Is On-Site Renewable Energy Generation the Future for SME’s?
As the energy crisis rages on, issues of energy cost, energy security and scarcity are all at the forefront of business owners’ minds. With all of that going on, is the case for renewable energy generation getting stronger? Or is it more profitable to hold off on this investment? For this week’s article, we’re evaluating all sides of the debate.
With energy costs at an all-time high and climate pressures mounting, the idea of clean and free energy on-site is more appealing than ever.
In fact, statistics published by BloombergNEF state that “the first half of 2022 saw a record investment globally in renewable energy, which reached $226bn (£191bn)” with solar and wind as “front runners” for investors.
With that in mind, many businesses will be wondering: is now the right time to invest in renewable energy technologies?
Free From Tariffs
On-site renewable energy generation provides more than merely cost and sustainability benefits. Ultimately, investing in this technology offers businesses an increasingly scarce commodity: energy security. But what exactly is energy security, and why is it so important right now?
Alex Hunter, CEO of renewable energy storage company Sherwood Power, describes energy security in Companies Digest, stating it consists of “having access to energy at the right time, in the right place, and at the right price for your business.” Hunter is quick to highlight how geographical, political and economic changes mean that we are not only seeing a rapid rise in the price of energy, but we’re “also being warned that there may be periods in the near future when energy is not available in the UK.”
Certainly the war in Ukraine, energy storage/transportation shortages and harsh winters have had a knock-on effect for access to “energy at the right time” and “in the right place”. With well publicised blackout warnings issued for winter 2022 and 2023, many domestic and commercial energy consumers have become increasingly anxious about access to energy.
For businesses with particular concerns about energy security, or those in which system shutdowns would be particularly disruptive or devastating, on-site renewables are a great way to sidestep these risks.
Better Paybacks
Alongside energy security, a key motivator in installing on-site renewable energy generation is cost-saving and return on investment. The key question businesses want answering is: “how long will this tech take to pay for itself?”
Fortunately, in the case of renewable energy generation, payback periods have been falling year-on-year while upfront costs remain the same.
Greenmatch estimate that new solar panels on a commercial site can cost anywhere from £16,000-£70,000 for small to medium-sized businesses, depending broadly on factors such as “roof size, the amount of energy produced and the number used.”
In businesses of this size, energy consumption equals around 30,000 - 50,000 kWh per year. However, with rising energy costs, that same usage can equate to much higher bills and much faster paybacks for solar panels.
For example, one study published by Centrica Business Solutions gives the example of a client facing £43,000 in annual savings from solar panels six months prior, and £78,000 in annual savings at the time of the investment, the difference being the price of energy.
Centrica are quick to point out that although they currently estimate a five to eight year payback, if tariff prices continue to grow, that will become even shorter. Given the 25 to 30 year lifespan of solar panels, there is certainly a good business case to be made for installing them right now.
The Old Oak pub in Cork is such a solar-success story. The business installed almost 100 solar roof panels with an initial payback period of eight years. However, due to the energy crisis, the projected payback has shrunk to just three years.
Making the Most of Renewables
On-site renewable energy generation may promise good savings and energy security for businesses, but energy efficiency and a strong site infrastructure are as important as ever when it comes to delivering on these benefits.
There’s nothing profitable or sustainable about wasted renewable energy, so insulating your site and properly maintaining any equipment is paramount. As stated by Christophe Williams, co-founder and CEO of Naked Energy: “Energy efficiency is incredibly effective at bringing down demand because the cheapest energy you’ll ever use is the energy you don’t use.”
Furthermore, renewable energy is most profitable when partnered with energy storage technologies. As one Centrica article explains, battery storage systems allow for greater usage savings by “maximising solar utilisation and optimising energy use via peak power avoidance and Demand Side Response strategies, which can unlock flexibility revenues.” In other words, renewable energy is important, but how and when you use it is just as important. Moving energy-intensive operations to off-peak hours can be a great way to make savings on your bill through schemes like Demand Side Response schemes.
The UK government also offers many other help packages for those investing in renewable energy generation. For example, a large number of UK homes and businesses have benefited from the Boiler Upgrade Scheme, formerly known as The Clean Heat Grant, which offers zero VAT on energy efficient measures and various grants for heat pumps and solar panels.
Businesses can also benefit from local schemes, including Business Innovation Funding, the Smart Export Guarantee scheme and more localised offerings run by councils.
For those currently weighing up their options, Ofgem recommends seeking advice about renewable technologies from The National Energy Foundation YouGen website, as well as referring to case studies available on the Energy Savings Trust website.
Other Things to Consider
Overall, whether your main motivation is cost-saving, return on investment, sustainability or energy security, it certainly seems that now is a great time to invest in renewable energy. However, there are still drawbacks to consider.
One of them is the particular generation potential of your business site. For example, solar energy generation is dependent on sunlight. This varies depending on panel positioning and the geographical location of the site. While roof panels might be suitable for some sites, they don’t work for every roof type.
Furthermore, some sites may not be consented to install energy generation technologies, especially if your business is based in a listed building, world heritage site or another area with strict planning constraints.
Finally, there’s also the upfront cost to consider. Sure solar is worthwhile eventually but it is still a hefty initial investment. What’s more, solar energy storage is similarly expensive.
There have also been some shortages in battery supplies in recent years, some of which are accounted for by COVID-19 production delays. With this in mind, there may be savings to be made on solar batteries by waiting for supplies to catch up with demand, although for the moment this is conjecture.
Despite these drawbacks, the benefits of energy savings, energy security and carbon savings have undeniably become more valuable and, at least for now, payback periods are at an all time low. Considering all of this, now is as good a time as any to invest in on-site renewable energy generation and if you know you want to invest in solar or wind eventually, why not start benefiting now?
If you are looking to save energy, GridDuck can help. Book an informal, 15-minute meeting with our Sales team today to find out more.