implications of crc on landlords and tenants
DESCRIPTION
The implications of the CRC Energy Efficiency Scheme of Landlords and TenantsTRANSCRIPT
www.crcnetwork.co.uk
Landlords & Tenants
18:30 – Introduction by Giles Hutchins, Head of Sustainability Solutions, Atos Origin UK
. 18:45 - Guest Speakers
19:45 - Drinks/ Networking
20:30 - Evening Close
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Message from DECC
DECC warmly welcomes the establishment of this CRC Network. Forums like these will be vital in helping organisations to understand the scheme and share best practice. We are particularly pleased that
this first event is focusing on bringing together landlords and tenants. CRC has been designed to try and overcome some of the split
incentives that can prevent improvements in energy efficiency and are common in landlord/tenant situations. We hope that CRC will
encourage landlords and tenants to work together, and this event is a positive step that we are very pleased to support.
--Chiara SorisiSenior Policy Advisor, DECC
www.crcnetwork.co.uk
Drivers for sustainability
Drivers of Sustainability
www.crcnetwork.co.uk
Landlords & Tenants
18:30 – Introduction by Giles Hutchins, Head of Sustainability Solutions, Atos Origin UK
. 18:45 - Guest Speakers
19:45 - Drinks/ Networking
20:30 - Evening Close
CRC – Managing the dataReducing energy use
David SymonsWSP Environment & Energy
www.wspenvironmental.com
Give one person responsibility
Managing data is an immediate issue
If you’re gathering data, use this to reduce energy consumption – which is the biggest cost by far.
CRC provides a good incentive to work together to reduce energy use
Don’t overcomplicate the process
Allowance cost will depend on the type of office
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£0.50
£1.00
£1.50
£2.00
£2.50
£3.00
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Give one person responsibility
Managing data is an immediate issue
If you’re gathering data, use this to reduce energy consumption – which is the biggest cost by far.
CRC provides a good incentive to work together to reduce energy use
Don’t overcomplicate the process
08:00 – 18:00 Occupied Office Building in London
Time of Day
The energy profile for a London office
Use the data to reduce energy use
08:00 – 18:00 Occupied Office Building in London
Time of Day
Question 1 – What is the 50kW increase between 01:00 – 02:00?
?
Use the data to reduce energy use
Because – A scheduled valve exercise programme meant that chiller & pumps all turned on automatically
Time of Day
Reduction of Reduction of 0.02% 0.02%
Time of Day
kW ?
Use the data to reduce energy use
Question 2 – Why is the out of hours baseload 125kW?
KW
Use the data to reduce energy use
Time of DayAnswer –
i) An air conditioning system had been refurbished and reinstalled separately to the BMS.
ii) the BMS lighting controls had been set up wrong.
Reduction of 9% Reduction of 9%
Use the data to reduce energy use
Time of Day
?
Question 3 – Why does the load increase at 5am, isn’t that a bit early?
Use the data to reduce energy use
Time of Day
Because – an optimiser in the BMS had been set at a different temperature to area set point. The system could never catch up…
Reduction of Reduction of 14%14%
Use the data to reduce energy use
Time of Day
??
Question 4 – Why does the load remain high after 18:00?
Question 5 – Why does the load increase again after 21:00?
Use the data to reduce energy use
Time of DayAnswer –
i) An air conditioning system had been refurbished and reinstalled separately to the BMS.
ii) the BMS lighting controls had been set up wrong.
Reduction of Reduction of 33%33%
Give one person responsibility
Managing data is an immediate issue
If you’re gathering data, use this to reduce energy consumption – which is the biggest cost by far.
CRC provides a good incentive to work together to reduce energy use
Don’t overcomplicate the process
CRC – Opportunities for Stakeholders
Helping you deliver CRC
Green Information Services Green Information Services (GIS) is a new and innovative partnership, which (GIS) is a new and innovative partnership, which brings together a group of well established industry experts in the field of brings together a group of well established industry experts in the field of
carbon management. carbon management.
.One of our specialist areas is CRC and we are strongly aligned with RSA's QUEST One of our specialist areas is CRC and we are strongly aligned with RSA's QUEST proposition. We aim to deliver a bespoke solution to our Clients , ensuring that proposition. We aim to deliver a bespoke solution to our Clients , ensuring that their statutory obligations to the Government’s Carbon Reduction Commitment their statutory obligations to the Government’s Carbon Reduction Commitment
are fully met. are fully met.
Helping you deliver CRC
Some negative perceptions!
