Finance for SME Energy Efficiency Improvements

LACK of finance should not be considered a barrier to installing energy efficiency measures or renewable technologies for businesses, according to UK utility company npower.

With the current media focus on the need for increased energy efficiency to help protect the UK from a potential energy supply gap, businesses may be considering where to get the funding required to invest in their premises. However, there are a number of options to be considered.

The UK Government’s Green Deal is designed to allow people and some businesses to pay for energy efficiency improvements, technology and measures through savings on their energy bills.

The measures included in the scheme have to meet the criteria of the Green Deal’s ‘Golden Principle’ – i.e. the charge attached to the energy bill should not exceed the expected savings and the length of the payment period should not exceed the expected lifetime of the measures. If the measures required do not meet this principle, then other financing routes, such as Energy Performance Contracts may be required.

In a similar way an Energy Performance Contract would allow installation costs to be covered under an agreed savings plan. Energy Performance Contracts are a relatively new financing scheme to help secure funding for energy efficiency measures and are used extensively in the US.

An Energy Performance Contract involves an energy services company designing and installing measures to reduce energy consumption, with the investment in the infrastructure being funded by the savings achieved. The energy services company provides a guarantee that energy savings will meet pre-defined levels, helping to secure the financing for the project.

Graham Ryott, Project Development Manager for npower’s Business Energy Services division, states: “The Government’s recent Energy Efficiency Strategy document, ‘The Energy Efficiency Opportunity in the UK’, identified misaligned financial incentives as one of the key barriers to businesses fully embracing energy efficiency.

“With this in mind, it is crucial organisations understand there are a range of financing options available to overcome this barrier. We’d encourage any business to look into the detail of those available. Lack of funding really shouldn’t be an insurmountable challenge to reaping the significant rewards of energy efficiency.”

Picture of small businesses in Scotland by Mary and Angus Hogg [CC-BY-SA-2.0], via Wikimedia Commons

Friday 14th June 2013

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