Posted: Monday 15 August 2011

Feed-In Tariff scheme and Renewable Heat Incentive should return the capital cost twice over

It’s a lovely idea to use your own local, clean, renewable energy from wind, water, wood, sun or ground for electricity and heat rather than buy the resource-depleting, weather-changing, sea-level-raising, despot-propping type at great expense from a faceless multi-national. However, that latter type has the massive advantage of not requiring a huge capital sum up front to get the flow started.

Renewable energy systems have now been around for long enough for us to see that they work. The Feed-In Tariff scheme and Renewable Heat Incentive should return the capital cost twice over, or perhaps four times over. Even if this sits uncomfortably with your politics, the offer of a 2-400% grant which turns energy from the traditionally bottomless pit into a cash cow is rather irresistible. So, planning aside, the main issue on which their wide adoption depends is capital funding.

The current situation regarding capital funding of small-scale renewables is frustrating and exciting in equal measure. Frustration stems from the fact that nobody anywhere knows whether receiving an interest-free loan as offered to SMEs for renewable energy systems by the Energy Saving Trust constitutes State Aid and, if so, does is disqualify you from receiving the generous quarterly FiT and RHI payments. Nor does anybody anywhere know whether local authorities will be prevented by the same European State Aid regulations from participating. We strongly suspect they won’t, but planning of many exciting projects isn’t going to start in earnest until these matters are cleared up at the DECC-Brussels level.

On the exciting side, interest rates remain lower than energy price inflation and many of the main banks are wide awake to the promise of a statutorily guaranteed, index-linked, 20 year plus stream of income which makes a loan against a renewable energy system one of the safest around. You could say it’s an answer to their prayers. It’s worth speaking to your own bank first, if you get on well, but the Clydesdale Bank, along with the Co-Op Bank, seem to have the longest record of supporting renewables projects and so the best-informed case managers. If it is a project under £1m in size the loan will probably have to be secured by assets rather than by the income stream itself, but the rate should be reasonable, say 7-8% at the time of writing, and could be fixed. Businesses can also get simple loans through the Carbon Trust, and some Scottish Local Authorities are expected soon to start offering ‘seed’ loans to help businesses and community groups to bridge the funding gap up to the golden 100%.

For further information contact :
nigel.benson@bellingram.co.uk or joe.fergusson@bellingram.co.uk

Tags: Microgeneration

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