Energy in 2022

Energy in 2022

As we begin 2022, many of us are still processing the events of 2020, let alone 2021. From an industry perspective, the current energy crisis has added fuel to the fire. Amongst our usual round ups for the year ahead, we explore what the impact of these price increases mean in financial terms, take a look at the new Green Gas Levy and provide a summary of consultations, notices, policies and upcoming legislation that may affect your business.

Levies & Taxes

For a full breakdown of what and when each legislation deadline is, please visit our timetable.

Climate Change Levy (CCL)

Climate Change Levy rates for 2022 & 2023 have been published and can be found below.

Electricity rates will remain the same but gas rates will continue to rise year-on-year.

If your business is required to pay CCL, and you are unsure of the cost, you can use our CCL Calculator to find out.

If you are unsure of what CCL is, and whether you could invest in measures to obtain CCL exemption, you can read our CCL White paper.

To keep up to date with this, sign up to our mailing list here.

Taxable Commodity Rate from 1st April 2022 Rate from 1st April 2023 Rate from 1st April 2024
Electricity (£/kWh) £0.00775 £0.00775 TBA
Gas (£/kWh) £0.00568 £0.00672 TBA
LPG (£/kg) £0.02175 £0.02175 TBA

Reporting Schemes and Directives

Energy Saving Opportunity Scheme (ESOS)

The Energy Saving Opportunity Scheme's Phase 3 is well underway. We advise all participants to start working with their lead assessors to gather relevant data and arrange audits that cover the Qualification Date of 31st December 2022. This will ensure a smoother process ahead of the new compliance deadline; 5th December 2023 and will make reporting to the EA much easier.

Compliance Period (Phase) Qualification Date Compliance Period Compliance Date
3 31 December 2022 From 6th December 2019 to 5th December 2023 5th December 2023
4 31 December 2026 From 6th December 2023 to 5th December 2027 5th December 2027

UK ETS

The UKETS was created by new legislation in late 2020 to replace the UK's participation in the EUETS - a globally significant carbon reduction scheme. UKETS is a lookalike of the EUETS which accounts for around 40% of all EU carbon emissions and naturally establishes a carbon price for EUA allowances measured as Euros per tonne of CO2 equivalent.

The schemes are aimed primarily at large oil and gas fuelled electricity generators and industrial plant. So fossil power stations are major participants but sites with large standby generators - like data centres and some city buildings - can be pulled in even though their generators are rarely used.

The UKETS is a "cap and trade" scheme requiring participating sites to measure and report to the government their annual emissions from all combustion plant. Each year, the government, knowing the previous year's national emissions, sets a tCO2e cap for the coming year and issues that number of tCO2e allowances. Some of the allowances are provided free, to certain industries for example, and the rest are auctioned by the government to participants or traders. After that, it's up to the participants and the carbon market that arises to ensure that each site has bought enough allowances at the end of the year to cover its emissions.

The idea is that high carbon prices justify more emissions reduction measures and that sites which can cheaply reduce emissions can benefit by not having to buy so many allowances. An interesting idea developed further at COP26 in Glasgow is to strive for a global scheme - possibly similar to EUETS and UKETS, with national caps to be agreed while allowing more relaxed (higher) levels for developing countries.

What determines a participating site for the UKETS is the amount of large combustion plant (including generators) measured as MW of thermal input from fuel such as gas or oil. The site is pulled in if plant items over 3 MW of thermal input (so around a MW of electrical output for generators) exceed a total of 20 MW thermal input. Ultra small emitter sites (emitting less than 2,500 tCO2e a year) can be excluded from full participation but they still have to measure annual emissions robustly and report if the threshold is exceeded. Certain other exclusions apply such as for hospitals.

Both the EUETS and the UKETS have been strongly affected by the disruption in the energy markets. EUA allowance prices have risen from €30 to €80/tCO2e (and UK allowances similarly) due partly to fuel switching from more expensive but low-emitting fuels like gas; with many sites emitting more than previous years there is strong competition for the available allowances and prices rise. The price rise has been sufficient to trigger the UKETS Cost Containment Mechanism process which can reallocate or bring forward allowances - but so far no such action has been taken by the government.

Information on the current status of the UKETS comes from John Field of Native Hue Limited.

Green Gas Levy (GGL) & Green Gas Support Scheme (GGSS)

The Green Gas Levy (GGL) places obligations on licensed gas suppliers, including a requirement to make quarterly levy payments, in order to fund the GGSS. The GGSS policy is set by the Department for Business, Energy and Industrial Strategy (BEIS) but the scheme is administered by Ofgem.

The Green Gas Support Scheme (GGSS) is a government environmental scheme that provides financial incentives for new anaerobic digestion biomethane plants to increase the proportion of green gas in the gas grid.

