OPINION
FINANCING YOUR INVESTMENT 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 agreement route - 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). 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. 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. There are many ways for businesses to bolster their energy consumption and even more reasons as to why they should. Onsite generation, for example, offers a range of benefits such as reduced costs and reduced carbon as many look to address climate change. Not to mention its potential to offer additional revenue, where technologies such as battery storage and combined heat and power may be used to support the grid with fluctuating energy demand in return for payment. Installing EV charging infrastructure is also an increasingly attractive investment, offering an additional revenue stream and competitive advantage as EV uptake increases. Businesses are an essential driving force behind reaching the UK and Europe’s net-zero goals. As many look to incorporate sustainability as part of their recovery from COVID-19, others simply look to increase resilience by reducing overheads - the ideal solution will be unique to every business. https://www.advantageutilities.com/
Public Sector
Sustainability Promoting sustainability across the public sector
THE OFFICIAL MAGAZINE OF THE PUBLIC SECTOR SUSTAINABILITY ASSOCIATION Register now to receive your digital issue of PSS Magazine FREE of charge www.pssa.info ENERGY MANAGER MAGAZINE • JUNE 2021
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