In recent years, energy managers have faced a number of unforeseen events, from the Brexit vote in 2016 to the snap general election in 2017. As we don’t have a crystal ball, it’s likely that 2018 will hold further surprises – but there are some key energy events that we know will happen this year and should be preparing for now.
So, what’s coming up in the energy world in 2018? Let’s take a look…
Potential cost rises
For some energy intensive industries (EII) it will be a good year due to exemptions of up to 85% of the costs of the RO and CfD schemes being removed from their bills. Exemptions for the CfD Levy have already started and the discount on the RO levy will begin on 1st April 2018. This may be followed later in the year with an exemption on the FiT Levy, but this is still awaiting EU State Aid approval. While qualifying businesses will be looking forward to the exemption scheme kicking in, businesses that aren’t eligible for exemption will be forced to absorb the extra costs.
When DCP 228 is introduced in April, many businesses could see their energy costs increase further as it will change the way that Distribution Use of System (DUoS) costs are calculated. Red band (peak period) charges will be reduced, but amber and green band rates will increase. Those organisations with high consumption during peak hours may see a slight reduction in their energy bills, however the majority of large businesses will see their costs rise as a result of these changes.
As we head into winter 2018/19, businesses will certainly notice the impact of the Capacity Market levy. In the current winter (Nov 17 to Feb 18), this charge is just over £30/MWh for all electricity used between 4pm and 7pm on weekdays. However, next winter this cost will be nearly three times higher and will also be compounded by Triad increases of over 10%.
While the above changes will increase energy costs for many organisations, businesses that optimise their energy strategy will be in the best position to mitigate these rising costs.
This year, we’ll see the introduction of new legislation that eligible businesses will need to be ready to comply with or face sanctions. Ofgem is introducing DCP 161 on 1st April, a measure that is being established to ensure that businesses on half hourly (HH) meters are given penalty charges if they exceed their assigned capacity. This penalty could be as much as three times the standard rate, so it’s vital that businesses with HH meters monitor their usage and ensure that they do not exceed their capacity.
Minimum Energy Efficiency Standards (MEES) will also come into force for all non-domestic landlords in England and Wales in April. Businesses should act now to ensure that all of their properties have an EPC rating of at least E by 1st April, as it will be unlawful to rent out any F and G graded EPC buildings from this point. Those that don’t comply risk financial penalties or being prohibited from renting out properties.
Just when you thought that ESOS had gone away, you will need to start preparing for the sequel – ESOS Phase 2. This will be based on energy consumption for a 12 month period including 31st December 2018 with submissions to the EA being mandatory by the 5th December 2019. This may seem like a long way in the future, but collating data can be slow and businesses should be starting the process this year.
Preparations for the future
As we move towards a low carbon future, we’re likely to take some important steps in 2018 in order to meet our goal of reducing the UK’s greenhouse gas emissions by at least 80% (from the 1990 baseline) by 2050. The Government will announce our 2020 greenhouse gas (GHG) emission reduction targets this year, and these targets (alongside the Clean Growth Strategy) should encourage all businesses to work to lower their carbon footprints as much as possible. We’ll also see the second stage of planned changes to the Renewable Heat Incentive (RHI), which helps organisations with the cost of installing renewable heat technologies, so businesses that want to benefit from the RHI scheme or continue to receive payments will need to keep up to date with any changes to the rules.
It’s not too late to get started
Many of these changes aren’t far away, but that doesn’t mean it’s too late for organisations to prepare for them.
If you’re in a corporate business, you will need to be particularly vigilant about the new DCP 161 measure that’s coming into play in April as exceeding your capacity could mean hefty fines. To talk to one of our experts about DCP 161 or any other element of your energy strategy, call us on 08451 46 36 26 or email email@example.com.
For those working in SMEs, rising costs from the EII exemption scheme and the changing DUoS structure should be your immediate concern. We’re here to help – give us a call on 0800 408 1499 or email firstname.lastname@example.org.