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Bounce back from COVID-19: Business Energy in Review

helping your business achieve competitive advantage

Why Now?

Financing your investment

Bounce back from Covid-19

Financing options to suit you

Where to start?

Benefits of onsite generation

How can you meet your business objectives?

What can you gain?

Technology options

First Steps

What solutions are available for you?

How can Advantage Utilities help?

Bounce back from COVID-19 Bounce back from COVID-19: Business Energy in Review With many businesses shuttered for the best part of a year, and many more operating under exceptional

issues covered

circumstances to stay in business, paying attention

in this report:

to energy consumption has sunk down to the bottom of most to-do lists. However, with the rise of new funding models, including power purchase

1. Why Now? 2. Where to Start?

agreements (PPAs), it is becoming much easier to

3. Technology Options

make the most out of energy efficiency measures

4. Financing your investment

without

5. Benefits of on-site

the

risks

associated

with

capital

expenditure or the ongoing worry of maintenance.

With that in mind, taking a closer look at energy consumption may offer many businesses a muchneeded

lifeline

to

reduce

overheads

generation 6. First Steps

while

improving resilience and addressing climate change in the process.

Why now?

All businesses will have explored their energy consumption in some way at some

point

in

time,

whether

that’s

looking for a better deal on their bills or considering

how

to

make

their

own

energy onsite. For the latter, some will have found the cost prohibitive or the return on investment insufficient, while others

will

have

made

sizeable

upgrades.

In any instance, options becoming available regularly, it pays to make investments into with new low-carbon regular reviews. At the same time, the need to address climate change remains and despite

technologies such as combined heat and

COVID-related challenges, businesses continue to act. In fact, a report commissioned by the

power several years ago, and now need too umake y r competitive advantage

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Bounce back from COVID-19

United Nations found that the number of commitments to reach net zero emissions has roughly doubled in less than a year, as many businesses prioritise

climate

action

in

their

recovery

from

COVID-19.

Meanwhile,

environmental, social and governance (ESG) investing is predicted to grow rapidly in the next five years. According to research by PwC, ESG funds are expected to increase their European fund market share by between 15 per cent and 57 per cent. The trend will see trillions of pounds become available to fund ESG activities such as renewable energy projects, with investors looking for the best return on their investment. To facilitate these transactions, a new type of contract – the PPA – has been developed which adds yet another way for businesses to finance renewable energy projects on their sites.

Altogether, ongoing technology developments coupled with evolving financial arrangements mean that businesses have access to an ever-increasing array of ways to reduce the costs associated with their energy consumption. Over the following pages, we set out what the options are, and how they can be applied to help finance popular energy technologies including roof and groundmounted solar and combined heat and power (CHP).

Where to start?

The best energy technology solution for any business is one that exactly meets the business’ objectives in the most economical and financially viable way. Before committing to a solution, a business should: 1. Agree upon and prioritise objectives – do you want to reduce cost, commit to net zero, make additional revenue, improve security of supply, offer electric vehicle charging to your hotel guests or electrify your vehicle fleet? Every objective has an influence on the final solution.

2. Identify your team – some companies will have the right expertise in house to take the project forward themselves. Others may prefer to engage an independent advisor to facilitate the process with them. An independent advisor can execute all the following steps for you and will bring insight from hundreds of previous energy efficiency projects.

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3. Audit your current position and create a baseline – whether you want to reduce energy consumption and costs,

or

improve

your

carbon

footprint, you will first need to gather the data to assess where you are currently

in

comparison

to

your

objectives. You may also want to audit the actions that have been taken to date to understand what has worked, and what hasn’t. If working with an independent advisor, they will collate and analyse your data and then create a report for you.

4. Consider all the options - the solution needs to account for the type of business that you have including your energy consumption profile, the space you have available, your location and your current energy costs. Occasionally, a site’s energy profile may warrant the use of two technologies to work in tandem, for example where solar cannot meet the full electricity load, and there is sufficient heat demand to implement combined heat and power too. This step is often where working with an independent advisor can help significantly improve the outcome. An advisor will use their expertise to create a bespoke solution from the different technology and finance options available that will most closely meet the business’ objectives.

