CRC Energy Efficiency Scheme

1. CRC Energy Efficiency Scheme A business perspective

2. Eddie Orchard CEng MIET CEnv MIEMAEnvironmental Risk ManagerSiemens plcCorporate Information Technology/Global Shared Services UK

3. Siemens • Siemens has been at the forefront of technological change and social progress in the UK since 1843 • Its founder, Sir William Siemens, was a pioneering environmentalist, concerned about waste & pollution, clean air and pure water • Siemens UK early successes included:laying the first undersea telegraph cable between Ireland & USAinstallation of the first electric street lighting (Godalming, Surrey)first electric lighting in a UK theatre (Savoy, London) development of the first water meterconstruction of the first public electric railway (Volks, Brighton)

4. Siemens Today • Energy sector • Fossil Power Generation • Renewable Energy • Oil & Gas • Power Transmission • Power Distribution • Energy Service • Industry sector • Industry Automation • Drive Technologies • Building Technologies • OSRAM • Industry Solutions • Mobility • Healthcare sector • Imaging and IT* • Workflow and Solutions* • Diagnostics • Magnet technologies • Hearing solutions *Marketed as Siemens Healthcare UK • Cross-sector businesses • Siemens IT Solutions & Services • Siemens Financial Services • Other operations • Siemens Real Estate • CIT/Global Shared Services UK

5. Carbon Reduction Commitment Energy Efficiency Scheme (CRC) • The CRC is a mandatory emissions trading regime for the UK • Its aim is to improve energy efficiency and cut emissions in large public and private sector organisations • It is designed to tackle CO2 emissions not already covered by: Climate Change Agreements (CCAs) or the EU Emissions Trading Scheme • Qualifying organisations are responsible for around 10% of the UK’s CO2 emissions • Qualifying organisations have to fully embrace the scheme or face financial and reputational penalties

6. Main Drivers for Energy Efficiency Improvements • Cost of allowances, which will not be “recycled” – adds approximately 10% to energy costs • Annual performance League Table ranks participants on energy efficiency performance – impacts on reputation • League Table based on key measures • Automatic metering (Early Action Metric – years 1-3 only) • Carbon Trust Standard or equivalent (Early Action Metric) • Growth of business (year 2 onward) • Absolute energy reduction (year 2 onward – 75% from year 4)

7. Early Action Metrics

8. Qualification Requirements • All organisations that had (at the time of registration) at least one settled half-hourly electricity meter qualified for participation • Organisations that consumed more than 6,000 megawatt-hours (MWh) per year of half hourly metered electricity during 2008 qualified for full participation • Qualifying organisations that consumed less than 6,000 MWh during 2008 simply had to make an information disclosure of their 2008 half hourly electricity consumption • Organisations include industry, commerce, supermarkets, water companies, banks, local authorities, schools, universities, hospitals, central Government Departments, etc.

9. Qualifying Organisations • The CRC scheme started in April 2008 (the qualifying year) • Organisations had to register by the end of September 2010 • Organisations had to report the total electricity they consumed through half hourly meters in 2008 • Qualifying organisations had to identify any subsidiaries that consumed over 6,000 MWh in their own right Significant Group Undertakings (SGUs) • Qualifying organisations were encouraged to implement Early Action Metrics in order to score well on the performance league table

10. CRC Registrations • Full participants – 2,764 • Organisations required to make information disclosure – 12,500 • Full participants by sector: • Manufacturing – 30.1% • General business activities, real estate, etc. – 24.7% • Councils – 6.8% • Health sector – 5.6% • Wholesale and retail trade, etc. – 5.4% • State education – 3.9% • Trust, co-operatives, etc. – 3.9% • Finance – 3.6% • Central Government, etc. – 3.4%

11. CRC Registrations by Sector

12. Evidence Pack • Required to be maintained for regulatory audit • Must include the following information • Company structure and changes to structure • Energy consumption • Significant events • Verifiable records • Signed records of audits of the Evidence Pack • Organisations need to keep track of • Mergers, acquisitions and divestments • Changes in plant and equipment • Failures of meters or systems • Replacement or addition of meters • Changes in energy supply

13. Scope of Qualifying Organisations • Organisations must identify their top level parent organisation • Top level parent organisation can be based anywhere in the world • All UK organisations and subsidiaries that are ultimately majority owned by the top level parent organisation are within scope • The scope of an overseas owned organisation may include many disparate organisations that have no logical UK grouping or control • For Siemens the top level parent organisation is Siemens AG • Siemens Holdings plc must report the energy consumption for all Siemens AG majority owned businesses purchasing and using energy in the UK

14. Siemens CRC Compliance Strategy • Cross business team created • CIT/GSS UK – Environmental specialists • Siemens Real Estate (SRE) • Corporate Purchasing – Energy contracts • Facilities Management sub-contractor • CRC Manager appointed with responsibility to achieve cost effective and timely compliance • Engaged with Siemens AG, UK Company Secretary and others to determine structure of Siemens in the UK • Engaged with SRE and all identified Siemens UK businesses to determine UK estate portfolio and energy supply footprint

15. Scope of Siemens in the UK • Siemens Holdings plc must report the energy consumption for all Siemens AG majority owned businesses purchasing and using energy in the UK • Siemens in the UK is made up of over 30 subsidiaries • Siemens plc is the largest, with over 20 separate businesses • Siemens operates out of approximately 150 sites in the UK • Siemens has 47 half hourly electricity meters across 43 sites 14 subsidiaries have half hourly electricity meters 3 subsidiaries used over 6,000 MWh in 2008 – SGUs

16. Siemens CRC Improvement Strategy • Early Actions • Achieve Carbon Trust Standard • Improve automatic metering/sub-metering coverage • Develop and formalise Evidence Pack • Long Term Strategy • Reduce energy consumption year-on-year • Minimise costs • Maximise position in the Performance League Table

17. Energy Reduction and Cost Minimisation Strategy • Energy Reduction Project with Siemens Building Technology • Energy Efficiency Programme – sponsored by Siemens AG • Project for five manufacturing sites (Phase 1)Additional sites to be addressed in Phases 2 and 3 • Siemens Building Technology guarantee carbon/energy savings • Other actions • Siemens Industrial Solutions are to look at energy reductions in the production environment • Improve centralisation of energy purchase process

18. Proposed Timeline • Phase 1 • Qualification year – 2008 • Registration – Between April and September 2010 • Annual Report and Footprint Report – 29th July 2011 • Annual Report and Purchase of Allowances – 2012 (£12 / tonne) • Also 2013 and 2014 Phase 2 • Qualification year – 2012/13 • Registration – Between April and September 2013 • Annual Report and Footprint Report – 2013/14 • Annual Report and Surrender of Allowances – 2015 (price????) • Performance League Table published every yearstarting October 2011

19. Timeline – Current and Proposed

20. The CRC in a Nutshell • Basic requirement is to: • Register • Monitor • Report • Buy and Surrender Allowances • Maintain Evidence Pack • Ever decreasing cap on number of allowances (increasing costs) • Significant impact – Cost and reputation • Primary and secondary energy consumption only (gas, oil and electricity) • Liable to add approximately 10% to energy costs (increasing)