at all about your energy use and the regulations that apply to it, contact us today.


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ESOS Already Resulting in Net Cost Savings, According to UK Government.

The Department for Business, Energy & Industrial Strategy (BEIS) published the Energy Savings Opportunity Scheme (ESOS) evaluation report in late February.

BEIS Logo

The report looks at how effective energy audits and energy reporting have been, particularly relating to the ESOS scheme, and gives us some encouraging findings:

Key Statistics

According to the research, significant measures taken by organisations to improve their efficiency have been associated with the ESOS scheme:

  • 38% of all implemented or planned energy efficiency measures;
  • 32% of all fuel efficiency measures;
  • 1.65 TWh saved as a result of changes made to buildings;
  • 0.52 TWh savings from fuel efficiency;
  • 1.51 TWh savings from changes to industrial processes.

Other Findings

The study also found that ESOS had encouraged audits in many businesses for the first time, resulting in better data gathering, more discussion about opportunities and improved awareness of energy or fuel consumption and associated cost.

ESOS identified brand new energy saving opportunities for some audited businesses, and in other cases it gave better validation of efficiency measures that were already planned, making the audits more valuable.

According to the report, 37% of organisations said that ‘changes made as a result of ESOS had already led to net cost savings’. Increased staff productivity and reputational benefits were also attributed by businesses to the ESOS process.

What Should Your Company Do?

If your organisation has had a ESOS report, don’t limit your ESOS involvment to a regulatory box-ticking exercise. The recommendations in your ESOS report are aimed at reducing energy consumption, and that will save your business money.

Speak to Envantage Ltd about taking steps to reduce your energy consumption and improve your bottom line profitability.


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SECR - mandatory under The Companies Act 2006

SECR – THE NEW, BIGGER, COMPULSORY EMISSIONS REPORTING FRAMEWORK – WHAT DO YOU NEED TO KNOW?

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There’s a new Carbon Reporting framework coming into force in 2019: Streamlined Energy & Carbon Reporting or SECR. What are the basics you really need to know?

  • SECR replaces the CRC Energy Efficiency Scheme (which you might also know as the Carbon Reduction Commitment).
  • The number of organisations affected by SECR will grow to almost 12,000, compared to just 4,000 for CRC… So, you might be included in SECR even though you’ve never been in CRC.

ARE YOU INCLUDED IN SECR?

All quoted companies (who are already party to Mandatory Carbon Reporting, also known as Mandatory Greenhouse Gas Reporting) will be required to report under SECR rules which have been revised slightly for MCR.

From April 2019 all unquoted companies and Limited Liability Partnerships (LLPs) will be included if they meet two of the following criteria:

  • At least 250 employees
  • Annual Turnover greater than £36 million
  • Annual Balance Sheet total greater than £18 million

IF YOU’RE ALREADY COVERED BY MANDATORY CARBON REPORTING AS A QUOTED COMPANY

Note that from 1st April 2019 there are new requirements. The rules you may have followed to date will change slightly so you will need to ensure that you know how this might affect your business.

IF YOU’RE NEW TO SECR – UNQUOTED COMPANIES

Reporting your Carbon Emissions may be new to you, but it‘s not new to us. Here at Envantage we’ve been measuring greenhouse gas emissions for organisations for 14 years, working with accountants and auditors since the inception of Mandatory Carbon Reporting to assure compliance for some of the largest business in the UK. Our experience is unrivalled, giving you peace of mind.

There are some exceptions, but very few. If you’re still unsure, or if this is a surprise to you, contact us today to check whether you’re affected.

SECR comes into force on 1st April 2019. In your first accounting period beginning after that date, you will need to quantify your energy consumption from electricity, gases, and business transport. You will also be obliged to report energy against an intensity metric and after the first year compare your performance with the previous year.

All of this information needs to be published in the Director’s report within your published accounts, for the transparent view of your stakeholders. You will also need to publish a narrative about the energy efficiency measures you’ve taken during a reporting period.

ASSURED COMPLIANCE

SECR is an important part of your obligations under the Companies Act 2006, and your published results can be subject to official audit by HMRC. Therefore it’s essential that you know the risks and ensure that your SECR compliance and reporting is in safe hands.

By choosing the right partner you can get on with your day job in the knowledge that your compliance is being dealt with professionally.

CAN SECR BE A BENEFIT?