5. Think about the future – what fits now, may not do so in the years to come. The business may have strong growth plans that will increase consumption, or ambitions to develop the site or services. These considerations should be factored in. Further, a consultant may be able to offer options that will help to futureproof the business as well as offering the latest advice on aspects such as forthcoming industry regulations, financial support or flexibility market participation.

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Bounce back from COVID-19 Technology options While there are many energy technology solutions, some of the most popular are: ROOFTOP SOLAR Producing electricity using solar PV is often the most straightforward option for premises with lower heat demand and can reduce consumption and costs by up to 20%. Connected via the site’s meter, the output of solar installation can be closely monitored to ensure performance.

GROUND-MOUNTED SOLAR Also sometimes referred to as solar farms, ground-mounted solar PV is best for businesses with significant land mass such as agriculture and golf clubs. In this instance, solar can be used for generation for proximal buildings, or for revenue generation – both of which require planning permission. For revenue generation, permission to connect to the distribution network is required and can be supplied back to the grid directly or to a supplier under a cooperate or bilateral power purchase agreement.

COMBINED HEAT AND POWER (CHP) CHP is a particularly effective option for businesses with a higher heat load such as manufacturers, leisure centres and hotels and can reduce consumption and costs by up to 30%. Combined heat and power produces usable heat and electricity in one single, highly efficient, on-site process and is almost twice as efficient as traditional power generation.

The increased efficiency translates to electricity costs that are around one-third of the price charged by conventional UK suppliers. CHP can also cut carbon emissions by around 20%. As well as providing electricity and heat for use onsite, there are also options to use CHP for revenue generation by providing grid flexibility services. CHP is typically more expensive to install which makes PPAs and joint ventures an attractive route for finance.

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ELECTRIC VEHICLE CHARGING More than 10 million electric vehicles will be on British roads by the end of the decade

according

to

National

Grid,

thanks to the Government’s planned phase-out of petrol and diesel cars by 2030 and rapidly decreasing cost of ownership. With the rise in EVs comes the rise in demand for electric vehicle charging benefits

ports. for

There

businesses

are

several

offering

EV

charging including: Competitive advantage: research suggests that EV owners actively choose to visit places that have EV charging ports over those that do not.

Option to create an additional revenue stream from spare parking space Improves employee, customer and visitor experience of your premises Shows the company’s commitment to sustainability

BATTERY ENERGY STORAGE SYSTEMS (BESS) Storage systems are configured based on your business’ electricity consumption levels, so vary in size. A typical system might take up the area of a single car-park space and is generally unobtrusive. Where there may be customer foot-traffic, security fencing can be installed. Storage systems can be operated in several ways including to provide back-up power in the event of disruption to the grid or to provide capacity to avoid costly upgrades and

to

generate

revenue

by

providing flexibility services to the electricity grid.

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Financing your investment Once a decision has been made about what technology solution will suit your objectives, you will need to decide on a finance option. Alongside more

traditional

routes

including

CAPEX

and

finance, newer methods to secure investment – namely

joint

ventures

and

power

purchase

agreements – are increasingly being offered for energy technology solutions.

CAPEX ROUTE This route is particularly attractive for cash-rich businesses who are comfortable putting their capital at risk and want to own the asset outright.

Businesses

financing

their

renewable

energy

investments through the CAPEX route receive all of the return on that investment. The business takes full ownership from day one and is responsible for organising maintenance and insurance.

FINANCE ROUTE The finance route is particularly attractive for larger businesses who want to own the asset but don’t want to use the CAPEX route. Finance terms will vary but a contract length of between five and seven years is quite typical with the investment becoming cash positive from around year five. Once the finance is paid up, the business owns the asset outright. As with the CAPEX route, the business will be responsible for maintenance and insurance.

