The business case for installing renewable energy technologies is now stronger than ever, according to new research that revealed average returns of 11 to 12 per cent on investments made in onsite renewable energy systems.
The new paper from Carbon Trust Advisory argues that with energy bills expected to rise 37 per cent by 2020 the financial case for investing in renewable energy technologies such as solar panels or small scale wind turbines is getting steadily stronger.
It adds that when spiralling bills are coupled financial incentives, such as feed-in tariffs and the renewable heat incentive (RHI), there is “a strong case and increasing requirement for businesses to produce their own renewable energy”.
Both feed-in tariffs and the RHI offer fixed payments for generators of renewable energy or heat, without which returns would be around the six per cent mark, the paper says.
But with these incentives, businesses investing in anerobic digestion, hydro power and biomass heat projects can expect returns of over 15 per cent. Meanwhile, wind turbines that qualify for the feed-in tariff scheme can generate returns of around 13 per cent.
According to the report, only large solar installations offer low rates of return with recent cuts to incentives meaning that many solar arrays will now produce returns of under five per cent. However, smaller installations with under 50kW of capacity can srtill deliver attractive returns of around 10 per cent.
The report recommends that businesses should be careful to assess the full range of renewable energy options in order to select the technology best suited to their site.
It advises firms to consider whether to purchase renewable energy through green tariffs or generate energy onsite, ensure it has the skills to support on-site projects, and assess how a project will be impacted by planning and safety considerations.
Hugh Jones, managing director of Carbon Trust Advisory, said businesses should take a staged approach to renewable technology adoption.
“This report should help convince more UK businesses to move to renewable energy. However, selecting the right strategy for renewable energy can be a complex area,” he said. “We recommend… trialling different measures, testing their viability and doing this sooner rather than later before energy price increases and regulatory pressure become more pressing.”
The paper highlights how the potential returns have encouraged a number of leading firms, including ASDA, Ikea, John Lewis and Marks and Spencer, to deploy renewable technologies.
Ikea bought a 12.3MW wind farm in Aberdeenshire, invested £4m in fitting over 39,000 solar panels to the rooftops of 10 stores, and has designed new stores to incorporate measures such as geothermal heating and cooling systems, biomass boilers, and improved insulation.
But while attractive returns are on offer for renewable heat systems, an industry body expressed scepticism at the paper’s stated returns for renewable electricity.
The Renewable Energy Association’s (REA) Leonnie Greene told BusinessGreen that the organisation’s dealings with large companies indicated firms were actually being dissuaded from investing in renewable electricity because of conflicting policies.
She argued that the Carbon Reduction Commitment’s requirement for firms to pay a levy on electricity generated from renewable sources in the same manner as grid-derived power was “a big problem” for companies that could otherwise deploy renewables.
“We’re concerned the commercial sector is not being remotely adequately incentivised to invest - there are policies pulling in different directions,” she said. “We’re happy with the heat side, but not on the power side of the commercial sector - although of course we’re pleased if companies are investing.”
