This article is based on a report written in January 2012 with minor updates at the start of April 2012. It does not cover loan-based support from banks or other financial lenders. This type of financial support is now available from most of the major UK banks and also from a number of other commercial lenders. However their terms will vary significantly. Reviewing the best options for this type of loan-based finance would be the subject of a further article.
There is a wide range of Government and other funding assistance available for renewable energy projects although many options will be limited to specific types of applicant – private households, businesses, public bodies, voluntary organisations, community groups etc.
The main options are listed below – the report on which this article is based had a strong Scottish focus. However most of the funding schemes are available across Britain. A more detailedlist of all options is provided on the Energy Saving Trust website under their funding and finance section:
Feed in Tariffs (FITs) were introduced in April 2010 by the Government with cross-party support to encourage the installation of renewable energy technologies in properties (both business and domestic). By legislating on what an individual or company gets paid for the energy generated, the technology is guaranteed to recoup the investment costs far quicker than was previously possible.
The reason the Government was so keen to get people to install renewable energy systems is because there is a legally binding EU target of producing 15% of the UK’s energy from renewables by 2020. At the start of 2010 we were only producing about 2% of our energy from renewables and whilst offshore wind farms and other big energy generation projects will make a significant contribution, it simply will not be enough on its own. Official estimates in 2010 calculated that the tariffs should produce 8% of the UK’s energy from renewables.
The first stage is to install the technology and have it grid connected. Once it starts generating electricity, you will use what you require. Any surplus that your system generates but you do not consume is automatically exported back to the National Grid. Any additional electricity that you need (for example if it’s night time when your solar panels don’t work or simply because you need more power than you are generating) is automatically imported into your property in exactly the same way that you currently get your electricity from the National Grid.
The payments happen in three ways:
1. You get paid for all the electricity that you generated and used yourself
2. You get paid for all the surplus electricity that you exported back to the National Grid
3. You pay your energy supplier for the additional electricity you needed to import
It is your energy supplier who will pay you, typically once a quarter, for point one (the electricity you generated and used yourself) and point two (the electricity you exported to the grid). You will pay them for the electricity you needed to import in the period.
Renewable Heat Incentive
In March 2011, the UK Government announced the details of their Renewable Heat Incentive (RHI) which is designed to provide financial support that encourages individuals, communities and businesses to switch from using fossil fuel for heating, to renewables such as wood fuel. Non-domestic installations can claim the RHI now for any installations commissioned on or after 15 July 2009. Installations that are eligible for the RHI include:
Applications opened on 28 November 2011 for the RHI and must be made to Ofgem. They will make quarterly payments to the owner of the installation.
For domestic installations, the householder, or owner, of the installation will be able to claim the RHI early 2013. In the meantime, the Renewable Heat Premium Payment can be accessed for eligible householders. This is a relatively small grant (available through a voucher) towards the purchase and installation of solar thermal panels, heat pumps and biomass boilers. Any householder can claim this money for solar thermal installation. However, only houses without mains gas can claim the grant for biomass or heat pumps. Note that this grant has recently been extended to 31 March 2013. Householders claiming the grant can also access the RHI when it becomes available to them hopefully around this time.
Green Deal is a new government initiative designed to help meet the upfront cost of making your home more energy efficient. Due to be launched in late 2012, the Green Deal will allow householders to install energy-efficiency measures and pay for the improvements with the savings on their fuel bill. Although they will repay the cost over time, this is not a conventional personal loan as the charge is attached to the meter and paid back through their fuel bill. If they move house, the idea is that the new occupant will pick up the outstanding loan while also benefiting from a more energy-efficient property.
Enhanced Capital Allowances (ECA)
The Enhanced Capital Allowance (ECA) Scheme is aimed at UK businesses allowing them to claim 100% first year capital allowances on investments in energy saving technologies and products, including some renewable energy technologies. Businesses are able to write off the whole cost of their investment against their taxable profits of the period during which they make the investment. The Government’s energy technology (www.eca.gov.uk/etl) lists promote products that encourage sustainable energy use and reward businesses for investing in them through the ECA Scheme. ECAs allow 100% of the cost of the product on the technology lists to be offset against your taxable profit of the year it was purchased. ECA’s bring forward the time that tax relief is available on qualifying investments, allowing the full cost to be written off against the taxable profits of the period in which the qualifying spending is incurred, delivering a useful cash flow boost and a shortened payback period on investment.
The company can claim the price paid for a new product and the costs directly associated with the installation of the product. Claims can only be made for products appearing on the technology lists at the time of investment (i.e. claims MUST be made within the same tax year that the equipment is purchased).
It is possible to use the ECA in conjunction with other sources of financial assistance, such as the Small Business Support Loan (detailed below)
Note that the interest free loan can be used in conjunction with the Enhanced Capital Allowance Scheme detailed above.
Interest Free Loans for domestic consumers
Interest free loans for up to £2000 are available for domestic renewable installations. The householder must contact the Energy Savings Trust to arrange for a free home survey and then the loan application pack will be sent out. Further information can be found at http://www.energysavingtrust.org.uk/
E-On Sustainable Energy Fund
The E.ON Sustainable Energy Fund offers grants of up to £20,000 to community groups and not for profit organisations who wish to consider and implement sustainable energy projects in their buildings - from energy efficiency through to micro-generation. The organisation must benefit specific groups namely:
The RDP is a significant sum of European funding for the development of rural areas. Funding is available for a wide range of activities including the development and diversification of land based businesses and the installation of biomass boilers. Further information can be found at the following website: http://www.scotland.gov.uk/Topics/farmingrural/SRDP
Note that this funding cannot be accessed if the applicant intends to take advantage of the Feed in Tariff or the Renewable Heat Incentive.
Energy Savings Trust
Provide advice on all aspects of energy efficiency and renewable technologies. They also administer the interest free loans. Website: www.energysavingtrust.org.uk
Provide advice to businesses on issues relating to the reduction of carbon emissions. Website: www.carbontrust.co.uk