Power politics
Green issues have been rather out of
the spotlight recently. With a recession and a General Election
taking up people's attention, there has been little talk of
alternative energy – but the need to plan for a low-carbon future
has not gone away, and the financial incentives for doing so are
becoming clearer all the time.
Public sector clients have a particular reason to pay attention, as they can now directly get involved in and benefit from the power they need to run their operations. "We're in the midst of an industrial revolution – 'microgeneration'", explains Michael Ware, corporate finance partner at BDO. "Installing wind and solar power in public buildings will cut both costs and emissions…but the potential remains largely untapped."
And there is indeed plenty to tap. Ware continues: "In the 90 minutes it will take England to lose in the quarter-finals of this year's World Cup, the sun will beam enough light on to our planet to power global energy needs for two years."
Notwithstanding our cloudy climate, the public sector has the largest collection of roofs, buildings and windy open spaces in the UK and hence has the potential to be at the forefront of a green revolution. But with the exception of a few brave pathfinders, most are still buying energy made from dirty fossil fuels rather than the wind and the sun.
This needs to change, says Ware. "The primary objection is, of course, money. All micro-generation requires an upfront investment followed by an uncertain but definitely long payback period." But, significantly, the previous government did create a more amenable financial environment by introducing so-called Feed-In Tariffs.
Ware explains: "In essence, these work by giving micro-generators a cash payment for every unit of energy produced, even though they consume it themselves, plus a cash payment for anything exported back to the grid. A typical medium-sized school with solar panels on the roof, a wind turbine in the grounds and a biomass boiler in the basement could make £20,000 per year in income and savings."
What does that look like in context? "The tariffs are designed to give an internal rate of return of 8%–10% for electricity and 10%–12% for heat. Not spectacular but not shabby in a world where bank base rates bump along at 0.5%."
And the markets are noticing. "There remains a wall of private sector money that is keen to get involved in anything secure and vaguely green, so finding a partner will not be an issue," he points out.
If you have public sector clients who may be reassessing their approach to energy use, there has never been a better time to discuss the advantages of getting involved in microgeneration. So don't delay, advises Ware: "The key is to do something and do it now. Every sunny day and every gust of wind is a missed opportunity to make savings."