While SECR is a mandatory scheme with rules to follow, it is a scheme aimed at reducing the carbon emissions of UK organisations. Embracing its values can be a benefit to you. Publishing the required information helps your potential customers and your stakeholders to understand your approach to improving your efficiencies, boosting your brand value. The information used in your submissions can also be invaluable in your marketing literature and tender processes, helping you to win more customers.

Many organisations also use the information required for mandatory submissions as a start point to measuring their own full Carbon Footprint. Why not take the next step and build a complete view of your Carbon impact? The brand benefits of this can be significant: ask us how we can help.

SECR - Transparent and clear emissions reporting
SECR – Transparent and Clear Emissions Reporting

SO… ARE YOU COMPLETELY READY?

SECR will affect your organisation from your first month of your first accounting year after 1st April 2019. Don’t leave things to the last minute.

You will need to have data collection routines in place to make sure you’re protected against the risks of non-compliance. In addition, simple supply-and-demand means that as the 2019 accounting year progresses, help will become more scarce and expensive. A managed process throughout your reporting year is the best approach to SECR. By avoiding last-minute work and last-minute charges, you will be prepared and protected.

As well as a vastly experienced team, Envantage can offer audit support: we’ve worked alongside auditors for many of our clients and will support you with HMRC, if necessary, to provide the evidential records you will need in the event of any audit.  You can rest assured that you have the right partners looking after you.

ACT NOW TO PROTECT YOURSELF

Your Annual Report for financial years beginning on or after 1 April 2019 will need to contain your SECR information, so if you’re not certain what will be required, now is the time to check. Contact Envantage today to ensure that you’re going to be compliant – call free on 0800 054 577 or email savings@envantage.co.uk


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ESOS Phase 2 Compliance - Checklist

ESOS PHASE 2 – WHAT SHOULD YOU DO NOW?

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If you’ve been keeping up to date with ESOS, you’ll know that the deadline for submitting your notifications of compliance is 5th December 2019. So, why should you be looking at ESOS Phase 2 so early?

(If you haven’t been keeping up to date, keep reading: you probably need to know this.)

THE NOTIFICATION PORTAL IS NOW OPEN – WHAT DOES THIS MEAN?

On 8th February 2019, the Environment Agency’s ESOS notification portal opened, meaning that qualifying organisations can already complete all the steps needed for full compliance. If you’re not sure whether you are covered by ESOS, the qualification criteria are listed below.

By submitting your notification of compliance early, you will:

  • Be able to spend the rest of 2019 managing your business, without worrying about compliance submission deadlines
  • Avoid fines for non-compliance which can be up £50,000 plus £500 per day, and the risk of being ‘named and shamed’
  • Be best placed to make the savings identified in your ESOS reports
ESOS Phase 2 Stress - Early Compliance with Envantage removes it
Secure Early Compliance – Avoid Submission Deadline Headaches

WHAT SAVINGS CAN YOU MAKE?

Typically our clients can make at least 10% saving by implementing no-cost or short payback recommendations from our work with them. Working alongside our experienced energy consultants, our clients are saving up to 30% against energy and emissions as a result of savings opportunities we’ve identified and prioritised.

DON’T MISS OUT – SECURE EARLY COMPLIANCE

Now that the qualification criteria have been fixed and the submission portal is open, let us help you to complete your compliance. Our highly experienced Lead Assessors and Energy Consultants have already managed over 300 ESOS compliance journeys for organisations like yours.

Simply call us on 0800 054 2577 or email savings@envantage.co.uk today to start making savings and stop worrying about compliance deadlines.

WHY USE ENVANTAGE FOR ESOS PHASE 2?

If you’re not already working with Envantage, ask us about our class-leading team and what it can do for you. We have unrivalled experience: our Lead Assessors and Energy Consultants have successfully managed compliance for over 300 ESOS organisations already.

We have worked throughout the UK since 2004 in all business sectors, using our experience to reduce costs and emissions. We strive to not only assure compliance, but we work with you to deliver a positive ROI for your efforts.

ASK US ABOUT EARLY COMPLIANCE

Call us on 0800 054 2577 or email savings@envantage.co.uk today. We’ll talk to you about your options and ease your worries.

IS YOUR ORGANISATION COVERED UNDER ESOS?

