The Case for Electric Vehicles

Now is the critical time to review the management of your vehicle fleet

Why is this important now?

Climate change is one of the biggest challenges facing our world. Greenhouse gases released into the atmosphere are causing global warming which if left unchecked will have disastrous consequences. There are many greenhouse gases but the combined effect is measured as tonnes of CO2 equivalent. In June 2019 the government committed the UK to a legally binding target of net zero carbon by 2050. The Digest of UK Energy Statistics shows that transport account for the biggest energy consumption and hence greenhouse gas emissions in the UK.

 

                               Digest of United Kingdom Energy Statistics 2019

 

Government bans sale of internal combustion engine vehicles from 2030

As transport is a major contributor to greenhouse gas emission it is essential that cleaner alternative technologies are introduced. To achieve this transition the government has introduced a range of policies and initiatives which include the banning sale of internal combustion engine vehicles from 2030. The intention is to replace fossils fuels with electricity generated from renewable source such as wind and solar.

There is rapid technological development on many fronts but batteries and fuel cells are most advanced alternatives to the internal combustion engine. Hydrogen fuel cells can meet some requirements but it will be many years before there is the infrastructure to support their widespread use. By comparison there is already massive investment in electric vehicles and battery technology and manufacturing.

Making the case for electric vehicles

While the cost of EVs is generally higher than the fossil fuel equivalent, when tax incentives and grants are taken into account, the business case for EVs is becoming compelling but there are many factors that need to be taken into account.

Capital cost

The list cost of a vehicle is made up of the basic cost plus vehicle excise duty (VED).  For zero emission vehicles there is no VED to pay but for other vehicles the VED is based on the CO2 emissions with the first year rate of £10-25 for Ultra Low Emission Vehicles up to £2135 for the most polluting vehicles. The full details can be found here

Grants

The government scheme provides discounts on brand new low emissions vehicles. Vehicles eligible for the grant include cars, motorcycles, mopeds, small vans, large vans, taxis and trucks. Only approved low emission vehicles qualify for the grant. For example, cars with CO2 emissions of less than 50g/km and can travel at least 112km (70miles) without any emissions at all. For eligible cars costing less than £35,000 the grant will pay 35% of the purchase price (including VAT and delivery charges) up to a maximum of £2500. Full details can be found  here

 

Employee Benefit in Kind (BIK)

For employees using a company vehicle for private use there are considerable benefits of choosing an electric alternative. The tax payable on the P11D value of the vehicle is determined by the CO2emissions of the vehicle. A sample of the current rates is shown below

The tax payable by the employee on their company car is calculated as

The P11D value X Bik rating X the marginal tax rate (usually 20 or 40%)

The tax payable on an electric vehicle is considerably lower than that for an equivalent fossil fuel vehicle.

Further guidance and tax calculators can be found here

Employer Class 1A National Insurance

Under the current tax system employers are required to pay Class 1A NI on benefits in kind including company cars. The NIC is determined by the

P11D value X BIK rate based on CO2 X 13.8%

The lower BIK rate for electric vehicles reduces the employer NI costs compared to fossil fuel vehicle.

Running costs

The running cost of EVs are generally much lower than their fossil fuel equivalent. The actual cost will depend on the vehicle type and engine size but some typical figures illustrate the case for EVs. The average UK electricity price is around 14p per kWh. Assuming the typical electric vehicle travel 3.5 miles per kWh the cost is 4p per mile. By comparison the average cost of petrol/diesel in April 2021 is around £1.20 per litre and the average fuel consumption for new vehicles is around 49 mpg equivalent to 11p per mile. In addition electric cars have fewer mechanical parts to go wrong and on some estimates cost 30% less to maintain than internal combustion engine cars.

Congestion and Ultra Low Emission Zone (ULEZ) charges

Electric vehicles are exempt from both the London congestion and the ULEZ charges saving up to £27.50 per day compared to unregistered vehicles that do not meet the emission standard. Other cities are also considering introducing congestion charges.

