Developing a sustainable business in a field as dominated by politics as renewable energy is a hazardous undertaking. So how do you pick the route to the most stable market?

Ask what the strategic policy drivers are, is the advice of Erich Scherer, an assistant director in the renewable energy finance team at BDO (and previously one of the team that devised the renewable heat incentive at DECC).

The strongest driver is the legally binding 2020 target, according to Scherer, speaking at Renewable Energy Installer's business strategy conference last month. "The one area that I think is a long term sustainable business opportunity is the commercial renewable heat incentive (RHI). Because the returns are very good indeed a commercial RHI project, if put together properly, should be able to get 25% project return on investment," he said.

"The commercial RHI is the only incentive that government sees as mission critical," he added. "It has a tariff that is high enough and some assurance that political support is here to stay."

Scherer's assessment for other incentives was gloomy. He said that solar PV will struggle to justify itself long term, and has a tariff that struggles to make commercial returns. He also expressed concern that the domestic RHI will be of strategic enough importance. "It's not a priority strategy area," he said. "The big question with the green deal will be finance."

So, how do you maximise the opportunities available? Scherer's advice is to be an ESCO project developer. This is the renewable heat equivalent of rent a roof for solar PV. The benefit for customers is that you take away the barrier of up front cost, then supply them with cheaper heat and certainty about energy prices going forward.

"But it is challenging to get schools, farms, care homes etc to sign up," said Scherer. The media hasn't picked up on the RHI yet, and the domestic launch may drive media coverage and encourage take up."

Photo by Chris

If you have a question about anything in the above blog, please ask it in the comments section below.