Complying with CRC Energy Efficiency Scheme: Best practices

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Complying with CRC Energy Efficiency Scheme: Best practices

Both private and public enterprises are required to reduce their carbon emissions and comply with the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. Organisations risk fines if they do not comply with these regulations.

In this tip, we outline the steps data centre managers can take to comply with the CRC.

To comply with CRC Energy Efficiency Scheme and to avoid penalties and reputational damage, data centre managers must undertake steps such as participating in a ranking scheme, measuring and improving energy efficiency, and buying sufficient power allowances.

Climate change -- time for action

In the Climate Change Act of 2008, the British government committed to cutting UK carbon emissions to 80% of their 1990 levels by 2050. It's a tough challenge -- but not impossible. And the

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CRC Energy Efficiency Scheme will play an important role in helping organisations to meet it.

CRC Energy Efficiency Scheme and its role

The CRC is a mandatory scheme aimed at improving energy efficiency and cutting emissions in both the public and private sectors. It will apply to all organisations using more than 6,000 MWh per year of electricity, which is equivalent to an annual electricity bill of approximately £500,000. There are between 4,000 and 5,000 such organisations in UK, which collectively account for around 10% of the UK's emissions (around 55 million tonnes of CO2).

Those which use less than 6,000 MWh will not have to participate in the first phase of the scheme but will be required to make an "information disclosure" -- that is, provide details of their half-hourly metered electricity consumption.

The CRC Energy Efficiency Scheme is designed to complement the Climate Change Agreements and the EU Emissions Trading Scheme (EU ETS), which are directed primarily at energy-intensive organisations. It features a range of reputational, behavioural and financial incentives for organisations to develop their understanding of energy usage and energy management strategies.

According to estimates, by 2020, the CRC will reduce carbon emissions from targeted organisations by at least four million tonnes of CO2 per year.

Meeting the carbon budget target

The Climate Change Act requires the UK government to set carbon budgets, which are limits on greenhouse gas emissions in the UK for consecutive five-year periods. These carbon budgets must be set at least three budget periods in advance.

The first three carbon budgets were set in 2009, following advice from the independent Committee on Climate Change. The Fourth Carbon Budget, showing the limit on emissions for the period from 2023 to 2027, will not exceed 1,950 million tonnes of carbon dioxide equivalent -- a 50% reduction from 1990 levels. The CRC will be a key mechanism in keeping within the set levels.

How CRC works

The CRC comprises three primary elements:

  1. Emissions reporting requirement: Participants will need to measure and report their carbon emissions annually, following a specific set of measurement rules. The first annual report of emissions was due in July 2011.
  2. A new carbon price: Starting in 2012, participants will buy allowances from the government each year to cover their emissions in the previous year. Organisations that decrease their emissions can lower their costs under the CRC. The money raised from the sale of allowances will be retained by the government rather than recycled back to CRC participants. The price of allowances was set at £12 per tonne of carbon dioxide in the 2011 budget.
  3. Ranking of participants in a performance league table: A publicly available CRC performance league table will show how each participant is performing. If an organisation demonstrates success in cutting emissions, the league table could significantly boost its reputation.

CRC Energy Efficiency Scheme and data centre implications

The CRC is likely to affect data centres of about 5,000 square feet or more. But some organisations have raised questions about how the legislation will affect them.

One of these questions concerns which data centres the CRC will apply to. Where a landlord is responsible for the energy bill of a tenanted property, then the landlord -- and not the tenant -- will be the scheme participant.

The implication for data centres is that operators that recharge energy costs to their customers are likely to be participants of the CRC scheme, irrespective of the fact that the operators are not the final consumers of the energy.

For most data centres that pay utility bills themselves, the CRC Energy Efficiency Scheme will create a financial liability which is hard to quantify. The cost of purchasing carbon allowances may (depending on the operator's position in the league table) be partly recovered by the operator in the future.

Any shortfall between the cost of purchasing carbon allowances and the credits reclaimed, however, is unlikely to be recoverable under the terms of customer contracts. The same applies to the other costs of participating in the scheme, such as registration fees and administration, monitoring and reporting costs.

Data centre operators may be able to redesign their power infrastructures so that the customer becomes the utility bill payer, shifting the carbon liability back to the customer. The customer would then have an incentive to use energy more efficiently in the data centre.

Older data centres, however, offer fewer opportunities for improving energy efficiency and transferring the carbon liability back to the customer. This presents the data centre operator with dilemmas: How many carbon allowances should it purchase? How should it second-guess the anticipated energy usage of its customers (and future customers) in any year of the scheme?

Purchasing sufficient allowances to cover the committed maximum power draw of all of its customers seems prudent, but most customers' allocated maximum power draw is many times higher than their actual power consumption.

By reducing carbon emissions, organisations can ensure that they lower the allowances they need to buy to satisfy the new requirements and comply with CRC Energy Efficiency Scheme. More important, though, is that they will be better positioned to reap the reputational benefits of a good position in the league table.

Mark Allingham is a certified data centre design professional with over 25 years of experience in the IT industry. As owner/director of UK-based data centre design and build specialist Comms Room Services Ltd. for the past 10 years, Allingham has delivered a broad range of projects for both public- and private-sector clients in the UK.

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This was first published in November 2011

 

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