POWER PURCHASE AGREEMENTS Power purchase agreements (PPAs) are long term contracts through which your business will agree to purchase a set amount of electricity at an agreed price. In return the solutions provider, usually working with an investor, will cover the cost of installing and maintaining your site’s solution for its life span (10 years for CHP & 25 years for solar).

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PPAs come at zero capital cost and zero

risk

to

your

business

–

insurance is covered by the funder, and most offer a certain element of hedging against future energy price increases. A further benefit is that should the business relocate or close

down,

the

PPA

can

be

transferred to the new site owner or the

technology

solution

can

be

removed.

Recently, the minimum consumption required to attract potential PPA partners has reduced to around 50kW, making it available to smaller premises such as schools, hotels and leisure centres. Consequentially, there has been a significant increase in the number of PPA deals being made with many more businesses now able to reduce their energy consumption, lower their carbon footprint and cut their costs.

JOINT VENTURE ROUTE Joint ventures are typically offered by original equipment manufacturers who will offer a fully packaged energy solution on a part or fully financed basis. Some providers offer the possibility to relocate the energy asset should your site move or return it after a certain period should your needs change. Many JV arrangements also include insurance and maintenance.

Benefits of onsite generation Reduced costs. On average, businesses will save between 20 and 30% on their energy bills by taking control of their energy.

Continuity of supply. For some businesses, continuity of supply is everything. A power cut at a theme park, for example, could leave visitors hanging upside down for some time! Onsite back-up generation can bring a new level of reliability to all businesses.

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Reduced carbon. Businesses are an essential driving force behind reaching the UK and Europe’s net-zero goals. If businesses do not already have their own carbon goals, consumer demand and scope 3 emissions requirements will see businesses need to address carbon.

Revenue generation. As the grid experiences a greater level of intermittency as more renewable technologies are added to the energy mix, a greater level of flexibility is required. Businesses with technologies such as battery storage and combined heat and power may be able to provide this flexibility in return for payment. This not only provides an additional source of revenue for the business but has the potential to lower the cost of the grid for all users – including householders.

Futureproofed technologies. Many combined heat and power plants are now being designed to be hydrogen compliant. Several announcements in the last year indicate that hydrogen will be the next big bet in terms of renewable energy technology development with the UK Government already offering support for research projects for 100% hydrogen and hydrogen-blended networks. In the coming years we can expect to see hydrogen begin to replace or supplement natural gas – by acquiring equipment that is hydrogen compliant, businesses will future-proof their energy generation investment.

Working with Advantage Utilities Energy is a huge cost for all businesses – the third largest outgoing in many cases. So, if you are looking for a straightforward way to make your business more sustainable and reduce costs, Advantage Utilities can provide a free desktop audit to assess what technology and finance solution would be best placed to meet your needs. After the audit is complete, we will carry out a site survey and once we have confirmed that the solution that will be right for your business, we can arrange procurement and installation on your behalf.

Call us today on 0207 371 5360 for expert advice on how to make your business energy greener, cheaper and more secure or find out more through our resources section.

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about us: Advantage Utilities is the consultative partner that considers every technology and finance option to help its clients achieve their goals. Backed by our simple motto – Procure, Reduce, Manage – Advantage Utilities is a one-stop shop that helps businesses to achieve their sustainable energy ambitions while adding value, reducing costs and meeting legislative compliance.

Advantage Utilities champions a consultative, customer-centric approach. We get to know our clients inside out - their needs, priorities and goals, so that we can develop, implement and manage a tailored solution to match.

Should you have any questions or queries regarding energy contracts, renewable energy products and services, energy management or water, waste and telecoms then please do not hesitate to contact your account manager or a member of our team on 0207 371 5360.

We wish all of our clients and prospects a healthy and speedy return to normality during this difficult time, and rest assured we are here to serve your accounts with business as usual.

contact us: 0207 371 5360 info@advantageutilities.com

www.advantageutilities.com Coda Studios, 189 Munster Rd, SW6 6AW

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