Finding finance in the downturn

The technology already exists to make lighting across the UK’s built environment cleaner and more cost-efficient. The problem lies in raising the capital, writes Nicola Martin.

A key contradiction has emerged during this economic downturn: energy inefficiency is costing organisations money… but they can’t afford to fix the problems that cause it. Notably, old-style fluorescent lighting persists across the built environment. Most companies are aware that they’re losing money through these inefficient systems, but stretched budgets mean that the upfront capital simply isn’t available to make the lighting upgrades that could both lower their fuel bills and improve their environmental profile.

“This is disastrous on a number of levels,” comments Richard Stirrup, chairman of Energys Group, a specialist in retrofit low-carbon solutions. “Businesses are forced to make cutbacks elsewhere just to pay the electricity bill and keep the lights on. Public sector organisations must pour public money into premises filled with expensive energy drains. And the UK’s sustainability agenda also suffers: carbon emissions are on the rise, despite a drop in GDP.”

While the natural instinct may be to delay any carbon-cutting lighting projects until better economic times, this is a false economy. Energy-saving upgrades not only have proven potential to make a dent in the UK’s carbon emissions, they could also help to improve the bottom line for struggling businesses. It’s clear that the provision of good-quality financing options for energy-efficiency projects could be the lifeline that is needed.

However, government funding schemes have been a victim of the downturn. The axe has fallen on the successful (if convoluted) business-oriented ‘Carbon Trust Interest Free Loans’ scheme, with limited pots of money now only available in Wales and Northern Ireland. It has been replaced by an even more complicated scheme (‘Energy Efficient Financing’) that charges commercial rates of interest. For the public sector, pots of money are available periodically, through the government-funded Salix scheme, but they are quick to run dry.

“A lot rests on the forthcoming Green Deal,” says Energys’s Richard Stirrup. “This flagship government policy will offer financing for energy-efficiency measures like low-energy lighting – not just for homeowners, but also for business premises. However, details have been slow to emerge, and if provisions do not meet market expectations, or if it fails to hit its target and appeal to risk-averse businesses, it could become a high-profile failure.”

 

Either way, waiting around for the Green Deal to deliver a financing lifeline is no solution at all. Instead, it’s beginning to emerge that it could be both possible and profitable to make financing provisions without government assistance. The low-carbon arena is unique in that it lends itself to alternative modes of funding.

“Organisations that invest in energy-efficient lighting upgrades overwhelmingly find that the initial costs are offset by savings elsewhere, within a couple of years,” comments Stirrup. “In many cases, the cost savings arise not only from lower fuel bills, but also through a reduced maintenance burden and a less frequent outlay on replacement lamps. All that’s needed is to harness this potential for long-term savings and allow organisations to benefit from their lighting upgrades straight away.”

With this in mind, lease schemes for low-carbon technologies are growing in popularity.

The key is simplicity: no long forms to fill out; no wrangling with government bureaucrats. Most importantly, since a majority of organisations are keen to keep any new debt ‘off balance sheet’, choosing a rental option reduces any risk.

“The historically low cost of borrowing, plus rising energy costs, mean that lease schemes for low-carbon technologies are now less a case of carrot-and-stick and more a case of carrot-and-no-stick,” comments Stirrup.

“In light of this,” says Stirrup, “Energys has been able to launch the ‘off balance sheet’ Save It Easy Lease Arrangement, which requires no capital investment from the customer in order to install the award-winning fluorescent lighting converters, Save It Easy. These plug-in converters allow low-energy T5 lamps to be slotted into the existing light fittings, producing lighting energy savings of up to 65 per cent. Because of these instant savings, right from day one, the monthly payments on the lease arecompletely covered by the financial savings that result from lower electricity bills.”

Such lease schemes provide a simple solution that could make a big difference to the tricky UK funding situation. And not a moment too soon. Though the economy remains in the doldrums, one thing is on the rise: the amount of CO2 in the atmosphere. If we are to tackle this problem, and produce a more cost-efficient, energy-efficient built environment, it’s vital we start thinking outside the box – both in terms of innovative technology and new financing options.

www.energysgroup.com

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