Energy Efficient Finance

The government is very keen to promote energy efficiency throughout the country and offers several incentive schemes to businesses to take up energy saving strategies and technologies. In the solar PV market, the government is offering a feed in tariff (FIT) to assist purchases with energy reduction schemes. In the boiler and heating market, the government is offering the renewable heat incentive scheme (RHI) and for lighting, it is offering the enhanced capital allowance (ECA) scheme.

The enhanced capital allowance (ECA) scheme allows businesses to claim back the tax element of their qualifying energy reduction investment within the 1st year of purchase. For example, if a business spends £5000 on an LED lighting upgrade, the corporation tax element of this cost (21% for the majority of businesses) would be £1,050. The purchaser would pay the lighting supplier the full £5000 for the upgrade and then simply deduct the £1,050 from the total corporation tax liability figure for the same year as the installation. Over the first year, the real cost of the lighting project would be £3,950.

Spreading the £3,950 over 12 months would equate to £329.16 per month additional capital outlay that the purchaser would have to budget for. However, if the lighting project was to save more than £329.16 per month in electricity cost savings then the purchaser would not have to allow any additional funds within their capital expenditure budget.

Supposing that a more considerable saving of electricity could be achieved, the purchaser would actually be spending less money than before the upgrade whilst still paying for the project over a pre-defined period with the finance option. Once the initial cost outlay has been repaid, the customer would benefit from the full energy cost savings that the new lighting upgrade delivers. The above scenario is the normal level of return that our customers receive whether the project cost is £1000 or £100,000.

Until recently, the government provided finance for energy reduction product and service upgrades directly via the Carbon Trust. The Carbon Trust has now teamed up with Siemens Financial Services who offers the finance direct but the cost is still validated by the Carbon Trust.