The UK Government’s own guidance defines those organisations covered by ESOS as “large undertakings”, which are:
– Any UK company that either (a) employs 250 or more people, or (b) has an annual turnover of more than 50 million Euro (£44,845,000) and an annual balance sheet total more than 43 million Euro (£38,566,700)
– An overseas company with a UK registered establishment which has 250 or more employees who pay income tax in the UK


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How Envantage can help with ESOS Phase 2

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy saving scheme for large businesses and corporate groups that aims to help protect the environment, while cutting business energy costs by as much as £1.6 billion by 2030.

For most large organisations it should be familiar already, and many businesses throughout the UK will have already carried out at least one detailed energy audit, and may have followed up on some of the suggestions made to cut business energy use and reduce energy costs as a result.

Envantage have worked with businesses to audit energy budgets ranging from £100,000 to more than £4 million, helping them to achieve ESOS compliance and make energy savings to cut costs and carbon alike.

If you are large enough for ESOS to be mandatory, then it requires you to carry out energy assessments at least once every four years, including audits of your industrial processes, along with energy consumed in your buildings and by your transport fleet.

For ESOS to be mandatory, you must fall into one of the following categories:

  • A UK company with more than 250 employees based in the UK and abroad.
  • A UK company with less than 250 employees but which has:
    • Annual turnover of more than €50 million.
    • A balance sheet of more than €43 million.
  • Belong to a corporate group in which one entity meets either of the above criteria.

If you are affected, then the upcoming deadline to comply with ESOS Phase 2 is coming sooner than you might think.

 

When is the ESOS Phase 2 deadline?

The official deadline to comply with ESOS Phase 2 is December 5th 2019. However, it is worth remembering that your reference year for that data will include December 5th 2018 – so you can start collating that data immediately.

Envantage can help with this. We have qualified Lead Assessors who can provide a free assessment to check whether you qualify for ESOS or not, and can then support you through ESOS compliance as necessary.

We will recommend efficiency improvements that not only protect you against fines and penalties under ESOS 2, but which are commercially viable to deliver cost savings over the long term too.

The sooner you act, the better – our Lead Assessors will be in considerable demand as the deadline approaches, and we are keen to work with as many companies as possible ahead of time to be able to deliver the best possible efficiency improvements.

 

What our ESOS 2 compliance service provides

Our ESOS 2 Lead Assessors are approved by the Environment Agency to compile evidence on your behalf, and to prepare this as an evidence pack that is fully compliant not just with ESOS, but specifically with ESOS Phase 2.

This means we can:

  • Carry out an ISO 50002 audit by one of our Chartered Energy Managers.
  • Identify energy savings typically in the region of 10-30%.
  • Make recommendations that support your future energy management plans.
  • Help you to implement any recommended changes that we make.

Our advice is impartial and based on extensive knowledge of the energy sector, but always on your side when driving cost savings and ESOS 2 compliance as the December 2019 deadline approaches.


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Avoid energy inaccuracy with Envantage’s Bill Validation Service

Our Bill Validation Service is an essential investment for large organisations to ensure you pay the right amount for the energy you use and do not fall victim to unnecessary costs due to errors either in-house or by your suppliers.

A comprehensive Bill Validation Service looks at energy consumption across your entire business, auditing and verifying all of the different utility invoices you receive to make sure that you are not paying twice for the same energy, and that your usage is being tracked accurately.

We do this as a fully outsourced service – so there is no administrative burden on your own in-house team, and we are able to provide the same standard of service for clients no matter how small or large your operations may be.

If you have struggled in the past to keep a close enough watch on multiple utility bills from different providers, or across different areas of your operations, an outsourced Bill Validation Service is the ideal way to get your utilities back under control and identify any unnecessary outgoing costs without changing tariffs or suppliers.

 

What is Envantage’s Bill Validation Service?

Our Bill Validation Service comprises a number of different steps and stages:

  • Collect energy usage information from all areas of your operations.
  • Audit energy figures and utility bills.
  • Query inaccurate invoices directly with your suppliers.
  • Identify and query inaccuracies in tariffs and standing charges.
  • Report back to you any anomalies we find.

We use advanced software to do this, allowing us to manage even very complex, large-scale and widespread bill validation projects, to create an overall utility bill profile that covers gas, water and electricity for each of your sites.

This profile can be broken down into each individual utility, each individual site, and also by contract terms, giving you unbeaten visibility into all areas of your operation’s utility usage and expenditure.

