Cuts Your Energy Costs: CRC Reason 3 For Immediate Energy Efficiency Action

Posted on 08. Apr, 2010 by Ross in Corporate Policy, United Kingdom

‘CRC’ stands for ‘Carbon Reduction Commitment‘, and with all the focus of the scheme on carbon accounting it would be easy to be side-tracked into thinking that greenhouse gas emissions were the only thing at stake.

Energy efficiency is not just about carbon reduction.

Energy efficiency is a proven and effective way of reducing costs and defending your company’s bottom line. Energy costs can form a majority of a company’s overheads, so any increase in your energy efficiency has a direct impact on your profitability. The business case for energy efficiency is simple:

Less Energy = Lower Costs = Bigger Profits = Better Shareholder Value

The equation is simple, but how much does energy efficiency cost? Some projects can have long payback periods if the efficiency gains are small: this is typical of new manufacturing machinery.

However, there are plenty of energy efficiency projects which achieve return on investments of 50-100%. Such projects include thermal insulation and intelligent energy efficienct lighting: these can have an immediate financial impact on a diverse array of business sectors, and characteristically have IRRs and NPVs far better than most other company projects.

WARNING!

Not all energy efficiency projects are created equal under the CRC Energy Efficiency scheme. Some projects might have a strong effect on your company’s balance sheet, but affect areas of your business whose carbon contributions are not counted under the CRC legislation.

A good example would be transport efficiencies: because transport is not counted under the CRC scheme (even electrified transport), a logistics company could not reduce their carbon credit obligations by improving fleet efficiency or retraining drivers to drive in a more fuel-efficient manner, despite the cost savings available from such action.

An alternative example more pertinent to the public sector is energy efficient street lighting. Much of the country’s street lighting is run from unmetered supplies, which were exempted from the CRC scheme in February. Whilst that automatically reduced the carbon obligation of most of the country’s councils, and enabled some of them to pass under the qualification threshold, it also created a disincentive to make efficiency gains in most council’s biggest single energy overhead. Instead, councils looking to perform well under the CRC scheme must look to other projects to reduce their measured commitments.

Make a decision: is it more important to your business to cut costs, or to generate green PR? Energy efficiency can be the key to one or two both, but be aware of the impact of your energy efficiency projects under the CRC Energy Efficiency scheme.

Still not convinced that your company need do anything right now under the CRC Energy Efficiency scheme? Well, there’s one more great reason to act now this week, and we’ll be revealing the most important reason to act now next week. No-one else is talking about this yet, but in this case ignorance is definitely not bliss…