Energy Act 2011 – Will the Green Deal add more green to your profit & loss?

The British government is constantly striving to improve our outlook on the environment and is looking for different ways to achieve business and domestic buy in. The policies around the protection of energy has developed quite considerably over the years. In 1962 they implemented the Pipes Act, 1986 saw the Gas Act, 1998 was the Petroleum Act and ever since 2004 the Energy Act has been amended 3 times. Energy has been, and always will be a key commodity to any developed, or developing nation.

The reduction of carbon emissions is not only one of the key protocols of the Kyoto agreement, but is also steadily becoming a big area of trading for many countries and organisations. In June 2010, Barclays Capital bought Swedish carbon emissions trading firm, Tricorona, for £98 million pounds, signaling the growth of the emissions trading sector. Carbon reductions are good not only for the environment, but are also a huge area of income if there is excess to be traded.

The most recent Energy Act to be implemented, the Energy Act 2011, focuses on one key area, The Green deal. The main crux of the Green deal is to create a new funding mechanism to help organisations implement energy efficient measures without having to pay the upfront costs. The government has set a ‘Golden Rule’ to the Green Deal and that is – The charge attached to the bill should not exceed the expected savings.

Essentially the way it works is that the company that installs or recommends the energy measures will not receive any money upfront from the client. They will instead be paid from the savings on the client’s bill, and this will be paid directly from the supplier. It is an interesting funding mechanism, but no doubt the government will have to have grants in place as it will be difficult to get buy in from the suppliers.

To achieve the 34% carbon reductions by 2020 that were agreed in the Climate Change Act 2008, it will require the UK to reduce carbon emissions in our homes/communities and workplaces by 29% and 13% respectively. The Green Deal has been put in place to help us achieve these targets. The UK has one of the oldest developed building networks and whilst this is a great feat, it also means that many of our buildings are highly inefficient when it comes to energy. The way the government is touting the new initiative is that it is bringing our buildings up to date.

A further key area to the Energy Act 2011 is that as of April 2018 it will be unlawful to rent out a private, or business premises that does not to reach a minimum energy efficiency standard. There is a huge drive to ensure businesses buy in to the initiative, but the focus will have to be on the landlords even more so than the actual business owners. Some of the processes that are involved with the development and installations of energy efficient measures can be quit taxing and sometimes can deter companies from taking them on board. If companies do not see any immediate savings and do not buy into it, the dependence will then fall on to the landlords and also people looking to be ‘greener’.

There is also huge resistance from the energy suppliers. Currently the government’s proposal is expecting the energy companies to overhaul their payment systems to accommodate the payments to the energy efficient suppliers. Many energy companies have claimed that it is not feasible for their payment systems to be developed by October 2012, as was originally stated.

It would seem that the government needs to amend the Act and make it mutually beneficial for the environment as well as the key stakeholders in the agreement for it to really blossom.