Let our experts help you manage your business’s transition to electric vehicles

As part of our comprehensive energy management services we offer a review of your current vehicle fleet to enable your business to plan for the inevitable transition to electric vehicles. Developing the business case for electric vehicles is not straightforward. It requires detailed knowledge of the vehicle supply market taking into account all the factors described above. Working through our associate companies we review the vehicle in your fleet, identify those due to be replaced and make the business case for an electric replacement. Our associates specialise in electric vehicles and can source vehicles form all brands and models, arrange finance if required and obtain the best discount in the market. Any data provided to us will be treated in confidence and only used by Colin Lillicrap and associated companies for the purposes of helping your business make the transition to electric vehicles.

Battery charging

A major consideration when purchasing or leasing an electric vehicle is its range which depends on the battery capacity in kWh. Small vehicles like the Renault Kangoo ZE 33 with a 33 kWh battery have a quoted range of 147 miles per charge. Allowing for a charge to discharge efficiency of 85% it will take around 5.5 hours for a full charge using a 7kW charger. Using a 50 kW charger would reduce the charging time to around 50 minutes. Larger capacity vehicles have a longer range but require longer to fully charge.

When planning the transition to electric vehicles it is important to identify how the vehicles are to be charged to meet the transport demands of the business. Where practical installing charging points in the company car park offers a solution. Alternatively it might be possible to install a charger at the employee’s home provided there is off road parking. Where neither of these options is available it becomes necessary to depend on public charging points. The charging network is in its infancy with incomplete coverage and issues of non-standardisation of socket and a variety of apps to enable payment. In these circumstances we would need to work with you to identify where charging points are located in the area to be covered and the time slots that can be made available around the work schedule. We have been advised that Zap-Map will be offering a fleet service later this year which we understand will help fleet managers to identify charging points and arrange automated payment.

Speak to our experts on 01442 873439 to see how we can help your business manage the inevitable transition to electric vehicles.

UK enshrines new target in law to slash emissions by 78% by 2035

Details of the new target can be found here here

The independent Climate Change Committee state that meeting this target will depend on policy decisions and  and public and private investments being made in 2021. To help companies meet this challenge Colin Lillicrap Associates can provide a comprehensive decarbonisation service that includes a full analysis of all your business’s energy consumption and greenhouse gas emissions to identify energy and carbon saving opportunities . We follow this up with costed project proposals and project management to ensure you hit your carbon reduction targets.

Achieving Net Zero Carbon – an update

Global warming caused by the emission of greenhouse gases (GHG) into the atmosphere is becoming a very high profile issue for businesses. Investors are increasingly assessing company’s green credentials and how they are planning to meet the legal target of net zero carbon by 2050 set by the UK government.  Customers are more likely to deal with companies that source materials from sustainable sources and take care to protect the environment. Successful companies will be those that start planning now to reduce GHG emissions.

Points to consider when planning how to achieve net zero carbon

Legislation

Net zero carbo target date

27 June 2019, government commits UK to legally binding target of net zero emissions by 2050. In some circumstances it will be impractical to eliminate all GHG emissions and companies will need to enter into an approved offsetting scheme whereby an amount of carbon equal to the residual emissions is removed from the atmosphere.

Phasing out of petrol, diesel and hybrid cars and vans

On 10 March 2021, the government published the outcome of the consultation on ending the sale of new petrol, diesel and hybrid car and vans.  The main outcomes were that:

  1. the phase out date for the sale of new petrol and diesel cars and vans will be brought forward to 2030.
  2. from 2035, all new cars and vans must be fully zero emission at the tailpipe.

UK Emissions Trading Scheme (ETS)

On 1 January 2021, the government introduced the UK ETS to replace the previous EU ETS. The first auction of carbon credits is set for 19 May 2021 when the price will be set. The price of carbon credits is expected to increase year on year.

