There is now an abundance of solutions to cut help us cut our energy use. There are renewable energy technologies like solar panels, wind turbines and biomass boilers, as well as technologies that you can retrofit to reduce your electricity use, like intelligent lighting systems or upgraded building insulation. If these aren’t viable you can also alter your building design to maximise natural light and ventilation. The possibilities are endless, but they all have one thing in common – they cost money. The unavoidable truth is that when it comes to energy management you’ve got to spend to save.
Let’s not ignore the possibility that you might have the spare cash in the bank. If this is the case then you can turn away now. In reality though many businesses that are doing the right thing in implementing an energy efficiency strategy won’t have the capital lying around to fund it themselves. Fortunately there are many practical financing solutions in the marketplace that it makes ‘stumping up the cash yourself’ seem like a bit of a senseless alternative.
ENERGY SERVICES CONTRACT
For some time, the energy industry has offered large energy users a funding option called an Energy Services Contract (ESCO), whereby an organisation essentially contracts out its energy services. As an example of how ESCO funding can work, we at The Energy Desk would for instance install a Combined Heat and Power (CHP) plant at a hotel and there would be no charge for this installation. The Energy Desk would then supply heat and power to the hotel for an agreed rate – and one that will significantly undercut the inflated costs for traditional gas or electricity supplies.
As far as financing energy management, an ESCO is far and away the most attractive option for large organisations – you get the benefits of installing pioneering technology but without the capital expense. However, if you do want to own the equipment, you also have a range of options.
THE CARBON TRUST
Take the Carbon Trust for example. As a not-for-profit company with a sole focus on moving the UK towards a low carbon future, it has so far helped 4,500 businesses by investing £1.6bn into energy efficiency equipment, resulting in a staggering £3.7bn reduction in energy costs. Although the Trust is restricted to projects that will yield a maximum return on investment (ROI) of four years, these interest free loans have had a huge impactenabling businesses to fund energy efficiency measures, and where the Carbon Trust has led, more have followed.
THE GREEN DEAL
Next you have the Green Deal – the government’s new initiative designed to help businesses install green technologies. As with the Carbon Trust, the energy efficiency technology is paid for with the loan, however there is a slight difference when it comes to paying the money back.
Both initiatives work on the assumption that the money you use to pay off the loan is the money you've saved by reducing your energy use. With the Carbon Trust you repay the loan yourself. However, through the Green Deal, you pay it back via your energy bills.
Though the initiative launched in 2012, the loans only became available in January this year so this is quite a new concept and one that the market is just about coming round to.
As an example, in November last year The Energy Desk launched a financing initiative that works on a similar basis to the Green Deal. TED Capital – like the Green Deal – offers a lump sum of financing that can be repaid in a manageable and digestible way. As a Merchant Cash Advance (MCA) a TED Capital loan is paid back through your merchant transactions – basically as a portion of your customers’ credit and debit card payments.
Although the money that our clients borrow through TED Capital needn’t just be for energy efficiency measures, it shows that ground-breaking financing solutions are becoming easier to access and this will ultimately enable companies to take the necessary measures to reduce energy consumption and costs without breaking the bank.
The face of money lending has of course changed somewhat over the past five years and shrewd borrowing has become the mainstay of successful business management. However, the need for energy efficiency isn’t going to go away and it will continue to be a priority for UK commerce for the foreseeable future.