Climate change and the environment

The move to a low carbon economy gives us an opportunity to build our energy services business as we help people use cleaner energy and less energy. The opportunities are currently greatest in the UK where the market for energy efficiency and low carbon products and services is more developed. However, we are also ensuring that our North American business is positioned to make the most of opportunities and we are trialling partnerships and smart grid technologies.

Energy efficiency and microgeneration

In the UK, we have the scale to deliver energy efficiency and microgeneration nationwide. British Gas has more than 9,000 engineers and a network of training academies, which we are using to develop the skills required to install and maintain new technologies. This includes the development and roll-out of smart meters, which will play a major role in changing customers’ relationship with the energy that they use. Smart meters also have the future capability to provide a two-way flow of electricity for those who have installed microgeneration technologies in their homes and business, supporting their take-up.

British Gas is building capability in a range of microgeneration technologies, from solar panels to fuel cells. In 2009 we invested in Econergy, a leader in biomass heating. We are also investigating innovative financing arrangements to help those interested in small-scale generation but put off by the initial upfront costs. British Gas won a government tender to pilot a ‘Pay As You Save’ scheme where people pay for the equipment with long-term payment plans through the energy savings on their bill.

While the market in microgeneration is still emerging, the energy efficiency market is more established. In 2009, the energy efficiency products we supplied will save 17.53m tonnes of carbon dioxide over their lifetime. Approximately 270,000 customers had loft and cavity wall insulation from British Gas in 2009, taking the total to more than 1.5m homes in the last five years. To capitalise on this growing market we set up a new insulation business in 2010, creating 1,100 new jobs.

Behaviour change

Low carbon living requires changes in behaviour as well as products and services and we are building on our year-long energy-saving experiment Green Streets. We launched Green Streets 2 in January 2010, with 14 communities competing to become Britain’s most innovative green community. The £2m project will provide invaluable insights into which community-based approaches to energy efficiency could work best, helping to shape future national policy as the UK government looks to increase the take up of such measures. It also gives British Gas the opportunity to test the latest in low carbon generation and energy efficiency technologies.

We are helping business customers as well as residential consumers. British Gas provides an Energy360 service to help businesses manage their energy, improve energy efficiency and comply with new legislation, including the Carbon Reduction Commitment.

North America

While not currently leading the consumer market, Direct Energy is building partnerships with technology providers and has joined a home energy management partnership that has developed a blueprint for an energy efficient home. The technology, which features appliances that interact to save energy, will also enable homeowners to control energy usage remotely. We are also working with software developer e3 solutions to distribute software that enables companies to measure, monitor and track their carbon emissions.

In addition, we have been involved in a range of pilot programmes such as the Milton Hydro energy conservation programme and CPL BrightHome – a ground-breaking demand response and energy efficiency programme for residential customers. This pilot involves using internet radio technology for electricity load control.

Managing energy demand will only provide part of the carbon emission reductions required to meet the challenging UK targets. We must also reduce the carbon content of the power customers continue to need and will do that with efficient power stations and an increasing proportion of low carbon generation.

UK

In the UK, we operate efficient gas-fired power stations and wind farms and as a result have one of the lowest carbon intensities of any major UK supplier. In 2009 we reduced the carbon intensity of our electricity generation by 2% to 371g CO₂/kWh. During the year we invested in nuclear power generator British Energy. New nuclear will be an essential component of a low carbon energy mix as it provides reliable baseload power, which wind cannot do.

As a result of our nuclear involvement and following announcements to invest further in offshore wind farm developments, we have reassessed our carbon intensity target and are now aiming to reduce it to 270g CO₂/kWh by 2012.

We are also exploring other low carbon innovations and are planning five biomethane demonstration projects. These are likely to be the first in the UK to inject renewable gas, produced from organic material, into the grid in 2010.

North America

In North America, there is currently less government support for investment in low carbon generation but we are lobbying for urgent action. In 2009, Direct Energy joined a coalition of American corporations and non-governmental organisations in an advertisement demanding a clear US energy policy on emissions reduction. We also lobbied the federal Canadian government for cap-and-trade rules to develop a carbon market.

Our current involvement in renewables centres on our existing power purchase agreements for the electricity produced by the Buffalo Gap wind farms in Texas, totalling 813MW. Combining this output with that of our three efficient gas-fired power stations in Texas gives us a carbon intensity for our power generation of 321g CO₂/kWh (compared to 264g CO₂/kWh in 2008). The increase is primarily due to a change in US Government emission factors for natural gas. When normalised, the year-on-year increase is lower at around 10% which can be attributed to a reduction in wind offtake in 2009. This figure remains almost half the Texas average of 601g CO₂/kWh.

Although the biggest environmental benefits we can have as an energy company are in helping customers to reduce their carbon emissions and decarbonising electricity generation, it is vital that we also seek to reduce the overall environmental impact of our own operations. This gives us the credibility to lead the consumer market and it also helps to engage our own employees in understanding environmental issues. We are working to reduce emissions associated with our office energy usage, our company vehicles and business travel, whilst reducing water use and waste and enhancing biodiversity.

Internal footprint¹

One of our key future targets is to reduce the global carbon footprint of our existing offices, company vehicles and travel by 20% by 2015 (baseline year: 2007). We operate robust environmental management systems certified to ISO14001 to help achieve this.

UK

Since 2003, our UK business has achieved a reduction of about 40% in the energy it uses, helping to drive down our UK internal carbon footprint by around 15%. In 2009, we achieved an 8.36% reduction in energy use across our UK properties, exceeding our 5% target.

We also achieved accreditation for our UK properties to the Carbon Trust Standard in 2009, recognising a reduction of around 25% in our office carbon footprint over the previous three years and our commitment to continual improvement.

In 2009, we conducted waste audits for every UK office, which helped us to identify the waste we generate and to set ambitious targets for reductions. We also continued to encourage our employees to choose greener company cars by raising awareness and using financial incentives.

Our global target requires a 25% reduction in the UK internal carbon footprint (offices, company cars and travel) by 2015 and we have launched a 10 point plan to achieve this. The target includes a 10% reduction in our offices during 2010, part of our commitment as a signatory to the 10:10 campaign.

Employee engagement

We engage employees through a network of Green Teams who helped to run a 100-day carbon reduction campaign for a second year in 2009. The campaign raised awareness of environmental responsibility in employees’ personal lifestyles as well as in the workplace. The majority of large sites also hosted events for World Environment Day again in 2009 to raise awareness of environmental issues both within and outside the company.

North America

In North America we estimate that we have already exceeded our target to reduce our carbon footprint by 8.5% on 2007 levels. However as most of this reduction is a direct result of reducing operational activity we cannot be complacent and are actively looking for ways to increase efficiencies further to sustain our reduction during the anticipated upturn in economic activity. We have focused on improving data management systems to give greater insight into Direct Energy’s emissions. We also launched Climate Change Week and ran a speaker series for employees to coincide with the international Copenhagen climate conference.

1. We use the term 'internal carbon footprint' to describe the emissions associated with our occupations of offices, company vans and cars and the business travel we undertake in planes and trains.