Trends in the Climate Change Levy (CCL)

The CCL for electricity from 1 April 2021 is 0.00775 £/kWh a nearly 10% reduction on the previous year, while the rate for gas is 0.00465 £/kWh a nearly 15% increase. As the decarbonisation of electricity generation gathers pace this trend is likely to continue which has implications for technologies such as heat pumps to replace gas heating systems.

Energy Saving Opportunities Scheme (ESOS

Companies that qualify as large are required to carry out an audit of their total energy consumption every four year and report to the Environment Agency. The next audit is due by 5 December 2023.

Streamline Energy and Carbon Reporting (SECR)

Qualifying large companies are required to report their total energy consumption and GHG emissions in their annual Directors’ report for the first complete financial year after 1 April 2019. Companies with financial year from 1 April should already have reported on their financial year to 31 March 2020 and all large companies will need to report by 31 March 2022.

Minimum Energy Efficiency Standards (MEES)

From 1 April 2018, landlords of non-domestic private rented properties (including public sector landlords) may not grant a tenancy to new or existing tenants if their property has an EPC rating of band F or G (shown on a valid Energy Performance Certificate for the property).

From 1 April 2023, landlords must not continue letting a non-domestic property which is already let if that property has an EPC rating of band F or G.

It is anticipated that the minimum EPC rating will be increased to band D or E

Incentives to reduce GHG emissions

There are a number of incentives to encourage companies to take steps to reduce their GHG emissions that include grants, low interest loans and tax benefits. Some examples are:

Non-domestic Renewable Heat Incentive (RHI)

Provide financial support for qualifying technologies for 20 years

Public Sector Decarbonisation grants

A £billion grant scheme primarily aimed at decarbonising heating in public sector organisations through the introduction of heat pumps but other projects were also approved. The deadline for applications was January 2021 but it is anticipated there will be similar schemes in the future.

European Regional Development funds

Typically provide 30% grants towards the cost of qualifying projects

Grants and tax benefits for low emission vehicles

New low emission vehicles qualify for grants although these were recently reduced. For example, cars with CO2 emissions of less than 50g/km and can travel at least 112km (70miles) without any emissions at all and costing less than £35,000, the grant will now pay 35% of the purchase price (including VAT and delivery charges) up to a maximum of £2500. Full details can be found at

https://www.gov.uk/plug-in-car-van-grants

Low emission vehicles have lower vehicle excise duty and lower Benefit in Kind (BIK) rating compared with fossil fuel vehicles.

 

 Decarbonising Electricity generation

 Decarbonising electricity generation when combined with measures to reduce energy consumption is the key to achieving net zero carbon. Due to the large scale investment in wind turbines and solar panels the carbon intensity of electricity is projected to fall to 0.1 kg CO2 equivalent by 2030. Critically this is lower than natural gas at 0.18396 kg CO2 equivalent. However, in 2018 just 11% of the UK’s energy consumption was from renewable sources meaning further large scale investment will be needed including upgrading the transmission and distribution networks to carry the increase electricity loads.

 

Alternative Low emission technologies

 The decarbonisation of electricity generation allows a considerable reduction in GHG emissions through introducing alternative electrical based alternatives to fossil fuels.

Heat pumps

Heat pumps in the form of air conditioning have been in use for decades and are capable of supplying heating or cooling. Their performance depends critically on the temperature difference between the source of the heat or coolth and the space to be heated or cooled. In heating mode under favourable conditions, a Coefficient of Performance of between 3.5 and 4 is achievable meaning that for every unit of electricity the heat pump delivers between 3.5 and 4 units of heat. When combined with the projected reduction in the carbon intensity of electricity generation by 2030 carbon emission can be reduced by around 85% or if green electricity is used by 100%. However, heat pumps are more expensive than boilers and to avoid increased operating costs careful optimisation of the heat pump system is required.