The scheme is open to applicants in England, Scotland and Wales for 4 years from 30 November 2021.

Registered participants will receive quarterly payments over a period of 15 years. Payments are based on the amount of eligible biomethane that a participant injects into the gas grid.

Consultations, Notices & Policy Papers

There are currently many consultations covering an array of important topics within the energy and environmental sector. We have included the most relevant below. Further to this, we have also included consultations we are aware of that will be upcoming in 2022. To view all of them you can visit the government's website.

Smart meter targets framework: churn adjustment

This consultation can be viewed here. It seeks views on proposals to mitigate the impact of smart meter customers switching suppliers ('churn') on energy suppliers’ minimum installation requirements for the second year of the new 4-year smart metering policy framework. This consultation closes at midday on 20 January 2022.

Single-use plastic: banning the supply of commonly littered single-use plastic items

This consultation can be viewed here. It seeks views on a plan to ban the supply of single-use plastic items and polystyrene food and drink containers. This consultation closes at 11:45pm on 12 February 2022.

Recovering the costs of heat networks regulation

This consultation can be viewed here. It seeks views on the government’s proposed approach to recovering the costs of heat networks regulation.

They propose that Ofgem and Citizens Advice’s total ongoing costs of regulating and performing consumer advocacy functions in the heat networks, gas, and electricity markets should be spread evenly across heat network, gas, and electricity consumers.This consultation closes at 11:45pm on 16 February 2022.

Towards a market for low emissions industrial products: call for evidence

This consultation can be viewed here.It seeks evidence on the design and implementation of policies that can encourage the market for low emissions industrial products to grow. This consultation closes at 11:45pm on 28 February 2022.

Climate Change Agreements (CCAs): proposals for a future scheme

This consultation can be viewed here. It seeks views on potential reforms proposed for a future CCA scheme to follow from the end of the current scheme. This consultation closes at 11:45pm on 11 March 2022.

Enabling or requiring hydrogen-ready industrial boiler equipment: call for evidence

This consultation can be viewed here. It seeks views and evidence to inform the development of possible options to enable or require hydrogen-ready industrial boiler equipment. This consultation closes at 11:45pm on 14 March 2022.

Tackling illegal deforestation in UK supply chains

This consultation can be viewed here. It seeks views ahead of secondary legislation to implement due diligence in UK supply chains to tackle illegal deforestation. This consultation closes at 11:45pm on 11 March 2022.

Notices

  • Cluster sequencing for carbon capture, usage and storage (CCUS) deployment: Phase-2: Call for submissions from organisations wanting to take part in Phase-2 of the CCUS Cluster Sequencing Process. This can be viewed here.
  • Heat Pump Ready Programme: The programme supports the development and demonstration of heat pump technologies and tools, and solutions for optimised deployment of heat pumps. This can be viewed here.
  • Register your interest for Phase 3 of the Industrial Energy Efficiency Accelerator: This programme will provide funding for the development and demonstration of technologies that could reduce energy consumption, maximise resource efficiency, and cut carbon emissions in industry. This can be viewed here.
  • Apply for the Red Diesel Replacement competition Phase 1: This competition provides funding for projects developing low carbon alternatives to red diesel for construction, mining and quarrying. This can be viewed here.
  • Heat Pump Ready Programme: apply for Stream 2 opportunities: The programme supports the development and demonstration of heat pump technologies and tools, and solutions for optimised deployment of heat pumps. This can be viewed here.

Policy Papers & Other

  • Energy-related products policy framework: This framework sets out the UK plan on how we will drive products to use less energy, resources and materials and how this will contribute to achieving net zero. This can be viewed here.
  • Net Zero Strategy: Build Back Greener: This strategy sets out policies and proposals for decarbonising all sectors of the UK economy to meet our net zero target by 2050. This can be viewed here.
  • Participating in the UK Emissions Trading Scheme (UK ETS): This guidance explains who the UK Emissions Trading Scheme (UK ETS) applies to and what is required of businesses that are covered. This can be viewed here.
  • Smart meters in the public sector: This introduction to smart meters is aimed at decision makers in the public sector, and illustrates the benefits of installing smart meters. This can be viewed here.
  • Heat technical research: BEIS technical research covering aspects of low carbon heating technologies. This can be viewed here.

Legislation

The government has been proactively moving forward with their green agenda. Some upcoming plans from BEIS over the coming years are listed below.

  • Proposed Performance-based Policy Framework: Commercial and industrial buildings over 1,000m2 will be required to have a rating displaying how well the building uses energy compared to its peers.
  • New Small Business Energy Efficiency policy mechanism.
  • Plans for key existing policies at delivery stage including on Combined Heat and Power, industrial heat recovery and energy auditing of business buildings.
  • The next phase of Climate Change Agreements; which provide tax incentives for businesses to decarbonise.
  • Consultation on and beginning to implement new minimum energy efficiency standards for rented business properties.

