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Guide to renewable energy for small businesses

Guide to renewable energy for small businesses


This article explains the different renewable energy options, how to install them and how they work.

Renewable energy can improve your business’s energy efficiency, helping you to save on utility bills. To reduce them even further, you can switch utilities to save as much £970* a year.

How do I get renewable energy for my business?

Before requesting installation of renewable energy technology, you’ll need to consider

  • Planning permission - to ensure you’re choosing the right renewable option for your environment.
  • Connection requirements - as you may need to make alterations to your building.
  • Renewable energy site survey - to help you determine the best renewable solution for your business.
  • Regulatory and legal obligations
  • Ensure your installer is government-approved under the Microgeneration Certification Scheme (MCS) - to protect your investment by ensuring all renewable products are installed to a high standard.

It’s best that you own your business premises – or at least have a long-term lease in place – as it’s likely your investment in renewable energy will take some years to produce a tangible return.

You can explore your renewable energy options and find your local installer at the Renewable Energy Hub

What are the renewable options for my business?

There are many renewable options, but the right one for your business depends on your location and the amount your willing to invest.

  • Wind power: Uses wind turbines to generate electricity. Suitable if you have acres of building-free land.
  • Solar PV panels: Uses sunlight to generate electricity. These are easy to install and can be fitted on the side of your building.
  • Solar thermal energy: Uses sunlight to heat the water stored in your hot water tank. These are easy to install and can be fitted on the side of your building.
  • Biomass systems: Generates electricity and heat by burning or fermenting organic material, such as straw or wood pellets, with a combined heat and power plant.
  • Anaerobic digestion: Generates heat and electricity by burning the methane produced by breaking down organic material, such as plant or animal waste. Suitable if you have a lot of space to store the fuels.
  • Geothermal and ground source heat pumps: Use low-level heat naturally contained in the ground to provide both heating and cooling. These are fitted on the side of your building.
  • Combined heat and power: Uses a CHP system to capture the heat produced by your electricity to heat your water.
  • Hydroelectric power: Generates electricity from the water flowing through an immersed turbine or water wheel. These are site-specific, but can provide a reliable energy source.

For more information about renewable energy technology, see our 'Why small businesses should go green’ blog.

How much does renewable energy technology cost?

Here are some renewable energy options for your business, with their approximate capital costs and estimated payback periods:

  • Wind power: £10,000 for microturbines (2.5-6kW), going up to £3.3 million for larger turbines. Small turbines (20-50kW) take eight to fifteen years to pay back, while large turbines (1MW-2.5MW) pay back within one to five years.
  • Solar PV panels: £5,000-£10,000 for small-scale systems. These take six to ten years to pay back.
  • Solar thermal energy: £3,000-£5,000. This takes five years to pay back.
  • Biomass systems: Cost varies depending on boiler size and type of fuel. These take five to 12 years to pay back - shorter if you use waste wood instead of having to wait for tree growth.
  • Anaerobic digestion: £8,750 per kWth.
  • Geothermal and ground source heat pumps: £11,000-£15,000. These take 15 years to pay back.
  • Combined heat and power: U£32,500. This takes 10.5 years to pay back.
  • Hydroelectric power: £4,000-£8,000 per kW of capacity installed. An 8kW hydroelectric power plant takes seven years to pay back.

What are the benefits of renewable energy for my business?

Alongside reducing your carbon emissions and your energy bill, renewable energy can bring the following benefits to your business:

  • Stable energy costs - renewable energy sources are not affected by price rises.
  • Sustainable energy - as fossil fuels are limited.
  • Another income - you can sell electricity back to the grid at a premium.
  • More manageable - easier to plan your energy usage and needs.
  • Reduces your emissions - this helps you to meet carbon reduction targets.
  • Improves your business reputation – customers and stakeholders value commitment to sustainability.
  • Exemption from the Climate Change Levy (CCL) – a government-imposed tax designed to encourage energy efficiency and carbon emission reduction among businesses.
  • Access to energy subsidies - exclusively for businesses that use less energy (see below).

Are there funding options for renewable energy?

If you need help with the initial costs for commercial renewable energy installations, there are funding options available:

  • Feed-In Tariffs scheme: If you generate electricity from a renewable or low-carbon source, your energy supplier can pay you for the energy. This means you’ll save money on your electricity bill, as you’ll use your own electricity and can offset your FITs income against your bills. Please note, the FIT scheme closed for new applications on March 31, 2019. If your business premises has an eligible system installed and you have already successfully applied for FITs payments you'll not be affected by the scheme closure. If your business has installed an eligible system with an MCS certificate dated on or before March 31, 2019, you have until March 31, 2020 to apply to the scheme. If your business installed an eligible system on or after April 1 2019, you won't be eligible for FITs payments. If this is the case, should keep an eye out for alternative deals offered by your business energy supplier.
  • Renewable Heat Incentive: This provides financial support for the installation of renewable heat alternatives. Almost all of the renewable energy technologies outlined above can be covered with funding by the RHI.
  • Enhanced Capital Allowances: If you invest in certain energy-saving equipment, you can write off the total cost of the equipment against your taxable profit as a 100% first-year capital allowance.
  • The Green Deal: This allows you to pay for the cost of implementing energy-saving technologies through savings on your energy bills.
  • Salix Finance: This is a government-funded scheme providing interest-free loans to public sector organisations to carry out energy-efficiency improvements.
  • Power Purchase Agreement: An agreement with a private funder, who will buy the generated energy at a set rate. They’ll own the renewable energy system and claim subsidy rewards.
  • Lease Purchase Agreement: You rent the technology and pay for it using the income earned from government subsidies. After the lease is paid, you take ownership of the system.
  • Business loan: You’ll own the system and pay back the loan over an agreed time period. Your bank may give you more preferential rates and terms than a lease purchase provider.
  • Client funded: You pay in full at time of installation and can claim the government subsidy rewards for 20 years.