Issues surrounding the environment and energy prices are still hot topics for debate – both for consumers and businesses. With increasing levels of fuel poverty in the UK, consumers continue to face difficulties keeping their homes adequately heated.
The issue has been given precedence by the government and energy suppliers, as they were expected to spend £1.3bn a year on energy-efficiency measures between January 2013 and March 2015 via the Energy Company Obligation.
As consumers look towards overcoming fuel poverty, businesses are being placed under increasing amounts of pressure to develop greener operations. With so many technologies to consider, and potentially large investment needed, deciding whether or not to invest in microgeneration technologies can be a difficult task.
The Energy Savings Opportunity Scheme (ESOS) aims to cut carbon emissions by requiring large businesses to identify energy-reduction measures. It requires that all qualifying businesses undertake comprehensive assessments of energy use at least once every four years, and has set a deadline for the first compliance period for 5 December 2015.
With the ESOS deadline looming, there are lots of financing schemes for businesses thinking about purchasing microgeneration technologies to consider.
The perceived high cost of renewable energy and microgeneration technologies can be off-putting for many businesses, as they feel the initial costs outweigh the benefits. Without any prior knowledge of the renewable energy sector, handing over large amounts of cash for relatively unknown technology may seem all too risky.
Hire purchase schemes offer a more cost-effective alternative; businesses can fix the cost of acquiring an asset, spreading payments over time. With many companies struggling financially, this option allows businesses looking to benefit from ESOS to invest intelligently in microgeneration technologies before the compliance deadline.
Owning microgeneration technologies outright may also leave some businesses feeling uncertain. The initial costs of the technology, alongside the cost of maintenance, begin to seem like a money-draining investment.
An operating lease is a contract that allows a business the use of an asset without owning it outright. The microgeneration technologies are accounted for as a rental expense, in what is known as off-balance sheet financing.
For the lessor, the technology being leased is accounted for as an asset and is depreciated as such. Operating leases have tax incentives and do not result in assets or liabilities being recorded on the lessee’s balance sheet, improving financial ratios.
Leasing therefore offers a relatively risk-free, affordable alternative because of the absence of large up-front costs. Funding in this way ensures that companies can still experience marked savings on their energy bills as they continue to become more sustainable.
The benefits of switching to renewable energy sources include lower energy bills, security and price stability of energy, better green credentials and the generation of new revenue streams from exporting electricity and/or biogas back to the grid.
Both businesses and consumers should consider installing microgeneration technologies in order to combat rising energy prices. With a variety of finance options available, these technologies have become more affordable than ever before.
Ryan Davis is projects director at GHE Solar