Battery powered vehicles

Pure battery powered vehicles produce zero emissions when running but generating the electricity to charge the batteries can produce emissions depending on the source. Manufacturing batteries is very energy intensive leading to a high embodied energy and hence associated GHG emissions. Nevertheless, since petrol and diesel vehicle are to be phased out from 2030 companies are going to need to plan to replace their company vehicles with electric alternatives.

Hydrogen technologies

Hydrogen can be produced by the electrolysis of water, but the majority is made by reforming natural gas a process that emits CO2. If hydrogen is produced using electricity from renewable sources, it is a truly emission free fuel since the only product of combustion is water. This makes hydrogen a promising fuel for transport, for example, in fuel cells for electric vehicles. There are some limited applications in buses and trucks but the infrastructure to support the widespread use of hydrogen is still some way off.

 

Developing your decarbonisation plan

 

Colin Lillicrap Associates has been advising companies on energy efficiency and reducing GHG emissions for over twenty years drawing on experience gained through research into energy intensive processes and energy efficient buildings. We guide you through the challenging process of decarbonising your operations based on our knowledge and experience of all the issues raised above. Our comprehensive service includes:

 

      • An energy audit you your total energy consumption and GHG emission from all uses of energy
      • A survey of your buildings to determine how energy efficient they are
      • Analysis generating energy profiles to show where most energy is used
      • Identifying energy and cost saving measures
      • Calculating reduction in GHG emissions as a result of the energy saving measures
      • Regular reporting including ranking of energy and cost saving measures by payback or Life Cycle Cost Analysis
      • Developing the business case for the saving measures with the greatest return on investment taking account of any grants available
      • Project development and management

Call 01442 873439 to discover how we can help you meet the challenge of decarbonising your business.

 

Is Your Company Prepared For The SECR Reporting Deadline?

The SECR legislation that came into force on 1 April 2019 requires qualifying* large companies to report their total energy consumption and greenhouse gas emissions for the first complete financial year after that date. Companies with financial year from April to March must now prepare to lodge their annual report and accounts at Companies House for the financial year ending March 2020 or thereafter. They must include in their Directors’ report as a minimum the following mandatory information.

Quoted companies

Large unquoted companies and LLPs

Annual GHG emissions from activities for which the company is responsible including combustion of fuel and operation of any facility; and the annual emissions from the purchase of electricity, heat, steam or cooling by the company for its own use

UK energy use (as a minimum gas, electricity and transport, including UK offshore area)

Underlying global energy use

Associated greenhouse gas emissions

Previous year’s figures for energy use and GHG emissions

Previous year’s figures for energy use and GHG emissions

At least one intensity ratio

At least one intensity ratio

Energy efficiency action taken

Energy efficiency action taken

Methodology used

Methodology used

 

*Qualifying companies

The definition of “large” is the same as applies in the existing framework for annual accounts and reports, based on sections 465 and 466 of the Companies Act 2006. The qualifying conditions are met by a company or LLP in a year in which it satisfies two or more of the following requirements:

    • Turnover £36 million or more
    • Balance sheet total £18 million or more
    • Number of employees 250 or more

Why is this important and is SECR mandatory?

a vector illustration of the greenhouse effect

Global warming is caused by greenhouse gases in the atmosphere which trap heat. The UK government has set a target for the UK to achieve net zero carbon by 2050. While there can still be emissions of greenhouse gases these will need to be offset by measures to remove the equivalent amount of carbon from the atmosphere. SECR provides directors with essential information to plan how they are going to reduce emissions and achieve net zero by 2050.

Benefits of SECR

There are direct benefits to your organisation from measuring and reporting on your environmental performance:

  • Many organisations are increasingly seeking information on the environmental performance of their suppliers.
  • Investors, shareholders and other stakeholders are increasingly requesting better environmental disclosures in annual reports and accounts.
  • SECR provides KPIs to demonstrate to your customers a link between environmental and financial performance
  • A Defra sponsored study provided robust evidence that environmental management systems generally delivered cost savings and new business sales.
  • Strengthen your green credentials in the marketplace.
  • SECR provides a base for assessing the risk to your business from climate change.

