Green Deal presents opportunities for commercial buildings
The launch of the Green Deal offers a wealth of energy- and cost-saving opportunities for businesses — as Siobonne Brewster of Carillion Energy Services, explains.
Green Deal and the new Energy Company Obligation (ECO) mark an important change for energy policy in the UK, as well as opening up considerable market potential. Businesses, like homeowners, will be able to benefit from energy-efficiency installations that reduce energy costs and help meet Government targets of reducing UK carbon emissions by 80% in 2050.
Green Deal is essentially a financing framework to enable property owners and tenants to install energy-efficiency or carbon-reduction measures without paying the full amount up front. Measures will be repaid through the energy savings on the electricity bill; unlike a traditional loan, the Green Deal charge will be attached to the building, not the individual.
At the heart of the Green Deal policy is the ‘Golden Rule’, which determines how much finance can be borrowed. It works by calculating that the total amount borrowed via the Green Deal mechanism does not exceed the expected energy-bill savings. Given fluctuating energy prices and behavioural changes, savings cannot be guaranteed — but the Golden Rule offers a basic level of protection.
For businesses, the appeal of the Green Deal is to enable companies to make energy savings without tying up cashflow in a heavy initial investment. Although the Green Deal will be available to businesses of all sizes, this straightforward funding solution is particularly appealing to SMEs, as smaller organisations often have less disposable cash and borrowing power than larger corporations — making the Green Deal an attractive means of bridging the gap.
What’s more, attaching the loan to the building rather than the organisation reduces the financial risk. Businesses leasing premises can therefore benefit from energy savings throughout the period of their tenancy but are not tied to a long-term commitment if they later choose to leave the building.
That’s not to say that large commercial buildings cannot benefit from the Green Deal, but alternative solutions may well be more appropriate in these cases. Bigger properties can make the savings stack up more easily and so, in many situations, large corporations that have better access to finance and large scale contracts, may find it more appealing to deal directly with energy-solutions providers and implement a shorter repayment programme. For example, Carillion can survey properties and make energy-saving recommendations; these would then be addressed via an energy-performance contract as opposed to a specific Green Deal package.
Whatever the case, access to the Green Deal depends on securing finance through an approved provider. For the vast majority of homeowners this is likely to be via the Green Deal Finance Company. Commercial organisations, however, are not eligible to apply through this route during the first wave of the scheme. The main barrier to commercial take-up of the Green Deal in the short term is therefore the need to source alternative means of finance.
Businesses should not be put off, however, as the Green Deal Finance Company is not the only route to funding, and options for commercial organisations will soon be more clearly developed. Although the focus is heavily on the domestic market at the moment, the commercial sector represents a significant growth opportunity, and the funding and support for this area is on the horizon.
As with any new initiative there will naturally be some uncertainty to begin with, and it will be difficult to predict early customer volumes. With this said, forward-thinking organisations will already be mobilising resources to take advantage of opportunities as they unfold.
Carillion, for example, has been working to embed specific Green Deal training, accreditations and processes, so that it is ‘business ready’ for full status as a Green Deal provider. Businesses that have an existing heritage of delivering energy-efficiency measures across the private, social and commercial sectors will be well placed to usher in this new era of carbon consciousness.
The Green Deal is an essential part of the development of secure, affordable and low-carbon energy in the UK, making renewable energy available to all homes, businesses, public sector and community properties. All those who participate in the Green Deal will benefit from lower energy costs and lower emissions. There are real long-term gains, and everyone can benefit in some way.
It’s an exciting time to be involved in the industry and from Carillion Energy Services’ perspective, we are looking forward to seeing this transition take place and are confident that it will lead to greater uptake of energy-efficiency measures and further successes in combating fuel poverty.
Siobonne Brewster is strategic development director with Carillion Energy Services.