17th June 2021
One of the most common questions that businesses are asking is how do you decarbonise your business? We’ve probably all heard the question and know a little about what it means, but what does it mean for us as business operators and what can we do about it?
The UK Government announced on 20th April 2021 that it would set into law, climate change targets that would see the UK reduce emissions recorded in 1990 by 78% before 2035. The aim is to reduce Carbon emissions to the ultimate target of ‘net zero’ by 2050.
Business has a major part to play in this. Industrial applications will be some of the hardest hit, but there’s no doubt that the new legislation will be wide-reaching and affect every UK business, in the drive to reach the target.
Most of us understand the concept of using less energy, but what do we mean by decarbonisation? What is carbon in this context? Where does it come from and how does that relate to using less energy?
Decarbonisation is the term used for the process of removing or reducing the carbon dioxide (CO2) output of a country’s economy. So whilst it’s known as decarbonisation, it’s actually referring to the reduction of Carbon Dioxide (CO2).
CO2 is produced when we burn fossil fuels such as coal, gas or oil. CO2 is a Greenhouse Gas that contributes to Global Warming. So-called ‘renewable energy’ options offer either lower or zero-carbon alternatives to burning fossil fuels.
So, if we switch more towards these renewable alternatives to power and heat our businesses, we will burn less fossil fuels and produce less CO2.
If we really must burn fossil fuels, then wasting as little of the power and heat as possible through better insulation and more efficient delivery systems, will mean that we also produce less CO2 for the same ‘work’ required. In practical terms, improvements to insulation and tighter control of carbon fuelled systems (heating, air conditioning etc) will produce a significant reduction in emissions and savings in energy costs/consumption.
In broad terms, 1,450 kWh of energy produced using fossil fuels will create approximately one tonne of CO2 emission.
Around 500kg of coal produces one tonne of CO2. It would need over an acre of UK woodland to capture (known as sequestering) that amount of CO2. This is why we often hear about tree planting as a way of offsetting carbon production.
As we move towards the target of net zero, there will doubtless be a direct cost to businesses that continue to produce CO2.
In the report written in May 2019 by Joshua Burke, Rebecca Byrnes and Sam Fankhauser of LSE, The Centre for Climate Change Economics and Policy (CCCEP) and The Grantham Research Institute on Climate Change and the Environment, the price of carbon consistent with reaching net-zero would start at £50 per tonne of carbon dioxide (tCO2) in 2020, reaching £75 in 2030 and £160 per tCO2 in 2050.
A typical small business in the UK may use 20,000 kWh per year. Based on an average UK tariff of 17.2p/kWh (BEIS 2020) the annual energy spend would be £3,440. In addition, there is likely to be a Carbon bill too. At current carbon costs, that’s an additional cost of £400 per year or so, but will begin to rise towards a cost of well over £2,000 per year.
The businesses that will be the most affected by this will be those that are considered to be the heaviest producers of carbon. On the Government website, these are listed as power generators; certain large industrial premises and manufacturers, including food processing plants; certain public sector facilities.
If you are considering how to decarbonise your business, it’s worth looking at these five key benefits to business
We’ve shown what decarbonisation is and explained the benefits, so let’s look at where the easy wins lie for business.
The biggest single win in any decarbonisation project is insulation. By stopping heat leakage from a building you will burn less fuel to heat/cool the space.
Any boiler or air conditioning system that is properly maintained will continue to operate at optimum efficiency. Planned, Preventative Maintenance Programmes help to maximise life for the plant item, but also evidences when the cost of continued operation is outweighed by the cost of replacement. The cost of replacement can often be helped by Government grants and capital allowances for business on energy efficient appliances.
Replacing inefficient air conditioning systems, switching to energy efficient lighting, replacing inefficient appliances and remembering to switch things off, rather than leave them on standby, all have a big impact.
A Building Management System allows the heating and cooling of a building to be centrally controlled. In one example, Cheshire-based housing trust reduced its heating bills by 30% – saving £1,796 and 13 tonnes of CO2e a year – after installing a Building Management System. By automatically responding to outside temperature and occupancy levels, the system paid for itself in less than 4.5 years.
A Heat Pump uses the latent heat in the atmosphere, the ground or the water that surrounds us, to heat the spaces we work in. Installation is relatively easy, even in an older building and can save as much as 50% of the overall energy bill. In our own case study here in a historic building, the CoP of the heat pump installation was 3.4, meaning that for every £ of energy put into powering the system, £3.40 was delivered in heating.
This is a peak figure and over the whole year, when it’s colder outside, the system would need to work harder to deliver the same level of heating. This Seasonal Performance Factor (SPF) needs to be at 2.5 or above to qualify as a renewable technology.
Solar PV is an increasingly cheap option for business and offers two huge advantages over residential installation. Firstly, it generates when people are in the office actually using the energy. Secondly, if you offer electric car charging for staff, these are effectively powered for free after the installation cost. ROI can now be as high as 15% or more.
Some level of self (or micro) generation ensures greater energy security for business. There is also the huge win of 100% asset finance availability and the annual investment allowance which can offset the capital cost against corporation tax in year one.
One thing Covid has taught us is that it is possible to work from home and a hybrid working model of part home, part office will save significant carbon in removing some of the physical commute to the office. In the long-term, this will greatly reduce mileage, ease congestion in cities and benefit carbon reduction.
A flexible system where there is some time working at home and some in an office together will have a significant impact when considering how to decarbonise your business.
We believe that making the move to decarbonise your business makes sense. Not just in improving your green credentials, but in short, medium and long term business cost-saving and security.
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