Steps in the reporting process

Step 1: Determine the boundaries of your organisation.

Boundaries can be set according to:

Financial control boundary: The organisation reports on all sources of environmental impact over which it has financial control.

Operational control boundary: The organisation reports on all sources of environmental impact over which it has operational control.

Equity share boundary: The organisation accounts for GHG emissions from operations according to its share of equity in the operation.

Step 2: determine the period for which the organisation should collect data.

The reporting period should be for 12 months and ideally should correspond with the financial year to allow easy comparison of financial and environmental performance.

Step 3: Determine key performance indicators.

SECR is focussed on GHG emissions. There is a mandatory requirement to calculate intensity ratios based on relevant normalising factors such as turnover or units of production for example tonne CO2 equivalent per £m turnover or tonne CO2 equivalent per unit of production.

Step 4: Measuring

For SECR we are concerned with measuring the total energy consumption and then using government approved conversion factors to calculate the GHG emissions. It should be noted that the new legislation now requires both quoted companies and large unquoted companies and LLPs to report both total energy consumption and GHG emissions. Electricity and gas consumption should ideally be obtained from meter readings and avoid estimated readings. For transport litres of fuel purchased should be obtained where possible for example from fuel card records. For grey fleets it is often necessary to use records of mileage travelled on company business and estimate the fuel consumption using any available information on the vehicles used. Gas oil use can be determined from delivery records. LPG may be recorded as litres or kg delivered. Identifying process energy within the total depends on the sub-metering available.

Step 5: Reporting

Guidance on environmental reporting including SECR can be found here

Large companies need to report:

  • UK energy use (to include as a minimum purchased electricity, gas and transport).
  • Associated greenhouse gas emissions.
  • At least one intensity ratio.
  • Previous year’s figures for energy use and GHG emissions (except in their first year).
  • Information about energy efficiency action taken in the organisation’s financial year.
  • Methodologies used in calculation of disclosures.

 

There is no set format for what appears in the Directors’ report but a reporting template is included in chapter 2 of the guidance. The template for unquoted companies and LLPs  is reproduced in the appendix. The template for quoted companies is very similar.

Group Reporting

Organisations reporting at group level must take into account any subsidiaries included in the consolidation which are quoted companies, unquoted companies or LLPs. However, there is an option to exclude from the report any energy and carbon information relating to a subsidiary which the subsidiary would not itself be obliged to include if reporting on its own account.

Voluntary Environmental reporting

This document covers only mandatory reporting under the SECR legislation. For further guidance on voluntary environmental please refer to  ‘Environmental Reporting Guidelines: Including streamlined energy and carbon reporting guidance March 2019 (Updated Introduction and Chapters 1 and 2)’ using the link above.

How we can help your business comply

Colin Lillicrap Associates Ltd has been carrying out energy audits and advising large businesses on decarbonising their operations since 2014 under the Energy Saving Opportunities Scheme (ESOS).  ESOS and SECR require the same data to be collected and processed but there are significant differences in the qualifying criteria and reporting requirements. Based on our years of experience of advising companies on energy and cost savings we have developed a template for rapidly process your energy consumption for all end uses and providing the outputs directors need to prepare their report to comply with SECR.

Additional services: Using the information we need to gather for SECR we can provide the following additional services:

  • Produce energy profiles to show where energy is used
  • Identify energy and cost saving measures and rank them by simple payback of where appropriate life cycle cost analysis
  • Check your business is on the best tariffs electricity, gas and water
  • If you run a fleet of company vehicles we can review your fleet management and advise on the transition to electric vehicles in the coming years

Call us on 01442 873439 for a competitive quote