We can provide feedback on a monthly basis – giving you something similar to a credit report that shows you how well you are performing on utility costs, and confirms that we have eliminated any inaccuracies.

Best of all, as an outsourced service, we can liaise directly with your suppliers and take care of the on-site admin too, freeing up your own team to focus on your core business activities.

Find out more in our Downloads section or contact Envantage today to discuss our Bill Validation Service on 0800 054 2577 or by email to savings@envantage.co.uk.


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NHH (Non Half Hourly) 05-08 metering – Licence Conditions with guidance notes for the provision of advanced metering for larger business sites

MPAN

 

In April 2009 the government introduced a requirement for Suppliers to provide advanced metering for larger non-half-hourly read electricity and non-daily read gas sites in the non-domestic sector. For electricity this affects about 170,000 sites in Profile Classes 5 to 8. The requirement applies to new and replacement meters, with advanced metering to be installed for all such sites by 06 April 2014.

Envantage provides replacement metering solutions for customers still using profile classes 5 to 8.  Contact Envantage today to discuss your needs.

For the DECC AMR documentation please click here. 

 

 

 In Summary:

 

  • Licence Conditions for the provision of advanced metering for larger business sites

 

  • Came into force April 2009

 

  • Obligation on all electricity and gas suppliers to install AMR by 5/4/2014

 

  • Applies to non-domestic supplies

 

  • Electricity profile classes 05 to 08

 

  • Gas sites with a measured annual consumption ≥ 732,000 kWh

 

  • Applies to all new supplies, any replacement meter and to all relevant supplies after 5th April 2014

 

  • In effect, from 2014 onwards suppliers can only use Advanced Metering on these larger non-domestic supplies

 

Profile Class (PC)

The first two digits of a full MPAN reflect its profile class

00 Half-hourly supply (import and export)
01 Domestic Unrestricted
02 Domestic Economy 7
03 Non-Domestic Unrestricted
04 Non-Domestic Economy 7
05 Non-domestic, with MD recording capability and with LF less than or equal to 20%
06 Non-domestic, with MD recording capability and with LF less than or equal to 30% and greater than 20%
07 Non-domestic, with MD recording capability and with LF less than or equal to 40% and greater than 30%
08 Non-domestic, with MD recording capability and with LF greater than 40% (also all NHH export MSIDs)

 

What is a Non-half-hourly metered supply?

Supplies under 100kVA tend to be Non Half-Hourly (NHH) metered, using standard meters that are read manually, or meters that feature Automated Meter Reading (AMR) technology.

For non-half-hourly metered supplies, the NHHDC determines the consumption by calculating the advance (the difference between the last two meter reads, this is annualised to produce an annual advance (AA), this being the data the supplier will pay on).

The NHHDC is also responsible determining the estimated annual consumption (EAC), which is a forecast for a year ahead. The EAC is initially provided by the supplier, and thereafter forecast based on actual meter readings.

Data from the DC (EAC/ AA’s) is provided to the non half hourly data aggregator, which aggregates the individual values provided into a single figure split in a number of ways e.g. geographically, geographically & supplier or supplier. This aggregated data is then provided to the Central Systems, maintained by Elexon, to determine the value of energy which has been used by suppliers so that they are able to settle with the distribution network which generated the energy. The process is known as balancing and settlement and falls under the balancing and settlement code (BSC).


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Envantage releases ENMAT V2.1 Energy Management Software

enmat logo 1 small 2 - Copy

We are excited to announce a new software update for their ENMAT Energy Monitoring and Targeting Software. This update entitles Gold and Platinum subscribers to ENMAT V2.1 new charts and graphs in addition to their existing subscription. The new features include:

Features Bronze Silver Gold Platinum
Energy Consumption Chart X X
Cost per M2 X X
kWh per M2 X X
Power Factor Detail X X
Power Factor Gauge X X
Production per kWh X X
Site Usage Summary X X
Site Usage X X
Period Summary X X
Degree Days X X
Main Dashboard (Custom) X X
Bespoke  Software Development X X X

 


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Merry Christmas from Envantage

envantage logo 1SANTA

 

Envantage would like to wish everyone a merry Christmas and a Happy New Year!

We look forward to providing you with the best Carbon and Energy Management Services for 2014 and beyond.


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