All the above plans may be subject to change

Energy Prices

The future has never looked so uncertain for energy suppliers; between 9 August 2021 and 1 December 2021, 25 energy suppliers had ceased trading. Many were small firms with modest customer bases in a large market, poorly managed, underfunded or just buying energy from the wholesale market and passing it on. The biggest shock of these was the collapse of CNG, an energy provider of 27 years.

Over the winter, media outlets have been crying out at what this means for consumers; usually an increase in energy bills. Unfortunately they are not wrong. The remaining energy suppliers all offer various tariffs, most are around the same price for electricity and gas.

Let's look at some of these domestic rates* before applying some real life examples.

Supplier Electricity Gas
Bulb £0.2066/kWh £0.0416/kWh
Octopus £0.2778/kWh £0.0845/kWh
E.on £0.4221/kWh £0.1315/kWh
British Gas Not taking on new customers
Taking Octopus, before the increase, electricity and gas rates were £0.1525/kWh and £0.0279/kWh respectively.

In the simplest of terms; this means that if you use 1kWh of energy, it would cost you 27.7p.

Spotlights in a modern home

Now imagine a living room has 6 halogen spotlights in the ceiling. If these lights were left on for 5 hours every evening for a year at £0.01525/kWh, it would cost £116.89. On the new rate of £0.2778/kWh, it would cost £212.93.

If you were to switch these to LEDs, based on the higher rate, they would cost £12.17 annually.

According to Ofgem, the average household in the UK uses 2,900 kWh of electricity and 12,000 kWh of gas. If we applied these amounts to the tariffs charged by Octopus this presents the following increase.

Consumption Energy Tariff Energy Cost Total
Electricity Gas Electricity Gas Electricity Cost Gas Cost
2,900kWh 12,000 kWh £0.1525/kWh £0.0279/kWh £442.25 £334.80 £777.05
2,900kWh 12,000 kWh £0.2778/kWh £0.0845/kWh £805.62 £1,014 £1,819.62
  82.16%⬆ 202.87%⬆ 134.17%⬆

If you want to work out your own home's energy cost, visit the online account of your energy suppliers website, obtain a summary of your annual electricity and gas consumption in kWh, what their new tariffs are and multiply these two together.

So what can be done to minimise the impact of rising costs?

  • Ensure you are on the best possible deal and continue to monitor the market for alternatives
  • Implement energy efficiency measures:
    • Switch out inefficient bulbs for LEDS
    • Do not run anything unnecessarily
    • Have your insulation checked by a professional and upgraded where possible
    • Install double glazing where possbile 
  • If you are walking around in flip flops or shorts and find it's cold, do not turn the heating on. Put on warmer layers
  • Do not heat rooms you don’t have to but ensure your house doesn't suffer from damp.
  • Ensure you set your timers correctly, if you're not home, the heating doesn’t need to be on for as long
  • Consider lowering the thermostatic valves by 1°c on radiators
  • Take monthly meter readings and send them to your supplier. It's better to be billed for what you've used than estimate and be stung later on

See our Energy in the Home sheet here

If your supplier fails, this does not mean the lights go out. Any credit you are owed (credit being money you have paid into your account to the supplier to cover energy costs) will be returned or added to the new account of your new supplier. You will be automatically switched to a new supplier. However, when you are moved onto a new supplier, they will add you to their standard tariff rate. This is usually the most expensive one. You can switch without any exit fees so make sure you check out comparisons as soon as possible. This is part of Ofgems safety net rules.

The Rumford Club

The Rumford Club is a dinner debate club based in central London. It was established in 1947 and at the time was for the discussion of air movement. The club has since grown and topics now include all parts of the built environment and engineering services.

Every dinner is held at the National Liberal Club and includes drinks, dinner and a different speaker for each event, with Lord Rupert Redesdale being its patron. The club's remaining speakers for this season are listed below.

Wednesday 23rd February 2022 Ruth Carter
CEO, CIBSE
Topic: CIBSE’s future
Thursday 17th March 2022: Sharon Duffy
Head of Engineering, Delivery Optimisation, Transport for London (TfL)
Topic: Opportunities to utilise TfL’s secondary heat sources
Thursday 28th April 2022: Simon Wyatt
Partner, Sustainability Cundall
Topic: Net Zero Carbon, challenges and opportunities

Membership is open to all within the industry that would find enjoyment and connection with like-minded individuals.

Though this is not a new piece of legislation or regulation, it is the leading club to meet leaders and influencers of these industries and is the one to watch in 2022.

To find out more visit their website here.

*Rates as of 01/01/2022 - these are subject to change.

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