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Guide to Renewable Energy for Small Businesses

In the past, renewable energy was often considered an expensive investment that was only viable for large corporations. However, the decreasing cost of installing renewable technologies means they are now increasingly adopted by small and medium-sized businesses looking to save on their bills, improve their energy efficiency, and reduce their carbon footprint.

Installing renewable energy

When it comes to installing renewable energy technologies in your business, you’ll need to consider your circumstances. You’ll probably need to 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’ll also need to consider planning permission, connection requirements and having to comply with any regulatory and legal obligations.

Whether working with an energy provider or going it alone, you’ll first need to carry out a renewable energy site survey to help determine the best solution for your premises. Deciding factors include the amount of space you have available and the amount of money you’re willing to spend. If you need help with your initial costs, you may be able to find banks and energy companies that offer loans specifically for the implementation of renewable energy technology.

It will help to ensure your installer is government-approved under the Microgeneration Certification Scheme (MCS). MCS certifies that all microgeneration (renewable) products are installed to a high standard, providing a degree of security for your investment.

Renewable energy options

Below are some renewable energy options for your business, as well as their approximate capital costs and estimated payback periods. Keep in mind that capital costs and payback periods can vary depending on the scale, site and installation requirements of your chosen technology.

Wind power

One of the oldest renewable energy technologies, there are more than 600 wind energy schemes operating across the UK – from large wind farms to single-turbine community schemes. It is the most common source of renewable energy in the UK – and the most financially viable.

You will need to obtain planning permission to install a wind turbine at your business premises. If you’re installing more than three turbines, you may also need to carry out an Environmental Impact Assessment. Wind turbines can operate at average wind speeds of four metres per second, but are most successful at average wind speeds of at least seven meters per second. They also work best in windy areas away from buildings – this means you’ll need to have access to plenty of building-free acres for wind energy to be a viable option for you.

Capital costs: £10,000 for micro-turbines (2.5-6kW), going up to £3.3 million for larger turbines.

Payback period: Small turbines (20-50kW) payback within eight to fifteen years, while large turbines (1MW-2.5MW) payback within one to five years.

Solar PV panels

One of the fastest growing renewable energy technologies in the world, solar photovoltaic (solar PV) panels are a popular option with small businesses. Solar PV panels are cells that convert sunlight into electricity – the brighter the day, the more electricity they produce.

Solar PV panels are easy to install and attached to the outside of buildings, usually on the roof, utilising this unused space and harnessing as much energy from the sun as possible. If you’re interested in installing solar PV panels at your business, you will need to carry out a structural survey and may need to obtain planning permission.

Capital costs: £5,000-£10,000 for small-scale systems.

Payback period: Six to ten years.

Solar thermal energy (STE)

Using active solar heating systems, solar thermal energy uses a thermal collector to capture energy from the sun to heat the water stored in your hot water tank. Solar thermal energy can generate water or steam at temperatures up to 55-65°C. It is usually roof-mounted to harness energy from the sun as effectively as possible.

As solar thermal systems use daylight instead of sunlight, the system works on cloudy days, year-round. However, while solar thermal systems can deliver hot water throughout the year, it may not supply all the energy you need for your business. Plus, the reduced amount of daylight hours in the winter will reduce the heat energy produced. For both these circumstances, conventional energy is used as back-up.

Capital costs: £3,000-£5,000.

Payback period: From five years onwards.

Biomass systems

This is the generation of power through burning or fermenting organic material such as wood pellets, straw and dedicated energy crops. You might also use sewage sludge or animal litter. If you intend to use wood, make sure it is taken from responsibly grown, local woodland to minimise your carbon impact. Biomass systems are often used in combination with a combined heat and power plant (see below) to generate both electricity and heat.

You’ll need plenty of space for the boiler and storage of fuel. You’ll also need to set up deliveries of fuel and ensure delivery vans can easily access your site. You may find local smoke control regulations limit your ability to implement this type of energy.

Capital costs: Varies depending on boiler size and type of fuel.

Payback period: Between five and twelve years – shorter if you use waste wood instead of having to wait for tree growth.

Anaerobic digestion (AD)

Anaerobic digestion (AD) causes organic material (plant or animal waste and purpose-grown crops) to be broken down by bacteria starved of oxygen. This produces a combustible biogas rich in methane which is then burned to generate heat and electricity. You will need an environmental permit, planning permissions and may want to consult a specialist about odour control.