• Landlord / Tenant Issues• The complexity of commercial property• Inadequate infrastructure and data setsBut• CRC will go ahead• Business as Usual is not an option• CRC offers opportunities
Helping you deliver CRC
Opportunities – CRC Health Check
• Data set, meter points and consumption• Organizational structure• CRC Gap AnalysisLeading to• Road map to compliance• Basis for the Evidence Pack• Improved knowledge of building performance• Allocation of responsibilities
Helping you deliver CRC
Opportunities – Strategic Review
• CRC gains Board attention• Where do you want to be in 2, 5, 10 years time?• Develop a Carbon Management Strategy• Devise your CRC Policy• Early Action Metrics?• Adapt the Management System (EMS?)• KPIs and Benchmarks
Helping you deliver CRC
Opportunities – At a local level
• Monitoring and Targeting• Management Programmes for energy, waste, water• Education and Training• CBA for technical interventions:
– Energy Audits– BMS Optimisation– Boiler/Air Con Optimisation– Re-lamping– Sub-metering– ESCO?
Helping you deliver CRC
Stakeholder Interests
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Landlords & Tenants
18:30 – Introduction by Giles Hutchins, Head of Sustainability Solutions, Atos Origin UK
. 18:45 - Guest Speakers
19:45 - Drinks/ Networking
20:30 - Evening Close
HERMES Emission Trading SchemeFindings of first year of trading
May 2009Tatiana Bosteels
Head of Responsible Property Investment
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www.hermes.co.uk
HETS 2008 Initial Questions
• What is the order of magnitude of the costs associated with CRC for real estate funds?
• Is it most cost effective for an organisation to buy all of its allowances up front, therefore incurring the initial cost and keeping control over the cost/benefits?
• Would an organisation seek to pass on the cost/benefits to the occupiers to provide incentive for behaviour change?
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www.hermes.co.uk
Hermes ETS
• The Hermes Emissions Trading Scheme (HETS) is a virtual model of the Carbon Reduction Commitment
– 103 properties
• Baseline year set as 2007
• Cap set as baseline - 5% emissions– allowances allocated on the basis of Hermes 5% year on year CO2
reduction target– using energy data from all properties which have been in the portfolio during
24 month period
• League table position based purely on relative changes in emissions– not growth metric, AMR or Carbon Trust Standard
• Calculations modelled on guidelines produced by DECC as of March 09
• Assumes Hermes ETS Participants constitute entirety of trading scheme
Developed with Upstream Sustainability Services at Jones Lang LaSalle
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www.hermes.co.uk
Findings of Hermes ETS 2008
KEY ELEMENTS AFFECTING FINANCIAL IMPACT
• Cash Flow– Cash flow impact of buying allowances– Cash flow impact of first double sale in 2011
• Projections– Accurate emissions projection avoids cost of buying in secondary market
without redistribution• League Table
– Significant financial impacts come from position on league table• Occupier incentive, or lack of?
– Phase 1: administrative burden probably too high to pass cost on to occupier – no incentive for occupiers to reduce emissions
– Phase 2: Increased cost will call for allocation of cost/ benefits to occupiers – at present not clear how this could be implemented
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www.hermes.co.uk
Hermes ETS 2008 Results
Hermes CO2 emissions and HETS targets Total By Fund
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
A B C D E
kg C
O2
2007 Total CO2 emissions
2008 Total CO2 emissions
2008 HETS allowances
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www.hermes.co.uk
Hermes ETS 2008 Results
Results of Hermes ETS 2008
Estimated CRC costs in phases1 and 2 of the scheme, for selected participants in the Hermes ETS
Note: Price of carbon - Phase 1: £12/tCO2; Phase 2: £50/tCO2
Year Participant
League
Table position
£ Allowances
Bought
£ Recycling cost (+ or -)
£ Trading cost (+ or -)
£ Overall cost or benefit
2011 A 2nd £160k £10k £0.5k £11k
C 1st £45k £5k £4k £9k
D 5th £100k -£9k -£30k -£39k
2015 A 2nd £667k £215k £2k £217k
C 1st £189k £112k £16k £128k
D 5th £415k -£195k -£126k -£321k
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www.hermes.co.uk
Cash Flow impact of buying allowances
• Cash flow impact in 6 months between auction of allowances and re-distribution
Greater impact of first auction in April 2011 due to double year auction
• Actual emissions for the financial year 2010/2011; and
• Projected emissions for year 2011/2012
• Up front cost of buying allowances in Hermes ETS 2008– A: £160k * 2 = £320k
– B: £100k * 2 = £200k
– C: £45k * 2 = £90k
– D: £100 * 2 = £200k
– E: £150 * 2 = £300k
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www.hermes.co.uk
Importance of accurate emissions projection
Hermes CO2 emissions and HETS targets Total By Fund
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
A D
kg C
O2
2007 Total CO2 emissions
2008 Total CO2 emissions
2008 HETS allowances• Participant A has accurately predicted emissions
• Participant D has emitted considerably more than it predicted.
