Renewable energy for businesses - making the sums add up
Posted by Daniel Bailey on 26 March 2018 at 10:04 am
For a company pondering a shift to renewable energy technology, the reputational benefits are as obvious - and ever-present - as Britain’s supply of wind.
But with Brexit blowing a chilly blast of uncertainty across corporate Britain, many businesses are battening down the hatches and deferring big investment decisions.
Yet made correctly, the business case for going green remains as compelling as ever.
Naturally the first, and biggest, hurdle to clear is the upfront cost of going green. Installing a renewable energy source - such as wind turbines or solar panels - or green technology, such as a biomass boiler, can be expensive.
But such an investment is no idle punt. In the current uncertain climate, having your own power generating capability provides a uniquely appealing level of certainty.
Companies contemplating capital expenditure rightly focus on the ROI (return on investment). Competition among renewable technology brands has driven down prices and greatly increased efficiency, meaning it now takes less time for green tech to pay for itself. In other words, the returns come sooner.
Meanwhile the febrile economic climate - in which the weak Pound has forced up input costs and oil prices remain volatile - means energy self-sufficiency brings immediate benefits because of the security and certainty it entails
Unfortunately, the days of generous green incentives to help organisations switch to renewables are all but over.
Business owners can still claim capital allowances when they buy energy-efficient technology, which can substantially reduce the amount of tax they pay, but government grants and dedicated green tax breaks have been pared right back.
Yet the baffling array of initiatives and incentives announced - and withdrawn - over the past decade has left many business owners scratching their heads.
Nevertheless this flux has proved creative too, as Britain’s financial sector has risen to the challenge by developing a smorgasbord of products to help companies fund a shift to renewable technology.
For bigger projects, companies may be able to attract an equity investor - who would share in the profits derived from the sale of any excess energy generated - but this option may not be available for smaller projects.
The most obvious route would be to borrow the money. But it’s worth noting that not all high street banks may be willing to advance funds for renewable energy projects, as the sector has developed so rapidly that some lenders haven’t been able to keep up.
Fortunately that funding gap has provided the catalyst for the creation of more diverse and competitive lending options.
There are now several “challenger” banks and renewable finance specialists who fill this gap, and tailor their loans to both the timescale and the projected returns of each greentech project.
So to be clear, the current climate of uncertainty should be an incentive rather than a barrier to going green. Despite the reduction in government incentives, finance is available to help businesses who want to go green clear the initial hurdle.
And with a strong financial and reputation-building case behind it, making the leap to green still makes both business and environmental sense.
Image credit: US Department of Agriculture.
About the author:
Daniel Bailey is managing director of Arkle Finance, a lender specialising in providing finance for renewable technology. Energy conservation and renewable power generation are topics close to Arkle’s heart. So much so that in 2011 Arkle acquired a 200Kw rooftop solar PV system at its office in Northamptonshire.
Since 2010 the company has provided finance for a wide range of renewable technology installations, including PV solar panels, biomass boilers, wind turbines and heat pumps.
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