Five things manufacturers need to know about renewable energy

Summary

By Carl Benfield, Prescient Power

We are seeing a surge of interest in renewable energy by manufacturers.   Progressive, innovative companies are realising that energy is a security issue hitting the bottom line and beyond.   With incentives delivering short payback terms, great quality products, and prices at a record low level, now is the time to build extra income streams and insurance against rising fuel costs into your business plan. So is it really worth it and what do you need to know?  With years of experience in renewable energy and the benefits that it can bring, here are our top tips: 1. Not all companies are equal If your space or process heat load and electrical consumption is high, then your energy risk may be significant.  Do you know what percentage of your input costs are energy related?  How sensitive is your business model to energy pricing? If these considerations strike a chord then you have a good basis to consider  renewable energy.  Offsetting some or all of your fossil-fuel energy into a lower, fixed cost, and sometimes free alternative, gives protection against the unforecastable energy price rises.  Many manufacturers fall into this group, which is why there is an increased interest within manufacturing right now. 2. It’s not just about solar panels There are six mainstream types of renewable technology split into two distinct groups.   Renewable Heat:

• biomass
• heat pumps (using heat from the ground, water or the air)
• solar thermal (hot water)

Renewable Electricity:

• solar panels (photovoltaic panels)
• wind turbines
• hydroelectric

The type of technology that you employ will depend on your your budget, your needs as a site and the space and resources that you have available.  If you are relying heavily on oil or gas for heating in processes then a biomass boiler might fit your purposes.  If you have a high electrical outlay to run machinery, and you have the space, then wind may serve you well.  If you are interested in space heating - heat pumps might work best. The important thing is to get someone in to look at your site and have a detailed discussion  about what you want to achieve.  Ideally, get a consultant involved who will be able to talk across all technologies to make sure that you have a full choice of options.  Solar panels aren’t for everyone, and if it’s the only product an installer is offering you might be drawn down that route. Don’t forget that in conjunction with a becoming an energy generator, you should also investigate energy saving measures.  Many of these attract grant funding and can add a significant benefit to your business. 3. Renewable energy isn’t just about being green or earning CSR points Although meeting sustainability objectives and showing a genuine concern for the environment often makes up a part of the reason for getting involved in renewable energy, it isn’t often the driving factor...saving money is All renewable technologies carry an initial capital cost followed by reduced running costs. The measure of how beneficial this technology will be is the payback period. Renewable energy pays back through the following ways:

• Reduction on energy bills - in most technologies, after the initial outlay, the generation of energy is free enabling you to quickly slash your energy bills.  Heat pumps require a small amount of electricity in order to extract heat, and biomass boilers require a fuel source, but both greatly reduce the original bill.
• Incentive payments - Government schemes such as the Feed In Tariff (FiT) and Renewable Heat Incentive (RHI) ensure that you receive payments for every unit of energy that you generate
• Selling electricity back to the grid
• Lower carbon footprint, mitigating any future taxes or levies introduced by Government
• Increased brand and customer engagement.  Shouting about your commitment to sustainable practises wins you loyalty and gets you talked about (in the right way!)

4. You get paid for generating energy - even when you use it Sounds too good to be true, but it’s true. The Government have backed two main incentive schemes:

• Feed in Tariff (for renewable generation of electricity)
• Renewable Heat Incentive (for renewable generation of heat)

Feed In Tariff With the Feed in Tariff, you are paid an amount by your energy provider for every unit of electricity that you generate.  You are free to use this electricity on site, and indeed it’s best if you can because you reduce your electricity bills at the same time. Any surplus energy is then fed back through to the grid, and you are paid a separate lower amount for this electricity. When your system is connected to the grid, the amount that you receive for each unit will be fixed over a 20 year period, ensuring that you continue to receive a fixed rate for that energy.  So it makes sense to get started as soon as you can, to make sure that you receive the best rates. Once you have entered into the agreement, it is underwritten by law, meaning that a change of Government policy will not affect the amount that you receive. There are different rates according to the size of the installation, the current rates are on our website. Renewable Heat Incentive The Renewable Heat Incentive is an amount paid out by the Government for every unit of heat that you create from renewable means.  As heat can’t be fed back into the grid, there is only one unit rate for generation, this heat is then used within your processes. Again, the agreement is underwritten by law, and the current rate at point of installation is the fixed rate that you continue to receive for 20 years. 5. You don’t necessarily need to raise CAPEX It just gets better and better...   We won’t lie to you; the best financial rewards through renewable energy come from raising  CAPEX from your own funds, seeing a fast payback (maybe within 5 years), and then happily generating 15 years worth of income from your renewable technology, not to mention the additional savings as well. However, raising CAPEX isn’t always an option and sometimes isn’t the ideal for your own financial model.  The way we see it there are five other ways: Get a loan Banks are increasingly happy to loan for renewable technologies as they are becoming more familiar with, and seeing the benefits of, this investment.  Although your payback will be slightly longer, it’s still a great option. Get a lease A lending body will pay for the installation and will own it at your property for the period of the lease.  You get the decreased energy bills and the Feed in Tariff or RHI and pay a set amount each month to the lender which will usually be covered by the benefits of the system. Once the lease is paid, ownership transfers to you and you get all the benefits. Get an Energy Supply Contract (ESCO) The system is installed, operated and maintained by a third party.  You pay reduced rates for the energy and the third party sees their return investment through the money you pay them, and from the RHI or FiT. Get crowdfunding Similar to the ESCO, except that the installation is bought by a community buying shares in the installation.  It’s a great way to engage with your stakeholders and promote your green values as well as saving money on your bills. Rent your roof or field An investor pays for the installation which they will install at your property or on your land.  You receive the sustainable energy for free or at reduced cost.  The investor then receives all of the Feed in Tariff or RHI and may also pay an amount to your for the rental of your roof or land.  We don’t often recommend this option as it delivers the least benefit to the client. You can see a short video summarising these methods on our website. So there you have it.  In a nutshell, the five things you need to know about renewable energy. Prescient Power are renewable energy consultants and installers, providing sustainable solutions to businesses across the UK.  Chartered engineers, MCS accredited installers and military trained project managers, we offer free advice and free site surveys with no obligation.