Energy
Funding the future

Cutting energy use can result in big savings, but often requires capital up front. Laura Clare Davies sets out the funding options for operators looking to implement energy efficiency solutions

By Laura Clare Davies | Published in Leisure Management 2013 issue 2


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.


Utility Connections
Ask TED, The Energy Desk’s specialist help desk, answers your questions


 

The Energy Desk
 

What would happen to the repayment of a loan if my energy saving devices weren’t working?
With initiatives like Carbon Trust loans you do repay the loan with the money you save. In most instances energy saving technologies will come with a guarantee on their ROI. Before installing any technology, check the guarantee so that you have a contingency plan in case your energy saving is not as good as you thought.

If I fund energy saving with a loan will I pay interest?
As with most loans there will be an agreed percentage. The government is currently in the process of confirming the percentage of interest that will be incurred through The Green Deal initative. For more information you can visit www.greendealinitiative.co.uk.

If you are looking at financing energy efficiency measures, does your credit rating matter?
The obvious answer to this is yes, your credit rating will generally matter when you are applying for credit. However, as innovative financing solutions come into play, there will be other means of establishing loan eligibility.

If I get a loan for energy efficiency, how will I know what to spend it on?
It is important to seek the consultation of an energy services company. On your behalf they can evaluate your energy use and the equipment that you use in order to best advise how and where your energy can be saved.

If I want to apply for a Merchant Cash Advance through TED Capital, do I have to spend the money on energy saving?
The short answer to this is no. As an energy services company The Energy Desk is acutely aware of the need for funding solutions such as TED Capital. The money can obviously go towards energy savings and we would strongly advise our clients to do this, however the money can be used in other ways should you so wish. 

If you have any questions about how to financing energy saving technology contact The Energy Desk on T: 0800 3777 889, F: +44 (0)1282 877 081 or e-mail us at [email protected] Alternatively for more information please visit www.theenergydesk.co.uk




Laura Clare Davies is business development manager at The Energy Desk
T: +44 (0)800 3777 889
E: [email protected]
www.theenergydesk.co.uk

A range of different options mean operators should be able to find a deal that suits them
 


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Hitchin, Hertfordshire SG5 1DJ Tel: +44 (0)1462 431385

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SELECTED ISSUE
Leisure Management
2013 issue 2

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Leisure Management - Funding the future

Energy

Funding the future


Cutting energy use can result in big savings, but often requires capital up front. Laura Clare Davies sets out the funding options for operators looking to implement energy efficiency solutions

Laura Clare Davies, The Energy Desk
Green savings
A range of different options mean operators should be able to find a deal that suits them

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.


Utility Connections
Ask TED, The Energy Desk’s specialist help desk, answers your questions


 

The Energy Desk
 

What would happen to the repayment of a loan if my energy saving devices weren’t working?
With initiatives like Carbon Trust loans you do repay the loan with the money you save. In most instances energy saving technologies will come with a guarantee on their ROI. Before installing any technology, check the guarantee so that you have a contingency plan in case your energy saving is not as good as you thought.

If I fund energy saving with a loan will I pay interest?
As with most loans there will be an agreed percentage. The government is currently in the process of confirming the percentage of interest that will be incurred through The Green Deal initative. For more information you can visit www.greendealinitiative.co.uk.

If you are looking at financing energy efficiency measures, does your credit rating matter?
The obvious answer to this is yes, your credit rating will generally matter when you are applying for credit. However, as innovative financing solutions come into play, there will be other means of establishing loan eligibility.

If I get a loan for energy efficiency, how will I know what to spend it on?
It is important to seek the consultation of an energy services company. On your behalf they can evaluate your energy use and the equipment that you use in order to best advise how and where your energy can be saved.

If I want to apply for a Merchant Cash Advance through TED Capital, do I have to spend the money on energy saving?
The short answer to this is no. As an energy services company The Energy Desk is acutely aware of the need for funding solutions such as TED Capital. The money can obviously go towards energy savings and we would strongly advise our clients to do this, however the money can be used in other ways should you so wish. 

If you have any questions about how to financing energy saving technology contact The Energy Desk on T: 0800 3777 889, F: +44 (0)1282 877 081 or e-mail us at [email protected] Alternatively for more information please visit www.theenergydesk.co.uk




Laura Clare Davies is business development manager at The Energy Desk
T: +44 (0)800 3777 889
E: [email protected]
www.theenergydesk.co.uk


Originally published in Leisure Management 2013 issue 2

Published by The Leisure Media Company Ltd Portmill House, Portmill Lane, Hitchin, Herts SG5 1DJ. Tel: +44 (0)1462 431385 | Contact us | About us | © Cybertrek Ltd