With the exception of a small - and sometimes vocal - minority, renewable energy is accepted as a very positive development. The challenge for individuals and businesses is to turn a good thing into one that is also financially rewarding.
There is a general perception that renewable energy refers only to large scale onshore and, to a lesser extent, offshore wind farm developments. While it is true that these technologies have been dominant, renewable energy sources include power generated not only from wind but also from the sun, water (through hydroelectricity, tidal and wave power), the ground (via ground source heat pumps), waste (through biogas or anaerobic digestion), biomass and a number of other more esoteric sources. For those looking to add a renewable energy scheme to their business these technologies are often more relevant and practical than large scale wind developments.
Another defining feature of renewable energy is that, for most of these technologies, there tend to be fiscal incentives or subsidies available from the Government. Whilst not all schemes are dependent on accessing financial incentives it is obvious that their availability will improve the viability of a project. Whatever your view on a political level of such fiscal incentives being available, everyone should recognise that they offer a potentially significant financial opportunity which any company in the position of wanting to develop their own energy source would be wise to investigate.
It is however important not to assume that any scheme supported with subsidy is guaranteed to succeed. While many businesses, particularly in the food production and hospitality sectors have seen renewable schemes transform their financial position, it is vital that you begin this process applying the same commercial rigour as you would to other business projects or investments.
If your business is considering embarking on a renewable energy project, here are some key tips:-
Carry out a thorough appraisal of the scheme costs, the likely direct returns, the incentives available, the ancillary savings you may make, the cost of capital, finance costs and other pertinent issues. Be realistic in your appraisal and anticipate that not everything will go as smoothly as it could.
- If you need funding for your scheme shop around; in the post-recession world funders have markedly differing attitudes to lending to the renewables sectors.
- If you can’t fund a project on your own or don’t want to do so then consider external investment. There are several funds set up to invest into relatively small projects either as a joint venture or on a simple leasing basis.
Consider whether it is possible to collaborate with other businesses in your locality to spread the risk.
Consider the use of unproductive assets to support renewable technologies. For instance, roofs can readily support solar panels, even small watercourses (clean, grey or dirty) can support hydroelectric turbines, and the land required for a wind turbine is modest.
Think creatively. For instance, if you are a food producer how much waste or by-product are you creating? What do you currently do with that waste or by-product? Could you instead be using it to feed an anaerobic digester?
Assess your current energy use and consider whether self-generated energy could be used in your business. Would that reduce your on-costs or future proof against energy price volatility? For instance, powering a drying facility using a biomass boiler instead of an oil-fired boiler could dramatically cut costs or even become a net income contributor.
Remember that many schemes will require planning permission (and in some cases SEPA/EA and other approvals). Ensure you have all necessary consents before embarking on your scheme.
If you will be unable to use all energy generated yourself consider how it can be exported. Ensure there is sufficient electricity or gas grid capacity available to connect your scheme to the wider world, be clear on the likely costs and whether any third party approvals will be needed (e.g. to connect to a sub-station on a neighbour’s land).
Understand the regulatory regime, the fiscal incentives available and any tax impacts, both positive and negative, and ensure your scheme is structured to maximise returns.
Take expert professional advice from people who have been there, seen the pitfalls and understand the opportunities
If you would like any more information about any of the issues listed and the impact that these may have on your business, please contact Andy Drane on 0131 625 9191 or email firstname.lastname@example.org
The matter in this publication is based on our current understanding of the law. The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.