Industry should act fast to save on the Climate Change Levy
This article first appeared in Energy Management on 6 August, 2020.
Businesses have a few short months to take advantage of the extended Climate Change Agreement (CCA) scheme, which could deliver significant savings. Richard Palmer of independent power and energy consultant Roadnight Taylor explains why industrial and manufacturing businesses of all sizes should think about joining the CCA scheme.
With our UK government, climate action groups and many businesses focused on how the UK can make a green recovery after Covid-19, the news that the Climate Change Agreement (CCA) scheme will be extended by two years to March 2025 has met with a positive response from businesses and industry. The scheme, which already benefits more than 9,000 facilities across the UK, requires applying businesses to set energy efficiency targets if they are to benefit from a reduction in their Climate Change Levy (CCL), and originally closed to new entrants in 2018. It will now reopen to eligible energy intensive businesses – who can expect to receive certification from the Environment Agency from January 2021 onwards.
However, while the deadline for new applications is now 30th November 2020, the advice from the Environment Agency is to apply to your sector organisation by the end of September to allow sufficient time for processing, meaning time is of the essence.
Significant savings for smaller manufacturers
While some details of the extended CCA scheme are yet to be ironed out, one thing is certain: it represents an important opportunity for companies to reduce costs and gain momentum as their businesses emerge from Covid-19 ‘demand destruction’, forming a crucial part of the green recovery narrative. And with many manufacturing businesses currently reeling from the effects of the global pandemic and feeling the pinch of CCL charges, which were raised significantly from 1 April 2019, a CCA also represents a more attractive commercial opportunity than ever before.
When eligible businesses voluntarily sign up to a CCA, they are able to reduce the Climate Change Levy (CCL) charges on their electricity and gas bills. 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. This can mean significant savings, even for smaller organisations: Roadnight Taylor has identified forward savings of nearly £10,000 on CCL for clients with annual electricity energy spend as low as £45,000.
Resilience, sustainability and competitiveness
The CCA scheme is available to more than 50 industrial sectors and its extension will be of interest to a broad range of manufacturing businesses, from metals and chemicals through to paper, glass and ceramics. It will also be relevant to businesses whose energy demand is high due to cooling or heating requirements.
For UK industry concerned about resilience or competitiveness in the wake of both coronavirus and Brexit, a CCA provides significant relief from the UK’s only remaining carbon tax, since the abolishment of the CRC, and from electricity prices which are currently the second highest in Europe. The scheme also acts as a key enabler of sustainability and corporate social responsibility programmes – concerns which are rising up the organisational agenda as more businesses seek to establish good environmental, social and governance (ESG) credentials. ESG has recently become a key indicator of future sustainability and a way of securing important investment; its relevance to the industrial world and its supply chains is expected to grow exponentially over the coming years.
Support for the future
Looking to the longer term, BEIS has expressed its intention to review, reform and potentially replace the CCA scheme; to simplify eligibility criteria, ensure that emerging and ‘best in class’ technologies are recognised, and implement policy changes which reflect our legal commitment to a 2050 net zero target.
For the moment, the scheme remains relatively complex. For example, it does not currently recognise on-site renewables contributing to meeting targets and can therefore impact planned investment in low carbon technologies.
Businesses interested in applying should have an assessment carried out to determine their eligibility, to analyse the cost/benefit of their application – and to identify their appropriate sector association, all of which can be a drain on precious time and resources. Thankfully, help is at hand. Specialist organisations like Roadnight Taylor can provide a tariff review service that determines CCA eligibility whilst also scrutinising energy supply contracts, demand data and tariffs for a range of other bill-saving opportunities. It means that manufacturing businesses can maintain their focus on core operations without missing out on important cost savings.