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www.hermes.co.uk
Importance of accurate projection
Scenarios
Difference between allowances and actual
emissions (tCO2) Allowance Price £/tCO2
Trading Cost Recycling Cost
Yr1 D -2,527,743 12 -£30,333 £0
Yr1 D - 2,527,743 18 -£45,499 £0
Yr5 D - 2,527,743 50 -£126,387 £0
Yr5 A 44,385.81 50 £2,219 £0
Participant A is better off having accurately predicted emissions, however:– Cash flow implications for over buying more allowances – Risk of not being able to sell any excess allowances in secondary market
Participant D faces high trading costs
Especially in phase 2 if the price of carbon increases, e.g. £50/tCO2
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www.hermes.co.uk
Impact of league table
ScenarioPosition on league table
Allowance Price £/tCO2 Trading Cost
Recycling Cost Overall Cost
Yr1 A 2 of 5 12 £533 £9,889 £10,422
Yr5 A 2 of 5 50 £2,219 £215,689 £217,909
Yr1 D 5 of 5 12 -£30,333 -£8,959 -£39,292
Yr5 D 5 of 5 50 -£126,387 -£195,397 -£321,784
• With good prediction league table is responsible for majority of financial benefits
• In Year 5: With a recycling payment of up to ±50% the importance of league table increases significantly
• Estimates assume price of carbon will increase with cap introduced
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www.hermes.co.uk
Impact of passing on cost/ benefits at asset level
Organisation A CO2 emissions and HETS targets
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
A B C D E F G H I J K L M N O P Q R S T U V
kg C
O2
2007 Total CO2 emissions
2008 Total CO2 emissions
HETS 5% allowances target
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www.hermes.co.uk
Impact of passing on cost/ benefits at asset level
ScenarioPosition on league table
Allowance Price £/tCO2 Trading Cost
Recycling Cost Overall Cost
Yr1 M 2 of 22 12 £3,344 £1,679 £5,023
Yr5 M 2 of 22 50 £13,935 £30,736 £44,671
Yr1 O 20 of 22 12 -£3,338 -£282 -£3,620
Yr5 O 20 of 22 50 -£13,909 -£5,162 -£19,071
• Assuming that one allocates the cost/benefit at asset level following the same rules as the CRC at organisational level
• Only after 5 years, assuming a cost of allowances at £50 / tonne of CO2 individual assets can begin to make significant savings or incur significant costs.
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www.hermes.co.uk
Impact of passing on cost/ benefits to occupiers
Total costs for individual occupiers in yr5 within a single property
-£9,000.00
-£8,000.00
-£7,000.00
-£6,000.00
-£5,000.00
-£4,000.00
-£3,000.00
-£2,000.00
-£1,000.00
£0.00
A B C D E F G H I
Occupier total cost + total recycling cost
Total cost by floor area
Allocation per floor area• In Yr5 cost to Occupier B
equals £6,700• In Yr 5 cost to Occupier G is
£4,700
With sub-meters & allocation by league table
• In Yr5 cost to Occupier B equals £1,900
• In Yr 5 cost to Occupier G is £7,700
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www.hermes.co.uk
Is there an incentive for Occupiers in CRC?• In the first phase when there is no emissions’ cap to the trading
system, the cost/benefits of the scheme will be of a very small order of magnitude.
• The administrative burden of passing on these cost/benefits to our occupiers will outweigh any potential savings for Hermes Funds.
• In such case there will be no cost incentive on occupiers to reduce their emissions
• In the second phase the financial impacts increase significantly and it would be important to find ways to share responsibility with occupiers and give them an incentives to change behaviour change
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www.hermes.co.uk
Impact of the League Table
• During both phase, the league table will be play a significant role in determining the overall cost or benefit of the scheme to organisations
• In phase 2 the league table recycling payments will increase even further
• The league table’s determining criteria need to be FAIR and verifiable
• Is there a need for a league table, or would a well assigned cap and auction process provide the right incentive for organisations to reduce emissions?
• If the league table is to stay how to ensure FAIRNESS to all participants?
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