Much of the early publicity surrounding the launch of the Government’s Green Deal in January 2013 has focused on the domestic market, but the scheme is also available to businesses, as DECC ministers are now increasingly keen to highlight.
The Green Deal for businesses is a scheme providing financing for energy efficiency improvements, so that organisations don’t have to pay the upfront purchasing costs. Companies will instead pay for the installation of approved energy efficiency measures over a number of years through their energy bills. The ‘Golden Rule’ of the Green Deal stipulates that the financing cost will be no greater than the savings generated by the energy efficiency measures installed, so that any business taking up the deal will bear no extra cost - and once the Green Deal loan is paid off (between 10 and 25 years) the reduction in energy use will be fully reflected in the company’s lower bills.
An approved assessor ascertains the most cost-effective technologies for the building from a list of over 45 possible installations for businesses (including LED lighting, insulation, air conditioning zoning controls, condensing boilers, solar PV and other microgeneration technologies). The assessment will usually incur a charge, though where an assessor is also a provider the assessment fee may be waived. The company will then choose which technologies they want to go ahead and install, and agree a Green Deal Plan with their chosen provider. The company’s energy provider will then add a fixed charge to the energy bill to repay the loan on a pay-as-you-save basis.
Some of the misgivings expressed so far are:
On the plus side, there is no cap on the amount of finance available to companies under the Green Deal, allowing large-scale installations to be financed in this way, and the roll-out is intended to make the scheme widely accessible across the UK. As a Government-backed initiative, there are safeguards in place to ensure the quality of technology and installers qualified to display the Green Deal brand mark, and to insist that suitable warranties are provided.
Research by the Carbon Trust shows that businesses implementing energy efficiency schemes can generate returns on investments as high as 40% and good projects can deliver paybacks in less than two years.
If you want to get going within the next few weeks or months, we suggest you first contact the Carbon Trust about their Energy Efficiency Financing scheme (EEF) which is an established pay-as-you-save scheme for businesses which has already given loans to 4,500 organisations. This scheme runs along exactly the same lines as the Green Deal:
The EEF scheme provides financing for projects from £1,000 and above, subject to credit approval, with no real ceiling on the project size or financing available. When asked, the Energy Efficiency Financing partners (Siemens) preferred not to quote a typical interest rate on an average loan, since each application is ‘assessed on its own merits’ - and sometimes a whole system is being financed including pre-use, service and maintenance - but insisted their rates were always ‘highly competitive’, quoting a satisfied customer (Spark Response) who ’..chose the EEF scheme to finance our lighting project because of its competitive interest rate..’ Spark Response go on to say ‘We are very pleased with the smooth process and the energy savings are now offsetting our monthly finance payments, making the investment zero cost for us’.
If you have a larger organisation and want to upgrade the energy efficiency of more than one building or install large systems and equipment, it is worth contacting the Green Deal team since there is no cap on the amount of financing available to individual organisations, and if you don’t need to get the installation underway immediately, once the roll-out of the Green Deal for Businesses is properly underway it will provide huge amounts of financing for large-scale building enhancement projects. The interest rates are high (see examples for a £5,000 loan below), but the rates are lower for larger loans and your organisation is expected to make savings which at the very least cover the costs. Make sure you are happy with the terms of your finance agreement - for example, any early redemption penalties that may apply.
Your organisation may also benefit from the Enhanced Capital Allowances (ECA) scheme which enables businesses to claim a 100% first year capital allowance on investments in certain energy saving equipment, against the taxable profits of the period of investment. To find out which plant and machinery qualifies for the ECA you can browse the latest list ECA Energy Technology List (ETL). Some items require criteria to be met (e.g. lighting) which should be checked with the manufacturer or supplier.
Green Element are able to help with a whole or part of this process. Please do contact us on Green Element Contact. Savings can be made by renegotiating energy bills onto cheaper tariffs and/or becoming exempt from the Climate Change Levy (CCL) (0.524 p/kWh from 1st Apr 2013) by transferring to renewable electricity - we’ll be blogging more about reducing energy bills…
By Emma Littlewood
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