5 fundamentals of business energy strategy

British Gas business energy strategy

As a business, you may be looking to reduce your environmental footprint, cut costs, or improve operational efficiencies. Many businesses, however, don’t have a strategy to effectively address these goals. We’ve highlighted five fundamental factors to consider below to help you plan/improve your energy strategy for your business.

Big business benefits

Strategies are about meeting goals with the available means, for example, you’ll need to know how you’ll get to your energy goals destination – whether that’s through reaching a science-based emissions target or upgrading to an EV fleet.

In return, you’ll be able to boost your brand reputation, minimise risks, and earn financial benefits.

Building an energy strategy is also crucial for meeting your legal requirements. In the UK, a variety of legislations require large businesses to report their carbon emissions, participating in trading schemes, pay environmental taxes, and carry out energy efficiency audits.

Efficiency incentives

With so much demand on your business, it is important to know where the government offers support:

– The Enhanced Capital Allowance (ECA) scheme [1] allows you to write off the full cost of qualifying energy-efficient appliances from your taxable profits in the year of purchase.
– You could receive quarterly payments for 20 years based on the amount of low-carbon heat you generate under the Renewable Heat Incentive (RHI) scheme.
– If you’re a highly energy-intensive organisation, you can apply for a Climate Change Agreement (CCA) [2]. In exchange for achieving specific efficiency targets, you can receive a discount on your Climate Change Levy (93% on electricity and 78% on other fuels).

The legal context

Considering legislation helps you understand why you have to pay so many different types of taxes.

Luckily, there are only two legislations you need to know about in order to understand the UK’s legislative landscape.

The first is the EU’s 2009 Renewable Energy Directive (RED). The law says that the EU will collectively procure 20% of its energy from renewable sources by 2020. Each EU Member State has a specific national target – for the UK, it’s 15%.

The other law is the UK’s 2008 Climate Change Act. The recently amended legislation requires the UK to reach zero emissions by 2050 [3].

Taxes and charges

Less than half of your energy bill pays for energy. The rest covers taxes and charges. So, knowing what you pay – and why – can help you identify opportunities to reduce your exposure to these costs.

There are currently two major environmental taxes that apply to large businesses:

– The Climate Change Levy (CCL) applies to practically every type of business.

– If you’re an energy-intensive organisation, you may also need to participate in the EU Emissions Trading Scheme (ETS) [4].

In addition, there are a variety of mechanisms to ensure that the energy network can transition to low-carbon generation. The Government collects the necessary funds for this through charges and taxes.

These non-commodity costs are likely to rise in the future. However, a robust energy strategy can help you manage them effectively.

Reporting requirements

We’re seeing more and more customers and investors call for increased transparency. And the numbers show it. Ethical consumption, for instance, nearly doubled in the UK since 2010. This means that reporting will help you meet your legal requirements.

If you’re a large business, you’ll have to comply with one or more of the following requirements:

– If you’re a quoted UK company, you must disclose your emissions under the Mandatory Greenhouse Gas reporting [5] requirement.
– The new Streamlined Energy & Carbon Reporting (SECR) [6] creates emissions reporting requirements for an extra 8,000 organisations by bringing unquoted companies under its remit.
– As a large business, you may also have to carry out an energy assessment every 4 years under the Energy Savings Opportunity Scheme (ESOS) [7].
– If you happen to be an asset owner or a listed company, then you’ll have to disclose your climate risks under the new Green Finance Strategy [8] by 2022.

Factoring the relevant requirements into your energy strategy will certainly help you save valuable time and effort.

Equipped with these fundamentals, you can set out to integrate your energy strategy into your business strategy. Contact our energy experts today to find out how our large business solutions can help you turn energy into a competitive advantage.

[1] https://www.gov.uk/government/publications/enhanced-capital-allowance-scheme-for-energy-saving-technologies

[2] https://www.gov.uk/guidance/climate-change-agreements–2

[3] https://www.gov.uk/government/news/uk-becomes-first-major-economy-to-pass-net-zero-emissions-law

[4] https://www.gov.uk/guidance/participating-in-the-eu-ets

[5] https://www.gov.uk/government/publications/environmental-reporting-guidelines-including-mandatory-greenhouse-gas-emissions-reporting-guidance

[6] https://www.gov.uk/government/publications/environmental-reporting-guidelines-including-mandatory-greenhouse-gas-emissions-reporting-guidance

[7] https://www.gov.uk/guidance/energy-savings-opportunity-scheme-esos

[8] https://www.gov.uk/government/publications/green-finance-strategy

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