Short deadline to reduce Climate Change Levy on energy bills
Energy intensive businesses have until 30 September 2020 to benefit from reduced energy bills through an extended Government Climate Change Agreement scheme.
In the most recent Budget, the Government announced a proposal to reopen and extend the Climate Change Agreement (CCA) scheme by two years. This is a voluntary agreement whereby eligible businesses can sign up to a CCA to reduce the Climate Change Levy (CCL) charges on their electricity and gas bills.
The CCL is an environmental tax charged to all industrial, public services, commercial and agricultural businesses and is designed to encourage businesses to be more energy efficient in how they operate, helping to reduce their overall emissions in the process.
Some energy intensive businesses will already be benefitting from holding CCAs, but this announcement represents a unique opportunity for those eligible businesses not in a CCA to apply and benefit for the next 4.5 years. If they meet certain pre-agreed targets, the CCL is currently reduced by up to 92% on electricity bills and between 77% and 81% on other fuels.
A BEIS consultation on the scheme closes on 11 June 2020 and they will publish their response in July 2020. Whilst there is some uncertainty on the outcome of the consultation, most Sector Associations are expecting a similar scheme with appropriate energy efficiency targets, and it is thought that applications for new entrants will likely need to be submitted by 31 August 2020.
Which businesses are eligible?
It applies to a wide range of industrial sectors, numbering over fifty and each with energy intensive processes. Sectors range from such as chemicals, paper, brewing, mineral processing and ceramics to agricultural businesses such as intensive pig and poultry farming and downstream dairy processing, to breweries, to mineral processors and to data centres and and for businesses whose primary energy demand is for cold storage.
The cost saving and other benefits
Qualifying energy intensive businesses need not have particularly high energy spend. For clients with annual electricity energy spend as low as £45,000, we estimate forward savings of nearly £10,000 on CCL over the 4.5 years of the scheme. There are only small upfront costs to pay the applicable Sector Association – who administer the scheme for your business sector – and the Environment Agency.
The opportunity also allows businesses to gain momentum as their energy demand and business emerges from the Covid-19 ‘demand destruction – and is a useful input into sustainability and corporate social responsibility programmes.
The potential savings over the term of the scheme must be based on a cost/benefit analysis i.e. a simple payback calculation. It is also important to understand the impact of, for example, any planned investment in low carbon technologies during this period. Only then should businesses apply to the appropriate Sector Association. Diversified businesses may not fall into the most obvious sector, so it is important you approach the right association.
How can Roadnight Taylor help?
As an independent, expert consultancy (not an energy broker), we can help businesses assess CCA eligibility and secure any discounts – whilst also identifying other opportunities to further cut energy costs through tariff optimisation. For example, we can also find out if your business is missing out on other opportunities such as Triads, time of use tariffs, or if your business could benefit from investment in low carbon technologies.
Our Tariff Review – which includes an assessment of your eligibility and CCL savings – costs from £495+VAT.