Finding an adequate supply of high-strength organic waste can be difficult, while storing the fuels can require lots of space. Solid waste (called digestate) can be also be used, as well as landfill waste that cannot be reused or recycled.

Capital costs: £8,750 per kWth.

Payback period: Approximately three to eight years.

Geothermal and Ground Source Heat Pumps (GSHPs)

Geothermal energy and ground source heat pumps (GSHPs) use low-level heat naturally contained in the ground to provide both heating and cooling. This can be most effective in areas where the heat from inside the earth rises to the surface, as hot springs or steam. Boreholes placed in the ground harvest this heat and transfer it to buildings. Similarly, air-source heat pumps (ASHPs) convert low-level heat occurring naturally in the air into high-grade heat.

The systems have to be attached to the outside of buildings, so you may need planning permission. It can be difficult to install GSHPs to existing buildings – it requires major work and is most viable for new buildings with the appropriate geological features. You will also need appropriate permissions from the Environment Agency.

Both ASHPs and GSHPs require energy to run, so can only be classed as fully renewable if this energy is also from a renewable source.

Capital costs: £11,000-£15,000.

Payback period: From fifteen years onwards.

Combined heat and power (CHP)

When electricity is produced, heat is produced as a by-product. Combined heat and power captures this otherwise wasted heat to produce both power – in the form of electricity – and usable heat. A CHP system provides this heat in the form of steam or hot water and is a convenient way to reduce wasted heat (and so wasted energy). Because the energy is produced locally, CHP systems can also eliminate the loss of energy that often occurs as energy is transmitted and distributed through local distribution networks.

Capital costs: £32,500.

Payback period: 10.5 years.

Hydroelectric power

Hydroelectric power involves generating energy through water flowing through an immersed turbine or water wheel. The turbine is moved through the natural flow of the water – usually a natural water source or stored water in a reservoir. Hydroelectric energy schemes are highly site-specific, but small-scale systems can provide a reliable and flexible energy source with minimal environmental impacts.

Capital costs: £4,000-£8,000 per kW of capacity installed.

Payback period: Seven years for 8kW hydroelectric power plant.

Other options for renewable energy

If you cannot generate your own renewable business energy but still wish to switch to renewable energy, you might consider a green energy tariff by choosing an energy supplier that gets most of their energy from renewable sources. Many suppliers provide details of their fuel mix, which you can use to find out how much of their energy comes from renewable sources.

Another option is investing in a BlueGen ceramic fuel cell device, which can turn natural gas into electricity. As gas is usually cheaper than electricity and has a lower carbon footprint, this can mean savings on your overall energy bill.

Benefits of renewable energy for your business

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

  • Microgeneration can make it easier to plan your energy usage and needs.
  • Stable energy costs – renewable energy sources are not affected by price rises.
  • Renewable energy can be a more secure energy supply in the long term, as fossil fuels are limited.
  • You can sell electricity back to the grid at a premium.
  • If you need to meet carbon reduction targets, renewable energy can help reduce your emissions.
  • Improving your reputation – customers and stakeholders increasingly 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.
  • You will also gain access to a wide range of energy subsidies available for businesses that use less energy (see below).

Government subsidies for businesses with low energy usage

  • Feed-In Tariffs scheme:
    If you install electricity-generating technology from a renewable or low-carbon source, you may benefit from the UK government’s Feed-In Tariffs Scheme (FITs). Introduced in April 2010, this scheme means your energy supplier may pay you for the electricity you generate – both that which you use yourself plus any surplus energy you export to the grid. This also means you’ll save money on your electricity bill – you’ll be using your own electricity and you can offset your FITs income against your bills.
  • Renewable Heat Incentive :
    The Renewable Heat Incentive (RHI) is a financial support programme for renewable heat – it provides financial support for organisations wishing to implement renewable heat alternatives. Almost all of the renewable energy technologies outlined above can be covered with funding by the RHI.
  • Enhanced Capital Allowances:
    Enhanced Capital Allowances (ECAs) let businesses that invest in certain energy-saving equipment write off the total cost of the equipment against their taxable profit as a 100% first-year capital allowance.
  • The Green Deal:
    The Green Deal allows businesses and organisations to pay for the cost of implementing energy-saving technologies through savings on their energy bills.
  • Salix Finance:
    Salix Finance is a government-funded scheme providing interest-free loans to public sector organisations to carry out energy-efficiency improvements.

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