Key fact
There are plenty
of financing options available-make sure you do your homework. Financing sustainability measures might be easier than you think.
Introduction
Investing in energy efficient equipment usually makes sound business and environmental sense. There are a number of financial schemes available to help make this investment as attractive as possible.
Recommendations
- Research associated cost savings from emission savings. When you put forward the internal business case make sure you include figures on the savings of a sustainability project and include payback times where appropriate/possible.
- Get multiple quotes from suppliers. Make sure you shop around to get the best deal when putting together a project. It is also wise to try to cross-reference efficiency saving figures provided by potential suppliers. It is sometimes in their interest to exaggerate them.
- Research funding opportunities carefully. There are lots of different financing options and plenty of grants available. Make sure you know all the opportunities. Often grants, particularly the larger ones, only provide a proportion of the initial capital costs. Be prepared to mix and match between different financing options.
Additional information
It can be hard to find the time to research financing options for your projects. We’ve collated a list of schemes below to facilitate the process.
Green Business Fund
The Carbon Trust Green Business Fund is offering a capital contribution of 30% of the project cost (up to a max of £10,000) to small and medium sized businesses, who could benefit from financial support when buying energy saving equipment. This could mean up to £10,000 towards a new lighting system for your warehouse, heating and air conditioning equipment for your offices or a controls system for your factory - to help you rise to the challenge of becoming a greener business.
This support is available for a limited period on a first come, first served basis for small and medium sized businesses (companies with fewer than 250 employees) in England, Scotland and Wales. The minimum total size of the project must be £2,500 with a simple payback of under five years, and equipment should be purchased from a Green Business Directory supplier or a BESA Supplier, to ensure that your supplier is properly accredited.
For further details visit: https://www.carbontrust.com/client-services/technology/implementation-and-finance/green-business-fund/#finance
O% Loans in Wales and Northern Ireland
The Carbon Trust offers interest free and unsecured loans in Wales and Northern Ireland from £3,000 up to a maximum of £200,000 in Wales and £400,000 in Northern Ireland for energy efficiency measures or renewable energy projects. Loans are designed such that in most cases the monthly energy savings should exceed the monthly repayments.
For further details visit: https://www.carbontrust.com/client-services/technology/implementation-and-finance/#financing
Enhanced Capital Allowance Scheme
The Energy Technology List (ETL), a government list of nearly 17,000 energy saving products, is designed to encourage businesses to invest in energy saving plant or machinery. The ETL database lists over 17,000 energy efficient products from nearly 60 technologies including boilers, electric motors, lighting, refrigeration systems, air conditioning systems, and automatic monitoring and targeting equipment. Businesses that purchase products listed on the ETL can claim a 100% Enhanced Capital Allowance (tax relief).
The ECA scheme provides businesses with a first year 100% accelerated capital allowance that enables them to set aside the total cost of the asset against taxable profits (or losses) in the year of purchase. An ECA provides approximately 5.5x the benefit of a standard writing down capital allowance in the year of purchase. A business investing £50,000 in ETL qualifying energy efficient equipment could receive ECA relief of £10,000 whereas the standard writing down relief would be £1,800. An ECA is claimed through a business’s income or corporation tax return in the same way as any other capital allowance.
For further details visit: https://www.gov.uk/government/publications/enhanced-capital-allowance-scheme-for-energy-saving-technologies
The Resource Efficiency Fund (REF)
The REF is a dedicated capital fund for implementing resource efficiency opportunities in the Leeds City Region (LCR). The REF will provide 50% match funding for the implementation of all eligible measures up to £10,000. For further information visit Leeds City Region Enterprise Partnership’s webpage: http://www.the-lep.com/what-we-do/energy-(1)/
Low Carbon Across the South East (LoCASE)
LoCASE is a business support programme for companies based in Essex, East Sussex, Kent and the intervening councils of Thurrock, Medway and Southend-on-Sea. It aims to help businesses optimise their use of resources and adopt eco-innovative and low carbon solutions in ways that improve business performance. It has funding totalling over £18.5 million from the European Regional Development Fund 2014-2020. LoCASE is able to provide support to businesses in the region in two ways.
It provides match-funded grants up to a maximum of £10,000 to:
- Help cover the cost of energy efficiency measures for any small or medium-sized business (up to £5,000).
- Enable businesses in the low carbon sector to expand and develop (up to £10,000). You can claim against eligible costs such as marketing, consultancy, equipment, IT software, licences, training and certification.
You must secure 60% of the costs of the project in cash from private sector sources before the LoCASE grant agreement is concluded.
For more information visit: http://locase.co.uk/
Siemens Energy Efficiency Finance
Funding is available for UK businesses to invest in cost effective energy efficient equipment and other low carbon technologies, such as new efficient lighting and biomass heating. Finance is available from £1,000 with no upper limit. For more information visit: https://www.siemens.com/uk/en/home/products/financing/market-focus/energy-finance.html
It is also worthwhile to research other financing models, such as those listed below.
Energy Service Companies (ESCOs) and Energy Performance Contracts
Energy Service Companies (ESCOs) offer companies an integrated energy management and implementation service where the fee for the service is structured to be less than the energy savings achieved reducing risk. There are several industry initiatives that are aimed at facilitating investments into energy efficiency projects.
Renewable incentives
If you are looking to install renewable energy technologies such as biomass boilers or solar PV, you may be eligible for long-term income via Feed in Tariff (FiTs) and/or Renewable Heat Incentive Schemes (RHI), making payback periods shorter. These schemes pay a tariff on the amount of energy generated each month.
RHI: The RHI helps businesses and non-profit organisations meet the cost of installing renewable technologies such as biomass, heat pumps, deep geothermal, solar thermal collectors, biomethane and biogas, and combined heat and power systems. Payments are made quarterly over 20 years and are based on the heat output of your system. For details visit: https://www.gov.uk/non-domestic-renewable-heat-incentive
FITs: If you are generating your own electricity from, for example, solar panels and wind turbines, you may be eligible to receive payments, known as Feed-In Tariffs, from your energy supplier. For the electricity which you generate, the rate, or ‘generation tariff’ you secure will depend upon the size of your system, technology installed and when the system was installed. Certified installers must be used. If you generate more electricity than you need, you can sell the extra units you generate back to the electricity supplier, to benefit from ‘export tariff’ rates. For further scheme details and a list of the current rates, visit: https://www.gov.uk/feed-in-tariffs/overview
Grants
Grants can be available for certain industry sectors, job creation, or business activity. One of the main benefits is that most don’t have to be repaid and don’t show up on your balance sheet. Competition for funds is usually high and you may have to show evidence of progress on your project.
High Street Banks
Dedicated loans for energy efficiency can cover the upfront costs of installation, and savings can often exceed repayments, creating a positive cash flow. Examples include GIB, DLL, Société Générale, SDCL, Aviva, Equitix and RBS.