SUPPLEMENT TO INFORMATION SHEET 20

Further Guidance on the Product Mix and Output Algorithm

1. Information Sheet 20.  The original guidance note on the methodology of deriving the PMOA.

2. Developing the PMOA – Nine Common Approaches. Nine common situations that many sites find themselves in and how to tackle applying the PMOA at each.
   

3. Dummy Submissions for each Common Approach. An example of how each of the nine Common Approach pre-approval documents should be presented to DEFRA.
   

4. Applying the PMOA – 2 Simple Examples.   Examples of how to targets are adjusted.
   

5.         Feedback from three Case Studies. Case studies were undertaken to assess how the PMOA could be applied at three sites within the food and drink industry.

In the simple example above, the site had a first milestone target of 228.5 kWh/tonne, but actually achieved 237.6 kWh/tonne during the first milestone year. This site misses its target due to a drop in production.

The site derives the following PMOA using data collected during the base year (following Common Approach 1):

Weekly Primary Energy = 191.4 x weekly total production + 7,513.

The target is adjusted by:

A1    using the above equation to calculate how much energy the site would have used if it had produced the same level of output achieved during the first milestone year.

E.g. milestone year output = 7,280 tonnes, this equates to 140 tonnes per week.

Adjusted weekly primary energy = 191.4 x 140 + 7,513 = 34,309 kWh/week.

A2 the value obtained in A1 is then divided by the first milestone year weekly output to give the adjusted base year SEC.

Adjusted base year SEC = 34,309/140 = 245.1 kWh/tonne.

A3    the first milestone percentage target (e.g. 2%) is then applied to the adjusted base year SEC to give the adjusted first milestone target.

Adjusted first milestone target = 34,309 * (1 – 0.02) = 240.2 kWh/tonne.

The site actually achieved 237.6 kWh/tonne during the milestone year, therefore surpassing the adjusted first milestone target and the site retains the CCL discount.

Example B – The PMOA is derived using data collected during a recent period, i.e. during the milestone year

Using the same data as shown in Table 1 of example A, the figure above shows the PMOA equation derived using data collected during the milestone year.

Point 3 is the actual energy used during the base year at the base year output level.

Point 4 represents the energy that would have been used during the base year if the site had produced the same output that it achieved during the milestone year, i.e. the adjusted base year SEC.

Point 2 lies on the PMOA line and represents the energy that used by the site when it produces the milestone year levels of output.

Point 1 also lies on the PMOA line and represents the energy that would be used during the milestone year if the site had of produced the level of output that was made during the base year.

The adjusted target can be calculated by comparing the site’s energy usage in the base year and milestone year under the same production conditions to ensure that energy savings have been made.

In order to do this using a PMOA derived from recent data, we can assume that improvements in energy efficiency since the base year have been made in equal proportions across the base load of the site (i.e. the intercept of the equation) and within the production process (i.e. the slope of the PMOA line). This assumption leads to the following relationship:

Re-arranging this equation gives:

The value for SEC₃ is known from Table 1, SEC₂ and SEC₁ can be calculated using the derived PMOA, and therefore SEC₄ can be calculated.

Adjusted first milestone target  =  SEC₄ x 0.98  =  263.4 x 0.98  =  240.8 kWh/tonne.

The site actually achieved 237.6 kWh/tonne during the milestone year, therefore surpassing the adjusted first milestone target and the site retains the CCL discount.

Using the assumption made above is not mandatory, you may use your own assumption as long as it is well documented in the pre-approval document.

Format of the Pre-Approval Document

The pre-approval document should be submitted before 30^th June 2002 and should have six elements to it:

1. Administrative Details, e.g. site name, Unique Facility Number, etc.

2. Description of changes since Base Year and PMOA approach adopted.

3.       Equations derived using this approach (and example calculation of target adjustment).

4.       Action plan for future data collection requirements or modifications to the algorithm.

5. Review of energy saving initiatives implemented and planned (optional).

6.       Appendix of supporting data and calculations.

When the pre-approval document is submitted, you may not have sufficient data for an accurate algorithm and the final energy and production data for the milestone year will be unknown.  The final submission document, which includes the final algorithm and the milestone year data, should be submitted during January 2003.

Although you do not legally need to meet the Qualitative Requirements or show what actions you have taken to reduce energy or carbon if you are applying the PMOA, it may help! The dummy submission documents demonstrate how your submission to DEFRA could look. 

The use of these dummy submission documents is not mandatory.