Renewables are needed in order to meet Government and European carbon cutting objectives and to reduce our dependence on fossil fuels.
But how is that relevant for SME businesses today? Surely renewable energy is a minefield of confusing facts and figures, only really relevant for rich landowners and far too expensive for us? Well think again…
Let’s start from the beginning – what is it?
Renewable energy is a means of generating heat or electricity from the sun. There are 6 main types of mainstream land-based renewable energy:
- Solar panels – converting light using photovoltaic cells to electricity
- Wind turbines – positioned in a favourable location and using rotation to create electricity
- Hydroelectric power – based in a stream and using kinetic energy to generate electricity
- Biomass boilers – using wood pellets, chips or logs as fuel
- Solar thermal – using sunlight to heat water
- Heat pumps – extracting heat from the ground, air or water
Each technology has its pros and cons and choice is dependent upon various factors such as location, building type, aspect and the natural resources available. Consideration of all of these will be required to determine whether a renewable energy type can benefit your business. You can find out more about each technology by clicking on the types above.
Why do businesses install renewable energy?
There are four main reasons why businesses install renewable energy technology:
- To save money
- To make money
- To cut their carbon footprint
- To deliver benefit to the community
The money aspect is a clear motivation when any business is looking at renewable energy. The Government has two main incentives schemes which it is using to encourage uptake of sustainable energy: Feed in Tariff (FiT) for electricity technologies and the Renewable Heat Incentive (RHI) for heat technologies.
When you install a renewable energy system the incentive payments help pay back the cost of the installation and run over 20 years. Each is index linked and fixed at the time that you join, so you are guaranteed payment over that period based on the energy that you generate, even if you use it on site.
For example, if you were a rural business running an oil boiler to heat your offices and spending £10k a year on fuel, replacing this with a 200kW wood pellet boiler could mean that the boiler would pay for itself through RHI and energy savings in 3 years. Leaving 17 years worth of RHI payments and further energy savings which could generate £700k in revenue during that time!
In this case the company is essentially creating another revenue stream by switching its boiler – diversification in a new sense.
The other technologies work in similar ways and each has their own payback periods depending on the specific situations.
Capital expenditure is the looming shadow over any great investment. Funds are hard to come by, and (from personal experience) we know that banks can be less than helpful. But it is very possible to install renewable technology without the upfront cost.
There are some great ways in which you can use power purchase agreements, where a third party buys and installs the technology at your property and charges you a fixed rate which is lower than your current supplier.
Or you could embrace localism and use your building or land to host a community energy scheme. The community would buy shares in the installation through a community energy company, that company would arrange for the installation and you would be charged a small fee for use of the electricity or heat. Reduced energy bills for you and a great win for the community with dividends paid through to FiT or RHI to community shareholders and money fed back through for projects to improve the lives of local people. A truly good thing to do; you improve relationships with your local community and hopefully strengthen and build new bonds and connections for your business. Not such a bad idea for an SME after all.
So what would I need to do?
Firstly get in contact with a local installer, preferably someone who offers a range of technologies so that they can talk through all of your options. They will need to visit your site and have a good look in order to advise you properly, so don’t take a hasty quote over the phone.
Ask people for recommendations, have a good look at the installers website and read their case studies. A good installer should have connections within the industry and be able to offer a range of products, be able to connect you with community energy companies or third parties to arrange financing. They should be open and honest and prepared to answer any questions that you throw at them. Although the Microgeneration Certification Scheme (MCS) applies to smaller installations, it’s a good idea to ensure your installer (and their equipment) is accredited.
The installers should have the knowledge to help you with planning applications (should you need them) and applications for your incentives.
And most importantly, they should be able to justify a system with a short payback period, a good return over 20 years, great savings on your energy bills and a carbon reduction figure for you to use.
Renewable energy isn’t for everyone, but it might be for you.